§ Motion made, and Question proposed, That the Clause stand part of the Bill.
§ Question again proposed.
§ 3.42 p.m.
§ Mr. Roy Jenkins (Birmingham, Stechford)
Throughout the whole of yesterday's debate we skirted, as it were, round the main point concerned in Clause 12. We were constantly reminded by Treasury spokesmen, and occasionally by the Chair, that the main point to be discussed would fall on the Question, "That the Clause stand part of the Bill," and not on the whole series of limiting Amendments which we attempted to move. We have now come to that Question and we can deploy the main case against the suspension of investment allowances.
I believe this to be by far the most undesirable Clause in the Bill. Most of the other provisions do not amount to a very great deal, but the Clause is of substantial importance and may well be of considerable long-term importance. Consequently, it is necessary for us to consider in some detail the Government's case for the Clause. We have not yet heard it deployed as a whole, but in the course of the discussions on the skirting Amendments yesterday the Government's case for the Clause peeped through at a number of points.
The Government's case came under four main headings. The first two were directed not so much against the merits of the case for the Clause as against the Opposition by saying that they were in no position to complain about what was being done. The first related to the suspension of initial allowances carried through in the 1951 Finance Act. The parallel of initial allowances is not a good one from the Government's point of view. I do not think that the Chancellor or the Economic Secretary would wish to press too hard the claim that circumstances today are comparable with those in 1951. 252 I notice the Chancellor smiling in agreement. It may be that he has in mind different things from what I have in mind.
However, I am sure that he will agree with me that 1951 was very different in at least two important respects. In 1951 we had at one and the same time the mounting of a very large defence programme and a sensational move against us in the terms of trade. It is unlikely that this year there will be a comparable defence bill, and it is also unlikely that there will be a sensational movement against us in the terms of trade.
Despite the very difficult circumstances in 1951, the Conservative Party resisted the suspension of initial allowances throughout a very long night sitting, and they did it, as is the custom when one is dealing with a Clause roughly of this sort, not merely by opposing the Clause as such but by moving a series of selective Amendments to it. I was astonished to hear last night the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) suggest that any fiscal discrimination against certain types of industry was so alien to his nature and to the constitutional principles in which he believes that he could hardly believe that such a proposal was put forward from this side of the Committee.
This morning I found that in the course of that night, in 1951, the noble Lord voted on no fewer than six occasions for selective fiscal proposals exactly similar to those that he was denouncing last night.
§ Viscount Hinchingbrooke (Dorset, South)
People in glass houses should not throw stones. The hon. Member for Stechford (Mr. Roy Jenkins) is in no better position than the position in which he is trying to put me, because he voted against all those Amendments, which shows the inconsistency of his thinking between then and now.
§ 3.45 p.m.
§ Mr. Jenkins
The noble Lord is not merely throwing stones from a glass house but hurling boulders out of a crystal palace. That is certainly a very undesirable course on any occasion. The circumstances of the two occasions to which I have referred are in no way parallel.
The other case at which the Economic Secretary hinted in the course of his 253 substantial number of very lucid interventions was that the Opposition was not in a very strong position to stand for no fiscal curb on the investment boom because we had opposed the Lord Privy Seal's Budget last autumn, a Budget which he suggested was directed largely against consumption, and in a time of manifest inflation one could not impose any curb on investment.
If that is what the hon. Gentleman believes about our attitude to his right hon. Friend's Budget, he is gravely mistaken in his approach. We were not opposed to some curbs on consumption as such. Indeed, we were gravely distrustful of the fillip to consumption given by the Lord Privy Seal in his Budget the previous April. However, we were opposed to the particular curbs on consumption which he imposed last autumn because we thought, particularly taken in conjunction with his April Budget, they were socially inequitable, and, also, they were to a large extent ineffective and were only too likely, as has proved to be the case, to give a further twist to the upward spiral of the cost-of-living index. Our attitude was certainly not that consumption had to be allowed to rise without check and that we were unwilling to countenance any checks on consumption to make room for investment.
The other point, rather more on the merits of the case, which I understand to be the Government view and the Government justification for the Clause, is that the investment boom is still very strong, and that, even with the Clause and the removal of investment allowances, the Government are certainly not knocking it on the head but are applying a little gentle moderation to it. Is it the case that the investment boom has, in the last year or so, been so strong that it is reasonable both to be fully satisfied about what has been happening in the field of investment and to be willing to accept certain curbs upon it at the present time? Perhaps more than most aspects of economic finances, investment provides us with figures, sometimes in arrears.
I think it not inappropriate to recall to the Committee the figures for investment in Europe in 1954, which were published in the last Report of the Economic Commission for Europe, and then make certain comments upon them 254 to ascertain how the position has changed since then. The figures for net investment as a percentage of the net national product of different countries in 1954 provided by this E.C.E. document are a most frightening commentary on the state of our economy and the state into which we have got after three years of stewardship by hon. and right hon. Gentlemen opposite.
The figures are striking and I will read to the Committee the salient part of the table. In descending order, the figures for net fixed investment as a fraction of the net national product were Norway, 22 per cent.; Finland, 21 per cent.; Austria, 15 per cent.; Western Germany, 15 per cent.; Switzerland, 14 per cent.; Netherlands, 13 per cent.; Denmark, 13 per cent.; Italy, 12 per cent.; Sweden, 11 per cent.; Greece, 10 per cent.; Turkey, 9 per cent.; France, 8 per cent.; Belgium and the United Kingdom, 6 per cent.
Those are very striking figures for the position in 1954. We all recognise, of course, that the position has improved since then, but to what extent has it improved? According to the Economic Survey, fixed investment in this country in 1955 was up by 7½ per cent. over 1954 as a whole. The sort of investment with which we are probably most concerned, that in plant, machinery and vehicles, was up by more than that, because there was a fall in investment in housing. Fixed investment in the more restricted, but from our point of view more important type, was up by 14 per cent.
That increase is an increase from the very low position in which we found ourselves in 1954 and an increase of that amount in no way leaves us in a very satisfactory position. The Economic Secretary said yesterday that all that the Government were attempting to do by the Clause was to moderate the rate of ascent of investment, but it should be remembered what that rate of ascent has been. It has been so uncontrolled over the past year that it has brought us from being in the fourteenth position in the table to which I referred to the twelfth or thirteenth position.
That is the enormous investment boom which we are told must be moderated. We are also told that we should feel no doubts about the necessity for moderation, yet in many ways it is a very 255 moderate boom. If one makes a comparison with the position in Eastern Europe, and in the Soviet Union particularly, our position is even more disturbing than is shown by a comparison with other Western European countries. In dealing with Iron Curtain countries, exact statistical information is very difficult to get, but all the figures available indicate that, largely because of a very much higher rate of investment, the national income of the Soviet Union has been growing by about 10 per cent. per annum. All the indications are that it will continue to grow at that rate, whereas the national income in this country has been growing by 2 to 3 per cent. per annum.
As a result of Government policy we have reached a production plateau where it is not growing at all. Even when it was growing, there was no doubt that the rate of growth of national income in the Soviet Union was three times, or even more, that of this country, largely because of a very much higher rate of investment. If these tendencies continue, it will not be so very long before the national income per head of the Soviet Union exceeds that of this country. That can happen in the middle or late 1960s.
I should like to have a comment from the Chancellor upon what he thinks about these respective rates of growth, because they are things with which he is directly concerned and are of very great importance in considering whether Clause 12 should stand part of the Bill. In our consideration of it we are entitled to have the Government's view. Examination of the figures shows that it is necessary to reject the complacent view, which we heard peeping through the various speeches of the Economic Secretary yesterday, that the investment boom has been so great in the past year or 18 months that we can safely afford somewhat to restrict it, without being too frightened of the consequences.
The rate of investment has been fast, but it has still been a good deal too low when measured against that of many other comparable countries, and the position to which it has led us is certainly not such that we can complacently consider restricting it. There is another point which emerged from Government speeches yesterday. The Economic Secretary told us that in his view we were suffering until 256 1954 from the effects of the removal of initial allowances in 1951.
§ The Economic Secretary to the Treasury (Sir Edward Boyle)
It did not, in fact, take place until 1952, because the Leader of the Opposition, who was then Chancellor of the Exchequer, gave a year's notice on that occasion.
§ Mr. Jenkins
The point that the Economic Secretary was making—and I think he will agree that I am not misrepresenting him—was that the effect was long-term and applied not for a year or so, but for a number of years. That is one of the most disturbing features of Clause 12.
We are dealing with a problem of inflation, balance of payments difficulties, gold reserve difficulties, which, we hope, will end eventually, even under this Chancellor and the present Government. Yet in order to deal with it we are removing an incentive to investment with the fair certainty that the effects of the removal will apply not merely in 1956, but in 1957, 1958 and 1959.
By accepting the Clause we shall do something which will continue to have a very undesirable effect upon the economy and the rate of investment for many years to come. I hope that the Committee will seriously consider that before agreeing to the Clause. I hope that the Chancellor, from whom we have still heard very little indeed in our discussions, will reply to the debate on the Question now before the Committee.
