HL Deb 08 December 1969 vol 306 cc288-302

2.56 p.m.

LORD BESWICK

My Lords, the purpose of this Bill is to give effect to the Government's decision, announced in this House on October 21, to seek power to extend the operation of the import deposits scheme for a further period of twelve months from December 5, 1969. The powers proposed are precisely those given under the 1968 Act except that the rate of deposit is reduced from 50 per cent. to 40 per cent. The power to collect the deposit under the 1968 Act expired at midnight on December 4, 1969. It may be of interest to say that by that time about £1,120 million had been collected and £580 million repaid. But for the necessary Ways and Means Resolution, which covered the situation that exists until the passing of this Act, £540 million would have been repaid over the next 180 days, at the rate of £90 to £100 million a month, without any offsetting new deposits. The financial effect of this Bill will be to reduce the rate of repayment from the £90 to £100 million a month to a net rate averaging some £20 million a month between December, 1969, and May, 1970.

Since the 1968 Act went on to the Statute Book there has been a very marked improvement in the financial position of our country. This is confirmed by the figures published to-day for the balance of payments surplus for the third quarter of the year. But even with this improvement, which has set in during 1969, it would be exposing the convalescent patient to an unnecessarily cold wind if he was exposed to this sharp blast of repayments at the rate of £90 to £100 million a month. This, then, is one justification of the renewal of the import deposits scheme, that it avoids any abrupt impact on our reserve position.

Equally, if not more important, the continued requirement of a 40 per cent. deposit means that the control of credit expansion is assisted and not frustrated. Sometimes in the course of economic policies, extending back beyond the lifetime of the present Administration, we have had a situation in which fiscal measures have run counter to monetary policy. Here we have a proposal which ensures that they run in harmony.

There is another good, complementary, reason for the Bill: it directly discourages certain imports. By the nature of things it is not possible to quantify this discouraging effect but available evidence suggests that the previous rate of increase of imports has been markedly slowed down by this deposits scheme. In any case, where an importer decides that, despite the deposit, he must buy foreign goods, there is a consequential monetary advantage to the economy.

I believe the case is made for the extension of the deposits scheme, at this reduced rate and for a limited period. But, of course, there are arguments against the proposal, and maybe I could help the noble Lord, Lord Erroll of Hale, and save the time of the House if I dealt with some of them in advance. First, there is the argument that undertakings were given when the scheme was first put before the House for approval in 1968 that it would be temporary. That is true. It was intended to be temporary and it is intended to be temporary. I know of no dictionary which defines "temporary" as one year and "permanent" as two years. I agree that the original intention was to limit the scheme to twelve months, but the effort to shift resources into the export market has been harder than was originally estimated and results have been slower in making an impact on the balance of payments figures. I put it to noble Lords opposite (and I see before me now the hardest-headed and clearest-minded members of the Opposition) that it would be just plain silly to deny ourselves this further use of the deposits scheme until our recovery was more firmly established.

I might add that our friends abroad recognise that this is so and recognise it more clearly than do some compatriots at home. Other countries, fellow members of EFTA and the I.M.F., accept the fact that we are applying this scheme because, and only because, of the balance of payments position, and that it is in their interests and in the interests of international trade generally, as well as in Britain's interests, that we get that position right beyond doubt—and beyond the doubt of the currency speculator. Given that, I am sure that the noble Lord, Lord Erroll of Hale, will not play politics in this House and talk about broken international commitments.

There is another argument, more fairly put, and which has to be met; namely, that lack of liquid resources, and credit restriction generally, will result in complete company failures in some cases and inadequate capital development elsewhere. This argument has to be taken very seriously. But it is a matter of judgment, and in a wider context than this one measure. In the New Year there will be additional strains. I know, arising from tax demands, but the total evidence available does not suggest, in the considered judgment of the Chancellor and his advisers, that now is the time to revise policy on credit restraints.

There is one further point that I should like to make before inviting your Lordships to give this Bill a Second Reading. There is probably room for more than one opinion upon the merits of this import deposits scheme but I hope the noble Lord opposite will be able to join with me in paying a tribute to the Customs and Excise Department who have had the responsibility of administering it. The procedures adopted were simple and they have been successful. East desposit is repaid separately from a Customs office at Southend-on-Sea. Some 25,000 orders are sent out each week, and from the beginning of the scheme to the beginning of this month 650,000 have been sent out. About 350 early repayments in respect of goods which are exported are despatched each week, and usually within one week of notification that the goods have in fact been exported.

