Pre-Budget Report

Over the last decade or so, it has provided an average of about 60 per cent. of our overseas earnings, but it cannot now support the economy or jobs in the way it did in the past—unless it is expanded, unless it is rebuilt and unless we shift the balance in the economy back to production and away from financial manipulation. That is our future, which will be bleak unless we do that; it will be a future of increasing debt in order to pay for imports that we are not currently paying for. For a couple of years our trade deficit has been higher than that of the Americans—a deficit that caused such a panic and alarm in the US. We should be alarmed and concerned about ours. All the experience of developing countries is that it is possible rapidly to develop a strong manufacturing sector if policy is focused on that by having a low and competitive exchange rate. That is what all the developing countries—starting with Germany, now finishing with China—have done. They started from a low exchange rate, which makes exporting profitable, building up a powerful internationally traded sector, which then achieves economies of scale and follows a process of continuous causation and improvement.