§ The Chancellor of the Exchequer (Mr. Harold Macmillan)
§ Mr. Roy Jenkins
The Chancellor shakes his head. This is a major matter on which we are entitled to hear from the Chancellor, and I hope that we shall do so before the debate ends.
Let there be no mistake about it; if he were to resign tomorrow—and one never knows with Chancellors of the Exchequer these days—he would be remembered as having struck a blow at the investment boom. There is very little else which he has done and there is very little else in the Bill. That is the one thing which will continue to have a substantial effect upon our economy for many years to come.
§ Sir James Hutchison (Glasgow, Scotstoun)
Before we part with it, I should like to say a few words about the Clause, which is causing a certain amount of anxiety in industry. All hon. Members will agree that one of the essentials which we must bear in mind all the time is that plant and machinery must be kept up to date, if we are to be able to face the international competition which is a growing danger to our economy and which will, as. Russia gets into her stride, probably become more acute still. It is, therefore, essential that we should not fall behind in the modernisation of our plant.
My right hon. Friend has told us—and I believe it to be perfectly true—that the rate of investment in 1955 was too high and that, consequently, he has taken this step to moderate it. Presumably—and on this issue I am in agreement with much of what was said by the hon. Member for Stechford (Mr. Roy Jenkins)—it is essentially a short-term policy and we may hope to see investment allowances restored in a fairly short time.
My anxiety arises not because of their being abolished, but because the yardstick which has been taken in deciding what shall be paid and what shall not be paid is creating anomalies and unfairness, and is not likely to achieve the short-term result which my right hon. Friend wants. I have no quarrel with cutting down the investment allowance for a very short period, but if we take as our yardstick a contract which has been placed we are going to delay its effect for a year or even two years, to a time when I should hope that the storm would have been weathered and there would be no further need for action of this kind, and investment allowances would have been restored or on the point of being restored.
It is necessary to consider how industry goes about a large modernisation plan. First, there is a discussion as to whether the plan is desirable or necessary, and will pay its way. Then comes the actual elaboration of the plan, and a decision is then taken to go ahead. The contract is placed and, finally, work is started. There is a series of stages, and the ultimate payment is delayed for quite a time. To take as our yardstick or measuring rod the fact that a contract has or has not been placed not only creates 258 anomalies of the kind which I shall show in a moment, but may cause investment allowances to continue to be granted so that they bring about their interplay for a number of years ahead upon contracts which will run on for many years.
A concern such as a dock authority, which does not put anything out to contract at all but merely formulates a plan, records it in its minutes so that the plan is easily checkable and then proceeds to do its own work, will at once lose any investment allowance benefit. In the case of another concern, which places contracts for part of its work and carries out the rest itself, the investment allowances will run on with the contracts which have been placed, perhaps for a number of years, but there will be no investment allowance upon the part for which no contract has been placed and which is carried out under the guidance and management of the concern itself.
I should like to hear my right hon. Friend the Chancellor reply upon this point. I suggested earlier that if we want to cut down the period over which the investment allowance will have an effect we should do so by laying down a period of time, and not according to whether or not a contract has been placed. We could have taken the financial year 1956–57, or even the calendar year 1956, and said that the investment allowance would be allowed only in respect of contracts placed and work undertaken and carried out within that period. Everybody would then have been treated equally, the position would have been much less anomalous, and my right hon. Friend would have known exactly what control he had over investment allowances.
The sooner we can restore investment allowances, and allow the flow of enterprise in the direction of the modernisation of plant and equipment to come into operation again, the better. I would still like to hear my right hon. Friend explain why it is necessary to take the contract as the yardstick of calculation, rather than a period of time.
§ Mr. M. Philips Price (Gloucestershire, West)
The hon. Member for Scotstoun (Sir J. Hutchison) has dealt with a point which shows what kind of effect the Clause will have upon certain contracts, and the complications which are bound to result. Those who are engaged in 259 industry, agriculture or whatever it may be, are continually faced with the danger of Finance Acts being introduced which alter the scale under which they derive relief from taxation. I agree that it would be very much better to make arrangements of the kind suggested by the hon. Member than to let matters go on as they will under the Clause.
The Economic Secretary yesterday told us that, in spite of the credit squeeze and other restrictions, industrial investments last year showed no drop over the previous year; indeed, I believe the figures showed that there had been an increase. My hon. Friend the Member for Stechford (Mr. Roy Jenkins), however, has pointed out how poor those figures are compared with the figures for other countries. It shows how extremely unfortunate the effects of the Clause will be, coming just at this time. Moreover, even if the figures for investment last year showed an improvement upon previous years, that does not alter the main charge which hon. Members on this side of the Committee make against the Government.
Large industrial concerns can always borrow from banks; they have good credit. Valuable as the investment allowance undoubtedly is to them, it does not have the same effect upon them as it has upon small people. It would not tilt the scale one way or the other, as it would in the case of the small industrial concern or the small farmer. For these people it would just tip the scale in the direction of their undertaking something which they otherwise would not. The Clause puts out of action altogether subsections (2) to (5) of Section 16 of the Finance Act, 1954, which gave this important relief.
I know that in 1950, when my right hon. Friend was Chancellor of the Exchequer, he had to abolish initial allowances. That action was due entirely to the circumstances of the time. We were then engaged in rearming. There are cases where international considerations have to be reflected in Finance Acts, but this is not one of those cases. The trouble into which the Government have got themselves is due entirely to their financial policy of last year, the pre-Election Budget, and their whole policy of letting everything go and allowing free enterprise to have its head, with no kind of control 260 or planning. That is why we so strongly object to these cuts. The situation now is quite different from what it was when my right hon. Friend was Chancellor in 1950, when the nation was hard pressed owing to the international situation.
We now have to push our export trade for all we are worth, and do all we can to bring our industries up to date and equip them with the latest plant and machinery. Farmers should be encouraged to improve their plant and equipment in order to produce more food, and food of a higher quality. Woodland owners should also be encouraged. We have to bear in mind all the devastation caused to our forests during the war, and the fact that large areas still have to be reclaimed. That involves considerable capital outlay. There is, for instance, a need for the construction of woodmen's cottages. All those factors would come in under the heading of investment allowances, but all that has to go now.
If there must be a curtailment of expenditure—if the pull upon our resources is such as to cause the danger of inflation—these investments are the last things which should go. Productive capital investments are vitally important to our economy. The Government's policy is to put our economy on a Procrustean bed. Everything must be cut, good and bad, productive and consumptive capacity alike. There is no attempt to discriminate
In the course of the last few months I have heard my constituents express fears as to what would happen to them if these investment allowances were taken away. I know of smallholders and small farmers who have been pressed by the county officials, under the various milk and dairies regulations, to improve their buildings so as to qualify under the terms of those regulations, and there are quite a number of premises which are still very much on the borderline. To the large farmer, this does not matter very much, because he can generally manage to find a means, somehow or other, of effecting the improvement, but to the small men, and I have many in my own constituency, it makes all the difference to get an allowance of this kind, which would reduce the incidence of taxation, so that they can feel that they can afford to make these improvements.
There are plenty of small landowners who want to do their duty and improve 261 their properties, but who find it very hard to come by the capital required. In the case of companies investing in land, they can always draw on the bank, but the small landowner who owns a couple of farms, working one himself and letting the other, finds these investment allowances of very great benefit, and I referred a moment or two ago to owners of forests and woodlands and the problems which they have of reclaiming woodland areas derelict as a result of the last war.
This decision is most unfortunate, and we on this side of the Committee feel very strongly that this is the worst Clause in the Bill; at least, I think so, and I am sure that many of my hon. Friends think so, too. It still prevents that kind of investment of which this country is so urgently in need. I would certainly agree that, owing to the danger of inflation, it may be necessary to curtail certain forms of consumption.
The Government and their supporters cannot accuse us of opposing the taxes proposed in the supplementary Budget of last year. That was not to say that we were not in favour of reducing consumption, but it was to say that that form of taxation on the poorest section of the community was wrong. It was not only the form of the tax, but the way in which it was imposed, that was wrong. I think there is a case for slowing down consumption of anything that is not absolutely necessary, and which is not the consumption of the poorest section of the population.
§ Sir E Boyle
May I ask the hon. Gentleman, who is always extremely fair in debate, how, by his criterion, he justifies in all cases having voted against the higher ranges of the Purchase Tax last autumn? Surely there was a very strong case, by any criterion, for increasing the Purchase Tax on cars and washing machines, even if he did not like the tax on pots and pans.
§ Mr. Price
That has nothing to do with the arguments which I have been adducing. The point is that we voted against the tax on pots and pans, and that is what really matters. I see no objection to reducing the sales of cars at present. I think that we were justified in taking that line.
It might be that in the worst circumstances, like the circumstances with 262 which my right hon. Friend the Leader of the Opposition was faced in 1950, it was necessary to reduce investments but now is not the time to do this. In view of the competition with which Britain is faced abroad, I think that this Clause is the worst in the Bill and I very much regret its inclusion.
