Orders of the Day — Industrial Development Bill

– in the House of Commons at 12:00 am on 19th July 1966.

Alert me about debates like this

As amended (in the Standing Committee), considered.

New Clause.—(EXEMPTION FROM BUILDING CONTROL IN DEVELOPMENT AREAS.)

For section 4 of the Building Control Act 1966 (exemption for development districts) there shall be substituted the section set out in Part I of Schedule 3 to this Act (which provides for the exemption to have effect in relation to development areas constituted under this Act).—[Mr. Jay.]

Brought up, and read the First time.

4.12 p.m.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I beg to move, That the Clause be read a Second time.

The purpose of the Clause is to ensure that the exemption from building control which is being enacted in the Building Control Bill, which at present applies to development districts, shall apply, when this Bill becomes law, to the wider development areas as defined in this Measure. I think that it would be the wish of all hon. Members that this exemption should apply to the wider development areas —that we should not extend building control further than we are bound to do.

It was not possible for the Building Control Bill, as originally introduced, to refer to the development areas because they had no statutory existence at the time when it was introduced. It was also not possible for us to make this change in the present Bill until the Building Control Bill had received its Third Reading. Thus, the only way this result could be secured was by moving a new Clause at this stage, and I hope, therefore, that the new Clause will commend itself to the House.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause.—(POWERS OF PARLIAMENT OF NORTHERN IRELAND 1920, C. 67.)

Notwithstanding anything in the Government of Ireland Act 1920. the Parliament of Northern Ireland shall have power to make laws for purposes similar to the purposes of this Part of this Act.—[Mr. Jay.]

Brought up, and read the First time.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I beg to move, that the Clause be read a Second time.

The purpose of this Clause is to ensure that the working of the Bill in relation to Northern Ireland is in accord with the intentions of the Bill. It emerged that, as the Bill is drafted and as the corresponding Northern Ireland legislation will be enacted, there was a loophole.

It is possible under the Bill for investment grants to be given in the case of leased plant. The way that is done is that the grant is given to the lessor. As matters stand, however, it would not be possible for an asset leased in Northern Ireland, if used in Great Britain, to receive the investment grant. Our intention is to ensure that we not merely provide for an investment grant for an asset leased from one person in Great Britain to another person in Great Britain and from one person in Northern Ireland to another person in Northern Ireland, but also from somebody in Northern Ireland to somebody in Great Britain and vice versa. The Clause, together with Amendment No. 79, provides the solution in the reverse direction.

The Clause will also remove doubts which have arisen about whether it is constitutionally possible for the Northern Ireland Parliament to provide grants for equipment used on the Continental Shelf off the coast of Northern Ireland. Apparently there was some doubt about that and the purpose of the Clause is to resolve these doubts in each case.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause.—(RIGHT OF APPEAL.)

(1) Any person aggrieved by a decision of the Board upon any application made to it under Part I of this Act may appeal to the President of the Board who shall afford to that person an opportunity of being heard by a person appointed by him in that behalf and the person so appointed shall report to the President upon the merits of the case before him and copies of such report shall be made available to the person aggrieved, to the appropriate advisory committee appointed under section 11 of this Act and, if so required by the Council on Tribunals, to that Council, and the President in announcing any decision which in any material particular departs from the recommendations of that report shall state his reasons for such departure.

(2) The President may cause a local inquiry to be held for the purpose of the exercise of his functions under this section.

(3) The provisions of subsections (2) to (5) of section 290 of the Local Government Act 1933 shall have effect with respect to any inquiry held by virtue of this section as if the President were a department for the purposes of that section.—[Mr. Corfield.]

Brought up, and read the First time.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

I beg to move, That the Clause be read a Second time.

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

Would it be convenient for the House to discuss, at the same time, new Clause No. 4, with the same title, "Right of Appeal"?

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

That will be convenient, Mr. Deputy Speaker.

These Clauses together represent an attempt—or provide alternative attempts —to set out a procedure which will allow an appeal from the decision of what may in many cases, particularly regarding smaller firms in the provinces, be a very junior civil servant. We are in something of a dilemma here in that the discretionary nature of the powers of the Bill makes it, on the one hand, more important that there should be a form of appeal or hearing and, on the other, very much more difficult to draft a satisfactory new Clause.

The Clause is modelled on the appeal procedure of such Measures as the Town and Country Planning Acts and the Housing Acts. Although, in those Measures, the appeal is generally a genuine one, in the sense that it is from another body, a local authority, to the Minister, there are occasions when it is, in effect, a hearing before an inspector appointed by the Minister who has himself initiated the procedure against which the appeal is being made.

This procedure is even more common when we consider matters like the Ministry of Transport special road Orders and similar provisions in which the Minister himself initiates and, at the same time, hears the appeal. This is never the most satisfactory arrangement, because, inevitably, the Minister starts by being judge in his own cause. Nevertheless, it has, over the years, proved a valuable procedure in that any person who feels aggrieved by an administrative decision has the opportunity of developing his arguments and to know that they will be recorded and considered in full detail by a fairly senior member of the Department, if not by the Minister himself.

No amount of argument by the Minister will persuade us that we should not face the fact that if we are to have about 300,000 applications a year, which is about 1,000 applications in a working day, we will not only need a great many more staff but that that staff is bound to be diluted in quality. After all, we are living in a period of what is sometimes called overfull employment, in which the vacancies available far outnumber the number of people unemployed and in which the pressures for the types of skills that will be required under the Bill—in addition to many other Measures which the Government are putting through, all of which seem to let Parkinson's Law run riot—are in particularly short supply.

For that reason, it is even more important than it would otherwise be—the principle is of utmost importance, in any case—that there should be some form of appeal. We are not attempting in the Clause, to tie the Minister. What we are saying, in effect, is that he must hear all the arguments and reach his decision in a quasi-judicial manner and that if he nevertheless makes a decision which is contrary to the recommendations of his inspector he must make his reasons for doing so fully apparent and make the report of his inspector and his decision letter available not only to the applicant, but, if required, to the Council on Tribunals.

