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.