Clause 33. — (Increase of Investmeni Allowances.)

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 21st May 1963.

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Mr. Milan:

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.

5.0 p.m.

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.