HC Deb 02 December 1964 vol 703 cc700-8
Dame Irene Ward

I beg to move Amendment No. 104, in page 8, line 2, to leave out "ship or".

The Deputy-Chairman

With this Amendment we can discuss Amendments No. 105 and No. 106.

Dame Irene Ward

I almost apologise for embarking on these Amendments at this hour of the morning. However, they relate to export rebate and they refer specifically to ship repairing, which, hon. Members will realise, is a very important industry, and is at present subject to great pressure and international competition.

I want, first, to put briefly the background propositions in relation to the Amendments. The first is that those ship-repairers' councils which speak as representatives of the industry are seriously perturbed that the Clause alters the continuity of policy which the industry has had for many years. In other words, ship repairing has always been regarded as an export industry. As the Clause seems to completely alter this continuity of policy, those connected with the industry naturally take great exception to it.

Secondly, those employed in the industry and those who are responsible for it are greatly dismayed that the Clause appears to be discriminatory against the ship-repairing industry. I represent a constituency which is concerned with ship repairing and I refer in the Amendments only to that industry. I am not arguing the case for the aircraft industry which is also concerned in the provisions of Clause 7(4).

Ship repairers are seriously dismayed that powers in the Clause relating to export rebates are discriminatory against the industry, and in their interest I have been asked to raise the matter. It would serve the purpose of my Amendments if I gave the basis for my argument that the Clause seems to mean an alteration in policy directed towards the ship-repairing industry. I therefore want to quote from a letter from the Dry Dock Owners and Repairers' Central Council, which puts the position exactly as it has been for many decades.

The letter says that All ship repair work on sea-going ships is export work. This was recognised at the time of serious material shortages in 1946. Fortunately, in the argument which I am deploying tonight I am dealing with the attitude of Her Majesty's Government at the time when they were His Majesty's Government in 1945. I am, therefore, not entering a controversy about the Socialist or Conservative approach to ship repairing. I am glad of this because as this was the Government's policy in 1945 it seems all the more remarkable that we should find this change of policy in the Bill.

The letter goes on: This was recognised at the time of serious material shortages in 1946, when the Admiralty (then the industry's sponsoring Department) instructed Regional Officers to have regard to the very important part which the industry played in the export drive. The official Admiralty Instruction said: 'In view of the fundamental importance of these industries. Merchant Navy and merchant building repairs and reconversions should be regarded as themselves of prime importance as contributing to the export drive.' In 1947, the Admiralty officially advised the Shipbuilding Conference that all ship building was henceforth to be treated as export work, without distinguishing between work for the British flag and work for foreign account. White Papers published in 1947 (Economic Survey for 1947) and 1948 (Capital Investment in 1948) both make the same point, and in all these circumstances ship building has always been interpreted as including ship repairing. I am sure, therefore, that I shall receive a sympathetic response from the Government. It would be very helpful to the ship-repairing industry if the Government spokesman would be good enough to explain this apparent difference in the treatment of ship repairing as an exporting industry. Both sides of the Committee attach great importance to ship repairing and to the part which shipbuilding, ship repairing and the Merchant Navy play in our country's economy. I hope that arrangements will be made to treat ship repairing as an export industry, as it has been in the past, so that it may obtain the benefit of the export rebate.

Hon. and right hon Members should realise, having regard to the competitiveness of our industry and the international competition which we face, that any additional money which comes in through ship repairing will be of benefit not only to the industry itself, but to the country's economy.

Mr. Redhead

The hon. Lady the Member for Tynemouth (Dame Irene Ward) will appreciate that this is an exceedingly complex and technical matter, and is particularly difficult to deal with at this hour of the morning. If I do not go over the whole field of technicalities, I hope that she will not think me discourteous. I shall try to relate what I have to say to what seem to me to be the overwhelming difficulties of her proposal.

The first of her Amendments expresses the desire to include ships' stores among goods eligible for the export rebate, although the hon. Lady devoted most of her remarks to the second leg of her proposition, that the rebate should be allowed in respect of goods used in the repairing and refitting of ships in the United Kingdom. She acknowledged that, logically, any concession in this respect would have to be extended to aircraft stores and repairs, and this would add further complications.

We have considered both aspects of the question of stores very carefully, but we see serious practical difficulties and risks in attempting to apply the export rebate to stores. Unconsumed stores, as the hon. Lady probably knows, are frequently relanded in this country and are returned and consumed in the home market. For this purpose, a very detailed account of the stores is required by the Customs, and when they have been relieved of duty the duty is collected before they are released for home consumption.

Since the export rebate will be claimed and paid quarterly, automatic repayment of the rebate on goods relanded would clearly be impossible, since there would be no certain way of knowing at that time whether rebate had been or would be paid. In this respect, these rebates depart from the existing drawback machinery.

3.45 a.m.