This is a further and important safeguard, in that that important body has a watchdog function, which, because of the very wide discretionary powers of the Bill, seems to us to be of the utmost importance. Nor is there any question of this proposal opening the door to frivolous appeals. We have incorporated in subsection (3) the standard provisions of the Local Government Act of 1933, which specifically empowers a Minister or whoever is convening an inquiry to award costs either way. Clearly, this can be used as a deterrent to anyone who put forward purely frivolous claims. The fact that he may have to meet the full costs of the proceedings is surely an ade- quate deterrent against frivolous appeals and time-wasting procedures.

As an alternative, we have put forward new Clause 4. This simply extracts from the Selective Employment Payments Bill —of ill repute—the appeal procedure. It seems to us that both this Bill and the Selective Employment Payments Bill depend upon the distinction, which we regard as a ludicrous one in this context, between manufacturing industries and service industries, with transport in some sort of no man's land in the middle. That tribunal which was set up under the Industrial Training Act, and is regarded by the Government as appropriate for considering matters like this, might be adapted to consider the sort of questions which will arise under this Bill.

I say "might" because this is not a tribunal with which I am familiar. But it is clear that at least some of the basic questions of whether or not an industry or a piece of machinery falls into a particular category are basically the same under both the Selective Employment Tax and the industrial investment grants. Of course, that is not to say that we at all condone the distinctions which have to be made. I described them as ludicrous because they have absolutely no bearing on the economic merits of a particular undertaking. They exclude such things as banking, insurance and the tourist industry, which are probably three of our most valuable earners of foreign exchange. They include such industries as the making of one-armed bandits and candyfloss machines, while excluding office equipment.

Nevertheless, if the tribunal under the Industrial Training Act is appropriate for decisions of classification, it may be possible to adapt it for recommendations under this Bill. Although we do not pretend, and it would not be wise for any Opposition to pretend, that we have the wording exactly right, there is the advantage that this is a Commons Bill. It will, therefore, go to another place, where the right hon. Gentleman will have the opportunity to insert words more to his liking.

Whether he likes the wording or not, we attach enormous importance to the principle. It is abundantly clear from the large amount of correspondence which I and my right hon. and hon. Friends have had that this is something to which industry—rightly, in our view—also attaches importance.

Photo of Mr John Peyton Mr John Peyton , Yeovil

There is probably a genuine difference of opinion between the two sides of the House. I do not imagine that the right hon. Gentleman, who once used those immortal words, "The gentleman in Whitehall knows best", which are engraved on all our hearts, has any feelings against the idea of giving a civil servant absolute discretion to hand out the taxpayers' money to an individual taxpayer. I believe that this is wrong, though I do not expect him to share those feelings.

However. I challenge the view of my hon. Friend the Member for Gloucestershire. South (Mr. Corfield) that there should be some appellate machinery. I am profoundly unimpressed by the argument that we should follow the quite horrid precedent of the town and county planning appeals procedure. I took it from what he said that the first of the new Clauses is based on that procedure I hope that he will correct me if I am wrong. If that is the case, it would be a hideous disaster of almost unspeakable proportions if we extended that horrid practice. If ever I have met a piece of machinery calculated to make a hollow mockery of justice, that is it. if that is coupled with the immense irritations of delays and the swish of bumbledom on the march, the position would be intolerable.

After having sat up all night I still find it possible to raise a little fire of indignation at the idea of putting in this horrid provision. I realise that I am being unreasonable in dismissing my hon. Friend's suggestion so lightly but I support him absolutely in his desire to set up some sort of appeal procedure.

The right hon. Gentleman himself would be well advised to do this, because in a matter like this Ministers should have visible and clear grounds for assuring the public, and, in particular, those people with an interest in securing a grant, that this matter has been dealt with with absolute fairness, and that, where necessary, a decision has been taken independently and on quite intelligible grounds. I believe that that is important.

although I have grave misgivings about the horror of anything to do with the Town and Country Planning Act.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I would not wish to use quite as strong language about the proposal of the lion. Member for Gloucestershire, South (Mr. Corfield) as was used by his hon. Friend the Member for Yeovil (Mr. Peyton). Nevertheless I think that he is right in assuming that there is a real difference of opinion between us on this matter.

This is a case which the Opposition have already raised and which it is legitimate for them to raise and raise again, but we are convinced that this whole scheme will be much more effective in its essential industrial purposes if there is an element of discretion left to the Board of Trade, and if the scheme is not administered by the sort of appeal to the courts which was the rule for the investment allowances.

The general case for believing that is twofold. In the first place, experience showed that under the investment allowance system there was a series of decisions by the courts which carried the whole scheme to a point to which it had never been intended to be carried by the House or Ministers or anyone else. It was precisely for this reason—that so many items were included that nobody had contemplated—that the system fell into some disrepute.

4.30 p.m.

The second reason is that if there were not some discretion it would inevitably be necessary to lay down rigid definitions for the working of the scheme which would, in fact, have to be more oppressive to industry and more limited and which would compel those administering it to exclude some items from grant which they would have wished and probably the House would have wished to see included. Nevertheless, we have to remember through the whole of this discussion that the Board of Trade are very scrupulously limited by the Bill.

In the first place, they cannot give a grant unless they are satisfied that it is for capital expenditure. Secondly, they must be satisfied that the person receiving it is an eligible person who is carrying on a business in this country. Thirdly, as those hon. Members who have been through the discussions know, it must also be on account of an asset which will be used in a qualifying process within the terms of the Bill. There are clearly laid down by the House limits within which the Board of Trade may exercise its discretion.

The hon. Member for Gloucestershire, South, spoke of junior civil servants making decisions without any possibility of appeal, but it will be open to a firm, as it is now in the case of I.D.G.s or one of the existing L.E.A. grants, to write to the Minister and to appeal to him or to raise the question in any of the ways which are familiar. Therefore, in any disputed case it will be the Minister and not a junior civil servant who takes the decision.