§ 4.15 p.m.
§ Mr. Gerald Nabarro (Kidderminster)
I could not agree with the hon. Member for Gloucestershire, West (Mr. Philips Price) that Clause 12 is the worst in the Bill, though I would not suggest that I think it is the best in the Bill. It is a Clause which I view with a lack of enthusiasm, but I think there is possibly, on balance, a little more to be said for it than there is to be said against it.
§ Mr. R. T. Paget (Northampton)
Would the hon. Member for Kidderminster, (Mr. Nabarro) let us into the secret of which is the worst Clause in the Bill?
§ Mr. Nabarro
I am quite sure that I should trespass upon your customary generosity in these matters. Sir Charles, if I strayed from the narrow confines of Clause 12.
I want, first, to deal with a specialised aspect of this Clause, namely, the proposal to leave unaffected, investment allowances applicable to fuel economising equipment in industry and expenditure upon insulation of industrial buildings. I recall with pleasure that you, Sir Charles, were occupying the same position in the Chair on 8th June, 1951, when I, with due modesty, initiated in Committee stage debates on the Finance Bill of that year a discussion on the question of fuel efficiency in industry, and on that occasion, pleading from the Opposition benches, my purpose was to try to secure the retention of the 40 per cent. initial allowances on certain classes of coal economising equipment in industry, independent electrical generators and equipment of that kind.
It is instructive to observe, in view of the arguments advanced by the hon. Member for Stechford (Mr. Roy Jenkins), that he and his hon. Friends then on this side of the Committee voted against such a discrimination. In subsequent years, from the other side of the Committee, he voted for an enlarged discrimination by 263 initial allowances of up to 100 per cent. for equipment of this kind. In fact, he was closely associated with the then hon. Member for Gloucestershire, South, Mr. Crosland, in pleading for initial allowances at the rate of 100 per cent, for fuel economising equipment in industry, in view of the extreme gravity of the coal situation.
I do not wish to relate in close detail this afternoon all the vicissitudes of the arguments which have flowed to and to between opposite sides of the Committee during the Committee stages of successive Finance Bills since 1951. The fact is that I view with little enthusiasm the stimulating of investment in industry by what I consider to be artificial means and recourse to palliatives by means of investment allowances, initial allowances, and the like. All that may be said for these allowances is that they are modest in their incidence, they are long-term in character—for nothing contained in Clause 12 can have the least budgetary effect until the fiscal year 1958–59—and they are not accepted with any great degree of enthusiasm by those engaged in general industry in the country.
What, then, is the proper recourse on this matter? I believe that, in the ultimate, only a reduction of direct industrial taxation can provide the stimulus to massive industrial investment. I do not believe that the actions of Socialist Governments in the past or Tory Governments during the last five years, in resorting to these recourses—expedients we may almost call them—of initial allowances at 20 or 40 per cent. and investment allowances at varying rates, will have the long-term effect to which the hon. Member for Stechford referred and that is the raising of investment standards in British industry to a level comparable with European and other nations who are our principal industrial competitors.
§ Mr. M. Turner-Samuels (Gloucester)
The hon. Gentleman's argument is addressed to helping the big businessmen, and not the small ones.
§ Mr. Nabarro
I am sorry, but that is a totally fallacious statement. In fact, a reduction of direct industrial taxation affects, encourages and helps every class of businessman, from the I.C.I. combine down to the single-man business or the 264 business with perhaps only two or three employees.
§ Mr. Turner-Samuels
The hon. Gentleman does not appear to see that it is not possible to reduce taxation in that way, but it is possible to make investment allowances so as to help the small business man.
§ Mr. Nabarro
I do not propose to follow the hon. and learned Gentleman's intervention. It is based on the fallacy that there is a distinction in general industrial taxation arrangements as between large and small businesses. In fact, there is none. There is complete equity in this matter, as, indeed, there ought to be.
I am grateful to the Economic Secretary for embracing in this Clause a principle which I believe to be of great importance in view of the growing gravity of the coal position during the last few years. It is the application of fiscal inducement, or incentive, to industry generally to install fuel economising equipment and properly to insulate buildings. Insulation must result in greater heat retention and, therefore, economy in the consumption of coal and fuel oil. For my part—I speak for myself alone from the Conservative benches, though I may have a measure of support—I do not believe that, in the long run, expedients of this kind, through investment or initial allowances, are any proper substitution for a progressive reduction of direct industrial taxation over the years.
Of course, it may be pleaded that if one reduces the standard rate of Income Tax it is inflationary because of its effect on expenditure from personal incomes. But that is an added argument for doing what the Royal Commission so strongly recommended, namely, separating, in the form of a corporation tax, the direct taxation of industrial profits from the direct taxation of personal incomes. When that separation is achieved, a proper recourse to stimulating investment would be by a progressive reduction of the corporation taxation, which would replace the present Income Tax and Profits Tax combined.
Surely, that would have a much greater impact on the rate of investment in British industry than the modest incentives—I am not condemning Clause 12 altogether—of a somewhat discriminatory character such as the Chancellor of the Exchequer has evolved in this instance.
§ Mr. Cyril Bence (Dunbartonshire, East)
It is an astonishing experience to sit in this Committee, and sometimes in the House, and listen to the hon. Member for Kidderminster (Mr. Nabarro), who seems to have an ointment for every sore. Sometimes he has a different ointment for different sores, and sometimes the same ointment for every sore. As he says, he has been pleading for discriminatory fiscal action for every fuel economising device. That seems to be all right. But, at the same time, although he has been struggling for that—he claims with some success, as he usually does—he is against the principle of discriminatory fiscal action against any particular classes of industry or investment.
§ Mr. Nabarro
The hon. Gentleman has completely misunderstood what I said—either deliberately or otherwise. I did not plead against discrimination. I said that the proper instrument for stimulating investment of a massive character was a reduction in direct taxation, and not the manipulation of investment or initial allowances.
§ Mr. Bence
I remember the days when taxation on corporation profits and company profits was very low, and when Income Tax was very low. As an engineer, and one who has been associated with the industry for many years, I claim that the shareholders wanted so much that we never got enough money out of a company to do the necessary investment. I am sure that the hon. Member for Kidderminster knows as well as I that there are engineers in the Midlands who, when taxation was low, were frustrated in their efforts to invest in a particular industry. That was not because of Income Tax, but, more often than not, because the shareholders wanted the fruits of today's work and were not interested in investment.
When my hon. Friend the Member for Gloucestershire, West (Mr. Philips Price) was speaking I was reminded of a lesson which I learned as a schoolboy, and which I shall never forget. I read an essay by Cobbett, who regretted that even in that period too many people were prepared to plant seeds from which they themselves could pluck the fruit, but were not prepared to plant the seeds of trees from which they would never pluck the fruit. 266 Today, we are concerned not with creating benefits for ourselves, for this generation, but benefits which will accrue in 1960 or 1970, and perhaps even later. I have in mind particularly the shipbuilding industry.
The shipbuilding industry is now in a very fine state. It is doing well. We are holding our position in the world market. We can compete on price, and certainly we can compete on quality. "Clyde built" is still the finest criterion of quality in the world, and I say that with all respect to those from the Tyne and the Mersey. Capital investment in the shipbuilding industry today is evolved from the traditional techiques of building ships, but the new techniques are a very expensive business.
The first difficulty which confronts our shipbuilders who wish to avail themselves of new techniques is lack of space. The French and Germans found it a simple proposition to expand the area of their shipbuilding yards, because we had bombed the area flat. The German Government found it possible to put up huge prefabricated shops in which cranes of 20, 30 and 50 tons could operate. That huge amount of investment could take place on land which was available.
Provision is made for those with ships to get the initial allowance. But how will the companies who are engaged in building ships fare? One of the first things they must do is to acquire adjacent commercial property, very often at a value which is far in excess of the real quality of the property. Some of them have to acquire large areas of property in order to erect sheds in which a three-shift system may be worked to provide prefabricated units for a hull.
The French yards are building hulls in dry docks and floating them out to the water line. They are building prefabricated sections on the three-shift system. In the British yards that is not possible, not because of lack of knowledge, but because of lack of space to put down huge areas of prefabrication. This is a serious matter, and it would be ridiculous for the Government to adopt the attitude that they cannot do anything for the shipbuilding industry, because of the dogmatic ideology of laissez-faire and freedom which prevents discrimination, when the whole world is discriminating against industries which are peculiarly strong in 267 their own countries, or industries in which they wish to build up representation.
It is being done in Germany and Japan, and the Americans have done it for years. If we adopt the attitude that the shipbuilding industry must fend for itself, and be limited to pursuing traditional methods of shipbuilding, notwithstanding the competitive power of new techniques, the effect will be serious.
I was surprised to learn, some years ago, that the prefabricated construction of American Liberty ships was evolved in Britain. It was evolved on the Tyne, but the whole equipment had to be exported to America because there was no room in our yards. The Tyne, the Clyde and the Mersey are all crowded. In my constituency, Messrs. John Brown have had to build plant on the opposite side of a main road because there is no room to extend prefabrication shops by the side of the Clyde.
