HC Deb 17 May 1965 vol 712 cc1122-63
Sir J. Eden

I beg to move Amendment No. 86, in page 2, line 24, at the end to insert: (2) For the purposes of the said section 7 goods used for the building, repairing or modifying of aircraft shall be deemed to be exported; but relief under that section granted by virtue of this subsection shall be subject to such conditions (in addition to any other conditions imposed by that section) as the Commissioners see fit to impose for securing that such goods will be used for such purposes as aforesaid. In this subsection reference to aircraft shall include reference to airborne vehicles or craft which depend for their functioning on the interposing of compressed and constrained air, gas, vapour or fluid between the underside of the vehicle or craft and the surface over which such vehicle or craft intends to operate. Subsection (1) of this Clause seeks to relieve from import duty those goods brought into this country for use in the building or repair of ships. I assume that it is designed specifically to give assistance to our shipbuilding industry, and, naturally, I do not wish to say anything against that. The purpose of my Amendment is to extend these provisions to aircraft and air-cushioned vehicles.

The Amendment is designed to lead to an exploratory debate, because my hon. Friends and I are anxious to have the position concerning aircraft and related vehicles completely clarified. As hon. Members on this side of the Committee know, the British aircraft industry has taken a considerable knock from the Government recently. The Labour Party has been running it down for some time and perhaps the country does not fully realise the extent to which this industry has succeeded in serving our best interests. It is universally recognised that our aircraft industry is a key leader at home. It is in the forefront of new design and is the first in the application of many advanced techniques. As a result, its products are becoming increasingly sophisticated and in aircraft construction a great deal of use is made of a wide variety of complex equipment.

I say at once that it is not my aim to encourage the use of overseas equipment. This country has first-class electronics and supply industries for the aircraft industry as a whole and it should be and is unnecessary to go overseas for the wide bulk of the whole range of components used by the aircraft industry. For those reasons I am particularly anxious to see, for example, the continuation of the flying programme of the TSR2, carrying as it does very advanced types of electronics equipment which will have an application in aircraft manufacture by the British industry later. Use of this equipment now installed in the regrettably cancelled TSR2 will prevent the necessity of having to turn to other countries for such equipment.

But some imports may be necessary. In answer to a Question by the hon. Member for Wallsend (Mr. Garrett) on 5th May, the Minister of Aviation said that he could not give a figure of the amount of foreign equipment used in British civil and military aircraft. He felt, however, that the amount so involved was not very great. The Minister's exact words were: I can say, however, that the proportion is a small one although the precise figure depends in the case of civil aircraft very much on the equipment installed to meet individual operators' particular requirements."—[OFFICIAL REPORT, 5th May, 1965; Vol 711. c. 165.] For the most part, that is so. For the most part, the imports of foreign equipment used in British aircraft, civil and military, although of importance and significant in the construction of the aircraft, are comparatively minor items as against the total cost of the aircraft. These are such items as nuts, bolts and cable connectors. At other times, however, it must inevitably be the case that more complex equipment will occasionally have to be brought in from outside the country to be installed in British aircraft. I am certain that the Government would not wish unnecessarily to add to the cost of the productions of the British aircraft industry.

The position of the industry is generally somewhat complicated. As hon. Members will recognise, it is becoming increasingly international in nature. More and more in the construction of aircraft, more than one country is involved. We heard this afternoon, in a statement by the Secretary of State for Defence, that new military projects are to be embarked upon by this country in conjunction with the French aircraft industry.

In evidence of the growing international nature of this industry, we already have the example of the Concord project, which includes not just equipment from another country, but whole sections of the aircraft. I am not certain what would be the position under the Clause of the hybrid aircraft and I shall be grateful if this can be clarified by the Minister.

Other aspects of the Amendment concern the importation of equipment used by our aircraft manufacturing industry: that is, the purchase of whole aircraft, not merely the equipment but the entire product. This has been highlighted for us recently by the decision of the Government to cancel a number of advanced British projects and in their place to purchase with dollars a number of American aircraft. I wonder what the exact position will be of the Phantom, which is being bought for the use of the Royal Air Force and the Royal Navy, of the Hercules C130E transport aircraft and any other aircraft which the Government might plan to purchase from overseas. If, for example, having cancelled the TSR2, the Government now decide to take up their option and purchase for dollars an aircraft of lower performance capability, the American F111, what would be the position of that aircraft under the Clause without the Amendment?

I think that I am right in saying that if foreign equipment is used in British-built aircraft which subsequently are exported and sold overseas, there is a drawback; the duty is reimbursed. In this instance, the position would seem to be safeguarded. If that is so, it is extremely significant for our industry. I am sure that all hon. Members will have taken heart from the recent very encouraging reports on the successful sales record for the BAC111.

9.15 p.m.

In this instance, there is an interesting point relating to the Amendment. It is that many Amercian customers specify American equipment to be built into the BAC111. They have specified the use of such equipment as radio, radar, navigational aids and brakes—specific equipment manufactured outside this country for use in British-built aircraft. In some circumstances, this has amounted to as much as 10 per cent. of the total value of the aircraft. I should like absolute confirmation from the Government that even though there is special mention in subsection (1) of the Clause of the British shipbuilding industry, and no special mention of the British aircraft manufacturing industry, there is, in fact, no intention by the Government in any way to penalise the British aircraft industry.

I am sure that hon. Members opposite will forgive us if on this side of the Committee we are suspicious about their intentions towards the British aircraft industry. The industry as a whole has not exactly been treated well so far by the Government. We are not asking for much in this Amendment, only that the position be clarified. I am sure that hon. Members opposite will be generous enough to recognise that it is to the great credit of this industry that the proportion of foreign equipment used in British aircraft is today very small.

Like all hon. Members, I hope that the position will remain so. For several years past the industry has had an extremely successful export record. In 1964, the value of aero exports, including guided weapons, came to a total of £100 million. In spite of the attacks which have been made on the industry by the Government, and of the damaging short-sighted denial to it of the important South African market, the export forecast for the aero industry, including guided weapons, for 1965 will probably amount to about £180 million.

This is an extremely significant figure. It is certainly greater than the shipbuilding industry exports. This may well be the reason for subsection (1), but if that is so I hope the position of the aircraft industry will be made quite clear.

Mr. Ivor Richard (Barons Court)

The hon. Gentleman said that the figure for goods used in the building and repairing and modifying of aircraft imported into the United Kingdom was small. Can he give a figure, so that we may know to what the Amendment refers?

Sir J. Eden

I am not sure whether the hon. Member was present when, earlier, I quoted from an Answer given by his right hon. Friend the Minister of Aviation on 5th May to his hon. Friend the Member for Wallsend, which was a specific answer to that question. The Minister said that it was not possible for him to give an exact figure, but the proportion was a small one.

This is the point I have sought to make, that the proportion of foreign equipment used in all civil and military aircraft now is a small one and covers only comparatively small items in terms of value when related to the total cost of the aircraft programme. I am sure that the hon. Gentleman recognises, as do other hon. Members, that the export potential of the industry is very great. Here are the names of some of the primary products of this industry which are now being exported—the BAC111; the VC10; the Short Skyvan; the Handley Page Herald; the Lightning; the Canberra; the Comet; the Trident; the HS125; and the Beagle range of aircraft.

This is not to mention the most important aspects in the guided weapons and missiles which are having extremely successful sales overseas. I think that it is right that, in moving this Amendment, we should seek to get clarification about the intentions of the Government towards the aircraft industry in relation to this duty, and also about what the position of these component parts may mean.

I should have drawn attention to the second part of the Amendment, which says: In this subsection reference to aircraft shall include reference to airborne vehicles or craft which depend for their functioning on the interposing of compressed and constrained air, gas, vapour or fluid between the underside of the vehicle or craft and the surface over which such vehicle or craft intends to operate. This is, of course, taking a look into the future. Not for the first time, the Conservative Party and hon. Members on this side of the Committee have made it abundantly clear that they are considerably more forward-looking and progressive in outlook, generally speaking, than the rather conservative members who sit on the benches opposite—I should say who are languishing on the benches opposite—though not for very long.

We are considering the tremendous prospects for air-cushioned vehicles generally. This is a new development in our industrial scene and of extreme significance to the future of the aircraft and transportation industry. It is estimated that the potential civil and military world demand for air-cushioned vehicles and their immediate developments will be about £75 million over the next 10 years. So we are not dealing with an insignificant element of our entire industrial picture.

The contribution to the economic wellbeing of this country of the aircraft industry and those industries associated with it—electronics and others—is very significant. The contribution has been extremely great in years past. We hope that this will continue to be the case, and that the industry will now get some support, some positive help, from the Government. That is why we have tabled this Amendment—to get some indication of the intentions of the Government and to ask them to give some help to an industry which is vital to the interests of this country, which has so far, in the life- time of the present Government, been victimised, largely through the prejudice of the Prime Minister and his right hon. Friend the Paymaster-General. I hope that they will now do something, at least, to vindicate it.

