§ Order for Second Reading read.
§ Mr. Speaker
May I announce to the House that I have selected the Amendment standing in the names of the right hon. Gentleman the Leader of the Opposition and some of his right hon. and hon. Friends?
§ 3.50 p.m.
§ The Chief Secretary to the Treasury (Mr. John Diamond)
I beg to move, That the Bill be now read a Second time.
My right hon. Friend the Prime Minister announced last month a number of cuts in the public expenditure programmes for the next two years. The proposals in the Bill will secure further savings in public expenditure of £200 million in a full year. Approximately £100 million will arise from the cessation of the payment of the additional sums under S.E.T., and £100 million will arise from the ending of the export rebate scheme. Together, they represent a very important addition to the savings which my right hon. Friend announced, and I will deal with each of them in turn.
As the House will be aware, under the Selective Employment Payments Act, manufacturers now receive payments which consist of two elements. The first is a refund of the Selective Employment Tax actually paid. The second is an additional sum amounting to 7s. 6d. a week for each adult male employee, 3s. 9d. a week for women and boys, and 2s. 6d. a week for girls. The Bill provides that, as from 1st April next, the refund will continue to be made, but the additional sum that I have mentioned will be paid only in respect of employment in a development area.
§ Mr. Joel Barnett (Heywood and Royton)
I apologise to my right hon. Friend for interrupting so early, but can he tell the House what will be the cost of paying this premium in the development areas?
§ Mr. Diamond
My hon. Friend has many qualities, all of them admirable. I congratulate him on his prescience. He is asking me about a matter which I shall be referring to in a moment.
665 As I was saying, as from 1st April the refund will continue to be paid, but the additional sum which I have mentioned will be paid only in respect of employment in a development area. Payments are made quarterly in arrears, and my right hon. Friend the Minister of Labour will, therefore, continue to make payments after 1st April relating to employment before that date. These payments will total about £25 million, and the net saving in the coming year, 1968–69, is likely to be about £75 million.
Having explained in broad outline what we are proposing to do under this heading, I now deal with the reasons why we suggest that the House should support us in our proposals. I shall have to refer to the amounts in question as "these additional sums" throughout, because the phrase "the premiums" which would naturally spring to one's lips refers technically in the Bill to both the additional sum and the refund. As I am talking about the additional sum over and above the refund, I shall have to describe it in that rather longer fashion.
The addition sums represent a little more than 1½ per cent. of labour costs and, as such, I am sure will have been a very acceptable subsidy to employers. Undoubtedly, they will have helped manufacturers to keep down unit costs. Bat devaluation has radically changed the business outlook and, whether manufacturers are large exporters or not, they should reap substantial benefits from the new opportunities created by devaluation. Accordingly, the case for continuing these additional payments has largely disappeared.
I do not need to labour the point that manufacturers with a sizeable export business will gain from the new export opportunities created by devaluation. But it is also true that manufacturers who do not do much exporting, although we hope that they will do more and more, will also benfit. With higher exports and lower imports, the nation will be able to achieve a satisfactory balance of payments at a higher level of domestic activity than otherwise would have been the case, and most sectors of business, therefore, will participate in this higher level. There should, no longer be a need to reply on these payments, and their withdrawal will reduce public expenditure by £100 million in a full year, which 666 will be a tremendous contribution. Given that these additional payments accounted for only one twenty-fifth of the relevant gross trading profits, I cannot think that their withdrawal will cause any hardship.
I may be asked why we are continuing to pay these additional sums in the development areas. The short answer is that we still have and must expect for some time to continue to have unused resources of labour in those areas, and, without special measures, we might fail to make fuller use of their productive capacity. With an unemployment level nearly twice the national average, clearly it is right to continue to provide the assistance which they are already receiving.
There are perhaps three points of fairly important detail to which I should refer in connection with this proposal. First, there are certain nationalised undertakings which are engaged in manufacturing activities. I have in mind the National Coal Board's brickworks and the railway workshops as two good examples. At present, they receive additional payments under the Selective Employment Payments Act. The Bill provides that they will continue to be treated in the same way as private manufacturers; that is to say, only those undertakings which are in development areas will continue to receive the additional 7s. 6d. or whatever the figure may be.
Secondly, the Clause provides for an order-making power to continue the additional payments to manufacturers in areas which cease to be development areas. This provision will give flexibility in terminating Government assistance when development areas are descheduled.
Finally, the Clause does not apply to Northern Ireland, where selective employment payments are made under local legislation. However, I understand that the Government of Northern Ireland will continue to pay the additional 7s. 6d. to manufacturers there, since the whole of Northern Ireland counts as a development area for economic purposes.
Before I summarise the arguments for the provisions in this part of the Bill, I want to make one important qualification to what I have been saying. The extra activity to which I have referred will be seen in the main by exporters, by those contributing to import saving, and by 667 suppliers of capital goods. It must be said, however, that manufacturers who do not fall into any of these categories may well feel the effects of the holding back of personal consumption, to which my right hon. Friend the Chancellor referred in his speech to the overseas bankers a few days ago. I have no doubt that these manufacturers are already turning their attention to the additional opportunities offered by exporting and by import saving, and I have every confidence in the resourcefulness of their managements to secure their share of the additional orders which should be forthcoming in the categories that I have mentioned and to seek to diversify their products appropriately.
In short, therefore, the Government take the view that outside the development areas the case for continuing these additional payments has largely disappeared and that the need to save this further £100 million of public expenditure in a full year is paramount.
The arguments for the abolition of the export rebate under Clause 2 are very similar to those which I have deployed in connection with the cessation of the additional payments under S.E.T. When my right hon. Friend the Home Secretary made his devaluation statement on 18th November last, he announced both these decisions as measures accompanying devaluation.
The first argument is that the rebate is no longer needed. It was introduced in October, 1964, to make our exports more competitive. Apart from exports to our E.F.T.A. partners, it has continued ever since. But, with devaluation, this competitive aid is no longer needed.
Let me give the House the broad figures. The competitive advantage which devaluation gives in terms of foreign currency is one-sixth, or 16⅔ per cent. But there are deductions to be made from that advantage. First, there is the removal of the S.E.T. additional payments to which I have referred, and their removal accounts for about half of 1 per cent. The export rebate, on average, is worth 1.8 per cent. So let us call the removal of that roughly a further 2 per cent. So far, we have a 2½ per cent. deduction from the benefit. Then again, devaluation leads to inevitable increases in import prices, and many 668 exported goods contain an element of imports in their make-up. So we have to add on a further 2½ per cent. in respect of higher import prices.
It would be reasonable, too, to have regard to some increases in wages, and it would be prudent, therefore, to include a figure of 1 per cent. as representing the increase in the total price attributable to higher wage costs. These increases that I have mentioned total about 6 per cent., and that leaves, therefore, a net advantage in export prices resulting from devaluation on average—I repeat on average—of between 10 and 11 per cent.
It is clear, therefore, that, as a result of devaluation, the export rebate can no longer be justified by the continuing need to make our exports more competitive. Still less can it be justified in relation to the pressing need to reduce public expenditure. The rebate also costs about £100 million a year, and all who feel that public expenditure should be reduced will agree that £100 million is a saving which we must secure.
Let me, therefore, refer shortly to the provisions in the Bill affecting the rebate. Clause 2 provides that the rebate will not be payable on goods exported after 31st March of this year; but, at the same time, it protects exporters who contracted in sterling before devaluation on the assumption that rebate would be paid, but did not completely fulfil their contracts at the old rate.
§ Sir Douglas Glover (Ormskirk) rose—
§ Mr. Diamond
May I finish this sentence, which might help the hon. Gentleman.
The Clause, therefore, makes an exception for goods exported under written contracts of sale if the Board of Trade is satisfied that the contract was made before the 19th November, 1967; that is, the day after the announcement of the abolition of the rebate.
§ Sir D. Glover
Is the hon. Gentleman telling the House that the Chancellor of the Exchequer settled the figure for devaluation as 14.3 knowing that it would be between 10 and 11 per cent. because he was going to take off the export rebate?
§ Mr. Diamond
A number of matters entered into the consideration about the 669 extent to which the rate should be varied. The main consideration was a rate which would be likely to be appropriate for many years ahead. I have not quite followed why the hon. Gentleman asked me that in relation to these items, but there we are.
I have dealt with both Clauses 1 and 2, but, as there are three Clauses in the Bill, I now turn to Clause 3. Although the subject matter this Clause was dealt with fully and with great clarity, in his usual entertaining and attractive fashion, by my hon. Friend the Financial Secretary only a short time ago, I suppose it is inevitable that, as I am putting the Bill for Second Reading to the House, I should also refer to it.
It is essential that I should do so, because I am aware of the fact that every hon. and right hon. Gentleman in the House will have read the Bill with their usual care from cover to cover, Clause by Clause, and will have observed that the rubric to Clause 2 reads, "Termination of export rebates" and the rubric to Clause 3 reads, "Reintroduction of export rebates". A superficial reading of that might give the impression that the Government were slightly ambivalent in their thinking or, what might be considerably worse, might give the impression that exporters were justified in retaining an element of doubt as to the Government's intentions.
Let me say straightaway that neither ambivalence nor doubt can be justified. It is the Government's firm intention in present circumstances to give effect as from 31st March to their decision to remove the export rebate.
There are three very good reasons for doing this. I have already put two before the House. The third that I want to deploy for a moment or two is that it will encourage exports indirectly.
Let me explain what I have in mind. It is in our interests at all times—especially so at the present time—that the free flow of goods between countries should not be unduly hampered. Any act which encourages a movement towards protectionism among nations is, therefore, to be regretted. We have always regarded the export rebate as fully compatible with our international obligations, but the plain fact is that not 670 every other country has completely shared that view.
Indeed, some countries have become increasingly critical of our maintaining the rebate, and it has, in fact, been used as an argument to justify protectionist pressures in some countries. We are satisfied that foreign Administrations will be helped in resisting those pressures by our withdrawal of the rebate. It is in our long-term interests to assist in defeating the forces of protectionism wherever they may appear.
Clause 3 will provide a useful weapon in that campaign. It is our hope that no decisions will be taken by any country which will have the result of interfering with the free flow of trade and which will offset to any significant degree the new advantages which would follow the implementation of the Kennedy Round proposals. I have no reason to believe that any such decision will be taken, but I am aware that international consultations are taking place with a view to preventing the need for protectionist measures. I firmly believe that both the action we have taken under Clause 2 in ending the export rebate and the tentative powers we are taking under Clause 3, by way of precaution, will serve to encourage a satisfactory outcome to those discussions.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
If the right hon. Gentleman is so much against protectionism—and I am delighted to hear that the Government are not becoming more protectionist—can he say how he squares that with the new policy of import saving by setting up industries in this country to do uneconomically what those who have hitherto exported to us have done much better abroad?
§ Mr. Diamond
There is no question of setting up industries uneconomically. There is a need for us to balance our payments, which I would have thought the hon. Gentleman would regard as being of supreme importance. We can only do that by exporting more and importing less. I should have thought that the hon. Gentleman would be entirely with us on that proposal.
It is also right that we wish to discourage protectionism, and one of the actions we are taking in the Bill is a most forthright action in that direction. 671 As I have explained, we are helping other nations, by taking these powers under Clause 3, to act in the way we would wish them to act to oppose restrictionist pressures in their own countries, which everybody has observed have mounted in recent times.
It may be said that we are acting with what the lawyers describe as an abundance of caution. There are many good precedents for that if that is alleged against us. But I would prefer to describe it slightly differently. I prefer to say that, under Clause 2, I am putting my trust in Allah and, under Clause 3, I am fulfilling the terms of the proverb by tying my camel up at night. That is a very sound proverb which I put before the House, which has been referred to many times.
I have explained that the main principles are Clauses 1, 2 and 3. They are the guts of the Bill. I hope that the explanation I have given has been clear and that the House will be good enough to give the Bill a Second Reading.
§ 4.9 p.m.
§ Mr. Iain Macleod (Enfield, West)
I beg to move to leave out from "That" to the end of the Question and to add instead thereof:this House, while welcoming a further step in dismantling the selective employment tax, declines to give a Second Reading to a Bill which removes the export rebate at a time when the burden on industry will be increased by the proposed addition of 2½ per cent. to the rate of corporation tax and by other Government measures.We are grateful, as usual, to the right hon. Gentleman for his explanation. This Bill is two Bills in one, and, as the Amendment I have just read shows, the Opposition take a very different attitude towards the first Bill, which is Clause 1, from that which they take to the second Bill, which is Clauses 2 and 3.
Clause 1 removes the Selective Employment Premium, with the exception of the development areas. Although the Chief Secretary did not say so, we take this as a welcome admission that the consistent objections put up by both the Conservative and Liberal Parties to the premium, and indeed to the whole of the S.E.T., have been right from the beginning. The Chief Secretary—it is perhaps not surprising—did not mention 672 that on 20th July, 1966, I moved an Amendment to delete the premiums from the Selective Employment Payments Bill. He explained at great length—I am paraphrasing, but I have his speech here if he wishes me to quote it—that I did not understand what the Government were trying to do, and that there was no question of them going backwards along the road I suggested. When I am dealing with the Chief Secretary I never know whether to attempt to answer him in the speech that he has just made or to wait for the second part which always comes along in due course, because on this occasion, as so often before, the stone which the builders rejected is now being hauled earnestly back into place by the Chief Secretary, and we on this side welcome it very much.
I would like, for a moment, to reflect on the mounting absurdity of the whole exercise of the S.E.T. About 80 per cent. of manufacturing industry lies outside the development areas, so for 80 per cent. of manufacturing, for the whole of mining, transport, agriculture, nationalised industries, local authorities, charities, and the disabled, these enormous sums are laboriously collected in, and no fewer than eight Government Departments are used to pay the identical sums out again. After 1st April the payment structure will be such that the Government will collect £1,100 million, they will refund £800 million, ad the premium, at £25 million, will come to 2½ per cent. of the gross yield.
I do not know whether the House is aware of it, but in some primitive tribes there is a system that when contributions are called for a notched stick is sent to the chief's hut. It is kept there for a certain time and then duly returned, and in due course it is carried hack again. We do not seem to have got much further under Socialism than that method.
It is ludicrous to go on with a tax which has been discredited from the very moment of its introduction, and so we on this side of the House welcome this step. But I ask the Chancellor of the Exchequer to consider going further in this matter. I would like to see the abandonment, after due preparation for tapering, of the Selective Employment Premiums in the development areas, and the R.E.P. as well. I say this for two reasons. First, I profoundly believe that 673 the present method is inefficient. I am not making a plea that less money should be spent on the development areas, although I believe that we could do much more good for a smaller sum than we now expend. I am arguing for a cost-effective study of the question of keeping the remnants of a discredited tax, S.E.T., and its offspring, the R.E.P.
I think that in this House we are apt to divide expenditure into good expenditure and bad expenditure, particularly in difficult times. We are apt to say that bad expenditure is expenditure across the exchanges—although that by no means follows—and good expenditure is something to do with the development areas. I therefore ask whether it is good value for money to do what will be done when this Bill becomes law.
We know roughly what the Government's objective is. It is so to reduce the disparity in unemployment between the development areas and the rest of the country that the difference will be rather more than halved. I have translated that into the January figures—not a suitable month as it happens because of the weather, for the case that I wish to argue, but never mind. It shows that unemployment in the country generally is 2.7 per cent., and that in the development areas it is 4.5 per cent. To achieve something rather better than half the margin, in other words to get an average 3.6 per cent. in the development areas, we have to create 41,225 jobs. The latest Government figures for expenditure show that on S.E.T. and R.E.P. alone after this Bill we shall be spending between £200 million and £300 million. It is a simple calculation to show that that makes something over £6,000 a job, roughly a car and a house for each person.
I have always held the view—and the House knows that I have expressed it many times—that for a smaller sum, if only we would concentrate on roads, on services, and on infrastructure, we could do far better for the development areas. Secondly—and this is in no sense a party point; I have heard it made from both sides of the House I believe that the Government's policy, which will be exaggerated by this Bill, is disastrous for the grey areas, and indeed for the off-white areas as well, if I may coin a phrase, 674 because the discrepancies and the anomalies after 1st April will be very severe indeed.
I take just two examples. The Times said recently:Sir Roger Stevens, chairman of the Yorkshire and Humberside Economic Planning Council, warned yesterday that the future growth of the steel and chemical industries in the region may be seriously prejudiced by the present Development Area policies.The development of these industries, he said, was in danger of being permanently diverted from the areas in which it could most advantageously take place.I believe that to be true.
Secondly, every one of us, as constituency Members, will have illustrations of cases in which, particularly with this new proposal about S.E.T. in the Bill before us, the anomalies will accelerate. One given to me by my hon. Friend the Member for Hendon, North (Sir Ian Orr-Ewing) shows that the S.E.T. premium costs a company which deals with the manufacture of coaches £25,000 a year, while its trade rivals will benefit from the 7s. 6d. per week S.E.T. and the 30s. per man R.E.P. to the extent of about £78,000 because they are in a development area.
If extra labour was being taken on, one could understand the Government's attitude towards this expenditure, but if extra labour is not being taken on it seems to me that the subsidy often becomes pointless and extremely expensive for the wages bill. I urge the Government—and there is no party point in this, it is a matter of great importance to both sides of the House—towards a more radical rethinking of their development area policies than the Bill indicates.
I believe that the growth point concept is the right one. I believe that the present methods are arbitrary, indeed whimsical, in their effect, and although Clause 1, as a sign of repentance, is welcome, I wish the Government would go further and abolish the S.E.T. I know that this is not something that we can do without putting something else in its place, and that lies outwith the scope of this debate, but I cay say to the Chancellor of the Exchequer—and it will not surprise him—that I think he should look into much wider based methods of taxing consumption. If it is out of order to pursue that now, it is something to which we shall return in due course.
675 I turn from Clause 1, which, for the reasons I have given, we find wholly acceptable, to an examination of what has been said about the export rebate. I am afraid that I found the Chief Secretary's account somewhat sketchy, and I doubt whether he believed it himself. He will forgive me, therefore, if I spell out in a little more detail a very confused and tangled story. It should be clearly on the record, because it seems a classic example of how Governments should not deal with business problems.
This matter goes back to—indeed, we are repealing—the Finance (No. 2) Act, 1964. The important point about Section 7 of that Act, to which also the Chief Secretary did not refer, is that the payment of export rebates was most clearly linked to the duty, in particular, on hydrocarbon oils. The Section said:The provisions of this section shall have effect for the purpose of affording relief in respect of duties of customs and excise chargeable on hydrocarbon oils, vehicle excise duty,…Purchase Tax,and so on. We had some doubts about the legality of this operation at the time. Then, when it was revived and the rebates were recast in December 1966, they were still linked, with the tax changes which had been made in July of that year, to oil duty and Purchase Tax.
Then came devaluation, and the Chancellor of the Exchequer told us on 20th NovemberThe United States Government are having to resist fierce attempts being made to impose tariffs against our goods. If we can remove the export rebate and other items of that sort, it strengthens other Governments throughout the world, including the American…"—[OFFICIAL REPORT, 20th November, 1967; Vol. 754, c. 945.]This is the argument which the Chief Secretary put forward again today.
Four or five days after the event of devaluation but the day after that statement, we began a two-day debate. My hon. Friend the Member for Yeovil (Mr. Peyton) asked the President of the Board of Trade:From what date is the export rebate being withdrawn?Mr. Crosland: April, probably, as far as we can tell.That was all the President of the Board of Trade knew. We pressed the Secretary of State for Economic Affairs for a 676 clearer answer when he wound up and he said:… it will be paid on exports which qualify on or after 31st March, but not thereafter."—[OFFICIAL REPORT, 21st November, 1968; Vol. 754, c. 1150, 1262.]Some of my hon. Friends rose to put the obvious questions to the Secretary of State, who did not give way because, of course, he did not know the answers. That was our two-day debate.
Quite clearly, the Government had not considered this point, they did not know the answer to it, and it is not surprising that the very next day the protests began to come in. I quote from The Times of 23rd November:A behind-the-scenes row broke out in Whitehall yesterday as exporters began protesting at the lack of clarification of the Government's decision to abolish the 2 per cent. export rebate from April 1. Confusion mounted to such a pitch that the Customs and Excise Department last night rushed out a statement indicating that there would be complete guillotine of the £100 million-a-year hand-out to export industries and no concessions to businessmen with contracts maturing from April onwards.That was the day after the debate, and, of course, the position has been altered several times since.
The Financial Times of the same day said:I understand that the department means by this that they"—that is, exports—must have left the country by1st April. This was clearly an impossible position. Exports are very slow to mature, particularly in the heavy end of exporting, and the pressures on the Government began to mount, as the Financial Secretary knew.
Then, in due course there came what was about the sixth change, when the Financial Secretary, in a Written Answer on 8th December, laid down—this was the origin of the Revenue (No. 1) Bill, which is now dead—that… goods … exported under a firm written contract made before 19th November, 1967, at fixed prices payable in sterling, which are not renegotiable".—[OFFICIAL REPORT, 8th December, 1967; Vol. 755, c. 412.]would still qualify. In due course, following that, the Ways and Means Resolution of 19th December was introduced. I made a brief comment that 677 we did not think it expedient to abandon the rebate. Of course, we had not then seen the Bill, which was brought in after the Ways and Means Resolution.
So we had so far had four or five changes of attitude by the Government within a very short time, but there was more to come. It is strange how all these matters seem to take the Government entirely by surprise, although they knew perfectly well that, on 1st January of this year, both France and Germany were going to bring in or develop methods of value added tax, which give exporters a similar sort of advantage to the export rebate. Naturally, President Johnson equally took note of this in his New Year Message.
A few days later, the President of the Board of Trade stepped in, and on 10th January he said:We are, it is true, disturbed at the suggestion that the United States might introduce some form of export rebate and connected import tax …He added that we would then have to consider our position.
Then, coming near the end of this saga, three weeks later, the Prime Minister took a hand. In response to a Question from my right hon. Friend the Leader of the Opposition, he said, after considerable preliminary about his visit to the United States and what he was going to say to President Johnson:… we should have to reserve our position entirely about the withdrawal of the export rebate."—[OFFICI AL REPORT, 30th January, 1968; Vol. 757, c. 1092.]At that moment, Question Time came to an end and we had to move on to the Orders of the Day. But what the right hon. Gentleman had said was entirely contrary to the Bill which contained nothing, no loophole at all, which made any sense of what he had said.
A few hours later, a new Ways and Means Resolution was put before the House and the next evening that, too, was debated in turn. Some very sensible questions were asked on that occasion by my hon. Friend the Member for Worthing (Mr. Higgins) and the Financial Secretary,—I can only assume that he was embarrassed by what his colleagues had been doing and perhaps by the Prime Minister's statement—gave, for the only time that I can recall in the House, an extremely petulant answer. What the hon. Gentle- 678 man said—this was his second time around—on 13th January was in reply to an hon. Member who asked "Why was it not in the first Bill?", which is a very good question, which the Chief Secretary made no attempt to answer. The hon. Gentleman replied:The position is perfectly clear. When the first Bill was proposed, no one envisaged any possibility that it would he in our interest to take back the export rebate scheme."—[OFFICIAL REPORT, 13th January, 1968 Vol. 757, c. 1489.]Why on earth not? Do this Government really think that, even today, one can devalue sterling without some ripples spreading across the world? Do they really think or pretend that they did not know of the movement of the Common Market countries—France and Germany, in particular—towards a value added tax on 1st January?
The result of that story, partly by bluff—that is unquestionably what the Prime Minister's intervention was—and partly by muddle, is that this House is now invited to consider a Bill which, as the Chief Secretary said, has a side heading for Clause 2, "Termination of export rebates", and a triumphant retort in Clause 3, "Reintroduction of export rebates". And business people are supposed, as a result, to know where they stand.
If one does anything except touch one's forelock to the Prime Minister one is in danger of incurring the wrath of the Lord Chancellor, and I would not wish to do that. One sometimes also starts off a correspondence in The Times. I hope to avoid that by quoting not my views but those of the Economic Editor of The Times, with which I happen to agree. Mr. Jay said:The Prime Minister's mini-threat in the Commons on Tuesday to retain the British export rebate if the United States presses its plans for an export rebate and import levy of its own is too transparently an empty bargaining position. The United States will not take it seriously, nor will the Americans care very much if it were carried out.Mr Jay then said:First, look at its futility as a bargaining counter.He examined that, but I will spare the Treasury Front Bench his conclusions, and he went on:Secondly, consider the senselessness of such threats. This is if anything more disturbing than their weakness.679 I agree. We know that the Prime Minister inhabits a sort of Walter Mitty world of his own, but the Financial Secretary does not, and I do not believe that the Chief Secretary does either. The answer which the right hon. Gentleman gave today in his speech merely reflected his embarrassment at having to explain this sally of the Prime Minister's into these affairs.
I am glad that the Committee stage, as announced by the Leader of the House, is to be on the Floor of the House. I wish to give notice of some points of importance they are more important than Committee points because they may affect our attitude towards the Third Reading—arising out of Clauses 2 and 3. I trust that the Financial Secretary will take note of them, and, while it will be admirable if he wishes to reply to them tonight, he may care to consult with the Board of Trade and reply later.
First—this is of the greatest importance to business people—Clause 2(2) deals with written contracts of sale and, by doing so, it excludes irrevocable bids and tenders. I ask the Government to think again on this point because if a tender is accepted by an overseas buyer, whether or not there is a written contract of sale, there is, in many cases, in honour, something equivalent to a firm contract. It may be that the loss of rebate would require withdrawal of the tender and a consequential penalty. I ask the Financial Secretary if he will look favourably at Amendments which we will table to include irrevocable bids—they must, of course, be irrevocable bids and tenders—in relation to Clause 2(2).