I agree with the hon. Member about the suggested procedure under the Clause. As I understand the procedure under the Town and Country Planning Act— and I know that the hon. Member for Gloucestershire, South is an expert on this—the normal case is where there is an appeal by an aggrieved person against a decision by a local authority, and he appeals to a third party, the If, however, we were to import this procedure into the system under the Bill, the President of the Board of Trade would be required himself to institute an inquiry into a decision which he had himself taken. Whatever we do, that would riot be a very appropriate system.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

I made it quite clear that I took as the basis of this procedure the procedure used by the Ministry of Transport who in fact initiates and then hears an appeal against his own proposal. There is no difference from that which is established over a very wide field. Even under the Town and Country Planning Act, the' Housing Act and many other Acts it can be that the Minister initiates and then hears the appeal. Certainly, under the Transport Act it is almost invariably used.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I would not use such harsh language as did the hon. Member.

Photo of Mr John Peyton Mr John Peyton , Yeovil

What struck me as horrifying about the right hon. Gentleman's proposal is that he believes that he can do all this. He is head of a huge Department of State with an immense diversity of functions, but he believes that personally he can oversee all these applications for grant. I do not like my hon. Friend's proposals, and I said that it was rather unfair of me not to like it, but the right hon. Gentleman's belief in his own talents and capacity or the capacity of any Minister who follows him—I do not wish to be personal—must be optimistic in the extreme.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

The precedent which we arc following here is the precedent introduced by the Conservative Party in the Local Employment Act, 1960, which first introduced grants payable for buildings and machinery in development areas. That is a very close parallel to what we are doing here except that we have extended the geographical application much more widely. In that Act no appeal was provided for. The system was that decisions should be by civil servants with an appeal to the Minister. That was the scheme which was introduced by the Conservative Party and that is the system under which the Local Employment Act has always operated. As far as I know, while no doubt there is some criticism of almost any system, there has been very little criticism of or dissatisfaction with the system. The same is true of the industrial development certificate. Therefore, in this matter we are following the precedent set by the Conservative Party when it was in power.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

It is very important that the President of the Board of Trade should recognise, as I do not believe he did in his reply to the debate, the extent to which this new Clause and the rationale underlying it goes to the very heart of our profound dislike of the whole pattern of this legislation.

In attempting to justify the exclusion of any right of appeal against a refusal to make an investment grant, in favour of a manufacturer, the Minister sought to justify it on a number of grounds one of which he must not be allowed to get away with. He referred to the system of investment allowances and said that the system had defeated the intention of Parliament, because by decisions of the court on appeal under the Income Tax Act it turned out that the language which had been incorporated in various Finance Acts under which the investment allowances were available had been drawn rather more widely than Parliament had recognised at the time.

This is a very familiar problem with which Parliament is faced and the Government are faced, and the remedy is not to sweep away the whole system and to set up something entirely new. The remedy is to bring in an Amendment—and for goodness' sake in Finance Acts one has enough opportunities—to put the matter right. If it is thought that it was outside Parliament's intention that the catering industry should get grants for knives and forks, sheets and blankets, or that firms which hire consumer durables should get grants for television sets and refrigerators, surely it is the easiest thing in the world for the Government to come to the House with an amending Clause for the annual Finance Bill to change the situation and to limit the grants to what they conceive was the intention of Parliament.

But that is not the way the Government carry on. The Government say, "We do not want to specify in advance the purposes for which we shall give grants. We do not want to spell out in detail for the benefit of the House or industrialists the circumstances in which we shall give or withhold grants. We want to retain a complete discretion on whether we make a grant in a particular case." The President of the Board of Trade referred to what he described as "an element of discretion in this legislation, but this is sheer rubbish. The whole of Part I is entirely discretionary. The right hon. Gentleman, in considering whether to give a grant, is entirely free, as the Act is drawn, to give or to withhold a grant, and as the Act is at present drawn he is not obliged to give any reasons. The whole matter is entirely discretionary.

We ask, what about the particular case or what about the case of doubt whether the asset will be used in a qualifying industrial process?—and the Minister of State will remember some of the examples which we gave in Committee, such as my peanut frying machine and various other examples where there is an element of doubt.

The answer is that the Minister's say-so is to be final and "it does not matter what we put in the Bill because in the last resort we shall administer it sensibly in the interests of the country for effective and essential industrial purposes."

This is a pattern of legislation which we on this side of the House abhor. We dislike it intensely. We have fought against it ever since the proposals were published in the White Paper last January and will continue to fight against it because we do not believe that this is the right way to deal with important industrial problems.

My hon. Friend the Member for Yeovil (Mr. Peyton) criticised, in some senses justly, the pattern of appeal we are trying to introduce into the Bill. I share his dislike of these administrative tribunals. I agree with him when the tribunal is an appeal to an official appointed by the Minister against a decision of that Department, but this is better than nothing. Those of us who have tried over the past few weeks to devise a pattern for administering such appeals know the difficulties in devising a form of words to get round the problems to which my hon. Friend drew attention. I believe that he was entirely with us in his abhorrence of this pattern of legislation.

We on this side of the House all agree about the arguments which the President of the Board of Trade addressed to us saying that his discretion is fettered, because he is allowed to give grants only to qualified people and if they are resident in the right place and doing the right sort of thing. This is sheer humbug and does not in any sense impinge on the discretion. The right of appeal if the case is argued and decisions on the interpretation of the Bill should be determined by some person other than the one actually taking the decision. That seems absolutely crucial to legislation of this sort. If the President of the Board of Trade will not be more forthcoming, I must ask my hon. and right hon. Friends to divide in favour of the Clause.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

Cannot the President of the Board of Trade be a little more willing to look at this matter again? Must he and his colleague be adamant in their present attitude? As my hon. Friend the Member for Wan-stead and Woodford (Mr. Patrick Jenkin) pointed out, there is such an element of discretion that many people applying for these grants in cases of comparable merit may feel that the discretion will lead to different results.