This question will be tremendously important to shipbuilding from about 1960 to 1970. We have orders for many years ahead, but, although the hon. Member for Kidderminster suggested, and other hon. Members opposite contend, that we cannot indulge in discrimination, I believe that we shall have to do so. We shall have to give particular help to particular industries under particular conditions.
My hon. Friend the Member for Stechford (Mr. Roy Jenkins) quoted some figures, which, I think, were in the Economist, giving details of investment in Europe. They showed that our investment was one of the lowest and was on a par with that of Belgium. I claim that in the shipbuilding industry investment is far too small.
Yesterday, I spoke about the machine tool industry. I did not want to speak for too long yesterday, but I must make this point today. I wish those who are concerned with the financial aspects of these matters would realise what a problem investment in the engineering industry is when the use of machine tools, particularly machine tools of a specialised nature, is involved. I remember that between 1922 and 1924, as a very young engineer, I was involved in the design 268 and development of a particular automatic machine tool. If I remember rightly, it was costed and put out at about £180. It was an automatic machine, hand-fed, and stood on its own as an independent unit. It can be bought by many companies and I know of many companies which use that machine.
We observed it over many years and found that it was very satisfactory. By 1936 that machine tool, which had been a major unit in a process, had become a minor factor in a chain of processes. It was part of a production unit line costing about £20,000. The purchase of that unit in 1923, which then constituted a revolution in the technique of a process of production, had become a minor factor in a completely mechanical chain of production.
The producer of an article by engineering processes today, if he wants to make new investment or write off old plant, has to put down a whole line of machines. Those who manufacture machine tools now find themselves in the position not merely of manufacturing a single unit as a machine tool, but having to put down the production plant to produce a whole line of products. I can give another instance in which I was involved. I can remember a plant being put down for the production of cycle chains. The machine tool manufacturers who, at one time, used to make presses and different types of operating machines for manufacturing cycle chains and motor-cycle chains, were in a German firm.
They so changed their production lines in their factory, which was producing machine tools, that they no longer made a machine tool for producing cycle chains, but machine tools for a production line for cycle chains—a whole production line. On one plant on which I worked, which was put down in 1937, the whole factory building was cleared, and not one machine tool but a series of inter-connected and inter-linked machines was established for the production of cycle chains by purely automatic processes.
In the production of pistons it is not a question of a machine tool being used to manufacture them now, but of a whole line of inter-connected machines costing £½ million. If we are to face competition in the modern world the industry and 269 the Government have to face this problem. In Britain we have to do everything we can by fiscal means—call them subsidies, or investment allowances—to enable the engineering industry not only to produce machines, but complete production lines. This has been done in the cycle industry and in the motor industry. Standard Motors, of Coventry, have bought from machine tool manufacturers not merely machine tools, but whole lines of production machines. The function of the machine tool makers today is not to make single machine tools, but to see what the customer wants and to design and produce machine tools for those products.
That is very costly, yet in an age of automation the Government are making an indiscriminate cut of investment allowances which will mostly hurt those people we want to help, machine tool designers who manufacture a series of machine operations constituting a production line in order to make a product. If one goes to Cadbury's and other food processing factories one sees whole production lines and not merely single machine tools.
Raising the Bank Rate is one way of penalising investment, but that is very expensive. The Bank Rate is crippling high-cost industrial investment. The investment allowance is another way. I hope that I am in order in pointing this out, but it is important that the Government should look very closely into this matter.
As we keep on investing in our industries, increase mechanical capacity of production and bring these high-cost mechanical processes into industry and, at the same time, decrease the unit of labour required in the production of a given quantity of items, so our capacity for varying the price of products is reduced. That is because the variable factor, which was the labour factor in production, is reduced, whereas the fixed capital cost represented by bank charges and bank loans is increased by reason of the high cost of capital equipment. Everyone knows that if one wants to reduce bank charges one is up against it. Between the wars it was a stock phrase that when we were pleasing the customers most we were pleasing the bankers least. It seems to me that one never serves the bankers and the community at one and the same time.
§ The Temporary Chairman (Mr. Malcolm MacPherson)
I cannot see the relevance to this Clause of obiter dicta about serving the bankers and serving the community.
§ Mr. Bence
I thought, Mr. MacPherson, that I was well up the line of production, but I was taken off at a tangent. Having been engaged in the engineering industry, I know that when one is in process of designing, manufacturing, drafting and producing a machine tool, often, half way through the process, one sees something else on the way and goes off at a tangent. That is where money is lost in designing aircraft and all sorts of things. If I deviated on this occasion, I hope that it was not to the cost of the Committee, or of the Chancellor of the Exchequer.
I hope that the Government will take the Clause back and look at it again. If we consider the increases in the Bank Rate, the price of money today and the almost indiscriminate cutting of investment allowances, we must realise that these things will have a very serious effect upon investment in such industries as shipbuilding, engineering and the machine tool industry. It will have the very opposite effect to that which hon. Members opposite want.
We must get on with the production of high-class mechanical devices as quickly as possible. Unless we do it quickly, our competitive position in the world will be almost eliminated. It is shocking to think that the Standard Motor Company must go to Germany to buy a tractor production plant at a cost of £4 million or £5 million. We have the engineers and the technicians to build this machinery, but the Government must give the incentive and not take it away. The Government must give every possible incentive for British engineers and scientists to go ahead with projects by which we become not only manufacturers of equipment for our own use but manufacturers of these production units for export.
We must rebuild an export industry on the basis of high-quality production units rather than on the export of consumer products which, within the next 20 years, nearly every leading country will make for itself. Our future lies not in the export of cheap tin trays. but in the export 271 of high-quality production lines of machine tools and transfer machinery. The Government have the duty to give encouragement to the engineering community of the country for them to build a new export industry within the next 20 years. If they do not do something about it, we may lose the battle. It will be a sorry story for this country if we try to build our export trade on the export of cheap tin trays.
§ Mr. Douglas Houghton (Sowerby)
The time we have spent on the Clause shows the importance which right hon. and hon. Members on both sides attach to this question. The pity is that many people outside could not care less. I think that one of the most serious political crimes is to pander to the people who take the short view, and there are far too many people in this country today who are taking the short view.
We are discussing here the foundation of our future well-being and national survival. I do not say that investment allowances alone will govern the rate of industrial investment, but they are a contribution towards it, and anything we do which discourages the forward movement of industrial investment is to be regretted.
I will not detain the Committee for more than a moment or two, because I want principally to ask the Economic Secretary a question. It is about the future, and I can lead to my question by reminding the Committee of the chequered history of this form of tax relief for investment. Initial allowances were introduced in 1945; they were then increased; they were then suspended; they were then partially restored; they were then replaced to a large extent by something more favourable, investment allowances; and now we are reverting to the initial allowances at the 1953 level.
Clearly, it is not a stable basis for forward planning in industrial investment when all that happens in the space of 10 years. It would be interesting to know, if the information were available—and probably a survey might give some sort of answer—how much industrial investment has been started by the encouragement given through initial allowances and investment allowances. Certainly industry will not find anything very stable 272 in looking at the experience of the last 10 years in these tax reliefs.
The question I want to put to the Economic Secretary is, have we now finished with investment allowances? The Clause suspends them. Does it end them? Are we ever to see them again? Of course, there were some traditionalists who raised their eyebrows when investment allowances were introduced, because for the first time this conferred on industry not merely a tax-free loan by anticipating the depreciation allowances; it granted industry a subsidy by giving tax relief of more than 100 per cent. of the capital cost, and that was an innovation in our fiscal system.
Has the Chancellor now decided to abandon that? If we stay on this "plateau of stability", which we are now supposed to be on, will investment allowances be restored again? Would it not be better to tell industry what is likely to happen to this aspect of our taxation system for several years ahead so that industrialists may know where they are? This is legislation by fits and starts, and that is a bad thing. The farmers demand stability. They impose their will on Governments and say they must be able to plan ahead. They say that the farmer cannot work from season to season; he must know several years ahead what prices he will get and what programme he should follow. I think the trade unions are asking for some form of stability so that they may be able to decide their wages policy for some time ahead. There is no sign of their doing it, I am sorry to say, but perhaps given more favourable conditions there would be a better chance of it.
What message has the Chancellor to give to industry about the future of these allowances? That, I think, is a legitimate question to ask, just as it is an important question to ask. We know what the Clause does; it suspends investment allowances. But what of the next 12 months or two years? Is industry to make up its mind that its investment programme must be contained within the initial allowances at 1953 level, or can it expect a more favourable change in the near future?
That is what I rose to ask. The question has not been put earlier in the 273 debate, and if the Economic Secretary is now able to say something about it, that might be helpful.
