HC Deb 08 February 1971 vol 811 cc15-8
24. Mr. Sheldon

asked the Secretary of State for Trade and Industry what further estimate he has made of the level of industrial investment in the first quarter of 1971.

Mr. John Davies

Information about investment intentions is collected only for calendar years and not for quarters. Statistics of actual investment will be collected only after the quarter has ended, and will not be available until June.

Mr. Sheldon

Since the figures of the Secretary of State's Department show that this year investment will decline in manufacturing industry for the first time since there was last a Conservative Government, when will the Minister do something about this most critical issue and, in particular, reconsider the effects of the change from investment grants to allowances? Whatever may be said in favour of that change, which is very little, it was obviously an appalling piece of economic mistiming. What will the Minister do about that now?

Mr. Davies

The Government have in no way lost confidence in the rightness of their decision to change from investment grants to allowances. It is undoubtedly true that the state of investment at the moment is far from satisfactory. This is attributable far more to the uncertain state of the economy, largely promoted by the inflationary level of wage settlements.

Mr. Michael Foot

Would the Minister agree that the abolition of investment grants will inflict upon the British Steel Corporation an injury of about £100 million a year? How does he propose to make that good?

Mr. Davies

The British Steel Corporation will lose investment grants, as will other sections of industry. On the other hand, they will have the opportunity to enjoy the advantage of investment allowances.

Mr. Sheldon

There is none.

Mr. Davies

The initial allowances—

Mr. Sheldon

There are no investment allowances.

Mr. Davies

Yes, there are. The steel industry will have this opportunity, as will the rest of industry. It must be for the industry to be able to grasp this opportunity by becoming profitable.

26. Mr. Barnett

asked the Secretary of State for Trade and Industry what action he is taking to improve the level of industrial investment.

Mr. John Davies

We are seeking to improve the climate for growth and investment in the long term by reducing taxation, providing tax allowances for investment and curbing wage inflation. Substantial addtional incentives are available in the Development Areas.

Mr. Barnett

Where are the funds to come from for new industrial investment in the short term? The Minister will be aware that the Prime Minister has said that he is not encouraging price increases, so they are not to come from that. There is no relaxation of the money squeeze. On the best interpretation of the new policy, there will be no increase in the cash flow. Surely the Minister needs to take positive action. What does he propose to do to increase industrial investment?

Mr. Davies

Apart from the taxation reductions which have been made by the Government, the hon. Gentleman will agree that funds are not unavailable to undertake investment. Uncertainty is the problem facing investment, and that uncertainty is spurred by inflation.

Mr. Bruce-Gardyne

Would not my right hon. Friend agree that the decline in industrial investment is very largely a reflection of the more serious decline in corporate profitability over the last four or five years? Since hon. Gentlemen opposite constantly clamoured for this decline in corporate profitability and their right hon. Friends on the Front Bench constantly legislated to achieve it, would it not be more proper if they welcomed this decline in industrial investment?

Mr. Davies

Certainly they should welcome it if it represents the result of their own endeavours, as it appears to. The share of trading profit before tax has markedly reduced over the last five years. Undoubtedly this is one of the factors propelling uncertainty.

Mr. Dell

On the subject of uncertainty, will the right hon. Gentleman make a further statement about the position of firms which, in the midst of major projects, suddenly found on 27th October that the whole basis of their investment planning had been changed? Will he adhere rigidly to 27th October, or will he assist these firms at all?

Mr. Davies

The question of the exact use of the date is for my right hon. Friend the Chancellor of the Exchequer. As for the rigidity involved, it was concealed to no one that the Conservative Party's views on the subject were that incentives to investment should be related to the tax system and should not be in the form of cash hand-outs.