Secondly, that Clause altogether excludes a verbal contract. It deals in some detail with written contracts but, as the House knows, a great deal of the business of this country is done in the first instance by a verbal agreement. Hon. Members will recall the phrase on which so much of the City of London works—"My word is my bond"—and although I absolutely recognise that, in a matter where public money is involved, one must have special standards of proof—that is not in dispute between us—I suggest that if, say, the President of the Board of Trade was satisfied that a contract was an absolutely genuine one which might be enforceable, so to speak, in honour, 680 though not necessarily in accordance with Clause 2, it would be right for the Government to consider an Amendment to that effect on the Floor of the House.
Thirdly—and I would like the Financial Secretary's comments on this tonight—I am surprised to see that Clause 3 can be selective in regard to a specified country or territory. I am particularly thinking of subsection (5). I would have thought that it was, almost beyond argument, in contravention of Article I of G.A.T.T., which deals with the most-favoured-nation obligation and which provides that… any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting Parties".I do not see how Clause 3, and in particular subsection (5), can be reconciled with our obligations under that Article of G.A.T.T.
I have explained our attitude to Clause 1. We welcome it and wish that the Government would go further. On Clauses 2 and 3, I agree with what the Economist said on 3rd February:The truth of the matter is that the rebate of taxes that otherwise fall (partly illogically) upon exporters are a perfectly sensible way of stimulating export trade…We therefore should not get excited with the development of a value added tax in other countries, or America's reaction to it. It may well be that we shall come to such methods in this country. We will certainly have to do so if we join the E.C.C.
We will put down a marker for the Government. There are, I fear, too many Members of this Government who regard industry as a sort of milch cow, with Socialism as the milkmaid. It is no good having a single sentence in the Budget about geese and their golden eggs, because it is the facts that talk, and I do not see how one can go through the purely factual account which I have given of events from October 1964 and the seven or eight different changes of mind by the Labour Government over that period without realising how anxious the business world is about the treatment being accorded to it. When this rebate was introduced it was quite specifically linked with the fuel oil duty. 681 Although the rebate is to go, the fuel oil duty is still to remain, and I see no logic in that.
We are now to have a 2½ per cent. increase in Corporation Tax, and this seems quite against the developments that we must have if we are to make a success of devaluation. Industry must bear a heavy and increasing load of burdens on its transport by the numerous Bills that are before the House now. We will, therefore, put down a marker for the Government. It is industry and industry alone which will enable us to get out of the many difficulties that today face the country. We very much welcome Clause 1 and we urge the Government to go further in this sphere. However, for the reasons I have spelt out in detail and which are indicated in our reasoned Amendment, we cannot agree with the rest of the Bill.
§ 4.40 p.m.
§ Mr. R. B. Cant (Stoke-on-Trent, Central)
The right hon. Member for Enfield, West (Mr. Iain Macleod) has made great play of the fact that from time to time the Government have changed their mind. I gather from my very detailed file of Press cuttings that the Opposition on this occasion have changed their mind. They decided originally not to oppose the Bill, but have since decided to do so.
I want to speak mainly about the export rebate, but I share some of the misgivings not only of hon. Members opposite, but no doubt of some of my hon. Friends, about the developments in relation to Selective Employment Tax premiums. I come from one of the intermediate areas. Those who both live in and represent intermediate areas, in my case North Staffordshire, are becoming increasingly aware that if they are not very careful they will be ground between the upper and nether millstones of, on the one hand, areas of economic growth and, on the other, of areas of economic rehabilitation.
We take this very seriously. I am anxious to make this point, because only this morning I received from the Stoke-on-Trent Planning Committee an extremely professional document which contains its evidence to the Hunt Committee. It is very obvious from this that such areas as North Staffordshire in general and The Potteries in particular, unless Government policy is changed, 682 will have their fate slightly worsened by the contents of this Bill.
I should like to say a few words about the export rebate. Here again, I am to some extent critical of the Government. I share the view that this should not have been dropped. I think it quite consistent with the General Agreement on Tariffs and Trade. I agree for once with the Economist that it is perfectly logical to exempt exports from the burden of relevant indirect taxes. I should have thought that this would have been something which would have appealed to the Chancellor, at any rate, if he wants to make a case for increasing slightly the proportion of tax revenue derived from indirect taxation and if he were feeling even more ambitious and wanted to feel his way towards the adoption of a value-added tax at some time in the future. Certainly, I would support that.
If I may be slightly parochial again, I have had a very large number of representations from pottery manufacturers expressing their disappointment that the Government have decided not to carry on with the export rebate. The pottery industry is an extremely export-conscious industry. It always has been; it has always exported more than 50 per cent. of its total output. The great advantage of the export rebate was that it was directly related to its efforts in this respect. It is very important on psychological grounds that a tax should be seen to have specific characteristics of which one approves. Certainly, the export rebate had become an extremely popular tax for which pottery manufacturers had acquired a certain affection. I do not know what truth there is in the story about why export rebate was dropped.
To quote the Economist again, did the Government panic? I do not know but I have read in various—
§ Mr. Diamond
Is my hon. Friend actually saying that he does not know whether for all time or at any time a Government never panic?
§ Mr. Cant
I have tried to do something about this situation, but so far I have not been successful. It seems to have been the general opinion—I put it no higher or lower than that—that the Government took precipitate action. At least, various newspapers, such as the Financial Times and the Economist, suggest this. I have a much greater respect for the international freemasonry of journalists, publicists and even civil servants than I used to have. I am rather surprised that the right hon. Member for Enfield, West did not quote further passages from the Economist. If it is true, for example, that the Government did panic, that we gave way to the opposition, in particular, of the manufacturers of Bourbon whisky in the United States, it becomes a rather lamentable story.
I say as a general principle that I think that perhaps this happened. Perhaps we are moving into a stage of history where it will be accepted as a general principle that we should not be quite so sensitive of the repercussions which our actions might have on other nations. I think, for example, to quote something similar to the export rebate, that we were rather precipitate in dropping the import surcharge. I know the academics writing in the Manchester School Quarterly, and so on, have said that the import surcharge did not do everything that the Government claimed it might do, and that there was a saving of only £100 million a year, but it so happens that it is hundreds of millions we are dealing with this afternoon, in one way or another.
I think that we gave way rather too lightly on that occasion. It is similar to the export rebate. Although it is quite obvious that the Government will not accede to the request made by the Opposition and will not restore the export rebate, I hope that they will definitely regard it as part of their armoury for the future and will not hesitate if they feel it would be advantageous to this country to reintroduce it. If we do reintroduce it, we should introduce it in general and not on a sort of discriminatory basis. If we introduced it on a discriminatory basis we should be made to look rather silly. In this context, at any rate, petulance would be even worse than panic.
684 I know that we have our problems. These are made worse by the fact that we are at the moment manoeuvring in terms of policy in a context which has been made particularly difficult by the conflict which has broken out between the United States and the E.E.C. Unless somebody can still the waters, a non-tariff war will break out between these two giants.
What we are discussing today in terms of the export rebate is not very important. In fact, we are very much on the sidelines. It is remarkable that the Kennedy Round, for example, took account of only one non-tariff barrier. That was the nettle, the American selling price for benzine-based chemicals. Quite apart from any of the machinations of de Gaulle in this American/Common Market conflict, the non-tariff barrier war could assume quite serious proportions. We are talking about a 2 per cent. export rebate, and the emergence of this new situation resulting from the introduction of the value-added tax has introduced border taxes of quite different dimensions.
It is interesting to note, for example, when we discuss whether we dare reintroduce the 2 per cent. export rebate, that the value in percentage terms of the value-added tax for France is about 39 per cent. This is because hydrocarbon oils, for instance, include a very high proportion of what I think it is fashionable to call "taxes occultes.". For Germany, the equivalent figure would be 10 or 11 per cent. The indirect taxes of the poor old United States average only 2½ per cent. This is the real battle which is going on in the world of international trade, a battle which is between the United States and the Common Market and which reflects the very different burdens of direct and indirect taxes. I suppose that it is understandable that the Americans should complain that they pay high personal taxes at home and, at the same time, are expected to pay high indirect taxes—border taxes—abroad.
There is a certain amount of statistical legerdemain in some of the calculations made by the import lobbies in the United States, but some of the figures of comparative total entry costs which have been produced by the Americans for such commodities as ethylene glycol and 685 carbon-welded pipe—not very romantic commodities, admittedly—show clearly that the Americans have a substantial grievance. If one adds to this the fact that the Americans have a 4,000 million dollar deficit, when the President of the United States says that he is looking for some revision of the G.A.T.T. rules and that he might introduce an export rebate/ import surcharge of 2.3 per cent., he might be seen to have a case.
I do not think that this should prevent us from thinking in terms of reintroducing the export rebate, but what I think that it should persuade us to do is simply this: if we reintroduce it, let us not pick on the Americans. If we reintroduce it, let us make it a general and not a discriminatory introduction. We should not make it discriminatory, if only to save ourselves from being laughed at, because I agree with Mr. Peter Jay, whose words must be much more unacceptable to my right hon. Friend the Prime Minister than the words even of the Shadow Chancellor, that this is a mini-threat. Sometimes David does offer a successful challenge to Goliath, but I do not think that we should lean too much on history in this respect. If we want to be discriminatory, in the new circumstances we should be discriminatory against the Common Market rather than against the United States.
I have said my piece. I hope that I have said it in general terms. I have also said it because I believe that the pottery manufacturers in my constituency have a very strong case. One day we might have to reassess the significance of exports and imports in the world economic system. Here we are, not only crucified on the cross of a balance of payments deficit, but now getting ourselves involved in a war of protectionism, of economic nationalism, over the question whether we should have export rebates, value-added taxes, and so on.
I cannot resist reading one little story, in conclusion, on this theme from the most recent article by Andrew Shonfield in International Affairs. The article is entitled, "Changing Commercial Policies in the Soviet Bloc". Mr. Shonfield is telling the story of some foreign trade administrators. One says:'A marvellous day—I managed to export a cat under the trade agreement with our 686 Socialist neighbour, X, for $50,000.' 'You cannot really mean it—one cat?', says the other official. It is true', says the first, 'and that is not the end of it. I imported two dogs for $60,000.'I do not know what the relevance of that is, except to say that we should try to get this import/export business into some sort of perspective. I hope that, if necessary, my right hon. Friend the Chancellor of the Exchequer will screw up his courage to the sticking point and reintroduce the export rebate as soon as possible.
§ 4.58 p.m.
§ Mr. Joseph Hiley (Pudsey)
The hon. Member for Stoke-on-Trent, Central (Mr. Cant) was right to refer to the predominant industry in his constituency. As one who has always been engaged in the wool-textile industry, I shall make my comments on, and criticisms of, the Bill in relation to that industry. The specific examples which I may give later do not concern me personally, but I hope that the Chief Secretary will take careful note of the point I make, because I believe that it is one which neither he nor the President of the Board of Trade has thoroughly appreciated.
Obviously, if the development area policy—of all Governments—is to succeed, there must be incentives. But, since this Government came to power, the number and extent of development areas has grown tremendously. The result is that there are within the new development areas many old-established concerns. They have been there a long time, they are successful and prosperous, but, merely because they happen to be in a place which has now become a development area, they enjoy grossly unfair advantages over other similar sections of industry which happen not to be in development areas. As I said, I am speaking primarily about the wool industry, but this applies to many others, too.
The proposals in the Bill further widen the gap between the advantages and disadvantages for those inside or outside development areas. It is not only the export rebate. There is the selective employment premium as well. The effect of both together is that the old-established firm in a development area will, if the Bill goes through, have the advantage of 37s. 6d. a week for every man employed.
687 I have often thought that the export rebate received more attention than it deserved. At one point, the Chief Secretary referred to a rate of 8 per cent. For the wool textile trade, it is, I believe, only 1¼ per cent. But, even so, it will not be news to the House that few exporters of textile goods have derived any great benefit from it. It had hardly been established before foreign buyers were demanding, and in many cases receiving, the concession which the exporters had received from the rebate.
Now is the time, with the Bill before us, for the injustice to be remedied. It should not be beyond the ability of Governments to lay down a time, say, five or 10 years, beyond which, after an industry has been established in a development area for that period, it should cease to enjoy those advantages. Obviously, firms which are starting afresh, with Government assistance and using Government accommodation, should have all these concessions. But it is unfair that others engaged in competitive industry should continue to suffer the disadvantage of 37s. 6d. a week per man.
The wool textile industry has for long been recognised as being high on the list of exporters. At one time, we were the sixth. Compliments have been paid to the industry by Governments over the years. But the Departments have not properly understood a custom in the textile trade, namely, the system of making long contracts, sometimes for 12 months or even 18 months ahead. Wool and wool tops are sold on that basis.
Some hon. Members may think that is a dangerous thing to do. All I can say is that they probably do not realise that this is a long-established custom in the trade, and that if we in this country are not prepared to sell on that basis there are others who will. Moreover, if the industry is criticised for doing something dangerous, particularly at this time of economic disturbance, I reply that it was not until after repeated assertions and promises by many members of the Government that there would be no devaluation that the trade was prepared to enter into contracts of that nature.
The events of 19th November, assuming that producers of wool did not devalue, as was the case with the principal supplier, 688 Australia, meant a severe loss to our exporters of wool and tops. The labour content in a pound of top is very small compared with that in a finished product. Therefore, the increased price which has to be paid for the raw material is a considerable item. In consequence, in this section of the trade, which is a substantial one, the effect of devaluation has been to put a heavy disadvantage on the exporter of goods sold on an irrevocable basis. The 1 or 2 per cent. advantage from the export rebate is nothing compared with the loss to him as a result of the increased cost of wool after devaluation.
On 23rd January, the Chancellor said that the Government were not responsible for the losses incurred as a result of devaluation. It was a disgraceful statement to make, particularly in view of the promises which had been given for so long. I can only assume that the Government have not realised what the effects are on some sections of the wool textile industry.
The concession in Clause 2 is welcome, but, as I said, it is not very much. It is insignificant compared with the effects of devaluation on the cost of the primary product. I hope that the Minister will give careful attention to the point I have made. The concession is given in respect of deliveries up to 31st March, and, as far as I can understand, probably for a longer period if the Government can be satisfied that contracts had been honestly entered into and taken into account. Will the right hon. Gentleman confirm that contracts made, probably for the next tender period, probably for another 12 months after 1st April next, can be similarly honoured, on the understanding that they were entered into properly prior to devaluation?
§ 5.8 p.m.
§ Mr. Joel Barnett (Heywood and Royton)
I am not sure whether my right hon. Friend the Chief Secretary was telling us to trust in Allah, because he did not trust too much the contents of his own speech. However, I may find that I do him an injustice when I read his speech tomorrow.
I am unable to support the Bill for two fairly simple reasons. I can state them by referring to paragraph 1 of the Explanatory Memorandum:The purpose of the Bill is to end entitlement, save in Development Areas"—689 I am opposed to that—to the payment of sums additional to the repayment of the Selective Employment Tax and to end the Export Rebate Scheme"—I am opposed to that. It seems, therefore, as there is nothing else in the Bill—
§ Mr. Barnett
I did not have it in mind to, discuss the Title at length, but now that my right hon. Friend mentions ft I must say that it is a little misleading. When my copy of the Bill arrived, the words "Revenue (No. 2) Bill" meant nothing to me. Usually when one sees a Bill one has some idea of the contents, but I could gather nothing from the Title or this one. In the end, I saw from Clause I that it meant something which I could not support.
The Opposition have got themselves confused, somewhat typically, on the question of export rebates. When the export rebates were first suggested way back in 1964, the right hon. Gentleman the Member for Barnet (Mr. Maudling) —for obvious reasons the name of his constituency springs readily to mind—said:On the export incentive, we doubt whether it will be adequate to work in practice, and whether, in view of the scale involved—it is difficult as we know to evolve a scheme consistent with our international obligations—the expenditure of £75 million will be justified by the amount of additional exports which will result."—[OFFICIAL REPORT, 24th November, 1964; Vol. 702, c. 1114–5.]Fairly recently the hon. Member for Worthing (Mr. Higgins) had something rather better to say about export rebates. On 31st January he told us how very useful and important the average of 2 per cent. rebate was. He said:This means a difference of about 2 per cent. on the turnover of exports: it is a 2 per cent. incentive on turnover but a very much higher percentage of profits."—[OFFICIAL REPORT, 31st January, 1968; Vol. 757, c. 1487.]The hon. Gentleman is right it is a much higher percentage of profits. In some instances it can be almost double the profit that some exporters are working on. The Opposition's position seems to have rather changed between 1964 and today. However, I always welcome changes in the Opposition, and I accept 690 this one in the spirit in which it was not offered.
One understands why the export rebate was given away when the negotiations were taking place in the weeks that elapsed between the decision to devalue and the date of the announcement. One assumes that it was because the only way the Government could get what they thought to be international agreement to the amount of devaluation was to make various concessions. One which they felt obliged to make was to do away with the export rebate. I willingly accept that it was well worthwhile trying to get international agreement on the amount: of devaluation, because it is important to us, more than any other country, not to disrupt world trade more than can be helped. But when we had eventually agreed to go for only 14.3 per cent. it was a terrible mistake also to give away the additional 2 per cent. on the export rebate.
I would have preferred a devaluation of about 20 per cent. and would then have been prepared to see the export rebate go. The Government decided to accept what they felt was the maximum they could obtain with the 14.3 per cent. devaluation, they then went much too far in agreeing to give up the export rebate. I understand the Government's apprehension about protectionism, although I have been through the debates we had when the export rebate was introduced and I cannot find any Government spokesman suggesting that it was in any way a form of protectionism, because the rebate is what it says—it is a rebate of tax. My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) made the point very well when he spoke about the value added tax and the tax rebate to exporters in the E.E.C. countries. As the rebate is not contrary to G.A.T.T., and was not contrary to G.A.T.T. before devaluation, I cannot see why the Government felt it necessary to give it away on devaluation.
However, I am grateful that at least the Government are taking power in Clause 3 to reintroduce it at some time, but like my hon. Friend, I hope that they do not use it selectively. I hope that they will bring it in before 31st March to save themselves, incidentally, a rather difficult task implicit in the Bill. There are opportunities for evasion in 691 all sorts of legislation dealing with extracting money from taxpayers or giving money away. When one has a date—and it is necessary on many occasions to draw a line—there are tremendous opportunities for evasion. I am sure that all our exporters are scrupulously honest. But if they negotiated something verbally and the date was not too clear in their minds, they might just be tempted to suggest that it was before 19th November that the initial order was contracted. It may be that that would not happen, but once there are dividing lines like this the opportunities exist, and there will be difficulties of policing them by the Customs and Excise.
§ Mr. Emrys Hughes (South Ayrshire)
If it is necessary to police them, how does my hon. Friend reconcile that with the theory that they are all very honest men?
§ Mr. Barnett
My hon. Friend takes the word "police" in its wrong context. What I had in mind was that when the Government give away money by way of subsidies, grants or otherwise, one polices it to see that they are doing so in the way we decide as legislators. It is in that sense that one must police any moneys being given away.
I now turn to the Selective Employment Tax and Clause 1 relating to it. One can agree with the Government's objectives. I certainly agree with them in regard to the development areas, both in the economic and social sense, because it would be wonderful if we could have an almost equal level of employment in the development areas and the rest of the country, including, incidentally, the so-called grey areas like my own. That would be perfect economically and wonderful socially. Those of us who know the level of unemployment, and have experience of it in the grey areas, the cotton textile areas and the development areas, all agree that that is the sort of ideal we want.
But I doubt the effectiveness of a 7s. 6d. premium as encouragement to manufacturers already in the development areas and as an incentive to other manufacturers to enter those areas. My right hon. Friend the Chief Secretary said that the premium would be acceptable to manufacturers. I should think it would. 692 I cannot think of many people who would not find it acceptable to be given 7s. 6d. a head per employee each week. I should be delighted if he would offer it to me in respect of the employees in my concern. He has not made that suggestion, but I can assure him that I would find it acceptable. [Interruption.] I thought that I heard the hon. Member for Ormskirk (Sir D. Glover) say that they were unproductive.
§ Mr. Barnett
I do not accept that, but I would accept the 7s. 6d. a head. We tend to give away this sort of money rather too easily, probably because we are frightened to be seen to be opposing a good cause. It is a good cause both economically and socially, but it would be better to be seen to be opposing a good cause and doing something directly to achieve what we want. What I fear is that we are giving money away, particularly when we are, for example, committed to a sum of £700 million over seven years through the Regional Employment Premium, without knowing what the effect is likely to be. That is taking the idea of giving money for good causes to rather ridiculous lengths.
Incidentally, on the question of trying to attract firms into development areas or grey areas, I hope that when the Government make their comment on the results in Greenwich of the merger between G.E.C. and A.E.I., which has brought about some workers being displaced, they will not shirk the issue. I hope that the Government will not pretend to the workers of Greenwich that they are on their side in wanting to keep a certain factory open. I hope that they will say bluntly and honestly that, both economically and socially, this is the sort of thing we want to achieve. Whether we achieve this objective directly rather than through giving 7s. 6d. or 30s. per head is not the point. The point is that this is just what we want to happen.
Of course the Government must do all possible to ease the transition for those displaced and to help them find other gobs. But the unemployment in Greenwich is 1.7 per cent., whereas it is twice and three times that figure in the development areas and the grey areas. 693 It would be cowardly to pretend to the workers of Greenwich that the Government are going to give in to them while at the same time giving 7s. 6d. under this Bill and 30s. under the Regional Employment Premium as incentives to manufacturers to go into development areas or to stay if they are already there.
What purpose can this premium of 7s. 6d. have other than as an incentive to go to or to stay in a development area? We are told that the 7s. 6d. is not to go to all manufacturers, and this can only mean that the device is being kept as an incentive to manufacturers in the development areas.
We already offer a massive amount of incentive to manufacturers to go to or remain in development areas. I am beginning to wonder how far we must go in order to get a small increase in employment in the development areas. It is worthwhile listing what we do for manufacturers to try to persuade them to go to these areas. First, we give 45 per cent. of the cost of machinery. When I mentioned this recently to manufacturers in the United States they could hardly believe it. They get a 7 per cent. tax credit. Indeed, many manufacturers in this country, when they first hear that they can get 45 per cent., are astonished that anyone could be so beneficent. But it still does not necessarily make them go to a development area.
Secondly, we have advance factories, which can be obtained two years' rent free, and then at a cheaper price than one could build them for. Then there are the BOTAC loans, and the Regional Employment Premium for up to seven years. I think that the incentive value of the R.E.P. must have been much depreciated in view of the Opposition's attitude, although it will be much more than seven years before they will be able to implement their policy. Nevertheless, they have dimiinished it as a form of incentive.
I have spoken to a number of people who advise large companies about the R.E.P. and other incentives and about where to place factories, and they have told me that they discount heavily the R.E.P. and treat it as marginal to making a decision on which area to go to. Then there are the training grants, which can be up to £10 per head per week in a development area. Finally, under this 694 Bill, manufacturers will be able to retain 7s. 6d. a head on top of that.
Many reasons lead firms to move into development areas. After speaking to a number of manufacturers, I have concluded that the order of priority for such firms is, first, that there should be an increasing demand for their products; secondly, a shortage of labour in their present area; thirdly, the negative incentive of being unable to get an I.D.C. for their present area; finally, that the right sort of labour is available in the area to which they wish to move.
These are the first four major reasons affecting a firm's decision on whether to move into a development area or into a grey area. The incentives over and above these four have varying values to different firms—depending, for example, on the degree of mechanisation and so on. But, as I have said, these incentives have a marginal effect compared with the four major reasons I have listed. Such firms would move to development areas were those four items present even without the other incentives, but they would not go for all the other incentives if those four were not present.
§ Mr. Stanley Henig (Lancaster)
My hon. Friend talks about the marginal effects of these incentives on a firm. Will he make clear the total, cumulative effect on a grey area of many adverse and marginal effects on firms of these incentives? The total effect on such areas could be catastrophic. The effect of an individual firm's decision might not be large in itself, but the cumulative effects of a number of firms' decisions could be considerable for a grey area.
§ Mr. Barnett
I quite agree. My constituency is in a grey area, so I have a great interest in this matter. But I have spoken against its being declared a development area because I think that, if we bring the grey areas into development areas, whatever little marginal incentive there is now will be completely dissipated. I did not make myself very popular in my constituency in saying that, but that is my view. My constituency is in the cotton area of Lancashire, which has a special case, but I do not think that this is the appropriate debate in which to make that case.