§ Mr. Paget
I do not often intervene in finance debates, but during the course of my week-end reading I came across a passage in terms which I hoped would appeal to the Chancellor of the Exchequer and which seemed almost perfectly to express the Opposition's case against the indiscriminating nature of the Clause. That passage is:An adequate policy must therefore provide for (a) a form of industrial organisation which curbs unwise speculative over-expansion in any industry and assists by an intelligent system of market anticipation in guiding capital investment into correct channels and in the correct proportions to maintain a balance in the quantities of separate goods which, if stability is to be preserved, must be exchanged for one another.I am glad that those words appeal to the Chancellor, because they are, of course, his own. They also seem to me to express quite admirably what we have been seeking to say from these benches during the debate. Indeed, when I reread with renewed pleasure "The Middle Way", I find myself the more surprised that one who in his youth so fully appreciated the need of planning and controls should have so departed from wisdom.
Indeed, the right hon. Gentleman is almost the last person whom one would have expected to be under the illusion that we could leave an economy to be self-adjusting when we peg and tie down its two main adjusting factors—the level of employment and the level of international exchange. That it could be done at all happened only because of the beginner's luck which the Government had in the terms of trade in their favour during the initial years.
We now hope that the right hon. Gentleman will return from the folly of his age to the wisdom of his youth and persuade some of the obscurantists behind him of that which he very well knows—that the modern economy cannot exist without planning and without adequate controls.
§ Sir E. Boyle
We have had an extremely good discussion on the Clause, both on the Amendments and on the Question, "That the Clause stand part of the Bill" I must congratulate the hon. and learned Member for Northampton (Mr. Paget) on imbibing from sources of 274 wisdom, both in my right hon. Friend's excellent book, which he published before the war, and, if I am not mistaken, in Mr. Balogh's recent articles in the New Statesman.
The hon. Member for Stechford (Mr. Roy Jenkins) opened this debate with a very enjoyable speech and, if I may, I should like to begin by taking up one point which he made. I certainly agree with him that there is no precise parallel between my right hon. Friend's decision to suspend the investment allowance this year and the decision of the right hon. Gentleman the Leader of the Opposition to suspend the initial allowance in 1951. I think that, in addition to those mentioned by the hon. Gentleman, there are two differences between those two situations which are highly relevant to this discussion.
The first difference is, of course, that in 1951 the right hon. Gentleman gave industry a year's notice of the suspension of the initial allowance. We are still retaining the initial allowance; I think it must be remembered, therefore, that the effect on industry caused by the suspension of the investment allowance is very much less than was the effect on industry caused by the suspension of the initial allowance some years ago.
I well remember the debates we had in this Committee in 1953 on the importance of the initial allowance. There was some controversy between my hon. Friend the Member for Oldham, East (Sir I. Horobin) who took rather a gloomy view of the allowance and said that it was nothing more than a tax-free loan, and the opposite view, put very ably by Mr. Crosland, who was then the Member for Gloucestershire, South, who pointed out that this was a matter of great importance to industry in making its expansion plans. Therefore, do not let us exaggerate what has been done to industry by this Clause. Industry still has the initial allowance at its disposal.
There is another and, in a way, more important difference. It is important for us to remember that in 1951 when the initial allowance was suspended we were still just able in that year to export pretty large quantities of consumer goods. It is quite true that the sellers' market in consumer goods was coming to an end at that time. That was why the right hon. Gentleman, in his 1951 Budget, did 275 deliberately plan, as it were, for a running down of our foreign balance, because he said that we must take into account the limits of overseas markets to absorb our goods. Despite that, we were not relatively as dependent as we are today on the export of investment goods. It is very important to remember that, because one of the principle reasons for this Clause—as I shall explain in greater detail in a moment—is precisely that we have to think of the competing claims for resources by home investment and by our export trade.
§ Mr. Roy Jenkins
I accept the hon. Gentleman's point as far as it goes, but when he says the total increase in claims upon what we call the investment goods industry is greater than it was in 1951, but he is surely leaving out of account the whole of the extra defence burden?
§ Sir E. Boyle
Not at all. We still have the extra defence burden. I am merely pointing out that now that our markets are, to a large extent, markets for capital goods—and for just those capital goods which are likely most to be in demand, as a result of an investment boom—there is obviously greater competition for those resources by home investment and by exports than there was in 1951, and it is obviously difficult in those circumstances, therefore, to justify this special subsidy to investment.
Let me turn next to consumption, which was referred to by the hon. Member for Stechford and by the hon. Member for Gloucestershire, West (Mr. Philips Price). Hon. Members opposite say that they were not, in principle, against curbs on consumption. They have certainly hardly shown that by their voting during the past year. Last year, when my right hon. Friend the Lord Privy Seal produced his April Budget, they complained that he did not do enough for the consumer. They said that if he was giving away this degree of money he should have given less to companies and more to the ordinary consumer.
The principal reason for the autumn Budget of last year, as hon. Members will remember well, was that consumption, in view of the large, increasing demand for consumer durables, was pressing on the same resources as those that were needed by investment and by 276 exports. Hon. Members opposite did not simply vote against the pots and pans increase in that Budget but against every part of it. They voted against the increase in Purchase Tax on cars as well. I think it is also worth remembering that, placed as we were last autumn, with an investment boom and with consumption running very high, there was every economic justification for cutting the housing subsidy both as a curb on nonproductive investment and on consumption. Yet hon. Members voted against the Housing Subsidies Bill through all its stages as well. They therefore have no grounds at all for saying they were not against curbs on consumption.
I now come to what I think is the most important point arising out of this debate; that is to say, whether it is necessary at the present time to have some curb on the investment boom. The hon. Member for Stechford quoted, very naturally in this connection, from the interesting recent Report of the Economic Commission for Europe. That certainly is a most valuable document, and I am glad that it fell to me to speak about it at the recent E.C.E. meeting at Geneva.
I would first say, do not let us be too pessimistic about our achievements in the field of investment. I quite agree that we should not be complacent about it, but do not let us fall into the other extreme of being too gloomy. Over the last ten years the proportion of domestic fixed income to the gross national product has risen pretty substantially. It has risen from 10.3 per cent. in 1946 to 14.4 per cent. in 1950 and to 16.7 per cent. in 1955.
Those, of course, are gross figures. In this calculation the figures include depreciation both as to investment and as to the national product. The Economic Survey for Europe table which has been very widely quoted gives net figures after depreciation. Those are net investment figures, and certainly the comparison between the United Kingdom and other European countries does seem to show our performance in a bad light. It is important to remember, however, that the United Kingdom is considerably richer than most other European countries, so that the amount of fixed investment per head of population is much higher in the United Kingdom than in Europe generally.
277 To put the comparisons into perspective, it is worth noting that over the period 1948–54 the fixed domestic investment as a percentage of the gross national product at market prices was 13 per cent. in the United Kingdom as against 16 per cent. in the United States of America—which is not so bad a comparison. Obviously, if we are dealing with figures of net investment it makes an enormous difference how much investment we already have. There are those economists who say that we should try to nearly double our net investment—and some say that we should aim at 10 per cent. of our gross national product. That would be a most astronomical achievement for a country as highly industrialised as ours.
§ 5.0 p.m.
§ Mr. Roy Jenkins
It is rather surprising to hear the right hon. Gentleman, almost in the same sentence, say that we must not base too much on a comparison between our figures for investment as a proportion of the national income and those of the other European countries because we are richer than they are, and then say that the relative figures as between ourselves and the United States are 13 per cent. as against 16 per cent., without mentioning that the United States is three times as rich as we are.
§ Sir E. Boyle
I quite agree. The United States started with even a bigger lead than we had. That is perfectly true. I am merely pointing out that it makes a big difference whether we are dealing with gross figures or net figures, and I think that those who draw a very unfavourable comparison between this country and other European countries should remember the extent to which we were in Britain a relatively developed and industrialised country already.
I would, however, like to use one or two more general arguments. I thought that the hon. Member for Stechford, in his speech this afternoon, came dangerously close to thinking in terms of a closed economy, because, however much we may feel that an increase in investment is desirable, we have to think of the competing claims of our export trade for the same resources, and also think of the capacity of the investment goods industries themselves. Let me emphasise particularly this point about the other claims for those resources. The economic circumstances of the United Kingdom make 278 it very difficult indeed for us to finance a sudden or really dramatic increase in the proportion of investment to our gross national product. Do not let us forget that the United Kingdom is carrying out a heavy defence programme and has a number of overseas commitments which require a big surplus in our balance of payments.
When we come down to it, the great problem which we have in our economy at the present time and the two great objectives that we have to reconcile are. first, the rising level of productive investment in this country, which we all agree is of the highest importance, with, at the same time, a surplus of at least £200 million a year in our balance of payments. Obviously there is a serious danger if we have too dramatic a rise at one time in our level of fixed investment, because that will make it difficult to achieve the balance of payments surplus that we must have if we are to fulfil our overseas commitments.
In this connection, let me say a word on the subject of discrimination. A number of hon. Members referred to this. I think it is fair to remember that on the whole, it is precisely that investment which most people would agree was absolutely essential that makes the biggest impact on our balance of payments. I think that sometimes hon. Members opposite delude themselves a little about this.
