HC Deb 10 November 1969 vol 791 cc112-20

7.35 p.m.

The Financial Secretary to the Treasury (Mr. Dick Taverne)

I beg to move,

That it is expedient to authorise the extension by one year of the period for which duty under section 1 of the Customs (Import Deposits) Act 1968 may remain in force, subject to the like exemptions and reliefs as were provided for by that Act but with the amount of the duty reduced as from 5th December 1969 from fifty per cent. to forty per cent. of the value of the goods on which it;s charged.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

It falls to me at this unexpectedly early hour to move the Ways and Means Resolution concerned with the Customs (Import Deposits) Bill. The Resolution provides for the import deposit scheme to be extended for a further 12 months from 5th December 1969, but at a reduced deposit rate of 40 per cent., as the Chancellor of the Exchequer announced in a statement on 21st October. The Resolution also provides for all the existing exemptions and reliefs to be continued. It therefore has two features: first, the extension of the previous scheme by another 12 months; and, secondly, a reduction of the rate, but in due course 1 hope that it will be possible, under the terms of a Bill which will be introduced if the Resolution is passed, to reduce the rate or to end the scheme before the 12 months' period expires.

The Resolution is so drafted as to have statutory effect pending the passing of he necessary Bill. This is precautionary, in case the Bill should not be passed before the expiry of the existing charge, but the Government's present intention is to provide time for all the stages of the Bill before 5th December.

The reduction of the deposit rate does not take effect on the passing of the Resolution, but on 5th December. If there should be a gap before the enactment of the new Bill and after the expiry of the present Act, there will be under the Resolution a continuation of an existing charge, and the legal difficulties which arose last year on the Ways and Means Resolution under Section 3 of the Provisional Collection of Taxes Act would not in this case, I am informed, arise. It is the intention to publish the Bill tomorrow morning.

A preliminary statement of the reasons for the continuation of the scheme was given by the Chancellor of the Exchequer. Perhaps it would be appropriate for full discussion of this Measure to take place on Second Reading which has been announced for next Monday, and perhaps it would also be appropriate and convenient for me to reserve my main exposition until that date. I shall, of course, be glad, with the permission of The House, to answer any particular points which may be raised on the Resolution.

7.38 p.m.

Mr. Terence L. Higgins (Worthing)

May I begin by congratulating the hon. and learned Gentleman on his elevation to the post of Financial Secretary to the Treasury.

The hon. and learned Gentleman said that it fell to him to move the Resolution. I can understand if he felt that he should display some diffidence in doing so, because, in moving the Resolution, we do not want so much an explanation as an apology. When, last year, a similar proposal was introduced, it was made abundantly clear that it was intended to be temporary rather than long-term. I feel that there is a danger that, as with the successive Prices and Incomes Bills over the years, this proposal may become an annual festival.

I hope that that will not be so, but we are not taken in by the Financial Secretary's saying, "If it is possible to end the import deposits scheme before the end of the year we shall certainly do so", because exactly the same view was expressed last year.

While I agree wholeheartedly that we should defer discussion of the merits or otherwise of the Bill we should not forbear from quoting the statement made by the hon. and learned Gentleman's predecessor on 28th November when he said that the import deposits were temporary in impact and in intention, the idea being to make a sharp immediate assistance to our export-import ratio, to give time for the major strategy … to take effect. It in no way derogates from that strategy. It is in no way a substitute for that strategy. It is a measure timed to ensure that imports do not get out of hand and tend to come down while that strategy is working."—[OFFICIAL REPORT. 28th November, 1968; Vol. 774, c. 751.] We cannot see how, in the present circumstances, there should be a repetition of this measure which the Financial Secretary clearly indicated was intended to be temporary.

It is worth looking at the context in which the original measure was introduced. On 22nd November, in the statement which was the prelude to the scheme, the Chancellor of the Exchequer said: The scheme is not one which can or should be kept in being for more than a limited period, but it will have powerful effects over the next few months … "—[OFFICIAL REPORT, 22nd November, 1968; Vol. 774, c. 1796.] But, instead of its having powerful effects over the next few months first, it is by no means clear precisely what effects it has had, and, secondly, 12 months afterwards the Government introduce this Resolution which is designed to perpetuate the scheme for many more than the "next few months" to which the Government referred this time last year.

There are one or two preliminary questions which we should ask the Financial Secretary tonight before the much broader debate which we shall have next week. First, the scheme was introduced in the atmosphere of the international monetary crisis of November, 1968. It is one of the measures designed to cope with that crisis. Meantime, we have had two major changes: devaluation of the French franc, and up-valuation of the German mark. One would not have thought that a crisis measure necessary in November, 1968, should be perpetuated by this Resolution.

