HC Deb 10 July 1975 vol 895 cc725-8
9. Mr. Hooley

asked the Chancellor of the Exchequer what further steps he proposes to take to stimulate industrial investment.

Mr. Joel Barnett

The best way of encouraging investment is to get the rate of inflation down, and in our discussions with representatives of the management side of industry my right hon. Friend has emphasised that the Government will expect companies to seize the opportunity to invest as we bring inflation under control.

Mr. Hooley

Is not my right hon. Friend being somewhat naive in supposing that we will get investment merely by bringing down inflation? Does he agree that there have been periods of no inflation, gross inflation and moderate inflation and investment has still not taken place? Docs he further agree that the question of industrial investment is far more fundamentally important to the economy of the country than inflation?

Mr. Barnett

It is a fact that one of the major reasons why companies do not invest is the uncertainty created by high rates of inflation. It is that uncertainty that causes a fall in investment. [Interruption]. There is no point in directing investment if the investment does not produce goods than can be sold.

Sir John Hall

Would not the Chief Secretary agree that we already have some of the best investment incentives in the world? Would he not further agree that with present production capacity under-utilised and likely to be further under-utilised in the coming months, any investment incentives given in addition to the existing ones should be directed towards growth industries?

Mr. Barnett

Investment incentives are already at a pretty high level. The important consideration is that during the next 12 months it should be clear to industry that the opportunities for investment are there. We have done a great deal to provide finance for industry to creat that investment.

Mr. Heffer

Will my right hon. Friend forgive me, because I am a personal friend of his—

Mr. Russell Kerr

You were.

Mr. Heffer

Would not my right hon. Friend agree that he is talking absolute nonsense? Is he aware that we had three and a half years of a Tory Government with the then Prime Minister trailing the country to CBI lunches and everywhere else saying "Look, we have given you all the incentives you need. Please invest in industry." Industry did not invest. That argument is absolute rubbish.

Mr. Barnett

May I tell my personal friend that I would not dare to accuse him of talking nonsense, even if he does so from time to time. I have constantly said that investment incentives of all kinds would not of themselves be sufficient to create the necessary increase in manufacturing investment. What is needed is the right climate.

Mr. Pardoe

Is the right hon. Gentleman aware that in the opinion of many British business men it is the lack of continuity between one Government and another over major economic policies and aims which is undermining investment intentions? Will he give reasons why investment has been so much higher in West Germany, where there is continuity of Government policy from one Government to another, than in the United Kingdom?

Mr. Barnett

I could give the hon. Gentleman a great many reasons why investment in West Germany is higher than ours, but it would take far too long to answer now. I doubt whether it has anything to do specifically with continuity. It has to do with bad policies throughout the years.

Mr. Cormack

Does the right hon. Gentleman agree that the greatest incentive to investment will be provided if the Government drop their threats of nationalisation and that this will create a climate of certainty for which industry is waiting?

Mr. Barnett

No, Sir.

Mr. Cronin

Does my right hon. Friend agree that the best stimulus for investment, both private and public, is confidence among the business community, both overseas and at home? Does he agree that the Chancellor's statement last week was the best stimulus to that confidence that there has been for a long time, and that that confidence will continue only if the Chancellor's new policy is rigidly enforced?

Mr. Barnett

I entirely agree with my hon. Friend's sensible statement.

Mr. Nott

Does the Chief Secretary agree that the greatest possible disincentive to industrial investment at this time would be a tightening of price controls, and that if the public sector pre-empts major proportion of our national financial resources it will be impossible for them to be available to the private sector?

Mr. Barnett

If the hon. Gentleman is saying that there should not be any kind of price controls, I disagree with him. As to how much there will be, I am sure he will be able to wait until tomorrow.