I think that it would be convenient for the Committee to discuss, at the same time, the next Amendment in the name of the hon. Member for Ash field (Mr. Warbey) in line 40, at end add:
(2) This section applies, and applies only, to cases of expenditure incurred in an industry prescribed as of national importance or on machinery or plant prescribed as of special national importance; and for the purposes of this section an industry or a description of machinery or plant shall be prescribed as of special importance, if, and only if, the produce of that industry or the use of machinery or plant of that description is of special value in increasing exports, saving imports, promoting technical development or the better use of national resources.
(3) In the last foregoing subsection "pre. scribed" means prescribed by orders of the Hoard of Trade made in the form of statutory instruments and with the concurrence of the Treasury, which shall be laid before Parliament and be subject to annulment by a resolution of the Commons House of Parliament.
We are now coming to a completely new chapter of the Finance Bill, that which deals with capital allowances. It is, therefore, a chapter which is concerned with the use of fiscal weapons as an instrument in economic planning. The Tory Party and the Chancellor have made an extremely belated conversion to the principle of economic planning, but they seek to do it in their own ways—ways which involve as little, interference as possible with private industry.
The whole argument between the two sides of the Committee and in the country now turns, not on whether fiscal means should be used as an instrument of planning, but on the way in which they should be used, and whether they should be used in a non-discriminatory or a discriminatory form. The essential purpose of the Amendment is to make the proposals in this Clause discriminatory, instead of being an indiscriminate tax hand-out to industry regardless of the purposes to which the new investment is put.
The Conservative Party has moved somewhat in the last eleven years and the Chancellor has urged it on a bit further since he has been in office. The proposals in this part of the Bill are proposals that he brought before the House last November in a kind of little pre-Budget speech, and in what he later described as a form of retrospective legislation. On that occasion, he approved retrospective legislation because he said that it had advantages. Because it had advantages, he was able to abandon the principle of all previous Chancellors in not engaging in retrospective legislation.
In his Budget statement, the Chancellor announced his intention to incorporate his proposals in this Bill in their present form. He was at pains to make clear their main motive and effect. In so doing, he revealed very clearly that the proposals in their present form are not so much a financial weapon as a bribe to all and sundry to enable them to make higher profits at the expense of the taxpayer, in the hope that such an inducement will encourage them to engage in investment.
What kind of investment is, apparently, of no importance? The Chancellor, being a good, if belated, Keynesian, takes the view that all investment is good investment, whether it be in manufacturing weapons of war for sale to a Fascist dictatorship, or in constructing and equipping palatial hotels and office blocks, or in simply digging holes in the ground, as the late Lord Keynes himself said—all that is a good thing in a period of depression or stagnation. Whatever type of investment it may be, however futile or wasteful its use of national resources may be is of no importance as long as it sustains demand.
The Chancellor would agree that it is an approach, but an approach that is in fundamental conflict with that of the Labour Party. The Labour Party has always taken the view that it is necessary to have public control of investment, that a Chancellor and the Government in general should intervene to guide investment into worthwhile channels. The Labour Party has not taken the view that all investment is good investment, but clearly believes that investment must not only be stimulated in amount, but purposefully directed.
That is the view put forward by the Labour Party in Signposts for the Sixties, a document that I commend to hon. Members on both sides. As I am sure that most of my hon. Friends have already read and absorbed the document, I need only remind them of what they know already, but to hon. Members opposite it will no doubt give a fresh insight into methods of economic planning.
I particularly commend to their attention the section entitled "Planning for Expansion", where it is stated:
…we must have a plan for economic growth…The preparation of such a plan would require the creation of a National Industrial Planning Board …The central directive of this Board would be to ensure speedy and purposive industrial investment.
I repeat, "speedy and purposive industrial investment". That, of course, is where we differ from hon. Members opposite—
The hon. Member has just quoted from Signposts for the Sixties. Does he virtually mean that a Socialist Government —should they get in—would take complete control of all our industrial investment in the nationalised industries, in private industry, and in everything else?
I was about to read a little more from the document in order to set out some of the ways in which the Labour Party proposes that investment should be controlled. It states:
Financial policies must be directed to seeing that the investment programme is fulfilled.
That implies that we must have a programme of investment. We do not leave
investment to chance—to laissez faire—but have a national plan.
I thought that even hon. Members opposite recognised that, in these days, we have to have some kind of national plan. Hon. Members opposite have approved the setting up of the N.E.D.C., and have read its reports. Some of them have even given some kind of mild approval to N.E.D.C. proposals. But all those proposals involve some concept of a national plan and they necessarily involve some concept of direction or guidance of investment into nationally worthwhile channels.
But the hon. Member has not answered my question. He is talking about controlling investment under a Labour Government. What sort of control does he envisage? Is it control over £500 of investment in a new petrol-filling station, or investment in a venture of about £100,000? What is the nature of the control? That is the first question.
The second question is: why is it that the hon. Member's name alone appears on this Amendment? Is it an unofficial Amendment? Why has the hon. Member not the support of the hon. Member for Grimsby (Mr. Crosland)? Was this the Communist wing of the Labour Party?
That would be for the Treasury to lay down. I have no doubt that the Chancellor of the Exchequer, if he were prepared to accept the principle of the Amendment, which he would be if he were consistent with some of the principles which he has embodied in other Clauses, would no doubt be able to put forward an appropriate figure. I do not propose to weary the Committee with discussion of trival matters of that kind.
The Chancellor of the Exchequer has tied his own hands very considerably in the weapons at his disposal for influencing the direction of investment. He and his party have ruled out one very important way, and that is by an expansion of public ownership, which is one of the ways of which the Labour Party approves and to which reference is made in this section of Signposts for the Sixties.
The Conservative Party has admitted in practice that public ownership is a valuable way of influencing investment. The party comes along from time to time with proposals for investment in publicly-owned industry, and when it wants to influence the general volume of investment up and down its favourite way of influencing it downwards is to cut public investment, because it has no direct means of cutting private investment. Therefore, the Conservative Party in practice endorses the value of public ownership as a means of influencing investment.
But in theory the Conservative Party has to maintain its doctrinaire approach and the Chancellor of the Exchequer therefore has to deprive himself of this valuable weapon for directing investment in future.
Then there is the method of controlling new capital issues by ensuring that Treasury approval would be required. That has been abandoned by the Tory Party. It was not a very valuable weapon because so many large industries today are largely self-financing and one cannot influence the financing of self-financing industries by controlling new capital issues.
The Chancellor has ruled out very largely the method of direct physical control of industry, with the exception of the rather broken weapon of industrial development certificates. He has, therefore, left himself with only fiscal inducements as a means of guiding and directing investment. How does the right hon. Gentleman propose to use the fiscal inducement? I want to be fair to him. To some extent he proposes a form of discrimination in the capital allowances which he is promoting in the Bill, but two main forms of discrimination are possible. One is by region and the other by structure. The Chancellor has adopted the regional or geographical discrimination. He has not adopted the equally important idea of structural discrimination.
Regional and geographical discrimination is important, valuable and necessary. It has been rendered necessary by the long neglect of areas of high unemployment, or the depressed areas, by successive Tory Governments. Now, at a very late date, to try to induce industry to invest in these areas in particular, we have the special discriminatory concessions made in Clauses 38 and 39. So far so good, but the Chancellor is not satisfied with that. He is also to give a general tax handout to industry as a whole. In Clause 33, in its unamended form, he proposes that any industry, for any purpose, which engages in new investment, in addition to speeded-up annual investment allowances, to the full amount of 100 per cent. in a period of six to seven years, shall receive an increase in the investment allowance by no less than 30 per cent.
I am in favour of this in certain cases. I am in favour of it because in our present society, with a large part of industry conducted under private ownership, tax inducements form one of the last weapons left in the hands of the Chancellor of the Exchequer to influence investment. Therefore, I subscribe to the principle. All I want is that it should not be an indiscriminate handout of tax relief to all and sundry, but should be handed out only to those who can make good their claim that the investment which they are proposing to make is of national value. This, I should have thought, is a proposal which would commend itself to all sides of the Committee.
Let us recognise what we are doing. This is not a relief of tax on expenditure. That is done in the annual allowances, which now amount to 100 per cent. over a period of seven years. But on top of those, as the Chancellor has said, there is something more to come, and that is 30 per cent. of what is purely a notional expenditure—no expenditure at all.
In other words, this 30 per cent. allowance is a straight subsidy to profits. It is another way of saying to industry, "Thirty per cent. of the cost of what you spend on new plant and equipment can be equilibrated against an equivalent amount of tax-free profits. Profits to the extent of 30 per cent. of the value of the new equipment will be free of taxation." It is a straight subsidy from taxation to industry and it is offered indiscriminately.
The Chancellor does not like the word "subsidy". In November, when he announced his proposals, he objected to the use of the term and said that it represented a reallocation of the burden. What burden is he reallocating? Who bears this burden? It is a substantial cost to the Exchequer. This year, it will amount to only £11 million, but next year it will amount to £50 million in a full year and in three years' time to £130 million.
The Chancellor has cunningly cast the burden of this reallocation on to future Labour Chancellors of the Exchequer. He gets the political credit in the current year, but he passes the burden on to the future. We have, therefore, a combination of retrospective legislation with prospective payment of the cost of it, and the cost will fall squarely and unfairly on the shoulders of the individual taxpayer.
The cost of these tax reliefs will not be paid by private industry. Although private industry will be encouraged and allowed to make bigger profits, these will be tax-free profits. The cost will be paid by the individual taxpayer, whether the direct or the indirect taxpayer, by having in future years to pay more in Income Tax, more in Purchase Tax and more it Excise duties than he would otherwise have to pay if these reliefs had not been given to private industry to enable it to make larger profits. Let us, therefore, be clear what is involved. This is calling upon the individual taxpayer to subsidise private industry to enable it to make bigger profits. One could make a case for that if it could be proved that it was in the national interest that that should be done. Of course, it is in the national interest that we should have more worthwhile investment, but not that there should be more worthless, useless and futile investment.