It is not often that the victims of imposts find it possible to pay tribute to the officers responsible, but individual firms, the C.B.I. and other trade organisations have been complimentary. The British Chemical and Dyestuff Traders Association, for example, said: I need hardly tell you what the views of this Association are about the scheme in general … but everyone has been very impressed with the prompt and efficient way in which repayments have been made …". In view of the Christmas spirit, I hope that, on that charitable note, your Lordships will agree to give this Bill a Second Reading.

Moved, That the Bill now read 2a—(Lord Beswick.)

3.5 p.m.

LORD ERROLL OF HALE

My Lords, in rising to take part in the debate on the Second Reading of this Bill, I should begin by declaring a personal interest, as I did during the Second Reading of the Bill a year ago. I am chairman of a company which imports a great deal of Swedish engineering products and we are considerably affected by the present Bill, as we were by the last. However, I should hasten to add that anything I say this afternoon has nothing to do with this private interest, although perhaps I speak with rather greater knowledge of the subject than might otherwise be the case. In regard to my own company, we had made proper arrangements to deal with the import deposit financial problems. We have imported more than ever in the last twelve months and our Swedish principals have bought far more from Britain than they have ever done in the past. So, from the point of view of my personal interest, I assure your Lordships that I have no axe to grind at this Box this afternoon.

The noble Lord, Lord Beswick, in an admirably brief speech, sought to answer my arguments before he had heard them—quite a legitimate tactic when you have very little to say in support of your case, but it would have been more appropriate if he had waited until he had heard my speech and then answered the points when he came to wind up. However, I do not wish to spoil his fun. He will find that there are a number of points which he did not succeed in anticipating and to which I hope to receive full and adequate answers before your Lordships grant a Second Reading to this Bill.

First of all, the noble Lord, Lord Beswick, referred to the temporary nature of the scheme and said that "temporary" did not necessarily mean one year, nor did "permanent" mean two years. But the noble Lord might refresh his memory with what he said on the occasion of the Second Reading of the previous Bill, on December 5, 1968. In opening the debate then and giving details of the Bill, he said: It fulfils the outline"— given— the 50 per cent. rate of deposit, which may be reduced but not increased by Treasury Order; the repayment period of 180 days; and the twelve months maximum life of the Scheme, which may be reduced, but not increased …".—[0FFICAL REPORT, 5/12/68; col. 309.] Not the Bill, but the scheme. The scheme was to have a twelve months' maximum life. There was no question of the word "temporary". So much for what the noble Lord, Lord Beswick, said in your Lordships' House.

On Committee stage in another place, on December 3, 1968, the Financial Secretary, referring to the subsection dealing with the period of the Bill, said that the Act shall cease to be in force at the expiration of a period of one year beginning with the date on which this Act is passed, or at such earlier time as the Treasury may by order …"—[OFFICIAL REPORT, Commons, 3/12/68; col. 1484.] decide. It is clear from what the Ministers in both Houses said at the time that it was their intention that this scheme should last for a maximum period of one year. That was why it was called a temporary import deposits scheme, and industrialists and traders in this country thought that it would last for the maximum period of one year. But we are now to have a second year, and doubtless we shall be told that it may not last the whole of the second year, only to Lind at the end of that year that we get the Mark III Bill.

That may not matter very much in this country. The noble Lord said that no firms are likely to go bankrupt or be unable to pay up on due dates. It is not that which really concerns me; it is the effect abroad. The noble Lord made some reference to the understanding co-operation of our partners in Europe, but I can assure him that the continuation of this twelve-months measure has caused a considerable degree of disillusionment abroad. At the time of the introduction of the scheme, a number of my friends in Europe, not only in Sweden but also in France, Germany and Switzerland, and some who came to see us in England at the London Chamber of Commerce, asked about this import deposits scheme, and we were all able to say—and I make this point strongly because I did so a great deal myself—that this was a scheme which was going to last for a maximum period of one year; that the British Government themselves had said so.

I think noble Lords know me well enough to know that I always defend the British Government abroad, and whenever I can at home, in front of foreigners. I felt completely confident that the maximum life of the scheme was twelve months. So it was difficult when I saw visitors here from Europe, or when I saw them in their own countries, who said: "Oh, your Government will think up another scheme as soon as this one has run out." I said: "No; I do not think so; not this time. I have listened to Ministers, and I have heard their assurances. This time I am sure that the scheme is only going to last for a maximum period of twelve months." They said: "Freddie"—those who knew me well enough—"you will believe anything that your Government tell you. There will be something else in its place." I said, "No; I am quite sure this time that they mean what they say."

