Export Rebates

HC Deb 31 January 1968 vol 757 cc1483-91

Motion made, and Question proposed, That it is expedient—

1. (a) to terminate export rebates, and to make further Provision as respects cases in which export rebates remain payable,
2. (b) to enable the Treasury by order to reintroduce export rebates either generally, or in respect of goods consigned to or exported for use in specified countries or territories, or by reference to specified kinds of transactions, and to vary or revoke any such order,
3. (c) to prescribe the matters which may be dealt with by any such Treasury order, but that, subject to paragraph (b) above, any Provision about export rebates must apply in the same way to all descriptions of goods.— [Mr. Harold Lever,]

10.7 p.m.

The Financial Secretary to the Treasury (Mr. Harold Lever)

I ought to explain that this Resolution replaces a somewhat similar Resolution which this House agreed to on 19th December, 1967. That Resolution concerned the abolition of the export rebate. A Bill to give effect to that Resolution was presented accordingly, but that Bill has now been withdrawn. The present Resolution Covers the same ground as the earlier Resolution, but it also provides that the Treasury shall have power to reintroduce export rebates either generally or in respect of goods consigned to or exported for use in specific countries or territories.

If the House passes the Resolution, a new Bill will be introduced and the effect of the Bill will be that the export rebate will be ended on 3Ist March next with protection for those exporters who had contracts agreed before devaluation, but the Bill will also contain provisions— this is the point of difference from the previous Resolution and Bill—for the re-introduction of the export rebate by Treasury Order.

I ought to tell House that the reason for the extension of the terms of the Bill by including this additional power is that since we published the Bill which has now been withdrawn there has been a great deal of discussion in many countries relating to future development of world trade. Of course it is our hope —this has been expressed by the Prime Minister and others—that no measures will be taken by anyone that would threaten the free flow of world trade, but there has been a great deal of public discussion about protectionist pressures in America and elsewhere.

When we recall the outstanding rôle of the United States in the post-war world in helping to restore the world economy and the liberalisation of world trade, much to the general advantage, I think it would be premature and pessimistic indeed to assume that America of all countries would give momentum to any move towards protectionism. Certainly so far as America is concerned we know of nothing beyond the very general reference in the President's State of the Union Message. On the other hand, we think it right in this Situation, while completing our already expressed intention that the rebate must end on 3Ist March, that the Government ought to be in a position, if they feel compelled to do so, to restore the rebate without the complications of a new act of Parliament but relying upon the affirmative Resolution procedure.

I emphasise that we are not in the least anxious to have to reintroduce the export rebate. Exporters should note that the extension of the Bill giving this power to bring back the export rebate by a Treasury Order in no way changes the Government's announced intention of ending the rebate at the end of March in the manner we have already made known. The Government will not even consider bringing in the export rebate except in the context of measures of protectionism by others and then they would only actually reintroduce the rebate under this power if this were inevitable.

I hope that this makes clear to the House the necessity for withdrawing the old Bill and introducing the new Bill with this extra power. I hope that the House will approve accordingly.

10.11 p.m.

Mr. Terence Higgins (Worthing)

I know that many of my hon. Friends are anxious to catch your eye, Mr. Speaker, in the subsequent debate on industrial training, but we would be failing in our duty as an Opposition if we did not bring to the attention of the House the remark-ably short notice with which this Resolution has been brought to the Floor and stress the unusual changes which appear to have taken place in the Government's policy.

We have, alas, become used over recent years to the Government pushing through measures at short notice and also to the vacillation which only too frequently is to be found in their policies. It is extra-ordinary that the Financial Secretary on this particular issue should go right against what appears to have been said on previous occasions.

The Chancellor of the Exchequer, in the statement he laid before the House on 20th November, pointed out that it was proposed to eliminate the export rebate. He said: The export rebate, now costing just under £100 million a year, will be abolished, since it will no longer be necessary."—[OFFICIAL REPORT, 20th November, 1967; Vol. 754, c. 952.] Now the Financial Secretary says that the whole matter may be under further discussion, which will depend on other factors which apparently the Government completely failed to anticipate on 20th November and that the Bill which they introduced is to have its Title changed, apparently new Clauses added and so on.