If the Government reject the idea of any sort of appellate machinery it will tend to strengthen that fear. Those people will get the impression that this is arbitrary in the worst sense of the word. I do not think fiat the machinery proposed by my hon. Friend the Member for Gloucestershire. South (Mr. Corfield) is so objectionable as my hon. Friend the Member for Yeovil (Mr. Peyton) might fear. There are distinctions to be drawn between this kind of application and the sort of appeals we have normally had in connection with local authority planning applications where all sorts of applications have been made by local authorities and other interested parties.

The machinery is capable of some simpler definition. If the Government accept the idea that there should be some machinery at this stage that would lessen the anxieties felt not only in this House, but outside that the Government may not implement these powers in the sort of impartial objective manner in which we believe they should be applied. I ask the Minister even at this late hour not to maintain such an adamant attitude towards this matter.

4.45 p.m.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

I apologise for the departure of my right hon. Friend the President of the Board of Trade. He has a somewhat important meeting to attend, hut he will he back here before long.

The answer which I must give to the hon. Member for Barry (Mr. Gower) and the hon. Member for Yeovil (Mr. Peyton) is that we have not set our minds against a statutory form of appeals procedure. What we are trying to do here is to establish machinery for looking at the applications for grants and claims for grants and allowing the grants that come within the terms and definitions of the Bill to be given as quickly as possible to the applicants. Generally, they are buying plant and machinery and want to know whether it qualifies for grant. In the activities of the civil servants the issues are quite clear, in the majority of cases.

If a person is buying machinery for a manufacturing purpose. and it comes within the terms of the Bill the grant will be allowed, but there will be a minority of cases where doubt will creep in. If we had the kind of appeal procedure suggested by hon. Members opposite we would have to rewrite the Bill in a way in which I feel sure industrialists would not like it to be rewritten. Because there would be a mandatory right of appeal we would have to lay down completely and rigidly in the Bill the classes of qualifying processes and assets which would qualify for grant. This would be far more restrictive than the machinery we now have.

What hon. Members must understand is that the discretionary scheme will be for the benefit of the applicants. This is what it is designed for. I am quite convinced that if we were to set up the statutory appeal procedure for which hon. Members opposite ask we would get ourselves into grave difficulties about definitions which would have to be spelled out in the Bill or in an Order. The applicants themselves would be in a more difficult position because we would be administering the scheme, not in a friendly and in many cases informal way, but in a way which would make everyone look over his shoulder to make sure that everything came within the mandatory rules we would have to lay down.

The discretion in the Bill is there to help everyone concerned. Many hon. Members have taken up cases on behalf of firms in their constituencies and have felt that they were badly treated with regard to B.O.T.A.C. and Board of Trade grants. They would agree that under the previous Administration and under this their approach to Ministers has been wide open and that we deal with these questions very quickly indeed. To have the kind of appeals procedure asked for, which the hon. Member for Yeovil rightly condemned, would mean that many of these cases which we could settle in a couple of weeks would be held up for months while the procedure worked. I am convinced that our proposal is a workmanlike way of dealing with the job. We shall, therefore, stick to it.