Mr. Maxwell-Hyslop

There are some other considerations which I think the Treasury Bench should bear in mind. To start with, this Amendment relates to a highly complex industry. This must be stressed. To value the importation of a tin of soup is not a profound undertaking, but in the aero-engine world, and in the aircraft world as a whole, many of the components which are imported so as to be embodied in an aircraft destined to be re-exported are not even in a complete condition when they are imported. This is progressively so, the more companies in this country which enter into licence agreements with producing units, particularly on the Continent.

In many cases, particularly in the early stage of a licence, parts will be incompletely manufactured abroad and then exported, from their point of view—imported from our point of view—to this country, where the manufacture will be completed and they will be assembled into a component which will subsequently be embodied in an aircraft which is exported.

All that the company has to do, if it is merely making its own financial arrangements with the licensee, is to calculate a rate which will leave that licensee not out of pocket and with a reasonable margin. But for the purpose of import duty, where, presumably, the Customs and Excise authorities try to ascertain the true value of what is being imported, I suggest that a difficult problem is posed not only for the importing firm, but also for the Customs and Excise authority.

I will give the example of a turbine blade for a jet engine, designed and developed in this country, forged and rough machined in France and reimported into this country, where it would have its final grinding and possibly cooling air holes provided before being put into the turbine. The cost of the material and the actual machining operations done outside this country is by no means difficult to ascertain but what proportion of the design and development costs, undertaken in this country, is to be allocated to the component imported in a semi-manufactured or even a completely manufactured condition? I asked the question but I do not pretend to know the answer.

Fortunately, one does not have to know the answer if these components are exempt from import duties. It becomes necessary to define these matters in a way so that we can write into the statute law or into import regulations how to deal with this sort of problem only if they are subject to import duty. It is common to both sides of the Committee that we want to encourage as much cross licensing as possible, because this leads to a much greater total market over which we can write off the design and development costs of a given component or——

The Temporary Chairman (Mr. H. Hynd)

Order. The hon. Member is talking in a very general way about the subject. Is he relating it to the Amendment?

Mr. Maxwell-Hyslop

Yes. I will be even more specific if I may. I was endeavouring to show how the Clause, in which the Amendment will be embodied if it is passed, will be brought into effect by the authorities concerned.

The Temporary Chairman

Yes, but the hon. Member must not talk about the Clause in general when we are dealing with this Amendment.

Mr. Maxwell-Hyslop

Certainly. With great respect, I think that without the Amendment the Clause will be much more difficult for the authorities to enforce, and it is a legitimate ground for advocating an Amendment that it will make it much easier for the Customs and Excise authorities to enforce the Clause.

For the reasons which I am giving, there would be considerable difficulty in ascertaining not just the manufacturing costs, but what we can broadly call the overheads of the original licensee, which may or may not be allocated subsequently to the firms from which the components concerned are imported. In the Bill we are concerned not only with what is written in the Bill and Amendment, but also with enforceability and lack of ambiguity.

Not only does this Amendment have considerable merit in achieving what it sets out to achieve—facilitating agreements of this kind—but it has the considerable additional merit that it would make the law much more easily enforceable because it would be much less complex than would otherwise be the case.

9.30 p.m.

Sir Eric Errington (Aldershot)

I feel bound to comment on the Amendment because difficulties may arise from the words: … vehicles or craft which depend for their functioning on the interposing of compressed and constrained air, gas, vapour or fluid between the underside of the vehicle or craft and the surface over which such vehicle or craft intends to operate". Presumably that deals with Hovercraft, but, as I understand the position, that is not the only type of craft which is new on the scene.

Would the hydrofoil vessel be covered? It would seem that it would. The hydrofoil operates on the basis of a ship with a formation which causes the vessel to rise up on top of the sea. As I understand it, the Hovercraft works on the basis of some air or gas which keeps it above the sea or, as far as I know, above the land as well.

Unless the Amendment is accepted there will arise a situation where the benefit of the Clause may very well go to the hydrofoil and deprive the Hovercraft of a similar benefit. I do not think that anybody would be prepared to say at present whether the hydrofoil or Hovercraft would be the most likely to develop in a big way. Either might have great value. I am particularly interested in the hydrofoil, because a constituent of mine has made a number of inventions in connection with its development. I would like to have clarification so that it is clear that both of these craft are covered by exemption.

Mr. Stanley R. McMaster (Belfast, East)

I support the Amendment. In view of the statements which were made during the weekend by the Parliamentary Secretary to the Ministry of Aviation about the Government's general intention towards the aircraft industry—the intention of keeping the industry as a live going concern in Britain—we now have the first opportunity for the Government, after all the cancellations of the last six months, to show how sincere they are in their desire to assist the aircraft industry.

If the industry is to remain in existence, it should be placed on the same footing as the shipbuilding industry. If any part of an aircraft must be imported for the manufacture of an aircraft in this country there should be a rebate of taxation for that part. The Government have already recognised this to a certain extent in regard to spares for aircraft operated by any of the corporations. Such spares have been exempted from the 10 per cent surcharge imposed on other imports. I therefore urge the Government to consider whether a parallel does not apply for aircraft manufacturers in Britain.

The British aircraft industry faces extremely severe competition from abroad, particularly from the United States. It would seem from speeches made by Government Front Bench spokesmen that this is recognised by the Government. If, therefore, we are to assist British aircraft manufacturers to meet competition from abroad, there must be scope for certain concessions similar to the concession being sought in the Amendment.

The leading firms in the aircraft industry—the British Aircraft Corporation, Hawker Siddeley, Short Bros. in Northern Ireland, and Handley Page—need positive signs of Government sympathy and assistance, not just words and speeches in this House or throughout the country but a positive sign of a true intention to support the industry. Before the election there were a lot of statements by members of the Labour Party of how they would provide employment and encourage our technology, but their actions since seem to have given the lie to those promises. They now have an opportunity to show the sincerity of their intentions.

My Labour opponent at the election promised to help to get high employment. There is a big aircraft industry in my constituency which employs about 7,000 people and exports a lot of its products. Reference has already been made to the Short Skyvan, which is now beginning to sell abroad and of which there are high hopes of further foreign sales. We also have the Seacat manu- factured there, but Short Bros. and Harland has been badly affected by cancellations such as that of the HS681, a transport aircraft of which about 20 per cent. was to have been manufactured in Northern Ireland.

Unless the Government quickly find other work to replace that which has been lost, thousands of men in Northern Ireland face loss of employment. I advance this as an additional argument why the Government, even if they are not prepared to accept the Amendment as it stands, should at least agree to consider it between now and the Report stage with a view to introducing their own Amendment on similar lines.

The aircraft industry is a very important income earner. Its exports run at more than £100 million per annum. There are not only its direct earnings from sales of aircraft, but also the indirect earnings. Aircraft purchased by our own air Corporations operate throughout the world, and their passenger and freight earnings form an important part of this country's balance of trade. With those additional arguments in mind. I would ask, in as non-controversial way as I can manage, the Government Front Bench to consider this Amendment favourably.

Sir William Robson Brown (Esher)

This Amendment is far more significant than would appear on the surface, and the amount of money it involves at the moment may not be significant or possibly of great financial assistance to the aircraft industry at the present time. The assistance that the industry needs now is something of a very much more gigantic and positive nature.

Behind the Amendment, however, there is a realisation, at least on this side of the Committee, of what Anglo-French and other co-operative projects in the aircraft industry mean, and this sort of Amendment is absolutely vital if we are to avoid confusion arising in the interchange of parts between here and France and back again, with complications of evaluation, and unnecessary work for our Excise people, who have no experience or competence to assess this aspect of the work at all.

Our aircraft industry has received, not a staggering blow but almost a death sentence—there is no doubt whatever about that—and I was shocked to hear my hon. Friend the Member for Belfast, East (Mr. McMaster) say that aircraft manufacturers in other countries—and I have one country particularly in mind—get relief on the importation of spares in this way. We do not get that kind of relief on our spares which go to the United States of America.

I hope the Government will accept this Amendment because they have made a mistake. I hope they will recognise that when making the concession to shipbuilding they should have automatically made it to aircraft making. The amount of money involved in this proposal is not significant. It would make the operations of the Excise much easier and it would assist greater co-operation with Europe, especially with France, to help this great industry which the country so sorely needs.

Mr. William Clark (Nottingham, South)

It is quite amazing that in a debate the importance of which I should not think any hon. Member would doubt, no Government back bencher has spoken about this industry. I have attended many Finance Bill debates, but I cannot remember when the Government of the day have had so few back-bench speakers on the various Amendments put forward. That seems a reflection on many hon. Members opposite that they are not interested in the aircraft industry.