If we allow this proposal to go forward unamended, its effect will be that the individual taxpayer is called upon to subsidise the manufacture and construction of unneeded petrol pumps, breweries and bingo palaces and the equipment of lavish office blocks and hotels. The taxpayer will be asked to subsidise the investment of new machinery for the making of more cigarettes per worker and, quite possibly, for the installation of automatic contraceptive vending machines in brothels. The Economic Secretary appears to be shaking his head. I do not know why. There is no provision in the Clause which makes it possible for the Chancellor to refuse this tax concession to any firm or industry making anything for any purpose whatever.
The effect of all this will be to weaken the advantages offered in the development districts, because if in the whole of the country any firm which engages in new investment can get not only speeded-up 100 per cent. annual allowances, but a 30 per cent. Tax-free hand-out in addition, what inducement is there for anybody to go from the south-east of England into the North or to Scotland to expand in those areas? Therefore, the effect of non-discriminatory allowances under Clause 33 will be to weaken the advantages offered to the development districts in Clauses 38 and 39.
The problem which the country is facing is one of the proper use of its scarce natural resources. Every time we deal with public investment, Ministers come forward and tell us that there is a limitation on what we can do in public investment because we cannot stake too big a claim to the national resources of workers, plant, equipment, materials, and so on. The Minister of Housing and Local Government tells us that we cannot invest more in council housing because the resources of the building industry are wanted for other things. The Minister of Transport says that we cannot build motorways faster and we cannot build a Channel tunnel because there is a limitation on the available national resources.
The Minister of Education slashes the programmes of the local educational authorities for school building because he says that the nation cannot afford as high a rate of investment in the building of schools as the local education authorities want.
May I draw the hon. Member's attention, in case he has not seen them, to my right hon. Friend's remarks on education in his Budget speech, when he indicated that expenditure on education this year would be rising by 10 per cent. I quote only one example out of many to which the hon. Member is referring in which he seems to have his facts completely wrong.
If the hon. Gentleman looks at the statements made by the Minister of Education only in the last two or three months about the programmes for school building submitted to him by local education authorities, and the proportion of those programmes which he has approved, he will find that in England and Wales the Minister of Education has approved capital expenditure on less than one-third of the proposals submitted to him by the local education authorities. These are the facts that the hon. Gentleman should study. The education authority with which I am concerned, the Nottinghamshire County Council, had its programmes slashed by nearly 75 per cent.
I recognise, Sir William, that I was led somewhat astray by the Economic Secretary into giving more detail on the point than I wished to give, because I had thought that the facts were well known to the hon. Members and that it would be quite sufficient to illustrate them by one or two examples. I think that I have established the point. One can refer, also, to the limitation on the building of hospitals required by hospital management committees to show that the Government do, in fact, restrain public investment because there is a limit to the amount of physical resources available at any given time for these admittedly necessary and worth while purposes.
All I ask is that we should do the same for private industry. We should tell private industry that, if it stakes a claim to use scarce national resources for worthless projects or projects of limited value, we shall not give it a 30 per cent. tax free hand-out. If industry wishes to squander national resources on frills and trimmings, there should be no taxpayer's money forthcoming as a gift.
On the other hand, if industry uses its money for promoting exports, for investment, to save imports by making the kind of sophisticated equipment which we are at present importing, for providing equipment for schools, and hospitals, for building roads and rolling stock, for enhancing the growth of the more advanced sections of our industry in telecommunications, nuclear power, plastics and so forth, then it should have its reward.
If industry wishes to employ national resources on useless or worthless purposes, purposes which are not in the national interest and which do not accord with our conception of a national plan and social value, there should be no gift.
I am surprised that the hon. Member for Ash-field (Mr. Warbey) was so critical of Clause 33 as it stands because, both during the Budget debate and the Second Reading debate on the Bill, I had the impression that all parties, including the official Opposition, approved the general principle of increasing investment allowances. I was surprised to hear him describe investment allowances as a sort of giving away of money unnecessarily.
Well, then, the hon. Gentleman used very disparaging terms which seemed to be completely at variance with the attitude to investment allowances which has been shown by the Opposition in this year's debates and in previous years when, on many occasions, they pressed for this kind of tax incentive to industry. I see the point at that which the hon. Gentleman is aiming, but he will not be surprised to hear that I regard his suggestion as most undesirable.
I have the highest opinion of the Chancellor of the Exchequer and my hon. Friend the Economic Secretary. They are men of great ability. I have the highest opinion of their advisers in the Treasury, too, but I know that all of them would be the last to suggest that they could today forecast what industries will, in the future, be of the greatest value to this country. They have not the equipment to enable anyone to make that assessment.
Who in Japan, after the war, could have foreseen that the export of small transistor radio sets would be a more important industry for Japan than some of the large industrial undertakings? Who in Switzerland, some generations ago, could have foreseen that it would be far more important for Switzerland to make watches than to make large machines? Who in Jamaica, two generations ago, could have foreseen that the export of cigars to Western Europe would become one of that country's major industries? It is impossible for ordinary industrialists, Treasury experts and Ministers to make that sort of assessment of the future.
I am grateful to the hon. Gentleman, since he is making a strong point about the ignorance of Ministers in the Treasury and the Board of Trade, but will he explain how they manage to decide upon the grants, subsidies and loans which are made to agriculture, shipbuilding and other sections of British industry?
I accept that there are certain industries which all parties in the House and in the country have, for particular reasons, sometimes with reluctance, decided should receive special treatment.
On balance, I do, but I do not wish to develop that now.
How many people, after the end of the war, could have foreseen that the export of shoes would become one of the major industries of Italy? Can anyone say that the export of ladies' hats may not become one of our best industries in the future? We do not know. Presumably, the hon. Gentleman and the Treasury experts of a Labour Chancellor, if he had his way, would apportion the benefit of the Clause to certain industries. No doubt, they would do it with the best of motives, saying, as the hon. Gentleman said, that it was important to develop the plastics industry, that it was important to give special benefit to the improvement of power stations, and so forth, but they would say that it was most undesirable, as the hon. Gentleman said several times, to spend money on hotels.
If France, Italy and Switzerland had followed his advice, they would not have expanded enormously their tourist industries. It is happening here too, but those three countries have done far more. The tourist industry in Switzerland is a far greater earner than many of the industries which the hon. Gentleman appeared to regard as desirable.
Although our motives would be of the highest, we might, if we followed the hon. Gentleman's advice, be doing a disservice to our country's future economy. It is impossible for us now to say with certainty that a particular industry will be the most desirable in 1967. There may today be an unknown citizen with an idea whose little industry, which would not enjoy the benefits of the Clause if the hon. Gentleman had his way, might conceivably, by 1967, be doing far more for our economy than some of the present established industries. Who could have foreseen, twenty or thirty years ago, that the development of efficient trading as exemplified by Marks and Spencer would be more beneficial to the standard of living of the people of this country than expenditure on some of the heavy industries? That sort of trading has created, undoubtedly—
On the other hand, according to my theory and the theory of Treasury Ministers, no one will have priority. By and large, all will have the same sort of treatment. This is why I say that it is wrong for the hon. Gentleman, or for Treasury Ministers under his prescription, to try to determine the future trends of trade and industry. It is for the different branches of industry to prove their efficiency and value.
There are many other examples to illustrate the objection to the Amend- ment. In many countries today, there are earning valuable export income industries which have grown up from very small beginnings. The hon. Member knows as well as I do that the transistors, cameras and cigarette lighters of Japan, in particular, are earning currency all over the world, as is the camera industry of Germany.
This Amendment represents a most undesirable suggestion. [An. HON. MEMBER: "Socialist."] I do not necessarily say that it is Socialist. My hon. Friend the Member for Kidderminster (Sir G. Nabarro) has made a valid interjection even though his method of doing so may have been subject to criticism. The hon. Member's name alone appears against the Amendment, and that is significant. I am sure that his Front Bench does not agree with this Amendment—at least, I sincerely hope that it does not—and I trust that my hon. Friend the Economic Secretary will have no hesitation in rejecting the Amendment.
I hope that I will be able to save the Committee a little time. I do not propose to follow the hon. Member for Barry (Mr. Gower) in such thorny questions as ladies' hats, Jamaican cigars, Japanese transistors and heaven knows what else. He may take it that I disagree with most of what he has said.
My hon. Friend the Member for Ash-field (Mr. Warbey) spoke for himself with his usual sincerity and independence.
However, I think that my hon. Friend has rather more than that to commend his Amendment.
It follows the lines of Amendments which we on this side have put forward over a number of years, although in a quite different context. It is substantially the same sort of Amendment as has appeared on the Notice Paper, but in a different context, a good many times. We have very respectable support here—I agree that it is fairly recent, but it is all the better for that—because the first
sentence of paragraph 173 in the chapter on taxation in the National Economic Development Council's Report on Conditions Favourable to Faster Growth reads:
The Tucker Committee and the Royal Commission on the Taxation of Profits and Income suggested greater discrimination in the use of initial and investment allowances to further the aims of national economic policy.
I shall not go beyond that, because my hon. Friend the Member for Grimsby (Mr. Crosland), if he has the good fortune to catch your eye, Sir William, will have a good deal to say on the Clause as a whole. I am simply dealing with the Amendment.
