HC Deb 07 December 1964 vol 703 cc1229-37
Mr. MacDermot

I beg to move Amendment No. 10, in page 7, line 33, at the end to insert: and (d) that the applicant is a person ordinarily resident, or, in the case of a body corporate, incorporated, in the United Kingdom, or (not being such a person) has produced or manufactured those goods in the course of a trade or business carried on by him in the United Kingdom". Perhaps it would be convenient also to discuss Amendment No. 11, in page 10, line 4 to leave out "and (b)" and to insert "(b) and (d)".

This is substantially a drafting Amendment in the sense that its intent is to make explicit what I think everyone has assumed was implied in the rebate provisions. It is obviously necessary not only to define clearly the transactions which qualify for rebate—and this is done in the Bill—but also to define who are the persons entitled to claim the rebate. Clause 7(6) defines the person at the receiving end of the transaction, as it were, but the Bill as drafted did not define the person who initiates the transaction and can apply for rebate on it. On adoption of the Amendment the definition provided will include not only persons ordinarily resident in the United Kingdom and bodies incorporate here, but also persons or bodies who produce or manufacture goods in the course of trade or business carried on by them in the United Kingdom.

If the House wishes, and if I have leave to speak again, I can explain the Amendment at greater length, but perhaps at this late hour this is all that the House will wish to hear now by way of explanation. The essence of the Amendment, as I have said, is to say expressly what was implied. I should make it clear that it does not in any way preclude payment in the cases alluded to by the right hon. Member for Bexley (Mr. Heath) in putting forward an Amendment to Clause 7(6) in Committee. He instanced two cases in which fears had been expressed that rebate would not be available to be paid although, in justice, it would appear that it should be.

I promised to look into those cases, and I have done so. Perhaps it is sufficient if I say that it appears to us that in each of them it would be possible for rebate to be paid. I undertake to write to the right hon. Gentleman and explain the matter more fully.

Mr. Hirst

I had an Amendment down which was discussed in Committee and which I later withdrew. I was led to withdraw it—I think that it was a mistake on my part—by the assurance which the hon. and learned Gentleman gave me. I am sure that he gave it quite sincerely, but he could not have grasped the point which I was trying to make. It is a very technical matter. In Committee, I put the point fairly shortly at about ten minutes to four in the morning, not an easy time for anyone to speak.

I shall not repeat what I said in Committee. I sought to substitute the much more reasonable test of residence which would avoid the anomalies with which we are fairly well familiar in our tax law. I thought that I had made the point clear. I instanced two cases, but, so far as I can see, they are still not covered. I am quite ready to be guided on it, and, if the point is a little difficult to deal with now by immediate answer, I should be happy to have a communication from the Financial Secretary in due course. I hope that he can give me an idea that there is some means of meeting the point.

I am the first to admit that it is complicated, and I shall be only too glad to be corrected if I am wrong, but, as I understand it, goods exported for use by United Kingdom registered companies operating overseas would qualify only if the goods were exported by the company which is to use them or by a company which actually controls it. That was an aspect of the case which struck me as somewhat fantastic, and, as I see it, the Amendment does not deal with it. At least, I am so advised.

Since I raised the matter in Committee, I have been given two instances, and I put them to the House now. Goods exported by a United Kingdom company and sold to another and independent company which uses them for its own purposes would not, as I understand, be covered by the Bill or by the Amendment. Secondly, goods exported by a subsidiary company of a group for use by another subsidiary of the same group, both being registered in the United Kingdom, would not qualify. I am advised that the Amendment would fail to meet either of those cases.

My original proposal was to take out of line 20, in Clause 7 (6, a), the reference to incorporation, because incorporation does not mean anything in this context. It does not matter whether a company is incorporated. What does matter a great deal is where it is managed and where it is trading. Therefore, the test of registration was what I mentioned in Committee, but, apparently, nothing has been done to meet the position of such companies.

I realise that nothing of the kind is intended, but I feel a little cheated in this matter. I thought that the point was clear, and I thought that the hon. and learned Gentleman had taken it. He has not met it in the least, and I should not have withdrawn my Amendment had I thought that an Amendment of the kind now before us would be what I should see on Report. I have good ground for believing that, to a great extent, the present Amendment is designed to stop foreigners and not to help British industry.

I would not object to that in part, although it is only part of the story, but the fact of the matter is that I do not think it would do it. It is like the usual zeal of the Customs in this matter, but it is laced with an almost unusual degree of stupidity on the part of the Government, because it would not have that effect at all. All that such companies have to do if they want to qualify is to put themselves right by getting registration in this country. Then they will be acting in an identical way with anybody else registered here and so will qualify for the rebate.

So I do not feel that we have been met in the slightest on this matter. I think that the proposal is likely to fail in its intention. Meanwhile, the just case of British industry goes unanswered. The people who ought to be in are still kept out, and, from my reading of the Amendment, the people who ought to be kept out can put themselves in. A United Kingdom company registered in this country cannot change its system of management or control or place of operation just to please the Chancellor, and a lot of that is bound up in our export pattern.

Little, if any, additional cost would be entailed if the Financial Secretary were to meet the point I have in mind. The rebate could always be made payable by various artificial methods, by passing the transaction through a company registered outside the United Kingdom. So we are back to the paradox which I put recently in Committee. The hon. and learned Gentleman said that my wording would not meet the case, and he may have been right, but by his wording he appears to be shutting the door to the foreigner setting up a purchasing organisation here to benefit from the rebate—and the foreigner can get round it—while he still leaves the position unjust for British industry.

