Company Liquidity (Hansard, 27 February 1975)

§ 13. Mr. Hordern
asked the Chancellor of the Exchequer what further proposals he has to encourage company liquidity.

§ Mr. Healey
An estimated £1,800 million will be made available to the company sector in 1975 as a result of measures taken by the Government last autumn. I am, of course, keeping the situation under close review.

§ Mr. Hordern
Does not the Chancellor appreciate that these measures will do nothing for those companies which have large investment programmes and little or no corporate tax liability? Is not the situation that the only way to achieve success in reducing the great pressures which are now placed upon corporate liquidity is to abolish price and dividend control, because, if they are not abolished the unemployment rate will rise much faster than it has done already?

§ Mr. Healey
I have been interested to discover that many of those in business who pressed me to relax dividend control, as I did last November, have since complained that I removed the one excuse which they were able to quote to their shareholders for not increasing dividend distribution in the past year. Very much the same is true of price control. Many companies have been unable to take advantage of the relaxation of price control because of increased competitiveness inside industry. But one of the major reasons for the problems facing companies is the very rapid inflation, which I am sure the hon. Gentleman will agree is due largely to the insensate increase in the money supply under the last Government.

§ Dr. Bray
Will my right hon. Friend take steps to see that companies which are in a satisfactory liquidity position increase their investment?

§ Mr. Healey
That is certainly a problem. The House will be aware that during the periods when there was no dividend control and a high level of corporate profits, investment in the company sector was very much lower than last year, when there was dividend control, when there was price control and when severe tax controls were put upon the company sector. The question of 689 how to encourage, cajole and otherwise persuade companies which have money to invest that money is one with which the Government are dealing. In so far as they are unable to do so on their own or cannot be persuaded, the National Enterprise Board and the planning agreement system should assist.

§ Sir G. Howe
Does the right hon. Gentleman recognise that developments and extensions of Government control of that kind are the very instruments designed to discourage the investment which he seeks? In his first answer, when he was explaining that in present conditions competition renders the provisions of the Price Code and price control unnecessary, was not the right hon. Gentleman demonstrating the extent to which my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) was right to press for further relaxation and ultimate abolition of price control?

§ Mr. Healey
As to that last point, all that the right hon. and learned Gentleman is saying is that what his hon. Friend the Member for Horsham and Crawley (Mr. Hordern) said showed that this was irrelevant to the problems which we are now discussing. The right hon. and learned Gentleman suggested that the National Enterprise Board and assistance to industry under the Industry Act would damage investment. However, that was not the view which he held when he was a member of a Government who nationalised the Rolls-Royce company and injected a great amount of additional money into its aero-engine activities.