The incentive being as marginal as they are in their effect and costing such an 695 enormous amount to the Government, it seems to me that the arguments have not been sufficiently thought out in terms of exactly what makes firms go to a development area or any other area. We need some detailed research in depth. Judging by the answers to questions I have put to the Government, this has not been don
When we were discussing the Regional Employment Premium, I got no satisfactory answer on whether the Government had done any kind of research into whether the spending of this sum of £700 million would result in bringing X amount more jobs into the development areas. In the Green Paper we were given a figure of the extra number of jobs that it was suggested we should be able to get by spending the money, but there was no evidence to support it
We need something more than merely asking a few industrialists, "Will you go if you get 30s. a head?" We need much more detailed questioning to find out just what it is which makes a firm go to a particular area. For example, we may find that the negative incentive of refusal of an I.D.C. is an important aspect and a comparatively cheap way to achieve our aim
I myself am convinced that the major reason which makes most companies move is that they cannot find sufficient labour in their own area and have an increasing demand for their goods. But even if the incentive argument has a point, there is no point in adding another 7s. 6d. to the 30s. already being received under R.E.P., and I cannot understand why the Government decided to leave the 7s. 6d. once they intended to do away with the manufacturing premium under S.E.T. I believe that doing away with the manufacturing premium generally was a correct move, because there was neither an economic nor any other argument for it, but why it was thought necessary to leave it on for the development areas I cannot understand, and we have not had a satisfactory explanation from my right hon. Friend the Chief Secretary to the Treasury
I have argued that there is no incentive value in the 7s. 6d. and, without it, all that is left is the argument deployed in 696 the Green Paper on R.E.P., which in paragraph 22 said:… provided these payments are confined to manufacturing industry in the Development Areas—their effects on the pressure of demand and the balance of payments will not be such as to require off-setting taxation to release resources for the subsidy.We did not hear that argument again today. I suppose that it was because it is a rather dubious argument anyway, and nobody liked to repeat it. It is somewhat dubious on economic grounds to argue that because this amount of money is going into the development areas it does not count in the pressure on demand. Even if that argument were a good one, there are many ways in which to put £25 million into the development areas other than giving 7s. 6d. a head to manufacturers.
§ Mr. Tony Gardner (Rushcliffe)
As an exercise in research, has my hon. Friend seen the last report of the Chairman of the Directors of Imperial Chemical Industries referring to the sum of £45 million gained from the Government last year? Would he add that to his list of worthy causes?
§ Mr. Barnett
Although I read many chairmen's reports, that one does not spring readily to my mind, so I hope that I shall be forgiven if I do not add it to my list of worthy causes today.
There is a strong argument in support of the Government's objectives, both economic and social, in the development areas, and I entirely agree with and support them. However, in their presentation of the Bill, or of R.E.P., or of the conglomeration of incentives which manufacturers now have and some of which I have supported, I do not believe that the Government have given adequate thought on how they can achieve their objectives. I would prefer to use the sort of massive funds which are going into these incentives directly, through something like the I.R.C. or the Industrial Expansion Bill, in development and grey areas at the points where they are needed and where it can be seen that a specific job has to be done. That would be a better way in which to spend the taxpayers' money.
For those fairly simple reasons and because I entirely disagree with the two 697 main purposes of the Bill, I am unable to support it in the Division Lobby.
§ 5.33 p.m.
§ Mr. Geoffrey Hirst (Shipley)
The whole House will agree that we have just heard a very valuable speech from the hon. Member for Heywood and Royton (Mr. Barnett). Occasionally, although not often, I have agreed with him about other subjects in the course of debates on the Finance Bill, although I have not agreed with him about the whole Bill, and I am delighted to be able to follow him on that account. I hope that the Financial Secretary to the Treasury, whose speeches I used to enjoy so much and with whom I have often heartily agreed, will maintain the same high level of common sense.
I want first to object to the Bill as a whole. I must make a distinct protest against this use of combined Bills. My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has already drawn attention to the fact that this is two Bills in effect. We ought to get away from the sort of thing which the Left wing of the Labour Party calls a package deal. I do not like it. It would be much better to deal with two Bills separately so as to be able to record our opinions distinctly. This is a matter of principle. I do not like, and I do not suppose that my right hon. Friends are very keen about, reasoned Amendments, which are always capable of other interpretations. We ought to be able to express our views on subjects which are completely separated from each other. The Bill has been drafted in this way for the convenience of the Treasury. I do not mean to be offensive, but it is a practice which ought to be ended.
The Chief Secretary made a facile argument about the savings which would accrue to the country as a result of various measures. That argument has to be considered in conjunction with the deplorably negative line that it is necessarily a saving to increase the burdens on industry. That is not very effective or very clever and it can have a devastating effect. I intensely dislike that argument.
I entirely agree with what was said by my hon. Friend the Member for Pudsey (Mr. Hiley), particularly about the wool textile industry which, as the House knows, operates on very narrow margins of profit and against keen overseas buying. From my contacts with the 698 C.B.I. I know that the export rebate has been of immense value to some people, especially in the capital goods market. I thought that the Chief Secretary's figures were far too optimistic. I do not know who does the figuring for the Treasury in these matters, but the right hon. Gentleman will not get confirmation of those figures from the C.B.I. on whose economic and many other committees I served, so that I speak authoritatively. He will not get confirmation of his figures about the effect of devaluation on industry, especially as those figures show that no assistance, such as the export rebate, is necessary. The C.B.I. would not agree with his figures for import saving or any of the others which he mentioned, although I could not argue about the 1.8 per cent figure in reference to rebate.
It is absurd to say that our attitude arises out of a concern for protectionism. No one would suggest that the value added tax was protectionism or not acceptable under our international trading agreements. There would be no difference in purpose and aim and very little in effect, except that the value added tax is a better tax and covers many aspects other than the tax rebate purpose. We should not have given way on that issue and I am not sure that all the haggling and haggling about the devaluation rate was worth all that.
After all, it has never been denied that we lost about £300 million from our reserves through all the haggling and baggling and leaks. No doubt it will take a very long time to get the true figure, but I should like to have the true figure—not the sort of figures which we are given for the gold and dollar reserves —of how long it will take to get that back. Much of the money was lost because an unnecessary time was spent in consultation in a very dangerous situation, and I do not think that the advantages to the nation anything like matched the disadvantages.
The burden on industry has been enormous. While they have been in office, right hon. Gentlemen opposite have placed an enormous burden on industry, let alone on the people who work in it. Their measures have added about £700 million to industry's burdens before devaluation and the burdens of devaluation in one way or another have added 699 almost £300 million, so that about £1,000 million has been put on industry's back, and yet industry is exhorted to export more. It has a fantastically difficult job to do. In addition, the Bank Rate is at 8 per cent., an extremely high panic rate which has now been maintained month after month. Many people, particularly the wool textile industry, have to use the banks, and this rate makes for large additional costs.
The Government's economic policy and the purpose of the Bill is to switch resources. It has to be remembered that about 15 per cent. has to be switched in order that, like Alice's Red Queen, we can run to stand in the same place. That is a considerable amount to start off with. Then one has to switch masses of extra resources in order to make devaluation work. Yet the Government step by step, and this Measure is another step, place further burdens on the very people who the Government are praying and begging and saying quite rightly, that they are the only ones who can get us out of our difficulties. This is true and a change of Government would be the best step towards that end. Fundamentally, irrespective of whoever is in power, this has to take place if we are to get out of our difficulties.
Cannot the Government get away from their negative attitude and become positive in their approach, and realise that they will get the results and the switch, and all the rest of it, far more readily from industry if the right incentives and atmosphere is there, allowing industry to operate in a perfectly natural way? Industry is quite capable of doing this, especially with less Government interference. Yet this is the time that the Government choose to clamp down in one way or another, by withdrawing the S.E.T. premium in certain instances, and drawing this distinction between areas and increasing discrimination. The Government are wasting enormous resources. They will find that they are pumping more and more money into development areas and getting, practically speaking, no return on the expenditure and failing to achieve the objective, higher employment.
It will be nothing like the return which could be got through different methods, for example, by increasing the general 700 mobility capacity of labour. One cannot naturally force people to go to these areas. They will only go if certain conditions exist, suiting their own circumstances, and mainly because they cannot get those circumstances where they are. It is a last resort, it is not something that they want to do. It is fantastically difficult to put down a factory in some area where the labour is completely ignorant of one's techniques. One has to train the labour, which is a frightful nuisance, and often increases the difficulties of management control. If one increases the areas which are to have these discriminations, then it will be even more negative.
The Government are planning, one way or another, to spend an enormous amount of money in this effort. It is a perfectly commendable effort and no one quarrels with it. The idea is to iron out the differences in employment throughout the country. This is perfectly reasonable, but I do not think that they will achieve it, and the money being spent will be an immense loss of resources in relation to what is needed to get us out of our difficulties. To a great extent industry has very good reasons for being in certain places. Quite often it has to do with local circumstances, water, air and so on. I can think of many instances from my own experience in the chemical industry and, more latterly, the woollen industry, where these factors are very important. What should be done is to improve the whole atmosphere and so far as one can, improve the areas by increasing the infrastructure and making them more viable.
A lot could be done in the Humberside area, the East and West Ridings, but there is a limit even to that policy and in the last analysis some people will want their businesses in certain places, and they will attract the labour there if they can. The facilities for moving, compensation for housing and all the rest, must be thought out as part of a Government plan, and it is much more likely to be effective in the long run in giving people the level of employment they want, rather than trying to force people to go, over and above a certain level, to places where they do not want to go.
To add insult to injury there is the raising of the Corporation Tax. The C.B.I. recently published a letter, which I saw during the consultations that took 701 place, and which was wholly endorsed by a specially called meeting of the C.B.I. Council. In that letter the Director-General laid out the points that I have been making about the burden upon industry, and added them up, item by item. I will not repeat them, but they come to the figure I mentioned, just short of that £300 million since devaluation. On top of this there is the cost in raw materials and wages.
I hope that the Financial Secretary will have some of these points in mind. He always replies to these discussions very well. I hope too that he will convey to his right hon. Friend in the Treasury that we would like something a bit more positive, on the lines of the C.B.I. Tax proposals, something to get us away from this negative attitude to our economic situation. If we get that we shall be doing much that will enable us to reach the sort of position where exports in this country can redeem even this Government from their paralytic mistakes.
§ 5.45 p.m.
§ Mr. Stanley Henig (Lancaster)
I am sure that my hon. and right hon. Friends on the Front Bench will not be at all surprised to learn that my line of criticism of this Bill will not he the same as the line taken by the Opposition. I noted with interest that, when the right hon. Member for Enfield, West (Mr. lain Macleod) was ending his speech, he said that broadly he found Clause 1 of the Bill acceptable, but objected to the rest. Broadly I find Clause 1 totally unaccepttable, and for that reason, unless some more rather substantial rabbits are produced out of the hat when my hon. Friend the Financial Secretary winds up, I will not be convinced and will be unable to support this Measure.
I am concerned about Clause 1, because it increases by 7s. 6d. the subsidy given to firms employing labour, for each man for each week that he is employed in a development area. I have an initial question to put to my hon. Friend. I want to go hack to the events of last summer, when a Green Paper was issued, and it was said that there was this idea of a Regional Employment Premium, and that the Government wanted to consult with people. It was said that as a result of their consultations they would 702 decide whether to have the Regional Employment Premium and at what level it would be fixed.
I had a sneaking suspicion all the time that the Government had made up their mind, because when they opened themselves to consultation on this the overwhelming weight of the advice given to them was not to go ahead. But the Government went ahead. As far as can be made out, the level of 30s. per employee per week was fixed as a result of these rather mythical consultations. Now, in effect, the change in S.E.T. increases that subvention per employee per week from 30s. to 37s. 6d. Fine! Obviously the reason for this must be that 30s. has failed—pretty quickly, because it has only been in effect for a few months.
Can we have some evidence of this? Are we to be told that the 30s. did not work and that the 37s. 6d. is to work or will there be a new Measure in six months time to put this up to 45s? Perhaps the Government will consider that people employed in development areas should have all of their wages paid by the Government! I am sorry to sound so bitter, but it seems to me to make a parody of the whole Government approach to development areas when this happens.
I want to concentrate now on the concept of development areas, because Clause 1 revolves round the idea of development areas. These premiums, these refunds under the S.E.T. will be abolished save for development areas. We have a definition for development areas:Development area"—it says in the Bill—has the same meaning as in section 26 of the Finance Act 1967.We know from the map where development areas are. Very often they are areas which in the past have had a terrible record of unemployment, human misery and suffering. This being the case, everyone on this side of the House would want to say that the Government ought to do everything that they possibly can to remedy this legacy of the past. I wonder, though, how the Government went about defining which these areas should be, and whether they are now to stick for ever to the existing demarcations. Consider unemployment. This is a prime way in which to define a development area. If unemployment is over, say 4 per cent., 703 surely an area ought to be classified as a development area? But is the bald unemployment figure the whole story? I am inclined to doubt it, and for the very reasons why my constituency is considered to be in a grey area.
It is not irrelevant to draw attention to one or two salient features of a grey area like Lancaster which is likely to be adversely affected by this kind of Measure. Between 1961 and 1966, the total number of people employed in the Lancaster area dropped from 30,700 to 29,700. This my hon. Friend might find, as I do, rather astonishing in view of the growth of population, and the working population, in that period. I find even more alarming the fact that the drop in the manufacturing sector was more than the total drop in the number of people employed. Employment in the manufacturing sector dropped over the same period by 1,600 people. Where have the people gone? They must still be there. They are living there. They are in the population figures. The Ministry of Labour does not know what has happened to them because they are not registered as working in the area.
I can hazard a few guesses as to where they have gone. One of them is that people are beginning to travel some distance to work. I know one person who travels 150 miles to work each week. This is exceptional, but many people are travelling 15, 20 or 25 miles to work. It may be said, "Why should not people travel to work? Why not spend an hour travelling to work?" Many people do it in London. But where are we to stop? Would it be unacceptable—I suspect that it would to some of my hon. Friends—to say to people living in the Highlands, "You had better travel to London to work". I think that it is unacceptable.
Where is the dividing line to be drawn? The real unemployment figure in an area like Lancaster is much higher than the figure given. I strongly suspect that it would be high enough to make Lancaster a development area. I have a terrible fear about this policy rigmarole. When we drain the grey areas by encouraging people to go elsewhere so that they become black areas, the Government may come to the salvation of the grey areas which have become black by offi- 704 cially recognising them as black and giving them the aids given to development areas. Then the whole process starts again. It is an absolute waste. It is better to define what we want to do about regional policy and how best it is to do it without adversely and deleteriously affecting other areas.
I should like to give some specific information which possibly goes against some of the remarks of my hon. Friend the Member for Heywood and Royton (Mr. Barnett). He doubted whether all these inducements would have very much effect. His criticism of the Government was that they were spending a lot of money without ensuring that they would get any return and that all this made no difference to the decisions of firms.
§ Mr. Barnett
I wanted to say, and I thought I said, not that it would make no difference, but that it would make a marginal difference.
§ Mr. Henig
It depends how big a marginal difference is. All these things may be marginal, but, as I tried to point out when I intervened in my hon. Friend's speech, the point is that all these individual marginal decisions are likely to weigh very heavily on particular areas. The fundamental point is not that firms which are well-established in an area will say, "We shall move the factory and go to a development area", but that firms which want to expand and to set up new productive units will say, "Where should we go"?
I wish to refer to a firm in my constituency which was mentioned in a recent debate in the House, Storey Bros., which has devised and developed a new process quite different from anything it has done before. It is likely to be very good and profitable. It is a process for making car seats. It would be quite independent of its existing productive units, so where should it be put? If there were none of this rigmarole of development area status, every argument would be in favour of Lancaster: the rest of the firm and the management is there. One could say that it would be nearer to its markets if it moved to Birmingham, and that Lancaster might have to fight it out with Birmingham. We should not be worried about that: this happens already.
705 However, now, a new factor has been introduced. Might it not be more profitable for Storeys to expand in a development area, preferably to the south of Lancaster, but, if necessary, to the north of Lancaster, with all the benefits this would bring. When I saw the management of the firm, it listed to me the kind of inducements which my hon. Friend has mentioned. But it went on notionally to talk about a firm of the size of its entire group and pointed out that if a firm like that wanted to set up either in Lancaster or in a development area the costs in Lancaster might be £7,247,500 compared with just over £5 million in a development area—in other words, a difference of over £2 million. But since it is not starting from scratch, and no firm of that size does, perhaps these considerations do not matter much.
What is more important is this. If the firm were operating in a development area, as a result of the Regional Employment Premium and the new Selective Employment Tax premium which is being distorted in favour of the development areas, it would receive annual assistance from the Government of £215,000. This firm, whose profit record is, fortunately for the constituency, very good, is prepared to admit that it does not need £215,000, but it is worried about what certain rivals of the same size and producing similar products will do with the £215,000 which the Government gratuitously give them.
I should like to put forward some hypotheses about what these firms—two of them—will do with their £215,000. First, they may increase wages either because they are benevolent or because the workers have asked for more. It is excellent if wages are increased, but I understood that the Government's aim in introducing the Regional Employment Premium and, I assume, the Selective Employment Tax premium was not to bring about a certain amount of wage inflation in those areas. If it is, they had better say so, now. Otherwise they must consider the matter again.
Secondly, the firms could use it to increase profits. If that is done, good luck to the shareholders and other people who benefit from it. But I doubt whether the objective of the Government's policy is to shift public money into the pockets 706 of shareholders or into the bank balances of firms. Alternatively, if they reduce prices, thus enabling them to affect the balance of payments between their region and other regions, this would be splendid; we like prices to go down. From a national point of view, that might be a good thing. But what about the firm trying to compete with them which was set up many years ago in an area not designated as a development area and which finds what might conceivably be called a certain kind of unfair competition. That is the problem which this firm faced.
When it considered where the new productive unit should go, it did some sums on what the result would be if it went to Lancaster or a development area. It made the assumption, which was merely a working assumption, that the building costs would be £100,000 and the plant costs £160,000. If it set up in a development area, the cost to the firm would be £143,000, whereas in Lancaster it would be £206,000. There is no argument about it: the difference is £63,000.
I have had a number of promises from my hon. Friends on the Government Front Bench. They have promised me that they would be sympathetic if anyone wanted an industrial development certificate to develop in Lancaster. Who on earth would want an i.d.c. on this basis, I cannot imagine. I have a pledge that if unemployment increased in Lancaster to levels which exist in development areas, we could become a development area. This is a good pledge because it gives a long-term guarantee to everybody in Lancaster. However, it is sheer nonsense for Government policy first to push up unemployment and then to bring it down.
These are matters which have filled me with a certain amount of concern. The calculations go on but, all the time, they are so adverse to Lancaster that nothing can be done. Another suggestion is that the Lancaster Corporation should do more. I agree that it could do a bit more, but I doubt if this would produce enough to deal with this massive and overwhelming inducement to move to a development area.
Clause 1 of the Bill increases by 7s. 6d. the subsidy given to each man working in any factory in a development area. Sometimes, I wonder how we came to 707 think that a way of helping the development areas was to give this sort of subsidy. This was at the time when the Government introduced S.E.T., and we heard my right hon. Friend the then Chancellor of the Exchequer say that hoarding labour is bad in the service industries. We now recognise a continuum: at the one end, hoarding labour in service industries is bad, but, at the other end, in manufacturing industries in developing areas, it is good.
The development areas are told that, if they hoard labour, they will be given 37s. 6d. a week for each man. We have shortages of labour sometimes when our economy gets overheated. It is not exactly overheated at the moment, but the time will come again when we may be in that position. Within the next seven years, I think that the economy will be a little hotter than it is now, and we shall be in the position of having labour bottlenecks in some parts of the country and, in other parts, we will give 37s. 6d. to firms to keep at the margin labour which they do not need. This seems to make nonsense of the Government's policy.
The 7s. 6d. might be said to be marginal. It could be that my hon. Friend the Financial Secretary will say, "This is marginal. We have the 45 per cent. and the 30s. Surely the straw which will break your back will not be this 7s. 6d." On a number of occasions, I have given the Government the benefit of the doubt about this problem, and I accept their good intentions. They say that, in the long run, they will look after us in the "grey" areas. However, I want some rather more specific reasons why I should give them the benefit of the doubt on this occasion.
Given the problems that I have outlined, which will be made marginally worse by Clause 1, what do they intend doing to solve them? If they say that some action is coming to solve them, it may be that I shall not worry too much which Division Lobby I go through this evening. If no action is on the way, there is more of a problem.
I have no doubt that my hon. Friend will say that we have been given the Hunt Committee, and it is true that, after a lot of us made a fuss, the Hunt Committee was set up. The first job of that Committee was to define what was a 708 "grey" area. If any member of that Committee happened to be present now, I would invite him to come with me through Lancashire, because in a few hours I could show him exactly what was a "grey" area.
I understand that the Hunt Committee is working with such urgency that it meets once a month and that its chairman has been out of the country for the last few weeks. If that is not true, I hope that my hon. Friend will deny it immediately, because the propaganda effect for the Government is a bad one.
When the Committee was set up, we were given to understand that it would produce a long-term report by perhaps the end of the year, and that there would be an interim report. In addition, action before the production of the interim report was not precluded. That half promise of possible action before the interim report seems to have vanished into thin air, and the possibility of an interim report seems to have vanished with it. It now appears that nothing much is to happen before the end of the year.
I would very much like my hon. Friend to tell us when he comes to wind up that this is not true and that, even if the Committee has met only once a month so far, he will see to it that in future it meets once or twice a week and that it will produce an interim report by the summer. If I thought that we were likely to hear that from him, I, for one, would be a little happier. I would be even more happy if, having done that, he added, "Moreover, we are looking at the whole context of our regional policy, because something has gone wrong".
What has gone wrong is that there is not one problem, but two. There is the problem of regional economics and regional economic organisation, and there is the problem of how to help specific areas. At the moment, everything in the way of economic planning in the North-West is useless, because development area aids are preventing progress towards solving our problems.
In my speech, I have concentrated on one Clause. The export rebate is something which I prefer to leave to people who are more expert than I. I have concentrated on what seems to be the final straw which will break the camel's back. Before the results of the 30s. regional 709 employment premium are known, the Government have come along with a proposal to increase it by 7s. 6d. I have a shrewd idea of what the result will be, and I think that it will be most serious for our areas.
I rely completely on the Government's pledge that if, economically, our area turns from "grey" to "black", they will give us the treatment received by a "black" area. I want the Government to say now that this has an absurd side to it, and that they intend to take action immediately to stop areas such as my own turning from "grey" to "black", while, at the same time, continuing to help the development areas in ways which are the most beneficial to them and the least expensive in public resources.
§ 6.6 p.m.
§ Sir Douglas Glover (Ormskirk)
I am very glad to be called in this debate. The right hon. Gentleman the Chief Secretary, the Financial Secretary and his charming partner the Parliamentary Secretary to the Board of Trade (Mrs. Gwyneth Dunwoody), deserve a premium for listening to the debate so far. It has been going on for three and a half hours, and no one yet has said anything in favour of the Bill, including the Title.
When I received my copy, I thought that it was a Bill doing one or two things to straighten up the revenue. It was not until I began to read it that I realised what an appalling piece of legislation it is. I hope that the Financial Secretary will tell us how the choice was made of this innocuous sounding title. It may be that the reason why there are so few lion. Members opposite speaking against the Bill is that they have not read it and do not know what it does. If they did, I am sure that they would be here to speak against it. It could have been, given a better name which was more easily understood by hon. Members and by the public at large. However, perhaps I have said enough about that.
I shall refer at greater length in a moment to the speeches by the hon. Member for Heywood and Royton (Mr. Barnett) and the hon. Member for Lancaster (Mr. Henig), who, I am sorry to see, has already left the Chamber. They both made very interesting speeches on Clause I, and I want to go into it at some length, because there is a problem 710 about the development areas and the amount of money which the Government are finding for them. I think that we need to take a harsh look at the position and make certain that we are getting value for money.
There is not much point in spending money if it does not achieve the object which we have in mind, and there is no point at all in spending it if, as the hon. Member for Lancaster said, it is rapidly creating problems in other areas which will he just as difficult of solution. If such problems are growing up, the time has come when, legitimately, the House could devote a little time to delving into matters concerning the development areas and their unemployment figures rather more than we have in the past.
First, Clause 2, "Termination of export rebates". There is no doubt that the Government have a bad record on this because they have shilly-shallied. I intervened during the Chief Secretary's speech this afternoon because he appeared to he trying to justify to the House that the Government had devalued 14.3 per cent. because they knew that they were going to take off the export rebate and do this, that, and the other, and therefore they were devaluing by 10 per cent.
This argument does not stand the light of day and is not worthy of the House. There is no doubt that the Government were forced into the devaluation and that they devalued as much as they dared without bringing the whole pack of cards round their heads in the international trading sphere. Any figure above 14.3 per cent. would have caused more countries to devalue and we would have had an international economic crisis which would have been very difficult to handle.
I am not blaming the Government. In fact, I support them, if they were going to devalue, in not taking a figure which would have created this crisis. But do not let us say that they worked this out beforehand. What has become more obvious than anything else about devaluation is that when the Government devalued they had not the faintest idea of the policies and action that would be necessary. This is one of the problems we have been facing ever since devaluation.
711 The Prime Minister has been accused of misleading the nation, and he certainly did when he went on television on the very night of devaluation and told the public that the money in their pockets would remain the same. He was so confused that he probably believed it at that time. If he did, it just shows he is less competent to run the country than we thought. Then we had step after groaning step of trying to get the policies of the nation into line as a result of devaluation, and here we had another problem.
I turn now to Clause 3, "Reintroduction of export rebates". When the Government started export rebates they said that they were certain this was in line with G.A.T.T. When it began to operate some nations said they did not like it. However, a great many nations do things which we do not like. There are a great many things we do that others do not like, but it does not follow that we have to scrap them.
This scheme was working advantageously to the benefit of our exporters and we thought that it was in line with G.A.T.T. Nobody had proved that it was not. I am sure that the only reason we are doing away with it is because the Americans began to threaten us. We have now made a counter threat to the Americans, although a small one. The Financial Secretary will tell us whether that is the only reason for Clause 3 being in the Bill. I hope that Clause 3 is in the Bill with the definite purpose that the Government are determined—not determined, prepared—if the conditions warrant it and our exports need it, to use their powers under that Clause to reintroduce the export rebates scheme. I would like a clear statement to the effect that that is why Clause 3 is in the Bill.
