HC Deb 14 November 1966 vol 736 cc183-94

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ioan L. Evans.]

10.46 p.m.

Mr. Mark Woodnutt (Isle of Wight)

In raising the subject of the £50 travel allowance, I wish to make three main points, each of which is an indictment of this Government and their hasty and ill-conceived policies. The first is the futility of Government policy in thinking that our balance of payments will be substantially improved by imposing this absurd restriction. The second is the hardship caused to many elderly folk who follow the sun during the winter months and winter modestly abroad. The third is the complete disregard of Her Majesty's Government for the sanctity of contracts and the dishonour which they are bringing on the name of Great Britain and individuals who are told to try to avoid contracts into which they have faithfully entered.

Of these three points, the third is by far the most important, because most of us would rather bear any hardship to preserve our good name. Most people realise that our present economic difficulties were caused by the present Government by losing the confidence not only of people abroad but of people in this country. Most of us also realise that the drastic measures announced by the Prime Minister on 20th July will make matters worse. The £50 travel allowance was one of them.

To demonstrate the futility of this, I would remind the Financial Secretary to the Treasury that, annually, six million Britons go abroad for their holidays. The British Travel Association says that they spend the equivalent of £300 million—an average of £50 per head. It is clear from that that Mr. Average, Mr. Just Below Average and, possibly, Mr. Just Above Average will not be affected by the restriction. Nor will the businessman who gets his £10 a day, as he should, because he is doing a worth-while job.

The only people who will be affected are the marginal ones who spend more than £50 a head. We all know that there are many ways and means of avoiding the restriction by reciprocal arrangements with people abroad. It is also as well for the Financial Secretary to remember that three million visitors a year come to this country, who, according to the estimates of the British Travel Association, spend no less than £330 million annually. I am informed by my hon. Friend the Member for Eastbourne (Sir C. Taylor), who is one of our leading hoteliers and whom I am pleased to see in his place, that foreign tourist industries are exerting the maximum pressure on their Governments to bring in reciprocal restrictions to cut down the amount of money spent in this country. If that happens it could be disastrous for this enormous invisible export.

The Government's policy in this matter is complete nonsense, is ill-conceived and was put through with undue haste. I am mostly concerned about the disregard of the sanctity of contract. It is disgraceful to instruct British subjects to act dishonourably in seeking to break contracts which they have faithfully entered into, and I am certain that if the right hon. Member for Nuneaton (Mr. Cousins) were here, after what he has said about the sanctity of contract between union and employer, he would agree with me.

I draw the attention of the House to a case in my constituency, the Isle of Wight, about which I have given the Financial Secretary due notice. It is the case of a Mr. Reachill, his wife and two sisters-in-law, who are all over 65 years of age and who have the habit every year of spending the four winter months, December to March, in a warmer climate.

Earlier this year they entered into a binding contract, by an exchange of letters with a person in Madeira, to rent an apartment for four months, from 1st December, at £50 per month. On 13th July they remitted, through their bankers, a deposit of £50. It was a week later, on 20th July, that the Prime Minister took his sledge-hammer to crack a nut and announced in the House the £50 travel restriction. Two days later Mr. Reachill wrote to me and asked how he was affected. I replied: Exceptions obviously can be made… and I suggested that he put in his application immediately. I telephoned the Treasury and was told that the Department would consider exceptions, but on only two grounds. The first was on health grounds—if one had a doctor's certificate saying that one must go abroad—and the second was on the grounds of there being an enforceable contract which could not be broken.

By this time Mr. Reachill had heard from the Exchange Control authorities and had been told that he could have only £50 per head. Meanwhile, he had to pay £200 under a binding contract. I told Mr. Reachill to reapply because the Treasury would consider exceptions if there were enforceable contract which could not be broken. He reapplied, for the modest sum of £125 per head for the four people, to include £200 rent for the period of four months. Mr. Reachill reapplied through his bank on 23rd August and, as he had heard nothing by 5th October, I wrote to the Chief Secretary of the Treasury, who replied within two days. To my astonishment, he wrote: People in their position "— that is, Mr. Reachill, his wife and two sisters-in-law who, before the July announcement of travel restrictions entered into commitments in respect of holiday travel after 1st November, are expected to exercise every endeavour to obtain release from those commitments in so far as they are unable or unwilling to fulfil them in the new circumstances". This is a disgraceful thing for the Government to tell a British subject to do and has absolutely no consideration for the man at the other end who signed the contract to let his property. I wrote to my constituent and passed on this information. I explained what the Government wanted him to do, and I quote my constituent's reply to sum up my attitude and the attitude of every decent person. He wrote: The suggestion in the Treasury letter that I connive to break our contract by endeavouring to induce the owner of the apartment in Madeira to release me from my obligation is, to say the least, a most dishonourable one. As an Englishman of some integrity I cannot agree to have any part in this undertaking. This expresses my own opinion, and I think that the only honourable course for Her Majesty's Government to adopt is not only to give my constituent the allowance for which he has asked in order to enable him to fulfil his contract, but to do the same for everyone else in the country who is in the same position.

