HC Deb 12 July 1966 vol 731 cc1197-9
14. Mr. Hordern

asked the Chancellor of the Exchequer if he will now announce the form of the special assistance to be provided to the clearing banks to allow them to finance companies to pay the Selective Employment Tax.

29. Mr. Cant

asked the Chancellor of the Exchequer whether, in view of the deterioration in the balance of payments in the first quarter of 1966, he will indi- cate to the clearing banks that he will not make special arrangements to offset the liquidity squeeze arising from the operation of the Selective Employment Tax and other tax factors.

Mr. Callaghan

There is no room yet for any relaxation of monetary restraints, and I have therefore agreed with the Governor of the Bank of England that the present ceiling on bank advances of 105 per cent. of the level in March, 1965. should remain from now until the end of March, 1967, and until further notice thereafter. I shall continue to keep the position under review, but it follows that there will be no general arrangements to offset the intended effect of the tax.

Mr. Hordern

Does not the Chancellor realise that this involves a great shock to industry and to many organisations throughout the country who had been led to believe by the Chancellor's Budget speech that some assistance would be forthcoming? Does he not now appreciate that this appears to be a reversal of what was intended?

Mr. Callaghan

The hon. Gentleman ought to read the speech before making those deductions from it. What I said then, and what I have said subsequently, was that I would review the position in order to see whether any relaxation could or should be made.

Mr. Cant

I welcome my right hon. Friend's statement. Does he not think it reasonable, however, that he should give the clearing banks as much notice as possible so that they can adjust their portfolios accordingly?

Mr. Callaghan

Yes, Sir. That is why I have answered this Question now. The review has been going on and hon. Members have asked me to make a statement at the earliest possible moment. I have now done so.

Mr. Ronald Bell

In view of what he has said, does the Chancellor still think that the Selective Employment Tax will supply a boost to manufacturing industry?

Mr. Callaghan

Over the long run, as it is a permanent tax and will have beneficial effects, there can be no doubt that it will be advantageous.

Mr. fain Macleod

Can the Chancellor tell us whether in his discussions he has proposed any exemptions to the indication of which has has just informed the House? In other words and in particular, are firms which have a large export business and which are adversely affected by S.E.T. to have special arrangements made for them?

Mr. Callaghan

I doubt whether there would be such firms, because, as the right hon. Gentleman will know, the banks have already given and are now giving top priority to exporting firms which are in need of credit.

Mr. Barnett

Despite the contradictions of hon. Members opposite who on the one hand want more deflation and on the other want less, will my right hon. Friend resist pressures for further massive deflation? Has he any information as to the present effect of the deflationary policies over the past 18 months, as it seems that there is some indication that they are now beginning to take effect?

Mr. Callaghan

I am much obliged to my hon. Friend for his helpfulness, but I do not think that an answer to that question would arise out of the original Answer.