The Chief Secretary did not make it clear that the Government had any intention or thought, however far back in their minds, that Clause 3 would ever be used. He emphasised that Clause 3 made clear that the export rebate scheme was going on 31st March and, like the auctioneer's hammer, was going for good. The hon. Member for Heywood and Royton would like Clause 3 to be operative, as would the hon. Member for Stoke-on-Trent, Central (Mr. Cant). I and all my hon. Friends who have spoken 712 would like it to be operative. I hope that we shall have some words of comfort about it.
Clause 1 concerns Selective Employment Tax. I think that I was the first person to make a speech in the House after the Budget in which the Selective Employment Tax was introduced. I said then that it was the biggest nonsensical tax that any Government had brought in in this century. I explained what it would do to the cost of living and service industries, and I was proved right. I showed the absurdities of this tax in its operation, and I was proved right. The Opposition have attacked this tax step by step ever since it began to operate, and the Government have slowly accepted that our view was right.
We have now got to an absurdity. Whether it is necessary—I will come on to the point made by the hon. Member for Lancaster—to give the development areas a boost of some sort is arguable. What is not arguable in any sensible society is that one should collect £1,100 million from everybody in manufacturing all over the country and to give it all back to the same people, but, in the development areas, to give it back with a bonus.
All that the Government need do is to go on extracting it from the service industries, although we oppose this, and give a 7s. 6d. bonus to the people in the manufacturing industries in the development areas. It would require a lot less money, it would not be necessary to have eight Government Departments treading on each other's corns, it would not give the hon. Member for Lancaster cause for making the sort of speech that he has made, and it might mean that the Government would have a closer idea of what they were doing.
My real objection to this Bill is very much on the lines of the speeches made by the hon. Member for Heywood and Royton and the hon. Member for Lancaster.
Let us consider the R.E.P., because that and the Selective Employment Tax are inextricably bound together. Apparently, firms in development areas are to get a bonus of 37s. 6d. a week for every workman. That means—my right hon. Friend the Member for Wirral (Mr. Selwyn Lloyd) will not mind my saying 713 this, because he has said it publicly—that some of the biggest growth industries in the country, the most scientifically based and technically advanced—people like Shell and Unilever, who are highly efficient—are to receive literally hundreds of thousands of pounds from the remainder of the community as a bonus for being where they are and for no other reason.
Does anyone suggest, in the second half of the twentieth century, that the oil industry is a declining industry which needs a couple of crutches from the State? But this unselective help means that the oil industry, if it happens to have a station in a development area, gets the same help as, for example, the coal mining industry.
§ Sir D. Glover
If the hon. Gentleman contains himself, he will find that I have something more constructive in mind. If necessary, I would be prepared to have a means test, because the object of the exercise is to achieve an object, and what we are trying to do is to get industries to go into certain areas, or to do certain things.
I do not see that it will be a tremendous boost to employment to pay 37s. 6d. per man to a vast complex like Shell. Employment in the organisation is governed by the size of it, and the size is not likely to alter. Nevertheless, it will receive this bonus. It will not make the company more efficient. It will not make it plan more efficiently. If anything, it will make it less efficient. I believe that at a time when the nation is trying to overcome its problems we are getting the smallest possible advantage from this money, and that we could put it to other uses to provide greater benefits for the community.
Perhaps the Minister will inquire into the issue which I am about to discuss. We are encouraging industry to go to development areas. This is a good idea, but there is one thing which bothers me. Let us suppose an electronics firm opens up a plant in County Durham, or Cumberland, or wherever it may be. I would like to find out, because I do not think the House has nearly enough information of this kind, how many people employed 714 in the factory—once it has been built with a 45 per cent. State grant for machinery, and about the same for buildings—lived in the area before it was built. I wonder how many workers for whom a bonus of 37s. 6d. will be paid for being employed in this highly sophisticated factory will have lived in the area before the first sod was cut. I think that it will be found that a large number are immigrants.
Purely and simply on the basis of having the population evenly spread over the country that is not an undesirable object, but if we are spending an enormous amount of money merely to persuade people to move from one part of the country into a development area we are not solving our problems. We may bring down the percentage of unemployed, but the people who were unemployed in that area to begin with will still be out of work because they are not employed in this highly sophisticated, technologically advanced factory.
I think that the Government could, with advantage to our society, begin to investigate in far more detail than they do the areas from which people come who work in these various factories once they are established, and whether we are really eating into the hard core of unemployment in the development areas. I have a shrewd suspicion that we are not, and it this is so most of the policies that we are carrying out are failing disastrously to achieve the objective which we all have in mind.
I hope that the Minister will go back to his right hon. Friend the Chancellor of the Exchequer and persuade him to cancel the whole thing and use the money in a much more productive way. My hon. Friend the Member for Morecambe and Lonsdale (Mr. Hall-Davis) is not here, but I am sure that he will not mind my quoting him. When R.E.P.—it ought to be R.I.P.—was first brought in, he said that he had calculated that one year's payment of R.E.P. in the Barrow-in-Furness area would be sufficient to build a motorway from Barrow-in-Furness to the M.6. This would be much more likely to bring new industries to that area.
I am sure that the Minister knows that driving to Barrow-in-Furness is almost a nightmare once one leaves the Lancashire border. Talk about the 715 drunken ploughman finding his weary way home! He must have been weary, because the road winds around in a series of S-bends. The mileage is about twice what it would be on a straight run between Barrow-in-Furness and Grange-over-Sands. This is one of the drawbacks to getting new industries established there.
I am sure that the hon. Member for Heywood and Royton will agree with me when I say that if a lot of this money was spent on infrastructure and providing new roads and motorways—say £700 million out of R.E.P. over seven years—we could create a richer community. Instead of trying to help these areas merely because of the decline in coal mining, we should give them an infrastructure which will last into the second half of the twenty-first century. Surely this is what society ought to be doing, and not treating a development area as a sort of glorified workhouse, because that is what is implied in R.E.P. and S.E.T.
We are paying a cash subsidy without knowing whether the nation or the community is getting 1 per cent. of advantage out of it. A firm can draw R.E.P. or S.E.T. It can spend it on increased dividends, or in any other way. It does not necessarily have to increase its efficiency, or employ more people. This surely cannot be the best way of spending the money.
The hon. Member for Lancaster talked about a total of 37s. 6d. Let us assume that a firm has been established for 100 years in what is now a development area. During all that time it might have been one of the most successful firms in the country, yet now the Government say that it will give it 37s. 6d. for every employee. Will it, after all these years, double the number of its employees? It may be a brewery or some other organisation which is well established in the community. It is big, and it is doing a good job. It will not dramatically alter the number of people it employs just because the Government in their wisdom, or unwisdom, decide to give it this bit of bread from Lazarus' table; of course it should be the other way round, because that is what it amounts to.
This proposal will not solve any of our problems. All it will do is create a feeling of largesse in these areas. There are many 716 other areas, such as those represented by the hon. Member for Lancaster, the hon. Member for Heywood and Royton, and others known to the Minister, which suffer as harshly as the development areas, but which receive no assistance at all. While their problems get harsher, they see that, under the Bill, the development areas will still get a bonus of 37s. 6d. for every worker. The Government should do much more research into what happens to this money, on whether it is drawing more people into the areas or getting rid of unemployment.
There is one other thing which I would like them to do. The matter revolves at the moment around the question of whether or not an area is a development area. That is the reason for the argument, which I understand but do not support, about white areas, off-white areas, light grey areas, dark grey areas and light black areas. But I have a feeling that, although our unemployment figure in the North-West is not high enough for development area status, the average take-home pay of those in the grey areas of Lancashire is much lower than in many development areas where, if one has a job, it is a good and highly-paid one. The trouble with working in the coal mines is that, although a man is not badly paid, when a pit is closed he is suddenly out of work. Many in Lancashire earn far less than those in development areas, although working full-time. Therefore, the total wealth of the area per man or woman is lower than in some development areas. I would be glad to find that this is wrong, but there is not enough research here.
We have heard that the whole of this process is designed to find 43,000 to 50,000 extra jobs. If that is what the Government are trying to do, and if that number of jobs would reduce unemployment in the development areas to a figure which they would accept, there are far better ways of doing it than by committing ourselves to £700 million on R.E.P. and to the ghastly business of S.E.T. Therefore, I ask the Government to reconsider these problems. Because there is still this nonsense under Clause 1 and because there is still an appalling mistake of judgment in Clause 2 and the export rebate, I was delighted to hear from my right hon. Friend that we shall divide the House tonight against the Bill.
§ 6.34 p.m.
§ Mr. Robert Sheldon (Ashton-under-Lyne)
Like so many other speakers, I regret the ending of the export rebate, but would put it differently. If it had never been introduced, it would not have been a measure which I wanted, but since it is already in force, and so many administrative difficulties have been overcome, its withdrawal is a pity, especially when the balance of payments has rarely been more important. To repeal the rebate and, in the same Bill, to provide for its reintroduction is regrettable.
I am sorry that the rebate is ending, because for some firms it has been much more Valuable than for others. The reason that the rebate was bargained away was the weak position which those who were negotiating the new exchange rate felt that they were in. Thus, in an attempt to seek an excessive area of agreement, the rebate may have been bargained away too lightly.
I understand the argument of those countries which have opposed the rebate—that it cannot be directly related to the taxes incurred in the production of the exported goods. I know the examples they give, such as the engineering product which is manufactured near a steelworks—which means that little transport and consequently little rebate of taxation is involved—using products from a steel mill operating on untaxed home-produced fuel. Such a product, with little genuine claim to much rebate of taxation is, in effect, subsidised. Although tie average of this type of firm might relate to the rebate received, to the firm itself this is a subsidy, and I understand the views of those competing with such subsidised firms.
However, distortions do not occur in only one country. The value-added tax brings its own distortions. It is simpler, in that one can say that these particular taxes are related to a particular firm and will be rebated, but for countries with high levels of direct taxation it is difficult to make a fair judgment of what is the right or wrong tax to rebate. One enters realms of high sophistry when trying to produce a final argument one way or the other.
Some form of export rebate is justified. In individual cases, it will be a subsidy, but there are other anomalies. With a small export rebate, the size and 718 the impact of those anomalies will be fairly small, but it was a pity that, having accepted devaluation of just over 14 per cent., we effectively reduced it to about 12 per cent. I hope that the reason for the provisions for the reintroduction of the rebate in Clause 3 is to cater for possible United States action. There might be a whole rethinking of export rebates by those countries with similar taxation systems to ours, and it is as well to have this wide general power for that eventuality.
I feel even less happy about the Selective Employment Tax refund. One of the many incentives which the Government have used to persuade firms to operate in one way or another has been this refund. I, too, believe that this large sum should have been used on roads and, perhaps more important, on training and providing required industrial skills. Little divides the House on the question of spending the money more advantageously and discriminatorily.
The most important thing about the refund is that it adds yet another piece of confusion to Government incentives. This is completely mixed up. The fundamental incentives, by which one persuades firms to operate in a certain way, should be looked at again. The idea of incentives is basically simple—that if a firm or an individual takes a certain course, he will receive or pay money, depending on whether that course is in the national interest. Because of this the Government exercise influence over the economy.
There are other kinds of control—direction, taxation and exhortation. These are many of the ways in which the Government attempt to control the economy. But the use of financial incentives to make individuals and industry act in a certain way is a method of control which has grown rapidly during the lifetime of this Government. Certain actions which are held to be advantageous receive money, while other sorts of action which are held to be disadvantageous require the payment from that firm or individual. It is in this area that some rethinking is needed.
If one considers an example of where this was done in a good way, one can also see the early forays of the Government in this sphere. I refer to the question of investment grants. Under that 719 system, if a firm invested in machinery it received the grant, but if it did not invest but distributed its profits it had to pay higher taxation. Since investment is held to be in the national interest and one of the good ways of increasing productivity—it spreads knowledge of how new machines operate, how to make use of advanced technological methods and the latest manufacturing techniques—I hold the investment grant system to be valuable. However, difficulty arises in less simple forms of incentive, and it is here that there is great confusion.
When incentives run into hundreds of millions of pounds, perhaps even thousands of millions of pounds if one considers all the disincentive effects of Purchase Tax, let alone the whole area of Income Tax, one realises that the Government have a great responsibility to ensure that there is coherence in their policy of incentives. This coherence must also extend to Selective Employment Tax refunds.
It is held that S.E.T. repayments are a great incentive for the development areas. The essential basis of the refund is that the money is given to those firms which happen to employ more than their competitors in a non-development area; so essentially it is an incentive to employ more people. This is the real incentive. It is not an incentive to assist the development areas but a direct incentive to employ more—and to have wishy-washy hopes that manufacturers will act in such a way as to improve the prospects of the development areas is to deny the straightforward existence of a relationship between the manufacturer and the S.E.T. refund.
We are, therefore, not sharpening the differences between those who employ more people and those who employ fewer—between those who employ more people inefficiently and those who employ fewer people efficiently—but are blurring the picture and, even worse, we are using the taxpayers' money to do it. There should be a change in management thinking and in people's attitude to their work. There are many bad labour practices and labour hoarding is universally discouraged. By the S.E.T. refund, we are lessening that discouragement.
This is not a large country and there are not large differences in the culture 720 and behaviour of many parts of the country. One great advantage we have lies in our homogeneity; that between vast areas of the country—indeed, almost from one end of it to the other—people tend to act, behave and think in a similar way. They have their aims, hopes and working habits, and they do not vary much where-ever they live in Britain. Industrial practices share in this homogeneity. It is no use thinking that one can encourage bad industrial practices in isolated pockets of the country and, at the same time, condemn those practices elsewhere. We are too unified a nation for that sort of thing to happen.
The whole sphere of incentives needs to be radically reconsidered and those incentives should be related to what people receive in terms of benefits. We must also consider the relationship between gains or loss to the individual and benefit to the country. I believe that the S.E.T. refund in development areas is bad and that the Government have tried to provide incentives for good purposes but for wrong reasons. I hope that, like the general repayment, it will be scrubbed before long.
§ 6.45 p.m.
§ Mr. Richard Wainwright (Colne Valley)
I am pleased to follow the hon. Member for Ashton-under-Lyne (Mr. Sheldon) in his rigorous opposition to the Bill. The Chief Secretary tried to commend the Measure and gave us a simile of himself in a desert with only a rather restless camel for company. It has been proved in the debate to have been an apt simile. The last eight speakers have been opposed to the Bill and, without exception, they have come from constituencies in the so-called intermediate areas. I deliberately shun the absurd term "grey" areas because these are areas intermediate in their prospects for economic growth.
The Chief Secretary began, with an air of great virtue—the same virtue as the child who puts 6d. in his money box, knowing that he has the key to the bottom of it—by commending the Bill as a Measure which provides for two large items of saving. But it was a cardinal part of the case when the regional employment premium was being commended by the Government that it was not, they claimed, in any sense expenditure since it did not involve an 721 extra call on resources. That argument was at that time rightly used by the Government to quieten those who wanted, for example, the money to be spent on roads to Barrow-in-Furness.
The regional employment premium, like the S.E.T. premium, does not result in a call on resources but is simply a form of transfer. I therefore dispute the notion that here we are confronted with two valid forms of substantial saving to the community. I also dispute the amounts, alleged to be £100 million in each case, because I heard no acknowledgment of the undoubted fact that in both cases a large part of the £100 million goes back to the revenue in Corporation Tax, or Income Tax and Surtax from sole traders. I hope that the Financial Secretary will give the House a fuller picture by providing his informed guess—from the advantage of knowledge that the Government have—of the extent to which even if this £100 million had been spent in both cases, tie revenue would recover a large part of each sum.
The Bill was commended to us as a logical accompaniment of devaluation. Much has been said on this theme but this pattern is part of the hopeless application of bad psychology which has accompanied the whole devaluation exercise. To try to get interest and excitement into exporting by laying fresh burdens on manufacturers and by telling them "It will all come out all right in the end" is not the answer. It is no good saying that devaluation will bring home the bacon, because the accompanying measures have already proved extremely unfortunate in their effect on manufacturing generally.
It may be—Socialists certainly hope so—that in the end devaluation will bring the harvest that is projected, but in my view—and this is the view of the Liberal Party—the Government should have waited for the harvest before withdrawing the S.E.T. premium and the export rebate.
Not a word has fallen from the Government lips about why April has been chosen. Why is it thought that manufacturing industry will be doing so well out of devaluation by April? Why will it then be doing so well that it must surrender these benefits which only a few months ago were being so eloquently commended to the House by the Government?
Turning to the separate subjects of the Bill and thus to Selective Employment 722 Tax, I wish to dissociate my hon. and right hon. Friends from the fantastic whimsy of the Conservative Opposition Amendment. With an incredible burst of optimism, the Opposition purport to see this asa further step in dismantling the Selective Employment Tax.There has not been a word—who could expect it, in a reasonable frame of mind?—from the Government that they are about to dismantle Selective Employment Tax. Liberals wish that they would. We want to see the end of the whole apparatus, but it is deceiving the people to suggest that this afternoon that any steps whatever are being taken towards its dismantling.
There are arguments for saying that the tax should go entirely, or that we should possess ourselves in patience for a while, but partial dismantling is an extremely dangerous operation. I should like to see the Albert Memorial and some gasometers in the Colne Valley dismantled. That does not mean that I would support a dismantler who took a few layers off the top of either building but left the rest a danger to people around. There is no virtue in partial dismantlement even if that were the case in this Bill.
By the withdrawal of the export rebate, again the Government are not showing even an attempt at consistency. The alleged reason, because they do not wish to admit panic at the time of devaluation, is that it will give us a more virtuous appearance in world trading circles and acquit us of any lingering taint of protectionism; but yet the regional employment premium survives. The main purpose of that premium was to provide a disguised subsidy to manufacture for export, which it was hoped would get through the G.A.T.T. Good luck to it.
The regional employment premium has provoked a great deal of hostility among some other trading nations which are competitors with our exporters, but in this new pose of international trading virtue, the Government have said nothing about removing the premium. The real reason for the withdrawal of the export rebate was panic and nothing else.
The effect is very unfortunate, because the one thing that any fiscal incentive must have if it is to carry conviction with those whom it is meant to attract 723 and stimulate is a high degree of certainty. This Government are on record time and again of complaining that the fiscal incentives which had previously been provided to businesses have not been heeded. Business, it is said, was slow to respond to the incentive of investment allowances and so on. The reason is very easy to see. Very few businessmen had any faith whatever in the persistence of these incentives. They feared that at any time they might be reduced or abolished. The Bill shows that they were right to be distrustful. Even if the Government were to doubt the complete validity of a particular form of fiscal incentive, I maintain that they should not lightly abandon the certainty which is an essential part of any incentive, even if that particular incentive is not producing all the effects that were at first expected of it.
Finally, I come to the third of the objections which Liberals have to the Bill. It is that in the otherwise perfectly reasonable provisions for restoring an export rebate, they have deliberately introduced the new possibility of discrimination. They take the power to restore the export rebate in respect of goods consigned to "specified countries or territories." That approach is not only contrary both to the letter and the spirit of G.A.T.T., but it also completely contradicts the posture they have taken up to explain the earlier parts of the Bill, the posture of the very virtuous international free trader.
On all these three counts I shall recommend my hon. and right hon. Friends to oppose the Government in the Lobby tonight and I hope that we shall be joined by those hon. Members opposite who have been very persuasive and eloquent in opposition to the Bill.
§ 6.55 p.m.
§ Mr. Emrys Hughes (South Ayrshire)
The hon. Member for Colne Valley (Mr. Richard Wainwright) said that eight speakers had been opposed to the Bill. I gather that he was the ninth. I wish to dissociate myself from the other nine, to support the Bill and say that I intend to vote for the Government. [Hon. Members: "Oh".] I do not know whether that impresses hon. Members opposite. I am usually associated with rebellions and rebels, but I am very sceptical about a rebellion led by chartered accountants.
724 I was very sorry indeed to hear the hon. Member for Colne Valley from the Liberal benches—wreak his vengeance on the Albert Memorial. I hope that he will not suggest that when it is taken down it should be sent to a development area such as the one from which I come.
I support the Government because I live in a development area and I want wholeheartedly to associate myself with what they have done for the development areas. I live in an area where mines are on the point of being closed and we want alternative work for those who are likely to be unemployed. Those people do not look forward to any diminution of the Government's campaign; they are asking the Government to intensify the campaign for financing the development areas.
There have been criticisms, probably valid, but on the whole the general plan for financing industrial activity in the development areas such as those in Scotland has been amply justified. The criticisms are rather niggling in view of the picture which is presented in those areas where, as a result of Government activity, we are getting the opportunity for new industries to be established.
In the town in which I live I see factories arising which would never have come there but for the support given by the Government. I want to see those industries developed. I want to see different kinds of industry coming into the area. For the time being we must have this incentive. The Government are thoroughly justified in spending money in this way. The Bata Shoe Company has come into my area and is building up a very prosperous export industry. We also have Chemstrand, an associate of an American firm, introducing artificial fibre manufacture. We have carpet factories and the prospect of other industries coming in. Although there may be some doubts about certain aspects of the financing of this policy, people in the development areas realise that this is sound, constructive industrial work and they will not look at it purely through the eyes of chartered accountants.
We could do with a little more information about how the money is spent. There is a bit of mystery about it which is quite unnecessary. For example, I put a Question to the President of the Board of Trade last week about the number of 725 factories built in development areas in Scotland and asked, also, what the price of the factories was and how much had been paid for the land. I was given a list of the factories, but I could get no further information about the cost of the factories or of the land. These items in the balance sheet ought to be disclosed.
It is true that large sums of money have been poured into the development areas. There may be a certain amount of overlapping and waste, and there may be doubt about whether the money could have been spent in another way. But I ask my hon. Friends who are critical of the Government today to remember the plight of the people in the development areas.
§ Mr. Sheldon
I wholeheartedly agree, and I am sure that those of my hon. Friends who have been critical would do tie same, with the point my hon. Friend makes. Our only comment was that the money could have been spent in a rather better way. I fully share the aims and objects which my hon. Friend has in mind.
§ Mr. Emrys Hughes
How could the money have been spent in a better way? It has been said, for example, that money should have been spent on road development instead of on factories. But hon. Members who adopt that argument do not realise that the amount of labour which can be employed in building a modern road is only a fraction of what it was 20 years ago, because of advances in construction machinery. I cannot see a road programme in the development area to which I have referred taking the place of a well thought out scheme of incentives to attract new industries into it.
I support the Bill wholeheartedly, therefore, while agreeing that we should not close our minds to thoughts of other ways of bringing industries to the mining areas. For example, I would hope that the committee called for by my hon. Friends would take into account whether a large proportion of the £700 million about which we have been told could have been spent in developing nationalised industries. I realise that I cannot hope to carry right hon. and hon. Members opposite with me in that, but the principle of the Bill is sound. The development areas need to be financed. So long as we have 726 a mixed economy, we shall need incentives.
I hope that the Government will proceed with the Bill, taking no notice of the rebellions which are threatened.
§ 7.4 p.m.
§ Mr. Gordon Campbell (Moray and Nairn)
I remind the hon. Member for South Ayrshire (Mr. Emrys Hughes) that, although he said that what the Government are doing, with their development area policies, is leading to factories being built, the great problem in Scotland at present—this has been brought out in recent Ministerial Answers—is that firms have not, unfortunately, come to occupy those factories. There are far too many standing empty in Scotland now, and others are being built without any prospect of tenants.
The hon. Member for Heywood and Royton (Mr. Barnett) referred to this matter in his speech, and I shall comment later on what he said. The hon. Gentleman gave some of the reasons why, even with incentives which seem very large, firms have not gone to development areas in the way the Government hoped.
Clause 1 makes a change in the Selective Employment Tax system. The hon. Member for Colne Valley (Mr. Richard Wainwright) criticised our Amendment for expressing the hope that this was part of the process of dismantling the egregious Selective Employment Tax system. I would give restrained approval to Clause 1 because it is a change for the better. It reduces the discrimination between manufacturing industries not in development areas and service industries which are in development areas. This discrimination has been both ludicrous and harmful, and I am glad that it will, to some extent at least, be reduced. But it is late in the day, too late to remedy the harmful effects which the system has had up to now.
We on this side have pressed for the complete abolition of the Selective Employment Tax. We entirely agree with the hon. Member for Colne Valley in saying that that is what is needed. That would be the best solution. But, failing that, we have tried, since the S.E.T. was first introduced, to have sensible changes made in it. Slowly, the Government have been brought to make some changes, 727 but always much later than they ought to have been. The first example was the exemption for charities. At first, the Government said that they could not do it, but, fortunately, they agreed later. Then there were the exemptions for the disabled and for part-time workers. Part-time workers are employed to a certain extent in some of the service industries, but we had pressed for that exemption for months before the Government introduced it. Now, the removal of the premium outside development areas will to some extent reduce the ludicrous discriminations which have existed hitherto.
The premium and the regional employment premium which still remain for the development areas apply only to manufacturing industries. Only those who can make a case to qualify as manufacturers receive them. In some of the areas with which I am particularly concerned, service industries predominate. As the Chief Secretary knows, I am concerned about the Highlands and the North of Scotland, where I live and where my constituency is. Because the great bulk of jobs there do not qualify for the premium or the regional employment premium, many firms there are paying £65 per male employee per year in Selective Employment Tax.
Up to now, these tax payments have gone towards paying premiums to manufacturing firms in Birmingham or the south-east of England, which is wholly inequitable in the circumstances. Now that those payments will not be made, there will be some consolation inasmuch as the tax payments made in the north of Scotland will go towards premiums to manufacturing firms actually in development areas. But this is still not much consolation to service industries in these areas.
