Part of the debate – in the House of Commons at 12:00 am on 22nd June 1965.

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Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North 12:00 am, 22nd June 1965

I did not imply that the people who have suffered are the shareholders. Some of the arguments made earlier were that the effect would be that the companies would retain their net dividends to shareholders and that this would slow down plough back and investment by the companies. It is perfectly correct to say that the effect of the relief will be to assist investment by those companies.

I was asked why the seven-year period had been selected. Originally, we selected a five-year period, which we thought on the advice we then had would be a sufficient period to help companies to tide over the effect of the introduction of this complete change in the taxation system. As a result of representations received, my right hon. Friend concluded that that was not a long enough period and that there ought to be one more year of full relief and tapering should be over seven years. That is how we arrived at the seven-year period.

A number of references have been made to the study which the F.B.I. has decided to set in motion. The suggestion is made that the extension of these transitional relief provisions was in some way attributable to the introduction of that study. That is not so. The two things are separate and not dependent upon each other in any way. The reason for the introduction is that we have been impressed with the arguments put forward as to the reasons why the original five-year proposals would not provide a sufficiently fair measure of relief. My right hon. Friend has said that he is willing to give all the assistance he properly can to the F.B.I. in any way in the researches which it is making.

We were asked what would be our attitude if the result of the inquiry were to produce new facts, new information, which might indicate need for a change the proposals which we are proposing should be in this Bill. Well, of course, vie are introducing a permanent change into the taxation system and we must introduce in connection with that proper transitional provisions as matters stand at this time.

If, as a result of either this survey or any other—if at any time—new facts come to light which throw a new light upon the decisions which have been taken, of course we will consider them, and will reconsider the position in the light of those facts. We have taken these decisions on the basis of a judgment, which we have explained to the Committee, about the level and effect of our present overseas investment.

This leads me to the other matter which has been touched upon by a number of hon. Members, which is really going back to one of the major issues which divides the Committee, which is whether we can properly regard the level of our overseas investment in relation to our balance of payments as a purely temporary problem, or whether there is a fundamental underlying imbalance here which needs correction. We think that there is.

The right hon. Gentleman the Member for Orkney and Shetland suggested that this is primarily a Government problem rather than of private overseas investment. I would remind the Committee again of the figures. Our net balance on current account has been£25 million on average over the last 10 years. As against that we have been investing overseas in private investment alone£80 million a year on average, over three times the amount of our surplus. The total figure, Government and private, has been running at£170 million. These are consistent figures on average, year in and year out, and during these 10 years we have now run into our third balance of payments crisis and we cannot feel that this is a situation which we can just regard as something which can be dealt with by a mere temporary expedient.

So I have been drawn into what, Dr. King, you have been urging hon. Members not to do, to go back over the arguments.