Clause 35. — (Rates of Annual Allow Ances for Machinery and Plant.)

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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Photo of Mr William Clark Mr William Clark , Nottingham South 12:00 am, 21st May 1963

I beg to move, in page 31, line 34, at the end to add: (12) Any person may, at the end of any accounting year or period, furnish the Inland Revenue with a certificate from an authorised accountant, confirming the amount of turnover to the home market and the amount of turnover to overseas markets.(13) Total capital allowances computed under this section shall be divided into the same proportions that home sales bear to overseas sales, as certified under the preceding subsection.(14) That proportion of capital allowances which relates to overseas turnover shall be doubled for the year of assessment of the accounting year or period. The two main problems which we have in this country are productivity and export. There is a certain amount of slack in the economy. My right hon. Friend the Chancellor of the Exchequer has in this Budget introduced the free depreciation allowance, but I cannot develop that under this Amendment. That arises under a subsequent Clause. But if it is right to give an incentive to development districts by the free depreciation allowance to encourage industry to go to development areas, this is indicative that capital allowances can be used in a discriminatory way to assist industry.

What can we do for exports? If we can increase productivity by taking up the slack in the development districts by giving a free depreciation allowance, the same sort of medicine should be applied to exports. What I am trying to do by the Amendment is to relate overseas turnover, as a proportion of the total turnover of a business, to the capital allowances due to a firm. May I give a very simple example? If the turnover of a company is £1,000,000 a year, £500,000 of which is in the home market and £500,000 in the overseas market, and if, consequently, it exports 50 per cent. of its total turnover, capital allowances should be computed in the normal way. That capital allowance figure should then be divided in proportion to the turnover. In this hypo pothetical example, it would be £500 for the home market and £500 for the export market.

As my right hon. Friend will, I am sure, appreciate, what I am worried about is not the wording of the Amendment but the spirit of it. I am asking my right hon. Friend to increase the amount of capital allowances given to the export part of a business. In the example which I have given, this would mean an increase from £1,000 a year normally computed to £1,500 a year.

The Government have over the years done a certain amount to help exporters and industry generally. Apart from a reduction in taxation, which, despite what some hon. Members may think, has come about under a Conservative Administration, industry has been helped generally. Not only are there increased capital allowances in this Budget, but there have been others in previous Budgets. There is also the magnificent work done by the Export Credits Guarantee Department to help exporters. I think that it is fair to say that the E.C.G.D. provisions in this country are as good as those available to any of our competitors, wherever they may be in the world.

It should, however, be borne in mind that certain aspects of our economy have hit industry to a certain extent. I take the recent example of the rerating of industry. I do not propose to argue the merits or demerits of the rerating of industry, but here is a built-in subsidy to industry which must have an effect on our competitiveness abroad. There is also the recently introduced fuel tax. On the one hand, the Government have helped industry and exporters, but, on the other, industry and exporters have been penalised.

What I want to do is to give as much incentive to exporters as is possible. I am sure that every hon. Member agrees with this. My right hon. Friend the Chancellor of the Exchequer accepts the spirit of it in the sense that he has set up the Committee under Mr. Gordon Richardson. This Committee will presumably discuss the turnover tax and the tax which is run by France. I find that many people are mixing up Mr. Gordon Richardson and someone who bears a name very similar to his. I think that both these gentlemen ride horses. Gordon Richardson is trying to ride the export horse, but the whole trouble with industry in this country is that, while we are trying to do that, someone else is holding the reins. Someone else is keeping the spurs away from the horse.

6.45 p.m.

I suppose that the excuse will be made that this sort of discriminatory proposal which singles out exporters far an extra allowance is against our international obligations. It is about time that we in this country decided that, if any other country which is competing with us in overseas markets is benefiting from export incentives, whether it be by T.V.A. or some of the blatant subsidies enjoyed by many of our competitors abroad, it is wrong to say to our exporters, "We have to play the game, although these other people do not." If our allies din G.A.T.T. or in any other international organisation do not play the game and have free and fair competition, we must do something with our tax system to give our exporters the same incentive as our competitors.

If the G.A.T.T. excuse is put up that this is discriminatory—and it is indicative of the importance of this subject for this country that the Chancellor of the Exchequer is listening to this debate —surely one can argue that an increased capital allowance is not a subsidy to exporters. In fact, it is an accelerated allowance. It does not cost the Exchequer any more whether one writes off a piece of equipment over ten years or five years. I should have thought that through G.A.T.T., and particularly since certain talks are going on at the moment, we might point out to our overseas competitors that this is an accelerated allowance and that exporters who may get this allowance are not getting a subsidy.

I apologise for having spoken so long, but this export problem is extremely important. Unless we export, our standard of living cannot be maintained. If our competitors are getting an incentive, then our exporters should get the same incentive. I hope not only that Mr. Gordon Richardson and his Committee will look at this aspect, but that my right hon. Friend, with his ingenious mind, will see whether he can conceive a scheme whereby we can give an incentive to exports without violating any of our international agreements.