I wish the right hon. Gentleman the Chancellor of the Exchequer no ill at all in expressing the hope that he will undertake to listen to the points which have been put to him by his own back benchers today. I have no doubt that it will be reported to him that from his own benches there has been only one speech in unstinted praise of his Finance Bill, and that was the speech of the hon. Member for Woolwich, West (Mr. Hamling).
From every other speaker opposite, let alone speakers from this side of the House, there has been a variety of criticisms and suggestions. If the Chancellor prefers to close his ears to those that have emanated from this side of the House, we could be reasonably satisfield—certainly we should be a great deal happier about the Bill—if he were at least to read what his hon. Friends the Member for Manchester, Cheetham (Mr. Harold Lever) and the hon. Member for Meriden (Mr. Rowland) in particular had to say.
In commending the speech of the hon. Member for Cheetham I will not follow him in the glowing tributes that he paid to the Chancellor. I am thinking of the meat in the middle of the sandwich —not the beginning, when he praised the Chancellor, or the end, when he castigated the Opposition. It is the middle part of his speech, which contained some valuable suggestions, I hope will commend itself to the Chancellor.
In a long debate it is natural that the House should concern itself mainly with the Corporation Tax. I am sure that hon. Members opposite will not object if I quote from the Economist. After all, it did recommend the British electorate to vote for the Labour Party last October. Last week the Economist had this to say:
The awful truth is that the most complicated tax change in recent British fiscal history is being introduced under an air of half-expectation, even among some of its godfathers, that it may conceivably prove to be the most almighty clanger.
In the same edition, having asked the Chancellor to reconsider the position even at this late stage, the Economist said:
Immediately after the budget this newspaper said that Mr. Callaghan had imposed a higher prospective burden of business taxation for 1966–67 than was likely to be wise, and urged that the corporation tax itself was too high. Do we now contradict ourselves by saying that corporation tax should actually go up to 45 per cent. if necessary, if that is the price of bringing the rate of withholding tax down? Very well, then, we must say with Walt Whitman, we contradict ourselves: in the light of the evidence of tax oddities that has poured in on us since the budget"—
it must have poured in on the Treasury too—
no reasonably pragmatic analyst could do otherwise. It would be greatly in the
national interest if Mr. Callaghan, who must have received the same weight of evidence and more, were now to contradict himself too.
It may be too much to hope for such repentance, but if the right hon. Gentleman would listen to some of the constructive criticism from hon. Members on his own side, he could yet do a great dealt to improve this Finance Bill and much more to improve the economic prospects facing the Government in the vital 12 months ahead.
Again to quote the Economist just after the Budget:
There was no shadow of an extra incentive for exports in this budget; that is one of the main criticisms to be levelled against it: And there was much less than any shadow of encouragement to keep up business investment in the crucial year of 1966. On the contrary, business taxation is then to be most unseasonably increased.
It is this concern for exports and for our overseas trade which has dominated the debate and on that I should like to spend a few moments myself. It is, I think, very important to realise that overseas investment is complementary to aid, and a number of hon. Members have dwelt on the importance of the aid which we have to go on finding for the less fortunate countries of the world. It is complementary to aid and if we have less overseas investments there will be more calls on the central Government for aid. But investment in long-term projects is more valuable than sums given in aid by central Government, because investment of that type tends to multiply in value to a much greater extent than the original cost. A great deal of the investment is, of course, ploughed back in the country, to serve further to benefit the economy.
It must be borne in mind—this point has been mentioned by hon. Members on both sides of the House—that less overseas investment does not automatically mean that we shall get more investment at home. It does not automatically follow that we shall get more people investing at home because it has been made more difficult for them to invest overseas. It has been pointed out that one has increasingly to invest overseas today to keep some of one's own industries going in their private markets, to get under tariff barriers in one case, to meet with national considerations and interests in others, bearing in mind the developing countries and the problems with which they are faced. If, under duress of the Corporation Tax, our companies have to bow out of some of these markets, they will bow out to competitors only too ready to move in where we have been forced out.
It is relevant to consider, when we are considering the need, to the extent that it exists, to cut down on overseas investment, that the bulk of overseas investment—the bulk of overseas expenditure—tends to be still that of the central Government. The figures issued in Cmnd. Paper 2629 show that the combined official deficit of £551 million was almost as large as the visible deficit of £553 million and more than twice as large as the net private investment of £251 million. Put another way, the Government accounted for nearly three-quarters of the total deficit of £745 million in its overseas expenditure of this type. The Government, therefore, have to consider their own position as much as they are seeking in this way to force private investors to reconsider theirs.
We must also think about the effect which all this is likely to have on our invisible exports, on shipping, insurance and banking, all of which are adversely affected if the flow of trade derived from investment overseas is itself adversely affected. Then there is the fact that so much investment has the effect of stimulating the export of capital goods and, in the creation of further sources of raw material supplies, generating the food imports which we need. There is, therefore, a strategic effect which has to be considered when one is cutting back on foreign investment.
Not least is the fact that the party opposite, which has talked so much over the last year or two of the importance of Commonwealth links, is surely the party which has in decency today to think again about any steps which are likely to be damaging to the interests of the Commonwealth. It must be rather staggering for some hon. Gentlemen opposite to reflect that the effect of the Budget will be to make it more attractive to invest in South Africa, than in India. When one is thinking of social purpose, let the Government ask themselves whether this is really part of the intention of their policies.
I should like to turn for a moment to another aspect of what the Financial Secretary had to say, when he seemed to be suggesting that the oil industry could and should be more heavily taxed than it is now. He argued that it tends to pay very little tax, if any, in the United Kingdom. I have tried to inform myself a little more about B.P., our great national company in which I have no sort of personal interest to declare. It is worth thinking about that B.P. earns overseas about £100 million a year.
From its resources overseas and its investments, B.P. imports oil which would cost us half as much again if we had to import it from foreign oil companies. B.P. buys equipment at a rate of about £10 million a year in Britain. For its overseas investment, it employs British contractors who, in turn, buy more equipment to service these investments. It has spent £17 million in the last 10 years in Britain's shipbuilding yards—and some hon. Members opposite should be interested in that. It has spent £20 million prospecting for oil in the United Kingdom. The vast bulk of its financial resources are held in this country.
It has in this country an elaborate machinery of research organisation which furthers technological understanding not only in the oil industry but also in allied industries. This research work could be penalised by the Corporation Tax because there is no virtue left to a company such as B.P. in carrying it on if financial criteria are the only criteria which the company is to use, for the simple reason that there is no way of offsetting this expenditure in terms of taxation.
B.P. has assets overseas worth £450 million. This is the catalogue of what B.P. is worth to the United Kingdom economy. It is not to be dismissed in the Financial Secretary's words this afternoon. The United States oil companies enjoy a better taxation position than will our own companies under the Corporation Tax.