HC Deb 16 February 1971 vol 811 cc1589-91
11. Mr. Barnett

asked the Chancellor of the Exchequer what effect he estimates his taxation and monetary measures will have on industrial investment in 1971 and 1972.

Mr. Maurice Macmillan

It is not possible to make a precise estimate. The Government's economic policies as a whole are designed to help create a climate favourable to investment.

Mr. Barnett

Would it not be true to say that the Government's economic policies as a whole are having disastrous effects on industrial investment, as the figures from the Secretary of State for Trade and Industry show? In view of the serious consequences for the years ahead, have the Government still no intention of changing their policies?

Mr. Macmillan

The latest survey of investment intentions shows that firms expect a small fall between 1970 and 1971 and no great change between 1971 and 1972. So the investment position is by no means satisfactory. In so far as it is exacerbated by shortage of cash, my right hon. Friend's reduction of corporation tax and other changes have helped. But, as the Treasury Memorandum to the recent Court of Inquiry made clear, one of the most adverse effects on investment is caused by the shortage and narrowing of profit margins, and this again is very much the Government's concern.

Mr. Hordern

Is it not extraordinary that the Opposition should dare to put down a Question on the effects of taxation on industrial investment, since they increased the rate of corporation tax from 35 per cent. to 45 per cent., whereas the first action of my right hon. Friend the Chancellor of the Exchequer was to reduce the level?

Mr. Macmillan

My hon. Friend is perfectly right. One of the difficulties has been the increasing rate of taxation of profits under the previous Government.

Mr. Roy Jenkins

Does not the hon. Gentleman agree—I am sure he must—that many factors other than taxation bear upon the level of investment? Could he tell us when the survey of investment intentions last showed a fall?

Mr. Macmillan

I have not got that information. Indeed, it is another question. Among other factors which affect investment is the rate of inflation, which is increased by the extremely inflationary wage demands which have come about, particularly since the controls were abandoned by the right hon. Gentleman just before the General Election.