The hon. Member's intervention rather belies his name.
As I have said, wages will be paid to indigenous labour instead of to British workers. In conditions of full employment there will, apparently, be no great harm done, because the wages forgone by British workers will merely be wages which would normally have been paid for some other work done in Great Britain. But there is another aspect which alters the matter considerably, and that is that all increases in real wages are ultimately obtained by increases in productivity.
In the vast majority of cases increased productivity is a direct result of increased investment, so, if we have increased investment overseas, we shall have increased productivity overseas. The overseas worker will get an increase in real wages, but the British worker will not. There will, therefore, be a clear loss, but if there is also a cessation of full employment here, then, of course, there is an entirely direct loss to the British worker irrespective of productivity.
Though full employment is part of the platform of both parties, it does not depend on the good will of both parties. It is possible that events overseas can cause a very marked drop in employment, and a serious balance of payments crisis might well cause a massive decrease in imports and a resulting massive increase in unemployment here. It would, therefore, be unwise to assume that full employment is guaranteed by the good will of the two parties, and Part IV as it stands does carry a danger to the future standard of living of the British worker, and a potential one if full employment is not maintained.
Further, as some of my hon. Friends have already pointed out, there is a serious objection to Part IV on grounds of equity. It is quite clear that a burden will be taken on the backs of some taxpayers and put on the backs of others. This should not be done lightly. All previous history indicates that justice in taxation is an extremely important principle and one which, if not applied, causes widespread resentment. The disadvantage of taxation, of course, applies not merely to overseas trade corporations, but to home producers' exports, and even to home producers who have to compete against foreign producers sending their goods here. Therefore, from the point of view of equity there is no sound argument at all for the provisions of Part IV of the Bill.
It is very doubtful whether we really can afford to give this very large bonus on the export of capital. As my right hon. Friend the Member for Smethwick (Mr. Gordon Walker) has pointed out, we have a very large problem at present with the sterling balances, from which there have recently been heavy withdrawals. There is already a heavy demand for capital by the sterling area—a demand which we are having great difficulty in fulfilling—so can we really afford to export further capital on a massive scale?
There is a severe danger that the terms of trade will move against us. If Part IV causes a big increase in our exports, but, at the same time, causes falling prices, that will cause the terms of trade to move against us, and that means that any advantage will tend to be cancelled. I should like the Economic Secretary to bear in mind that the experiment of increasing the United States investment overseas has, so far, caused a real decrease in the demand for dollars. United States overseas investment has not caused increased demand for United States exports, so one has to be rather chary of assuming that we will be on a quite different basis and that, as a result of Part IV, there will be an increase in our exports.
Another matter that has been gone into at some length is tax avoidance. Companies everywhere will try to obtain the maximum possible advantage. There will be massive avoidance to prevent which it will be impossible, as far as one can see, to draw up provisions which are sufficiently tight. Any company can hive off as an overseas trading corporation. The suggestion that the loss of revenue is nearly £35 million is probably fallacious; it is probably very much more.
Another objection to Part IV is that it is likely that countries overseas which are the site of these overseas trading corporations will derive a great deal of help, directly and indirectly, of a technical nature which will increase the profits of their own industries at the expense of our exports. Everyone knows that a large proportion of countries, particularly new Commonwealth countries, are attempting to increase their industries so as to do without our exports. The setting up of overseas trade corporations is very likely to increase the number and quality of industries to be set up in these overseas countries, very much at our expense.
As far as there is any argument at all in favour of Part IV it can only be in favour of a highly selective interpretation. Later, we shall have a new Clause which will go into this question of selectivity and it will be fully debated. I do not think that it would be out of order now to say that to use Part IV in the rather massive, bludgeon-like way that is contemplated at present will have a very mixed effect and that most of the effects will tend to cancel each other out. The argument is primarily in favour of selectivity and not of the blunderbuss of the description which the Chancellor is using.