I have always been proud of the fact that it is stated all over the world that an Englishman's word is his bond; what is the foreigner to think of our word if now we tear up written agreements?

10.55 p.m.

Sir Charles Taylor (Eastbourne)

The story told by my hon. Friend the Member for Isle of Wight (Mr. Woodnutt) is a shocking one. That anyone should be caused to break a contract by force majeure of Government action is a most dishonourable act against our country.

When, during and after the war, we had sweet rationing, everyone took up their ration because they thought that that was what they were entitled to. I find that now the £50 allowance is being taken by anyone wishing to go abroad and that those who perhaps have been in the habit of taking their holidays abroad, instead of taking £30 or £35 as they have done in the past, are now taking up the full £50. I therefore do not believe that this restriction will save us very much money.

I am more concerned about the effect of this regulation on the tourist trade to this country. I must here speak of something I know about, and refer to the Grosvenor House Hotel, of which I have the honour to be chairman. The Grosvenor House last year had 52 per cent. American clients or guests, and 75 per cent. foreign visitors. At the cash desk—which is not a bank but just a little cash desk—we cashed nearly £1 million worth of foreign currency, foreign money and travellers' cheques to the benefit of this country. In addition, we have in the past year had the Selective Employment Tax put on us, which will cost us £80,000 a year. We are concerned in this business about what is, for its size, probably the biggest foreign currency earner in the whole country.

I am worried, too, about the effect that this sort of action will have in European countries. I recently had the honour to be a British representative at the International Hotels Association meeting in Germany. I found the feeling to be: "Why should we put up your hotel brochures in our hotels when there is no reciprocity? Why should our national associations put up posters saying 'Come to Britain' when there is no reciprocity? We should prefer to spend our money with the French, the Austrians, the Swiss, the Scandinavians, and the Americans, who are much freer to travel than the British."

Has the Financial Secretary heard of any retaliation? Has he discussed this matter with the British Travel Association? Has the Prime Minister, the Government or the hon. and learned Gentleman yet received any representations from the International Hotels Association, which is an international body in which the British take a lively part, about this £50 travel allowance?

11.0 p.m.

The Financial Secretary to the Treasury (Mr. Niall MacDermot)

Until I heard the hon. Member for Isle of Wight (Mr. Woodnutt), I should have thought it unnecessary to remind the House why it was necessary to introduce the restrictions on travel expenditure. My right hon. Friend the Prime Minister announced a whole series of measures on 20th July last designed to get our economy into balance, and included among them certain exchange control measures which had a direct and speedy impact on our balance of payments. The most important of these was the restriction on travel expenditure.

Expenditure on travel outside the sterling area has been rising rapidly. The debit on travel account with non-sterling countries has risen from £112 million in 1958 to £215 million in 1965. If the restrictions had not been introduced, the figure would have been even higher next year. The hon. Member quoted some figures put out by the British Travel Association designed to show that foreign visitors to this country were spending more than British travellers going abroad. I am afraid that those figures were based on a false comparison, because in one case they included the cost of fares and in the other they did not. The fact is that the travel expenditure of British travellers abroad has been very much higher than the earnings of our tourist trade in this country.

Sir C. Taylor

Including the cost of purchases? If people come here they buy many things in the shops. Is that taken into account?

Mr. MacDermot

Yes, including the total expenditure in this country.

These restrictions were not unexpected, and I think they have been generally accepted. I was asked by the hon. Member for Eastbourne (Sir C. Taylor) about the international effect and repercussions. We have had no representations from the International Hotels Association—to answer his question directiy—and the restrictions we introduced have received the approval of the International Monetary Fund, which is necessary as we subscribe to that Fund, which of course operates a surveillance over measures of this kind.

