Amendment of the Law

Part of Economic Assessment – in the House of Commons at 12:00 am on 6th April 1965.

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Photo of Mr Robert Maxwell Mr Robert Maxwell , Buckingham 12:00 am, 6th April 1965

The Corporation Tax, once it is examined—[Laughter.] Hon. Members may laugh, but I assure them that some of them may have long faces Mien industrialists have had the opportunity to work out what the Corporation Tax will do for them in business. They will discover that it is a tremendous incentive to re-equipment, to modernisation, to invest in trading, and to invest in sales. There is a whole string of other suggestions in the Budget with which I shall not bore the Committee. Hon. Members can read it tomorrow.

The last and perhaps the most important criterion by which we should judge the success or failure of the Budget is whether the proposals are such that they will genuinely bring about an immediate and rapid increase in the quantum of our exports. The Budget tries to do this, but I am afraid that my right hon. Friend will be disappointed, in that British industry has for so long lived with exhortation and palliatives, has for so long grown rich and fat on the home market, and has for so long heard about our need to export but has failed the nation, that the proposals in the Budget, as they stand at the moment, in spite of the export incentive, welcome though it is, will not be sufficient to help or compel British industry to achieve the kind of increase in exports we badly need.

I come to the suggestion to which I hope that my hon. Friend the Chief Secretary to the Treasury and my right hon. Friend the Chancellor of the Exchequer will give serious consideration and perhaps, which is even more important, adopt. I invite the Government to use the purchasing power that they have as a buyer of goods and services of about £8,000 million to modernise British industry and make it more competitive and export minded. During 1964 our economy was allowed to raise its output of goods and services by 6 per cent. Because British industry failed at the same time to increase its exports and maintain our share of world trade in order to pay for our increased imports, we are once again in a most severe balance of payments crisis. The Labour Government had to go cap in hand to foreign bankers and governments to obtain huge cash loans so as to enable us to meet our commercial obligations for the goods and services that we have imported or consumed abroad and to avoid the dire consequences of a further devaluation of the £.

Former Conservative Administrations, the F.B.I. and other industrial organisations have known for years that there are structural weaknesses in British industry and management and in our trade union set-up. We have been trying for years to put it right with palliatives, exhortations and occasional tinkerings. All these have largely failed and Britain's share of world trade has inexorably been driven down year after year after year.

Our rival trade competitors and creditors have apparently decided that we, the people of Britain, do not have the will or intelligence to get out of this ghastly economic position. Our present Government have already taken quite a number of steps and have announced some new ones in the Budget to try to correct these structural weaknesses. I am pessimistic whether these will suffice to make our country's economy capable of steady and sustained growth without inflation and without running into chronic balance-of-payments problems.

During our first six months in office, the steps taken so far have been only improved palliatives and some more and better exhortations, with the exception of the small export rebate. The new budgetary proposals will be too slow in their action and will not achieve the urgently needed increase in our exports this year. To my mind, the Government have in their hands an instrument as a major purchaser of goods and services to the tune of about £8,000 million per annum. They must use this tool to compel British firms to modernise themselves. to use computers and the latest automatic machine tools and other techniques to increase their productivity, their competitiveness and their exports.

Were the Government to announce that they were really going to use this tool, it would not only impress our foreign creditors and competitors but, perhaps even more important, it would impress British industry, its owners, workers and managers. They would immediately realise that the Government are very serious indeed in wanting them to become more productive, more enterprising and more competitive. Once they know that the Government mean business, the British people will rise as they did at Dunkirk, and within five years or less we will cease to be "the sick man of Europe" and, instead of our reapplying to join the Common Market, it will be the Common Market countries who will be applying for us to join them.

As an example of how Her Majesty's Government are using at present the taxpayers" money to finance obsolescence, I should like to tell the Committee what happens when a local authority decides, for example, to purchase a new water purification plant or sewage plant, an item costing several thousands of £s. After the project has been examined in detail and has gone through all the procedures provided for by the Ministry of Housing and Local Government, after it has gone through the committees and gone out for tender to the manufacturers, the final choice of plant is then made by the sanitary engineer or some other qualified engineer of the local authority.

When he chooses a plant and talks to those who make it, he says, "Please show me where a similar water purification plant has been working successfully for 20 or 30 years without any trouble." It is no good a manufacturer saying, "We have done a considerable amount of research and development and have produced a lighter and better water purification plant", because the local authority's engineer is likely to say to the manufacturer, "That is an excellent plant. It should be bought, but by the next local authority." He is interested only in having a plant which has been running trouble-free for 20 or 30 years elsewhere. The consequence is that no British manufacturer can invest money in research and development for new plant. He cannot sell it at home because people will not take plant which is an improvement on what already exists. In the result, we are at a disadvantage in the export market.

What can the Government do? With their block grants to local authorities, they can insist that local authorities do not place contracts with local firms for goods and services merely because they are ratepayers. Instead, local authorities should be invited to place their orders with the most scientific and research-minded and export-minded firms in the country which can offer the lowest prices.