HC Deb 25 October 1966 vol 734 cc812-5
23 and 34. Mr. Luard

asked the Chancellor of the Exchequer (1) whether, in view of the present difficulties of the motor industry, he will relax the present restrictions on hire-purchase dealings in motor cars;

(2) whether, in view of the difficulties created for the motor industry by seasonal fluctuations, he will introduce variations in Purchase tax or hire-purchase regulations between summer and winter to maintain a more stable market.

26. Sir G. Nabarro

asked the Chancellor of the Exchequer, in view of the heavy decline in demand for motor cars on the United Kingdom market and consequential increased cost per unit for production of motor cars for export, whether he will relieve purchase tax on motor cars by a reduction from 27½ per cent. to 15 per cent.

Mr. Callaghan

I regret that I cannot propose any relaxations of hire-purchase restrictions or Purchase Tax for the motor car industry at the present time.

Mr. Luard

Will my right hon. Friend agree that the belief that export sales are stimulated by restrictions on the home market has been completely disproved by past experience and that, in fact, export sales have always been highest when home sales have been highest? Is it not clear that it cannot be a contribution to the long-term economic strength of this country to weaken one of our major exporting industries, and will the Chancellor, therefore, at the very least reduce the deposit restriction from 40 per cent.?

Mr. Callaghan

I do not think that it is true that exports are necessarily helped or hindered by a home sales market. What is true is that, if the home market is restricted, there is an increase in unit costs and that, clearly does not help exports. On the other hand, in present circumstances, in view of the need to lower the pressure of demand at home, I hope that motor car manufacturers will press ahead with more exports during the next 12 months, because there is a good long-term market available.

Sir G. Nabarro

I congratulate the Chancellor on his belated recognition that a diminution of throughput of motor cars must necessarily raise unit costs, but does he now understand that in the motor car manufacturing constituencies of the Midlands there is a 30 per cent. decline of output for the home market, which is raising export costs very steeply and making British cars highly uncompetitive in price overseas?

Mr. Callaghan

No, Sir; I do not recognise that. I believe that it is possible to export British cars, given the after-sales service, given delivery on time, and given good quality and reliability. It is not price that is making it impossible to export them. It is still true that car manufacturers can make a reasonable return on capital.

Mr. Macdonald

Does not my right hon. Friend recall that the practice of controlling the economy by tinkering with hire-purchase deposits was condemned long ago by the Radcliffe Committee as a harsh, abrupt and unreasonable way of controlling the economy? Will he reconsider this matter?

Mr. Callaghan

I acknowledge that, but it is necessary to use the instruments which are available, and in the circumstances of this year it was important to lower the pressure of demand.

Mr. Hogg

Will the Chancellor explain to his hon. Friends that, as the difficulties of the motor car industry are the result of deliberate Government policy, the only way to assist is to change the political complexion of the Government and the political complexion of the membership for Oxford?

Mr. Callaghan

I have a feeling that the burgesses of Oxford City will not want to go back to the days when the right hon. and learned Member for St. Marylebone (Mr. Hogg) was a Minister, when Purchase Tax on cars was not at its present rate of 27½ per cent. but at 60 per cent.

Sir G. Nabarro

In view of the unsatisfactory nature of the Answer about Purchase Tax, I beg to give notice that I shall endeavour to raise this matter on the Adjournment, as I am properly able to do.

36. Sir C. Osborne

asked the Chancellor of the Exchequer, since the motor car manufacturing industry now expects its gross profit to fall by £40 million as a consequence of Her Majesty's Government's economic policy of creating mass unemployment, how much less taxation he will get from this industry; what other major trades will be affected in the same way; how he proposes to deal with this problem; and if he will make a statement.

Mr. Callaghan

Any estimate of the effect on tax receipts of the current trend of output in the motor industry is highly conjectural, and I have no statement to make.

Sir C. Osborne

The Chancellor must know that the Motor Traders Association issued a statement saying that it expected a reduction of £40 million on its earnings this year, which will mean that he will not collect nearly so much in taxation. This experience will be the same in other industries. Will not this affect his estimates for the collection of taxes from companies during the current year?

Mr. Callaghan

Yes, Sir, but I have no statement to make on it today.