HC Deb 20 January 1970 vol 794 cc263-70

The Treasury shall from time to time publish in the London and Edinburgh Gazette the details of the complete test whereby they assess whether an application, if granted, would operate to the detriment of the balance of payments.—[Mr. Ridley.]

Brought up, and read the First time.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

I beg to move, That the Clause be read a Second time.

Perhaps I should start by saying that new Clauses 2 and 3 are similar but differ in one respect in that they refer respectively to the Treasury and to the Ministry of Technology. The House will be aware that the Bill was considerably improved in Committee, as a result of which the Treasury was removed and the Ministry of Technology inserted. In case the House should decide to reverse that decision, I thought it prudent to have two new Clauses on the Notice Paper dealing with this subject. Therefore, the House may select whichever new Clause it thinks appropriate.

This Clause requires the publication by the Government of the full details of the balance of payments test which will be applied to applications for investment grants for new ships. I hope that with this Clause we will be pushing at an open door, because the Financial Secretary to the Treasury, during Committee Stage, said: I assure the hon. Gentleman that we shall publish changes. We published the circular in the first place so that there should be as much comment upon this as possible."—[OFFICIAL REPORT, Standing Committee E, 4th December, 1969; c. 25.] We are at least at one about the desirability of publishing the rules of the test.

The test is very important in connection with the Bill. The publication which has so far been made does not appear to be entirely specific. It will be a great help to all concerned if the test is entirely specific. I hope that the publications which will follow in due course if the Clause is accepted will be more specific. It does not, so far as I can make out, say whether the cost of buying a new ship in a foreign shipyard shall be taken into account in assessing the outflow on the balance of payments or whether it will be merely the cost of the investment grant, namely, the 20 per cent. itself. I cite that as an example. One can read the balance of payments test as already published, but I believe that it is impossible to get a true answer as to what is meant in those two respects.

I hope that the Financial Secretary will clear up this point straight away since it is most material and of the greatest importance. An expert with whom I was discussing this test was under the certain conviction that it was only the outgoing investment grant which was to be considered in relation to the test and not the outgoing for the total cost of the ship if ordered abroad. It would completely upset the administration of the test if one or other of those two propositions turned out to be the true one.

Indeed, if it is the total outgoings on the ship which are to be considered it seems odd that this is treated separately from any other form of overseas investment, because that is all it would become. It is surprising that the same rules are not applied to overseas investment in assets as are applied to overseas investments in ships, with which the Bill deals.

The second point which does not appear to be specific in the present test is that profits from other activities carried on by the shipowners have in the past been used to depreciate the value of ships. This has been quite legal and legitimate, but, clearly, it would upset the calculation if profits from other sources of activity were allowed to be applied to the depreciation of ships covered by the Bill. I hope that the Financial Secretary will clear up these two areas of doubt which I have cited as being instances in which the present test is not specific.

It is very important that these tests should be specific. It would help enormously if the Government published a specimen calculation, taking an imaginary ship worth £5 million, putting in imaginary figures for profits, crew and maintenance and all the rest, and showing how the calculation is to be worked out. If this were done, any shipowner who was contemplating ordering a ship could, without difficulty, do his own calculations to make sure that he had exactly the right method. He would then know whether to go ahead with his application and whether it was likely to fail. So far as possible, it is important that there should be certainty in these matters.

I do not like the phrase in the present test provided that sufficient details of such loans are given, Her Majesty's Treasury will make the necessary calculation. We do not want any discretion to be left to Treasury Ministers. We want it to be all above board and perfectly clear, so that the rules are known to everyone. I am sure that the Government will take it in good part when I say that it is possible for the powers in the Bill to be abused and for pressure to be put on shipowners and applicants to do what may not be strictly in their interests in return for permission to order a ship abroad.

It is that aspect of the matter which worries the Opposition slightly. It is not quite open enough, and we think that the best way of dealing with the situation will be to have complete and regular publication of the test in the fullest detail together with some system of appeal, to which we will come in a later Amendment.

