§ 9. Mr. Leatherasked the Chancellor of the Exchequer what was the figure of total capital investment in industry for the last year for which figures are available; and what percentage of this was financed by net retained profits, by depreciation allowances, and by new capital issues, respectively.
§ The Paymaster-General (Mr. Reginald Maudling)I assume that by "industry" my hon. Friend intends to cover all companies and unincorporated businesses but 1315 not the nationalised industries nor the trading activities of local authorities and the Central Government. On that basis gross fixed capital formation in 1956 amounted to about £1,450 million, of which about 58 per cent. was covered by the statutory depreciation allowances given for tax purposes, including initial and investment allowances. It is not possible to give the sources from which the balance was met, as undistributed profits and the proceeds of new capital issues are used not only to finance fixed capital formation but also to finance changes in stocks and in other working capital.
§ Mr. LeatherWhile thanking my right hon. Friend for those figures, may I ask him to reflect on this? Fifty-eight per cent. is a significantly low figure. Successive Governments since the war have been urging industry to finance investment by ploughing back profits, which in turn means artificially high profit margins. When he and his right hon. Friend consider depreciation allowances in the forthcoming Budget, will they reflect that if they can increase that 58 per cent. a great deal it will make a real contribution towards stabilising prices by allowing industry to reduce profit margins?
§ Mr. MaudlingThat is a very important point. My hon. Friend will appreciate that it cannot be dealt with adequately by question and answer.