In this Clause relief is given to the shipbuilding industry. Everyone accepts that we are a maritime nation and have built much of our wealth from shipping. All that my hon. Friend the Member for Bournemouth, West (Sir J. Eden) is trying to do, as shown by the very well-reasoned speech he made, is to get the Government to extend the same relief from import duty to the aircraft and hovercraft industries as that given to the shipbuilding industry.

If the Minister cannot accept the wording of the Amendment we should be happy to withdraw it on the assurance that the Government would put it into proper wording and keep the spirit of the Amendment. When he replies, if he cannot accept the Amendment, I hope that the Minister will give concrete reasons for turning it down, because we consider this to be a matter of major importance.

Many of my hon. Friends have spoken of the importance of the aircraft industry. My hon. Friend the Member for Bournemouth, West spoke of its export potentiality and record. I do not think that any hon. Member would deny that the industry has done a first-class job for exports. We agree that the shipbuilding industry also has a good export record and it has a good record in invisibles. What I cannot understand is why the Government should ignore the aircraft and Hovercraft industries. My hon. Friend the Member for Esher (Sir W. Robson Brown) remarked that the aircraft industry had been dealt, not a crippling, but a shattering blow. I should think that every hon. Member on either side of the Committee would agree. The labour force, put out of work because of the actions of the Government, would agree that it has been dealt a shattering blow.

9.45 p.m.

If the future of transport is that it will not be by sea, but will be in the air or by hovercraft, obviously this country must be in the lead. At the moment, it is in the lead as regards aircraft. If the Labour Government are forward-looking, there is no reason why they should not accept the Amendment. The Opposition has not got the wherewithal to find out what the implementation of the Amendment might cost the Exchequer. It was obvious from the Question and Answer that my hon. Friend the Member for Bournemouth, West, read that the amount it would cost the Exchequer would be infinitesimal.

It is not necessarily the amount that matters. It is the principle. Do the Government want to help the aircraft and Hovercraft industries, or do they not? Even taking the kindest view of the Government's recent actions, every fair-minded person would say that the Government do not want to help the aircraft industry. One way of disproving that allegation would be for the Government to accept the Amendment.

My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) spoke of the difficulties, particularly with regard to drawback claims. Any of us who have had anything to do with drawback claims know that the question of the valuation of an item is extremely difficult. If a propeller is partially manufactured in this country, sent abroad for more processing, and brought back here for more processing, it is difficult for import duty purposes to value the equipment and consequently work out what the Import Duty would be.

My hon. Friend the Member for Aldershot (Sir E. Errington) drew attention to the Hovercraft. I hope that hon. Members opposite have heard of the hovercraft industry. I have no doubt that they have heard of the aircraft industry. As my hon. Friend the Member for Bournemouth, West, said, the export potentiality of the Hovercraft industry is £75 million over the next 10 years. We know that this is an estimate, but it is no mean figure. The Government came to power some months ago having made many pledges and promises. One thing of which they tried to convince the country was that the Labour Party was the scientific party of the two main parties. Let the Government prove it. Why do they give import relief to the shipbuilding industry, which has been going for many hundreds of years, and not give relief to the two vital industries which may—I put it no higher—in time replace the shipbuilding industry? Why do not the Government think again and include the aircraft and Hovercraft industries in the Clause?

Mr. J. T. Price (Westhoughton)

My right hon. Friend will give the answer he chooses to give to the general criticism which has been levelled in the debate. One thing which the hon. Gentleman, who is usually fair in these matters, and his hon. Friend have failed to mention is that, if comparisons are being made with the shipbuilding industry, which appears to have a favourable position relative to the aircraft industry, it must not be forgotten that the aircraft industry of all our industries has had the greatest amount of support by way of research and development paid for out of public funds, to the extent of hundreds of millions of pounds, which have never been bestowed on the shipbuilding industry. This puts it into its proper perspective.

Mr. Clark

That may or may not be true. It still does not answer the main allegation made by my hon. Friends that the Government have dealt the aircraft industry a crippling blow by the cancellation of the TSR2. Hon. Members opposite know this to be absolutely true. The importance of the aircraft industry cannot be over-emphasised. It should get as much help as possible from this Government and from any other Government, particularly in view of the cancellation of the TSR2.

Mr. Richard

The hon. Gentleman has told the Committee that the quantity of goods imported is small and that the amount of relief if the Amendment were accepted would be infinitesimal. Would he explain to the Committee how an infinitesimal relief on a small amount of imports will help the aircraft industry?

Mr. Clark

If the hon. Gentleman reads my speech in the OFFICIAL REPORT he will see that I said that we on this side of the Committee have no means of checking how much would be involved. I quoted my hon. Friend the Member for Bournemouth, West, who in turn had quoted from a Written Answer, saying that the information was not available and that in any case it would be small and infinitesimal. I accept that. But what the hon. Gentleman should do is ask his own right hon. and hon. Friends on the Front Bench what the figure is. It does not matter what would be the amount of relief; it is the principle of the thing. If it is right to give this concession to the shipbuilding industry, it is right to give it to the aircraft and hovercraft industry. This is the burden of our argument. No amount of jiggery-pokery and saying that the amount involved will be much or that it will not be much will affect the principle of the thing. We have got to do all we can to help the aircraft industry.

Mr. Maxwell-Hyslop

Will my hon. Friend agree that if the amount of money saved in the drawback is not very much, the amount of money saved in not having to calculate the drawback is tremendous?

Mr. Clark

I am sure the Minister will agree that there would be a saving in administrative costs. The whole burden of our argument is that we should help the aircraft industry. We are helping the shipbuilding industry through the import surcharge. I hope I shall not be out of order in what I am about to say, Dr. King; I do not intend to discuss subsequent Clauses, but subsequent Clauses particularly relating to the Corporation Tax will penalise the shipbuilding industry. Yet under this Clause we are giving the shipbuilding industry a certain amount of relief. This is the illogicality of the Government's thinking. If the Government want to help, they should help logically. If the Government say, "It does not matter so far as the aircraft industry is concerned; we do not necessarily want to give the aircraft industry this amount of relief", why is this? Is it that the Government are certain that shortly we shall not have an aircraft industry to help?

I ask the Minister to deal with this point specifically. We have been speaking about helping this industry, and one has got the impression that it is new aircraft with which we are concerned. But in fact this would bring in the repair of aircraft and hovercraft, which is an important matter.

My hon. Friend the Member for Belfast, East (Mr. McMaster) has a very personal interest in the aircraft industry and he has never hesitated to say exactly what he feels about it. [HON. MEMBERS: "Hear, hear."] He has 7,000 of his constituents dependent on the aircraft industry. It is all very well hon. Members opposite saying "Hear, hear" but they should not forget that with the cancellation of TRS.2 there are thousands of aircraft workers who do not know whether they are going to work tomorrow. If hon. Members opposite agree with this shabby way of treating the aircraft industry, all I can say on behalf of my hon. Friends is that this is certainly not the way that we regard the industry.

I ask the Minister to give this matter serious consideration. I hope he will not shelter behind the incorrect wording, if the Amendment is incorrectly worded. We are prepared to take this Amendment back on the understanding that the Government will introduce a properly worded Amendment to give effect to the spirit behind it.

Mr. McMaster

I am grateful for what my hon. Friend has said. Has he heard the unsympathetic questions which have been asked on the benches opposite about the unemployed? Is he aware that these 7,000 men cannot find similar employment in Northern Ireland if they are thrown out of work?

Mr. Clark

I am grateful to my hon. Friend for that hesitant intervention. This is the burden of our whole argument. Each time that we question Ministers about what is happening in the aircraft industry in the matter of redundancy and unemployment we always have the same old answer, "I am afraid that the information is not available. We have not got these registered." The Government were responsible for the cancellation, and in all fairness and honesty they should make it their business to keep records so as to prove to the Committee whether what they say about there not being redundancy or unemployment in future is right or wrong.

I hope that what has been said has convinced the Minister of State, Board of Trade, that we view the Amendment with great seriousness. Why is it that his hon. Friends cannot be bothered to speak to the Amendment or to say anything about the aircraft industry but from a sedentary position have been quite capable of jeering and laughing? They will not stand up to intervene. I ask the Minister again whether he will extend this concession to the aircraft and hovercraft industries.

Mr. Godfrey Lagden (Hornchurch)

Would my hon. Friend agree that when hon. Members opposite make unsympathetic remarks and ask, "Are these men yet unemployed?" they should be asked whether they realise that these are men who have given a long time to the aircraft industry and wish to be employed in the most modern industry that we possess? Does not my hon. Friend agree that the party opposite, led by the Prime Minister, in pre-election days spoke of this industry as the industry which would be guaranteed employment? Is it not a fact that these men do not wish to be employed in making washing machines but want to work in an industry which is vital to the future of the country?

Mr. Clark

I am most grateful for that intervention. My hon. Friend has made the point more eloquently than I could, and what he has said is absolutely true. Hon. Members opposite know that it is. I hope that the Minister will deal with this matter in his reply.