I hope that I have made the position clear. If not, I will write the hon. and learned Gentleman a full memorandum so that it can be closely studied. If I have made myself clear, I should like an answer because, with no intention of being rude, I feel a little cheated having withdrawn my Amendment in the belief that I should be given something which met my point of view.

11.45 p.m.

Sir Harmar Nicholls

My comments on Clause 4 were made in modified anger. My comments on this Amendment to Clause 7 are made in sorrow. I did not see a great deal wrong with the wording until my hon. Friend the Member for Shipley (Mr. Hirst) spoke, and I should like to read his memorandum to be able to understand what he finds wrong with it.

However, we ought not to accept the Amendment without realising that it in no way improves the Clause. This is described as an export rebate. At best, that is what it is. By no stretch of the imagination can the Clause, even amended, be called an export incentive. But it is an export incentive that we want. The effort ought not to be to cut down exports. What we want is increased exports, and we want a real incentive. The Amendment, which is well worded to meet the narrow point referred to, will not give us that incentive.

It is good to see here both the Chancellor and my right hon. Friend the Member for Barnet (Mr. Maudling) who, I have no doubt, will be Chancellor again in a few months' time. I hope that they both bear in mind that Clause 7 as now to be amended must be improved very much before we can get to the point of improving exports. The method must be simple, direct and easily applied. It means that we shall probably have to get the G.A.T.T. to alter its rules, and the sooner we start doing that the better.

My right hon. Friend the Member for Barnet resisted that course, as did his predecessors, and it looks as though the present Chancellor, despite Clause 7 and this Amendment, is also resisting it. But it needs to be done. Only 30 or 40 firms are responsible for 30 per cent. of our exports. Eight thousand members of the F.B.I. should be making a greater contribution to exports, but the Amendment, as it has been explained to us, will not get them to do so.

I hope that the Chancellor and, later, my right hon. Friend the Member for Barnet, will get the G.A.T.T. amended so that we can give a profit and rebate to the firms which earn foreign currency. It can be done in a direct way on an accountant's certificate.

That sort of inducement would give us export incentives which would put right our balance of trade and it is only by doing something as drastic and as constructive as that that we shall get out of the dilemma the country is in. While I am prepared to welcome Clause 7 as amended—at least as I understand it until I read the memorandum promised by my hon. Friend the Member for Shipley—I hope that the Chancellor and my right hon. Friend the Member for Barnet will realise that something more substantial must be done. The sooner we get on with it instead of tinkering about, the better.

Mr. MacDermot

Perhaps I may reply, by leave of the House. I congratulate the hon. Member for Peterborough (Sir Harmar Nicholls) on beating his hon. Friends to the post and succeeding in making his Third Reading speech while we are still on Report. He decries a provision which directly offers an export incentive and which will make available to exporters rebates totalling an estimated £75 million. He is aware—he alluded to it—of the provision of the G.A.T.T. within the framework of which we have to operate in trying to do anything in a Finance Bill.

The hon. Member for Shipley (Mr. Hirst) referred again to the question which as he said he raised at a late hour in Committee. I did not comment on that earlier for I did not think it was on the point of the Amendment, but I will do so now. As I understand it, he was dealing with the definition of the overseas purchaser. What this Amendment is concerned with is the definition of the vendor—the exporter, in effect, from this country.

It is obviously essential that the scheme must make it clear to all parties concerned, not only the Customs authorities but also the commercial parties, who is to be treated as the last United Kingdom seller of the goods, otherwise there is a danger that double claims may be made or no claims at all when the rebate is due.

We also contemplate that there may be adjustments between traders so that the benefit of either all or part of the rebate may be passed on to someone other than the person who is entitled to claim the rebate. These adjustments cannot be made as a matter of commercial transaction unless there is real certainty who are the parties concerned.

It was for that reason, as well as for the convenience of the Customs, that the test of place of incorporation of the purchasing company was put into the Bill rather than the test of residence. The test of place of incorporation is easy to apply. It is a matter of public knowledge. Under the Companies Act, overseas companies having a place of business here must state on their bill-heads, and so on, the country in which they are incorporated. That is a matter which, in case of doubt, can easily be verified. Residence, on the other hand, has, I understand, been interpreted as the place where management and control of a company are exercised. It may mean no more than where the board meetings are ordinarily held. This is not necessarily a matter of public knowledge and, also, may vary from time to time.

The analogy of the use of residence as the test for tax purposes was mentioned, but that would provide no assistance in this case, first because the decision of the Inland Revenue for tax purposes relates to a past tax year, whereas under the rebate scheme the facts need to be known at the actual time of the sale of the goods. Secondly, it would not be either proper or practicable for the Inland Revenue to disclose to Customs officials details of the affairs of companies which are declared solely for tax purposes.

In any event, it is not merely the Customs who need to know the status of the purchaser of the export goods. The first essential is that the supplier should know, so that if he is entitled to do so he can make a claim or, if not, can contract to sell in the knowledge that someone else can claim. These, in short, are the reasons. If I have not answered the hon. Member's points sufficiently, I will be glad to conduct what, I am sure, will be an interesting correspondence with him on the subject.

The hon. Member referred also to two examples of cases in which, he thought, rebates were not claimable. As I understood them, one at least of them was the same as one of the examples given by the right hon. Member for Bexley (Mr. Heath), to which I referred when first addressing the House. I will, however, look at them carefully and undertake to write to the hon. Member.

Amendment agreed to.