Question put, That the Clause be read

Division No. 130.]AYES[4.50 p.m.
Alison, Michael (Barkston Ash)Gresham Cooke, R.Munro, Hector
Astor, JohnHall-Davis, A. G. F.Morgan, W. G. (Denbigh)
Baker, W. H. K.Hamilton, Michael (Salisbury)Munro-Lucas-Tooth, Sir Hugh
Balniel, LordHarris, Reader (Heston)Murton, Oscar
Batsford, BrianHarrison, Brian (Maldon)Nabarro, Sir Gerald
Beamish, Col. Sir TuftonHarrison, Col. Sir Harwood (Eye)Heave, Airey
Bennett, Sir Frederic (Torquay)Harvey, Sir Arthur VereNoble, Rt. Hn. Michael
Biffen, JohnHawkins, PaulOnslow, Cranley
Birch, Rt. Hn. NigelHeath, Rt. Hn. EdwardOsborn, John (Hallam)
Black, Sir CyrilHeseltine, MichaelOsborne, Sir Cyril (Louth)
Blaker, PeterHiley, JosephPage, John (Harrow, W.)
Body, RichardHill, J. E. B.Peel, John
Boyd-Carpenter, Rt. Hn. JohnHirst, GeoffreyPink, R. Bonner
Boyle, Rt, Hn. Sir EdwardHogg, Rt. Hn. QuintinPounder, Ration
Braise, BernardHolland, PhilipPowell, Rt. Hn. J. Enoch
Brewis, JohnHordern, PeterPrior, J. M. L.
Brinton, Sir TattonHornby, RichardPym, Francis
Bromley-Davenport,Lt.Col.Sir WalterHunt, JohnRidley, Hn. Nicholas
Brown, Sir Edward (Bath)Hutchison, Michael ClarkRidsdale, Julian
Bruce-Gardyne, J.Iremonger, T. L.Rossi, Hugh (Hornsey)
Buchanan-Smith,Alick(Angus,N—M)Irvine, Bryant Godman (Rye)Royle, Anthony
Burden, F. A.Jenkin, Patrick (Woodford)Russell, Sir Ronald
Campbell, GordonJennings, J. C. (Burton)Scott, Nicholas
Chichester-Clark, R.Jopling, MichaelShaw, Michael (Sc'b'gh — Whitby)
Clegg, WalterKing, Evelyn (Dorset, S.)Sinclair, Sir George
Cooke, RobertKnight, Mrs. JillSmith, John
Cooper-Key, Sir NeillLambton, ViscountSummers, Sir Spencer
Corfield, F. V.Lancaster, Col. C. G.Taylor, Edward M. (G'gow, Cathcart)
Craddock, Sir Beresford (Spelthorne)Langford-Holt, Sir JohnTaylor, Frank (Moss Side)
Crouch, DavidLegge-Bourke, Sir HarryThatcher, Mrs. Margaret
Cunningham, Sir KnoxLewis, Kenneth (Rutland)Turton, Rt. Hn. R. H.
Dalkeith, Earl ofLloyd, Rt. Hn. Selwyn (Wirral)van Straubenzee, W. R.
Dance, JamesLoveys, W. H.Vickers, Dame Joan
Dean, Paul (Somerset, N.)McAdden, Sir StephenWalker, Peter (Worcester)
Dodds-Parker, DouglasMaclean, Sir FitzroyWalters, Dennis
Eden, Sir JohnMcMaster, StanleyWard, Dame Irene
Elliot, Capt. Walter (Carshalton)Maginnis, John E.Weatherill, Bernard
Eyre, ReginaldMarten, NeilWebster, David
Farr, JohnMathew, RobertWhitelaw, William
Fisher, NigelMaude, AngusWills, Sir Gerald (Bridgwater)
Fletcher-Cooke, CharlesMaticiling, Rt. Hn. ReginaldWilson, Geoffrey (Truro)
Fortescue, TimMaxwell-Hyslop, R. J.Wood, Rt. Hn. Richard
Giles, Rear-Adm. MorganMaydon, Lt.-Cmdr. S. L. C.Worsley, Marcus
Glyn, Sir RichardMills, Peter (Torrington)Wylie, N. R.
Goodhew, VictorMills, Stratton (Belfast, N.)TELLERS FOR THE. AYES:
Grant, AnthonyMitchell, David (Basingstoke)Mr. More and Mr. R. W. Elliott.
NOES
Abse, LeoChapman, DonaldEnsor, David
Allaun, Frank (Salford, E.)Coe, DenisEvans, Ioan L. (Birm'h'm, Yardley)
Alldritt, WalterColeman, DonaldFernyhough, E.
Archer, PeterConcannon, J. D.Finch, Harold
Armstrong, ErnestConlan, BernardFletcher, Ted (Darlington)
Ashley, JackCraddock, George (Bradford, S.)Floud, Bernard
Atkins, Ronald (Preston, N.)Crawshaw, RichardFoot, Sir Dingie (Ipswich)
Atkinson, Norman (Tottenham)Cullen, Mrs. AliceFoot, Michael (Ebbw Vale)
Bacon, Rt. Hn. AliceDarling, Rt. Hn. GeorgeFord, Ben
Blazier, Cordon A. T.Davidson, Arthur (Accrington)Forrester, John
Barnett, JoelDavidson,,James(Abdardeenshire,W.)Fowler, Gerry
Beaney, AlanDavies, Dr. Ernest (Stretford)Fraser, Rt. Hn. Tom (Hamilton)
Bennett. James (G'gow, Bridgeton)Davies, G. Elfed (Rhondda, E.)Freeson, Reginald
Binns, JohnDavies, Harold (Leek)Gardner, A. J.
Bishon. E. S.Davies, S. 0. (Merthyr)Garrow, Alex
Blackburn, F.Deli, EdmundGinsburg, David
Blenkinsop, ArthurDempsey, JamesGray, Dr. Hugh (Yarmouth)
Boardman, H.Dewar, DonaldGregory, Arnold
Booth, AlbertDickens, JamesGrey, Charles (Durham)
Braddock, Mrs. E. M.Dobson, RayGriffiths, Rt. Hn. James (Llanelly)
Brooks, EdwinDoig, PeterGriffiths, Will (Exchange)
Brown, Hugh D. (G'gow, Provan)Driberg, TornGrimond, Rt. Hn. J.
Brown,Bob(N'c'lle-upon-Tyne,W)Dunn, James A,Hamilton, James (Bothwell)
Brown, R. W. (Shoreditch—F'bury)Dunwoody, Mrs. Gwyneth (Exeter)Hamilton, William (Fife, W.)
Buchan, NormanEadie, AlexHannan, William
Buchanan, Richard (G'gow, Sp'burn)Edwards, Rt. Hn. Ness (Caerphilly)Harper, Joseph
Cant, R. B.Edwards, Robert (Bilsten)Harrison, Walter (Wakefield)
Carmichael, NeilEdwards, William (Merioneth)Hefter, Eric S.