Several Hon. Members rose——

The Chairman

Order. I think that the hon. Member for Nottingham, South (Mr. William Clark) has finally resumed his seat.

The Minister of State, Board of Trade (Mr. Edward Redhead)

I have listened carefully to the debate and I assure hon. Members that I shall not try to shelter in my reply behind any purely technical points of phraseology. On the contrary, I shall try to take account of what has been explained to be the purposes behind the Amendment. I must say first, however, that by seeking, in the Amendment, to apply to the aircraft industry the phraseology of Clause 2(1) which applies to the shipbuilding industry, the sponsors of the Amendment have misconceived the purpose of the subsection. Their Amendment goes very far beyond that purpose.

10.0 p.m.

That subsection is limited to a small technical adjustment by way of consolidating a long existing and comprehensive policy for duty relief in respect of the shipbuilding industry. It aims only at extending the powers conferred by Section 7 of the Import Duties Act, 1958, to allow relief from import duty to be granted under that Section on goods intended to be used in a registered shipbuilding yard on grounds similar to those on which it may be granted in respect of goods intended to be exported and which are qualified under the drawback provisions of Section 9 of the main Act. In other words, the subsection is designed to remove a discrepancy between the drawback provisions of Section 9 and the duty relief provisions of Section 7 in so far as they apply to the shipbuilding industry.

It must be observed—strangely enough, no reference has been made to this in the debate—that in the Import Duties Act there is another provision making up the general comprehensive policy which has long been adopted towards the shipbuilding industry. I refer to Section 5, whereby goods of any description consigned direct to a registered shipbuilding yard to be used in shipbuilding, ship-repairing or refitting in the yard are exempt from import duty.

All these provisions taken collectively in respect of the shipbuilding industry represent powers specifically designed to encourage shipbuilding, and they represent, also, a long-established policy which has emerged only as a result of an intensive examination of the industry over a considerable period of time.

Sir E. Errington

Will that cover a hydrofoil ship?

Mr. Redhead

I shall come to that, if I may, although I hardly think that it is up to me to define the purpose of the Amendment or its precise meaning and effect.

Sir E. Errington

I am not asking about the Amendment. I am asking about what the Minister has just said.

Mr. Redhead

I thought that the hon. Gentleman was referring to the point which he raised in his own speech.

As I understand it, the broad effect and purpose of the Amendment is to seek to extend to the aircraft industry the duty relief provisions which are available to the shipbuilding industry in this connection. In that sense, I appreciate its purpose, that is, to extend this principle of policy to imported component parts of aircraft, Hovercraft or other forms of craft contemplated under the terms of the Amendment which are delivered direct to an aircraft construction establishment.

I must tell hon. Members that, if that be their object, they cannot achieve it by the Amendment, for it would be necessary to address themselves to both Section 9 and Section 5 of the Import Duties Act. This Amendment alone would produce an anomaly. It would introduce in respect of aircraft parts the principle that goods delivered to an aircraft or Hovercraft manufacturer would become eligible for Section 7 relief, but goods of a drawback class so delivered would not be eligible for drawback and goods directly imported by aircraft manufacturers would not, ipso facto, be free of duty.

To that extent, therefore, the result would be anomalous and inconsistent with the purpose which hon. Gentlemen opposite have explained of bringing the same provisions as apply to the shipbuilding industry to the aircraft industry.

Mr. Maxwell-Hyslop

Before the hon. Gentleman leaves the point, will he tell us what all that means?

Mr. Redhead

I am trying to clarify what are, admittedly, rather difficult provisions of drawback law in the Acts of Parliament. I am sorry if the clarity of the hon. Gentleman's mind does not enable him to follow it. I can only say that I will do my best.

The purpose of the Amendment would be virtually to abolish the protective tariff on all aircraft parts and components whether or not the completed aircraft was exported or sold on the home market. I believe that the hon. Gentleman accepts that as being the purpose of the Amendment. I hope that he will equally accept it from me that the Amendment does not achieve that purpose in the way that it is drafted.

Let me deal with that purpose. I would agree that in the context of modern conditions and circumstances, and hon. Gentlemen have made some play on much wider grounds about the condition of the aircraft industry—I will not be drawn into a debate on those lines; I would prefer to confine myself to what I think is strictly in order, the provisions of the Amendment—there may, by reference to the long-established policy in respect of ship-building, be a certain logical attractiveness and some justification for the purpose which the hon. Gentleman has in mind. But I think that the Committee would recognise that it would represent a very major extension of that policy and an entirely new sphere of very considerable magnitude.

The Government's view is that such an extension ought not to be undertaken without a very long, hard look at the aircraft industry as a whole and at all the relevant factors in that industry. Certainly, it ought not to be undertaken at very short notice in the context of an Amendment to this Bill. It is inappropriate to seek to use, particularly at such short notice, the Finance Bill as a means of effecting a fundamental change in duty provisions. Nor can it be certain, without a much greater and detailed examination, that the purpose sought to be served by the Amendment would be beneficial to the industry. Clearly, that point has to be established.

I submit quite seriously to the Committee that, whatever views hon. Members hold about the present condition of the aircraft industry—obviously, it is an industry of tremendous national importance—the balance of advantage is not easy to assess. The amount of imported parts in British-made aircraft—we have had some debate on this point—obviously varies enormously. In some designed for particular overseas markets it may be fairly high, but I gather that on the average it may represent not more than about 10 per cent. of the cost.

Mr. McMaster

I thought that I heard the hon. Gentleman say just now that the Amendment would be of considerable importance. Now he seems to be seeking to argue that it would have a minimum of importance. He cannot have it both ways. Which is it? Is it important or not important?

Mr. Redhead

I said that the Amendment goes far beyond the purposes of the existing subsection. To that extent, it seeks to widen the provision.

But, even if one takes account of the purpose which lies behind the Amendment as I have defined it—I understand that it is accepted that that is the purpose—it is extremely doubtful, without much more detailed examination, whether it would have a very real, beneficial effect. What it would do, on the other hand, is to remove the protective duty given by the existing tariff over this part of the field. It would represent a significant change in the competitive position of the makers of parts and equipment who themselves make a significant contribution to direct exports.

Mr. F. A. Burden (Gillingham)

I find myself in some difficulty. The hon. Gentleman stated that this proposal would bring about an entire change in our tax laws, but how can that be so when this provision already exists for the shipbuilding industry?

Mr. Redhead

Obviously, by extending it to an industry which has never been the subject of a provision of this kind. The shipbuilding policy was determined in the light of the circumstances of that industry. It is a long-established policy. There has been no detailed examination of the applicability of any such provision to the aircraft industry and I say, therefore, that it should not be applied to it without much very careful and detailed consideration.

Indeed, it is impossible to assess without such an examination just what merit or validity there is in the claim that the industry should have the benefit of the provision which applies to the shipbuilding industry. Having said that, however, let me make it clear that my right hon. Friend the Minister of Aviation is currently considering, with the advice of the Plowden Committee, the future of all sections of the aircraft industry, all the various ways in which assistance could and should be given for its proper and competitive development.

Mr. William Clark

The hon. Gentleman says that there has been a detailed study of the shipbuilding industry. Can he tell us for what reason that industry was given this relief?

Mr. Redhead

On the ground that it needed it in the circumstances of the review undertaken at the time. That was an established case. What I am saying now is that there is not a clear and demonstrable established case in respect of the aircraft industry and, secondly, that it is questionable whether the provision sought by the Amendment would have a very significant beneficial effect upon the industry.

To the extent, however, that the intention behind the Amendment is valid to take into consideration in the general review now being undertaken by my right hon. Friend the Minister of Aviation, I can give the Committee our assurance that very careful consideration will be given to this proposal as one possible means of assistance.

Sir J. Eden

Will the hon. Gentleman clarify one point? What is the position of the aircraft which are now on order for military purposes for use by the Air Force and the Navy? Would they be affected in any way or do not they come under this impost?

Mr. Redhead

I was about to say that aircraft components come within Section 7 or 9 of the Act. In so far as they can satisfy the conditions of those Sections, relief of duty may be obtained. Admittedly, it is more limited than in the case of the shipbuilding industry, but opportunities do exist and this subsection in no way affects or impairs that position.

But I ask the Committee to appreciate that any extension of the provision should not be sought through an Amendment to the Bill. The proposal would be better left to be considered with any and every other possible means which may be adjudged appropriate to assist the aircraft industry. Believing that to be the better way to approach a problem of this kind, I hope that the hon. Member for Bournemouth, West (Sir J. Eden) will be content to accept my assurance that his purpose will be borne in mind and considered and not to press the Amendment.

If the hon. Gentleman thinks that he must press the Amendment, then, for the reasons I have outlined, I must advise the Committee to reject it.

10.15 p.m.