There is quite a lot to be said for the Amendment in its proper context, but, unfortunately, the Chancellor of the Exchequer, as long ago as November, said that he would make the concession which is embodied in the Clause. Without going into the merits of it, which, again, I prefer to leave to my hon. Friend the Member for Grimsby, the concession was publicly announced to come into operation, presumably, when he found the opportunity of getting the House of Commons and this Committee to vote in favour of it. Of course, one can make criticisms about that kind of procedure. It is a rather remarkable way of treating taxation questions for the right hon. Gentleman to say a good many months beforehand, and, speaking merely as a Member of the Government, to anticipate the rights of Parliament in dealing with these matters when the time comes.
None the less, the statement was made. There can be no reasonable doubt that a number of people in the country must have read it and either took some action on it, or, at any rate, considered taking action on it. When the proposal has been passed without any major criticism from our side of the Committee, it is out of place to introduce an Amendment now which would have the effect of whittling down the concession as a whole.
This Amendment originally appeared on the Notice Paper in a different form, and, in that form, it would have given an additon to certain cases. It is not on the Notice Paper in that form now, and I can say no more about it, but that would have been a different matter. The effect of this Amendment would be to whittle down the concession in a number of cases and to allow it in others on the sort of conditions which my hon. Friend has explained with such sincerity and a certain eloquence. In that form, the majority of us on this side do not feel that we can possibly support it.
I make it perfectly clear, however, that that is not because we differ from the N.E.D.C. in the sentence which I have read, which seems to me perfectly right. It is not because we withdraw in any way the arguments which we have put forward on similar proposals in a different context in other Finance Bills, but simply because, having regard to what was said in November, and to the Clause as a whole, we feel that it is an inappropriate Amendment to introduce and does not really represent our view in this context.
We do not wish to be told that we are lagging behind such austere and revered bodies as the Tucker Committee and the Royal Commission on the Taxation of Profits and Income, not to mention the N.E.D.C. We think that there is a very great deal to be said for this kind of thing in its place. But here we have a concession announced several months ago —I think wrongly and, perhaps. rather unconstitutionally, but, nevertheless, announced—and it is now sought to put it in legislation. I do not see how we can at this stage possibly stand for this sort of derogation from it. It would be unfair to a number of people who would have acted on the original statement.
For those reasons, I trust that my hon. Friend will not press his Amendment, which, as has been pointed out, stands only in his name. I spent a very long time on the back benches myself—perhaps I should be there now—and I was glad to see the general approval in the Committee for independent views which are sincerely expressed, particularly on a complicated matter of this sort.
I entirely agree with the hon. and learned Member for Kettering (Mr. Mitchison) that it would be a sorry day for the House of Commons if it were not possible for individual hon. Members to express the views that they hold without fear or favour. As one who practised independence in the past, and who is quite willing to practise it again in future if need be, I entirely agree with that view and have every sympathy for it.
The hon. Member for Ashfield (Mr. Warbey) probably will not expect me to reply to him at length, for two reasons: first, because my hon. Friend the Member for Barry (Mr. Gower) replied to him in excellent and clear terms and answered a number of his points, which saves me that trouble; and secondly because, as the hon. and learned Member for Kettering said, there is considerable difference between an Amendment which appeared on the Notice Paper a little time ago, and which, perhaps, was argued last year to some extent, and the rather fuller Amendment which the hon. Member for Ashfield has proposed today.
I do not want the hon. Member for Ashfield to think that, because I shall not reply to him at great length, I agree with what he has suggested. I must tell him as clearly and frankly as I can that I fundamentally and totally disagree with most of what he said. He spoke about signposts. I think that I had a clear signpost of the way in which his mind was working. He is in favour of more nationalisation and, apparently, of very strong Government control of the economy in all its details. He would prevent new petrol stations from springing up.
The hon. Gentleman says "unwanted" petrol stations, but I am sure that no one with a commercial mind would build a petrol station or go in for any other consumer enterprise unless he felt that it was wanted. I am sure that the majority of the Committee will agree with me that the fact that commercial enterprise of one sort or another has led to improvement in the standard of life of our people is something to be pleased about and not something to denigrate. I am delighted at the improvement in the standard of life that we have had in this country even since the war. Long may it continue, and long may independent private business serve the community in the splendid way in which it does.
The Amendment on its own, without the hon. Gentleman's explanation, was certainly very plausible. But to come away from political argument, I hope that he might agree with me, when I have finished talking, that it is simply not practicable. The intention in the Amendment is that the increase in the investment allowances proposed in
the Clause shall be given only if these assets are provided in an industry
prescribed as of national importance or on machinery or plant prescribed as of special national importance.
The criterion which the hon. Gentleman adduces for judging that is whether the products of the industry or the use of the plant and machinery is of special value
in increasing exports, saving imports, promoting technical development or the better use of national resources.
I think that that is a clear summary of the position.
I dislike very much the suggestion made by the hon. Gentleman that the improvements in these investment allowances were a form of subsidy. How can it be a subsidy not to tax people as much as one could tax them? It seems to me to be equivalent to the awful phrase, which I hate to see, that the Chancellor has given away so much money.
The Chancellor to use the newspaper phrase does not give away anything. He fails to take it from people, which is a very different matter indeed. The hon. Member for Ashfield was suggesting that it was quite wrong to subsidise certain industries and I repudiate that term. The object of my right hon. Friend's exercise here is to create more trade, business and jobs and a higher level of prosperity. I think that that is a thoroughly desirable objective.
I wonder whether the hon. Gentleman has ever stood by the side of a pool and thrown a pebble into it. As the world knows, the ripples spread, and that is what is happening to the British economy at present, as the figures for industrial production so rightly show. In other words, what my right hon. Friend is seeking to do is already being achieved.
It is so easy to pick one rather disgusting and nasty example, as the hon. Gentleman did, and to say, "Do we really want to give additional help to this industry?", which I believe to be no industry at all in the terms in which he described it, and to ignore totally the good which is being done.
That is where I fault the hon. Gentleman's argument particularly. What I wanted to do was to show the way in which the Amendment was defective in practical terms. The Amendment is, in fact, defective in its wording. If the hon. Gentleman will look at subsection (2) he will see that the second phrase does not fit the first. Perhaps that is a detail. I am quite willing to agree with the hon. and learned Gentleman the Member for Kettering, who so modestly made the point that drafting is always extremely difficult, but it is appropriate that I should make the point. It will give him the opportunity no doubt of putting it down in an amended form next year. We shall look forward to that.
The hon. and learned Member referred to some discussion on this matter last year and he was quite right to do so. I thought that his hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) in speaking to this point last year—a rather different point, as the hon. and learned Gentleman said—was very fair indeed. He said that if we were to provide arrangements of this type or something like them arbitrary decisions would be involved. This is perfectly true. This is where the weakness of the argument plainly comes.
My hon. Friend the Member for Barry was very eloquent in saying, "How can anybody, however skilful, or however well-informed, judge which industries will be those that matter most to Britain in the future?" From what I recall of history many people had good ideas in the past, and produced new developments with which they wished to press on. And the pioneers, the adventurers, were precisely the people who were laughed at, whether they were the aviators, or the inventors of mechnical devices of one sort or another.
To quote an example from my own experience, I remember that when I established a business five and a half years ago all my friends and all the informed commentators whom I met were honest enough to say to my face that they did not think that I could last six months. That experience is by no means unique. Yet we have to have these arbiters, apparently, to say what are the right things and what are the wrong things for the national economy. I believe that this would lead us into great difficulty.
The Economic Secretary has been doing quite well up to now, but if he gets any more polemical I shall be inclined to have a go myself; but I do not want to. What he is saying, in effect, in his last few remarks, is that many enterprises from small beginnings have turned out to be flourishing corporations, with great benefits to the national economy, and that is nationally a good thing. I agree that it is a good thing, but the converse of the argument is that a great deal of activity in this country is quite useless. For example, the massive building of office blocks in every city at the expense of houses is a matter of priorities. Surely the use of a great deal of our activity in making useless things cannot be justified. I think that the Minister is getting into polemics and falling into the errors that my hon. Friend fell into.
I hope that that intervention, at any rate, will satisfy the hon. Member for Westhoughton (Mr. J. T. Price), who will feel that he has made his point. Obviously, it was a reasonable and sensible point. On the one hand, how can we in Parliament pass legislation to say to industrialists and commercial people, "You must provide higher standards for the people working in your offices", and, on the other, forbid them to build? It does not make any sense at all.
It does not stop the building of houses, if I may say so with some asperity to the hon. Gentleman, because house building has been continuing at a very high rate for a number of years, and that is a very satisfactory thing, too.
The point in general is not invalidated. Someone would have to make arbitrary decisions. It is suggested by the hon. Member for Ashfield that it would be the Treasury. I am flattered that he should suggest that, and so I am sure is my right hon. Friend. Without doubt, an extraordinarily heavy and invidious burden would be placed on the Treasury. It means that the Government have to take the whole responsibility as arbiters of deciding what is right and what is wrong for our economy. That would not be either successful or satisfactory. I believe it would be quite the reverse.
My right hon. Friend is now proposing increases in investment allowances generally for all assets of the kind for which investment allowances can be given in all industries. The point at issue now is whether he should abandon that general approach, as the hon. Gentleman suggested, or concentrate on specific cases said to be of particular national importance.
What is plain, as the hon. and learned Member has emphasised, is that it is obviously out of the question for my right hon. Friend now to cut down a relief which he announced as long ago as 5th November last, for obviously, a degree of expenditure has now been undertaken. The hon. and learned Gentleman said that it was rather naughty to do that. Perhaps that is a matter that we shall be going into later; but let us be clear about this. What has been done has at least had some success, and it is right to be pleased about that, for what matters to everybody on both sides of the Committee is that the economy in general should be moving forward—and that is what is happening.
