HC Deb 19 December 1968 vol 775 cc1565-71
(Mr. Harold Lever)

Under the Exchange Control Act, permission is required for United Kingdom residents to borrow foreign currency or external sterling. On the introduction of the import deposit scheme it was decided to allow such borrowing to assist importers to meet payment of import deposits in the early stages of the scheme.

The Government indicated then that the scale of borrowing would be kept under constant observation.

In the light of our experience since, it has been decided, in the interests of rein forcing the main intentions of the scheme, that permission will not in future normally be granted.

Sir K. Joseph

How much has been paid in deposit during the first fortnight? What proportion of import deposit do the Government think would have been financed from non-sterling credits but for the prohibition? Why has the Chancellor of the Exchequer changed his view since 22nd November that if credit is obtained from overseas this will improve our reserve position? Do the Chancellor and the Government realise the distraction of management effort caused by the order, itself a bolt out of the blue, and. within two weeks, counter-order?

Mr. Lever

It was made plain, on the Second Reading of the Act and in the public information, that these arrangements would be kept under careful review

Sir Knox Cunningham

Two weeks later.

Mr. Lever

I shall not bandy dates with the hon. and learned Member for Antrim. South (Sir Knox Cunningham).

I made it plain that these applications would be kept under review and that each would be considered on merit. We have concluded, in the light of our experience and our assessment of the future position, that it is now desirable to review these facilities and that, normally, permissions of this kind will not be granted.

The right hon. Gentleman referred to extra management effort. I have already said that I am deeply sympathetic to those importers who have to meet this impediment, but any import restriction scheme of any kind would cause a great deal of extra administrative and management effort, and, as the right hon. Gentleman has recognised, this scheme is the one that causes least difficulty. I cannot at this stage give him the figures he desires.

Mr. Emery

Does the Financial Secretary realise that many firms and buyers have negotiated and renegotiated con tracts to meet the exact criteria stated by the Minister of State to the House, and that this sort of third-rate bucket shop alteration puts the Treasury in disrepute?

Mr. Lever

I would be better able to give a specific and useful answer to the hon. Gentleman if he would tell me the kind of renegotiations which would be affected by this change in the degree of liberality with which we grant these per missions. There was never any kind of assurance that this facility would be kept at the same level continuously. [HON. MEMBERS: "Oh."] On the contrary, it was made plain, both in this House and to the Press and in the information generally made public, that the arrangements were provisional as they were announced to the House and would be kept under close review. That remains the position.

Mr. Barnett

As deposits can still be paid by foreign banks and foreign companies and the interest added to the cost of the goods, what does my hon. Friend expect to achieve from the present Measure? Could he confirm reports that about 40 per cent. of deposits to date have been paid in foreign currencies?

Mr. Lever

I am not in a position use fully to give figures in answer to the latter part of my hon. Friend's supplementary question.

As far as the first part is concerned, we are aware that there will be several means of obtaining sources of finance from abroad as well as at home. It is not out present intention to interfere with those sources.

Sir Knox Cunningham

The Government cannot.

Mr. Lever

No doubt the hon. and learned Gentleman is authoritatitive on that matter.

All I can say is that this particular facility is to be reduced considerably. Instead of normally granting applications, we shall normally refuse them. Since the intention of the House was to sup port the scheme to allow an impact on domestic liquidity, it does not require a total stoppage of all facilities for finance from abroad. It merely means that those facilities are being somewhat narrowed.

Mr. Baker

Does the hon. Gentleman recall his Second Reading speech, when he said that importers would be able to adopt many methods for financing deposits, and that, by supporting the speech of the hon. Member for Heywood and Royton (Mr. Barnett), who specifically recommended this method, he gave his own blessing to it? What has happened during the last two weeks to make the hon. Gentleman change his mind?

Mr. Lever

I would always be ready to lay sacerdotal hands of blessing upon the speeches of my hon. Friend the Member for Heywood and Royton (Mr. Barnett) wherever possible, but, unhappily, he made his speech on that occasion after I had concluded my own observations, so I was not able to do so in this case.

There has been no change in the policy which was announced on Second Reading—that this Measure was to have a impact on domestic liquidity while recognising that some of the funds to enable importers to continue their imports would come from abroad. I make it clear that it is in order for importers to finance their import deposits at home or to use such other facilities as may be available to finance them from abroad. I am merely tightening up one facility so as to enhance somewhat the domestic liquidity impact of the Act.

Mr. Blaker

Does not the hon. Gentleman think that this is likely to be another case of eating of words by the Government because of the inadequate preparation of the Bill and its hasty introduction?

Mr. Lever

If the only meal I had was words eaten in this particular instance, I would be starving. Not a single word has been eaten by the Government except those unceremoniously placed on their plate by the Opposition.