So the noble Lord has, in fact, let me down personally by his bland assumption that "temporary" does not mean twelve months but can mean any period that you like. It does not matter that I feel that I have been let down in my defence of the British Government abroad; that is of little concern. What really matters is that the British Government, for continuing this scheme without any previous warning or notice, are slightly more in disrepute than they were before, in view of the categorical assurances that were given at the time of its introduction, two examples of which I have already quoted to your Lordships. That does a lot of harm. It induces scepticism about the intentions of the Government.

A week or two ago we were discussing the effect of the £50 travel allowance. I do not intend to refer to that to-day, except to say that it produces a bad effect abroad. it does not make much difference to the balance of payments; and I do not think that this scheme makes much difference to the balance of payments. It is the fact that Her Majesty's Government changed their minds. Having given what everybody understood to be categorical assurances, they blandly throw them overboard and put forward arguments about keeping international money speculators at bay, strengthening the pound et cetera. I regard it as a very unfortunate affair that Her Majesty's Government should have taken this step at the present time, when there was, in my opinion, no need to renew the scheme at all.

Indeed, the difficulty is to find out whether the scheme has been of value or not. It has certainly been an inconvenience to many people in this country. It has probably caused difficulties to some small importers. But the Government themselves are not sure. They say that while it is impossible to quantify—and I accept that it is—they seek authority on the basis of the fact that imports did not grow as much as they have done in previous years. But then imports are unlikely to have grown in the last 16 months because of the Government's credit squeeze and restraint on the money supply. That in itself was sufficient to damp down the demand for imports, and even for domestically produced goods. At the outset of the scheme the Chancellor of the Exchequer on November 22, 1968, in the other place, said: The scheme is not one which can or should be kept in being for more than a limited period, but it will have a powerful effect over the next few months… But his own Financial Secretary, Mr. Lever, reported in Hansard six days later, said: The whole point of the scheme is that it is to have a marginal effect. So Ministers were not clear about it at the time. As the months passed, it was interesting to see again this curious dichotomy of view. The Chancellor of the Exchequer, at a meeting with insurance officials in May, 1969, reported in the Financial Times, said: The Imports Deposit Scheme without producing dramatic results has by no means been without its effect"— a rather elegant form of double negative, of which he, as a great literary expert, will appreciate the full value.

So, as the months went by, it was interesting to see that it was not clear whether the scheme was having much of an effect or not. If it was not having much of an effect, then there was no point in continuing it; but if it does have an effect, then that ought to have been brought out. British Industry Week, as opinion was crystallising last summer, said on May 30, that: As far as can be determined the effects of the scheme have been minimal. A wide cross-section of industry quizzed only last week could find no evidence of imports being curbed since the scheme's introduction. It has certainly caused difficulties, but no more than that. Then, as one goes on through the year, one finds that the Board of Trade Journal—surely a publication which the Government accept as authoritative—say on August 6, 1969, that the scheme may have affected the level of certain imports among industrial materials. There is no clear evidence of any marked effect, however, since imports of semi-manufactures, which were largely subject to the scheme, increased a little by volume between the second half of 1968 and the first half of this year. Perhaps I may be allowed to quote from the London Chamber of Commerce—and here I must declare an interest as one of its Vice-Presidents. In its News Letter of October 24 of this year it said: The scheme has, however, involved importers in special and expensive financial arrangements which in some cases will have been passed on to the consumer in the form of increased prices. But the evidence we have been able to obtain from a broad cross-section of importers is that the scheme, while it has had some initial success in checking imports, has not over the period of its operation resulted in a material reduction in the volume of goods chargeable to the import deposit. So it is very doubtful whether the scheme has been worth all the pain and effort that has gone into its conception.

While I should be the last to say anything against the Board of Customs and Excise, for whose body of officials I have a great admiration, nevertheless, I do not think they need have unctuous praise, because they are merely doing what they ought to be doing. Indeed, they should repay these monies properly: and I wonder whether they would have been so prompt if it had not been for the great outcry at the time that they would not be prompt. Grave fears were expressed by commerce and industry that there would be substantial delays in repaying these import deposits by the time the repayment became due, because so many people have had experience of customs and excise delays in repaying deposits of customs duty in the normal course of business. So if we are to thank them for doing what they ought to do, we should also remember that they probably did it because they knew that there would be a very proper public outcry if they hung on to the money a day longer than they should have done.