What was surprising about the hon. Gentleman's speech was that he took no account of some of the points made in the debate last year. For instance, he did not deal with the question of whether or not his proposals would run counter to our international obligations. That has to be thought out very clearly. Nor did he deal with another point raised last year, on the subject of saving imports. Does he intend that agriculture is to be fully brought in? Does he mean that the most generous treatment will be accorded to agriculture? That requires an answer.
The hon. Gentleman says "It would". Has he really looked into this with care to be able to detail the costs which are involved? I do not believe he has. He said nothing about that. The hon. Gentleman suggests that we are quite wrong to give incentives to many industries. He instanced holes in the ground, which would certainly not qualify for investment allowance unless they were for building dry docks, mines or some other useful purpose. He instanced examples of that sort without appreciating not only that those are practical arguments against his suggestions—and he failed to answer them—but that what has been done is patently in the general national interest.
I put it to him that it would surely be extraordinarily difficult to decide between the competing claims that would be made. Cannot he imagine the pressure that would be brought to bear in Parliament and outside for other industries to be included in the list when the announcements were made about what industries were or were not to qualify?
The hon. Gentleman says, "As there is already". We are dealing with Clause 33, which, according to my understanding, has been warmly welcomed by industry and the country as a whole. What the hon. Gentleman says is, in fact, not correct.
I could carry on a great deal longer on this whole subject, but I will not. As I said at the beginning, I frankly think that the hon. Gentleman's suggestion, though plausible, is not practicable when one reads the Amendment. Frankly, I very strongly disagree with the reasons that he advanced in favour of his Amendment, and I disagree even more positively with the sort of extreme thinking, if I may say this to his face, that it seemed to me was very much in his mind in advancing his cause.
As the Minister was good enough to give way to me, I should like to try in a few moments to make my position clear, as I do not wish to leave the Committee in any doubt about where I stand. There was a bit of a hubbub on the benches opposite during the brief intervention that I made. So let me now make the position clear.
I accept that the Amendment in this context is not the right way to deal with this matter. At the same time, I think that my hon. Friend the Member for Ash-field (Mr. Warbey) has done a service to the Committee in giving us the opportunity to ventilate a most important question of principle.
My hon. Friends and I, in previous Finance Bill debates, have given support, verbally and otherwise, to proposals that investment allowances should be promoted for the revival of industry arid in order to give encouragement to the industrial growth that the country needs. Nevertheless, I do not think that any of us are so unsophisticated as to believe that when we give such a blanket concession as this it will not encourage the wrong people. This provision was, in fact, on the Statute Book under a previous Finance Act. I say that since my hon. Friend seemed to assume that investment allowances were something new. They are nothing of the kind. They were on the Statute Book at 20 per cent. last year. All that the present proposal does is to increase the allowance to 30 per cent. I am prepared to support that policy in the general economic interests of the country.
I was about to say that I am not so foolish as to suppose that a great deal of encouragement will not be given to the wrong people by this sort of thing. We are all aware that industry and finance are very flexible instruments by means of which activities are attracted to those spheres in which the highest profits are likely to emerge. Therefore, I accept that this Bill, this part of which, dealing with investment allowances, the Opposition are supporting, will have the effect of stimulating some activities which are undesirable.
To illustrate that point, I have been active on many occasions in the House of Commons in criticising the Government's betting and gaming policy. I refer to this subject only in its industrial context. Betting and gaming have caused many operators and speculators to seek licences to build large amounts of flashy premises throughout the country, and large numbers of premises have been obtained at very high prices for the site value and very lush buildings have been erected on them. Also, vast sums have been spent on furnishing in the most orientally opulten fashion. There are gaming houses which are undermining the moral standards of many people.
I am taking the opportunity of this Clause to ventilate that problem. It can perhaps be described as a chip on my shoulder. Many of the people who are engaging in activities which I, from my ethical view of society, would regard as undesirable, are being encouraged by Government allowances further to extend their activities. The Minister cannot deny that. I thought that the Minister was going a little far in getting a little polemically emotional about it. I hope that my speech is fully factual and devoid of any emotion. These are the hard facts of the situation. When we try to offer a big concession of this kind, we do a great many undesirable things and a great many unscrupulous and undesirable people cash in on the concession.
I live in and represent a large tract of the central Lancashire industrial area, where the unemployment position is very serious, and I am looking to the provisions of this Bill to improve the prospects of my constituents in getting back to work and improving their living standards, which is the right of every man. But I am by no means sure that the Bill in its present form will do that. I say that because the investment and depreciation allowances are unlikely to attract industry to my part of the country, because there is no certificate in existence defining it as a development district.
This may be widening the scope of the debate, but I have been encouraged or goaded into this intervention because much of what the Minister said was in principle and philosophy "phoney". One cannot do something like this and have the general effect that he supposed will occur, because other factors will creep into the equation.
This will encourage industry in the ordinary play of the financial markets and in the kind of considerations which weigh with industrialists and economists. But it will also encourage industry to go to places where the concessions are highest and will cream off the prospects of getting it into such areas as that which I represent.
I take this opportunity to make a mild protest, because this will not produce all the good results that the Economic Secretary imagines. Perhaps what I say would be more appropriate in discussing the Clause as a whole, but it is linked with the Amendment. Do not let us be so smug and self-satisfied as to imagine that, because a thing has a general element of good in it, it will not have some adverse effects which we on this side of the Committee, as Her Majesty's dutiful Opposition, are bound to criticise.
Mr. Bruce Milian:
This gives us an opportunity to say something in general terms about investment allowances. There are two main reasons for looking closely at what is proposed: first, the granting of these allowances reduces the burden on the taxation of profits generally; and, secondly, the element of discrimination involved.
Obviously, therefore, if we are to take this line we should at least do so with our eyes open, If the Government had decided to reduce the profits tax they might have got a rather less charitable reception. But, in practice, an increase in investment allowances means a reduction in company taxation. In a full year this proposal will cost about £69 million. Therefore, we must look at it very carefully.
The question is whether it is worth while, as a general principle, to give incentives to invest by means of investment allowances. I think that anyone would come to the reasonable conclusion that it is desirable to give incentives in this way. Everyone agrees on the need for a high level of industrial investment in this country. In fact, it used to be one of the main arguments about our comparatively poor record of economic growth that we did not manage to sustain a high individual level of private investment. I am not sure that that criticism is as accurate now as it was several years ago.
It is still perfectly valid to say that we do require a high and sustained level of private investment. But there is a need to emphasise the word "sustained". Private investment has, of course, suffered, as have other things, from the Government's general "stop-go" economic policy. It is worth pointing out that the investment allowances originally introduced for plant and machinery in 1954 lasted in the first instance for less than two years. From February, 1956, until April, 1959—more than three years—there were no investment allowances in the normal line of things, either for industrial buildings, or for plant or for machinery.
While the Government are congratulating themselves today that under this Clause the level of investment allowances is high, and that a very considerable advantage has been given to industry because of it, then it is worth reminding them that from 1956 to 1959. when our economic progress was not exactly brilliant, there were no investment allowances. Indeed, I think that the fact that investment allowances stopped during those years is only another example of the kind of approach to our economy that the Government have shown in so many different directions.
It is not, of course, any use expanding industrial investment unless one can be reasonably sure that the new capacity will be used. I hope that the Government have learned this lesson now, because we have had the situation of increased private investment leading to nothing like the increased output we should have got, simply because the rest of the Government's economic policy was not designed to keep up sustained economic growth.
Will not the hon. Gentleman agree that a large proportion of industrial production is directed to foreign consumers, and that no Government can ensure at all times that foreign consumers will be willing or even able to sustain their purchases?
That may be so, but our unemployed were not foreign. They were domestic consumers. The fact that we have had so many unemployed has contributed very considerably to a reduction of demand and thereby to the fact that in many of our major industries—steel is the most obvious example —production has been far below the installed capacity. In strict economic terms a good deal of our capital investment has been wasted.
While it is certainly true that investment allowances are a stimulus to investment, and that we want to encourage investment by such means, it is also true that if we could get a sustained economic growth we could get the same level of industrial investment with considerably lower investment allowances than the 30 per cent. introduced by this Clause. There is a case for saying that investment allowances are part of the very expensive payment we have to make for the failures of the Government's policy.
I turn all the more readily to discrimination, because I thought that the Economic Secretary's reply to the Amendment was absurdly exaggerated. I was extremely disappointed that he took that line. It should be pointed out that, in the nature of things, investment allowances are discriminatory at present. For them not to be discriminatory one would have to have the situation in which the capital structure of one industry was exactly the same as that of another. Each industry would have to be capital-intensified and labour-intensified to the same degree for investment allowances to give completely equal benefit to all. But that is not the case.
It may well be that within an industry it is right to give a certain advantage to a firm which is more capital intensified because, on the whole, that will be the more progressive firm and well worth encouraging. But, looking at comparisons between industries, the fact is that some industries lend themselves to capital intensification in a way that others do not. The different levels of capital intensity, comparing one industry with another, would not merely be an indication of different levels of efficiency. Thus, investment allowances are by nature discriminatory. I was sorry that the Economic Secretary did not seem to recognise that.
Not only that, but the Government themselves have applied discrimination in a number of other ways, quite apart from the discrimination inherent in the principle of investment allowances. For example, during that period of three years between 1956 and 1959 when, generally speaking, investment allowances were not paid, they were paid for the insulation of industrial and agricultural buildings at a rate of 20 per cent. and for fuel-saving plant and for assets expended on scientific research. What is more, ships, as a form of capital expenditure, have had a special discriminatory rate of investment allowance of 40 per cent. since April, 1957.
