§ 14. Mr. Tom Boardmanasked the Chancellor of the Exchequer what is his estimate of the effect of the Budget on the cash flow of companies.
§ Mr. Maurice MacmillanThe cuts in corporation tax and S.E.T. and the reduction in Bank Rate will help the cash flow of companies; and company liquidity will be helped both by these changes and by the less severe limit on private sector bank borrowing. It is difficult, however, to quantify these effects precisely.
§ Mr. BoardmanDoes my hon. Friend agree that this additional cash flow will help companies, which have been starved of cash for so long, to invest in a way which will provide both more employment and profit?
§ Mr. MacmillanThis is certainly true, provided that this increase in cash flow is not used in meeting higher costs, including wage costs.
§ Mr. AlbuIs there not a danger of this country coming to rely too much on overseas investment and invisible exports while its productive capacity at home declines? Was not that the view of the Conservative Party at the beginning of the century?
§ Mr. MacmillanMy recollection does not extend as far back as the hon. Gentleman's. It is fair to say that a higher proportion of our total import bill is now being met, taking one year with another generally, by exports than at any previous time in our history. The effect of overseas investment and earnings producing foreign exchange was far greater in the last century than in the last decade.
§ Mr. BarnettGiven this increase in companies' cash flow, is it not a fact that the forecast rate of industrial investment increase in still i per cent.? Are not the Government prepared to do anything to increase it?
§ Mr. MacmillanThat question has already been dealt with several times this afternoon. The Government have taken some measures in the Budget and these will have their effect. For the rest, it is the expectation of profit, and this cannot be achieved if companies are expecting to have to pay out the extra cash flow in higher and increasing wage levels.