The Government's Green Paper on the Regional Employment Premium recognised this point, mentioning the Highlands and Islands as an area which, because it had only about 10 per cent. of jobs in manufacturing, was likely to suffer as a result of the increasing discrimination then taking place. The mistake which the Government made, which I pointed out in the debate on that Green Paper, was to treat Scotland as though it were one economic region. In fact, 728 Scotland falls into five economic regions, as the hon. Member for South Ayrshire will, I am sure, agree.
The Government have been thinking of Scotland in terms of one region—the industrial area; the central area, as it is sometimes called. That area has quite different circumstances from the other four. In those other four regions—for example, the Highlands and Islands—there is a smaller proportion of manufacturing industry. This is very much a Scottish problem. It is the essence of the problem that, in the matter of the Selective Employment Tax and in the matter of investment grants, discrimination between manufacturing industry and other types of industry occurs. We have only to look at the map of Scotland to see the enormous areas involved and to see the four regions which suffer from this form of discrimination. The tax falls especially heavily on tourism, which is an important industry in these regions, and also on other service industries. Only a small proportion of jobs qualify for the premium.
The hon. Member for Heywood and Royton said that, although some of the incentives seemed to be very large on paper—he referred particularly to the 45 per cent. investment grants in development areas—they did not seem to be having an effect in bringing firms to development areas. He gave a number of reasons which, he thought, really counted with firms in coming to development areas. I agree with him to a large extent, because I think that he was right in that.
I would add other reasons. First, as I have said, the 45 per cent. investment grant is only for manufacturing industry. The investment grant for most of the firms and most of the industries in these areas is 0 per cent. It does not matter whether it is in a development area if the investment grant is 0 per cent. Another factor which affects the decisions of firms, and which I would add to those put forward by the hon. Member for Heywood and Royton, is transport costs. In the North of Scotland where I live, 600 miles north of here, I travel more than 100 miles south before I reach Perth. Any firms which are considering setting up at distances of that kind from the South of England must think of the costs of transport. At this very moment 729 the Government are putting forward proposals for two extra taxes on transport.
Then there is the whole question of communications. The money which is going out in the R.E.P. would be much better spent on improving roads or other aspects of what is called "infrastructure". Basically, it is confidence and investment which influence firms when they are deciding whether to go to development areas which are at some distance from centres of population.
Turning to Clause 2 and the removal of the export rebate, the Government's explanation of this change seems to have been that, with devaluation and the extra advantages which there should be for British exporters, it is less necessary to have the rebate. It also seems clear that there have been objections from the United States and, no doubt, from other countries to the kind of export rebate which the Government introduced. Unfortunately, this is part of a general whittling away by the Government of the price advantage to British exporters which arises from devaluation, because, al. the same time, there is the addition of 2½per cent. to Corporation Tax, the new taxes on transport which I have mentioned, and other factors which mean that the edge which British exporters should be getting from devaluation is being blunted straight away.
I want to speak about export rebates in general. I would like the Minister to confirm what is broadly regarded as acceptable internationally at present, because the rules of G.A.T.T. and other international understandings have in the past broadly resulted in international agreement that it is wrong and illegal to have export rebates on direct taxation, such as Profits Tax and, now, Corporation Tax, but that it is broadly acceptable and legitimate to have export rebates on indirect taxation. The Government should tell us whether this is still broadly the result of the international understandings and rules which exist.
I hope that the Chief Secretary is listening to this point, because it is not only I who am concerned about it. Other hon. Members have expressed some doubts on this point. For example, on the question of indirect taxation, it is clear that the way that Purchase Tax is not paid on exports that leave this country has been accepted by foreign coun- 730 tries. It is perfectly simple. It is a tax which is applied at one stage—the wholesale stage—and either it is returned or does not fall at all on exports. What was wrong with the export rebate now being abolished was that it was an imprecise rebate which related to a number of taxes. It was too vague.
What has been acceptable to other countries has been an imprecise rebate related to one tax—to a single tax. I will explain what I mean. Where countries have had a form of turnover tax, whether a cascade turnover tax or a value-added tax, they have had systems of rebate which I can only describe as approximate, because it is extraordinarily difficult for anyone, including the Treasury in the country concerned, to work out exactly how much tax has been paid at various stages during manufacture on components and at different stages of production on an article when it reaches the stage of export. It is sometimes extremely difficult to work it out, if anybody wants to bother to do it at all.
Therefore, one system which has operated in Europe has been to have five, six or more groups with different percentages of export rebate so that a complicated article on which the tax has been paid several times as a percentage during the course of manufacture is in a high group and has a rebate of, say, 8 per cent.; and a more simple item which has had the tax paid only once would be in the lowest group—say, 2 per cent. This has been a system which I would describe as approximate, though other countries have always looked closely to see that the country operating these rebates kept various products in an appropriate place in the groups. There has been suspicion at various times when a country operating this system has moved a product from one group to another—from, say, a 3 per cent. rebate into the group which gets 4 per cent. The suspicion has been heightened if it happened that product or its industry was going through a difficult time at that period and then the product was suddenly moved so that it got a bigger export rebate.
The point I was making was that this form of export rebate has been acceptable because it was related to a single tax, whereas the rebate which we have been using, although it was connected with one tax in particular, was also to cover a 731 number of other general measures of indirect taxation. I believe that the opposition to it which has arisen abroad has been largely to its vagueness and to the fact that it might be a precedent for other countries producing similar vague rebates not related to taxes which could be identified.
I come to Clause 3 and the possibility of introducing an export rebate again. I believe that we may well have to do so. I have made it clear in debates on taxation that I am in favour of a major reform of indirect taxation. Whether we eventually find ourselves in Europe or not, the present system should be replaced with an added-value tax or general sales tax. I prefer the added-value tax system.
One of my objections to the Selective Employment Tax has been that it is so complicated that its introduction has meant the postponement of a proper reform of indirect taxation and the real study of the issues that are important to the country and its exports. I spoke of this in a debate on 27th January last year on taxation, and I shall not give my views again now. I pointed out just over a year ago that the European Economic Community was heading towards a common value-added tax. Since then it has adopted that system, and the process is continuing.
The important points about any form of turnover tax are, first, that the rebates on export are accepted internationally at present; and, secondly, that because the tax produces a large revenue—many people in the country pay it in small percentages—large rebates are available. The turnover tax systems in Europe present difficulties for precise calculation, but there are incentives in the rebates existing under them. The group methods which I have mentioned mean that a person exporting an item on which the turnover tax has been paid many times may be offered a large rebate of, say, 8 per cent. If the choice is between receiving that rebate if the item is exported and receiving nothing if it is sold on the home market, there is an incentive to sell it abroad.
The Richardson Committee, which looked into the whole question of turnover taxation and its possible advantages for exports, pointed out that in theory 732 there is no financial advantage because, as the tax has been paid at different stages, it should be reflected in the cost of the item and its components as they reach the exporter, and that although the exporter could be offered 8 per cent. rebate, 6 per cent. of which had not been paid by him in tax but by other people back along the line, the 6 per cent. should be reflected in the price he paid for the item before selling it. I agree with the Committee that that is so in theory, but I believe that, in practice, there is an incentive when a large rebate is offered on an export sale. One can say that this is largely psychological, but I believe that, in practice, it happens.
With an added-value system there is also an incentive to keep the cost increase down when the tax is paid and each time the item passes to another stage of manufacture there is a built-in incentive to keep down the cost while it is being manufactured, particularly where it passes through several stages.
I am sure that such a system of rebates will be consolidated in the E.E.C. I therefore believe that if we are to reform our system of indirect taxation and go for a tax of this kind we shall also wish to have export rebates of the same kind and size. Therefore, we may in the future find ourselves wanting to reintroduce an export rebate, and it will be on a much larger scale than that which is now being discarded by the Government.
I regret that the Government introduced this form of export rebate at the end of 1964 very hurriedly and without much thought, with the result that it has got itself a bad reputation. I believe that in the future we should have, and will have, proper systems of export rebate on a larger scale, when we have reformed our indirect taxation, and that this is much needed. We shall certainly want Clause 3 or other provisions to make sure that we can introduce such systems.
The right hon. Gentleman will have noted that I have made a speech on the subject of indirect taxation without once referring to the whisky industry in my constituency. Whenever I rise I think that he believes that that is what I am going to speak about. I trust that he will realise that my not doing so tonight is an earnest of my very serious thoughts on the subject as a whole.
§ 7.28 p.m.
§ Mr. Christopher Mayhew (Woolwich, East)
I hope that the hon. Member for Moray and Nairn (Mr. G. Campbell) will forgive me if I do not refer to his comments on the Bill. I wish to confine my remarks to one particular aspect of it, the first paragraph of the Explanatory and Financial Memorandum, which says:The purpose of the Bill is to end entitlement, save in Development Areas, to the payment of sums additional to the repayment of the Selective Employment Tax…I am grateful that my attention was recently drawn to the importance of the Bill by one of the Government Whips. Now that I have studied it further, I find—
§ Mr. Mayhew
Having further studied the Bill, I find that it contains a provision, which I should already have recognised, which affects my constituency in an important degree. I should like to make a few comments on this.
As I understand it, the effect of Clause I will be to deprive all employers with industrial undertakings in my constituency of the 7s. 6d. a week premium additional to the repayment of Selective Employment Tax. Thus, in effect it again gives an advantage to manufacturers in the development areas as against those in my constituency.
I should like to make it plain that I support the Government's development areas policy. I have been a strong supporter of such a policy since before the war, when I recall arguing the importance of the Government's controlling the location of industry. I visited parts of Wales, such as Merthyr Tydvil and Dowlais, where, the unemployment was then about 70 per cent. Yet at the same time new industry was being built along the Great West Road and there was ribbon development around London and in the Home Counties.
I sincerely support the Government in their plan to bring work to the development areas, but I must question whether the amount of incentive has become excessive. In my constituency today many would say that the incentive given to the General Electric Company to close down the A.E.I. factory in Woolwich and trans- 734 fer the work to development areas, though right in principle, is excessive in amount. In its business section, The Times worked out how much the taxpayer will pay to G.E.C., to move work from my constituency to places, which admittedly have a higher level of unemployment—Hartlepools, Kirkcaldy and Glenrothes, where employment is 6 per cent., 5.8 per cent. and 5.3 per cent., far above the level in Woolwich In Greenwich we have 1,200 on the unemployed register. This is above our normal rate and above the London average of 1.7 per cent.—it is impossible to get an exact figure.
The policy of putting work into development areas is one that we must all support, but I put it to the Government that £400,000 a year is a very big payment by the taxpayer to the General Electric Company to take this work to the North. It is not the slightest use taking work from the South to the North if it simply means transmitting unemployment from the North to the South. Nothing is gained by that.
§ Mr. Emrys Hughes
I have every sympathy with the unemployed in my hon. Friend's constituency, as I have with the unemployed everywhere. But is there not for those unemployed in Greenwich more opportunity to find other work, because of the greater diversification, than there is in Scotland, where mining has in many places been the only industry?
§ Mr. Mayhew
I take the point, but it is dangerous to generalise. At first sight, the fact that a man is unemployed in Greenwich may seem a far smaller problem because he can go round London looking for work and is not in a confined, say, mining community, where such opportunity is not available. But, here again, although the principle is right, it depends how far one takes it.
It is planned to have 60,000 new residents in the new town planned in my constituency at Thamesmead, on the banks of the river where the old Arsenal used to be. It was carefully planned that, of the 60,000, about 10,000 would require work and would get it on the site, and 187 acres have been set aside for that. It was also expected that 6,000 of the 60,000 would require jobs in Greenwich and the surrounding area.
735 It is most important that these jobs should be available. If they are not, we shall have a hideous unemployment problem in Greenwich. But, according to my hon. Friend, these 6,000 can go to central London or to Chislehurst, or to some other part of southern England for work. But he does not understand that one cannot generalise when one has not got the transport at peak hours to take these 6,000 men from Thamesmead to central London. With enormous difficulty, the plan for Thamesmead involves 2,000 more places on the trains to London. That means a tremendous effort. But it does not include any of the 6,000 men who are supposed to get work in Greenwich.
Even today, therefore, Greenwich should not be looked upon as part of London but as an island cut off from the rest of Britain by public transport inadequacies. Therefore if, as a result of the G.E.C. decision, we cannot find th 6,000 jobs for these new residents at Thamesmead, we shall find it impossible also to find transport to take them to central London or Chislehurst, or anywhere else.
In all seriousness, I say to the Government that it is not enough to give, as the Bill does, yet more incentives for work to be transferred from places like my constituency to development areas if we cause equally great problems where the work is taken from as we solve in the places we take the work to. We do not grudge the development areas their good fortune, but there must come a time when, balancing up the hardships caused in the South with the gain by the North, and subtracting all the expense and all the dislocation caused by the move and adding in the £400,000 a year from the taxpayer in this case to the G.E.C., one must feel that the development area policy of the Government needs a careful reexamination.
This situation has been aggravated by the extraordinary misconduct of the G.E.C. in putting its plan forward without consultation, either with the unions or with the local authorities concerned or with the South-East Regional Planning Council. The company ruled 5,500 jobs out and made a Press statement last Friday without any prior consultation with any of these people at all. That is 736 a crime against normal industrial behaviour and the G.E.C. is not the only offender. There is a case in Coventry only today.
One of the things I urge on my right hon. Friend is that he should establish a code of conduct for private industry—since, if these mergers go on, we shall have more cases like this—whereby it becomes a real offence for any company to behave to its employees and to the local community as the G.E.C. has behaved to my constituency and to my constituents employed in it factory in Woolwich.
This is a national problem. The company's action last week gives an indication of the size of the problem and the urgency with which the Government must tackle it. It may be argued—and this is certainly relevant—that at least the company—and "General Electric Company" is the correct term for the new firm—took this decision—
§ Mr. R. J. Maxwell-Hyslop (Tiverton)
It might be relevant to the hon. Gentleman's argument, but is it relevant to the Bill?
§ Mr. Mayhew
I do not know whether the hon. Gentleman was here when I said that that part of the Bill which affects my constituency is the first sentence of the Explanatory Memorandum. I will read it again for the lion. Gentleman:The purpose of the Bill is to end entitlement, save in Development Areas, to the payment of sums additional to the repayment of the Selective Employment Tax…I was explaining to the House that this would give an extra advantage to the development areas, in such a thing as the product of the G.E.C. factory at Woolwich, of 7s. 6d. per employee. One must also take into account the straight development area premium, the S.E.T. refund, and, of course, the subsidy for retraining of employees at the G.E.C. plants in the Hartlepools and elsewhere. By the time one has added all these things together, one finds that the taxpayer will be paying about £400,000 a year to the G.E.C. to take work from my constituency. I hope that is now clear to the hon. Gentleman.
I was saying that the Thamesmead project was computerised. The computer worked out that under the regime which would be imposed by the building of Thamesmead and the arrival of 60,000 737 new residents in my constituency, to avoid unemployment and chaotic conditions, 6,000 jobs in the Greenwich area would be needed. For the reasons I have given, they must be in the Greenwich area and not in other parts of London—because of the transport situation.
§ Mr. Mayhew
I will argue that with ray hon. Friend some other time. Scotland must be very under-equipped with transport if it can rival the Southern Railway between Charing Cross and Arsenal Station.
The plan for Thamesmead absolutely requires 6,000 new jobs in Greenwich for these new residents. This figure was achieved after asking A.E.I., G.E.C. as it now is, how many people it was willing to employ in future years in the constituency. The directors of A.E.I. assured the Greater London Council and the Thamesmead Committee that they would be using in the area not only the same labour force as hitherto, but in certain departments 55 per cent. more men. The 7s. 6d. adds to the incentive to G.E.C. to move to a development area, but G.E.C. took this decision in total ignorance of the Thamesmead project. It seems scarcely believable, but, although A.E.I. understood the Thamesmead project, the new G.E.C. took its decision in total ignorance of it.
While I approve of a great part of the Bill and hope to be able to give the Government my support later, I draw the attention of the House to the additional advantage given to development areas over my constituency and the increased advantage given to the General Electric Company to make this abrupt, sudden, and ill-considered closure, a decision which was taken without any consultation with any of the proper authorities. A civic deputation on which I had the honour to serve went to see Mr. Weinstock, the managing director of G.E.C. At that meeting he gave us an assurance that there would be no firm date for the closure of the factory and that the rate of rundown of the factory and the date of closure would be related to the finding of jobs for employees.
738 However, it is not only my view but that of my hon. Friends representing constituencies in the neighbourhood that the original concept of the closing of the factory within 12 months was utterly inhuman, that it would have caused widespread unemployment and widespread hardship to thousands of South London families. In our view, the closure cannot take place in less than four years. It must be carefully phased in with the creation of employment opportunities in the area, and especially in the new town of Thamesmead.
1 ask the Government urgently to take all measures necessary to prevent or to counteract this grave threat to the employment and livelihood of many thousands of families in South London.
§ 7.44 p.m.
§ Mr. Peter Hordern (Horsham)
The only hon. Member so far to support the Bill has been the hon. Member for South Ayrshire (Mr. Emrys Hughes), and I am very sorry to see that he is now leaving his place. The Government must draw what comfort they can from the fact that he is supporting the Bill and that he has now resumed his place.
I listened with great interest to what the Chief Secretary had to say and enjoyed the interchange between him and the hon. Member for South Ayrshire about the necessity to improve grants to development areas, and the reluctance of the hon. Member for Woolwich, East (Mr. Mayhew) that the G.E.C. merger should have the effect which it obviously will have on his constituency. It occurred to me that one difficulty which the hon. Member must be experiencing is how to reconcile his description of the merger with the Prime Minister's oft-quoted statement about the necessity to streamline industry. I do not see how he can square his own account of the situation with what the Prime Minister has said many times about the need to take the fat off industry.
The Bill is a further indictment of the Government's handling of our economic affairs. It is worth adding up some of the consequences. By these two further measures in the Bill, plus the 2½ per cent. increase in Corporation Tax already announced as part of the devaluation 739 package, the total extra burden of taxation arising from changes since the Government took office is now about £1,300 million. These two measures are, therefore, not in any sense inspired by an attempt to rectify the distortions of the Selective Employment Tax and are certainly not inspired by a sudden call of conscience for breaking the spirit of G.A.T.T., if not the rules of G.A.T.T., through the export rebate. They arise because of the Government's failures—their failure to promote investment in the private sector, their failure to get growth, their failure to control public expenditure, and their failure to control the money supply.
The Chancellor of the Exchequer himself has already failed to act in time by not using the regulator. He says that he does not want to dig too many holes too soon. That is not a situation in which I can readily imagine the right hon. Gentleman. I do not altogether associate him with that rôle. But whether it is his unfamiliarity with such exercise, or his admiration of Asquith, his policy of "Wait and see" will bring dangerous dependence on wage restraint, however tough his Budget may be. These measures are proposed not by choice, but through necessity—they are Hobson's choice.
What we now have to consider is the effect on industry of the total additional weight of taxation. There are, first, £100 million from the withdrawal of the regional employment premium outside development areas; secondly, the £100 million withdrawal of the export rebate; thirdly, £80 million from the extra 2½ per cent. on Corporation Tax; fourthly, the delay in receiving investment grants, another £80 million; fifthly, £40 million in new road haulage taxes; and then there are the higher costs of raw materials brought about by devaluation and the higher interest charges as a result of the Bank Rate now standing at 8 per cent.
The Government must now look at the level of Bank Rate. It does not act as a spur to attracting money from overseas, as the Financial Secretary, I am sure, will agree. There seems to be little purpose in keeping Bank Rate at 8 per cent. when the clearing banks are already limited in the amount which they can lend. 740 There is little purpose in keeping it at this historically very high level.
That industry has survived this constant battering is a tribute to its inherent strength, but nobody can claim that it has not been considerably shaken by continued Government interference in its activities. The system of investment grants has involved it in endless paper work. Along with the growth of the Civil Service, an army of accountants, legal advisers and secretaries has grown up in industry to hurl back the forms with which Ministries bombard them.
Unlike other battles, this bombardment between an army of civil servants and an army of accountants who have to defend themselves, will never be won. We are all form-fillers now. The only cure is total disarmament, but with the Industrial Expansion Bill, and the new National Plan, we understand, in the offing, this is the last thing that we shall see. Of all the nonsenses for which the Government must take responsibility, the Selective Employment Tax has been the worst.
The discrimination between services and manufacturing is an indication of the fundamentalist attitude of the Socialist party. Nothing is any good unless it is made by hand and the Prime Minister's constant references to "hard core industries" merely supports this view. I welcome the fact that there is to be less discrimination between manufacturing and services, but there will still be some, and there will still be absurd anomalies, with contracting companies keeping their plant in development areas open in order to claim the premiums. The disparity between manufacturing in the development areas and the rest of the country is now huge.
As much as 37s. 6d. a week more per man is being provided to a manufacturer in these areas. The hon. Member for Heywood and Royton (Mr. Barnett) referred to the difficulties that the development areas had in attracting firms. He said that the reason why firms went there at all was because of the shortage of labour in their original area of operation. I do not believe that to be the main reason. My observation is that the reason they are reluctant to go into development areas is the shortage of 741 skilled labour in the development areas. This is a very hard problem.
Earlier this week we had a debate dealing with retraining of labour. I put forward then a proposal that the number of skilled workers that should be retrained should be far more than the proposed 23,000 in Government training centres, which is the Government figure for 1970. It should be more like 70,000 in 1970 and 100,000 shortly thereafter. The way to attract labour is to have Government retraining centres in the development areas so that companies outside will be attracted.
As a result of the Government's policy, companies in Crawley, in my constituency, have been refused permission to expand their capacity by not being given I.D.C.s. Crawley has the best export record of any industrial town in the country. The position is now absurd, in that there is a housing programme for 4,500 houses by 1970, but because the companies are not being allowed to expand physically there will be no jobs for those who are rehoused. The Government must look again at this question.
The country cannot afford not to allow our export companies to get as much business as they can while our prices remain competitive. The cost of the regional development policy must also be quoted in terms of lost exports and lost foreign exchange, and in any event the disparity between the treatment of development areas and the rest of the country is now ludicrous.
The regional employment premium should be scrapped. If it were, there would be a saving of £100 million in a full year. If that was done Corporation Tax could be kept at the present rate of 40 per cent. instead of being increased to 42½ per cent. Furthermore, there is no cause and never has been for any differential between manufacturing and service industries. If there was a straightforward employment tax, with no selectivity about it at all, of 12s. 6d., half the present rate for men, levied throughout industry and the services, the yield would be sufficient to reduce the level of Income Tax to 7s. 3d. in the £ at the standard rate.
There is a strong case for an employment tax in industry to encourage more labour-saving machinery. Those who are 742 familiar with Mr. Allen's articles, describing the performing of a function in industry, will realise that we appear to be using more people than are required in other countries to perform the same function.
§ Mr. Maxwell-Hyslop
I do not think that I agree on that point. Is not one more likely to get newer manufacturing processes, more labour-saving processes into industry by having a more realistic taxation policy that leaves money in the industry to buy machinery, rather than by increasing the cost burdens on industry still more onerously?
§ Mr. Hordern
It is very difficult to discuss a part of taxation without discussing the whole of it. In the first part of my speech I was trying to discuss ways in which the burden of taxation could be removed from companies. There is a strong inherent case for a tax on employment, provided always that there is a quid pro quo in the reduction of tax on personal incomes. I see no such prospect of this under the present Government—we shall get more burden and no reduction at all. I have never liked the export rebate. It has never seemed to me more than a mean Measure, and it has probably caused more harm with our trading partners than any good that it may have done for our exporters.
I am glad that it is going, and the circumstances of its departure seem to be relatively immaterial. The fact that the Bill gives powers to reintroduce it, if necessary, seems a powerful commentary on the very disturbed state of international trade and payments. What seems to be wholly bad about the Bill and this Clause is that the powers are discriminatory in relation to different countries.
Why is this? Have the Government given a special undertaking to the E.F.T.A. countries and if so, why? We must have a clear explanation, and I hope that the Financial Secretary will give it when he replies to that debate. I hope too, that there will be no reintroduction of the export rebate. If we feel that there is a clear advantage enjoyed by the E.E.C. countries in the added-value tax why do we not introduce such a measure ourselves? As it is our taxation is heavily weighted on direct 743 taxation compared with both Germany and France. What is more, the tax would not have to be so high here as it is in France to produce the same revenue. A recent P.E.P. publication says that a 5 per cent. added value tax would produce as much revenue as the 16 per cent. rate in France. There is no point in threatening to reimpose the rebate in order to influence the Americans, because I do not think that they take much notice.
What the Government can do to help exports is to be much more rational than they now are in treating tariffs and imports. I must say how impressed I was with the remarks by Mr. Ambrose Congreve, of Humphreys and Glasgow. It appears that if a heat exchanger is imported as part of equipment later to be exported, duty is payable not on the cost of the exchanger, but on the company's own chemical and mechanical design cost, and also on a notional profit that a British company in competition with Humphreys and Glasgow would have made, had it been making it. This is an extraordinary state of affairs.
One of the things that we cannot dispense with in our present situation is competition. If that competition comes from abroad we must use it. If we cannot use it now, after devaluation, when shall we be able to? The Bill is another mark of the Government's defeat. It has been a dismal retreat for a long time, and I see no reason for expecting the situation to change until at last we have a General Election, and I hope that that will not be long delayed.
§ 7.58 p.m.