In other words, the Government have definitely adopted discrimination as a matter of policy, and it is worth pointing out—and this follows what the Economic Secretary said about betting shops—that no investment allowances are paid for commercial buildings, office buildings. That may or may not be right, but the fact remains that there is discrimination and it is absurd for the Government to pretend that there is not. The new benefits which are to be given by free depreciation introduce discrimination between different areas of the country and while that kind of discrimination does not apply to the granting of discriminatory investment allowances it will have the same effect as would have been obtained by adopting a method of discriminatory investment allowances on a regional basis. Again, I say that discrimination is absolutely inherent in the system.
I noticed that the Economic Secretary nodded with approval when my hon. Friend said that commercial buildings did not qualify for investment allowances. That is perfectly true, but firms manufacturing equipment for office bulidings or hotels do qualify for investment allowances.
I agree that that is so, but it does not invalidate my argument that there is discrimination and that one often does not see any particular justification for some of the discrimination which is now applied.
This discrimination could all be applied at a much lower level than the 30 per cent. for industrial plant and machinery and the 15 per cent. for industrial buildings which are recommended in the Clause. I am not in any sense suggesting that the Clause is wrong, because I agree basically with my hon. and learned Friend the Member for Kettering (Mr. Mitchison) that when this proposal was announced we accepted it at the time, so that, apart from anything else, it would be a breach of faith to start criticising it now.
But it is worth making the point that our investment allowances have now reached quite substantial levels and it is, therefore, very important that we should look at them rather closely. Even on this point of commercial buildings, for example, there may not have been as strong an argument when the allowance was 10 per cent. on industrial buildings and none on commercial buildings, but when the allowance goes up to 15 per cent., the discrimination against office buildings becomes that much higher, and it is worth studying the matter more closely. Another discrimination is that motor cars have never had an investment allowance, although there are many businesses in which motor cars, perhaps quite legitimately, form a good deal of the captial equipment.
In principle, there is a very strong case to be made for discrimination. I know that it is very easy for the Economic Secretary to say that this is an extremely complicated subject and that any Government which attempted to apply discrimination on any really selective basis would be putting themselves in almost insuperable difficulties, but I am not sure, if we are to maintain investment allowances at something like the current level, that we ought not to try to make that kind of discrimination effective.
If investment allowances were much lower, the problem would be much less, but if we are to look upon investment allowances as having the importance in our taxation system generally which they have at the levels proposed by the Clause we have to consider discrimination.
The argument which is usually used against that is that since investment allowances are favourable to capital intensive industries, they are likely to be about right, because on the whole it is the capital intensive industries which we want to encourage as being the industries likely to contribute most to the country's economic expansion. However, I should like to give just one example of the fallacies which can lie behind that argument which is probably sound on the whole.
One of the industries which is commonly quoted in the context of the argument that investment allowances are too high is that of television set hire, which gets 30 per cent. investment allowance on the sets put out for hire. That does not encourage investment in television sets, but it gives the hire company an advantage over the company selling sets outright or on hire purchase. That is the only economic effect which the investment allowance has.
However, when we come to that part of the electronics industry which is more important from the point of view of the British economy, the producing side, it comes as a surprise to read in the first Report of the N.E.D.C. that the electronics industry is a labour intensive and not a capital intensive industry. This is the kind of industry which we want to encourage and yet, relatively speaking, this is the kind of industry which comes off badly with investment allowances. It is a surprising result that the producing end of the electronics industry, the end which we want to encourage, comes off rather badly, being labour intensive, whereas the companies which hire television sets get 30 per cent. investment allowance.
I am not suggesting that there is any easy answer to this problem. Perhaps some of the things I have said have been rather too critical of the Clause and repeat that we ought to stimulate investment in this way and that the Clause is to be welcomed. However, I would have liked the Economic Secretary to have shown, as I hope he will in his later answers, more sign of having understood some of the implications of Government policy on investment allowances. Very important implications are involved, particularly if we are to have investment allowances at these extremely high levels, and it is very important that we should try to clarify some of these issues.
Many things have been said about discrimination in investment and I hope that the Economic Secretary will take the opportunity to clarify some of the points which have been made Some of the statements made today have been most interesting, because they have made it clear that it is impossible to pre-diet, that it is a bad thing to predict, whether an industry will be important to the economy in a few years' time.
This change has been going on throughout the industrial revolution. There have always been predictions, and the wisest and cleverest people of the day have been proved right in a few years as a result of their astuteness. During this century we have had the tremendous examples of Germany and Japan predicting what lay ahead. Germany predicted the change from one type of industry to another, and as a result made a powerful and sustained revival after being completely devastated. Germany changed from light to heavy industry. It is interesting to note that light industry, on which that country had been engaged, and from which it gained considerable experience, formed a high proportion of the world's trade at the beginning of the century, but since then there has been a steady change from light to heavy industry among the industrial nations of the world.
The question is asked: what made Japan decide to make transistors? We work on a different basis from Japan in the way in which we order our affairs. It is impossible to predict what they are going to do. The whole question is tied up with a national programme which is aiming more and more at getting a larger share in the industries which are expanding in world trade. They are not very interested in those industries in which they have a share of the world's trade, but which are not expanding.
The point that we are discussing this afternoon impinges to some extent on this question of discrimination and the planning of our industries. I should like to deal, first, with the importance of investment allowances, because the effectiveness of these allowances has been argued at great length by the financial pundits and others during the last year. The history of investment allowances is somewhat chequered. One might almost say that it is Exchequered, because it seems to fit into the stock remedies for improving the economic situation, together with relaxations of credit, Purchase Tax cuts, the lowering of hire-purchase deposits, and all the conventional army of Treasury devices.
My hon. Friend the Member for Glasgow, Craigton (Mr. Millan) outlined the history of investment allowances, and I need not go over it. What my hon. Friend sad proves conclusively that the Treasury regards investment allowances as an adjunct to the other facets of our monetary and fiscal policy. My opinion is that the advantages to be gained by industrialists are limited and should be considered by them and the Treasury in terms of what effect they have, first, on the use of less floor space to produce more, and, secondly, in industries where world trade is increasing, and in areas of chronic unemployment where extraordinary measures are necessary, what effect they have on improving the situation.
Investment allowances on their own will not provoke expansion. Time and again we have been told by the Chancellor of the Exchequer, in first-class speeches both in the House and in the country, what we need to do. The Chancellor has been seeking to increase the confidence of businessmen in the economy. Different people put forward different arguments about how confidence can be restored. It is said that the directors of public companies can play their part by increasing dividends so that the Stock Exchange has a little more confidence that things will improve.
It is said that the Chancellor of the Exchequer, the Prime Minister, or somebody equally important, should draw attention to the Gallup poll to show that there is less risk of a Labour Government corning into office. It is said that the Chancellor of the day should be prepared to take risks with the balance of payments position. But all this has to happen before there is sufficient momentum in the economy to create the necessary confidence in the manufacturing industries to lead to increased investment in them.
If we are right in assuming that investment allowances are directed at manufacturing industry, as the Economic Secretary suggested when he belittled the argument of my hon. Friend the Member for Westhoughton (Mr. J. T. Price), we must remember that before there can be any improvement in the economy, manufacturing industries have to expand. When we think in terms of the 4 per cent. growth which has been suggested by N.E.D.C., we include a number of factors which do nothing to help the expansion of our economy. Such factors as education, health, and the building industry come into the picture. Con- fidence in the economy is usually highest at the peak of a boom period when manufacturers have the confidence to invest, but, as we saw in 1960–61, the investment very often takes place too late, and at too high a rate. That happened in the steel industry. Whatever explanation one may give for what went wrong, we know now that the investment in the steel industry during 1959, 1960, and 1961, was far too high.
If the boom is a big one, like that of 1960 and 1961, this over-investment can have extremely serious consequences later, because the manufacturer does not invest to get a better return for the floor space he is using, but uses it to cash in on the boom by manufacturing more of the product he is already producing.
There should be discrimination in favour of steadiness in the application of investment allowances. If there is not steadiness in application, how will the developers and the engineers make their proper contribution towards doing more on the same floor space? Unless we accept it as a principle that we must do more on the same floor space we shall not succeed in marching abreast of the times. Whatever comes afterwards—whether we have to make allowances for redundancy, or bring in programmes to deal with it—something will have to be done once the principle has been accepted that investment for growth really means doing more than was done before on the same floor space.
My hon. Friend the Member for Craigton was right in saying that much of the investment going into British industry in 1960 and 1961 never paid off in terms of profitability. If I were an investor and studied the markets in order to make my living out of Stock Exchange transactions I would avoid the type of firm which made bad investments in 1961, on whatever ground. The Economic Secretary would probably agree with me. Years have passed, but those firms are still saddled with the same sort of machines, bought from makers who were making them to the same pattern in the last boom. Unless we can get out of a continual pattern of boom and trough we shall never succeed in doing what we want to do, namely, to ensure a sustained growth that will carry British industry forward.
If we regard investment merely as shovelling capacity into the factories we are doing no more than the Georgians of the 1920s in digging holes, as my hon. Friend the Member for Ashfield (Mr. Warbey) said, or the Brazilians in burning coffee—simply making way for another type of machine. What we need is a planned idea, with more inquiries being made, and a steady determination to do something about trends. I hope that the Economic Secretary will explain what he meant about the impossibility of predicting. The great weakness of our economy is the lack of consistency in our investment in manufacturing industries. We must review the question of capital allowances, investment allowances, and the like. This is all tied up with the necessity to have courage in predicting what lines our economy will take.