The second point on which I must press the Minister for a reply concerns the legal position. When this question arose last year, it seemed clear to us on this side of the House that the introduction of the import deposits scheme was in conflict with our international obligations under the General Agreement on Tariffs and Trade and the European Free Trade Area Treaty. It would be wrong for the House to pass this Resolution without being clear about the legal position of the Government's proposal.

Last year we heard from the Attorney-General, for whom I have great personal admiration, what I think was the least convincing argument that I have heard him put forward. I will not burden the House with the semantics in which he engaged, but the Government's appeal was that the imposition of an import duty was not contrary to our G.A.T.T. or E.F.T.A. obligations, and, despite the Attorney-General's assurances, the Government asked us to accept that the right tribunals for deciding whether it was contrary to those two treaties were the appropriate tribunals established by those two treaties. Before approving this Resolution, we should have a clear statement from the Financial Secretary on what the decision of those tribunals was when the matter came before them after the imposition of the scheme last year.

Secondly, I hope that the Financial Secretary will be able to tell us precisely what prior consultations the Government have had with the other members of G.A.T.T. and E.F.T.A. about the extension of the import deposits scheme. It is apparent that last year the Government were anxious not to appear to be taking protectionist measures or doing anything which might lead to a reduction of world trade or a series of tariff wars which would curtail world trade and consequently reduce the level of British trade. There must be renewed concern in G.A.T.T. and E.F.T.A. about the Government renewing the scheme which they said would be temporary. Could the Financial Secretary tell us what consultations have taken place with these two bodies and what their replies have been?

I make only two further points. First, the Financial Secretary will be well aware that the impact of the import deposits scheme was intended to accentuate the credit squeeze, and this is con tinuing within the Government's general policy. But he will also appreciate that there is grave concern among small and medium businesses about the situation which may develop in the winter.

This scheme, tightening the general credit squeeze, will have an effect on a number of small and medium companies. But it could have a very traumatic effect on small and medium importers, because this measure has added to the normal cost of the capital which they employ a further charge, which effectively means that they are borrowing the money to lend it to the Government on an interest-free basis, but are having to pay interest, not only on their own working capital, but on the additional loan which they are making to the Government.

That is something which small and medium importers, or perhaps even large importers, can reasonably cope with for a short time, but if it is continued for longer than 12 months, which this Motion enables the Government to do, a number of importers who are in viable businesses in normal circumstances, carrying out a task which is useful to the community, will find themselves in very serious difficulties and may eventually, if the credit squeeze continues, be forced into bankruptcy.

I have had representations from a number of such businessmen who have stressed that in the present difficult conditions, with the very high interest rates being charged to them, the requirement to finance their own capital and in addition to provide an interest-free loan to the Government is seriously jeopardising their future viability. This is an imposition on this group of people which cannot be justified beyond a very short time.

Finally, I refer to the Resolution on the Order Paper. I am sorry that we have again reverted to this form of presentation, and I express our thanks for the tremendous amount of work done in the Vote Office in running off these documents every day. The Resolution reads: And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968 ". I accept the Financial Secretary's point, but concerning the exemptions the Resolution says: … section 1 of the Customs (Import Deposits) Act 1968 may remain in force, subject to the like exemptions and reliefs as were provided for by that Act but with the amount of the duty reduced … to forty per cent. … It has become not so much an unfortunate lapse, but rather a nasty habit of the Government that they draw Resolutions in such a way that they curtail debate on perfectly legitimate matters of constituency concern to many right hon. and hon. Members.

I therefore ask the Financial Secretary a specific question: would I be right in thinking that the Ways and Means Resolution will not reduce the scope of debate to a degree that it is less than we had last year'? In other words, is this a more restrictive Resolution than last year's Resolution? That one was restrictive, but if we are not to be allowed to go into some of the details of the effects of the scheme on matters which affect individual constituencies it will be extremely wrong. I therefore hope that the hon. and learned Gentleman can assure us that this Resolution is not more restrictive than last year's and that if we want to examine the situation after a year's operation of the scheme we shall have full scope, if the Resolution is passed and the Bill is given a Second Reading, to amend the Bill to extend the present exemptions to take account of the serious effects which this measure may have on a great many parts of industry.

It would be wrong of me to delay the House further. We on this side think that it is completely wrong for the Government to introduce a Resolution of this kind which enables them to perpetuate a scheme which on their own admission was intended to have effect over a period of a few months. We shall return to this point on Second Reading of the Bill, but for the moment I hope that the Financial Secretary will answer the questions which I put to him.

7.50 p.m.