§ Mr. George Wallace (Norwich, North)
I will not follow the arguments of my hon. Friend the Member for Woolwich, East (Mr. Mayhew), who has now departed, in his comments on the Southern Region. I am one of the sufferers of that Region, but it is no part of this debate. I agree with the objections to the refunds of S.E.T. as outlined in the Bill. To be quite honest, I am not too happy about the Selective Employment Tax generally. I am extremely doubtful as to whether it is achieving its objective, and I am certain that it imposes a large number of difficulties and hardships on smaller businesses and particularly individuals. It is quite clear what the 744 Government's objective is. The changes in S.E.T. refunds are heavily weighted in favour of the development areas. But we must also remember that in so doing it penalises all those areas on the borderline of the development areas. I refer to what is known as the grey areas. I represent the City of Norwich—or the most important section, the North. We claim that Norwich and Norfolk should be classified as a grey area. It is an area which needs expansion and new industry.
Norfolk Members are exerting pressure to get Norfolk recognised. More industry is needed simply because our average wage is small and unemployment is increasing. Such industries as we have, particularly in Norwich, have magnificent export records. One firm has the Queen's Award for Industry. Many firms, because they are going all out for exports, wish to expand still further, but are being obstructed because of the strict adherence to the development area policy. One hon. Member referred to the difficulties of obtaining industrial development certificates. It is no secret that some firms in my constituency are facing similar difficulties. Why penalise them still further?
The pressure to transfer work, as is implied in the Bill, to development areas is far more serious to a grey area such as Norwich than it is to London and the South-East. Let us face the facts about the London and South-East area: it is already too overcrowded and we cannot think in terms of further expansion in it.
I believe that it was a mistake to introduce Selective Employment Tax refunds. Let us recognise that crazy anomalies exist. I do not wish to refer to them, but they are numerous and ridiculous. The move proposed in the Bill will increase instead of decrease anomalies. This aspect of the Bill should receive further consideration and more weight should be given to the claims of the grey areas.
§ 8.4 p.m.
§ Mr. Michael Alison (Barkston Ash)
I feel sorry for the Financial Secretary. The Government have had one of their roughest days. It has been a day of continuous fire from all quarters. I remind the Financial Secretary that the taciturnity which was such an asset in 745 his hon. Friends the Members for Stoke-on-Trent, Central (Mr. Cant) and Heywood and Royton (Mr. Barnett) in the National Loans Bill Committee upstairs has blossomed into the most eloquent speeches of criticism. If that taciturnity had not been preserved upstairs, I dare say we should still be considering the National Loans Fund Bill.
Not only that, but the Government have had the misfortune, in sweeping through the House to find advocates on the Government side for the Bill, to catch a large fish in the net in the shape, of all people, of the hon. Member for Woolwich, East (Mr. Mayhew), whose principal manufacturing industry in the form of the G.E.C. factory has just been swept up to the remote wastes of the North. And surely the most unkindest cut of all is the fact that literally the only supporter for the Government's measures is the hon. Member for South Ayrshire (Mr. Emrys Hughes), who qualified his support by saying that he was naturally rebellious and would not follow a chartered accountant into the lobby, omitting to note that, presumably, he is about to follow the Chief Secretary there.
This has been a dismal day for the Government. It is fitting in the context of this Bill, because the Government could not have produced a more irrelevant or counter-productive instrument in terms of the economic needs of the country. As my hon. Friend the Member for Horsham (Mr. Hordern) said, it maintains the general penalty on the service sector. Surely at a moment when services, particularly as they relate to invisible exports, are of crucial importance, and with a sector which has a very low import content, the thing we do not want to do is to continue a discriminatory penalty on services.
The Bill takes another gratuitous swipe at the work horse of our economy, namely, the manufacturing industries, by giving them no relief on the service element which is an unavoidable input into their manufacturing processes—at least, they had a relief before—and by landing them with the full cost of an 8 per cent. Bank Rate on the bridging finance for the payments which they have to make in respect of the Selective Employment Tax. Furthermore the Bill heaps—and this is its dismal feature—the most prodigious and wasteful sums of tax- 746 payers' money on to the development areas, representing as they do only about one-quarter of the manufacturing capacity of the country.
We look to the Financial Secretary to deal with the hard facts underlying this instrument and its economic repercussions. The first fact that we want to establish is this: is it or is it not the Government's policy to produce an export-led reflation or boom in the economy? Is it or is it not the Government's intention, to use the words of the Chancellor of the Exchequer or certainly of the Prime Minister, to have a massive shift of resources to exports? If this is the Government's policy, let us consider the realities of the situation.
Let me remind the Financial Secretary of the facts which are clearly established by a Report which I believe has gone the rounds of Government Departments—it has certainly filtered into the House—namely, the Report of the Port of London Authority on a survey of the origin of exports in the United Kingdom. Let us say that the exports of this country are worth about £5,000 million. We are told by the P.L.A. Report that 50 per cent. of the value of our exports have the following characteristics. They are controlled by about 100 firms. They are accounted for by only three commodity groups—vehicles, engineering products, particularly light engineering and sophisticated engineering products, the sort produced, for example, at Crawley; and chemicals. They emanate from three standard regions in the United Kingdom—London and the South-East, the North-Western Region and the Midland Region. These, needless to say, are not development areas. Here is the heart of our export effort.
If we take the remaining 50 per cent. of exports by value, we find that again the bulk of it comes from the non-development areas, although in slightly smaller proportions. About 30 per cent., in addition to the 50 per cent. I have mentioned, comes from the Southern Region, the Midland Region and the East, and the East and West Ridings of Yorkshire. Therefore, 80 per cent. by value of British exports come from the non-development areas and the great bulk of them from three regions.
If words or policies have any meaning at all, and if there is to be a massive shift 747 of resources to exports, then it can mean only one thing: there must be a deliberate and systematic policy of shifting the factors of production—that is, capital and manpower—not to the development areas, which are largely unproductive, apart from Scotch whisky, in exports, but in precisely the opposite direction, namely, in the direction of the crucial exporting areas.
The Government are going in the opposite direction—
§ Mr. Eric S. Heffer (Liverpool, Walton)
Is the hon. Gentleman aware that the Merseyside part of the North-West is a development area, and we now have a motor car industry of which we are proud and which is doing quite well in terms of exports? The hon. Gentleman is getting his argument a little mixed.
§ Mr. Alison
I am aware of the situation in the North-West. It has a working population of 3 million, and exactly 350,000 of those in manufacturing, or 10 per cent., are in development areas. I think that I am fairly indicating that the North-West region is a non-development area in terms of exports. What the hon. Gentleman says about development areas in the North-West is correct, but only a small segment of the area is concerned.
The Government are going in the opposite direction. They are shifting resources into areas where there is no export potential and denuding areas where we shall need manpower and capital to get in on the export boom. It would be acceptable if it could be established that the theory of the shift of resources to the development areas would improve the unemployment position. But the staggering fact is that the Government have not added up their sums and made any rational judgment of whether the shift of resources to the development areas will reduce unemployment on a very large scale.
In the light of an answer given to me by a junior Minister at the Department of Economic Affairs, it is now possible to quantify precisely the effects of the various schemes of regional economic assistance to the development areas. I ask him to note this answer, because it is significant.
Some weeks ago, I asked the Secretary of State for Economic Affairs what would 748 be the final result of the various kinds of discriminating help which the Government were giving to the development areas, in which I included the S.E.T. premium, the R.E.P., the various other special forms like discriminating investment grants, special assistance for collieries, special assistance for training manpower, and the rest of it. In other words, could he tell me what would result from all this over a period of years in terms of a drop in the unemployment ratio. He replied that the Department's approximation would be that the total effect of all present measures over a period of years should be to reduce the margin between averge unemployment in the development areas and in the rest of the country by appreciably over one-half.
The measures which the Government are taking are worth about £200 million a year. Over a period of seven years, which is the standard working length of most of these discriminating advantages, they will result in a reduction in the margin between the development and the non-development areas of one-half.
Let me spell out what that means in statistical terms. The average unemployment in the country at large was something like 2.7 per cent. at the last count. The average unemployment in the development areas was between 4 and 4½ per cent. at the last count. Taking the margin between the two averages, one gets an average of something like 1.6 per cent. as being the margin of unemployment between the less favoured and the more favoured parts of the country.
The Department of Economic Affairs tell us that, as a result of all these measures, this margin will be reduced over a period of years from 1.6 per cent. to 0.8 per cent., which is a reduction by half. In other words, the expenditure of £200 million a year for perhaps seven years—£1,400 to £1,500 million over the period—will result in the narrowing of the margin of unemployment between the development and the non-development areas by 0.8 per cent.
If one quantifies that in terms of actual bodies, it is about 40,000 people. It is staggering that the Government should have embarked on a programme of spending £1,500 million over seven years 749 with a view to reducing the unemployment margin between the less favoured and more favoured parts of the country by 40,000 people at the end of that time. It works out at about £35,000 per head, taken over the whole span, in terms of those who are put back in work as a result of these measures. It is ludicrous arid a total waste of resources. In addition, it will do nothing to get the economy right.
The Chief Secretary tried to persuade us that the margin of advantage which would remain to British industry at large, following devaluation, particularly in the non-service sector, would still leave a great deal of leeway for successful exporting. I rather doubt that. At the same time I want to point out to the Financial Secretary that the cost margin in pricing is not the main factor in the sort of exports which predominate in the British export effort, and I refer to items like highly sophisticated engineering products, vehicles and chemicals.
Let me remind the hon. Gentleman of something that his right hon. Friend the President of the Board of Trade said in a remarkably frank estimate of the key factors in the British exporting effort. In a speech to the Grimsby Chamber of Commerce on 15th December, he said:In the more affluent export markets"—and those, after all, are really where the hope for the future lies—such factors as advertising, packaging, product design, immediate availability from stock, and after sales service, may often be more potent factors in increasing demand than price itself.The right hon. Gentleman has given a precise list of those aspects of the service industries, which are inextricably intertwined with the manufacturing process of the country, and yet deliberately penalised. By this extraordinary weapon of economic surgery, the Government have succeeded in plucking the heart out of the economic system, and they have let it bleeding on the table.
Another important point to note is one about advertising. In "British Industry", just before Christmas and after devaluation, I read that the order books of advertising agencies, which are always good indicators of industry's confidence arid determination to expand, are dropping, particularly in their appropriations for overseas markets. It goes on to say 750 that even in Toronto, where over 2,000 British firms took part in the Trade Fair, only 30 bothered to advertise.
It is a matter of crucial importance that packaging, advertising. and the rest, which are essentially service industries, should get a fair crack of the whip if the export boom is to go ahead. Yet here we have a Bill which continues the primitive process of dismembering the British economy vital member by vital member, like some ghastly Aztec sacrifice. An essential organ of the British economy—the service sector—is taken out and left pulsating on the altar to see if it will survive and go on ticking on its own.
Perhaps I might draw the attention of the Financial Secretary, possibly for the first time, to a fascinating article by Professor Postan, the economic historian, published in "Encounter", in January of this year. In one paragraph he says:The insufficiencies, the irrelevancies, and the unforeseen side effects of an economic advice preoccupied with the general and the overall and indifferent to the specific, local, technical and human nature of economic problems are obvious; and they are frequently acknowledged by the economists themselves.Though, I add in parenthesis, they do nothing about it.
He then draws attention to some of the side effects he means. Talking about private investment he says:As for private investment, it has not risen, but on the contrary declined, in spite of all the fiscal privileges and concealed subsidies; and the decline has been mainly due to the unpropitious psychological climate generated by deflationary measures in the industries most in need of modernisation. The industries whose investment has remained buoyant are not those which government and economists would have chosen had they been able to discriminate between them, but those which happen to be relatively insulated from deflationary measures—such consumption trades as supermarkets and food industries or such nationalised industries as railways and gas.We are dealing with yet another example of blanket legislation, impervious and insensitive to the particular needs of British industry, which goes further along in this hopeless process of dismembering the organically unified nature of the service and manufacturing sectors of British industry.
Let the Financial Secretary recall the figures with which I started. The reality of our exporting situation is that 50 per cent. in value comes from 100 firms, is 751 accounted for by only three different commodity groups, and comes from three standard regions, none of them development areas.
Let the Government sweep away all these blanket fiscal measures. Let industry grow together, as it was meant to do, service and manufacturing beating in time, let business get on with the job, and we shall see the exports flowing.
§ 8.22 p.m.
§ Mr. Alec Jones (Rhondda, West)
I am sure that the hon. Member for Parkston Ash (Mr. Alison) will understand that, while I share some of his views, I could not go along with him all the way. In this sense I shall have to leave him, as it were, pulsating on his own altar.
I would refer to the opening words of the Bill:The purpose of the Bill is to end entitlement, save in Development Areas, to the payment of sums additional to the repayment of the Selective Employment Tax …The important words are "save in Development Areas". Members opposite and my hon. Friends will understand that I am very relieved that development areas are excluded. I freely admit that this gives development areas certain advantages over non-development areas and grey areas. But I would remind hon. Members that, while these advantages are given, the development areas have greater disadvantages than other parts of the country. These disadvantages need some counterbalancing by the advantages mentioned in the Bill.
The obvious one which comes to mind, the one with which I live night and day, is the figure of unemployment. The figure for the United Kingdom is about 2 per cent., for Wales about 4 per cent., but in the Rhondda it is 7.4 per cent. I understand the concern of other hon. Members in non-development and so-called grey areas, but I hope they will appreciate my genuine feelings of relief. While enjoying the relief now, I hope that more can be accomplished in future.
I could not keep up with the mass of statistics which the hon. Member for Barkston Ash turned out, but we all know that the Government are spending vast sums of money on their regional policies. I am sure that the people of Wales appre- 752 ciate this. My own constituents certainly do. The investment grant policy is not only appreciated by me as a Member of Parliament and by my constituents; it is valued by the industrialists who are engaged in manufacturing industries in the Rhondda.
Reference was made to advance factories. One hon. Member referred to a number being empty. I am pleased to say that two advance factories being built in my constituency are already tenanted. I look forward to seeing a few more along the way.
There are other regional policies. I would like to see a good many more added to them, because I believe that our regional policy programme needs strengthening. I do not carry the whole House with me, but I believe that they can best be strengthened by giving public enterprise a more vital rôle to play in this direction.
My fear is that these regional policies, while they need strengthening, can actually be thwarted by the harsh application of the Selective Employment Tax. What is the point in creating about 200 new jobs by investment grants or advance factories if, at the same time, we lose the same number of jobs through the harsh application of the Selective Employment Tax?
I will give two examples, again referring to my own constituency. I hope that hon. Members will forgive me for constantly referring to it. The first example concerns a television rental firm which was taken over by a national organisation. The 120 girls working there went to work on the Monday to be told that their jobs would go on the Friday, because the firm was centralising its accounting departments in the London area. On this occasion, the Rhondda lost 120 jobs. I suggest that if the Selective Employment Tax was relaxed in development areas it is likely that this type of move would not take place. In fact, it might move in the opposite direction, which would at least have the virtue of being in line with our regional policies.
The second example concerns a firm called Rapid Repairs which is classed as a service industry. I visited this firm during the Summer Recess. One can imagine all kinds of rapid repairs, but these are not minor repairs. The work 753 carried on by this firm involves the complete renovation of garments which were unusable, even unwearable, and rendering them saleable and completely wearable. This firm employs over 80 skilled machinists and hand sewers They use the same kind of materials, and the same kind of highly skilled labour.
There is keen competition between these two firms, but as one is a service industry it pays S.E.T. This is unfair discrimination between two firms whose work can in many ways be regarded as identical. This repair firm works for firms in the Midlands, and, naturally, there is pressure on it to move up there. We are faced with the possibility of 80 experienced people moving out of the area, which will mean that what we gain on the roundabouts we are likely to lose on the swings.
My complaint against S.E.T. is that it is not selective enough. It does not select between essential and non-essential services. It does not select according to the needs of the development areas. I believe that it should operate in a way which will strengthen our regional policies, and not undermine or damage them.
§ 8.30 p.m.
§ Mr. Tom Boardman (Leicester, South-West)
The hon. Member for Rhondda, West (Mr. Alec Jones) has slightly spoilt the average. Until he spoke, the score was 16 to 1 against the Bill. I am not sure whether he makes it 16 to 2 or 16 to 1½. The hon. Member for South Ayrshire (Mr. Emrys Hughes), the other proponent of the Bill, supported it for reasons which he explained to the House. The hon. Member for Rhondda, West spoke about the needs of the development areas. My approach to the Bill is based on the needs of industry and of the economy as a whole.
During the short time that I have been a Member, I have seen imposed on industry burden after burden, and confusion upon confusion. We have had Corporation Tax, with its extra 2½ per cent., but earlier this afternoon the Chief Secretary did not refer to the burden of this tax when he talked about the advantages of devaluation. It is the net profit of a company after paying all tax, including Corporation Tax, which decides its rate of expansion, and it is this in turn which decides its competitiveness and its ability 754 to export. When making comparisons, the Chief Secretary has no right to exclude Corporation Tax.
The right hon. Gentleman referred to the costs of devaluation, and gave a table of them. He said that they were average figures. As such, they must suffer the fault of all averages in that they are not true of any one firm or any one company. The figures given by the right hon. Gentleman do not represent the true average costs of firms which export a substantial part of their products because usually they have a larger amount of imported content in their goods than applies to industry generally. An example of this is the leather industry. Imported raw materials account for over 50 per cent. of its price, and, therefore, the cost of devaluation is substantially more than the 2½ per cent. quoted earlier today.
One cost to which the Chief Secretary did not refer is the rate of interest. This is vital to the export industry, because there is a long gap between an order being received for goods, money being laid out to purchase raw materials, processing them, shipping goods, and finally receiving payment after long credit terms. The present high rate of interest is a heavy burden, and must be weighed against the benefits which the right hon. Gentleman claimed for devaluation.
I have referred to some of the burdens which have been placed on industry. There have been many more during the last few months which have added to the confusion and uncertainty from which industry has suffered. The hon. Member for Ashton-under-Lyne (Mr. Sheldon) referred to the confusion in industry. If the Government want industry to prosper, if they want exports to be increased, there must be certainty, and we must get rid of these costly burdens.
Like everyone else who has spoken from this side of the House, and many from the benches opposite, I think that the monstrous burden of S.E.T. should be removed. The hon. Member for Dearne Valley (Mr. Richard Wainwright) criticised the dismantling of part of it. We would obviously like to cut the whole thing down, but would prefer to cut off one rotten branch to leaving it on the tree, and if the Bill removes one piece of nastiness from the system we should be thankful for small mercies.
755 I want to deal more fully with the export rebate. I am no authority on G.A.T.T., but I query whether we take as much advantage as we could of those parts which permit subsidies of exports. I have seen a study made available to the Board of Trade of the incentives given to French export industries. This formidable document lists incentives which, presumably, do not infringe G.A.T.T. but which we do not have. An example is their price guarantee system, which means that, if a firm price is fixed, with over 12 months' delivery, the Government will guarantee the exporter against any increased costs, so that he can maintain the price. They have special low interest rates and their rates for discounting bills and many export credit facilities are about 3 per cent., and on terms far more favourable than those extended by E.C.G.D.
They also finance overseas activities and permit capital to be provided on favourable terms for building warehouses and consignment stocks, and so on, overseas. These things presumably do not infringe G.A.T.T., and I hope that the Financial Secretary will say whether he or the Board of Trade is considering the incentives of, say, France, Germany or Japan to see whether we could do more to assist exporters within the terms of G.A.T.T.—apart, of course, from the thing which is in everyone's mind, the switch to an added value tax.
The provisions for the reintroduction of the export rebate in Clause 3 leave future options open. Grave doubts have been cast on this and the view here of my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) will be shared by many. If we are to infringe G.A.T.T., let us not be mealymouthed about it, but make a bold decision to give real subsidies to exporters and say that we will. However as an exporting nation, we cannot afford to infringe G.A.T.T., although we could try to have it amended. But let us not have bits and pieces which may infringe G.A.T.T., antagonise other countries and harm our exports.
When the export rebate was introduced many thought—I was one—that it was a meagre and marginal aid, and wondered whether it would do much good. It has had a marginal effect. It would not, per- 756 haps, ever have been very beneficial, but, having once introduced it and got it accepted in the costing and pricing system of the exporters, it would be a tragedy if we removed it. Its withdrawal will cause considerable disruption and have grave practical consequences which the Government have never thought through.
I do not think that this Government understand what makes industry tick or how it works. Prices of a large proportion of our exports are fixed many months before goods are delivered. Samples, quotations and export salesmen go out; orders are taken for the season ahead in various trades, such as textiles and footwear. Prices may be fixed six to eight months ahead of delivery and eight to 12 months ahead of payment. These firms cannot juggle with their prices between the sampling and delivery period. Industry cannot be run like a sweetshop or supermarket by taking 1d. off or adding on overnight 2d. There must be continuity and certainty. The sudden switching off of the export levy, with manufacturers being told, in effect, "It may be put on again some time for certain commodities in certain markets", is extremely dangerous.
My right hon. Friend the Member for Enfield, West referred to written contracts. Many practices in business will come within this category because contracts are often made not in writing but by arrangements which do not amount to a contract, although, in honour, they are binding on manufacturers.
Tenders are sent out, as are samples and quotations. A sample order may be placed on the understanding that bulk deliveries will be made during the following month or season at the price at which the order has been placed. There may be no legal obligation on the exporter to keep firmly to that price, but if he raises it and departs from the practice which he has probably followed for many years, he will lose goodwill along with future exports.
I hope that, in Committee, the Financial Secretary will accept a minor Amendment to the provision dealing with applications for certificates. A certificate can be obtained only by an application made within one month after the passing of the Bill. There is uncertainty about various types of sale made before 757 19th November, where there is doubt whether delivery will be effected by 31st March.
In my constituency there is a very successful hosiery firm which exports 80 per cent. of its products in quite small quantities widely throughout the world. This firm is in considerable doubt about how many of its orders placed before 19th November will be fulfilled by 31st March. Delivery depends on a variety of things, including the customers call and availability of shipping space. As the Bill stands, this firm will have to fill in thousands of application forms for certificates to cover all goods ordered before 19th November that may not be delivered b y 31st March.
I hope that the Financial Secretary will give serious consideration in Committee to the Amendment I have in mind. I hope even more, in view of the almost unanimous opinion on both sides of the House condemning the Bill, that he, too, will decline to recommend the House to give it a Second Reading.
§ 8.45 p.m.
§ Mr. Eric S. Heffer (Liverpool, Walton)
I have been very interested in some of tile speeches which have been made by hon. Members opposite. The description of the Bill by the hon. Member for Barkston Ash (Mr. Alison) was in rather lurid terms. I had a feeling when 1 heard his speech that the Bill was regarded as of monumental importance. I have had another look at it and I cannot believe that it is of monumental importance or that it will fundamentally change our society and our economy. 1 think it a very small Bill and I do not understand why the hon. Member was sc worked up about it.
Possibly the Bill has some important arid necessary things in it, but it also contains some things which are rather regrettable. I am not very happy about the effect of Selective Employment Tax on development areas. Sometimes I winder whether we make the best use of the money provided for the development areas. I can see that there is an important case for bringing new industry in and for those new industries to take on new workers so as to create employment in the areas. Looking at some of the factories in my constituency, which is in a development area, I find it diffi- 758 cult to understand how by giving 30s. by way of Regional Employment Premium and another 7s. 6d. under the Selective Employment Tax rebate we can create one additional new job in a long-established industry, which in any case is not likely to expand in that way.
Probably it will be argued in any case that industry should be modernising and by use of new machinery cutting down on manpower, but it is important to create new jobs in development areas. That means that employment opportunities must be created through the establishment of new factories and the diversification of industry in the areas. I am not entirely against the Bill, but I think it should be a little more selective in its application.
I again raise the question of how we should use money which is poured into development areas. I am all in favour of maximum assistance being given to those areas. I made my first speech in this House on the need for support for the development areas, particularly in my region. Naturally, I want to see development there, but Merseyside needs a new spur from the M6 to the heart of Liverpool. Money is needed to make that road. Some of the money which is going in the wrong direction could be diverted towards building new roads in the area. It is important to develop the infrastructure of the area.
We need more manpower training. There was a debate on this subject yesterday and there are all sorts of plans for stepping up manpower training. When we consider the number being trained on Merseyside and the level of unemployment among unskilled and semiskilled workers there, we realise the measure of the sort of job which has to be done.
Thirdly, more diversified industries need to be brought in. I agree with my hon. Friend the Member for Rhondda, West (Mr. Alec Jones) that we need a development of publicly owned industries. Before hon. Members opposite start talking about sweeping nationalisation, I want to make it clear that there are many forms of public ownership. I want to see some new forms of public ownership develop which we have not yet begun to experiment with. I ask my right hon. Friends to consider the type of public ownership which has developed in Italy in an entirely new way, 759 in a sense in competition with, and based upon, the complete private ownership concept. It is a very important form of public ownership.
When I was chairman of the works department in Liverpool I learned that in a competitive society one must adopt competitive methods. The question for me is the ownership of industry, not the question of competition. I am all for competition, provided that we ensure that its benefits return to those who require them. This is how we should operate, rather than paying back the money as we do at present.
I will come quickly to a close, because I know that the hon. Member for Cambridge (Mr. Lane) has been sitting here all day waiting to speak and has much more right to speak than I have, because I have not been sitting here all day. I say again that I was fascinated by some of the arguments advanced by hon. Members opposite. I remember when export rebates were introduced. There was then a great howl from hon. Members opposite. They opposed the scheme, said that it would not help exports, and that it would be useless. Now that export rebates are being withdrawn, there is another great howl. Hon. Members opposite say that it is wrong to withdraw the rebates. We are being accused of inconsistency.
