§ 21. Mr. Dickensasked the Chancellor of the Exchequer what steps he is taking to reduce the net outflow of private direct investments to developed countries.
§ 28. Mr. Frank Allaunasked the Chancellor of the Exchequer if, in view of the declared intention of Imperial Chemical Industries and other firms to export increasing amounts and proportions of capital abroad, he will give an approximate estimate of the effect of this on the balance of payments in this financial year and next year; and what action he proposes to remedy it.
§ Mr. CallaghanThe Government's policy to reduce the cost to the balance of payments of direct investment abroad has been implemented by measures under the Exchange Control Act, the Control of Borrowing Order and the Voluntary Programme. All projects in the non-sterling area and the four developed countries of the sterling area are subject to one or other of these measures.
Direct investment abroad by United Kingdom firms in the 12 months to June, 1967, was £41 million lower than in the preceding year, with a substantial proportion financed by overseas borrowing.
I have no present proposals for further restriction.
§ Mr. DickensWhilst this cut is to be welcomed, does not my right hon. Friend agree that we should now take steps to prohibit completely, for example, the private direct investment of capital to a country like South Africa? Why build up a fascist racialist economy in South Africa at the expense of full employment and economic growth at home?
§ Mr. CallaghanWe have a very substantial trading relationship with South Africa and there are a great many British 1121 firms with large interests in that country. I do not think it would be in our interests to prevent them from at least maintaining their position there. We cannot really be as generous as to write off all that capital.
§ Mr. AllaunHas not I.C.I alone announced that it will spend a further £50 million in this way? Would not tighter restrictions help to prevent this major burden on our balance of payments deficit?
§ Mr. CallaghanNo, not necessarily, because I.C.I. and a great many other firms have been encouraged and, indeed, cajoled to raise a large amount of this new capital abroad on loan terms. To that extent it is no drain on the British balance of payments, but can bring a long-term benefit.
§ Mr. Patrick JenkinWill the right hon. Gentleman draw to the attention of his hon. Friends the major difference between what the I.C.I. overseas director referred to as the greatest growth in investment overseas and the actual export of capital? Further, will he point out to them that, in fact, the great majority of this investment overseas, which is greatly to the advantage of this country, comes from depreciation, ploughed back funds and money borrowed overseas?
§ Mr. CallaghanYes, Sir, that is the case; but, even though it is in the form of depreciation, it appears in some of the statistics as an export of capital, which to that extent may be misleading. However, I do not believe that any of us
| 1964 | 1965 | 1966 | ||||
| Duty | Consumption per capita | Duty | Consumption per capita | Duty | Consumption per capita | |
| £m. | lb. | £m. | lb. | £m. | lb. | |
| Cigarettes | 875 | 6 | 930 | 5.7 | 960 | 5.7 |
| Pipe tobacco | 55 | 0.3 | 55 | 0.3 | 55 | 0.3 |
| Cigars | 9 | 0.1 | 11 | 0.1 | 13 | 0.1 |
| Notes to the Table | ||||||
| 1. Virtually all the tobacco duty revenue comes from the duty charged on the raw leaf when it is withdrawn from bonded warehouse, and the duty receipts do not record the use to which the leaf is ultimately put. The figures given in this table are approximations based on manufacturers' records of sales of tobacco goods. | ||||||
| 2. The figures for cigarettes include both manufactured cigarettes and tobacco for hand-rolled cigarettes. | ||||||
| 3. Consumption is given per head of the total U.K. population aged 15 and over. |
§ would wish to prevent large British companies with interests abroad from borrowing money abroad in order to maintain, develop or modernise their plant there.
§ Sir J. RodgersHas the Chancellor's attention been called to the recent speech of Lord Cromer, a former Governor of the Bank of England, about the operation of the Exchange Control Act, and has he any plans, in view of this devaluation speech, to repeal that Act?
§ Mr. CallaghanNo, Sir; none at all.