We turn next to some of the temporary effects which have been so unsatisfactory. One of those has been the way in which interest has been denied to those who have had to make the deposits. I submit to Ministers that it is a very bad precedent for the Government to establish; namely, the compulsory collection of deposits without the payment of any interest. Noble Lords may remember that with post-war credits there was for a long time an outcry because no interest was payable on those that were not repaid. That was put right in the Budget of 1959. since when the deferment of payment of post-war credits has been acceptable. The Government pay interest on money held by the Board of Trade in connection with the insolvency of companies; the Government pay interest on tax reserve certificates. It is a well accepted and proper principle that when the Government hold monies owned by the individual the Government pay a rate of interest. I am not suggesting that it should necessarily be the going rate of interest, but it does acknowledge the principle that interest should be paid.

It is a particularly bad feature of this scheme that these monies should be held without payment of interest. It is particularly exacerbating for those firms concerned when interest rates are so high. I am not making that as a principal point; I just think that it is a bad principle that the Government should take money from people and not be prepared to pay interest. It means that people, recognising how manifestly unfair it is, may be tempted to take it out of the Government in other directions; they may be tempted into delaying paying company taxation by a little longer than they would otherwise do. They say: "You take our money away and will not pay us interest, so we will hold on to what is due to you for as long as we can before you take us to court."

This is where the scheme is so bad. It is destroying what remains of mutual confidence between individuals and Government departments. I have seen it stated in a Sunday newspaper that the best way of living to-day, if you are a company, is to find a means of tax dispute of a sufficiently big sum of money and to take it to court. So long as the matter is before the courts no money is payable and no interest is payable. In fact, if the sum of money involved is large enough, it costs less to bring the case up to your noble Lordships' House for a final decision, pay the legal fees and have use of the money, than to surrender the money earlier to the Inland Revenue, thus losing the interest on it. This is the state of affairs which is induced by the unfairness of Her Majesty's Government in refusing to pay interest.

If that were not bad enough, where the Government has been so petty in this matter (it is perhaps a rather technical point, and I hope I am not taking up too much of Your Lordships' time) is that they said at the inception of the scheme that if foreign exporters to Britain provided the money to the British importer, while it did not take money out of the British economy, it would help the British balance of payments in the short run. That is an ingenious argument, and I thought so at the time. A number of foreign firms have done this and provided the money, and thus helped the British balance of payments. The mean part of the Government's action was that it would not allow the British importer to pay interest across the exchanges, at his own expense, to service the loan from the foreign exporter to this country. That is quite indefensible and leads only to a degree of bitterness out of all proportion to the small amount of interest so saved.

When funds from abroad are deposited in Britain in almost any other context, interest at the going rate is permitted. In this one case, where the transfer of funds can be identified as a loan to meet an import deposit, interest across the exchanges is denied to the lender, and the borrower is not allowed to transmit it. Of course, what happens, inevitably, is that ways and means are found of getting round this ban because it is so unfair. If only Her Majesty's Government could realise that when they do these things which are so manifestly unfair they build up far more than any small saving to the balance of payments could possibly justify! For these and many other reasons I deplore the continuation of this legislation, albeit at a slightly reduced rate. I appreciate, too, that the rate can go down from 40 to 30 per cent.: it can be reduced. But it has not been reduced in the past twelve months, and I would ask: is there much likelihood that it will be reduced in the coming twelve months? I think the likelihood is very small indeed.

There are arguments which can be used for exempting different classes of products. I would not wish to waste your Lordships' time on devising refinements to the scheme, which I personally believe should be abolished. There are some very strange anomalies in it. For instance, certain steel products are now allowed into this country, temporarily, duty-free because domestic industry cannot provide them; but import deposit still has to be paid. The Government help the user, on the one hand, but handicap him, on the other hand, by still insisting on the payment of import deposits. Plywood is urgently required for packing cases, and the like, for export goods, yet that also is subject to the import deposit scheme. I merely mention some of these anomalies and stupidities of temporary legislation, and say that if this had shown any signs of becoming permanent legislation we should want to see written into the Bill means for dealing with anomalies and absurdities of that sort.