Mr. Anthony Barber (Altrincham and Sale)

I have listened, I hope with an open mind, to what the Minister of State has had to say and I know that he will take it from me that, on this side of the Committee, when this debate started we had not made up our minds whether or not we should divide on the Amendment. I am pleased that the hon. Gentleman did not take too seriously any defects that there may be in the wording of the Amendment.

The hon. Gentleman said at some length that it was his view that this particular Clause might result in certain anomalies. He will recall, as I am sure some of his hon. and right hon. Friends will, their noble Friend, Lord Mitchison, who on one occasion in my hearing moved an Amendment from these benches to provide relief from duty for agricultural vehicles. He did so by referring to provisions in another Act providing relief from duty for fishing vessels. The only consequence of his Amendment was to provide relief from duty for agricultural tractors while travelling on the high seas. He nevertheless felt that this was something worth pursuing.

This is something very different, and I think while it has been a short debate it has been an incredible one. We have not had a single speaker from the Government backbenches on this vitally important aspect of the British aircraft industry.

We have only had two interventions, and each of those interventions, for a moment or two, were not the sort of interventions which would please anybody working in the aircraft industry. We have had promises in the past about help for the aircraft industry, but there are two reasons why I hoped that we might have had something a little more forthcoming from the hon. Gentleman the Minister of State.

The first is that it cannot be denied, whatever the merits may be over the TSR 2 and other projects, that the aircraft industry has received more discouragement during these past few months than for many a year previously. Secondly, I would have thought that on its merits the hon. Gentleman and his right hon. Friends, particularly the Minister of Technology who is here, would have thought it a good thing to take some action to encourage the hovercraft industry which is a great invention of the United Kingdom. We have had a lot of lip-service in the past about new inventions, modernisation, technology and so on. Here was an opportunity to help. I am not suggesting that the particular way in which my hon. Friend wished to do it was necessarily right but here was an opportunity to help. The hon. Gentleman himself agrees that the cost of doing this would not be great and it is true, as one of his hon. Friends said in an intervention, that because of this, help at this particular time would not be

very much. There is nobody in this Committee who would deny that the potential of the Hovercraft is very great indeed.

Mr. Emrys Hughes

Can the hon. Gentleman explain how the previous Government helped the Hovercraft industry?

Mr. Barber

I might be out of order if I went into great detail, but I must say that if the hon. Gentleman looks up what we did for the aircraft industry, including the Hovercraft industry, he will see we helped a great deal.

What saddens me is that the hon. Gentleman in his very courteous reply held out no hope at all of anything on the lines put forward by my hon. Friend. He made only a very general promise of a sort of inquiry by the Ministry of Aviation. There may be arguments against the proposal of my hon. Friend, but I am bound to say to the Committee that if there are we have certainly not heard of them in the debate this evening. I mean no personal disrespect to the hon. Gentleman when I say that his reply was highly unsatisfactory and for this reason I must advise my hon. Friends to divide the Committee.

Question put, That those words be there inserted:—

The Committee divided: Ayes 170, Noes 195.