Therefore I want to ask some questions of the Financial Secretary, because we deserve an explanation on one or two points he has raised. The first is whether we would have been told about this before it was on the Order Paper had it not been for a question asked by my right hon. Friend the Leader of the Opposition yesterday. He asked the Prime Minister: What attitude does the Prime Minister pro-pose lo take with the President towards the imposition of export incentives in the United States which will affect our trade? 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. We have already informed the United States Government of our very strong feelings in this matter. and he went on to say The right hon. 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.] Thus suddenly, in the twinkling of an eye, there is a complete reversal of what the Government previously said. If my right hon. Friend had not asked that question— which was the last question of the day —when would the House have been told about the matter? Would this Motion have appeared on the Order Paper without comment at one day's notice? My second question is: if the Prime Minister could answer this question off-the-cuff yesterday, why were we not told about it days or even weeks before, because clearly the Government had been reconsidering the question but gave very little notice before the matter was brought before the House?

My third question is this: as I understand it, the purpose of the Resolution is to enable the Government to change the Long Title and to introduce a new Clause or Clauses so that the withdrawal of the export rebate can be cancelled, if they wish, by Statutory Instrument. Is this correct? I understand from what the Financial Secretary said that it is. Further, when does the hon. Gentleman now propose to bring forward a quite different Bill for Second Reading? Should not we be told tonight what the new Clause, or Clauses, will be in the amended Bill which apparently the Resolution is designed to cover?

I think that it is important, though I want to be as brief as I possibly can be—

Mr. R. J. Maxwell-Hyslop (Tiverton)

Hear, hear.

Mr. Higgins

I am grateful to my hon. Friend for his encouragement. I think that it is important to stress that the sums involved, as I understand it, are about £200 million—£100 million for the export rebate and £100 million for the Selective Employment Tax, if some alteration is made on that as well.

Mr. Speaker

Order. The Resolution does not cover the Selective Employment Tax.

Mr. Higgins

At any rate, it is £100 million for the export rebate, compared with the total cuts of about £500 million. It is a very large proportion of the total and the Government propose to take powers to stop the cut by Statutory Instrument rather than to adhere to their original decision. The Financial Secretary said that there was no question of the United States going protectionist. Yet the only reason we were originally given for the export rebate being with-drawn was that its Operation was likely to stimulate protectionist tendencies in the United States and elsewhere. It would therefore seem some arrangement was made with the United States on this matter, and that the Government have subsequently changed their minds. Was any such arrangement made; and, if so, what were the terms of that arrangement?

It surely is ludicrous to suppose that, if protectionist elements were likely to be stimulated in the previous Situation, the proposal, which the Financial Secretary is now considering, of going completely in reverse will not now stimulate those protectionist elements. We need to have a clear indication of what under-standing, if any, was reached with the United States Government and, indeed, what their position is likely to be now.

I want to say a few words about two other groups. First, what does the Financial Secretary think the impact of this new and amended Resolution and the proposed amended Bill will be on exporters? Clearly, many of them were in a difficult position after devaluation when they found that quotes which they had given on the basis of the export rebate had to be altered. Then they find themselves in the position where they have lost Orders over the last ten weeks or so because they thought that they would not get the export rebate in future. Finally, they now suddenly find that the Government are considering altering the whole Situation.

This policy of vacillation creates an enormous feeling of uncertainty amongst exporters. It is not any good the Financial Secretary telling us, "We have to take the extra powers, but in fact we shall never use them and exporters can work on the previous basis." Clearly, the Government would not propose to take the extra powers if there is not a possibility of their putting them into Operation and altering the position as to the export rebate. 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.

I will defer the many other matters which could be raised now to the future occasion, whenever that may be, when the Government decide to bring forward the amended Bill.

Two final questions. If the Government had originally intended to consider the impact which their proposals might or might not have on a general move to protectionism, why did they not include in the original Bill a Clause of the kind which they now propose? It shows a remarkable lack of foresight or a remarkably naive approach to the whole question. Second, if this is merely a bargaining counter for the Prime Minister on his visit to Washington and he proposes to say that we could reintroduce the export rebate if there were any general move towards protectionism, why could not the Bill itself be delayed till a later date, and then withdrawn completely, if necessary, so that the export rebate would remain as it has been hitherto and a decision deferred until the position has been clarified.

The Government have been remarkably short-sighted on this matter. This is a most peculiar way of bringing the matter to the Floor of the House at short notice, and we are entitled to a better explanation that we have had so far.

10.21 p.m.

Mr. Geoffrey Hirst (Shipley)

I shall not detain the House for more than a minute. It is a tragedy that two such important matters as this and the Prayer to follow should come before us in so short a time. But the present question is a serious one for an enormous amount of British trade. The Financial Secretary's naive attitude is not justified. He knows the position much better than that. He cannot confuse the American attitude towards Europe and the world in trade and everything else, for economic reasons which I shall not detail, with a natural protectionist attitude. He must not be so naive——

Mr. Speaker

Order. I hope that the hon. Gentleman will come to the subject of the Resolution.

