§ 6. Mr. Tugendhatasked the Chancellor of the Exchequer what proposals he has to increase British direct investment overseas; and whether he will make a statement.
§ Mr. BarberI am very aware of the importance of overseas investment as providing a basis for future income for this country and as an essential part of overseas aid and development. But, obviously, there are limits to what we can afford to finance from the reserves in present circumstances.
§ Mr. TugendhatI welcome that statement. Is my right hon. Friend aware that the increasingly severe restrictions imposed, perhaps unavoidably, under the 210 last Government have made it very difficult for British-based international companies to hold their own in international industry and for them to match the growing take-over of British industry in Britain? Now that the balance of payments is in surplus and apparently likely to remain so for some time, is not this the time to ease these restrictions to some degree?
§ Mr. BarberI take my hon. Friend's point. As I think he knows, we are pledged to consider the whole question of corporate taxation. One of the aspects of this is the effect of the changes which were made in 1965 on overseas investment. We are also studying ways of encouraging private investment in the developing countries. This was one of the matters which I discussed with my colleagues in the recent Commonwealth Finance Ministers' Conference.
§ Mr. DuffyNot only because or the improvement in the balance of payments but also because of present developments in the direction of economic international integration, should there not be some relation of current restraints, otherwise British overseas investment will suffer?
§ Mr. BarberThe House will appreciate my own sentiments in this matter from the answer I gave to the Question which is on the Order Paper. The simple fact is that inevitably—the whole House will, in fairness, agree—there are limits to what we can afford to finance from the official reserves in the present circumstances. Having said that, of course I take note of what has been said.
§ Mr. BarnettMay we take it that the Chancellor will not encourage any further capital outflow? If through his tax measures he is going to encourage further outflow, how will he balance this, as he will also be repaying debts in the short and medium term? Does this mean that we will have even heavier deflation than we have at present?
§ Mr. BarberOne of the constraints—I not want to rub this in, but as the hon. Gentleman has himself raised it and as my hon. Friend has reminded me I must now mention it—is that we inherited a very considerable increase in the short- and medium-term debt. This is obviously one of the major constraints 211 upon the Government in almost everything they consider in this field. I am immensely grateful to the hon. Gentleman for raising the point.
§ Mr. EmeryHas not the balance of payments been brought to its present state to a very considerable extent by the amount of the invisibles which are the return on our overseas investments? If my right hon. Friend desires a deflationary position, is not this one of the best ways of obtaining a long-term gain?
§ Mr. BarberMy hon. Friend is right Everyone in Britain has cause to be grateful to those who were wise enough in the past to build up our massive overseas investments, because the contribution which is made to our invisible earnings by interest, profits and dividends from private investment overseas is very considerable.