Division No. 110.] AYES [10.19 p.m.
Agnew, Commander Sir Peter Bullus, Sir Eric Eyre, Reginald
Alison, Michael (Barkston Ash) Campbell, Gordon Farr, John
Allan, Robert (Paddington, S.) Cary, Sir Robert Fletcher-Cooke, Sir John (S'pton)
Allason, James (Hemel Hempstead) Chichester-Clark, R. Foster, Sir John
Anstruther-Gray, Rt. Hn. Sir W. Clark, William (Nottingham, S.) Fraser,Rt.Hn.Hugh(St'fford & Stone)
Astor, John Cole, Norman Fraser, Ian (Plymouth, Sutton)
Atkins, Humphrey Cooke, Robert Gammans, Lady
Awdry, Daniel Cooper-Key, Sir Neill Gardner, Edward
Balniel, Lord Costain, A. P. Giles, Rear-Admiral Morgan
Barber, Rt. Hn. Anthony Crosthwaite-Eyre, Col. Sir diver Gilmour, Ian (Norfolk, Central)
Barlow, Sir John Crowder, F. P. Glover, Sir Douglas
Batsford, Brian Cunningham, Sir Knox Glyn, Sir Richard
Bell, Ronald Curran, Charles Godber, Rt. Hn. J. B.
Bennett, Sir Frederic (Torquay) Currie, G. B. H. Goodhew, Victor
Bennett, Dr. Reginald (Gos & Fhm) Dance, James Gower, Raymond
Berry, Hn. Anthony Davies, Dr. Wyndham (Perry Barr) Grant, Anthony
Biggs-Davison, John d'Avigdor-Goldsmid, Sir Henry Gresham-Cooke, R.
Birch, Rt. Hn. Nigel Dean, Paul Grieve, Percy
Blaker, Peter Deedes, Rt. Hn. W. F. Griffiths, Eldon (Bury St. Edmunds)
Bossom, Hn. Clive Digby, Simon Wingfield Griffiths, Peter (Smethwick)
Box, Donald Doughty, Charles Gurden, Harold
Boyd-Carpenter, Rt. Hn. J. Douglas-Home, Rt. Hn. Sir Alec Hall-Davis, A. G. F.
Boyle, Rt. Hn. Sir Edward du Cann, Rt. Hn. Edward Harris, Reader (Heston)
Brinton, Sir Tatton Eden, Sir John Harrison, Col. Sir Harwood (Eye)
Bromley-Davenport,Lt.-Col.Sir Walter Elliott, R. W. (N'c'tle-upon-Tyne,N.) Harvey, John (Walthamstow, E.)
Brooke, Rt. Hn. Henry Emery, Peter Hawkins, Paul
Browne, Sir Edward (Bath) Errington, Sir Eric
Heald, Rt. Hn. Sir Lionel Maltland, Sir John Robson Brown, Sir William
Heath, Rt. Hn. Edward Mathew, Robert Roots, William
Higgins, Terence L. Maude, Angus Sandys, Rt. Hn. D.
Hirst, Geoffrey Mawby, Ray Scott-Hopkins, James
Hobson, Rt. Hn. Sir John Maxwell-Hyslop, R. J. Sharples, Richard
Hordern, Peter Maydon, Lt.-Cmdr. S. L. C. Shepherd, William
Hornsby-Smith, Rt. Hn. Dame P. Meyer, Sir Anthony Sinclair, Sir George
Hunt, John (Bromley) Mills, Stratton (Belfast, N.) Stanley, Hn. Richard
Hutchison, Michael Clark Miscampbell, Norman Stoddart-Scott, Col. Sir Malcolm
Irvine, Bryant Godman (Rye) Mitchell, David Studholme, Sir Henry
Jenkin, Patrick (Woodford) More, Jasper Summers, Sir Spencer
Jennings, J. C. Morrison, Charles (Devizes) Taylor, Sir Charles (Eastbourne)
Johnson Smith, G. (East Grinstead) Munro-Lucas-Tooth, Sir Hugh Taylor, Frank (Moss Side)
Jopling, Michael Neave, Airey Temple, John M.
Kerr, Sir Hamilton (Cambridge) Noble, Rt. Hn. Michael Thompson, Sir Richard (Croydon,S.)
Kershaw, Anthony Nugent, Rt. Hn. Sir Richard Tiley, Arthur (Bradford, W.)
Kilfedder, James A. Osborne, Sir Cyril (Louth) Turton, Rt. Hn. R. H.
Kimball, Marcus Page, John (Harrow, W.) van Straubenzee, W. R.
King, Evelyn (Dorset, S.) Page, R. Graham (Crosby) Vickers, Dame Joan
Kirk, Peter Percival, Ian Walker, Peter (Worcester)
Lagden, Godfrey Peyton, John Walker-Smith, Rt. Hn. Sir Derek
Lancaster, Col. C. G. Pickthorn, Rt. Hn. Sir Kenneth Ward, Dame Irene
Langford-Holt, Sir John Pitt, Dame Edith Webster, David
Legge-Bourke, Sir Harry Powell, Rt. Hn. J. Enoch Whitelaw, William
Litchfield, Capt. John Price, David (Eastleigh) Williams, Sir Rolf Dudley (Exeter)
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield) Prior, J. M. L. Wills, Sir Gerald (Bridgwater)
Lloyd, Ian (P'tsmouth, Langstone) Pym, Francis Wilson, Geoffrey (Truro)
MacArthur, Ian Quennell, Miss J. M. Woodnutt, Mark
McMaster, Stanley Redmayne, Rt. Hn. Sir Martin TELLERS FOR THE AYES:
McNair-Wilson, Patrick Ridsdale, Julian Mr. Martin McLaren and
Maginnis, John E. Roberts, Sir Peter (Heeley) Mr. Dudley Smith.
Albu, Austen Fitch, Alan (Wigan) Lomas, Kenneth
Allen, Scholefield (Crewe) Fletcher, Sir Eric (Islington, E.) Loughlin, Charles
Armstrong, Ernest Fletcher, Raymond (Ilkeston) Lubbock, Eric
Atkinson, Norman Floud, Bernard McBridge, Neil
Baxter, William Foot, Sir Dingle (Ipswich) McCann, J.
Beaney, Alan Foot, Michael (Ebbw Vale) MacColl, James
Bennett, J. (Glasgow, Bridgeton) Ford, Ben MacDermot, Niall
Blackburn, F. Fraser, Rt. Hn. Tom (Hamilton) McGuire, Michael
Blenkinsop, Arthur Freeson, Reginald McInnes, James
Boston, T. G. Ginsburg, David McKay, Mrs. Margaret
Bowden, Rt. Hn. H. W. (Leics S.W.) Gourlay, Harry Mackenzie, Gregor (Rutherglen)
Bowen, Roderic (Cardigan) Greenwood, Rt. Hn. Anthony Mackie, George Y. (C'ness & S'land)
Boyden, James Gregory, Arnold Mackie, John (Enfield, E.)
Braddock, Mrs. E. M. Griffiths, David (Rother Valley) MacMillan, Malcolm
Bradley, Tom Griffiths, Rt. Hn. James (Llanelly) MacPherson, Malcolm
Bray, Dr. Jeremy Griffiths, Will (M'chester, Exchange) Mahon, Peter (Preston, S.)
Brown, Rt. Hn. George (Belpor) Grimond, Rt. Hn. J. Mallalieu, E. L. (Brigg)
Buchanan, Richard Hamilton, James (Bothwell) Mallalieu,J.P.W.(Huddersfield,E.)
Callaghan, Rt. Hn. James Hannan, William Mapp, Charles
Carmichael, Neil Harper, Joseph Mason, Roy
Carter-Jones, Lewis Harrison, Walter (Wakefield) Mellish, Robert
Castle, Rt. Hn. Barbara Hart, Mrs. Judith Millan, Bruce
Chapman, Donald Herbison, Rt. Hn. Margaret Milne, Edward (Blyth)
Coleman, Donald Hooson, H. E. Morris, John (Aberavon)
Conlan, Bernard Houghton, Rt. Hn. Douglas Mulley.Rt.Hn.Frederick(SheffieldPk)
Corbet, Mrs. Freda Howarth, Harry (Wellingborough) Murray, Albert
Cousins, Rt. Hn. Frank Howell, Denis (Small Heath) Neal, Harold
Craddock, George (Bradford, S.) Hoy, James Newens, Stan
Crawshaw, Richard Hughes, Cledwyn (Anglesey) Noel-Baker, Rt.Hn.Philip(Derby,S.)
Cronin, John Hughes, Emrys (S. Ayrshire) Oakes, Gordon
Cullen, Mrs. Alice Hynd, John (Attercliffe) O'Malley, Brian
Dalyell, Tam Irving, Sydney (Dartford) Orme, Stanley
Davies, C. Elfed (Rhondda, E.) Jackson, Colin Oswald, Thomas
Davies, Ifor (Cower) Jeger,Mrs.Lena(H'b'n&St.P'cras,S.) Owen, Will
de Freitas, Sir Geoffrey Johnson, Carol (Lewisham, S.) Page, Derek (King's Lynn)
Delargy, Hugh Jones, Dan (Burnley) Paget, R. T.
Dempsey, James Jones, J. Idwal (Wrexham) Palmer, Arthur
Diamond, John Jones, T. W. (Merioneth) Pargiter, G. A.
Dodds, Norman Kelley, Richard Park, Trevor (Derbyshire, S.E.)
Doig, Peter Kenyon, Clifford Parking, B. T.
Donnelly, Desmond Kerr, Dr. David (W'worth, Central) Pearson, Arthur (Pontypridd)
Driberg, Tom Lawson, George Pentland, Norman
Duffy, Dr. A. E. P. Leadbitter, Ted Perry, Ernest G.
Dunnett, Jack Ledger, Ron Popplewell, Ernest
Edelman, Maurice Lee, Rt. Hn. Frederick (Newton) Prentice, R. E.
Edwards, Robert (Bilston) Lee, Miss Jennie (Cannock) Price, J. T. (Westhoughton)
English, Michael Lever, Harold (Cheetham) Probert, Arthur
Ennals, David Lever, L. M. (Ardwick) Pursey, Cmdr. Harry
Ensor, David Lewis, Arthur (West Ham, N.) Rankin, John
Fernyhough, E.
Redhead, Edward Slater, Joseph (Sedgefield) Watkins, Tudor
Rees, Merlyn Small, William Wells, William (Walsall, N.)
Reynolds, G. W. Snow, Julian Whitlock, William
Rhodes, Geoffrey Steel, David (Roxburgh) Wigg, Rt. Hn. George
Richard, Ivor Steele, Thomas (Dunbartonshire, W.) Wilkins, W. A.
Roberts, Albert (Normanton) Stonehouse, John Williams, Alan (Swansea, W.)
Roberts, Goronwy (Caernarvon) Stones, William Williams, Albert (Abertillery)
Robertson, John (Paisley) Summerskill, The Hn. Dr. Shirley Williams, W. T. (Warrington)
Robinson, Rt.Hn.K.(St. Pancras, N.) Swain, Thomas Willis, George (Edinburgh, E.)
Rogers, George (Kensington, N.) Swingler, Stephen Wilson, Rt. Hn. Harold (Huyton)
Shore, Peter (Stepney) Taylor, Bernard (Mansfield) Winterbottom, R. E.
Short, Rt.Hn.E.(N'c'tle-on-Tyne,C.) Thomas, George (Cardiff, W.) Woof, Robert
Silkin, John (Deptford) Tinn, James Zilllacus, K.
Silkin, S. C. (Camberwell, Dulwich) Wainwright, Edwin
Silverman, Julius (Aston) Walden, Brian (All Saints) TELLERS FOR THE NOES:
Silverman, Sydney (Nelson) Walker, Harold (Doncaster) Mrs. Harriet Slater and
Skeffington, Arthur Wallace, George Mr. Charles Grey.

10.30 p.m.

Question proposed, That the Clause stand part of the Bill.

Mr. Graham Page (Crosby)

We cannot let this Clause go without a further explanation from the Government. It is a Clause which deals with miscellaneous amendments to the Import Duties Act, 1958, and I think that the Minister of State unwittingly misled the Committee in dealing with the last Amendment, when he said that Clause 2(1) gave further relief to shipbuilders——

The Chairman

Order. It is very difficult for the Chair to hear the hon. Member if other hon. Members indulge in loud conversations.

Mr. Page

I am much obliged, Dr. King.

Clause 2(1) deals with Section 7 of the Import Duties Act, 1958, which deals with imported goods intended to be exported. It does not deal with shipbuilding or ship repairing or with goods brought to a ship-repairing yard. They are dealt with in Section 5(2) of that Act, and by that subsection seem to be given a complete exemption. The subsection says: Goods of any description shall be exempt from import duties, if consigned direct to a registered shipbuilding yard and imported for the purpose of being used for the building, repairing or refitting of ships in the yard. It is in the Import Duties Act, 1958, in Section 5(2), that we have exemption for the very goods dealt with in Clause 2(1). Therefore, what is the purpose of Clause 2(1)? It seems to introduce these goods into a class where certain conditions have to be observed before relief is given.

It seems to me that it does not do what the hon. Gentleman said it did, give further relief to shipbuilding. It seems to put further conditions on those who are importing goods for use for shipbuilding or ship-repairing with the intention of their being exported. We already have that exemption under Section 5(2) of the 1958 Act. So far as drawbacks are concerned, we have the exemption under Section 9(4). The conditions which can now be imposed by bringing this subject into Section 7 of the 1958 Act only seem to be restricting and not lessening the bonds on those who import these goods. Why these further conditions under Clause 2(1)? If conditions are to be imposed, as appears from Clause 2(1), how are these conditions to be imposed?

The Treasury can impose conditions by Order, and, as under the 1958 Act, the Order has to be made by Statutory Instrument. Is that the intention, that, instead of the imported goods for shipbuilding being completely free under Section 5(2) of the 1958 Act, they are in future to be subject to some further restrictions under Clause 2(1) of the Bill? If ships are to be switched, as it were, from Section 5 of the 1958 Act to Section 7 of that Act, will the manufacturer, the shipbuilder, who uses these goods for shipbuilding have to go through all the procedures of Section 7?

Section 7 of the 1958 Act sets out an elaborate procedure for obtaining freedom from import duty. It would seem that the amendment proposed by subsection (1) of the Clause imposes a procedure which did not exist before for this class of manufacturer. Clause 2(3) provides that So much of subsection (3) of that section "— Section 7 of the 1958 Act— as requires any application for the exercise of the power conferred by that section to be made by the importer, to be made in writing and, except where the Commissioners otherwise allow, to be made before the imported articles are released from customs control shall cease to have effect. It is not clear from that whether, first, an application must still be made and, secondly, if it does, whether it has to be made by the importer himself. The relief given here is that the application does not have to be made in writing and before the imported articles are released, but it leaves out whether an application must be made at all and, if so, by whom.

