HC Deb 13 June 1967 vol 748 cc277-9
4. Mr. Gardner

asked the Chancellor of the Exchequer what is his latest estimate of the effect of joining the European Economic Community on the British balance of payments position.

Mr. Callaghan

I would refer my hon. Friend to the statement made by my right hon. Friend the Prime Minister in the debate on 8th May.—[Vol. 746, c. 1077–80.]

Mr. Gardner

But has my right hon. Friend seen the reports in some responsible national newspapers that the figure could be as high as £800 million? If that is the case, what kind of growth rate does he think he should allow?

Mr. Callaghan

On the first part of my hon. Friend's supplementary question, I am glad to say that I do not take responsibility for what appears in the newspapers. On the second part, the growth rate up to 1970, which is before any entry could have a major effect, is estimated at 3 per cent., and I see no reason to depart from that.

Mr. Ronald Bell

Has the right hon. Gentleman seen the conclusion in the report of the London and Cambridge Survey last week that even if the cost were only £500 million a year it could not be carried at the expected growth rate by 1970?

Mr. Callaghan

No, Sir. I did not see that, but as the expected growth rate up to 1970 would not affect that calculation it is not very relevant.

7. Mr. Ridley

asked the Chancellor of the Exchequer in view of Her Majesty's Government's proposal to join the European Common Market, what proposals he has for encouraging the distribution, rather than the retention, of profits by fiscal means.

Mr. Callaghan

I would refer the hon. Member to the Written Reply given by my hon. Friend the Financial Secretary to the hon. Member for South Angus (Mr. Bruce-Gardyne) on 6th June.—[Vol. 747, c. 161.]

Mr. Ridley

In addition to that reply, would the Chancellor not accept that it would show a good earnest of our intentions if we were to move in the right direction in this matter? Secondly, as the Common Market has been more successful economically than this country, might we not with benefit copy some of the more successful policies in the fiscal sphere?

Mr. Callaghan

That is a matter of argument and one which is not susceptible of a reply at the moment. I should not have thought that it was right at this stage to start revising our fiscal system until we see more clearly the course of the negotiations.

9. Mr. Ridley

asked the Chancellor of the Exchequer in view of Her Majesty's Government's policy of entering the European Economic Community, if he will amend the Selective Employment Tax so that it ceases to subsidise labour.

Mr. Callaghan

No, Sir. The Selective Employment Tax helps redress the balance of taxation between services and manufacturing. Premiums are payable to all manufacturing industry and do not favour particular forms of production.

Mr. Ridley

But has the Chancellor asked the Commission in Brussels for its views about this subsidy on labour? Is he really so pessimistic about our chances of getting in that he is not prepared to alter the fiscal system to suit that obtaining on the Continent?

Mr. Callaghan

As far as I can see, the selective employment premiums are not inconsistent with the Treaty of Rome and the aims of the Six. Therefore, there is no reason to make the adjustment which the hon. Gentleman suggests.

15. Mr. G. Campbell

asked the Chancellor of the Exchequer if he will now reconsider his policy on the introduction of a value-added tax, in view of the negotiations to enter the European Economic Community.

Mr. Diamond

I would refer the hon. Gentleman to the statement made by my right hon. Friend the Prime Minister on 8th May.—[Vol. 746, c. 1089.]

Mr. Campbell

As it is clear that the six countries of the E.E.C. are going to have a value-added tax, will the Chancellor now examine seriously the implications of such a tax, despite the inconveniences of a change?

Mr. Diamond

The implications of all problems related to going into Europe are a matter for the consideration of the Government, and they are not behind the times in giving consideration to them, but I think the hon. Gentleman would be well served if he would read the relevant passage of my right hon. Friend's statement, which deals with this point precisely.

Mr. Barnett

Would not my right hon. Friend agree that the Richardson Committee's Report found, for example, that the value-added tax did not stimulate exports for growth, and also that the Purchase Tax system was more economic and efficient than the value-added tax system? Does he not think that it might be better to try to persuade the Common Market countries to accept our simpler system of Purchase Tax?

Mr. Diamond

There is a good deal in what my hon. Friend says, and if he reads what my right hon. Friend the Prime Minister said he will see that this point, too, was in mind.