§ 37. Mr. Sheldonasked the Chancellor of the Exchequer what estimate he has made of the cost to the revenue of investment and initial allowances as compared with the cost of investment grants.
§ Mr. DiamondThe true comparison is between the present system of investment grants and the associated capital allowances and the whole of the previous system of capital allowances, including investment allowances, and Local Employment Act grants. It is expected that over a period, the present system will cost much the same as the previous system would have cost had it continued.
§ Mr. SheldonWould not my right hon. Friend agree that, although the sharpness of the instruments can be considerably improved, nevertheless there have been great advances in the investment grant system over the previous capital allowances and that this system should be continued, because we are introducing direct incentives to plant and machinery, as opposed to a whole range of unnecessary objects in the previous system?
§ Mr. DiamondMy hon. Friend is right to draw attention to one of the advantages of the present system. Of course, he and I would share fully the view that a further advantage is the effect on the development areas.
§ Mr. LubbockDoes the right hon. Gentleman recall that, before the 1966 White Paper on investment incentives, a considerable amount of research work was done, by the N.E.D.C., the C.B.I. and various other authorities, on what the amounts of additional investment would be according to the various 204 methods adopted for promoting it? In the light of experience with the investment grants scheme, does the right hon. Gentleman not think that additional research work should be done by the Treasury to decide whether it is proving effective in practice?
§ Mr. DiamondThe system is already under review all the time, but it is almost impossible to identify the particular causes of particular variations in investment rates.