The House divided: Ayes 136, Noes

Henig, StanleyMackenzie, Alasdair(Ross—Crom'tY)Roberts, Albert (Normanton)
Hooley, FrankMackintosh, John P.Robertson, John (Paisley)
Howarth, Harry (Wellingborough)McMillan, Tom (Glasgow, C.)Roebuck, Roy
Howarth, Robert (Bolton, E.)McNamara, J. KevinRogers, George
Hoy, JamesMacPherson, MalcolmShaw, Arnold (Ilford, S.)
Hughes, Emrys (Ayrshire, S.)Mahon, Peter (Preston, S.)Sheldon, Robert
Hughes, Hector (Aberdeen, N.)Manuel, ArchieShinwell, Rt. Hn. E.
Hunter, AdamMapp, CharlesShort, Mrs. Renee(W'hampton,N.E.)
Hynd, JohnMarquand, DavidSilkin, S. C. (Dulwich)
Irvine, A. J. (Edge Hill)Mason, RoySilverman, Julius (Aston)
Jackson, Colin (B'h'se — Spenb'gh)Maxwell, RobertSilverman, Sydney (Nelson)
Jackson, Peter M. (High Peak)Mendelson, J. J.Slater, Joseph
Jeger,Mrs.Lena(H'b'n—St.P'cras,S.)Milian, BruceSmall, William
Jenkins, Hugh (Putney)Miller, Dr. M. S.Snow, Julian
Johnson, Carol (Lewisham, S.)Mitchell, R. C. (S'th'pton, Test)Spriggs, Leslie
Johnson, James (K 'ston-on-Hull, W.)Morgan, Elystan (Cardiganshire)Steele, Thomas(Dunbartonshire, W,)
Johnston, Russell (Inverness)Morris, Charles R. (Openshaw)Swain, Thomas
Jones, Dan (Burnley)Moyle, RolandSymonds, J. B.
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)Neal, HaroldThomas, Iorwerth (Rhondda, W.)
Jones, J. Idwal (Wrexham)Noel-Baker, Francis (Swindon)Thorpe, Jeremy
Judd, FrankNorwood, ChristopherTinn, James
Kelley, RichardOgden, EricUrwin, T. W.
Kenyon, CliffordO'Malley, BrianVarley, Eric G.
Lawson, GeorgeOswald, ThomasWainwright, Edwin (Dearne Valley)
Leadbitter, TedOwen, Will (Morpeth)Walker, Harold (Doncaster)
Ledger, RonPage, Derek (King's Lynn)Wallace, George
Lee, John (Reading)Paget, R. T.Weitzman, David
Lestor, Miss JoanPalmer, ArthurWellbeloverl, James
Lewis, Ron (Carlisle)Pannell, Rt. Hn. CharlesWhitaker, Ben
Lipton, MarcusPardoe, JohnWhite, Mrs. Eircne
Lomas, KennethPark, TrevorWhitlock, William
Luard, EvanParkyn, Brian (Bedford)Williams, Alan Lee (Hornchurch)
Lubbock, EricPearson, Arthur (Pontypridd)Williams, Clifford (Abertillery)
Lyons, Edward (Bradford, E,)Pentland, NormanWilliams, Mrs. Shirley (Hitchin)
McBride, NeilPerry, George H. (Nottingham, S.)Wilson, William (Coventry, S.)
McCann, JohnPrice, Thomas (Westhoughton)Winterbottorn, R. E.
MacColl, JamesPrice, William (Rugby)Woof, Robert
Macdonald, A. H.Prohert, ArthurTELLERS FOR THE NOES:
McGuire, MichaelRedhead, EdwardMr. Fitch and Mr. Gourlay.
McKay, Mrs. MargaretReynolds, G. W.

Clause 1.—(MACHINERY AND PLANT.)

Photo of Mr Alfred Hall-Davis Mr Alfred Hall-Davis , Morecambe and Lonsdale

I beg to move Amendment No. 1, in page 1, line 11, to leave out "or".

Mr. Deputy-Speaker:

I believe that it will be for the convenience of the House if, with this Amendment, we discuss Amendment No. 2, in line 11, after "plant", insert "or equipment". Amendment No. 3, in line 17, at end insert: (c) for providing board and lodging in a hotel, or the provision of food or drink in any restaurant, licensed premises or other establishment of like nature. Amendment No. 51, in page 10, line 28, at end insert: equipment" in relation to section 1(1)(c) of this Act means the items listed in Schedule (Equipment eligible for grant) to this Act. And Amendment No. 52, the new Schedule: Equipment eligible for Grant

For the purposes of section 1(1)(c) of this Act the equipment towards the expenditure on which the Board may make a grant is confined to the following assets—Sanitary fittings and services connected thereto;Ventilating plant and equipment;Heating plant and installations; Mechanical conveyors for goods and passengers;Cookers;Machinery for the storage, preparation or cooking of food.

Photo of Mr Alfred Hall-Davis Mr Alfred Hall-Davis , Morecambe and Lonsdale

The Amendments hang together in meaning. To understand their gist it is necessary that they be taken together, Mr. Deputy Speaker.

The purpose of this series of Amendments is to provide the hotel and catering industry, which, under the Bill as it stands, will receive no investment grants, with new investment incentives for improvement and modernisation to replace those which it enjoyed until the beginning of the year but for which the industry will no longer be eligible, because of the Government's controversial decision to confine investment grants almost entirely to manufacturing industry.

This is not the first time the Minister of State has heard some of the argument on this important subject during our debates on the Bill. The right hon. Gentleman has been very courteous in his consideration of arguments which have been advanced. The Amendments are clear. The proposed Schedule is selective. It is more logically selective than certain of the Government's own proposals in other fields. Up to 16th January this year, hotels and catering establishments received investment allowances on linen, cutlery, glass and china as well as on such items as baths, basins, radiators, cooking equipment and furniture. This may appear on the surface to have represented extensive assistance to the industry.

5.0 p.m.

I am very sorry that the President of the Board of Trade could not remain to hear this part of our debate. We understand that he is mending his fences, and I suppose that from the country's point of view we wish him well, but it is clear from comments that he has made previously that the right hon. Gentleman thought that those investment allowances represented very extensive—and excessive —assistance.

I must repeat, because it is important that the House should be clear about this, that for a wide range of smaller items of hotel equipment, such as cutlery, china and furniture, the old investment allowance was no more than an approximate offset for the burden of Purchase Tax on the industry, for the hotel and catering industry is almost alone in having to pay this tax on many of the normal tools and much of the equipment of its trade. The hotel and catering industry lost these allowances because of the Government's decision to limit primarily to manufacturing industry the new investment grants introduced in the Bill, and the Government have based their defence of this policy on the argument that it is on manufacturing industry that we depend for the greater part of our export earnings.

In the context of this series of Amendments, we are prepared to argue our case on that basis. For as soon as the Government relate the paying of investment grants to the contribution made to the balance of payments, the illogicality of excluding the hotel and catering industry from the grants becomes obvious, because the industry, as part of our tourist and holiday industry, is both an earner and a saver of foreign currency.

In so far as an efficient hotel and catering industry plays a vital part—almost the vital part—in attracting tourists to this country, it is an important earner of foreign currency. The other side of the argument is equally important and probably as the years pass may become more important; that is, that the industry is a saver of foreign currency in so far as it can meet and overcome the very considerable competitive attractions of holidays abroad, and people decide that they can equally enjoy a holiday spent in Britain. I do not need to labour that point now, but I feel that the Government have not yet got the importance of the balance of payments factor entirely in perspective.