I hope that the Government will respond to this Clause. It is moved in an attempt to improve the Bill, make it fool-proof and narrow the area of discretion left to the Government. Beyond that, it is always desirable that the exact rules of an operation should be made public. I know that the Government accept the principle behind the Clause, and I see no reason why they should not accept the Clause itself.

4.0 p.m.

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

I understand and share the hon. Gentleman's desire that the fullest details of the test to be applied should be known and that they should be specific.

To answer his questions about the test, it was made clear that all transactions associated with the purchase and the financing of the purchase of a ship will be considered as part of the sum of gains and losses in considering whether there is a balance of payments gain. That must include the cost of purchasing a ship abroad. It is plain that the investment grant in itself is a loss so far as it goes to someone who may send profits abroad. One looks at the capital transaction as one of the factors to be taken into account in determining whether a profit or loss arises.

We will no doubt be discussing other activities on a further Amendment, but it will be the transactions concerned with a particular ship which are in question and not, for example, profits from activities in connection with running an oil refinery. It is that ship and that ship's transactions which are in question.

As for the hon. Gentleman's point about publication, I can assure the House that no one affected will be or has been kept in the dark. There is no question of any change being made without notice to those who are affected. Anyone who wishes to discuss it can do so. There have been regular contacts with the Chamber of Shipping and, if a company fails the test, there is no question of the Treasury or the Ministry of Technology keeping the figures to itself. A company will be free to discuss the calculations with the Government to see how they are arrived at, and everything will be open and above board.

In discussing this Amendment, the real question to be faced is how the details of the test can be best made known. What is suggested is that we should publish the test regularly in the London and Edinburgh Gazettes. However, I suggest that that is not the best way of publication. As a result of discussions with the Chamber of Shipping, a number of amendments to the test have already been made. They concern such matters as equipment manufactured in Britain being incorporated in a ship abroad, which is a material factor to be considered in working out the calculations. That was a useful suggestion, and it has been incorporated in the test.

Another suggestion which has been accepted was concerned with making an allowance for withholding tax. In addition, the question of where repairs should be carried out is a matter which will be taken into account in doing the sums.

However, from time to time proposals will be put to us by individual companies and discussed with the Chamber of Shipping about how the test should be altered. Many of these will be trivial, fiddling little changes, and I suggest it is unnecessarily cumbersome to publish the test in the Gazette on each occasion that a very minor change is made when there is no question of anyone affected being kept in the dark. Everyone will know what is happening. The Chamber of Shipping will be kept fully informed.

There is nothing between the two sides of the House on our intentions and what we would like to achieve, nor about what will be achieved. But I suggest that regular publication of the kind suggested is not the desirable way of doing it, because, in practice, everyone will know.

Dame Irene Ward (Tynemouth)

To me, this debate appears to be quite involved. In what he has just said, was the Minister speaking with the authority and at the request of or after discussion with the Chamber of Shipping? If this has not all come forward suddenly, why were these details not settled before? I do not know the angle of the Chamber of Shipping on this, but I know that shipbuilders support the Bill, and I would have thought that all the details would have been settled before the Bill reached Report and Third Reading—or are we to understand from what the Financial Secretary has said that the new Clause is not acceptable?

I am all in favour of having as much light as possible thrown on these matters. Taking into account what shipping and shipbuilding mean in terms of invisible exports and our balance of trade problems, there are few hon. Members who are au fait with all these matters. The shipping interests have been tossed about from one Government Department to another, and I for one cannot remember which Minister is responsible for what. As there are so few hon. Members who are conversant with these matters, I am anxious that the Executive should not be able to impose a departmental view unless that view is acceptable to those who have the responsibility for the interests concerned.

I hope that the hon. and learned Gentleman will go into the matter in a little more detail in order to satisfy an ordinary individual like me, because I want to be sure that we get it right.

Mr. John Rankin (Glasgow, Govan)

I have a very narrow interest in this matter, but I hope that it is not in any way a bigoted one. The phraseology of the Bill is new to me in that it seeks to give the Government power to refrain from providing funds to help any shipbuilder to build a ship abroad. I take it that that is the basic purpose of the Bill.