Subsection (5) seems to be wholly objectionable. It deals with an order under Section 9 of the 1958 Act, which states: Subject to the provisions of this section, the Treasury may by order provide that drawback on exportation shall be allowed under this section (either for a period specified in the order or without limit of period) as respects import duties paid on the importation of goods of any description specified in the order. In short, it says that any allowance of this sort is made by the Treasury by order and that no order shall be made except on the recommendation of the Board of Trade and in accordance with the Fifth Schedule of the 1958 Act. These drawback orders are at present made by Statutory Instrument. That is provided for in Section 13 of the 1958 Act, which states: (2) Any power of the Treasury or Board of Trade to make orders or regulations under this Act shall be exercisable by statutory instrument". An even more important point is that if those orders are in respect of a relief from tax, they take effect only subject to annulment by a Resolution of the House of Commons. If they increase the tax or if they decrease the relief from tax, then they only take effect for 28 days, unless they have an affirmative Resolution of the House.

This is an elaborate procedure whereby drawback orders are made and whereby the House has kept track of departmental taxation. Even when tax is being decreased, an order must be laid before Parliament by Statutory Instrument and Parliament can decide whether to pray against it. If it is increasing tax or decreasing the relief from tax, it cannot continue to take effect after 28 days unless it has an affirmative Resolution of the House.

Now, it seems, the Clause will alter this procedure and the Treasury will be entitled to make its drawback orders without mentioning the rate of drawback. Subsection (5) reads: An order under Section 9 of the said Act of 1958 providing for drawback … on the exportation of goods produced or manufactured from imported articles may, instead of prescribing a rate of drawback … provide that the drawback shall, in relation to these goods, be of an amount equal to the duty appearing to the Commissioners to have been paid. Without the House knowing what rate of drawback is intended, the House will be asked to give a blank cheque to the Commissioners to decide that rate where previously they have always had to bring it before the House in an order by Statutory Instrument.

This provision tucks away in Clause 2 a constitutional change without a proper explanation being given by the Government as to why it is necessary.

It is a constitutional change giving the right to a department to tax and set a rate of tax as it might choose without telling the House even the rate it will impose. The subsection seems to be thoroughly objectionable. I hope that the Minister of State will have some explanation to give.

Sir E. Errington

In discussion of the last Amendment, I endeavoured to get the Minister of State to tell us the position in relation to a hydrofoil. He informed me that he would deal with it later. I understand that a hydrofoil is in the nature of a ship. I want to know whether or not it comes under this Clause. It is a simple question and I hope that the Minister of State will do me the courtesy of answering on this occasion.

I made the point that there was little distinction between a hydrofoil and a Hovercraft. They work on different lines, but achieve the same object in travelling over the sea. It is a pity that the Minister of Technology has left the Chamber. There is a considerable development of hydrofoils, which, I hope will increase. I should like to be satisfied that if there is any benefit under this Clause—which, at the moment, I fail to see, and I await with interest the Minister's answer to my hon. Friend the Member for Crosby (Mr. Graham Page)—when goods are brought to a registered shipbuilding yard for the purpose of building a hydrofoil, they will get that benefit.

Mr. David Price (Eastleigh)

I appreciate what my hon. Friend the Member for Aldershot (Sir E. Errington) has said, and I shall appreciate it if, when the Minister of State replies, he will also deal with the case of Hovercraft.

I have studied the Import Duties Act, 1958, and I draw attention to subsection (6) of Section 5, where I looked for a definition. It does not help us except from the weight limit. It says: Unless otherwise provided by order of the Treasury, the expression 'ship' in subsections (2) and (3) of this section shall not include any ship which is of a gross tonnage … of less than eighty tons. That would rule out many current hovercraft. Is it the view of the Department—I suppose that at the end of the day it would be determined in the courts—that a Hovercraft is in fact a ship? This is not an entirely esoteric question. Those of us who represent constituencies around Southampton Water and the Solent are deeply concerned about the development of Hovercraft. We read that the Americans are considering the application of pocket nuclear power propulsion to Hovercraft, a form of propulsion which we have not developed. We have been working mainly on the Magnox type of reactor. These are, I understand, variations of the boiling water reactor on which the Americans have done a lot of work in relation to nuclear submarines.

10.45 p.m.

I say with all respect to the Minister of State that this question of definition, which may appear to be rather an esoteric and semantic point, is extremely relevant to the future of the Hovercraft which is, I hope, of deep interest to all members of the Committee, but especially to those of us who represent constituencies in southern Hampshire and the Solent area.

Mr. Maxwell-Hyslop

I should like to be told what a manufacturer has to do before he can register as a registered shipbuilding yard. I ask this question because there is an increasing export trade in fast motor boats produced in this country, and there is not as yet any suitable lightweight high-powered V.8 engine produced in this country which can be installed, for which reason manufacturers tend to install imported Chrysler engines in particular.

Many of these light vessels could much more efficiently be produced in an inland factory than in a yard adjacent to the sea, which is quite unnecessary. As this is a type of export which I have reason to believe is now increasing and is presumably a type of industry that we would like to encourage, I should be grateful if the Minister would let the Committee know whether a factory producing motor boats which is not adjacent to the sea or water can be registered as a shipbuilding yard within the meaning of this Clause.

Mr. Redhead

May I first deal with the point raised by the hon. Member for Aldershot (Sir E. Errington)? I am sorry if I misunderstood the point of his question. I understood it to apply to the Amendment then under discussion. I will attempt to deal with the question, which was whether a hydrofoil is within the definition of a ship for the purposes of the existing reliefs applicable to the shipbuilding industry. I gather that is the point?

Sir E. Errington indicated assent.

Mr. Redhead

I am advised that the definition of a ship is a legal question but, on the information at present before me, it would appear probable that a hydrofoil would be an exempt ship if it weighed over 80 tons and satisfied the other definition in the Act. The point, however, is one which I should like an opportunity of confirming, and I will write to the hon. Gentleman subsequently by way of confirmation or otherwise.

A similar point was raised on the question of Hovercraft. I would not venture an opinion at the moment as to the probabilities in that connection, but I would like to have an opportunity of doing so later.

As to whether a factory producing motor boats in a place which is not adjacent to water can be a registered shipbuilding yard, there would be a question of the application for registration and of whether it conforms to the requisite conditions of the appropriate Act. Again I am not too clear—it has not been within my province at the Board of Trade—as to the precise procedures of application, but I will communicate with the hon. Gentleman later and advise him precisely what those procedures are.

Perhaps, therefore, I may now address myself to the points which have been raised on subsection (1) of the Clause. The provisions in this Clause arise on and follow from the statement made by my right hon. Friend the President of the Board of Trade during the Budget debate on 8th April—the appropriate references in the OFFICIAL REPORT are columns 687 and 688—when he said that he had in contemplation some changes in administering drawback of import duties. He explained that Drawback is designed to relieve the exporter of paying duty on materials which he needs to import, although without unnessarily stimulating imports."—[OFFICIAL REPORT, 8th April, 1965; Vol. 710, c. 687.] My right hon. Friend indicated that we were addressing ourselves to the task of assisting exporters to whom it is important to use imported materials in order to compete effectively abroad. This was by seeking the means of avoiding delays and undue complications in procedures by which they apply for drawback or make applications for payment.

The changes which my right hon. Friend envisaged fell into two categories. First, there were the administrative changes of procedure and interpretation in the application of the existing legal provisions, which are outside the scope of our present discussion. Secondly, he envisaged a number of legislative changes to which effect is being given in this Clause. All the changes involved are of the same kind, inasmuch as they do not involve any fundamental alteration in the basic purposes of the drawback provisions but are aimed at providing a greater degree of flexibility in their application, to remove in one or two instances certain doubts which have arisen and certain irritations apparent to exporters when operating the existing provisions.

The main provisions for drawback are in Sections 7 and 9 of the Import Duties Act, 1958. The Clause is directed to the amendment of those Sections. I am sorry that the hon. Member for Crosby (Mr. Graham Page) thought that I earlier misled the Committee in saying that subsection (1) gave additional relief. The hon. Member went on to support his view that I was misleading by quoting Section 5 of the 1958 Act as if it were a blanket provision exempting all such goods. If the hon. Member will address himself to the terms of that Section he will see that it applies to goods of any description which are consigned direct to a registered shipbuilding yard. Not all goods which would qualify for relief under the drawback provisions of either Section 7 or Section 9 of the 1958 Act are necessarily consigned direct.