Reading behind the Bill, the real question in my mind is, what is Her Majesty's Government's attitude towards imports. A noble colleague of mine on this Front Bench said to me a few minutes ago: "Nobody is speaking about imports to-day because 'imports' is a dirty word." But why should it be a dirty word? After all, our exports are another country's imports. We live by trade in both directions. I should hope that Her Majesty's Government, in the last few months of their lives, would spend a little time in rationalising their ideas on imports and on trade.

I should like to take your Lordships back to a very important policy speech made by the then Leader of Her Majesty's Opposition, now the Prime Minister. I refer to the famous Swansea speech of January 25, 1964. He spoke very clearly then, and said: Import-saving industries needed to be developed, and this should be tackled with at least the same urgency as the exports drive. He said that he was appalled at the big increase in machinery and semi-finished manufactures that came into Britain in the past few years. Then he went on: If I were President of the Board of Trade"— and he had been, so he should know— I should sit down and work out in detail from the trade returns all those imports which rise sharply—Then each would be examined to see whether we could, economically and competitively, find means of producing them in our own factories. The next job would be to discuss with industry … the prospect of developing home produced substitutes. This would be one of the priority tasks of our new economic planning machinery. That was said on January 25, 1964, in Swansea. There have been many changes since then. While, on the one hand, we are told about the evils of importing, there seems to be another mood growing up, particularly in the Government's economic Ministries, and among leaders of key sections of British industry.

The Financial Times reports on the meetings of the National Economic Development Council. Perhaps I might mention to your Lordships that reports of these meetings are not exactly inspired leaks, but no official communiqué is issued: a spokesman gives the gist of what was discussed. That is intended to be an authoritative but informal summary of the discussion that took place. So I think it right that I should quote one report, which appeared in the Financial Times, because at this meeting of the National Economic Development Council it was revealed that Government economic Ministries are cutting down sharply on the attention directed to import substitution and the "Buy British" approach. The report continues: At an all-day meeting of the National Economic Development Council and heads of seven Economic Development Committees in London yesterday it was agreed that in important sectors, such as engineering, electronics, chemicals and machine tools, the emphasis should be on equipping industry with the best products from whatever source …"— that is to say, from abroad as well as domestic. The interesting point about the views expressed yesterday on imports substitution"— the point made so eloquently by the then Leader of the Opposition in his Swansea speech— is that for many years the desire for import substitution as an aid to the balance of payments has often outweighed the more economic considerations of international competitiveness. Indeed, examination of areas where import substitution might provide savings has taken up a significant proportion of certain Economic Development Committees' time. While these considerations are hardly going to disappear from official policy, it is clear that the United Kingdom's post-devaluation situation has reduced the pressures on this front. So it seems clear that at least inside Whitehall, if not overtly, there is a change of mood on import substitution and policy. If the report that appears to come from the National Economic Development Council is true, I welcome this change. The best way of helping British industry to become more efficient in terms of world competitiveness is for its products to be bought on merit, and not for patriotism or on patriotic grounds. The best way for British firms to become efficient is for the products of other countries to be equally available in this market, as they are in other markets of the world where British firms have to compete. The best way for British firms to re-equip themselves with the most modern capital equipment is to buy British or foreign, depending upon which is the more suitable for their purpose, regardless of what flag may be attached to the packing case delivered to the works. That is why I deplore the continuation of this measure. I think it is inappropriate to our time when, I hope and believe, economic recovery is on the way. I think this measure is one which the Government should have abandoned when the Act came to an end three or four days ago. If it continues, it will be one part of the clutter which at present surrounds Whitehall and slows down the work of industry in the country. I would urge the Government to clean up something of this clutter, and make a start by scrapping this measure within the next few months.

3.30 p.m.

LORD MOYNE

My Lords, if I may speak, although I have not put my name down, I should like to begin by saying that I think I have no interest to declare because, although my firm manufactures in Ireland and imports to England, the Irish Government, I believe, makes up the interest on the sums borrowed to pay the deposits. So I think I have no interest to declare. But, if I have, I declare it. I will speak very briefly, just to ask a question of the noble Lord, Lord Beswick, because I think we are behaving meanly and against our treaty obligations. When we imposed these deposits, in plain breach, as I see it, of our special treaty obligations to the Republic of Ireland, it was argued, with some cogency, that the deposits, which weighed very heavily on the economy of that small country, would be less harmful than quotas, for which at the time we should have been entitled, undoubtedly, to apply to the inter- national authority. Does the noble Lord, Lord Beswick, now say that, in spite of the improvement in our balance-of-payments position, we would still be entitled to apply for the more drastic method of quotas?