§ Mr. Heffer
No, because if I do I shall take time from the hon. Member for Cambridge.
The Government are being accused of inconsistency. I have myself gone in for a little of that type of accusation, but I ask hon. Members opposite to remember that they, too, are inconsistent. All Governments constantly have to experiment to find the best type of policy. If we are honest, we know that this is so. I was on the Liverpool City Council when the idea of the Selective Employment Tax was first mooted under the Conservative Government. I went home and worked out what it would mean to the city council. At the next council meeting I made a speech saying that if the scheme were introduced it would cost the city a great deal of money.
760 But the scheme was not then introduced. It was my Government who introduced it. No doubt it was the same civil servants who gave exactly the same advice. The Tories rejected it. We accepted it. It is about time we started developing policies of our own without necessarily taking the advice of civil servants. Governments of whatever political complexion can be inconsistent, particularly if they take the advice of civil servants.
I have nothing further to say. I hope that I have left sufficient time for the hon. Member for Cambridge to make the points he wishes to make.
§ 8.55 p.m.
§ Mr. David Lane (Cambridge)
I am grateful to the hon. Gentleman the Member for Liverpool, Walton (Mr. Heffer) for allowing me a little time. I should very much like to argue with him on another day about his interesting theory of Government by experimentation.
Today—it happens to be the second Thursday running when this has happened—we have before us a half-baked Bill receiving lukewarm support from the House. I have not heard every speech, but I have heard precious little praise for the Bill. I have only a minute or two to present the arguments I should like to put about it, and, in any case, many of them have been put by other hon. Members.
Clause 1 will bring to an end some of the Selective Employment Tax premiums. I doubt that any Tax in this century has been so widely condemned as this, and I hope that the Government will learn at least two lessons from their experience of it. First, now that the tax has been so emasculated, as it will be if the Bill is passed, let them abolish it completely and do what has been urged by several hon. Members today, notably the hon. Members for Heywood and Royton (Mr. Barnett) and for Walton, that is, take a completely fresh look at their development area policy. Second, let them learn the lesson that, when they are thinking again of some dramatic new tax, they must have more consultation beforehand than they did on the occasion of the Selective Employment Tax.
As regards Clause 2 and the ending of the export rebate, the crucial question is whether our exporters are yet 761 doing battle on level terms in world markets. I do not believe that they are. This point was well made by my hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman). Even if the Bib goes through and the rebate is ended, there will remain one practical step which the Government could take to help industry in the export drive. I refer to the fuel oil duty, which my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) mentioned earlier this afternoon. The Minister of Power told us a few days ago that the average effect of devaluation was to raise oil prices, that is, the prices of oil products, by an average of about 1d. per gallon.
This tax has always rankled with industry. I put to the Financial Secretary directly what I put in a supplementary question indirectly yesterday through his Board of Trade colleagues. Will he urge the Chancellor to consider giving at least some token encouragement to industry in the forthcoming Budget by reducing, if not abolishing, the fuel oil duty?
Apart from the individual points of criticism which I have, I criticise the Bill generally because it shows the Government once more making a mistake in psychology. Time and again, they give with one hand and take back with the other. Time and again, there is a gap between encouraging words and unhelpful deeds. Time and again, Ministers speak with different voices. My right hon. Friend the Leader of the Opposition drew attention to the latest example this afternoon, the Chancellor talking rightly and bravely of devaluation as a defeat, and the Leader of the House talking about another leap forward in Socialism.
The trouble is that the country is saddled with a "half-cock" Government. They tell us, as the Prime Minister did in November, that our exporters are offered great opportunities as a result of devaluation, while at the same time they announce the cancellation of the export rebate. So they went off at half-cock. The same thing has happened in the last few weeks. There was a great build-up to the statement of economy measures in the middle of January, but even then we had less than half the picture, and we have to wait till the middle of March for the rest. Again, the Government have gene off at half-cock.
762 Until the Government think through their economic policies consistently, without prejudice and without worrying too much about opinion on the benches behind them, the country will never achieve the economic recovery of which it is capable.
§ 9.0 p.m.
§ Mr. Terence L. Higgins (Worthing)
The debate has been very interesting. I think that I have heard all but about 10 minutes and there is not the slightest doubt that one of the outstanding features has been the extraordinary lack of support for the Bill on both sides of the House. I have kept a running tally, and I make the score about 17¾ to l¾. Apart from one or two hon. Members opposite, all speakers have effectively denounced the Bill. This is very significant.
The debate has had its lighter moments. The hon. Member for Heywood and Royton (Mr. Barnett), making a powerful speech early in the debate, was interrupted by the Chief Secretary, who was, I think, becoming a little distressed that his hon. Friend could find no reason to support the Bill. The right hon. Gentleman asked what his hon. Friend thought about the Title, and the hon. Member for Heywood and Royton did not like that very much, either. On reflection, I am not clear why this should be called a Revenue Bill. I am clear as to why it is called a No. 2 Bill, but what it has to do with revenue completely eludes me.
My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) said that it is essentially two Bills in one, and this may have explained the misunderstanding in some quarters as to our attitude to it. I think that my right hon. Friend made abundantly clear the basis on which we and many hon. Members opposite feel that it should be opposed, and on which we believe that our reasoned Amendment should be supported.
I should stress that not only has this been an interesting debate but that, contrary to what the hon. Member for Liverpool, Walton (Mr. Heifer) suggested, it is important. The Financial Secretary to the Treasury and I were somewhat appalled in the Standing Committee on the National Loans Bill earlier today by the size of the National Debt sums we were discussing, which I think were about £23,000 million. We are now discussing only £200 million, but it is taxpayers' 763 money, and a large amount of it. To put it in perspective, it is equivalent to about 9d. on the standard rate of Income Tax or 6 per cent. on Corporation Tax. The amounts involved are important, and the House has been right to give the Bill due consideration.
§ Mr. Higgins
That was among the things the hon. Gentleman said, but the overall impression he created was that it was not something about which we should be too concerned. But we should be concerned about it very much, largely because of the point made by my hon. Friend the Member for Barkston Ash (Mr. Alison) that it is part of an overall policy leading to the disintegration of British industry and distorting the use of our resources.
I now turn to what I can only describe as the bizarre comedy surrounding the transformation of the Government's Revenue Bill, introduced before Christmas, into the Revenue No. 2 Bill. The House is entitled to an explanation of how the Bill came to be changed. It was a situation in which the Government, and, by implication, the country have been held up to ridicule in many ways. What happened first was that we were told that the export rebate would be abolished. It was said—this is reported in column 952 of HANSARD of 20th November—that this would happen… since it will no longer be necessary.Later, when we debated it in the House, we found that the Financial Secretary was saying that we should go completely into reverse; instead of the original arrangement we should have an additional Clause which would give the Government power to reintroduce the export rebate, if necessary by Order, because otherwise we might in some way stimulate protectionist elements overseas.
I shall read two quotations from the hon. Gentleman's speech in the debate on the Ways and Means Resolution on 31st January, when he said:… we thought that the clear intention to do so"—to abolish the export rebate—from next March would discourage protectionist pressures from arising in various 764 countries, including the United States of America."—[OFFICIAL REPORT, 31st January, 1968; Vol. 757, c. 1490.]We are entitled to know why the Financial Secretary thinks that if we retain the export rebate this would in some way stimulate protectionist lobbies in the United States when he does not think that devaluation, which he argues is a much bigger incentive for exports, will stimulate protectionist lobbies. What makes him suppose that these protectionist lobbies in the United States or anywhere else need stimulating? They are normally active and to suppose that they would take particular consideration of this change in our policy is overstating the case too far.
Why did the Government decide to cancel the export rebate in the first place? If we disregard the protectionist argument for a moment, it would seem clear that it was originally done because of pressure from abroad—through the loans made to cover devaluation and the agreements which were presumably arrived at with other countries that they would not follow devaluation. Apparently, it was all part of some package deal. Is this true? The House has never been told. If it is true, was it right to put the weight of devaluation not on exporters who might reasonably have been prepared to make the effort but to throw the balance of the weight on to import costs and the cost of living in this country?
Who was likely to take any such action to bring pressure on us? I would have thought that it was not the Common Market countries because, as has been pointed out, they themselves have turned towards a T.V.A., which has much the same effect as our rebate. It has emerged in the course of our discussions in the House that it was due, apparently, to the Prime Minister's visit to Washington. Indeed, the matter would not have come before the House at all, apparently, if it had not been for a question by my right hon. Friend the Leader of the Opposition on 30th January.
My right hon. Friend asked the Prime Minister:What attitude does the Prime Minister propose to take with the President towards the imposition of export incentives in the United States which will affect our trade?765 The Prime Minister replied:I think that the biggest cause for anxiety, as I think that the Leader of the Opposition will agree, is the proposal about border taxes coupled with export rebates.… The right lion. Gentleman will understand that, if measures of this kind are taken which might have a very bad effect on spiralling world trade downwards, we should have to reserve our position entirely about the withdrawal of the export rebate.—[OFFICIAL REPORT, 30th January, 1968; Vol. 757, c. 1092.]Apparently, then, the Bill was introduced with the object of giving, in some way, the Prime Minister a bargaining counter in Washington. Could anything be more ridiculous?
What we have effectively is a Clause in the Bill which is supposed to give the Government power to reverse their original decision. This was surely unnecessary. If they thought this power necessary at all, one might have thought that it would have been in the Bill as originally drafted but, during the debate on the Ways and Means Resolution, the Financial Secretary to the Treasury, when asked why it was not in the Bill originally, replied:The position is perfectly clear. When the first Bill was proposed, no one envisaged any possibility that it would be in our interest to bring back the … rebate."—[OFFICIAL REPORT, 31st January, 1968; Vol. 757, c. 1489.]How myopic can one get? This is an extraordinary situation. In any case, surely the right approach, if the Prime Minister felt there was a point here which he might reasonably discuss with the President of the United States, was simply to delay the passage of the Bill for a week or so, go to Washington and, if necessary, say to the President, "If we cannot come to some agreement we will not pass the Bill through as we had originally intended."
This is not the right way to go about negotiating with a major ally which provides the other of the two key currencies on which the entire world trade must rely, because, if the Prime Minister were to go to Washington with this Bill, including Clause 3, and say to the President, "If we do not come to some agreement we shall operate Clause 3", it would not be surprising if the President replied, "Have you not noticed that people abroad read what you say at home? Your Financial Secretary has given a clear assurance that in no circumstances 766 would you dream of using Clause 3". This can be described only as a charade.
However, it has one important implication for the future. It means that the House is being asked to pass into legislation a Clause, Clause 3, which, on the Government's submission—although this is highly debateable—is in some elements a protectionist measure which we are threatening to reintroduce. If this is so, is it not very undesirable that it should go on the Statute Book, because anyone wanting in future to discriminate against us will be able to point to the fact that we ourselves have this kind of discriminatory legislation on our Statute Book remaining there long after the overall debate today and the discussion of this issue in particular are forgotten?
I want to put a specific question to the Financial Secretary at an early stage of my speech so that he can have time to make sure that we get an answer. Contrary to any indication which he gave when we debated the Ways and Means Resolution, the Clause provides for the export rebate to be given in respect of specific territories. There is some dispute about whether the original export rebate was contrary to the letter of G.A.T.T., or contrary to the spirit of G.A.T.T. However, if the Government take the view that it was not contrary to either, it is ridiculous for them now to introduce a measure which is contrary notonly to the spirit but to the letter of G.A.T.T. I hope that we shall have h clear statement from the Financial Secretary as to whether he believes that Clause 3 as it stands is or is not contrary to both the spirit and the letter of the General Agreement on Tariffs and Trade
I turn now to the broader issue raised by the Bill. It is probably the first of a number of measures designed to implement the cuts announced over the last three months or so. Presumably, we shall have further measures on prescription charges and on school milk, and so on. In that general context there are one or two points which need to be made.
The first, which was stressed by my hon. Friend the Member for Ormskirk (Sir D. Glover), is that it is quite apparent that the Government went into devaluation without having any contingency plan and without having any idea of what measures would be necessary to make devaluation effective. As a result, we had 767 the Prime Minister's statement before Christmas saying that there was to be a grand survey, although carried out in difficult conditions, and that real priorities were to be fundamentally reassessed and so on. Instead, when the package was finally announced, we got a shaving of a little off each Ministry, designed, not fundamentally to reassess priorities, but to ensure that Ministerial resignations were kept to a minimum.
Hon. Members opposite, particularly the Prime Minister, have replied to that by asking what the Opposition would do. In the context of these cuts it is right to point out that the list of things which we would have done, mentioned by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) in the debate on the cuts, both embodied a better sense of priorities and were larger in amount than the cuts which the Government themselves propose. I hope that in these debates on the successive measures we shall not be told that we are not backing up the Government in a crisis situation. They created the crisis situation and the solutions which we have put forward so far are very much better and more effective, certainly better in the long run, than those which they have put forward.
I have a question of detail about the arithmetic of the cuts. He will recall that when the original cuts backing up devaluation were announced, when we first heard of it, we were told that there were to be cuts of £400 million. The White Paper which then followed did not give the figures for that £400 million. Instead it listed some additional cuts in the various columns of the Appendix included in the White Paper.
In answer to Questions since then it has emerged that the total amount of the cuts announced before Christmas has somehow become reduced to £371 million. If we are to appraise the Bill, we would like to know to where the other £29 million on cuts have apparently disappeared. It may be that the hon. Member for Walton might say that £29 million is not very significant, but we need to get the arithmetic right on this point.
Let me now turn to the S.E.T. premium. The recurrent theme throughout our debate has been that we really must have a major reappraisal of the Govern- 768 ment's regional policy. The Government have not got a credible policy. Not only on this side of the House, but opposite, nearly every speech has said that the regional policy that the Government have adopted is ineffective—I should have said inefficient, although I would suggest that it is also ineffective—and the basis on which it is being operated is inefficient in the sense that the cost is far greater than the possible gains from it.
I do not want to recount the various points which have been made on the Selective Employment Tax. We said quite clearly in our reasoned Amendment that we believe that it is something of an improvement to eliminate the premium outside the development districts. I do not think, as the hon. Member for Colne Valley (Mr. Richard Wainwright) was suggesting, it is something like dismantling the Albert Memorial. It is a movement in the right direction and we hope that we will ultimately reach the position where the Selective Employment Tax and its anomalies have been eliminated. The fact of the matter is that after 1st April the figures will be quite absurd.
The Government will be collecting £1,100 million and refunding £800 million and the premium will only be £25 million. Something like 70 per cent. of the tax will be refunded and the premiums will only be something like 2½ per cent. of the total yield. That is a very strange way in which to set about the creation of a reasonable fiscal system.
There is another point which I want to put to the Financial Secretary and it arises over the relationship between the S.E.T. regional premium and the regional employment premium. These now go to the individual manufacturer in development districts. I hope that we shall hear, in relation to the Bill, why we need to have the continued split between these two payments. There are two quite separate machanisms for paying out benefits to a number of manufacturing firms which are intrinsically, as far as I can ascertain, the same.
It is true that in development districts we shall have some tax which is collected and not refunded, some which is collected and refunded and some which is refunded with a premium-plus R.E.P. I am not clear why we should continue to have the double administration of these two individual taxes. In that connection, 769 we on this side of the House have said that we think that the whole thing is a nonsense, but if we are to have it, and if they are to be perpetuated by the Government, there may well be a case for simplifying the administration.
A very important point raised by hon. Members was the actual cost of the Government's present regional policies. My right hon. Friend the Member for Enfield, West referred to this in his opening remarks and my hon. Friend the Member for Barkston Ash actually spelt the matter out in considerably greater detail.
The conclusion was that the Government, in answer to Parliamentary Questions, said that they thought that perhaps over seven or more years their objective would be to narrow the unemployment differential between the development districts and other districts by 50 per cent. and this would, therefore, reduce the level of unemployment in the development districts. My hon. Friend the Member for Barkston Ash pointed out that this meant that they hoped to create another 40,000 jobs in the development districts. He then related this to the question of costs and pointed out that even on the regional employment premium and the Selective Employment Tax it looked as though the cost would be about £200 million a year. If that were so, it would mean that one was paying about £5,000 a year to create each job in these areas.
That is an extraordinary state of affairs, and I am not surprised that the hon. Member for Woolwich, East (Mr. Mayhew) took up this point very strongly. It is not that we or hon. Members opposite disagree with the Government's objective in regional policy; it is that we believe that the way in which they are going about the matter is inefficient and, as has been pointed out, the extent of the expenditure is disproportionate to the benefits which the Government are obtaining from their policies.
This is surely a severe indictment and, as has been said repeatedly, the effect of the Bill will be to lead to a greater discrimination in favour of development districts and an adverse effect on the grey areas, in particular, which surround the development districts. This has beep a major point in the debate.
I turn in greater detail to the more technical aspects of the proposed can 770 cellation of the export rebate in Clause 2. The first point which I want to stress is that the original concept of the export rebate was that it would rebate certain indirect taxes, principally fuel tax, but also vehicle excise duty and the Purchase Tax incurred in connection with the manufacture of goods exported This was the objective of the export rebate. If this was the original justification for it, I am not clear why hon. Members opposite should suddenly change their ground completely and say that we have to get rid of it because it is a protectionist measure and that if we do not it will stimulate protectionist elements abroad. We need a clear answer on this point.
I should like to reply to a point made by the hon. Member for Heywood and Royton. He suggested that there was some difference between my right hon. Friend the Member for Barnet (Mr. Maudling) and myself. If the hon. Gentleman considers the point, he will understand why there is no difference. I stressed in the debate on the Ways and Means Resolution how important the export rebate might be to turnover for an individual company or as profit for an individual company, whereas my right hon. Friend stressed the fact that he did not think that it was likely to have a very significant effect on the position of the country as a whole and its balance of payments.
§ Mr. Barnett rose—
§ Mr. Higgins
Before the hon. Gentleman intervenes, perhaps I can say in shorthand that he is stressing only the costs side. The reflation must come from the demand situations overseas.
§ Mr. Barnett
The hon. Gentleman is trying hard. He can try as tortuously as he likes, but on 24th November, 1964, the right hon. Member for Barnet (Mr. Maudling) said:On the export incentive, we doubt whether it will be adequate to work …"—[OFFICIAL. REPORT, 24th November, 1964; Vol. 702, c. 1114.]
§ Mr. Higgins
That is precisely my point. My right hon. Friend was looking at the matter in a global way rather than from the point of view of the individual manufacturer. There is a difference, because we must consider demand situations overseas.
771 That brings me to the next point, which was raised by the Chief Secretary in his opening speech. It is whether the effect of devaluation will be offset substantially for individual exporters by the other steps taken by the Government in the course of their post-devaluation measures.
It was common ground between us that the difference was 16.7 per cent. in terms of overseas currencies, and that S.E.T. and the export rebate would each reduce it by about 2 per cent. But the right hon. Gentleman's estimate of the effect on raw material prices was substantially less than the figure which has been quoted in other journals, which have suggested that the increase in raw material prices and in some manufactures used for export might put on another 3 per cent. On top of that, we must not overlook that the fuel oil tax remains in force and that fuel costs may rise. In addition, apparently we shall have a high Bank Rate for some time. When all the factors have been netted off, the advantages of devaluation for exporters are substantially reduced.
If someone says, "I will still go out and make bigger exports", the effect of the Government's proposals is to tax those export prices even higher. That is the essence of our Amendment. After all these factors are taken into account and a company makes a profit on its exports, the Government will increase the Corporation Tax on that company. Clearly, that goes against the overall objective of the Government, which is to increase rather than decrease our exports.
That is the main point which I want to make about the export rebate. In my final remarks, I want to take up the overall point made by a number of hon. Members. It is vitally important that we should move towards greater trade liberalisation. My right hon. Friend the Member for Enfield, West referred to the recent article in The Times by Mr. Peter Jay. Mr. Jay was quite right to stress that, in many ways, the debate going on internationally is between the United States and the Common Market countries, and that the effect of our export rebate, if anything, is at best peripheral.
If that is so, we ought not to be concerned about an export rebate in the 772 general protectionist context, because it is debatable whether in any way it can be described as a protectionist measure. But we need desperately to move towards greater trade liberalisation, and it is not right that we should go for a movement which will result effectively in beggar-my-neighbour policies.
It may be that the time is coming for a major reappraisal of the whole G.A.T.T. concept. It may be particularly so in the context of the conference now taking place in New Delhi, where the subject of reverse preferences was mentioned by the President of the Board of Trade. It may be that we shall have to look at it in a general tariff context and, in particular, reducing our own tariffs unilaterally in cases where a large monopoly element may exist in our own economy due to economies in scale not exhausted within our own domestic market. This is the overall global framework.
Coming to a narrower national point, the fact is that the Government have still not fully appreciated that, if they are to get out of our present economic difficultties and if devaluation is to be made effective, they must regard profits and investments as good. I do not think that the measures that they have taken since devaluation have done anything significant to encourage a greater activity by industry or to maintain a higher level of investment. Instead of that, we have had a series of cuts and a threatened cut in consumption which will still lead to a considerable increase in Government expenditure.
The two measures which we are de- bating and the 2½ per cent. Corporation Tax together will raise the extra burden in taxation since October, 1964, to about £1,300 million. Well over half of that falls directly on industry. The Prime Minister, in a recent statement, said that if wage increases were greater than the norm he would tax away the difference. As far as we can ascertain, looking over recent periods of Government policy, this would have meant about 1s. 7d. to 2s. 2d. in the £ on the standard rate of Income Tax each year since this Government have been in office. This kind of tax increase cannot conceivably lead to an economic climate in which the Government will ensure that industry can make devaluation work.
773 Devaluation, with its £450 million in cuts and taxes, has had an effect on industry, because three-fifths of that burden falls directly on industry. Therefore, looking at the Bill, I join with my right hon. Friend in saying that we think the movement on the Selective Employment Tax is right in present circumstances. We hope that it will go further in the future. However, we do not believe that the part of the Bill concerned with the export rebate, given the economic climate and the balance of the Government's measures since devaluation, is one which we ought to support.
§ 9.31 p.m.
§ The Financial Secretary to the Treasury (Mr. Harold Lever)
I hope I will be forgiven if I remind the House—this is not a criticism of hon. and right hon. Members who have spoken from either side—that the debate on this Bill concerns two measures brought in by the Government as a result of the position following upon devaluation of the £. One is to bring to an end outside the development areas the additional payment to manufacturing industry relating to the Selective Employment Tax. The other is to end the export rebate, subject to qualifications which I shall deal with in detail. However, tie debate has ranged over a much wider area. I cannot answer all the questions raised on the broad points of economic policy, but I will do my best to answer those which were more directly relevant to the Bill.
I always find the right hon. Gentleman the Member for Enfield, West (Mr. Iain Macleod) stimulating in one special particular. He rarely speaks on these occasions without some Old Testament quotation—usually accurate. On this occasion he referred to the advice tendered by the Opposition in relation to the Selective Employment Tax as in the nature of a stone which had been rejected by the builder and now placed, or about to be placed, as the cornerstone. He criticised the Selective Employment Tax and our regional policy in general.
Unhappily, I am not able, without preparation, to quote from the Testament with the reliability of the right hon. Gentleman; but as he spoke I was reminded of the saying somewhere in Ecclesiastes that "time and chance happeneth to us all". I recalled a debate some years ago in which regional policy 774 was being discussed when he was a member of the Conservative Cabinet. I was taking the line he took today of proposing measures more on lines of the infrastructure argument for the regions and he was proposing and defending tax concessions on the lines of depreciation, if I remember rightly, on behalf of the Conservative Government. These measures had precisely the same defect that our measures have—I concede this—that they fall upon the just and the unjust alike. They are unselective; they do not guarantee specifically to operate only in the areas where they will create employment. That is one of the difficulties whenever one is trying to promote an economic policy. The right hon. Gentleman made an eloquent defence. If I possessed the Prime Minister's elephantine memory for columns and dates, I could have used his speech in defence of the Government's policy. At all events, he has now come to the point of view which I then propounded.
If I might again try my hand at a quotation, there is more "joy in Heaven over one sinner that repenteth" than ten righteous men.—[HON. MEMBERS: "No."] I have got it wrong, have I? I understood the quotation was a proportion of one repentant sinner to ten righteous men. [An HON. MEMBER: "Ninety-nine."] I can only hope that those proportions do not prevail in the Division Lobby, but that a rather more mundane assessment of numbers will continue as before.
I shall return to the question of regional policy, but I feel that as the export rebate question is the central part of this Bill, and has aroused the most criticism I ought, first, to clear up the points that were raised about it.
It is said that there is great unanimity in criticism of the Government. The debate ranged very widely, and since hon. Members on both sides have taken advantage of the occasion to ventilate their own areas of grievance with Government policies, it is not surprising that this gives the impression that the Bill is in some way not supported adequately on either side of the House. This is a misconception. There are divided views about both aspects of the Bill, as I will show.
The right hon. Member for Enfield, West opposes the abolition of the export 775 rebate. His hon. Friend the Member for Horsham (Mr. Hordern), who often speaks from the Front Bench, rejoices at the abolition of it.
§ Mr. Hordern
I am sure the Minister does not wish to misquote me. I have never been in favour of an export rebate, and I was proposing an added value tax to take its place.