The hon. Lady seemed to think that there was some change of policy in regard to goods used in ship repair. I think that she was mistaken. Goods taken into shipbuilding yards for building or refitting ships are relieved by Sections 5 and 9 of the Import Duties Act, 1958. They are not relieved of other Customs duties, nor are they automatically relieved of Purchase Tax, though the shipowner may, by becoming a registered trader for the purpose of the tax itself, receive them free of Purchase Tax.

What I want to make clear is that the export rebates that will be repaid are not in respect of protective duties, but belong with the charges on which registered shipbuilding yards as such do not at present obtain statutory relief. In these circumstances, I hope that the hon. Lady will appreciate that there is no intention of any change of policy.

I acknowlege quite readily that there is a particularly attractive case in principle for allowing the rebate on goods specifically intended for the repair of foreign ships in British shipyards but the difficulty is that the present Customs arrangements for the control of shipbuilding yards make no comprehensive distinction between goods supplied to foreign ships, on the one hand, and goods supplied to British ships, on the other.

To set up such a control would be a complication very unwelcome to the shipyards themselves, and also to the Customs, whose staff will be fully extended in the early stages of the scheme. In any event, it would appear that the Amendments in their present form would probably fail to achieve the object which the hon. Lady has in mind in that there would not be any sale of the goods as such to a person resident or incorporated outside the United Kingdom.

Now, essentially, the whole export rebate scheme is linked to export sales, but the real difficulty here is one of mechanics. Ships' stores and goods used for ship-repair work honestly cannot be fitted into the scheme without a considerable degree of complication. I would add that notwithstanding this, the rebate will be paid on ships and aircraft built here to meet genuine export orders.

I have very deliberately, in view of the time, abbreviated my reply to the hon. Lady. If that reply does not fully satisfy her, I am sure she will accept my assurance that the matter has been very fully considered and that it is the practical difficulties which dictate this reply to her. If she would like more detail on the technical aspect and would care to write to me, I will ensure that she has a fuller explanation.

Dame Irene Ward

In thanking the Minister for that reply, which, of course, is very disappointing, I myself am obviously in no position to go into all the technical details. But it does seem to me that because of the difficulties of the machinery, which I think really was the nub of what the hon. Gentleman was saying, the ship-repairing industry has got to be sacrificed. The export rebate which might go to the industry has got to be sacrificed because the Treasury cannot find a suitable machinery so as to be fair to the ship repairers.

In other words, those working in ship repairing are being made to pay for a very complicated Bill because it appears impossible to find adequate machinery to give them what they always had in the past. The Minister says that there has been no change, but he is wrong, because foreign ships built or repaired in this country, whether for foreign or for British owners, were always regarded as contributing to exports. The Minister has not answered that point.

I have tried to be as well informed as possible. I know that the Department—I do not know which Department will deal with it—is to meet the representatives of the shipbuilders and the ship repairers on Friday. The Minister need not give me an answer now on the technicalities, but he must apply his mind to giving an answer to those who speak for the industry. Will he give me an assurance that between now and Friday he will put the brains of his Department to work so that there may be a satisfactory discussion with those representing the industry on Friday?

It has been pointed out that it is difficult to find an interpretation for an export ship. Perhaps after the discussions on Friday, if the Minister works over the weekend he will be able to put down an Amendment for Report on Monday which will meet the case of the ship repairers. I hope that he will give me an assurance that he will do that. He has all the Department at his disposal whereas I have only my own brains with which to find a solution.

Mr. Redhead rose—

Mr. Loughlin rose—

Hon. Members

Oh.

Mr. Loughlin I do not know why my hon. Friends say "Oh". It is only ten minutes to four.

I hope that my hon. Friend the Minister, who so eagerly jumped to the Dispatch Box, will give the hon. Lady no further assurance, because she is not quite in keeping with the normal conduct this morning. She says that we on this side of the Committee are sacrificing the shipbuilding industry. That is the burden of her complaint. She is so concerned about it that she is prepared to plead for assurances and to do no more about it. If she, with all her well-known fighting qualities, feels that we are sacrificing the industry which she represents, her duty is to take her hon. and right hon. Friends into the Lobby against the Government.

Mr. Redhead

Courtesy demands a reply to the latter part of the hon. Lady's interjection, with due respect to my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin). Any representations from the authoritative organisations concerned with this matter which are made at official level will be most carefully considered and every attention will be given to those representations and to any propositions which they make.

Amendment negatived.

Mr. Hirst

I beg to move Amendment No. 107, in page 8, to leave out line 20.

This Amendment deals with a short but a technical point, so I hope that the Committee will bear with me. If I have it right, and I hope that I have, the export rebate scheme provides that rebate shall normally be payable on fulfilment of three conditions: first, that the goods have been produced or manufactured in England; secondly, that they have been exported; and, thirdly, that they have been sold or hired to a foreigner on application, though not necessarily at the time of the export.

I should be very grateful if those hon. Gentlemen on the Government Front Bench who want to talk would do so outside. I am talking at the moment.

