§ 3.43 p.m.
§ LORD BESWICKMy Lords, with permission, I will now repeat the Statement made by my right honourable friend the Chancellor of the Exchequer in another place. It is as follows:
"We have seen in recent months a very considerable improvement in our economic strength. As a result of the measures taken since November, 1967, the balance of payments passed into surplus in the early months of this year, and the surplus has since grown fairly steadily. Until the end of the second quarter, the main factor in this turn-round was the very healthy state of the invisible account, but in recent months the visible account has also passed into surplus. We have reason therefore for cautious optimism about our progress towards our economic objectives, and in particular towards the objective of a £300 million surplus by April next year.
"But this does not mean the time has come to relax. I have always emphasised that recovery would take at least two years, and that even then it will be necessary to ensure that it is maintained. Nevertheless, the recent run of better figures has naturally been an important factor in considering whether the import deposit scheme should be allowed to lapse when the present Act runs out on December 4.
1639 "There is no way of quantifying the precise effect of import deposits. But there can be no doubt that the scheme has had a useful restraining effect on imports, as well as reinforcing control over domestic credit. Our trading partners, particularly in EFTA and the Irish Republic, have been most understanding in their acceptance of the scheme, though of course I fully understand their dislike for it and their wish that it should be brought to an end as soon as our position allows.
"Our greater strength means that we can now tolerate some abatement of the scheme. But it would be foolish to reverse our policies so soon after moving into substantial surplus. The Government have therefore decided that the right course is to take powers to continue the scheme covering the same range of imports for a further 12 months from December 5, 1969, but for the rate of deposit to be reduced from 50 to 40 per cent. The period of deposit—180 days—will remain unchanged.
"The travel allowance has to be considered against the same background. Much as I should like to remove the restrictions, I am satisfied that they save significant sums in foreign exchange and that it would be premature to remove them now. The restrictions on foreign currency expenditure for travel (and on cash gifts) to the non-sterling area will therefore remain unaltered for the time being. I shall keep the matter under continuous review, and hope to be able to abolish the restrictions before long. But it would be wrong to do so until it is quite clear that the improvement in our balance of payments is a secure one which we have a good prospect of maintaining. That is the end to which our policies over the last two years have been directed, and I do not intend to change them just as they are showing unmistakeable signs of success."
§ LORD CARRINGTONMy Lords, the House will be grateful to the noble Lord for repeating that Statement, and all of us hope, as he does that the improvement in our economic position will continue. I may say, in passing, that it is rather refreshing and an agreeable change to 1640 hear some praise from the Government about the achievements of our invisible exporters. The Government have done more in five years to make it difficult for those who earn invisible exports than any other Government I can think of. Nevertheless, I am glad that it has been possible for some abatement to be made on the rate paid on import deposits, and I agree with the noble Lord that the sooner it can be done away with the better. It is contrary to our obligations to our trading partners and a source of friction between us.
As for the status quo, the "no-change" in the travel allowance, I must say that I am very disappointed at what the noble Lord has had to say. My own opinion is that this restriction does much more harm than the good it does by saving such currency as it does save. For example, it is widely disregarded and got round; and if the noble Lord does not know that he must live in a very restricted circle. It is bad to have a law which cannot be, or is not, enforced; and very bad, incidentally, for those who get round it. I think, too, that it is bad for British prestige abroad that we are continually looked upon as, "Those who cannot afford to travel and cannot afford to pay for things". Lastly, I think it is very difficult for a number of people to understand why it is possible to go into a motor showroom in London and spend £10, 000 on buying a Mercedes motor car or a very valuable picture from France, while at the same time one can buy only £50 worth of marks or francs when going abroad. I think the Government have made a mistake here, and that the mistake is not in the national interest.