Mr. Taverne

Perhaps I may deal briefly with some of the points which have been raised, but I am sure that the hon. Member for Worthing (Mr. Higgins) will appreciate that it would be more appropriate to deal with major questions, such as the effect on the liquidity of various importers, not at this stage but during the Second Reading debate next week. The hon. Member referred to remarks last year which stressed the temporary nature of the scheme, and I expect him to make the most of this in the debate when we have it in due course. No doubt, this is a matter that we can deal with then.

I should like to deal specifically with two major points, one concerning the legal position and the other on the scope of the resolution. As to the legal position, in 1968 G.A.T.T. was advised by the I.M.F. that the scheme did not go beyond the measures required in the light of the United Kingdom's circumstances, and that advice was accepted. Legally, therefore, in the case of G.A.T.T., the scheme was last year in the clear.

E.F.T.A. decided to keep the effects of the scheme under review, without prejudice to the issue of whether it was consistent with the provisions of the Stockholm convention. On this occasion, the G.A.T.T. Council has decided once again to consult the I.M.F. about the scheme. A meeting of the E.F.T.A. Ministerial Council was held last week on 6th and 7th November. That Council expressed concern at the continuation of the scheme and it was agreed that it would keep it under review in the course of the next six months. The communiqué which was issued subsequently, however, made no reference to doubts about the legality of the scheme.

The Council—the body concerned in E.F.T.A. with the legality or otherwise of the scheme—is keeping the scheme under review and has made no mention of doubts about its legality.

Mr. Higgins

Surely, this is a very unsatisfactory situation. As I understand the hon. and learned Gentleman, last year the appropriate E.F.T.A. body decided not to make any decision whether the scheme was contrary to the treaty. Now the hon. and learned Gentleman says that again the matter has been deferred. In view of the determined way in which the Attorney-General said that the scheme was legal, I should have thought that in the interest of the United Kingdom the Government would have expected a firm decision one way or the other.

Mr. Taverne

My right hon. and learned Friend the Attorney-General expressed the view of the Government that the scheme was legal. The question whether to question its legality was a matter for the E.F.T.A. Council. In the last communiqué it has not raised the matter of its legality. Therefore, this is not a matter of great concern to the House in considering the resolution.

I come finally to the scope of the Resolution. The interpretation of what may be permitted by way of amendment is a matter for the Chair, but as I understand the effect of the Resolution it is specifically to carry out what my right hon. Friend the Chancellor of the Exchequer proposed and to do no more.

What my right hon. Friend proposed, and what, therefore, the Resolution is designed to carry out, is to continue the existing scheme and to provide for a variation in the rate. It authorises the extension by one year of the period for which the duty may remain in force subject to the like exemptions and reliefs as were provided for by that Act ", which, I understand, means that there will be full discussion of the grounds on which the continuation of the scheme will be accepted or not, and objections about the effect can, of course, be raised on Second Reading.

As I understand it, however, since the Ways and Means Resolution states that it may remain in force, subject to the like exemptions and reliefs ", the scheme as a whole would be subject to the same exemptions as last year and, therefore, this would not be the same debate as we had last year with questions concerning detailed exemptions. This is not the imposition of a new scheme. It is the continuation of the previous scheme which was fully gone into that year.

Mr. Higgins

This would be a very bad way of doing it, because the whole point about last year's Bill was that it was supposed to come to an end at the end of the year and could not be extended by Statutory Instrument, the intention being that if it were to be reintroduced, we would have a new Bill and we should reopen the whole question. Surely, in those circumstances it is most irresponsible of the Government not to introduce a Ways and Means Resolution which enables one to examine the impact on individual groups of constituents who may be affected.

I hope that if that is so the Government will look again at the Resolution and if necessary, introduce one which would enable us to debate points of great constituency interest to many of my right hon. and hon. Friends.

Mr. Taverne

There is nothing whatever to prevent those points being raised during the opposition, if there is opposition, to the Second Reading, but it would be straining considerably the purpose for which the Bill is introduced if the resolution went beyond the precise purpose proposed by my right hon. Friend the Chancellor of the Exchequer, namely, to continue the same scheme in existence for another year, subject to the powers which exist to reduce the rate below 45 per cent. and to terminate the scheme earlier.

It is, therefore, a termination of the former scheme which is being proposed with the powers which the Treasury has to make orders concerning particular products. It is not, I understand, a proposal which would lead to reconsideration in terms of amendments of the various measures that were proposed last year.

Question put and agreed to.

Resolved,

That it is expedient to authorise the extension by one year of the period for which duty under Section 1 of the Customs (Import Deposits) Act, 1968, may remain in force, subject to the like exemptions and reliefs as were provided for by that Act but with the amount of the duty reduced as from 5th December, 1969, from fifty per cent. to forty per cent. of the value of the goods on which it is charged.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1968.

Bill ordered to be brought in upon the said Resolution by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. John Diamond, Mr. Dick Taverne, and Mr. William Rodgers.