§ Turning to matters of wider interest I will deal, first, with the question of fiscal measures in the field of investment. As the Committee will remember, my right hon. Friend suspended the 20 per cent. investment allowances in February, 1956, in all but certain special cases. It will, I think, be clear to hon. Members who followed my earlier remarks about investment that I do not consider that the time has come to restore these allowances.
§ But there is one exception that I propose. Strong representations have been made to me in the case of the shipping industry. This industry is, indeed, in a special position. It is faced with severe competition in a world market, often from ships sailing under flags of convenience with small tax liabilities. It finds it increasingly difficult to build up finance for the replacement of its ships when they become obsolete. It has been suggested that I should give to shipping some specially favourable depreciation allowances which would enable the owners to build up, while a ship was operating, tax free reserves against its eventual replacement. Much as I appreciate the problems of the shipping industry, I cannot agree to do that.
996§ I have, therefore, looked for alternatives. There are clearly very real difficulties in giving any special tax relief to a selected industry, for inevitably the question arises where to draw the line. There is, however, already in existence one form of special relief to the shipping industry, namely, the 20 per cent. investment allowance which it was allowed by my predecessor to retain last year. After careful thought I have reached the conclusion that as a recognition of its unique position I can increase that allowance.
§ I propose, therefore, that the investment allowance for capital expenditure on the construction of new ships shall be increased to 40 per cent. as regards expenditure becoming due and payable after today. This will cost nothing this year, but the cost will rise to £11½ million in a full year. I must repeat that this is a unique step for a unique industry which is the life line of our country and I must be rigid in my attitude to any requests by other industries for similar treatment. Capital expenditure on scientific research and approved fuel saving equipment, which at present qualities for the investment allowance, will continue to enjoy the present rate.