My interest is confined largely to the interests of the shipbuilding area which I have the privilege to represent. In Govan the Government, fortunately for us, have not refrained from investing money. They have—

Mr. Speaker

Order. The hon. Gentleman must come to the new Clause, which asks the Treasury to publish the details of the test on which it refuses an application for grant.

Mr. Rankin

I am sorry. I assume that in a little while we may come to this part which I have reached ahead of the rest. Therefore, like a good sailor, I shall await the arrival of my ship at the proper port.

Mr. Ridley

With the leave of the House, I will briefly reply to the Financial Secretary's speech which aroused in me the feeling that he wanted a cosy little party with the Chamber of Shipping. I thought that his dodging of the issue, that these details should be regularly published, was rather a pity.

The representative of the Ministry of Technology, giving evidence to the Estimates Committee on the run-away figures for investment grants, dealing with this very point, at page 30, said: However, a company will have its case judged on published criteria—its transactions, where its profits go, the source of the ship, the crewing of the ship and other factors with a balance of payments implication. I draw attention particularly to the phrase "published criteria". It is not good enough for the Minister to say that he does not want to publish every alteration, because it would be too much trouble, when he is telling us that the criteria will be changed from time to time. They must be made public. I do not stick to the London and Edinburgh Gazettes, but it is important that this should not be a private matter between the Treasury and the Chamber of Shipping. They should be made public for all to see. After all, some shipowners may not be members of the Chamber of Shipping and there may be other interests, apart from the direct interests of the shippers.

I hope that the Financial Secretary will find some way to give an undertaking that these details will be made public at all stages and that there will not be changes made—although changes may not seem important to him, they may be very important to other people—which are not in some way brought to the notice of all concerned. Unless the hon. Gentleman can be more forthcoming in meeting the point made from this side, I feel it would be right to ask my hon. Friends to insist upon the Clause being inserted in the Bill.

Mr. Taverne

With the leave of the House, I should like briefly to deal with some of the points which have been raised.

First, the point raised by the hon. Member for Tynemouth (Dame Irene Ward). I am not aware of any dissatisfaction by the Chamber of Shipping about its being kept in the dark. Indeed, the circular was published specifically so that comments could be made on it and it could be improved. We are aware that in an operation of this kind there should be the most rapid consultation so that people are put to the minimum inconvenience.

We are aware that all the time there will be improvements of one kind or another which, in the light of experience, we will incorporate. This will be decided by the Executive. The form in which it is published will not detract from or add to the power of the Executive.

Dame Irene Ward

Does this also apply to the shipbuilders?

Mr. Taverne

Indirectly it affects shipbuilders, but it is directly the concern of the shipowners. It is an investment grant which goes to owners, not to builders. There are special grants which go to builders.

4.15 p.m.

Dame Irene Ward

I fully understand that, but there is a great alliance between shipbuilders and shipowners. As far as I know, the shipbuilders endorse the Bill. But when the Minister makes observations about the shipowners and the Chamber of Shipping I want to know more, because, at any rate in the Common Market, there is a difference between shipbuilders and shipping interests. I want everybody in on this. That is why I support the case put forward by my hon. Friend.

Mr. Taverne

I appreciate the hon. Lady's concern with the shipbuilders, and I am aware that they strongly support the Bill. However, I do not think there will be any difficulty about the shipbuilders being aware of the test, the details of which are not of immediate concern to them. The details about the balance of payments profit and loss calculations are of immediate concern to the person applying for the grant. It is important that he should know

I realise that Members of Parliament will be interested to see how the test is applied. As the original circular was published and issued, so from time to time, incorporating the changes which may be made, there will be a memorandum showing what the test is. It is desirable that this memorandum should, amongst other places, be available in the Library of the House so that hon. Members may satisfy themselves how the test is being worked.

I think that that will meet the point made by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). Therefore. I hope that he will not press the new Clause to a Division.

Question put and negatived.

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