There is relatively little productive investment in industry which is obviously inessential. The amount of plant and machinery used for obviously inessential purposes in this country, and which competes directly with the resources for our export trade, is comparatively small. I say frankly to hon. Members opposite that if they really want to make a cut in non-productive investment which would have a substantial effect on our balance of payments, there is only one way in which they can do it—and I think that in their hearts they know it—and that is by making a really large reduction in the housing programme. If they think that we should go back to the Ebbw Vale housing programme of not more than 200,000 houses a year, that is an arguable view, but I think that they ought to say so. We know that houses use a large amount of timber, and the programme necessitates other forms of investment. too. A cut in the housing 279 programme is the only way in which we can make a really big cut in non-productive investment that would really have a considerable impact on the balance of payments.
I should like to take up a point made by the hon. Member for Sowerby (Mr. Houghton) and the hon. Member for Stechford about the future. The hon. Member for Stechford spoke about the long-term effect of suspending the investment allowance. I must say that it puzzles me very much that hon. Members opposite who believe in economic planing have not yet appreciated what seems to me to be one absolutely essential point, which is that in economic policy we are always in a short-term situation whether we like to admit it or not. I do not know if hon. Members opposite read the admirable Reid lecture on this subject by the late Professor Sir Hubert Henderson delivered some ten years ago. Sir Hubert was a man wise enough, like my right hon. Friend, to be an apostle of the middle way and an adherent of the policy of the extreme centre, and nobody could complain that he was a supporter of complete laissez faire—he certainly was not.
In this lecture, he pointed out very forcibly, that in economic affairs one is always in a short-term situation and it is no good trying to look too far ahead at any time. Clearly our present economic circumstances demand that we should have some moderation in the rate of climb of the investment boom. We cannot yet tell what the level of investment will be in 1957, but we can be sure of this, that if it looks as if the boom is moderating by then—and at the moment the climb is still a fairly steep one—there is plenty of investment that can be done in the public sector as well.
Since the war, great resources have been devoted to the fuel and power industry, and there is now no shortage of electricity for our manufacturing industries. Electricity is a great consumer of coal, and an increase in production there is vital to our economy. But we still have a large amount of leeway to make up by way of transport, and a large amount of investment in the fields of roads and railways upon which we can embark should there be any sign at all of slower development in the private sector.
280 I say to the hon. Member for Sowerby that one has to realise that if any part of our economy ought to be flexible it is the tax system. Indeed there are those who would like to see the investment allowance used in an even more flexible way and who think that in a year like this it would be a good idea to have a sort of negative or minus investment allowance. I do not think that any Government need make any apology for using the tax weapons available to it in a flexible manner.
This Government fully realise the very great importance of investment to the economy.
Indeed, they want to raise the rate of investment both absolutely and proportionately. Their recent measures most certainly have not been designed to sacrifice investment to consumption; indeed, it was forecast in the Economic Survey that fixed investment in 1956 would be considerably higher than in 1955 when a notable rise took place.
It is the object of the Government to foster a steady increase in fixed investment combined with an increase in savings. I would certainly say that one of the best features of the past year in this country has been the realisation on the part of very many people, particularly financial journalists, of the enormous importance of a high level of industrial investment to our economy, and I have myself on many occasions drawn attention to this.
We must have regular re-equipment of our industries if we are to compete in a more competitive world, and there is also the point—I make no apology for mentioning it—that a high level of productive investment is essential if we are to have rising living standards, and quite obviously from every point of view technical progress is about the best thing that can happen to a community.
We must achieve this rising level of production without inflation and without imposing too much strain on our balance of payments. It is with those considerations in mind that my right hon. Friend has decided that this year we must suspend the investment allowance in order to ensure that we build up our reserves and earn again a good surplus on our balance of payments.
§ Mr. Douglas Jay (Battersea, North)
Although we always enjoy listening to the Economic Secretary, I think it rather extraordinary that we have heard nothing from the Chancellor of the Exchequer on this very important Clause. We have now reached the concluding stages of Clause 12 and so far we have had only two or three contributions from the Chancellor of the Exchequer on the Bill. I can well understand that he has many burdens on his mind, but we do not feel that he is treating the Committee entirely as it is accustomed to being treated.
§ Mr. H. Macmillan
I do not wish to treat the Committee with any discourtesy. I think that the Committee have heard quite enough from me. Last night I made a somewhat lengthy speech on an Amendment, it is true, but it was such a comprehensive one that it was, in effect, a speech on the Clause stand part, so far as the rules of order permitted, and they were very wide. I think that it has been a long tradition to allow any of the Treasury Ministers to speak on these matters. I certainly did not wish to treat the Committee with discourtesy, and I hope that I shall not fall into that trap in the long discussions which we are still to have tonight.
§ Mr. Jay
I think that the Chancellor took one wicket out of ten yesterday, and I am not quite sure that that is a captain's contribution.
However, I rose to say that we must vote against this Clause because we believe that this country ought to have a higher investment economy.
The argument is really very simple. We are a country with very little resources of raw materials. We have to live by exporting. Therefore, we have to do it by our own ingenuity, efficiency and productivity. That being so, we ought to be a higher investment country than most of our competitors, whereas, in fact, all the figures show that we are a low investment country. Therefore, in a temporary balance of payments crisis, we ought not to attack investment rather than consumption.
In his speeches both yesterday and today, the Economic Secretary to the Treasury—who makes twelve speeches to every one made by the Chancellor—was a little in danger of juggling with figures 282 in order to bolster up his rather complacent attitude. After all, whichever way we look at them, the figures show that we are investing at a lower rate than our competitors. As my hon. Friend said, if we look at the straight comparison with Europe we see that we are at the bottom of the table. If we adopt the Economic Secretary's ingenious suggestion that one expects the country with a higher standard of living to have a lower rate of investment, we find the United States is ahead of us.
Compared with the figures of 22 per cent. net investment by Norway and 6 per cent. by this country, Russia is probably investing something like 25 per cent. at the present time. We cannot really believe that these figures are encouraging or that the Economic Secretary is altogether innocent of some complacency about them. I entirely agree with the hon. Gentleman that if we are going to maintain and increase investment and if we are going to get our balance of payments right, we must restrain consumption.
The hon. Gentleman accuses us of having failed to advocate that during the last two years. That really is not true at all. We have repeatedly said that the reductions in taxation on profits which the previous Chancellor made with the connivance of the Economic Secretary, and with the resulting increase of dividends and expenditure, should not have been made. We opposed this. We feel that if these needless cuts had not been made then the increase in expenditure would not have occurred.
I will quote only one figure to the Economic Secretary from his own Economic Survey, which I am sure he reads even if the Chancellor does not. There was an increase in dividend payments between 1954 and 1955 of about £100 million. That was a very similar figure to the reduction in taxation of companies in that year, and it is also almost exactly the same figure as the Economic Survey gives for the excess of expenditure over resources in 1955 which led to the trouble. That is how we should have kept down consumption, and where we think the mistake was made. Since the Government refused yesterday to discriminate in this matter of the investment allowance, we have no alternative but to oppose the whole Clause.
283 The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) made a speech last night in which he said that to discriminate in these allowances would disrupt capitalism, ruin the country, disunite Europe, and so on. I told the noble Lord earlier today that I was going to mention this. When I pointed out to him that he voted for a similar proposal in 1951, he challenged me to produce chapter and verse for that statement. As it turns out, I did him an injustice; he did not vote once but six times for it. My hon. Friend has already mentioned that I have the HANSARD references if the noble Lord were here to question what I said.
I wish to make one more point before we reach a decision on the Clause. As a result of the decision to abolish the investment allowance, we shall now be giving precisely the same capital allowance to the passenger motor car used for business or alleged business purposes as for any other item that attracts the allowance. The Economic Secretary will remember—I hope that the Chancellor is also aware of this—that when the investment allowance was introduced in 1954 motor cars were excluded, thus admitting by implication our argument that they ought never to have this allowance at all, and also admitting, what the Inland Revenue had up to then denied, that it was impracticable to discriminate between cars for this allowance and other types of capital assets.
I hope that the Government will look at this matter very seriously. I know that the Economic Secretary knows the point well, but it never was the intention of Parliament that cars should be bought for nominally business purposes and used largely for private purposes at the expense of the Exchequer. In the past week we have had a very interesting statement from Lady Docker to the effect that the famous Daimlers with their golden doors, zebra-skin seats and tyres made of mink, or whatever it was, were not, in fact, the property of Lady Docker but the property of the Daimler Company. I take that to mean that these cars, like so many others, were bought partly at the expense of the Exchequer and with the assistance of the initial allowance. 284 I make this point in no party sense whatever, and I hope that the Chancellor win look seriously at it.
§ 5.15 p.m.
§ Mr. J. T. Price (Westhoughton)
I congratulate my right hon. Friend on being able to raise a matter which on a previous occasion I thought would be outside the bounds of this Clause. But since it has been mentioned, I ask my right hon. Friend and the Chancellor to realise that the estimate given for the value of private cars placed on the market as new cars last year was of the order of £350 million. On reliable estimates, 80 per cent. of that was chargeable to business account and a 30 per cent. initial allowance was allowed on the purchase of those cars, which brings the total being allowed to somewhere in the region of £90 million for private cars charged to business account. That is a very serious matter.