I want to refer to what has already been said about the impossibility of predicting. The hon. Member for Barry (Mr. Gower) asked how it was that the Italian industry could predict in such a way that it is now the biggest exporter of boots and shoes. My answer is that the Italians knew when they started on this process, just as Lord Marks knew that he would be able to sell in the way that he is now doing. Unless we get down to the problem of the future programming of our industries, using the sort of discrimination mentioned by my hon. Friend the Member for Ashfield, we shall never succeed in our endeavours. We must be able to estimate the trends in industry so that we can ally our industries to movements in world commodities, and can cut down production of those manufactures which are either declining or which could be produced better by under-developed countries.
Japan has already decided that in respect of those manufactures of which she has a large share of world trade, but where the demand for those manufactures is declining, investment shall be discouraged.
The hon. Member has quoted two examples of matters with which I have a slight connection, and in both respects he is wrong. He said that the Italian boot industry was planned a long time ahead, and knew that it was going to be able to sell a great deal more. This morning Mr. Charles Clore stated that his experts had planned to take account of the fact that women would wear square-toed shoes this year, but that those planners had been so wrong that sales and profits were very much down as a consequence. The people in the Midlands who have been making these square-toed shoes have found that planning—
The hon. Member has only just entered the Chamber. He has not heard what I have been saying. I will say it again.
The people who knew what they were going to sell were the people who succeeded—just as we knew in the last century what we were going to do. The modern method which is paying off in international trade is that which is adopted by the Japanese. There is discrimination in investment in Japan. They are playing down manufactures which are declining or can be produced by underdeveloped countries.
I ask the Economic Secretary to explain more fully what he meant by the impossibility of being able to predict. If it is impossible to predict there is no hope for our export trade.
First, I ought to point out that I came into the Chamber specially to listen to the hon. Member for Ashton-under-Lyne (Mr. Rhodes). He said that what industry wanted was long-term planning, in order to know what was going to happen for a good many years ahead. That is what we should all like to know.
It is not so much that we want to know what is going to happen a long time ahead. We want to know what is going to happen tomorrow, in terms of the expansion of world trade in certain commodities.
As I said, the hon. Member cited two examples of which I have a little knowledge. He must know that Lord Marks, of Marks and Spencers, is one of our shrewdest and ablest businessmen. I know that that great organisation—shrewd and able as it is, and producing the finest goods at the cheapest prices in this country and probably in the world. and which is able to put its finger on the pulse of world trade week by week —has not made out a plan for the next 10 years and said, "This is what will happen", because, as the hon. Member knows, all sorts of factors affect trade. It is impossible to plan for 10 years ahead, five years ahead, or even two years ahead, knowing that industrial plans must be altered week by week according to the way in which the market moves at home and abroad. The hon. Gentleman is wrong in saying that long-term planning is practical.
The other point the hon. Gentleman made was that the Italians had planned what they were going to sell, for years ahead. I made a statement in order to refute this and to show the impossibility of long-term planning. This morning Mr. Charles Clore issued a statement that his boot and shoe industry, probably the biggest in the country, had suffered a loss this year because the fashion experts who plan for him, in the same way as the hon. Member wants the Government to plan for the whole of industry, had failed to anticipate what the public would buy.
The only other example I wish to give to the Committee is that of the appointment by the then Socialist Government of the Ridley Commission in 1951. This Commission had to forecast—as the hon. Gentleman wants to forecast—what it thought would be the national requirements for some years ahead of coal, gas and electricity. That is the kind of forecasting and planning upon which hon. Members opposite pin all their hopes. It is supposed to be a panacea, a cure, for all things. Every forecast of the Ridley Commission in 1954 about our future fuel requirements was falsified. To say that planning will cure all economic troubles is just nonsense.
The hon. Member might have paid me the courtesy of listening to all I had to say, instead of making a speech off the cuff an something about which he knows nothing whatever. It would be just as discourteous for me to walk out of the Chamber while he is speaking.
I would never dream of being discourteous to the hon. Gentleman, because I have a great respect for him and for his knowledge of industry.
I came into the Chamber when I knew that he was speaking because I thought it was the sensible thing to do.
The hon. Member should look at the OFFICIAL REPORT tomorrow. He must be unaware of what he did say. All I wish to put to him is that planning, especially by civil servants and politicians, is not necessarily the answer to all our problems.
The contribution by the hon. Member for Louth (Sir C. Osborne) showed how dangerous it is to come into this Chamber half way through the speech of another hon. Member and to make an intervention on the strength of the small part of that hon. Member's speech which may have been heard. Had the hon. Member for Louth been in the Chamber when my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) began his speech he would know that a number of times my hon. Friend made the point that we should all like to know how to plan for years ahead, but that industrialists had to plan from day to day or from week to week. The hon. Member for Louth did not hear that and so he did not appreciate what my hon. Friend was talking about, and that was rather unfortunate.
I wish to discuss this Clause from the point of view of the effect of investment allowances on different industries. I am in favour of the provisions in this Clause. But my experience of industry has taught me that where investment is high and is managed competently, everyone works under better conditions and for better wages than in an industry where investment is poor and badly managed. As a trade unionist who has worked for the benefit of people in industry, I wish to see high and competent investment properly managed and administered and a Government fiscal policy which would encourage this.
As a trade unionist and a representative of trade unionists, I agree that if the organisation in a factory is efficient and the company is making bigger profits we should share in them.
I interrupted the hon. Member on that point because earlier his hon. Friend the Member for Ashfield (Mr. Warbey) was arguing that these investment allowances were in many ways merely methods of increasing profits.
That relates to a point which I wish to make about investment allowances being given discriminately. Some engineering enterprises are intensively capitalised and others are labour-intensified. Copper drawing and tube drawing industries are highly capitalised. They are pretty well a monopoly. Hundreds of smaller industries which are labour-intensified depend on the products of the copper and tube drawing industries for copper wire, and for plastics they depend on another section of industry which again is almost a monopoly. To what extent are the advantages from investment allowances given to capital-intensified industries to enable them to make more profits and perhaps to give better conditions to their workers? In what way can we ensure that these advantages are passed to smaller units, such as those which may be assembling copper wire into printed circuits for radio and television, or manufacturing bicycles or parts for motor cars?
In some monopoly conditions it is only the highly capitalised industrial units which get the benefit of the allowances, and I wish to see that benefit spread. This may be possible through low prices. Here we must be frank and appreciate that, where there is little competition and prices are agreed upon, it may be that many manufacturers lower down the scale do not get the benefits which they should receive from industrial allowances.
Not long ago I made it my business to investigate a number of companies—I shall not, of course, give the names—and I came across some businesses, including some big businesses, which had not made a profit for 18 months. They have nothing to write anything against. Any new capital investment they put in—and some are putting in plenty—must be against expectations for the future. At present in Scotland expectations are not too bright. On a very stormy day last week it was said by hon. Members opposite that Scotland had passed the winter and the sun was beginning to shine, but, believe me, the sun is not shining for the shipbuilding firms on the Clyde. If they are not making profits this does not mean a thing to them. There may be plenty of confidence down here in the South, but I am afraid that there is not so much confidence north of the Border.
My hon. Friend the Member for Glasgow, Craigton (Mr. Milian) showed that there is discrimination in this matter. The men in Whitehall do discriminate. Discrimination in regard to investment is a balanced thing. It is balanced as to what is desirable for the community and what is a socially desirable project. For that reason gaming institutions will not enjoy the benefits of this particular Clause. The Board of Trade discriminates through B.O.T.A.C. when making grants to companies going to development districts. There is discrimination about whom they should help. We had discrimination about a company which we hoped would come to Dunbartonshire. The Board of Trade decided that it should get a certain amount and the company would not come because it did not think that was enough.
I am not complaining about discrimination, but we should recognise that it has to be balanced. My hon. Friend referred to frills. As a member of the Temperance Alliance, I always feel a little depressed when I see a distillery or a brewery being erected, but when one was erected in Dunbartonshire I consoled myself by the fact that of the whisky to be produced there 90 per cent. would be sold to the United States.
I take it that the institution to which I referred will get an investment allowance. Of the whisky, 90 per cent. will be exported and we shall be paid for that in dollars. With those dollars we may buy Spanish oranges and I love them. It is very difficult to decide what is a frill and what is not a frill in a multilateral system of trading. If the goods are going to export, the product might be desirable and good for the British economy although superficially it seems a waste of resources. I think that the distilling and consumption of whisky is a waste, but that is a matter of opinion and has nothing to do with the Finance Bill, except in so far as we discuss Customs and Excise duties.
I welcome the Clause because it will enable us to keep these matters under review and keep in touch with the Monopolies Commission to see that the tremendous advantage given to the tube drawers, copper wire drawers and manufacturers of steel drawn tubes will pass on these benefits and not merely keep the benefit they get from basic manufacture.
I wish to intervene only for a moment to ask one or two questions prompted by the rather doctrinaire assertions of the Economic Secretary in favour of laissez faire and against planning. If the Chancellor considers that private industry in this country has shown itself so enterprising, so vigorous, so patriotic and so concerned with national interest without the arbitrary decisions of the Government, why are we having these investment allowances? Secondly, I ask why are we increasing these allowances?
The Economic Secretary has to make a case for this Clause. These investment allowances were originally introduced in order to stimulate investment. We had this 20 per cent. tax hand-out—that is what it is—in order to stimulate capital investment before a General Election. Why are we having more added today? What has happened to the use of this investment allowance business as an economic regulator to operate in regulating the economy and smoothing out booms and slumps?
We are now told by the Chancellor that this is to be a permanent thing. My next question is what is to happen when the effect of this addition to investment allowances exhausts itself? Are we then to have another instalment of 10 per cent.? Once industry has got used to the idea that if it invests it can get tax-free profits it will sit back every now and then and wait for some foolish Chancellor to say, Well boys, all right, here is another 10 per cent. on what you have already." Is that the projection which the Chancellor has in mind, or is he leaving that headache to a Labour Chancellor?