§ LORD WADEMy Lords, I should like to join in thanking the noble Lord for repeating that Statement, which I think will be received with some disappointment by a number of people. Incidentally, it is worth noting that the Press forecasts are sometimes incorrect. On the subject of the balance of payments, we certainly owe a great deal to the earnings from invisible exports, and the figures there are very encouraging. But is the noble Lord aware that there seems to have been some holding back in imports in anticipation of the import deposit scheme lapsing on December 4? And, if that is so, then the recent figures must be looked at with some caution.
1641 Turning to the travel allowance, does the noble Lord really suggest that it has any major effect on the balance of payments? I should have thought that that was very doubtful.
§ LORD BESWICKMy Lords, may I answer the first few questions that I have been asked. First, about the invisible exports, I am sorry that the noble Lord, Lord Carrington, chose to say that this is a change in our recognition of invisible exports. The noble Lord was probably not able to be here when we had the debate last Session on this matter, when I went out of my way, on behalf of the Government, to praise, and to draw attention to, those who had contributed so much by way of invisible exports.
I accept and recognise the disappointment to which the noble Lord, Lord Carrington, and the noble Lord, Lord Wade, referred, which will be caused by the decision to retain the travel allowance. They spoke about the psychological effect of maintaining it. But I put it to them that there would be a psychological effect in abolishing it at this point. It would surely be rather odd when, the first time we begin to show economic progress, the first concession is to those who wish to spend their holidays abroad. Surely that is not necessarily the order of priorities that we ought to show. The £25 million or so which is saved towards the balance of payments is not to be sneezed at; it is something very significant. Nevertheless, my right honourable friend has said that this matter will be kept under continuous review and in this case that is not an empty statement. He intends doing something about it as soon as he can be certain that it can safely be done.
§ LORD CONESFORDMy Lords, may I ask the Minister whether he realises that it will be widely thought that the refusal to do away with the existing travel limitations is a direct breach of the express terms of paragraph 11 of the Chancellor of the Exchequer's letter to Mr. Schweizer, dated May 22 this year? Secondly, may I ask him whether he agrees that it would be perfectly possible to ensure whatever saving he desires from limitation of expenditure on foreign travel, not by this total prohibition of spending more than this trivial amount, but by making the person who desires to 1642 travel abroad pay more for the privilege, and that this was the method deliberately chosen by the United States when they contemplated such travel restrictions; and that it is far less tyrannical to make those who desire foreign travel pay for it, than to prohibit them from indulging in it altogether in so many cases?
§ LORD BESWICKMy Lord?, the noble Lord expressed a legal view about the travel allowance. He is entitled to that view and we regard it with respect, but there are others who have a litle to authority on this and they come up with a different view. The noble Lord asked whether this result could be achieved in some other way. It is possible, bat this is a straightforward way which for the time being was imposed and it is hoped that, rather than fiddle about with any other method of getting the same return, as he said, we shall remove it as soon as is practicable.
LORD INGLE WOODMy Lords, did I hear the noble Lord say that £2.5 million was the saving by the imposition of the travel allowance? If so, is that a figure which I ought to have known before or is it a new figure which is being quoted? Secondly, the noble Lord referred to the psychological effect of removing the travel allowance. I agree that there will be a psychological effect, but could there not be an even larger psychological effect if it were delayed until the spring, nearer the General Election?
§ LORD BESWICKMy Lords, I cannot be certain whether or not the noble Lord knew of the £25 million figure. At the beginning I believe it was estimated that a slightly larger sum might be saved, but the figure of £25 million which X now quote does take into account the evasion which it is thought by the noble Lord, Lord Carrington, and others is taking place.
LORD REAMy Lords, is the noble Lord aware that there is a school of thought which considers that the total abolition of the travel allowance would do far more in the way of invisible exports than keeping it on, and that we should do much better without it? After making proper provision for the non-transfer of capital, we should do much better by abolishing the whole thing, both in good will and in return trade.
§ LORD BESWICKMy Lords, I think I really ought to study that when it is eventually printed in Hansard. All I say about this, and about all the other measures which have been taken, is that each of them has been criticised, but all of us welcome the improvement which together they have helped to bring about.