§ Mr. Lever
For whatever reasons, and no doubt he regards them as good and sufficient, he is glad, and expressed himself candidly as being glad, that the export rebate is being brought to an end. The right hon. Gentleman is sorry. His hon. Friend the Member for Horsham is glad. I am not sure whether the hon. Member for Worthing (Mr. Higgins) is sorry or glad, or a mixture of the two. At all events, as most of his opinions on the subject consisted of expressing my opinions, some of them accurately, and some of them invented—I am sure with no dishonesty of intention, but by a misconception of what my position is—I am not sure whether he is glad or sorry that we are abolishing the export rebate.
Equally, we are taking power to bring back the export rebate should circumstances warrant it, and I shall elaborate on this. This seems to cause a great deal of amusement among right hon. and hon. Gentlemen opposite, but I shall explain the reason for it. Here again there is by no means unanimity on this question. Those who are sorry to see it go are glad that we have taken the power to bring it back. The extraordinary thing is that instead of mitigating the right hon. Gentleman's grievance, it inflames it. On the other hand, although the possibility might amuse the House that one can be sorry to see the export rebate go, but glad to see that the power to bring it back exists, this is the position taken up by the C.B.I. It would prefer—I hope that I am summarising its position fairly—to continue the export rebate, but, on the other hand, if we feel obliged to bring it to an end, the C.B.I. would like to know that we have the power, in appropriate circumstances, to bring it back.
I must state our position clearly on the question of the export rebate. It is simpler than the hon. Member for Worthing supposed. We regarded, and we still regard, the export rebate as being lawful 776 and compatible with our G.A.T.T. obligations. It was a rebate calculated on a mathematical average related to hydrocarbon oil and similar taxes borne by industry as a whole, and by this rebate these taxes were proportionately abated for export industry. It was not possible, and it is not possible, to measure how much tax on hydrocarbon oil or petrol is paid by lorries used for the export trade, because these lorries do not exclusively concern themselves with the export trade, but continue the general work of firms. What we did was get a mathematical average and propound it in the form of a rebate which we believed to be internationally acceptable and lawful under G.A.T.T. We also thought that it would be very useful to export industries.
But, of course, as my hon. Friend the Member for Heywood and Royton (Mr. Barnett) rightly said, this export rebate was not received with any enthusiasm or confidence by right hon. Gentlemen opposite. I make no complaint about their criticisms then. I do not even complain that they expressed publicly and repeatedly the view that it was of doubtful legality. It was certainly not long, however, before other countries were echoing the criticism which had been first voiced by right hon. Members on the benches of this House about the legality of the rebate. I make no complaint about that. If this House did not permit the candid expression of opinion by leaders of the Opposition on questions like this, we might as well pack up the House. As I say, I do not complain, but it is no good the right hon. Gentleman expressing surprise today that we are abandoning the rebate and that we are taking into account the pressure which we have had from other countries which did not regard it as undoubtedly lawful within G.A.T.T.
We keep talking blithely about "legal" and "lawful" considerations with regard to the export rebate under G.A.T.T. Unhappily, there is no mechanism for litigating questions like this. It is not merely a justiciable question but a political one—
§ Mr. Higgins indicated dissent.
§ Mr. Lever
It is all very well the hon. Member laughing at that, but we thought that it was lawful, and we were advised that it was lawful, under G.A.T.T. Other 777 countries which did not approve of or like this rebate complained that it was not lawful under G.A.T.T.
There is no international court of justice to whom such disputes can be submitted. It is a matter of argument, discussion and negotiation to try to get agreement. So long as we had a heavy balance of payments problem and were fighting hard to maintain the $2.80 parity, we received a certain amount of leniency in the argument and discussion with other countries on this, even though they had strong feelings. It was possible for us to sustain the argument for the export rebate without producing retaliation by those countries, but, when devaluation occurred, this position was no longer tenable, and we judged—I think rightly—that, had we insisted after devaluation on our position over the rebate, we might very well have provoked retaliation which would have done our trade more harm than the good which the export rebate was doing.
We therefore decided that we would abolish the rebate, and we so announced. We brought in the Revenue (No. 1) Bill. The hon. Member for Worthing, the right hon. Member for Enfield, West and many others were curious about why we called it the Revenue Bill. I must confess that not a great deal of artistic initiative is devoted in the Treasury to the titling of Bills. On the other hand, the Bill does deal with the Revenue. We could not call it the Finance Bill, since that title is reserved for a very special piece of legislation, so we called it the Revenue Bill. When we decided to amend the Bill—I have told the House why we decided to do so—we called the second piece of legislation the Revenue (No. 2) Bill.
The No. 1 Bill was simply the present Bill but without the power to restore, by Treasury Order, the export rebate. That is the only difference. The question is, why did we not suppose it desirable in the first instance to have that power but believed it desirable later? In the first instance, we had no reason to do other than abolish the export rebate simpliciter, and that we proposed to do.
Immediately after that, there arose in various quarters, for various considerations, a great deal of discussion as to the possibilities, in different forms, of restricting international trade, and we 778 thought it right, therefore, while abolishing it—in view of the great deal of discussion which had fairly suddenly arisen on restrictionism and other measures to be taken—to amend the proposal so as to include a power to bring back this rebate by Order, which was perfectly sensible and reasonable.
Of course, we did not do this to arm the Prime Minister in Washington—it was not necessary for that purpose—but as a simple, common sense measure to enable the Government to restore the export rebate if the situation made that desirable. I wish to make it clear, however, that the Government's policy of abolishing the export rebate stood and stands and that the inclusion of this Clause is not an expression of the Government's intention to bring back the rebate. It is a reserve power.
The Government feel it wise, having regard to the considerable discussions that have taken place in various parts of the world of a protectionist nature, to take this step. I do not believe that doing so does any harm or that it is a senseless threat or indeed any threat. It is an exercise of common sense and foresight to take a power which discussions, which have recently taken place, make it seem a power we may be reluctantly forced to use. We have no intention of using it if it can at all be avoided. We will bring back the export rebate only in circumstances of a considerable wave of restrictionism, which we would deplore and which we would certainly not initiate by the bringing back of the rebate.
§ Sir D. Glover
I appreciate that the Financial Secretary is trying to be fair with the House. Is not the logic of what he is saying that it is unwise that Clause 3 should be in the Bill? It was necessary under pressure at 2.80 dollars to the £, and it was then considered legitimate, but now, under the less pressure of 2.40 dollars to the £, we do not consider it legitimate? Is he not worried that we will, by Clause 3, be telling the world that we still think that the same situation may occur again? Would it not be wiser to delete the Clause?
§ Mr. Lever
It has never been our view that the export rebate was unlawful. We are entitled to bring it in if the circumstances warrant it. We have abolished it because friction was undoubtedly 779 coming about by reason of the exercise of what we regarded as a perfectly lawful export rebate. It is not always a question of exercising all the things that one has power to do. We decided, having regard to devaluation and its consequences, that it would not be wise and in the British interest to continue it. I do not acknowledge that it was unlawful. One of my hon. Friends asked why, if it was lawful before, it is not lawful now. The answer is that it is lawful now. We would not take power to bring it back if it were not lawful under G.A.T.T.
§ Mr. Iain Macleod
The hon. Gentleman was asked more than once a specific point. Leaving aside the question of the legality of the rebate—I accept what he says—for the purpose of argument, is it the legal advice he has received to the effect that Clause 3—which enables the export rebate to be introduced in specific instances and not across the board—is lawful?
§ Mr. Lever
If the right hon. Gentleman will allow me to pursue my argument he will find that I will answer in detail the three specific questions which he asked, including that one. I was giving the Government's policy about the bringing in of the rebate, the intention to abolish it and the intention to have a reserve power. All these complaints of our change of attitude, therefore, can be seen to be beside the point.
Before coming to the detailed questions I have been asked—and I assure hon. Gentlemen opposite that I will not evade them—I must comment on the right hon. Gentleman's case against the Measure. There was no enthusiasm from the right hon. Gentleman and his colleagues when we introduced it, although they complain bitterly when we wish to take it away. I could not help wondering when the hon. Member for Worthing talked about the enthusiasm or view—about how it would be introduced to benefit the export trade—that had been expressed by his right hon. Friend the Member for Barnet (Mr. Maudling). He said that the view that he had expressed was a global one and did not relate to individual firms. It was not clear from what the hon. Member for Worthing said whether his right hon. Friend thought that it would be of global advantage and individual disadvantage or the reverse.
§ Mr. Higgins
The distinction is clear; between whether the rebate is likely to affect an individual firm's costs and the position that might be created from the point of view of our balance of payments. Perhaps the hon. Gentleman might be able to clarify the point if I ask him a question. To what extent does he think that the expenditure of £100 million on the export rebate has improved our balance of payments?
§ Mr. Lever
I am not able off the cuff to make a complex estimate of that kind. I am not even sure that, given ample time, one could make it. I would only say that the right hon. Gentleman seems to have reserved his enthusiasm for our Measures exclusively to those points in time when we are repealing them. He is rather like one of those difficult ladies who reject when the man is in love and only respond when the passion has evaporated. Then the right hon. Gentleman says that I am petulant. If he sees the circumstances in which this unusual situation was brought about, he might have a little more sympathy for me.
As to the right hon. Gentleman's specific questions, which are very relevant. I shall deal with the most important first. It is the one he has repeated and which has been repeated by the hon. Member for Worthing. Is the power selectively to reimpose the export rebate lawful under the G.A.T.T.? There are two answers to that question and I hope that no one will interrupt me until I have made them both. The first answer is that it is not possible to debate hypothetically whether an Order we have not yet laid before the House is lawful or not. This cannot be a very profitable debate. The second answer, which may satisfy the right hon. Gentleman and the hon. Gentleman more than the first, is that it is entirely lawful under this provision.
It is possible, of course, that it could be unlawfully exercised. [Laughter.] Hon. Members are unnecessarily amused. If they had waited a moment they would have heard me add that it is, of course, also possible that it may lawfully be exercised selectively to bring back the export rebate, which is the heart of this point. What I assert is that there is nothing unlawful in the Clause which gives us the power selectively to reimpose the export rebate when there are 781 many circumstances in which the selective reimposition would be entirely lawful even under Clause 1 of the G.A.T.T.
The right hon. Gentleman was puzzled. I give one very obvious example. The reimposition selectively in relation to countries which are not themselves subscribers to the G.A.T.T. would of course be lawful under the rules of the G.A.T.T. I could give many others. The taking of this selective power is certainly not evidence of any intention to be in breach of the G.A.T.T. It is not the Government's intention in any circumstances to bring back the export rebate selectively in a manner which would be a breach of our G.A.T.T. obligations. I can assure the House that there is no intention on our part to do that.
The next question is: will we extend the benefit given to written contracts entered into before devaluation to irrevocable bids and tenders? I should like to make clear to the House that the only considerations we have had in dealing with this matter are the necessity for proof of the contract having been entered into before the devaluation date and practicability in administering public funds. That is to say, we have to have some means whereby we can check whether or not a contract qualifies.
We cannot have an exclusively oral contract decided upon in this way. The Board of Trade is not equipped to conduct a series of viva voce examinations with innumerable exporters to decide who is to be believed when they allege that they entered an oral contract and who is not to be believed. So far as the Government are concerned, it is our earnest wish to include as far as we can within the rules of practicability and proof required to protect public funds, all contracts whether oral or written where there is written evidence of the contract in existence before devaluation date. We have not yet found a solution to a widening of the Clause that would give complete effect to our wishes in this regard. We shall continue independently to seek such a solution. It is gratifying that the right hon. Gentleman will attempt such a solution. We shall certainly look on any Amendment put forward and will not turn them aside too lightly.
The same point goes to irrevocable tenders as to oral agreements. The ques- 782 tion of contracts which are in honour binding on a British firm will be looked at too, because we are not anxious to quibble or make pedantic objections to exclude these contracts. I hope that this answers the questions relating to export rebate to the satisfaction of the right hon. Gentleman.
I ought to make one little point about the taking of the power in Clause 3 to bring the rebate back. This power was included in the Ways and Means Resolution which we debated the other night. It did not at that time arouse any kind of criticism or hostility. I cannot help thinking that the anger is a later development on more mature consideration in preparation for this debate rather than a spontaneous reaction.
§ Mr. Lever
The Ways and Means Resolution contained express provision for the selective reimposition of the export rebate. No problem was raised on that.
I want to deal as briefly as I can with the regional question and the effect upon the development areas, the grey areas, and the rest of the country of our proposal to withdraw the additional payment except in the development areas. Briefly, the position that I am invited to take by my hon. Friend the Member for Lancaster (Mr. Henig) is that I should denounce the Government's regional policy, call it a great and complete failure, and then make alternative suggestions. Any temptations that I have to join—
§ Mr. Lever
Any temptations that I have to join the frolicsome Members on the third bench behind me—a position I used to occupy with much enjoyment—must be resisted, but I recognise that those temptations could be gratified very readily if I were to adopt my hon. Friend's suggestion. I cannot do that. This is not a debate on regional policy. The Government are faced with an intractable problem in the regions. It has faced not only this Government. The Conservative Government were faced with just the same problem.
783 There are various ways of dealing with these problems. None of them is completely satisfactory. There is not one method which is not open to objection when it is subjected to perfectionist scrutiny in the House. We can all have very good debating larks about the policy which has been adopted. No doubt, if suggestions made by my hon. Friends in regard to infrastructure had been adopted, we should have had many criticisms of those. My hon. Friend the Member for Liverpool, Walton (Mr. Heller) suggested building a spur from the M6 into the heart of Liverpool, for instance.
The answer is that the Government are endeavouring to assist the regions and to improve employment in the regions. I have great sympathy with those of my hon. Friends—there were many of them—who complained about the grey areas. I beg them to believe that the difficulties of the grey areas do not and cannot spring from the Government's regional policy. [HON. MEMBERS: "Oh."] Hon. Members opposite cannot have it both ways. On the one hand, the Government's regional policy is denounced as totally ineffective in creating employment in the regions. On the other hand, it is said to cause massive unemployment in all the grey areas.
The answer is that the modest improvement in the affairs of the regions can by no means be held to be responsible for any difficulties there are in the grey areas.
§ I suppose that we must now modify the popular saying, "Nobody shoots Santa Claus". It is not quite true. Hon. Members representing the grey areas shoot Santa Claus. We know that now.
§ My hon. Friends are entitled to hold different views about how the regions should be helped. My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) had his own pet remedies. He thought that it had confused the issue to bring in all these details. He said that he likes simple things such as Corporation Tax, Capital Gains Tax and investment grants by way of incentives. He does not like complicated incentives such as the Regional Employment Premium and the S.E.T. I beg him to believe that there are other hon. Members who prefer other remedies and that whatever remedy is introduced causes a certain amount of difficulty.
§ The fact is that the Bill includes two obvious and sensible measures that are required by events following devaluation. It is right that we should abolish the export rebate—the devaluation situation makes it unnecessary. And it is right that we should withdraw the additional sum now paid to manufacturers outside the regions. For these reasons, I ask the House to give the Bill a Second Reading.
§ Question put, That the Amendment be made:—
§ The House divided: Ayes 119, Noes 182.785
|Division No. 41.]||AYES||[10.0 p.m.|
|Alison, Michael (Barkston Ash)||Cunningham. Sir Knox||Higgins, Terence L.|
|Allason, James (Hemel Hempstead)||Dean, Paul (Somerset, N.)||Hiley, Joseph|
|Atkins, Humphrey (M't'n & M'd'n)||Dodds-Parker, Douglas||Hill. J. E. B.|
|Awdry, Daniel||Doughty, Charles||Hirst, Geoffrey|
|Bell, Ronald||du Cann, Rt. Hn. Edward||Hogg, Rt. Hn. Quintin|
|Biggs-Davison, John||Eden, Sir John||Holland, Philip|
|Black, Sir Cyril||Elliot, Capt. Walter (Carshalton)||Hordern, Peter|
|Blaker, Peter||Elliott, R. W. (N'c'tle-upon-Tyne,N.)||Irvine, Bryant Godman (Rye)|
|Boardman, Tom||Errington, Sir Eric||Jenkin, Patrick (Woodford)|
|Body, Richard||Eyre, Reginald||Jennings, J. C. (Burton)|
|Bossom, Sir Clive||Farr. John||King, Evelyn (Dorset, S.)|
|Brinton, Sir Tatton||Fortescue, Tim||Kirk, Peter|
|Bromley-Davenport, Lt.-Col. SirWalter||Foster, Sir John||Kitson, Timothy|
|Brown, Sir Edward (Bath)||Fraser, Rt. Hn. Hugh (St'fford & Stone)||Lancaster, Col. C. G.|
|Buck, Antony (Colchester)||Galbraith, Hon. T. G.||Lane, David|
|Bullus, Sir Eric||Gilmour, Ian (Norfolk, C.)||Langford-Holt, Sir John|
|Burden, F. A.||Glover, Sir Douglas||Legge-Bourke, Sir Harry|
|Campbell, Gordon||Goodhart, Philip||Lewis, Kenneth (Rutland)|
|Channon, H. P. G.||Goodhew, Victor||Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)|
|Clark, Henry||Griffiths, Eldon (Bury St. Edmunds)||Lubbock, Eric|
|Clegg, Walter||Hall, John (Wycombe)||McAdden, Sir Stephen|
|Cordle, John||Hamilton, Michael (Salisbury)||Maclean, Sir Fitzroy|
|Corfield, F. V.||Harris, Reader (Heston)||Macleod, Rt. Hn. Iain|
|Costain, A. P.||Hawkins, Paul||Maxwell-Hyslop, R. J.|
|Craddock, Sir Beresford (Spelthorne)||Heald, Rt. Hn. Sir Lionel||Maydon, Lt.-Cmdr. S. L. C.|
|Crowder, F. P.||Heath, Rt. Hn. Edward||Miscampbell, Norman|
|Mitchell, David (Basingstoke)||Russell, Sir Ronald||van Straubenzee, W. R.|
|Monro, Hector||Scott, Nicholas||Wainwright, Richard (Colne Valley)|
|Murton, Oscar||Scott-Hopkins, James||Walters, Dennis|
|Onslow, Cranley||Sharples, Richard||Ward, Dame Irene|
|Osborne, Sir Cyril (Louth)||Silvester, Frederick||Weatherill, Bernard|
|Page, John (Harrow, W.)||Stodart, Anthony||Wells, John (Maidstone)|
|Pardoe, John||Tapsell, Peter||Whitelaw, Rt. Hn. William|
|Peel, John||Taylor, Sir Charles (Eastbourne)||Wilson, Geoffrey (Truro)|
|Percival, Ian||Taylor, Edward M. (G'gow,Cathcart)||Winstanley, Dr. M. P.|
|Powell, Rt. Hn. J. Enoch||Taylor, Frank (Moss Side)||Woodnutt, Mark|
|Prior, J. M. L.||Testing, Sir William||Worsley, Marcus|
|Renton, Rt. Hn. Sir David||Temple, John M.|
|Ridsdale, Julian||Thatcher, Mrs. Margaret||TELLERS FOR THE AYES|
|Rippon, Rt. Hn. Geoffrey||Thorpe, Rt. Hn. Jeremy||Mr. Jasper More and|
|Royle, Anthony||Turton, Rt. Hn. R. H.||Mr. Anthony Grant.|
|Anderson, Donald||Harrison, Waiter (Wakefield)||Murray, Albert|
|Archer, Peter||Haseldine, Norman||Norwood, Christopher|
|Atkinson, Norman (Tottenham)||Hazell, Bert||Oakes, Gordon|
|Bacon, Rt. Hn. Alice||Healey, Rt. Hn. Denis||Ogden, Eric|
|Barnes, Michael||Heifer, Eric S.||O'Malley, Brian|
|Burnett, Joel||Henig, Stanley||Orbach, Maurice|
|Benn, Rt. Hn. Anthony Wedgwood||Hilton, W. S.||Oswald, Thomas|
|Bidwell, Sydney||Hobden, Dennis (Brighton, K'town)||Owen, Dr. David (Plymouth, S'tn)|
|Binns, John||Hooley, Frank||Owen, Will (Morpeth)|
|Bishop, E. S.||Horner, John||Padley, Walter|
|Blackburn, F.||Houghton, Rt. Hn. Douglas||Page, Derek (King's Lynn)|
|Blenkinsop, Arthur||Howarth, Harry (Wellingborough)||Palmer, Arthur|
|Booth, Albert||Howie, W.||Pannell, Rt. Hn. Charles|
|Boston, Terence||Huckfield, Leslie||Pavitt, Laurence|
|Boyden, James||Hughes, Emrys (Ayrshire, S.)||Perry, Ernest G. (Battersea, S.)|
|Bradley, Tom||Hughes, Roy (Newport)||Perry, George H. (Nottingham, S.)|
|Bray, Dr. Jeremy||Hunter, Adam||Price, Christopher (Perry Bar)|
|Brown, Rt. Hn. George (Belper)||Irvine, Sir Arthur||Price, William (Rugby)|
|Brown, R. W. (Shoreditch & F'bury)||Jackson, Colin (B'h'se & Spenb'gh)||Randall, Harry|
|Butler, Herbert (Hackney, C.)||Jackson, Peter M. (High Peak)||Rankin, John|
|Cant, R. B.||Janner, Sir Barnett||Richard, Ivor|
|Carmichael, Neil||Jay, Rt. Hn. Douglas||Roberts, Goronwy (Caernarvon)|
|Chapman, Donald||Jeger, Mrs. Lena (H'b'n&St.P,cras,S.)||Roberts, Gwilym (Bedfordshire, S.)|
|Coleman, Donald||Jenkins, Hugh (Putney)||Robertson, John (Paisley)|
|Cronin, John||Jenkins, Rt. Hn. Roy (Stechford)||Robinson, W. O. J. (Walth'stow, E.)|
|Dalyell, Tarn||Jones, T. Alec (Rhondda, West)||Rodgers, William (Stockton)|
|Davidson, Arthur (Accrington)||Kenyon, Clifford||Roebuck, Roy|
|Davies, Dr. Ernest (Stretford)||Kerr, Mrs. Anne (R'ter & Chatham)||Rowlands, E. (Cardiff, N.)|
|Davies, Ednyfed Hudson (Conway)||Kerr, Dr. David (W'worth, Central)||Shaw, Arnold (Ilford, S.)|
|Dell, Edmund||Kerr, Russell (Feltham)||Sheldon, Robert|
|Diamond, Rt. Hn. John||Lawson, George||Shore, Peter (Stepney)|
|Dickens, James||Ledger, Ron||Short, Rt. Hn. Edward (N'c'tle-u-Tyne)|
|Dobson, Ray||Lee, John (Reading)||Silkin, Hn. S. C. (Dulwich)|
|Doig, Peter||Lestor, Miss Joan||Silverman, Julius (Aston)|
|Dunwoody, Dr. John (F'th & C'b'e)||Lever, Harold (Cheetham)||Skeffington, Arthur|
|Edelman, Maurice||Lewis, Arthur (W. Ham, N.)||Small, William|
|Edwards, William (Merioneth)||Lipton, Marcus||Snow, Julian|
|Ellis, John||Loughlin, Charles||Swain, Thomas|
|Ennals, David||Luard, Evan||Swingler, Stephen|
|Evans, Albert (Islington, S.W.)||Lyon, Alexander W. (York)||Tinn, James|
|Evans, loan L. (Birm'h'm, Yardley)||McBride, Neil||Tomney, Frank|
|Faulds, Andrew||McCann, John||Tuck, Raphael|
|Fletcher, Raymond (Ilkeston)||MacColl, James||Urwin, T. W.|
|Fletcher, Ted (Darlington)||Macdonald, A. H.||Varley, Eric G.|
|Foley, Maurice||McKay, Mrs. Margaret||Wainwright, Edwin (Dearne Valley)|
|Foot, Michael (Ebbw Vale)||Maclennan, Robert||Walden, Brian (All Saints)|
|Ford, Ben||MacMillan, Malcolm (Western Isles)||Walker, Harold (Doncaster)|
|Forrester, John||McMillan, Tom (Glasgow, C.)||Wallace, George|
|Fowler, Gerry||MacPherson, Malcolm||Wellbeloved, James|
|Fraser, John (Norwood)||Mahon, Simon (Bootle)||Wells, William (Walsall, N.)|
|Gardner, Tony||Mallalieu, E. L. (Brigg)||Whitaker, Ben|
|Girsburg, David||Mallalieu, j. P. w. (Huddersfield, E.)||Willey, Rt. Hn. Frederick|
|Gray, Dr. Hugh (Yarmouth)||Marquand, David||Williams, Alan Lee (Hornchureh)|
|Greenwood, Rt. Hn. Anthony||Mayhew, Christopher||Williams, Clifford (Abertillery)|
|Grey, Charles (Durham)||Millan, Bruce||Williams, W. T. (Warrington)|
|Griffiths, David (Rother Valley)||Mitchell, R. C. (S'th'pton, Teat)||Wilson, William (Coventry, S.)|
|Griffiths, Rt. Hn. James (Llanelly)||Molloy, William||Winnick, David|
|Griffith, Will (Exchange)||Moonman, Eric||Yates, Victor|
|Hamilton, William (Fife, W.)||Morgan, Elystan (Cardiganshire)|
|Hamling, William||Morris, Alfred (Wythenshawe)||TELLERS FOR THE NOES:|
|Hannan, William||Morris, Charles R. (Openshaw)||Mr. Alan Fitch and|
|Harper, Joseph||Moyle, Roland||Mr. Ernest Armstrong.|
§ Main Question put forthwith, pursuant to Standing Order No. 39 (Amendment on second or third reading) and agreed to.
§ Bill accordingly read a Second time.786
§ Bill committed to a Committee of the whole House.—[Mr. Fitch.]
§ Committee Tomorrow.