Various suggestions have been made in the Press and elsewhere of ways in which these restrictions can be evaded, but I must make clear that I have yet to see one such way which does not involve illegality and liability to prosecution. I hope that this will be clearly understood. I think the ordinary man and woman in this country is essentially law-abiding and will not wish to damage the country's interests by "fiddling" the travel allowance. Because they recognise the need, most people observe the rules and will put up with inconvenience as part of a worth-while effort to put the economy on a sound footing.

The hon. Member for the Isle of Wight spoke particularly of the position of the elderly. We have not overlooked the essential needs of the elderly. If an elderly person, or for that matter a young person, is suffering from a serious illness or disability and his doctor recommends that it is desirable that he should spend a period for treatment or recuperation in a non-sterling area country, a special allowance of up to £7 a day for three months will be provided. A similar amount is also made available for a companion if the doctor so recommends, but no doctor's recommendation is necessary in the case of a husband or wife who is over 60. Special consideration will also be given to applications for an additional allowance for elderly people to visit close relatives.

These allowances compare favourably with those which were granted by the previous Administration at a time when there was a comparable travel allowance. If one goes back to the period when the allowance was £35 a year, the health travel allowance was nil in what was known as the American account area in those days, particularly North and South America, and £4 a day for a patient or companion for three months. When the basic allowance was raised in January, 1955, to £100 a year, the allowance was £4 a day for a patient and £3 a day for a companion for three months outside the American account area. In May, 1959, again when the basic allowance was £100, it was £5 a day for a patient and companion for six months. So I think it will be seen that the allowances that we have made to meet the special position of the sick and elderly compare very favourably with what was introduced before.

The exchange control authorities—these controls are operated by the Bank of England under delegated authority from the Treasury—will go a long way to meet special cases, and they have authority to do so. But I cannot accept that because certain people have more leisure they should be allowed more foreign exchange. If the expected savings are to be achieved, we cannot make exceptions for anyone who would like it, and the line has to be drawn somewhere and we think we have gone as far as is reasonable.

The hon. Member raised the question of the sanctity of contracts. I must say that listening to some of his arguments and some of the quotations from the letter I wondered whether a better phrase would not be "sanctimoniousness". The question of contracts arises in relation to commitments which were entered into before 20th July when the new restrictions were introduced. There are obviously bound to be difficulties during a transitional period. We have had to adopt a policy that is realistic and, as far as possible, fair to all, including those who have not made commitments in advance.

To meet the transition problem we made provision for an interim period between the end of July and the end of October before the full restrictions came into effect. Broadly speaking, during this interim period those who had holiday plans were allowed sufficient currency to carry them out on a reasonable scale. But this transition period has now finished, and for holidays starting after 1st November the general rule is that no additional allowances are being given whenever they were first arranged, but we do not deduct from the basic allowance any payments which were actually made before 21st July.

The policy is that where people have entered into commitments they are expected to do what they can to obtain a release from them. There is nothing whatever dicreditable about this. It is perfectly proper and not uncommon for a party to a contract to ask to be released from some or all of his obligations when circumstances have changed to such an extent that it is difficult or even impossible to comply with them. Usually the other party will agree to the release, sometimes unconditionally and sometimes on terms. In the case of travel bookings, in the vast majority of cases it is practicable for people to obtain a release.

We recognise that there may be some cases where, despite every reasonable effort, this does not prove practicable, and in such cases where a legally enforceable commitment is involved and failure to comply is likely to result in a resident being successfully sued, we are prepared to consider special provision to enable the legal commitment to be met in addition to the normal basic allowance of £50 in foreign currency.

This policy accords, I suggest, not only with common sense but with the generally recognised international procedure. For example, there is a recommendation in the G.A.T.T. about the handling of pre-zero contracts when quantitative import restrictions are imposed, and the relevant recommendation is that goods which are covered by an adequately confirmed prior order in the course of normal business at the date when restrictions are announced and are not marketable elsewhere without appreciable loss should receive special consideration on an individual case basis. This is a process parallel to the policy which we have followed. We have asked—and it is all that we have asked—that people shall take reasonable steps, in effect, to try to market their obligations elsewhere. I see the hon. Member for Eastbourne shaking his head. Why is it not a comparison?

