§ 2.28 p.m.
§ LORD CASEYMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ [The Question was as follows:
§ To ask Her Majesty's Government whether they can elucidate the apparent conflict between—
- (a) the statement in the Chancellor of the Exchequer's Budget speech that restrictions on the future availability of foreign exchange would be confined to the non-sterling area; and
- (b) the implication in the letter, dated April 8, of the First Secretary of State to British firms with overseas interests that such restrictions would not be confined to the non-sterling area; and further that all overseas firms should remit back to this country all funds not immediately required in their overseas business;
§ LORD SHEPHERDMy Lords, there is no conflict of policy. The statement that was made by the Chancellor of the Exchequer referred specifically to the Exchange Control Act, 1947, which applies only to the non-sterling area. The letter of my right honourable friend the First Secretary of State did two things. First of all it called attention to the need for greater effort in exports; and, secondly, it was intended to supplement the exchange control measures by appealing to companies to exercise restraint in embarking on investment projects overseas and to endeavour to increase the remittance to this country of earnings and surplus funds. This appeal applied to the non-sterling area and to the sterling area. The investment of capital from this country to sterling area countries remains free and at the discretion of the investor, but in the present circumstances we cannot afford to invest overseas, even in the sterling area, if the yield to the balance of payments is small or long delayed. My right honourable friend's letter asked investors to postpone or eliminate projects of this sort. I am sure that our friends in the Commonwealth will understand that the basic elements for the development of Commonwealth trade lie with a sound United Kingdom economic base.
§ LORD CASEYMy Lords, in thanking the noble Lord for his reply, which, if I may say so with respect, does not entirely eliminate some of the doubts which are in my mind and which prompted my Question, perhaps the noble Lord would allow me to pursue the subject a little further. Would the noble Lord not agree that one of the important features—in fact, one might almost say one of the last remaining features—of membership of the sterling area resides in the fact that it offers the advantage of an absence of restrictions on the outflow of capital from this country to the sterling area countries—in other words, in an absence of exchange control? The First Secretary's letter of April 8 certainly appeared to me to indicate some element of possibility of exchange control being 454 operative in the future. Further, does the noble Lord realise that the total of the sterling balances of the sterling area countries at the end of 1964, amounted to the large total of £2,400 million and that it is possible—I do not say probable—that a hint that exchange control might become operative might well result in a running down of this large total of funds in London of sterling area countries? That would at least not be a help to the point that Her Majesty's Government are anxious to pursue, which is to maintain and improve their overseas balance of payments—
§ THE LORD PRIVY SEAL (THE EARL OF LONGFORD)My Lords, I am extremely sorry to intervene, but does not the noble Lord feel that perhaps his question has been of the necessary length?
§ LORD SHEPHERDMy Lords, I am sorry that I have not been able to satisfy the noble Lord, but if he will carefully look at what I have just said he will see that the letter by my right honourable friend was addressed to a large number of companies and did not lay down, or even suggest, that there would be exchange control between this country and the Commonwealth.
§ LORD BYERSMy Lords, is the noble Lord aware that there is a serious conflict here in that the First Secretary has asked companies to remit funds from overseas, while at the same the Chancellor of the Exchequer is imposing penal taxation, which means that they will be forced to keep funds overseas to develop their operations?
§ LORD SHEPHERDMy Lords, the second part of the noble Lord's question goes quite beyond the original Question. I repeat, that there is no intention of bringing exchange control to Commonwealth countries.
§ LORD CARRINGTONMy Lords, is the noble Lord aware that in certain countries overseas there is growing up a feeling that investment by this country does more good to this country than it does to the country in which it is invested, and that the consequence of the sort of statement made by the First Secretary, referred to in paragraph (b) of Lord Casey's Question, may be to make the operations of our companies overseas more difficult, and consequently 455 do evil to the balance of payments rather than good?
§ LORD SHEPHERDMy Lords, the noble Lord must not jump to conclusions. May I say to him that, if he has not already seen it, I will certainly see that he has a copy of the letter of the First Secretary. I am sure that he will agree—in fact, I think he did in his speech in a recent debate—that if we are to help in the development of Commonwealth trade, which we all believe in, the first essential is to obtain a sound economic base, something which we have not had since the last war.
§ LORD CARRINGTONMy Lords, did the First Secretary not say in his letter that overseas firms should remit back to this country all funds not immediately required in their overseas businesses?
§ LORD SHEPHERDNo, it is nothing like that at all. What he said was that the companies are asked to examine their policies to see whether or not those sums which are surplus and are not immediately required can well be returned to this country, and therefore help the balance of payments.