Clause 12. — (Suspension of Investment Allowances (with Certain Exceptions).)

Part of Orders of the Day — FINANCE (No. 2) BILL – in the House of Commons at 12:00 am on 12th June 1956.

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Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North 12:00 am, 12th June 1956

I think that the Chancellor took one wicket out of ten yesterday, and I am not quite sure that that is a captain's contribution.

However, I rose to say that we must vote against this Clause because we believe that this country ought to have a higher investment economy.

The argument is really very simple. We are a country with very little resources of raw materials. We have to live by exporting. Therefore, we have to do it by our own ingenuity, efficiency and productivity. That being so, we ought to be a higher investment country than most of our competitors, whereas, in fact, all the figures show that we are a low investment country. Therefore, in a temporary balance of payments crisis, we ought not to attack investment rather than consumption.

In his speeches both yesterday and today, the Economic Secretary to the Treasury—who makes twelve speeches to every one made by the Chancellor—was a little in danger of juggling with figures in order to bolster up his rather complacent attitude. After all, whichever way we look at them, the figures show that we are investing at a lower rate than our competitors. As my hon. Friend said, if we look at the straight comparison with Europe we see that we are at the bottom of the table. If we adopt the Economic Secretary's ingenious suggestion that one expects the country with a higher standard of living to have a lower rate of investment, we find the United States is ahead of us.

Compared with the figures of 22 per cent. net investment by Norway and 6 per cent. by this country, Russia is probably investing something like 25 per cent. at the present time. We cannot really believe that these figures are encouraging or that the Economic Secretary is altogether innocent of some complacency about them. I entirely agree with the hon. Gentleman that if we are going to maintain and increase investment and if we are going to get our balance of payments right, we must restrain consumption.

The hon. Gentleman accuses us of having failed to advocate that during the last two years. That really is not true at all. We have repeatedly said that the reductions in taxation on profits which the previous Chancellor made with the connivance of the Economic Secretary, and with the resulting increase of dividends and expenditure, should not have been made. We opposed this. We feel that if these needless cuts had not been made then the increase in expenditure would not have occurred.

I will quote only one figure to the Economic Secretary from his own Economic Survey, which I am sure he reads even if the Chancellor does not. There was an increase in dividend payments between 1954 and 1955 of about £100 million. That was a very similar figure to the reduction in taxation of companies in that year, and it is also almost exactly the same figure as the Economic Survey gives for the excess of expenditure over resources in 1955 which led to the trouble. That is how we should have kept down consumption, and where we think the mistake was made. Since the Government refused yesterday to discriminate in this matter of the investment allowance, we have no alternative but to oppose the whole Clause.

The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) made a speech last night in which he said that to discriminate in these allowances would disrupt capitalism, ruin the country, disunite Europe, and so on. I told the noble Lord earlier today that I was going to mention this. When I pointed out to him that he voted for a similar proposal in 1951, he challenged me to produce chapter and verse for that statement. As it turns out, I did him an injustice; he did not vote once but six times for it. My hon. Friend has already mentioned that I have the HANSARD references if the noble Lord were here to question what I said.

I wish to make one more point before we reach a decision on the Clause. As a result of the decision to abolish the investment allowance, we shall now be giving precisely the same capital allowance to the passenger motor car used for business or alleged business purposes as for any other item that attracts the allowance. The Economic Secretary will remember—I hope that the Chancellor is also aware of this—that when the investment allowance was introduced in 1954 motor cars were excluded, thus admitting by implication our argument that they ought never to have this allowance at all, and also admitting, what the Inland Revenue had up to then denied, that it was impracticable to discriminate between cars for this allowance and other types of capital assets.

I hope that the Government will look at this matter very seriously. I know that the Economic Secretary knows the point well, but it never was the intention of Parliament that cars should be bought for nominally business purposes and used largely for private purposes at the expense of the Exchequer. In the past week we have had a very interesting statement from Lady Docker to the effect that the famous Daimlers with their golden doors, zebra-skin seats and tyres made of mink, or whatever it was, were not, in fact, the property of Lady Docker but the property of the Daimler Company. I take that to mean that these cars, like so many others, were bought partly at the expense of the Exchequer and with the assistance of the initial allowance. I make this point in no party sense whatever, and I hope that the Chancellor win look seriously at it.