§ Mr. H. Macmillan
I take it that the party opposite would support the exclusion of private motor cars from the benefit of the initial allowances, although not, of course, from being charged as part of business expenses.
§ Mr. Macmillan
I should like to know, because it is a very interesting decision of the Opposition—[An HON. MEMBER: "In present conditions."]—in present conditions
§ Question put:
§ The Committee divided: Ayes 261, Noes 199.285
|Division No. 211.]||AYES||[5.19 p.m.|
|Agnew, Cmdr. P. G.||Gower, H. R.||Macpherson, Niall (Dumfries)|
|Aitken, W. T.||Graham, Sir Fergus||Maddan, Martin|
|Allan, R. A. (Paddington, S.)||Green, A.||Maitland, Cdr. J. F. W. (Horncastle)|
|Alport, C. J. M.||Grimond, J.||Manningham-Buller, Rt. Hn. Sir R.|
|Arbuthnot, John||Grimston, Hon. John (St. Albans)||Markham, Major Sir Frank|
|Armstrong, C. W.||Grimston, Sir Robert (Westbury)||Marlowe, A. A. H.|
|Ashton, H.||Grosvenor, Lt.-Col. R. G.||Marples, A. E.|
|Astor, Hon. J. J.||Hall, John (Wycombe)||Marshall, Douglas|
|Atkins, H. E.||Hare, Rt. Hon. J. H.||Mathew, R.|
|Balniel, Lord||Harris, Frederic (Croydon, N.W.)||Mawby, R. L.|
|Barber, Anthony||Harris, Reader (Heston)||Maydon, Lt.-Comdr. S. L. C.|
|Barlow, Sir John||Harrison, A. B. C. (Malden)||Medlioott, Sir Frank|
|Barter, John||Harrison, Col. J. H. (Eye)||Milligan, Rt. Hon. W. R.|
|Baxter, Sir Beverley||Harvey, Air Cdre. A. V. (Macclesfd)||Monckton, Rt. Hon. Sir Walter|
|Bell, Philip (Bolton, E.)||Harvey, Ian (Harrow, E.)||Morrison, John (Salisbury)|
|Bell, Ronald (Bucks, S.)||Harvey, John (Walthamstow, E.)||Nabarro, G. D. N.|
|Bennett, F. M. (Torquay)||Harvie-Watt, Sir George||Nairn, D. L. S.|
|Bidgood, J. C.||Hay, John||Neave, Airey|
|Biggs-Davison, J. A.||Head, Rt. Hon. A. H.||Nicholson, Godfrey (Farnham)|
|Birch, Rt. Hon. Nigel||Heald, Rt. Hon. Sir Lionel||Nioolson, N. (B'n'm'th, E. & Chr'ch)|
|Bishop, F. P.||Heath, Rt. Hon. E. R. G.||Nield, Basil (Chester)|
|Black, C. W.||Henderson, John (Cathcart)||Noble, Comdr. A. H. P.|
|Body, R. F.||Hicks-Beach, Mal. W. W.||Nugent, G. R. H.|
|Boothby, Sir Robert||Hill, Rt. Hon. Charles (Luton)||Nutting, Rt. Hon. Anthony|
|Bossom, Sir Alfred||Hill, Mrs. E. (Wythenshawe)||O'Neill, Hn. Phelim (Co. Antrim, N.)|
|Boyd-Carpenter, Rt. Hon. J. A.||Hill, John (S. Norfolk)||Ormsby-Gore, Hon. W. D.|
|Boyle, Sir Edward||Hinchingbrooke, Viscount||Page, R. G.|
|Braine, B. R.||Hirst, Geoffrey||Pannell, N. A. (Kirkdale)|
|Braithwaite, Sir Albert (Harrow, W.)||Holland-Martin, C. J.||Partridge, E.|
|Brooke, Rt. Hon. Henry||Holt, A. F.||Peyton, J. W. W.|
|Brooman-White, R. C,||Hope, Lord John||Pickthorn, K. W. M.|
|Bryan, P.||Hornby, R. P.||Pilkington, Capt. R. A.|
|Buchan-Hepburn, Rt. Hon. P. G. T.||Horobin, Sir Ian||Pitman, I. J.|
|Burden, F. F. A.||Horsbrugh, Rt. Hon. Dame Florence||Pitt, Miss E. M.|
|Butcher, Sir Herbert||Howard, John (Test)||Pott, H. P.|
|Campbell, Sir David||Hudson, Sir Austin (Lewisham, N.)||Powell, J. Enoch|
|Carr, Robert||Hughes, Hallet, Vice-Admiral J.||Prior-Palmer, Brig. O. L.|
|Cary, Sir Robert||Hughes-Young, M. H. C.||Profumo, J. D.|
|Channon, H.||Hutchison, Sir Ian Clark (E'b'gh, W.)||Raikes, Sir Victor|
|Chichester-Clark, R.||Hyde, Montgomery||Ramsden, J. E.|
|Clarke, Brig. Terence (Portsmth, W.)||Hylton-Foster, Sir H. B. H.||Rawlinson, Peter|
|Conant, Maj. Sir Roger||Iremonger, T. L.||Redmayne, M.|
|Cooper, Sqn. Ldr. Albert||Irvine, Bryant Codman (Rye)||Rees-Davies, W. R.|
|Cooper-Key, E. M.||Jenkins, Robert (Dulwich)||Renton, D. L. M.|
|Cordeaux, Lt.-Col. J. K.||Jennings, J. C. (Burton)||Ridsdale, J. E.|
|Corfield, Capt. F. V.||Johnson, Dr. Donald (Carlisle)||Roberts, Sir Peter (Heeley)|
|Craddock, Beresford (Spelthorne)||Johnson, Eris (Blackley)||Robertson, Sir David|
|Crosthwaite-Eyre, Col. O. E.||Johnson, Howard (Kemptown)||Robinson, Sir Roland (Blackpool, S.)|
|Crouch, R. F.||Jones, Rt. Hon. Aubrey (Hall Green)||Rodgers, John (Sevenoaks)|
|Crowder, Sir John (Finchley)||Joynson-Hicks, Hon. Sir Lancelot||Roper, Sir Harold|
|Cunningham, Knox||Keegan, D.||Sandys, Rt. Hon. D.|
|Currie, G. B. H.||Kerby, Capt. H. B.||Schofield, Lt.-Col. W.|
|Dance, J. C. G.||Kerr, H. W.||Scott-Miller, Cmdr. R.|
|Davidson, Viscountess||Kimball, M.||Sharples, R. C.|
|D'Avigdor-Goldamid, Sir Henry||Kirk, P. M.||Shepherd, William|
|Deedes, W. F.||Lagden, G. W.||Simon, J. E. S. (Middlesbrough, W.)|
|Digby, Simon Wingfield||Lambert, Hon. G.||Smithers, Peter (Winchester)|
|Donaldson, Cmdr. C. E. MoA.||Lambton, Viscount||Smyth, Brig. Sir John (Norwood)|
|Drayson, G. B.||Lancaster, Col. C. G.||Soames, Capt. C.|
|du Cann, E. D. L.||Leather, E. H. C.||Spearman, Sir Alexander|
|Duncan, Capt. J. A. L.||Leburn, W. G.||Speir, R. M.|
|Duthie, W. S.||Legge-Bourke, Maj. E. A. H.||Spens, Rt. Hn. Sir P. (Kena'gt'n, S.)|
|Eccles, Rt. Hon. Sir David||Legh, Hon. Peter (Petersfield)||Stanley, Capt. Hon. Richard|
|Eden, J. B. (Bournemouth, West)||Lindsay, Hon. James (Devon, N.)||Stevens, Geoffrey|
|Emmet, Hon. Mrs. Evelyn||Lindsay, Martin (Solihull)||Steward, Sir William (Woolwich, W.)|
|Errington, Sir Eric||Linstead, Sir H. N.||Stewart, Henderson (Fife, E.)|
|Erroll, F. J.||Lloyd, Maj. Sir Guy (Renfrew, E.)||Stoddart-Scott, Col, M.|
|Farey-Jones, F. W.||Lloyd, Rt. Hon. Selwyn (Wirral)||Studholme, Sir Henry|
|Fell, A.||Longden, Gilbert||Summers, Sir Spencer|
|Finlay, Graeme||Lucas, Sir Jocelyn (Portsmouth, S.)||Taylor, Sir Charles (Eastbourne)|
|Fisher, Nigel||Lucas, P. B. (Brentford & Chiswick)||Taylor, William (Bradford, N.)|
|Fleetwood Hesketh, R. F.||Lucas-Tooth, Sir Hugh||Teeling, W.|
|Forrest, G.||Macdonald, Sir Peter||Thomas, Leslie (Canterbury)|