Sir C. Taylor

Because the G.A.T.T. agreements were made many years ago, and everybody knew what to expect from them. But this is a new law that has been imposed on the country suddenly, and it imposes certain obligations on subjects in their contracts abroad.

Mr. MacDermot

I point out to the hon. Gentleman that it is not a new law. It is a law under the Exchange Control Act, which dates back to 1947. If we are talking legalities, the hon. Gentleman's constituents, when they made their contract were under the obligation at that time, before 20th July, to obtain exchange control consent to remit the moneys abroad under their then contract. There had been plenty of speculation in the Press about the likelihood of the introduction of travel control restrictions of this kind. There is a very fair comparison with the imposition of quantitative restrictions, and it is recognised internationally that where measures of this kind must be introduced to safeguard a country's balance of payments position—and this was recognised in our case by the I.M.F.—this is the proper way to deal with existing contracts. This is exactly what we have done. We are not asking people to break their contracts. We are asking them to take reasonable steps to obtain a release from existing obligations, and there are several ways in which that can be done.

Sir C. Taylor

Wriggle out of them.

Mr. MacDermot

It is not a question of wriggling out of them. The hon. Gentleman is a hotelier himself. How many people book rooms in his hotel and find for some reason that they cannot meet their obligation? They approach him and ask whether they can be released from their obligations, and I imagine, as the hon. Gentleman has a well run hotel, that in the vast majority of cases he says, "Of course". In most cases he suffers no loss because he can relet the rooms to somebody else. It is perfectly normal practice, and this is why I suggest that there is an air of sanctimoniousness about the argument. It is a normal practice in everyday business transactions and in this trade. An enormous number of bookings are made in the travel business, and for one reason or another people seek to be released from their obligations and are released, and it is in the interests of the other contractors in most cases if they are.

Even if the other party to the contract, the person who let the flat in Madeira in this case, is not willing to release the hon. Gentleman's constituent from the obligation, he is free to find someone else prepared to take on part of the obligation and he can assign it to him. This is done by travel agents over and over again. Very many travel agents had binding contracts when these restrictions were introduced and in most cases they have been able to adjust them either by assigning their contractual rights to someone else—very often travel agents outside the Sterling area—or by obtaining release from the contracts. That is all that we ask, and it is a perfectly reasonable thing to ask. If after due efforts have been made and reasonable steps have been taken, it proves impossible for them to obtain release, we are prepared to consider further applications.

Mr. Woodnutt

For the small number of cases there must be from 1st November onwards, does the hon. and learned Gentleman really think that it is worth going to this trouble to put people to all this embarrassment and inconvenience for the saving of what must be a minute amount of foreign currency?

Mr. MacDermot

I do not agree that it is a minute amount. If we did not think it worth while we would not have done it. When one imposes restrictions of this kind, it is important that people feel that they are being administered with fairness and justice as between different people. There is no reason why people who happen to have made their booking at an earlier date should enjoy a privilege denied to other people who booked later, simply because of the date they made the booking.

Mr. Woodnutt

Why 1st November and not 30th November?

Mr. MacDermot

One must choose a date. We introduced this on 20th July. We had an interim period, and the full restrictions began to bite as from 1st November. There is no question here of our causing people to break a contract by force majeure, to use the phrase of the hon. Member for Eastbourne, nor any question, to use the words of the hon. Gentleman's constituent, that we are asking people to connive to break their contracts by endeavouring to induce the owner to release them from their obligation. No breach of contract is involved in asking someone to release one from an existing obligation. There is nothing dishonourable about it at all, and all this talk about an Englishman's integrity is entirely irrelevant to the argument.

What these people are asking is that, because they made a booking, whatever it was, and paid a deposit seven days before the restrictions were introduced, they should be entitled to a four-month holiday abroad and to escape the exchange control measures. We do not consider that that is a reasonable way to operate the controls. What we ask is that they shall seek to obtain a reasonable release from their contracts. There is no reason why they should not spend part of their holiday abroad.

If there is some special reason, on health grounds, why they need to spend four months in Madeira, then, of course, they can make a special application on those grounds. But I do not understand the case to have been put forward on that basis at all. Therefore, if they do not come within any of the exceptions, we would expect them to make the reasonable efforts which any travel agent would make, and which anyone else in their position would make, either to try to dispose of the rights which they have obtained to some other people, or to obtain a release from their contracts from the person with whom they have contracted.

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at a quarter past Eleven o'clock.