We have had an extremely interesting debate, both on the Amendment and on the Question, "That the Clause stand part of the Bill." It has included a rather personal interpretation of Labour Party policy towards industry from one of my hon. Friends and an exceptionally polemical party speech from the Economic Secretary. I hope that when he replies to this debate he will be rather more constructive than when he spoke before.
I do not know if the hon. Gentleman reads the advertisements published by his party in the newspapers. If he does, he will have observed that the policy of the party opposite is to take "a cool, clear look" at matters. I hope that he will take a cool, clear look at the whole question of investment allowances. I hope that he will not make such heavy weather of the question as he did on the subject of discrimination when he spoke earlier.
It seems that the key to the matter was expressed very clearly by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan), who pointed out that in their very essence investment allowances must be discriminatory. They are not a tax remission which uniformly aids the profits of all firms and industries. Firms benefit solely to the extent that they spend money on investment. If one can imagine a firm spending nothing on investment that firm would gain nothing whatever. Over the years the present Conservative Government have operated a number of different rates of investment allowances and have discriminated, apparently with no difficulty or danger to their consciences, between plant and machinery on the one hand as opposed to industrial buildings on the other, and special rates for ships, for research and so on.
The principle of discrimination has been embodied in these allowances from the start. Quite apart from that, on the more general point the Economic Secretary cannot be allowed to put over the over-simplified line that any discrimination is a matter for arbitrary decision by Governments even if it is of a kind which can never be acceptable.
The fact is that in these days even a Conservative Government are so heavily involved with industry that they are bound to discriminate the whole of the time in their taxation policy, in their policy for subsidies, in hire-purchase controls and over the whole range of Purchase Tax. The Government are involved in discrimination between different industries, whatever we may say about investment allowances. One can say, further, that under this Government parts of their financial policy have involved not merely discrimination by the Government themselves between different industries but a deliberate attempt to make outside bodies discriminate between different industries.
For example, when the Capital Issues Committee existed it was instructed by the Government to give, or not to give, loans according to the national importance of different industries and according to how much they contributed to the balance of payments. In the days when Chancellors of the Exchequer used to exchange friendly letters with the chairmen of the banks asking for bank restraint, it was common for Conservative Chancellors to ask the bank chairmen to discriminate, in making advances, according to the national importance of an industry. This principle of discrimination has therefore long been accepted even by Conservative Chancellors of the Exchequer, and the Economic Secretary made unnecessarily heavy weather of it this afternoon.
This is apart from the fact quoted by my hon. and learned Friend the Member for Kettering (Mr. Mitchison) that N.E.D.C. has recently accepted the possibility of new kinds of differentiation and has drawn attention to the fact that both the first Tucker Committee and the Radcliffe Commission approved the principle of discriminating between industries.
This is the only occasion each year on which we can look at the principle of investment allowances, and I therefore think it reasonable to ask one or two questions. I should be grateful if the Economic Secretary would reply to them. One question which we on this side of the Committee have to ask is whether from our point of view investment allowances are an equitable form of tax remission. As my hon. Friend the Member for Craigton pointed out, however we describe them—whether we talk about them as a subsidy to profits, which I do not think is an accurate description, or, more accurately, as a subsidy to investment—the fact is that the investment allowance by itself, or an increase in it such as we are considering under the Clause, means a reduction in the total amount of taxation which is being paid by industry.
There might be conditions in which we on this side of the Committee would be inclined to say that there was no case for reducing the total burden of taxation on profits. But I do not think that we should consider that a sufficient argument in principle against the investment allowances. We could quite easily correct that situation by increasing Profits Tax at the same time as we increased the investment allowances. It would be possible to maintain the total yield of corporate taxation at exactly the same level as before by increasing the investment allowances and at the same time increasing the Profits Tax, thus redistributing the burden of taxation between firms which were investing heavily and firms which were investing lightly. In that way we could dispose of the argument that there is always a danger of too much remission of corporate taxation.
The next question on which I hope the Economic Secretary will comment is how effective these allowances are for their declared purpose of stimulating investment. None of us can possibly know in detail. This is not the sort of thing we can ever calculate. One cannot isolate the effect of these allowances from all other considerations which determine investment decisions. It would be interesting to know whether the Government have a view about this. They have to make precise calculations as to the cost of the increased allowances, and it would be interesting to know their view on the effectiveness of these allowances.
For example, do they share the view often put forward that they influence the decisions of small businesses but have very little influence on the decisions of large businesses? Certainly in theory they should be an extremely powerful stimulus to investment. Twice at any rate over the last 10 years, both in 1954 and in 1959, either the institution of the allowances or, in the second case, their restitution preceded a very considerable investment boom. But would be interesting to have the Treasury view on the question of how effective they are.
The next question which it seems to me we must ask, and which my hon. Friend the Member for Craigton asked, is this: supposing they are effective, do we need as a permanent feature of our taxation system this almost artificial stimulus to investment? Here I should like to quote the Second Report of the National Economic Development Council. It is a good thing to quote this Report to the Economic Secretary because it may encourage him to reread it. That is a good thing if it encourages him to read the reference to the wealth tax which shows that N.E.D.C. has come out more strongly in favour of it than has my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan). I always like to encourage the Economic Secretary to go back to N.E.D.C. Report No. 2.
In paragraph 171 the Report refers to the question whether investment allowances are needed permanently. The Council says:
It is an open question whether special encouragements to investment are needed permanently as a long-term means of sustaining growth…".
I think that that is right, and I think that my hon. Friend the Member for Craigton will also agree that it is right. Let us suppose that we can jerk investment up to the proportion of the national income which seems to be right, and suppose that we can run the economy fairly hard and continuously and in a fairly stable way afterwards it would seem to me to be peculiar that we should need this special additional stimulus to investment. I think that we could then revert to the more normal situation in which people could write off 100 per cent. of the value of the plant but not write off 130 per cent, as they will be able to do under the Clause.
But, despite what we expect would be the long-run position, investment has been allowed to fall so far in recent
months that we need this increase in the allowances in order to jerk it back to the level which most of us would like to see. Nevertheless, from this point of view the Economic Secretary must answer the question: why was this decision delayed until November and not taken in the last Budget? After all, we knew at the time of the last Budget —many of us, including myself, mentioned it in our speeches on the last Budget—that private investment was about to fall. May I quote paragraph 32 of the Economic Report for this year? It reminds us, quite rightly, that a
survey of firms' intentions at the end of 1961 suggested that there might be little change in investment by manufacturing industry between 1961 as a whole and 1962 as a whole.
It added that
since manufacturing investment was rising during most of 1961, this forecast already implied"—
at the end of 1961—
some decline in investment between the beginning and end of 1962.
In this situation, why did the Chancellor's predecessor not take this action then instead of waiting until November? It seems to me an example of extraordinarily inept timing. In view of the point about timing, I think that we all agree that we now need these increased allowances in order to get investment to the level which we want to see.
Will the hon. Member say a word about the medium-sized industries which are subject to fashion changes and in which new machinery has to be installed continuously because of fashion changes? Does he not agree that they must have greater allowances? Secondly, will he deal with the problem of depreciation allowed only on what is called historic cost when to replace a machine will cost a great deal more than the historic cost?
The argument about historic cost is a hoary old argument which we used to have on the Finance Bill year after year. It takes about half the second Report of the Royal Commission on Taxation. I think that I shall be out of order if I discuss historic costs on the question of investment allowances. It is relevant, perhaps, to the next two Clauses.
The hon. Member asked about firms which are subject to fashion changes. This does not seem to me to be a reason for a permanent need of these provisions. I am not talking about this year or next year, but it does not seem to me to be a reason why they should permanently be able to depreciate more than 100 per cent. of their equipment. Under the new suggestions in the next two Clauses our depreciation allowances are extremely generous by international standards, and it is not quite clear why as a permanent feature of our economy people should be able to write off more than 100 per cent. of what they have spent on their plant.
The last point which I want to make takes up an issue raised earlier from this side of the Committee. I hope that the Government do not regard these allowances as a kind of regulator, because they cannot possibly be a method of correcting fluctuations in investment or in the economy as a whole. They are much too uncertain for that. We do not know precisely what their exact effect will be. None of us can tell precisely. All sorts of other considerations are involved. But, even if they were not so unpredictable in their effect, there must be a time lag between announcing that investment allowances will be raised or lowered and actual investment spending on plant, equipment and buildings.
It seems to me quite wrong to suppose that we can use investment allowances as a kind of regulator to control fluctuations in the economy. Their real function should be to get investment as a permanent, long-term thing, at the sort of level we want. The allowances should ensure that investment stays at that level as a proportion of the national income to the point which the Government think right.
The last N.E.D.C. Report makes an extremely powerful point and pleads for far fewer changes in the allowances and much greater security. After all, we have had changes in 1954, 1956, 1959 and now in 1963—and this is far too often. The N.E.D.C. Report states in paragraph 17:
With frequent variations they"—
that is, the allowances—
lose much of their effect because a business planning its investment cannot be sure what
allowances will be in force when the expenditure is incurred".
It is absolutely essential that we should get a greater degree of security in the future for these allowances than we have had in the past.
My hon. Friends and I are certainly not opposed to the Clause. We believe that the Chancellor was right to do this in November, although we should have done it earlier—perhaps in the last Budget. Since it was not done, however, he was right to take the step, and most of my hon. Friends think that it represents a desirable method of stimulating investment, although we do not necessarily want it for the rest of time as a permanent feature of our taxation system.