The Minister of State referred in Committee to the fact that the industry's earnings from foreign tourists represented 10 per cent. of its turnover. That was in the report of 14th June. I do not think that it is generally understood, not even on the Government Front Bench, how great would be the effect on our balance of payments if our hotel and catering industry were to falter in its attempts to meet foreign competition. If our tourist earnings were to fall away by 10 per cent. and holiday spending by Britons abroad were to increase by 10 per cent., the adverse effect on our balance of payments would be about £50 million a year, almost as much as the Prime Minister's week-end in Moscow has cost the reserves.

We had hoped that when the Bill reached the Report stage the Government would be ready to put forward some definite proposals to stimulate the competitive efficiency of the industry. On 14th June, the Minister of State, replying to an Opposition Amendment moved in Committee by my right hon. Friend the Member for Argyll (Mr. Noble), said: Something has to be done, and as the hon. Member has said, discussions are going on."—[OFFICIAL REPORT, Standing Committee D, 14th June, 1966; c. 145.]

The right hon. Gentleman made certain other sympathetic references to the Amendment. We on this side of the House hoped that the Government would have clarified its policies by now and embodied them in practical proposals in time for them to be included at this stage in the Bill, which is the proper place for them.

The Minister of State indicates that this is unlikely to be the revelation that he is to make to the House, but I say to him that this is not a matter which has been under consideration only since the Bill was introduced to the House. We were given notice by the Chancellor of the Exchequer and the First Secretary early last year that the whole question of investment grants and investment allowances was to be reviewed. There has been ample time for this situation to be clarified, and the uncertainty has continued for over a year. We were too optimistic, for the Government are proving themselves every day to be a Government of "never-readies".

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

My hon. Friend speaks of uncertainty, but is not the fact that there is no uncertainty in the holiday, hotel and tourist industry now? The industry is quite convinced that the Government have written it off.

Photo of Mr Alfred Hall-Davis Mr Alfred Hall-Davis , Morecambe and Lonsdale

I am obliged to my hon. Friend. As perhaps he intended, what he says reinforces the argument I am putting forward. If this is too severe a view to take of the Government's intentions, it is most important that the situation should be clarified, because in the meantime the industry is in a state of stagnation and ossification. In this series of Amendments my right hon. and hon. Fr ends and I have attempted to provide the Government with at least the bare bones, the framework, of a logical and practicable policy. I hope that the President of the Board of Trade, when he comes to read the report of the debate, or when the Minister of State has the hasty consultations with him before accepting the Amendment that I trust will take place, will recognise that those items to which he has taken such strong exception in the past are omitted from the Amendments.

During the Second Reading debate, the President of the Board of Trade spoke of the furniture, carpets and curtains, the cups and saucers, and asserted, in a phrase perhaps worthy of some weightier subject, that for them to get …the special privilege of an investment allowance or grant is to pervert the objective of technical advance in British industry."— [OFFICIAI REPORT, 16th May, 1966; Vol. 728, c. 949.] These items do not appear in the Amendment. We are trying to tempt the President of the Board of Trade to come to a decision. The items ap- pearing in the Schedule are those which are usually an integral part of any scheme of hotel modernisation or the improvement of catering services. The private bathroom is no mere status symbol for a hotel today. It is becoming increasingly essential feature necessary to maintain the reputation of the hotel industry.

While the British climate is temperate, no one could fail to recognise that it is extremely changeable. Those of us who left our constituencies in the North, as I did yesterday, in brilliant sunshine, and arrived in London in a shivering shower, will realise this only too well. As tourists come to this country from parts of the world where air conditioning is increasingly installed, it is vital that standards of heating and ventilation in our hotels and restaurants should also rise. Another mundane but important item is that many of our older hotel buildings need passenger lifts for guests and goods lifts and conveyors to reduce the hotels' staffing requirements.

In catering, to achieve and maintain the highest standards of hygiene in the preparation and serving of food, and to make the minimum demand on our limited manpower, the provision of modern storage, preparation and cooking equipment should be encouraged. In any case, there can be no defence of a Bill which would allow the manufacturer of a pork pie to qualify for investment grant while denying grant to the hotel which serves prime Scotch beef and Welsh lamb freshly cooked for the customer.

Our discussion about hotels during the Committee stage of the Finance Bill was markedly disturbing to some of us because we felt that the sympathetic attitude expressed by the Board of Trade was not being reflected by Treasury spokesmen. The Chief Secretary to the Treasury said, at six o'clock on the morning of 29th June: Every responsible and self-respecting hotel manager will expect to show an increase in productivity over the years and to incorporate more and more labour-saving devices. The S.E.T is an appropriate encouragement to him to do SO."-[OFFICIAL REPORT, 29th June, 1966; Vol. 730, c. 2077.] I believe that acceptance of this series of Amendments would be a much greater encouragement to the industry to fulfil the exhortations of the Chief Secretary to the Treasury than the Selective Employment Tax could ever be.

I end on a note of warning, based on what I believe to be a true assessment of the situation. Whether we see any positive action in this Bill or at a later date, there is one pitfall into which the Government must not fall. They may find it attractive to restrict the giving of incentives to investment in the hotel trade for the provision of new and additional accommodation only. One can see that certain arguments point in this direction, and it would be administratively very much easier. I hope that the Government will give some financial incentive to the provision of additional accommodation, but I hope that they will not stop there. If they do, they will encourage the creation of an unbalanced hotel trade, and one the reputation of which will suffer in the long run.

Generally speaking, in this country, with its short tourist and holiday season, the provision of new hotels is economic only near large industrial or commercial centres, and even with Government assistance the provision of new hotels is unlikely to be economic, except in isolated cases, away from the industrial areas. Yet a great deal can he done for the comfort of tourists and to increase the attractiveness of both small and large hotels in areas which tourists want to visit by the provision of the amenities covered by the Amendment.

Many of our small hotels are sound buildings in attractive surroundings, and it would be a mistake if incentives were to be concentrated only on new and additional accommodation. A way should be found—the Amendment points to it— for giving incentives to the modernisation of existing hotels. Otherwise, there will be a two-tier hotel system, with a few very expensive modern hotels unsupported in other areas of the country by an efficient and adequate hotel trade.