Mr. Mendelson

Is it not rapidly becoming clear that while one understands the Government's reluctance, and despite the unreasonable criticism levelled by right hon. and hon. Members opposite, the method chosen is the wrong one and that the only way to deal with the problem is to introduce selective physical import controls?

Mr. Lever

No, Sir. Selective controls of the kind my hon. Friend has in mind would cause considerably greater dislocation to perfectly legitimate import traders and might have other significant consequences of a kind none of us would wish to see. I re-emphasise that this is not a veto on imports, but imposes some pressure on the propensity to import and on liquidity sources in the United Kingdom.

Mr. Bessell

I want to revert to the question put by the hon. Member for Heywood and Royton (Mr. Barnett), who accurately assessed how this scheme will be overcome. Has the Treasury made any calculation of the increased costs of imports to consumers as a result of the interest charges mentioned by the hon. Member for Heywood and Royton?

Mr. Lever

I cannot give the hon. Gentleman those figures. It is clear that this and similar questions are inconsistent with the other criticisms. One cannot say, on the one hand, that the import deposit scheme imposes an intolerable burden upon importers to the point of disruption and bankruptcy, and then on the other, that it is laughably easy to obtain money. It is neither one nor the other but a significant, marginal and useful pressure.

Mr. Boyd-Carpenter

Will the hon. Gentleman now answer the question put by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), why did the Chancellor of the Exchequer indicate originally that loans of this sort would be acceptable, because, in the short term, they would affect the balance of payments? Will the hon. Gentleman address his mind to the point that, where people have acted on a Ministerial statement of that sort, it is intolerable to alter the arrangements without any notice?

Mr. Lever

What I have said today in no way challenges what my right hon. Friend said. He made it plain that, to some extent, import deposits would be financed from abroad, and so they will. That will continue to be the case even in future. But one of the facilities has been tightened up.

As for putting people in the position of entering into engagements on the strength of our statements, on those loans already obtained interest will be payable. If arrangements have been made already for foreign exporters to make the deposits on behalf of the importer, the interest in future will be pay able on those loans which have already been made. No one will go back on a single word which has been uttered in this matter.

Mr. Peyton

Can the hon. Gentleman give any reference in HANSARD to any precise warning that he gave that this kind of action might be taken to make the arrangements more oppressive? Does not he realise that, when he referred to the fact that they would be kept under review, this was widely taken and no doubt intended to be taken, to mean that they would be reviewed sympathetically with a view to minimising the effects on trade. Now, he is making them worse.

Mr. Lever

That is the precise manner in which these arrangements have been kept under review. In the early stages of the scheme, when many importers had not yet found means for obtaining domestic finance, we wished to lighten their burden deliberately by leaving as wide as possible the sources of finance. That has been done. Now that the domestic market has had time to organise itself so that importers have many alternative facilities at home as well as abroad for obtaining the money, it is thought fit to tighten up this particular facility.

The hon. Gentleman asked for the HANSARD reference of my warning. I will give it to him. It was during the Second Reading debate on 28th November last, and the reference is in c. 753. I said: Exchange control is, of course, required for borrowing from non-sterling sources and it has been directed that applications for borrowing from non-sterling sources to finance import deposits must be submitted to the Bank of England. This will enable us not only to ensure that each application is considered on its merits"— and there has never been open, general licensing for this facility— but also to know how much business of this kind is done."—[OFFICIAL REPORT, 28th November, 1968; Vol. 774; c. 753.] I hope that the hon. Gentleman did not suppose that I indicated that I would watch the situation in order to do nothing about it one way or the other.

Mr. Speaker

Answers should be reasonably brief.

Mr. Crouch

May I draw the attention of the Financial Secretary to the fact that some countries are very dependent on their exports to this country? The country of which I am thinking is Malta. When I was there about 10 days ago, the Maltese Government, in con junction with the banks in Malta, were considering seeking to raise a loan to the tune of£1 million to support Maltese exports to this country.

Can he advise the House whether such an application from the Government of Malta and the banks in Malta would have the support of the Treasury in supporting the export trade to this country, on which the Maltese are absolutely dependent?

Mr. Lever

Loans will not normally be sanctioned, but, as hon. Members have pointed out, there are other facilities, as I am sure the Maltese Government are aware, which would enable them to some extent to mitigate any hardship which might be involved in the scheme.

Sir K. Joseph

As the Financial Secretary has now himself admitted that he has the figures of the volume of supplier credit authorised, will he please give them?

Mr. Lever

I assure the right hon. Gentleman that while these figures may be in existence, certainly I do not have them and have not been given them. I have kept under review the total programme. We in the Treasury have made some assessment of the prospective borrowing and we have concluded that at this point in time it is desirable to take the action which I have announced.

I am not able to give the right hon. Gentleman the figures, but if he will put down a specific Question I shall look into the matter.