|Fort, R.||McKibbin, A. J.||Thompson, Kenneth (Walton)|
|Foster, John||Mackie, J. H. (Galloway)||Thompson, Lt.-Cdr. R. (Croydon, S.)|
|Fraser, Sir Ian (M'cmbe & Lonsdale)||McLaughlin, Mrs. P.||Thornton-Kemsley, C. N.|
|Freeth, D. K.||Maclay, Rt. Hon. John||Tiley, A. (Bradford, W.)|
|Galbraith, Hon. T. G. D.||Maclean, Fitzroy (Lancaster)||Tilney, John (Wavertree)|
|Garner-Evans, E. H.||McLean, Neil (Inverness)||Touche, Sir Gordon|
|George, J. C. (Pollok)||Macleod, Rt. Hn. Iain (Enfield, W.)||Turner, H. F. L.|
|Godber, J. B.||MacLeod, John (Ross & Cromarty)||Tweedsmuir, Lady|
|Gomme-Duncan, Col. Sir Alan||Macmillan,Rt.Hn.Harold(Bromley)||Vane, W. M. F.|
|Vaughan-Morgan, J. K.||Wall, Major Patrick||Williams, R. Dudley (Exeter)|
|Vickers, Miss J. H.||Ward, Hon. George (Woroester)||Woollam, John Victor|
|Vosper, D. F.||Waterhouse, Capt. Rt. Hon. C.||Yates, William (The Wrekin)|
|Wakefield, Edward (Derbyshire, W.)||Watkinson, Rt. Hon. Harold|
|Wakefield, Sir Wavell (St. M'lebone)||Whitelaw, W.S.I.(Penrith & Border)||TELLERS FOR THE AYES:|
|Walker-Smith, D. C.||Williams, Paul (Sunderland, S.)||Mr. Oakshott and Mr. Wills.|
|Ainsley, J. W.||Griffiths, Rt. Hon. James (Lianelly)||Paling, Will T. (Dewsbury)|
|Albu, A. H.||Griffiths, William (Exchange)||Palmer, A. M. F.|
|Allen, Arthur (Bosworth)||Hall, Rt. Hn. Glenvil (Colne Valley)||Pargiter, G. A.|
|Allen, Scholefield (Crewe)||Hamilton, W. W.||Parker, J.|
|Awbery, S. S.||Hannan, W.||Parkin, B. T.|
|Bacon, Miss Alice||Hayman, F. H.||Paton, John|
|Baird, J.||Healey, Denis||Pearl, T. F.|
|Balfour, A.||Henderson, Rt. Hn. A. (Rwly Regis)||Plummer, Sir Leslie|
|Bence, C. R. (Dunbartonshire, E.)||Hobson, C. R.||Price, J. T. (Westhoughton)|
|Benn, Hn. Wedgwood (Bristol, S.E.)||Holman, P.||Price, Philips (Gloucestershire, W.)|
|Benson, G.||Holmes, Horace||Probert, A. R.|
|Bevan, Rt. Hon. A. (Ebbw Vale)||Houghton, Douglas||Proctor, W. T.|
|Blackburn, F.||Howell, Charles (Perry Barr)||Pryde, D. J.|
|Blyton, W. R.||Hubbard, T. F.||Randall, H. E.|
|Boardman, H.||Hughes, Cledwyn (Anglesey)||Rankin, John|
|Bottomley, Rt. Hon. A. G.||Hughes, Emrys (S. Ayrshire)||Redhead, E. C.|
|Bowden, H. W. (Leicester, S. W.)||Hughes, Hector (Aberdeen, N.)||Reeves, J.|
|Bowen, E. R. (Cardigan)||Hunter, A. E.||Reid, William|
|Bowles, F. G.||Hynd, H. (Accrington)||Roberts, Albert (Normanton)|
|Boyd, T. C.||Jay, Rt. Hon. D. P. T.||Roberts, Goronwy (Caernarvon)|
|Braddock, Mrs. Elizabeth||Jeger, George (Goole)||Robinson, Kenneth (St. Pancras, N.)|
|Brockway, A. F.||Jeger, Mrs. Lena (Holbn & St.Prics, S.)||Rosa, William|
|Brown, Rt. Hon. George (Belper)||Jenkins, Roy (Stechford)||Royle, C.|
|Brown, Thomas (Ince)||Jones, Rt. Hon. A. Creech(Wakefield)||Shinwell, Rt. Hon. E.|
|Burton, Miss F. E.||Jones, David (The Hartlepools)||Short, E. W.|
|Butler, Herbert (Hackney, C.)||Jones, Elwyn (W. Ham, S.)||Shurmer, P. L. E.|
|Butler, Mrs. Joyce (Wood Green)||Jones, J. Idwal (Wrexham)||Silverman, Julius (Aston)|
|Callaghan, L. J.||Jones, T. W. (Merioneth)||Skeffington, A. M.|
|Castle, Mrs. B. A.||Kenyon, C.||Slater, Mrs. H. (Stoke, N.)|
|Chetwynd, G. R.||Key, Rt. Hon. C. W.||Slater, J. (Sedgefield)|
|Clunie, J.||King, Dr. H. M.||Smith, Ellis (Stoke, S.)|
|Coldrick, W.||Lawson, G. M.||Snow, J. W.|
|Collick, P. H. (Birkenhead)||Lee, Frederick (Newton)||Sorensen, R. W.|
|Collins, V. J. (Shoreditch & Finsbury)||Lee, Miss Jennie (Cannock)||Stewart, Michael (Fulham)|
|Corbet, Mrs. Freda||Lever, Harold (Cheetham)||Stokes, Rt. Hon. R. R. (Ipswich)|
|Cove, W. G.||Lever, Leslie (Ardwick)||Stones, W. (Conceit)|
|Craddock, George (Bradford, S.)||Lewis, Arthur||Strachey, Rt. Hon. J.|
|Cronin, J. D.||Logan, D. G.||Stross,Dr.Barnett(Stoke-on-Trent,C.)|
|Crossman, R. H. S.||Mabon, Dr. J. Dickson||Summerskill, Rt. Hon. E.|
|Cullen, Mrs. A.||MacColl, J. E.||Sylvester, G. O.|
|Dalton, Rt. Hon. H.||McGhee, H. G.||Taylor, Bernard (Mansfield)|
|Darling, George (Hillsborough)||McInnes, J.||Thomas, lorwerth (Rhondda, W.)|
|Davies, Harold (Leek)||McKay, John (Wallsend)||Thomson, George (Dundee, E.)|
|Davies, Stephen (Merthyr)||Mahon, Simon||Thornton, E.|
|Deer, G.||Mallalieu, E. L. (Brigg)||Timmons. J.|
|de Freitas, Geoffrey||Mann, Mrs. Jean||Turner-Samuels, M.|
|Delargy, H. J.||Marquand, Rt, Hon. H. A.||Viant, S. P.|
|Dodds, N. N.||Mason, Roy||Warbey, W. N.|
|Dugdale, Rt. Hn. John (W. Brmwch)||Mayhew, C. P.||Wells, Percy (Faversham)|
|Dye, S.||Messer, S.,- F.||West, D. G.|
|Ede, Rt. Hon. J. C.||Mikardo, Ian||Wheeldon, W. E.|
|Edwards, Rt. Hon. John (Brighouse)||Mitchison, G. R.||White, Mrs. Eirene (E. Flint)|
|Edwards, Rt. Hon. Ness (Caerphilly)||Monslow, W.||White, Henry (Derbyshire, N.E.)|
|Edwards, Robert (Bilston)||Moody, A. S.||Wigg, George|
|Edwards, W. J. (Stepney)||Morris, Percy (Swansea, W.)||Wilkins, W. A.|
|Evans, Albert (Islington, S.W.)||Mort, D. L.||Willey, Frederick|
|Evans, Stanley (Wednesbury)||Moss, R.||Williams, David (Neath)|
|Fernyhough, E.||Moyle, A.||Williams, W. R. (Openshaw)|
|Fienburgh, W.||Mulley, F. W.||Willis, Eustace (Edinburgh, E.)|
|Finch, H. J.||Neal, Harold (Bolsover)||Wilson, Rt. Hon. Harold (Huyton)|
|Forman, J. C.||Oliver, G. H.||Winterbottom, Richard|
|Fraser, Thomas (Hamilton)||Orbach, M.||Woodburn, Rt, Hon. A.|
|Gibson, C. W.||Oswald, T.||Woof, R. E.|
|Gordon Walker, Rt. Hon. P. C.||Owen, W. J.||Yates, V, (Ladywood)|
|Grey, C. F.||Padley, W. E.||Younger, Rt. Hon. K.|
|Griffiths, David (Rother Valley)||Paget, R. T.||Zilliacus, K.|
|Paling, Rt. Hon. W. (Dearne Valley)|
|TELLERS FOR THE NOES:|
|Mr. John Taylor and Mr. Rogers.|
|Clause ordered to stand part of the Bill.|
|Clause 13 ordered to stand part of the Bill.|
Question put and agreed to.