HC Deb 14 November 1974 vol 881 cc564-8
3. Mr. Skinner

asked the Chancellor of the Exchequer whether he has any plans to set up an investment bank.

24. Mr. Cryer

asked the Chancellor of the Exchequer whether he intends to introduce legislation to enable an investment bank to be established.

26. Mr. Russell Kerr

asked the Chancellor of the Exchequer whether he has any plans to set up an investment bank.

27. Mr. Norman Lamont

asked the Chancellor of the Exchequer whether the Government have any plans for the creation of an investment bank.

29. Mr. Moate

asked the Chancellor of the Exchequer whether he has any plans to set up an investment bank.

The Chancellor of the Exchequer (Mr. Denis Healey)

Not at present. I believe that any immediate need for a new source of investment finance for industry will he met by the plans for a major expansion of Finance for Industry, which I mentioned in my Budget speech on 12th November. The National Enterprise Board will have its rôle at a later stage.

Mr. Skinner

Does my right hon. Friend agree that the Finance for Industry scheme is akin to the previously proposed investment bank and that it was conceived out of a strike of capital? Will he bear in mind that, on the day he announced that nationalised industries were to be told to deprive themselves of their social responsibilities, private industries were being bailed out in this fashion to fuel the Aims of Industry and the Tory Party, because there is no planning agreement on unemployment? Will my right hon. Friend guarantee that no category 1 firms will be assisted by the Finance for Industry bank?

Mr. Healey

My hon. Friend totally misunderstands the nature of Finance for Industry. Finance for Industry is the new name for two bodies which were set up in 1945 to operate entirely within the private banking system. Considering the criticism which my hon. Friend and many others have levelled at insurance companies and pension funds for not giving sufficient investment to productive industry in the past, I had hoped that he would welcome the fact that an instrument has been found for directing funds to productive investment in industry in the future.

Mr. Lamont

Is it not true that no banking system in the world—not even in Japan—provides long-term capital on a substantial basis? As the Prime Minister in his speech to the TUC said that he wanted to see a buoyant stock market financing industry, would it not be much simpler and less tortuous for the Government to repeal some of the anti-investment measures they have taken and, for example, further relax dividend control?

Mr. Healey

No, Sir. The hon. Gentleman should be aware that in the past British banks have played a far smaller rôle in providing investment finance for industry than have banks in countries which compete successfully with us like Germany and Japan. He should welcome the fact that banks have been used much more in the last few years as a source of investment finance. In reply to the latter part of the supplementary question, the hon. Gentleman should be aware of the remarks of Mr. George Loveday yesterday about the important rôle the Budget will play in reactivating the capital market in Britain.

Mr. Cryer

Will my right hon. Friend confirm that the Finance for Industry investment programme will increase, as a result of his Budget, from £50 million a year approximately to £500 million a year? Does he accept that this will effectively castrate the National Enterprise Board and that it represents a significant victory for the City? Does my right hon. Friend also accept that FFI finance should go to small and medium-sized firms and not to category 1 firms?

Mr. Healey

No, Sir. With respect I am surprised at my hon. Friend, because he and many who share his general views have argued for some years that the banks should contrive to direct more of their resources towards investment in productive industry. That is precisely what is envisaged under Finance for Industry, which is a private organisation for which the Government provide no support. As to Government finance for industry, the Government propose, as I made clear in my Budget speech, to make use of the National Enterprise Board to provide help for industry in return for a suitable share of the equity, if that seems appropriate, and on other conditions which have been laid down in the White Paper "Regeneration of Industry".

If, as I know he does, my hon. Friend puts full employment first, he must recognise that there is no means of avoiding a large increase in unemployment in the immediate future unless steps are taken in the immediate future to improve finance for industry, and there is no chance whatever of the National Enterprise Board fulfilling that rôle in the time scale required.

Mr. Moate

Has the Chancellor seen the forecast that the new funds will have to be lent at a rate of 15½ to 16 per cent.? Does he agree that that sort of rate will have to be charged? If so, is it not clear that, with such low returns on capital, industry at present could not possibly use those funds to any great extent? Would not confidence have been restored more promptly by reducing the level of corporation tax and allowing more appropriate prices to be charged through the price control mechanism?

Mr. Healey

The hon. Gentleman will be aware that the measures I announced in my Budget speech will increase the return on capital available to industry and that those measures have been widely welcomed inside industry. I believe that there will be a widespread demand for the funds made available through Finance for Industry. These funds will be borrowed on very fine terms and on-lent on fine terms. The terms will be commercial terms, and I have no doubt that industry will take advantage of them.

Miss Margaret Jackson

Will the Chancellor tell the House why he believes that the money being made available through Finance for Industry will help the unemployment problem this winter or next more effectively than would such help channelled, for example, through the provisions of the Industry Act 1972? Will my right hon. Friend also say why he feels that making these funds available will surely promote investment and job expansion in ways which similar measures in 1973, 1972, 1971 and back into history did not?

Mr. Healey

My hon. Friend is mixing up several separate matters. I made clear in my Budget speech that I am prepared to expand the funds available under the Industry Act for helping industry in the immediate future. I said that on Tuesday, and I regret that my hon. Friend does not seem to recall my announcement. Assistance under FFI will be made available to industry for productive investment, which I am sure my hon. Friend welcomes because I know her views on that matter.

The question how industry in general will make use of the improved financial conditions provided by the Budget is something which I shall watch as carefully as will my hon. Friend, but she will be aware that in every respect the concessions made both under the Price Code and under the new system of dealing with stock appreciation are carefully calculated to help industry in ways which are most likely to encourage productive investment.

Mr. Pardoe

Is the right hon. Gentleman aware that in his discussions with the managers of public service pension funds about these finances the Governor of the Bank of England and his staff threatened that the Government might remove some of the tax advantages from the pension funds unless they lent money through FFI? Is the right hon. Gentleman aware that those threats were being made, and has he authorised them?

Mr. Healey

I am not aware of those threats, and I am not prepared to accept that they were made without investigating the matter, but I will certainly do that.