Mr. Graham Page

I notice, of course, the difference in the words, but Clause 2(1) uses the words … goods brought to a registered shipbuilding yard … Surely those words cover goods consigned direct to a registered shipbuilding yard. Therefore even those which are consigned direct will now come under those words and come within Section 7 of the 1958 Act by virtue of coming within Clause 2 of this Bill.

Mr. Redhead

Perhaps the point will be clear if I explain in more detail the purpose of the subsection. The Amendment is designed to do no more than remove discrepancy between the drawback provisions of Section 9 and the duty relief provisions of Section 7 of the 1958 Act. Section 5, to which the hon. Member has drawn attention, makes provision for goods of any description consigned direct to a registered shipbuilding yard to be used for shipbuilding, repairing or refitting, to be exempt from import duty. By extension of this principle, goods of a drawback class—those covered by a drawback order under Section 9—when delivered to a shipbuilding yard are deemed by Section 9(4) to be exported so as to qualify for relief which is normally dependent upon export. But in the absence of corresponding provision in Section 7, goods which would qualify for relief under that Section are geared by the present terminology to actual exportation. To that extent, therefore, that Section differs from Section 9. This has led to certain difficulties in practice in the case of goods incorporated in ships.

Perhaps I can best illustrate the point by an example of the kind of goods which, in equity, ought to have relief but which, as the respective Sections are now phrased, would be denied it. A manufacturer of ship's hatch covers wishes to import certain types of specialised equipment from the Continent for incorporation in hatch covers for fitting to new vessels. If the parts had been delivered direct to the registered ship building yard, they would have been exempt from duty under Section 5, as the hon. Gentleman knows. If they had been acquired by the ship yard and then sent to the hatch maker as a subcontractor, they would still have been exempt under that Section. If the hatch maker had imported the parts himself and they were covered by a drawback order under Section 9, drawback would have been payable when the completed hatch covers were delivered to the ship yard. As there was no such order and as the parts were sent direct to the manufacturer for incorporation before delivery of the hatch covers to the ship yard, the hatch maker was not entitled to duty relief.

The amendment rectifies that obvious anomaly and removes the legal difference, bringing Sections 7 and 9 into conjunction. The difference was, in fact, quite accidental and not deliberate. It has been difficult to defend to an industry which plays a very important part in our export trade, and the purpose of the subsection, therefore, is to bring the two into relation and to do no more than give effect to what was equity in this respect.

The hon. Gentleman next raised a point on subsection (3), and I think that he was here a little confused on the question of who makes the application. The subsection amends Section 7(3) of the Import Duties Act so as to allow the Commissioners of Customs and Excise to accept an application for duty relief under Section 7 from a person other than the importer of the goods. Section 7(3), as amended by Section 10 of the Finance Act, 1960, requires that applications for relief from duty must be made by the importer and, save where the Commissioners otherwise allow, must be made before the imported articles are released from Customs control. The Customs have found from experience that this requirement places an unnecessary restriction upon them, as there are circumstances in which it would suit commercial requirements for the application to be made by a firm somewhere down the line of manufacture or processing. From the Customs point of view, it is, generally speaking, more convenient to deal with the intending exporter rather than with the original importer in circumstances of that kind.

Similarly, in a long and complicated chain, such as one sometimes finds in these cases, down which the original importer passes the goods through a series of other dealers until finally they are incorporated in goods which are exported, it is not always easy for anyone to say at the moment of import whether the goods in question will eventually be incorporated in exports.

The Customs already have powers conferred by Section 10 of the Finance Act, 1960 to accept belated applications. The proposed change, therefore, will permit some further easement of Customs administration. The Customs will still require to satisfy themselves in every case—it will be done under the normal conditions and regulations—that they can adequately protect the revenue and ensure that imported articles or goods incorporating them which are manufactured or produced from them are, in fact, exported.

The final point was on subsection (5). With respect, I think that the hon. Gentleman misconstrued this. I am sure that the subsection will in no way abrogate from the requirements of Section 13 of the Act. What it does is to amend paragraph 3 of Schedule 5 so as to allow rates of drawback for particular classes or descriptions of goods to be calculated individually, where appropriate, firm by firm instead of on the basis, as now, of a class or description of goods, and will enable an equitable rate of drawback to be given in circumstances in which it has hitherto not been possible to provide an acceptable rate.

11.0 p.m.

Paragraph 3 of the 5th Schedule to the Act of 1958 sets out the conditions which govern the allowances of "materials for manufacture"—the drawback provision in that regard. But the conditions governing that calculation mean, in fact, that when making an order the rate of drawback must be calculated as a national average rate based on the figures supplied by all the likely participants in that particular relief.

Where there are a number of firms participating in a scheme with different manufacturing processes, using different quantities of raw materials, it is obviously going to produce different quantities of by-products and wastage, and the result is that a national average rate cannot be any more than rough justice.

What we are seeking to do is to give a more appropriate rate firm by firm, but this would have to be embraced in an Order made by the Treasury in precisely the same way as the orders of a national rate character, are at present made. It is not intended by this provision to interfere with any existing orders based upon a national rate of calculation, but only to apply it to new applications. We let stand the existing orders, but we shall be ready to consider any representations in regard to any such orders if there is a wish to explore the possibilities on a firm by firm basis and if a more equitable arrangement can be made.

What we are trying to do in this Amendment is to introduce a more equitable arrangement which is a little less rough and ready than the existing one, and which we believe will be more helpful to the exporters concerned.

Mr. Geoffrey Lloyd

The Minister has explained that this Clause is partly to remove an anomaly which has been frustrating the intention of Parliament in giving this concession to shipyards. This is welcome in that it is a more constructive attitude than the rather backward-looking position he took with regard to the Amendments to this Clause put down by my hon. Friends.

May I press him to go a little further in the assurances he gave in regard to the point raised by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) about making it possible for a registered shipyard to attract the concession although it is not necessarily on the seaboard, for example, in the Midlands.

In the United States, the making of these light craft is one of the fastest growing industries in the country. It is the fact that a very large proportion of these craft are manufactured far from the seaboard for reasons of commercial efficiency. This might well be the case in this country. It is also the case that this light type of motor craft and dinghy are extremely popular and the sailing of them is growing faster than almost any other sport.

It would be a pity if, for example, in the Midlands where the motor industry is established—and in America that industry has a great affinity with the manufacture of light motor craft—the building of these craft should be to some extent frustrated because it could not attract the concession given to a registered shipyard. I want to reinforce the point made by my hon. Friend and ask the Minister to consider it seriously.

Mr. Graham Page

I am sure the Committee is most grateful to the Minister for his lucid explanation of the points which I raised on Clause 2. There are just three points I would like to make. He did say that this Clause produced greater flexibility; of course, flexibility can work in both ways, for and against the taxpayer.

In subsection (1), I am sure that in order to preserve the rights under Section 5(2) of the 1958 Act, this particular subsection of this Bill should exclude those which are already covered by section 5 (2) of the 1958 Act. It needs only a few words there to preserve their rights under Section 5 of the 1958 Act and not sweep them into this subsection of Clause 2.

I still do not think that the wording of subsection (3) makes it clear that it is someone other than the importer who can make the application. This is important in practice because, as the hon. Gentleman said, goods pass through several hands, and if it is the manufacturer of the final article which is to be exported who can make the application, it will simplify the procedure.

I am unconvinced about subsection (5). It is clear from the wording that the orders which are now to be brought before the House will not prescribe a rate of drawback. The words in the subsection are: instead of prescribing a rate of drawback". Therefore, the House will not know the rates above or below which the Commissioners are working to grant concessions. The House has always previously known the rate, and unless it knows it I do not know how it can be decided whether an affirmative Resolution is required or whether a negative Resolution is the appropriate course to take by anyone who wishes to object to the order. Unless we know the rate I cannot see how we can know whether it is an increase or a decrease in tax or relief. I hope that the hon. Gentleman will look again at subsection (5). I still think that there is a serious constitutional change in it.

Mr. Redhead

In so far as I have been pressed on the question of applications from registered shipyards, I fully appreciate the point made. I do not want it to be thought for a moment that I am unsympathetic to the purpose behind the question. I refrain from giving a specific reply because this is outside my province. Indeed, it is a question which might well have been asked at any time about the provisions as they have existed, but it has not been raised in this form. I can say that applications have to be made to the Customs and Excise. What I said previously—that I would give the hon. Gentleman the requisite details in writing—still holds good. I will ensure that he has the requisite information to guide him. I am fully seized of the point made.

As to the hon. Gentleman's lack of conviction on the points I have raised, I think he will agree that, broadly speaking, he has accepted the purposes that I sought to outline for the subsections. What he really queries is the legal construction to be placed on the terminology in the Clause. He questions whether the purpose is adequately or effectively served by the terminology. These are very important questions of legal construction. While I am not convinced, any more than the hon. Gentleman is about my explanation, that his objections are sound, he may be sure that I will give attention to the points of view which he has raised.

Question put and agreed to.

Clause ordered to stand part of the Bill.