As the hon. Member for Grimsby (Mr. Crosland) said, we have had an interesting debate. Apart from the general interest in many of the points that have been raised today—and I will do my best to reply to them—I think that our discussion has been remarkable for two special reasons: first, the hon. Member for Dunbartonshire, East (Mr. Bence) said that he thought that whisky was a waste. He is the first Scotsman I have ever heard say anything of the sort—[An HON. MEMBER: "He is not a Scotsman."] Perhaps that accounts for his remark. Secondly, there was a passage in the speech of the hon. Member for Grimsby which indicated his love-hate relationship with the wealth tax. I appreciate that that hon. Member is most anxious to get off the hook, as it were, in regard to the wealth tax matter, although I do not think that he will be able to do that by consistently quoting the N.E.D.C. Reports.
I did not actually say that whisky was a waste. Being a member of the temperance movement, I do not care for the stuff myself. I showed in my remarks the chain of manufacture; how whisky is exported so that we may obtain foreign currency and buy, for example, oranges—of which I am very fond. I did not say that whisky as such was a waste.
I am sure that my right hon. Friend the Chancellor will be grateful for the general welcome that is being given to his proposals in the Clause. These proposals are designed exactly to increase the investment allow- ances for new plant and machinery, new mining works, building plant and machinery used for scientific research from 20 per cent. to 30 per cent. They are also designed to increase for new industrial buildings, structures, dredging equipment and so on, the rate from 10 per cent. to 15 per cent. The rate for new ships stays the same and I mention these categories because I think that there has been some misunderstanding as to precisely what is involved.
These increases in the investment allowances are part of a substantial scheme of improvements. It is difficult for us to consider the matter wholly in the context of this one scheme, although it is relevant, for there are four proposals in total, the others being increases in the annual allowances for industrial buildings, increases in the annual allowances for plant and machinery and the improvement in the scientific and research allowances. Thus it must be considered as part of a coherent whole.
I have been asked a number of questions on discrimination. This matter was raised by the hon. Member for Glasgow, Craigton (Mr. Malan) in his extremely interesting speech, as well as the hon. Member for Grimsby. The hon. Member for Ashton-under-Lyne (Mr. Rhodes), who always speaks with great knowledge and experience on these matters, also raised this point. I hope that I can clear up the matter to the satisfaction of all hon. Members.
The point seems to be this. Certainly there is discrimination in much that is done. There is discrimination here, particularly regarding ships, as the hon. Member for Craigton pointed out. It is clear that it must be right to endeavour to help certain industries or to lead others in a certain way. The hon. Member for Ashton-under-Lyne suggested certain new criteria which should guide the Government in judging these matters and in providing new discriminations. We shall certainly pay attention to what he suggested because, as he will know, we are thinking about these matters from day to day.
What one might generally call marginal or general discrimination is, I believe, perfectly in order and appropriate. I am admitting what is being done now, for it is endemic in the Clause. In this connection, and replying to the hon.
Member for Ashton-under-Lyne, I meant to indicate earlier—I regret if I did not make myself clear—that while discrimination of that sort is certainly appropriate and we believe it to be right, a total direction of the economy—total control, which seemed implicit in his Amendment—is not, and will not be, accepted by us. I said earlier that I thought that there were severe practical reasons why it would be wrong and why it would involve great difficulty. I hope that I have explained what I had in mind.
My hon. Friend the Member for Louth (Sir C. Osborne), although he got terrible stick from the hon. Member for Ashton-under-Lyne, illustrated the difficulties that controlling any attempt to plan the total economy would bring. I agree with my hon. Friend; and that is really the answer to the questions asked by the hon. Member for Ashfield (Mr. Warbey). I certainly agree with the hon. Member for Ashton-under-Lyne who said, by inference, that such matters as market research and forecasts are of extraordinary importance in deciding which sectors of industry one wishes to help. In fact, any intelligent businessman must run his business in that way, and so must any responsible Government.
I had my leg pulled rather severely by the hon. Member for Grimsby on the subject of my right hon. Friend's timing. He will not expect me to answer that point in detail, although I realise that it was fair to have raised the subject. He might have gone on to make the further point—though I do not blame him for not doing so—that in November my right hon. Friend saw the need and acted. I am sure that it would be the wish of the Committee, certainly of my hon. Friends, to congratulate him strongly and warmly for doing that.
In proposing the increases in investment allowances and the other changes which have been introduced, my right hon. Friend's first concern was for investment in manufacturing industry, which has been declining. As the hon. Member for Ashton-under-Lyne rightly said, manufacturing industry must achieve growth if our whole economy is to flourish. As the hon. Member for Glasgow, Craigton said, everyone agrees that we need a high and sustained level of private investment. The aim is to create confidence in a policy of sustained and deliberate expansion, and we are of the opinion that a stimulation in investment is a justified requirement of our long-term policy. I am attempting to make this point as clear as I can.
The hon. Member for Craigton, the hon. Member for Grimsby and the hon. Member for Ashton-under-Lyne pointed out that in the past there has been some criticism of the fact that investment and initial allowances have been changed from time to time. This is perfectly true. The whole aim is to endeavour to get a degree of stability in these improved allowances. I cannot, of course, go further today and promise that the present level of capital allowances will be maintained for any specific period. The hon. Member for Grimsby would probably quarrel with me if I attempted to do so. The Government fully recognise and entirely accept that stability in this context is extremely important. "Steadiness" is a good word to use in this context, to quote the hon. Member for Ashton-under-Lyne.
The hon. and learned Member is entitled to say that. My right hon. Friend has made it abundantly clear, ab initio, that we were anxious to achieve policies of growth at a rate that could be fully sustained, and we believe that these investment allowances have an important part to play in this regard.
Can the Economic Secretary say whether he regards the timing of the changes in the investment allowances as a means of regulating the level of investment, or as a means of regulating our total economic activities? If I under-stood my hon. Friend the Member for Grimsby (Mr. Crosland) correctly, he saw the present increase of investment allowances as being aimed at raising investment to a certain level where we would hope to see it maintained indefinitely. Is that the Government's intention, or not?
It must obviously have an effect on both, and it would be our wish that it should have an effect on both. Though it may be early days to assess the matter precisely, I think that we can fairly claim that the effect is already flowing. Time will show whether all these measures—all four of them—are fully effective, but the present indications are that they are having both effects.
That brings me to the point put by the hon. Member for Grimsby when he asked precisely how effective these allowances are. He said that it is quite impossible to make a precise calculation, and that is quite true, but some answer may be that my right hon. Friend deliberately chose an improvement of the investment allowances as being one of the most effective inducements to investment. A further comment is that an estimate of cost is, again, an imprecise thing at this stage, but may provide a yardstick by which in time, precise measurements can be made. The cost of the investment allowances is estimated at £8 million this year, £52 million next year, and £70 million in a full year. That probably has a bearing on the N.E.D.C. Report.
I should like now to refer to a technical point in relation to the phrase
…expenditure incurred after the 5th November, 1962…
For the avoidance of doubt, I should like to define that phrase. It means, by virtue of Section 330(2) of the Income Tax Act, 1952, sums payable after that date, whenever contracted for. I hope that that may assist in resolving that doubt.
Of course, sums payable in, say, the last few months from November for expenditure contracted for long before 5th November, and coming under this Clause, may be all right, but can it really be claimed that the Clause has provided a stimulus to investment in these cases when it comes to paying money for investment already incurred even before 5th November, if that is what the Clause means?
If I may say so, that does not altogether follow. What matters is the future. The hon. Member is quite right in saying that. On the other hand, however, he is putting undue emphasis on what happens in a little period immediately after 5th November. The point is, as I tried to show the hon. Member for Grimsby, that one will see the results as time goes on, but I believe that it is fair to claim that some of these results are already becoming apparent and I think that they will become increasingly apparent during the course of the summer and autumn—
We are all most grateful to the Economic Secretary for referring to that point. It has helped to clear up the difficulty, but has not cleared it up completely. As the hon. Gentleman is probably aware, there are some items of investment that are contracted for, shall we say, in two instalments at two different dates. The actual contract might be signed. It might be a piece of investment that has to be taken as a whole in the interests of the industry or business itself but, quite conceivably, the first part is contracted for at a given date, which might be before the relevant date, and the later part contracted for afterwards.
Suppose one has that situation, and the payment is made. It would be interesting to know how the Revenue will treat it. I know that this is a slightly technical point but the hon. Gentleman was good enough to refer to an associated matter, and the more one can clear up these things at the start the more helpful it is for all of us.
As I understand it, and this applies to other Clauses as well, it is the date of payment that is relevant. The hon. Gentleman will, therefore, find that in the case he has in mind, where one payment may have been made before 5th November and another after, the first payment would not qualify, but the second one would. I hope that that deals with that point but, as I say, it is relevant to other Clauses besides this one.
The hon. Member for Craigton suggested that a real problem which we have to face is to make full use of our industrial capacity. I entirely agree with that, and I hope that the hon. Gentleman will see this Clause, at any rate, not only as part of the four measures to which I have drawn attention but as part of the wider policy of the Government to obtain growth at home and to facilitate international trade, which is very much in our minds at the moment, perhaps, with these international conferences that have been going on recently—E.F.T.A., G.A.T.T., and the rest.
I cannot pursue that now, of course, but will merely say that this is one part of an endeavour to ensure that spare capacity is better used than it has been in the immediate past. Again, I would say that it is our policy and aim to obtain sustained economic growth.
We are, as the House is proud to remember, an old country. That gives us many strengths but it brings problems in its train, and the particular problem that so much of our industry—and, if I dare say it, some of our thinking, also —is perhaps a little out of date. It is vital that we should modernise, and vital, in particular—and this has a bearing on the question asked by the hon. Member for Dunbartonshire, East (Mr. Bence)— that we should re-equip. This Clause is designed to help that process. As such, we are indebted that it would appear to have the Committee's blessing.