Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 8th April 1963.

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Photo of Mr Roger Cooke Mr Roger Cooke , Twickenham 12:00 am, 8th April 1963

I am glad to hear that, because we want first to have the impartial investigation by Mr. Richardson.

In Germany, there is the turnover tax. A manufacturer gets a cash refund Pr a drawback on his exports. In France, the T.V.A. tax is levied at each stage of manufacture. If the manufacturer sells goods for £100, for instance, the tax may be £20. First of all, there is no T.V.A. tax on exports and, in addition, the exporter may deduct the amount of tax passed on to him in the cost of material he has bought. These calculations are done on a monthly basis, so that a French exporter, in making his actual export, gets a cash refund. That system is a direct incentive to both large and small companies to export.

I think that we could have that system here in place of Purchase Tax, which is no incentive to exporting because there is no draw back to exporters when they make their actual exports. For the T.V.A. tax there are different rates according to different commodities—only 6 per cent. on coal and oil and 20 per cent. on jewellery and furs—but the significant thing is that it is to be adopted, I understand, throughout the Common Market.

The Australians have a system of tax relief on expenditure on export promotion. Every £1 spent on this receives taxation allowance. That, I think, is within the terms of G.A.T.T. and well worth considering. In due course, we will have to take some such steps as these.

I turn from the question of a tax incentive to some practical steps to improve our balance of payments in the present position. Now that we are not now in the Common Market, we could do more to increase our trade with E.F.T.A. The Chancellor has made a second reduction in the protective part of the revenue duties on a number of goods coming from other E.F.T.A. countries. We should press on our E.F.T.A. friends to reduce their revenue duties where they are too large and are holding up our exports.

For instance, Norway imposes a 30 per cent. revenue duty on motor cars. I am told that if it were reduced by half the price of a popular British family car would come down by £150 and our car exporters could double the amount of cars sold, from 10,000 to 20,000. If that reduction were made the duty could be kept on exports from Common Market countries. We should ask for the revenue duty to be reduced for E.F.T.A. partners, but kept on for Common Market countries. If revenue is required it could be obtained by spreading the sales tax over all the motor cars imported. Finland, another E.F.T.A. country, has a duty of 14 per cent. If that were halved we could reduce the price by £78 and put up our exports from 6,000 to 10,000 cars. E.F.T.A. countries should do these things to keep in line with the spirit of the E.F.T.A. partnership.

I was delighted to hear the Chancellor say that he would tie loans to Ghana, India and Pakistan to definite orders for British exports. The U.S.A. has been doing this sort of thing for years. If the U.S.A. makes a loan to India for tractors the tractors have to be American ones. I see no reason why we should not earmark our loans in this way on a much larger scale.

To stave off the chance of an import crisis which might come later in the year, will my right hon. Friend consider instructing all Government Departments to scrutinise most carefully imports of foreign goods, materials and equipment coming to this country in the next few months, because we may be on a knife edge, and with growth of expansion there might be imports by the autumn which would cause an "expansionist threat". That seems worth considering.

I was also pleased to hear that the Chancellor is still considering the simplification of taxes. I think that we have to reach the day when company taxation is all on one system, perhaps based on 45 per cent. of profits, and taxation of individuals is all on another personal system. I cannot see why Surtax and Income Tax should not be incorporated on one graduated scale and paid under P.A.Y.E. I know the difficulties and arguments against that, but we have to reduce the time spent on these computations.

I do not hold the view, which is held so generally by many hon. Members, that expansion of our industry is purely a matter of economics. I do not think that it is. Expansion, or lack of expansion, comes from something much deeper and from difficulties which will face the Labour Party if it ever comes to power. They are in the British way of life. We are low in the league of growth because we are a very poor country in the matter of applying science. Applied science is one of our weaknesses. We have some splendid fundamental, basic ideas in science, but we take a very long time before we give them commercial application.

The machine tool trade has hardly scratched the surface compared with the automatic type of machine tools produced in America, Germany, Sweden and Switzerland. We have been very slow in producing a front-wheel drive or a rear-wheel drive car, but it has been popular on the Continent for very many years.