The Bill actually requires, in Clause 7 (6, a, (i)), that the goods should be sold … to a person not ordinarily resident, or, in the case of a body corporate, not incorporated in the United Kingdom, the test obviously being that residence is reasonable, and incorporation is not. That is the point which I want to put to the Committee quite briefly. It is a paradox. A company may well be incorporated in one place, and owned, managed or controlled in another, and the present rules will have artificial results in such cases.

If one sells the goods to a company which operates and is owned and controlled entirely outside the United Kingdom, it will, nevertheless, not qualify for the rebate if the company is incorporated here. On the other hand, the sale of export goods to a company which operates entirely within the United Kingdom will qualify for rebate if the company was incorporated outside it. I hope that everybody was able to follow that very substantial difference. My Amendment seeks to substitute the much more reasonable test of residence, which avoids the anomalies in tax law. I hope that that point has been considered.

I am sorry to bring such a troublesome Amendment before the Committee, but it has been on the Notice Paper for some time. I hope that the Treasury has given consideration to this rather technical point.

Sir Eric Fletcher

As the hon. Member for Shipley (Mr. Hirst) said, this is a short but not an easy point. Careful consideration has been given to it, and I am not at all sure that the solution which the hon. Member suggests will have the effect which he intends or desires. He is perfectly right in pointing out that if a company is incorporated abroad, but carries on business here, it would be anomalous for goods exported to such a company to have the benefit of the rebate. The alternatives are twofold—to define the company in such a way either by reference to its place of incorporation, or to its place of residence. There are in some instances objections to either course.

4.0 a.m.

One thing which is essential is that the company should be identified with complete certainty. As the hon. Member will realise, there is an almost infinite variety of possible transactions which could be entered into. This rebate scheme is a new introduction into our fiscal law. I can assure the hon. Member that while I cannot advise the Committee to accept this Amendment we are not unfamiliar with the kind of difficulty which may arise. It is the kind of situation which the Government will watch carefully. We shall give it further thought between now and Report, and if we can find an alternative form of words which makes the position even clearer than it is now I am sure that my right hon. Friend will put down an Amendment for that stage. I cannot give a definite assurance to that effect, but we appreciate that the point is one of substance which requires further thought, which will be given to it.

Mr. Hirst

I am most grateful to the hon. Gentleman for that approach and consideration. In view of the assurance, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Heath

I beg to move Amendment No. 114, in page 8, line 35, to leave out from "business" to "and" in line 37.

Three points arise on this Amendment. If the Minister without Portfolio will deal with them, I shall be grateful. The first occurs in subsection (6,b): business carried on by the applicant or any company directly or indirectly controlled by him". In the Bill there is no definition of directly or indirectly controlled by him". This could raise some ambiguity. The Amendment would delete the phrase entirely for two other reasons. Even if the Government do not accept the following reasons it may be that they will look at the definition of company directly or indirectly controlled by him". The second point arises where a manufacturing company has a subsidiary which is an exporting company and exports to its trading company which is abroad. We understand that it would not be eligible for export incentive, so this appears to be a case where it is justified. If our interpretation of the subsection is correct and the Government agree that this is a case where incentive is justified, while perhaps not accepting this form of words, they could deal with the matter at a later stage.

The third case is that of goods exported to a British registered company operating abroad and using the goods for its own use. The question is whether it should have the rebate. That would appear not to be covered by this form of words. I understand that the Minister may not be able to give his views on these points at this moment, but I shall be glad if he takes them into account and makes some arrangement about the wording, perhaps at the next stage of the Bill.

Sir Eric Fletcher

I gladly respond to what the right hon. Member said about this Amendment and the spirit in which he said it. It is not an easy matter. I am sure that he will appreciate that the object of the Government is to give the fullest possible benefit by way of this rebate to all exporters who are genuinely entitled to receive it.

This is a somewhat complicated matter of finding with absolute precision who will benefit from it. It is a matter which has given concern to the Federation of British Industries. In answer to one of the three points the right hon. Member mentioned, he will appreciate that there are cases in which a group of companies are so set up that they have a subsidiary which is a manufacturing company and another which is not. There may be cases where, under the Clause as it stands, they would not get the benefit of the rebate, but it would be open to them to rearrange their internal affairs in such a way as to get the benefit. They will not necessarily be penalised and it would not be impossible for them to make the necessary adjustments in their commercial transactions to bring themselves within the terms of the rebate.

I appreciate that there are other considerations arising out of the Amendment. We are familiar with the point, and I can give the right hon. Gentleman the assurance for which he asks, that we will give the matter further consideration between now and the Report stage.

Mr. Heath

In those circumstances, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Amendment made: In page 9, line 9, leave out "relates" and insert "relate". —[Sir Eric Fletcher.]

Clause, as amended, ordered to stand part of the Bill.

Clause 8 ordered to stand part of the Bill.