§ The President of the Board of Trade (Mr. Douglas Jay)
When I announced on 1st December the Government's decision to make a temporary increase in the rate of investment grants payable by the Board of Trade under Part I of the Industrial Development Act, 1966, I stated that I intended to speed up the payment of claims as soon as practicable. I have therefore reviewed whether the new organisation which we have built up could handle more claims. Claims on investment made in 1966 have so far not come in at the rate we allowed for and I am satisfied that the organisation can now start speeding up payments.
I have therefore decided, after consultation with my right hon. Friend the Chancellor of the Exchequer, that payments of valid claims for the first quarter of 1966 which have been cleared by the Grants Offices should begin in April instead of July. This will reduce the average interval between a firm's expenditure and payment of grant from 18 months to 15 months from the very beginning of the scheme.
We have already invited firms to submit claims from the 1st April onwards on their expenditure during the second quarter of 1966, and it will be our aim to begin making payments on this second batch of claims in July.
Under the old system of investment allowances the delay between a firm's expenditure and the receipt of the allowance averaged about 18 months. We shall be improving on that this year, and I hope that this will encourage firms to 1447 take full advantage of the temporary increase in the rates of grants for investment this year and next, and go ahead with schemes for modernising and expanding their production capacity.
§ Sir K. Joseph
Is the President of the Board of Trade aware that we welcome this acceleration in payment, even though we still think that the system of investment grant introduced by the Government is far less good than the one it replaced? Will he answer three questions? First, does he agree that the slower-than expected rate at which claims have come forward only reflects a slump under this Government in investment intentions? Second, does he accept that confidence and expectation of profit are more important to the rate of investment than the level of the base of the grant? Third, does he now accept that, after one correction by his Ministry, the Board of Trade forecast of a 10 per cent. drop in private investment in 1967 is still too optimistic and that the February forecast of the C.B.I. of a drop of between 15 per cent. and 20 per cent. is far nearer the mark?
§ Mr. Jay
On the first question, what it means is that we took a cautious estimate of how well we could do. It now turns out that we have done rather better than we expected, and that is to everyone's advantage. As to confidence, there is no doubt that since today's statement will mean a quicker cash flow to industry, it will increase industry's confidence in future investment. The right hon. Gentleman asked whether we might make a still further amendment. It is quite possible that as we have managed this administration so much more efficiently than the previous Government we will be able to do so.
§ Mr. Sheldon
Is my right hon. Friend aware of the satisfaction his statement will give both to those in industry and to those who believe that investment is the key to the growth we must have in future years? Will he state what reassessment he may have in mind as to the new level of investment this year to be expected as a result of this change?
§ Mr. Jay
Yes, Sir. I think the statement will certainly give satisfaction to industry; indeed to everyone except the party opposite. As to estimates of future 1448 investment, I do not think it would be wise to put this into statistical terms, but obviously this is likely to increase the rate of investment rather than the reverse.
§ Mr. Biffen
Will the right hon. Gentleman fully bear in mind the point made by my right hon. Friend the Member for Leeds, North-West (Sir K. Joseph) that the key to desirable investment lies in the ability of company management to foresee the possibility of earning good rates of profit and of being able to distribute those profits? Will he therefore use this intervening time between now and the Budget to persuade his colleague the Chancellor of the Exchequer to be appraised of that fact?
§ Mr. Ian Lloyd
Will the right hon. Gentleman indicate that he has understood quite clearly the point made by my hon. Friend the Member for Oswestry (Mr. Biffen) that the encouragement of national investment itself depends legitimately on a financial return, disbursable, spendable after tax to the advantage of the investor?
§ Mr. Barnett
While congratulating my right hon. Friend on this move in the right direction, may I ask him whether he does not feel that 15 months is still quite a long time and, that in order to make the cash investment grants—which is much better than the old system—really meaningful, will he have consultation with 1449 the Chancellor to bring them forward very much more than this, not only because that is more meaningful, but because it would be helpful to precisely the firms we need to help?
§ Mr. Bessell
Is the right hon. Gentleman aware that his statement this afternoon, coupled with the statement on 1st December, will be very much welcomed by industry generally? Does he anticipate being able to increase, slightly at any rate, the rate of grant? Will he consider investment grants for hotel development?
§ Mr. Mendelson
While my right hon. Friend may be disinclined to give any statistical estimate of the rate of investment at the end of this year, has his attention been drawn to the estimates by the National Economic Social Research Council, which predicts that unless some action is taken to increase consumer demand very soon there will be at least the same level of unemployment—perhaps a slightly higher level—at the end of this year?
§ Mr. Jay
Yes, Sir. But these estimates were made before the recent decrease in Bank Rate and before the statement which was made today. There are expansionary forces in the economy both from the present increases in exports and from the rising rate of public investment. Therefore we should treat forecasts with caution.
§ Sir Harmar Nicholls
Is the right hon. Gentleman aware that it is gratifying to hear his support for profit-making which is based on improving the general pro- 1450 ductivity of the country, which has not always been the view expressed from the Dispatch Box while this Government have been in power? Is he the odd-man-out, or is he representing the Treasury Bench?
§ Sir Knox Cunningham
Can the right hon. Gentleman say whether the information he has given to the House was given last night to the Press?
§ Mr. Manuel
Is my right hon. Friend aware that his decision and announcement will give great satisfaction, especially to smaller firms about which I have been in correspondence with him because of the particular difficulty of waiting so long for the grant? Is he aware that those firms in my constituency had invested their money and are getting no profit today, but they are quite delighted if ultimately through this grant they will reap the profits ultimately for that area?