Mr. Hirst

I thought that I was dealing with it, Sir. I was commenting exactly on the Financial Secretary's speech in moving it and following the speech which my hon. Friend the Member for Worthing (Mr. Higgins) has just made. My hon. Friend stressed the effect that there is and will be on exporters, who do not know where they are. It would be better in the present context, as the matter has arisen now under the Resolution, if the rebate had been carried on until the Position was clarified.

This is a serious matter, but I shall not detain the House now as I know that many hon. Members wish to speak on another question. But we are custodians in the House of many things, and our trade, particularly our export trade, is one such. The Financial Secretary must think again.

10.25 p.m.

Mr. Harold Lever

If I may have the leave of the House, I wish to reply to the points which have been raised.

It has been suggested that uncertainty is created in the minds of exporters. The only people who can create uncertainty in the minds of exporters are the orators on the benches opposite. What I have said was perfectly clear to exporters. The export rebate is to be abolished with effect from 31st March, while, at the same time, protection is given in respect of export contracts entered into before devaluation. Nothing has changed so far as exporters are concerned compared with the Position existing under the previous Ways and Means Resolution, approved, if I recall aright, without discussion by the House.

The new Bill, if the House is so minded. will re-enact every provision in the old Bill. The only difference will be that one Clause will be added, namely, a Clause permitting the Government, by Treasury Order under the affirmative Resolution procedure, to bring back the rebate if they think it is necessary. [An HON. MEMBER: "Why was it not in the first Bill?"] 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 export rebate scheme. [An HON. MEMBER: "Why was it not thought possible then?"] We do not think that it is in our interest to bring it back now, if it can be avoided. We would regard the bringing back of the export rebate scheme as desirable only if, contrary to our expectations and our desire, events moved in a protectionist direction elsewhere. It is right that, when abolishing a rebate, we should make it known that we intend to put ourselves in such a position that any protectionist tendency would not necessarily leave this Government in the same position as it was under the last Bill, before these protectionist ideas were freely mooted.

Mr. Higgins

The only reason we have been given why it would be abolished in the first place was that it might en-courage protectionist elements. The hon. Gentleman clearly thought of that before. Why was not the Clause in the original Bill?

Mr. Lever

The hon. Gentleman is failing to analyse logically the course of events. We determined to abolish the export rebate because we thought that the clear intention to do so from next March would discourage protectionist pressures from arising in various countries, including the United States of America. Unhappily, after this declaration of our intention protectionist pressures arose in various parts of the world and there was a good deal of discussion in the world about various suggestions which were in the air. Nothing very specific has been announced by anybody, and we are hopeful that nothing of a character that would threaten the freedom and liberalisation of world trade will occur. On the other hand, the Situation has changed since we originally announced the abolition of the export rebate as a permanent factor. There has been some talk of other countries possibly engaging in some form of protectionist measure that might compel us to reintroduce the export rebate scheme.

In these circumstances, we thought it right to take back the old Bill and reintroduce it with the additional Clause of which I have already told the House. The hon. Gentleman seems to think that the Government, in discussing and considering the changes in affairs which go on from day to day, should let him know about them. He and his right hon. and hon. Friends must bear in mind that at present they are the Opposition and do not occupy the Government's position. The Government considered the matter, and as soon as their decision was reached on it they decided to bring this Ways and Means Resolution before the House in the ordinary way. If the House sees fit to pass it, I hope to bring in the Bill this very night, and no doubt the hon. Gentleman will be able to read it tomorrow. There will be no difficulty; it will be the same as the old Bill, having everything in it that the old Bill had, but with one simple Clause enabling us, by Treasury Order, to reintroduce the Bill.

I emphasise again that despite the clouding of counsel of hon. Members opposite which greatly disappoints me— they are much below the form I would have expected of them on a matter of such importance to our commerce— there is no ground for doubt or con-fusion in the minds of exporters. The export rebate is to be abolished from 3 1st March next, as already announced, with the safeguards already announced to cover contracts entered into before devaluation. That is how the matter stood under the old Bill; that is how it will stand under the new Bill; and that is the basis on which exporters will work, if they take notice of the Government's Statement and the terms of the Bill, and not the words of a somewhat fractious and trouble-making Opposition.

My final point is that complaints about bringing this late to the House are quite unjustified, because the House will have ample opportunity to consider the Bill when it comes before it. The Bill will have to pass through all the usual stages. It will be under the scrutiny of hon. Members opposite, and I hope that by the time it is presented they will resume the somewhat more constructive spirit I would have expected from them on this kind of subject.

Question put and agreed to.

Resolved,