If the Government do not accept the Amendment to provide investment grants for hotels and catering, they will regret it before very long because their failure to do so will be reflected quickly and substantially in the balance of payments.

5.15 p.m.

Photo of Mr John Eden Mr John Eden , Bournemouth West

I congratulate my hon. Friend the Mem- ber for Morecambe and Lonsdale (Mr. Hall-Davis) on presenting the case so forcefully and clearly, emphasising the great need for the hotel trade to be given assistance in order to ensure the continued forward momentum of the modernisation programme. The Minister of State and the President of the Board of Trade will by now have had many representations made to them on behalf of hotels and catering, and every hon. Member will recall how on previous occasions, on the Finance Bill and on this Bill, the strongest plea has been put forward, notably from these benches, on behalf of this industry. The right hon. Gentleman will be aware of the arguments, and I hope that he is now prepared to give a positive sign, more than just a form of words, that the Government are determined to do something to ensure that the hotel and catering industry continues to serve the country's needs.

There is no doubt that improvements are needed, and there is equally no doubt that the provision of investment incentives helped to stimulate these improvements. Looking at it only from the negative point of view and considering the likely consequential effect on costs of the withdrawal of these investment incentives, we appreciate the great help which they did provide.

The loss of the investment allowance will considerably raise the cost of essential equipment. The proposals in our Amendments, particularly the list specified in the proposed Schedule, are modest and have been picked out in an endeavour to fall in with what we believe to be the expressed views, wishes and policy of the Government. On the Finance Bill, albeit in a somewhat unsympathetic speech from the Treasury spokesman, the Government emphasised that hotels and catering and the tourist trade generally must help themselves by modernising their own techniques and methods of operation. I am sure that the trade accepts this and would be among the first to admit the desirability and, indeed, the urgency of pressing ahead with such a modernisation programme.

I know of many hotels which are in mid-programme of modernisation. They have embarked upon, if not five-year plans, at least three-year plans of substantial improvement, alteration and modernisation. But these have now fallen by the way. The Government's proposals in this Bill and in the Finance Bill have, to my certain knowledge, caused many hotels, by no means only in the area which I am more directly concerned as a Member, to interrupt the modernisation programmes on which they have already embarked. This is bad.

As every hon. Member does, I travel about the country and from time to time stay in hotels. We know that standards vary, service varies, and so on, but a considerable measure of modernisation has been taking place already. I should regret it if this momentum were now to be lost as a result of Government decision. I cannot believe that this is what the Government originally intended, yet they are now pigheadedly sticking to the original terms of the Bill. In this context, I wonder what the President of the Board of Trade and the Minister of State have been doing in their discussions with the British Travel Association.

The right hon. Gentleman will recall that I asked a Question on the subject to elicit some illumination, and I was told that some discussions were taking place, with a view, I understand, to seeing whether there is any way of assisting those hotels which most noticeably are foreign currency earners.

I have always thought that one of the arguments for the resistance by the Government of approaches for Amendments to the Bill on behalf of the industry was that it was not possible to differentiate between one hotel and another or to single out the predominantly foreign currency earners from the rest. Now the Government make a different emphasis. I do not know what they have in mind, because it is not always easy to follow these matters through the procedure of Question and Answer in the House, so I hope that the Minister of State will take the House into his confidence and tell us exactly what the Government have in mind and what they are seeking to achieve in the discussions the right hon. Gentleman is currently engaged in with representatives of the British Travel Association.

I am sure that the Government wish the modernisation programme to continue and I hope that they will address their minds to the sort of assistance they can give to the industry. These Amendments are most modestly put forward.

We know that this can be done. I know that the Government are not particularly enchanted with the argument that British hotels do not in any way benefit to the same extent from Government assistance as do the hotels of other countries in Europe. I believe that they take the view that so many considerations are attached to this form of assistance, which varies from country to country, that one cannot generalise when comparing the position of British hotels.

I accept that fact, but I also ask the Government to accept that we have to be much more positive in our attitude towards the hotel industry. Instead of dampening down any enthusiasm to modernise and improve their services which is apparent among the membership of the industry, we should be encouraging them and doing all we can to help them and make their task easier.

This is all the more important because of the nature of the competition, as was mentioned by my hon. Friend the Member for Morecambe and Lonsdale. This is not competition solely provided by the counter-attraction of hotels and catering establishments in other countries. It is a matter of a different type of competition which concerns us more especially—the type that is felt when a visitor to this country expresses disgust and dismay at the standards of comfort and accommodation provided for him.

I saw this best represented the other day in a reference made by a team of German tourist agency representatives who were visiting the West Country. They were not as complimentary as all of us would have wished them to be. I do not entirely blame the hotel industry but a series of imposts, rising prices and Government attitude in general. We have to recognise that this is the real element of competition and we cannot afford to slacken off in any way in our efforts to secure an improvement in the services in hotels and catering.

I hope that the right hon. Gentleman will accept these Amendments and do so with the best possible grace. By giving the maximum possible encouragement he can help an industry that is labouring under very great difficulties.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

In my intervention during the speech of my hon. Friend the Member for Morecambe and Lonsdale (Mr. Hall-Davis) I did not mean in any way to be jocular when I suggested that many people in this industry feel that, in some respects, the Government have almost written them off. In speaking to persons working in hotels and who are associated with tourism in the broadest sense I find a mood of bewilderment.

For example, some members of the Welsh Holiday and Tourist Association are bewildered and I do not doubt that the same is true of Scotland, with its various organisations, and of other parts of the United Kingdom. It seems to these bodies, which are sponsored and supported by the Government, that the Government are bringing forward policies which are not merely failing to help them but are positively damaging or sabotaging their efforts.

In a lucid and cogent speech, my hon. Friend the Member for Morecambe and Lonsdale put an unanswerable case for the Amendment. He rightly said that the case is based on two most important factors. The first is the importance of the industry as a saver of foreign currency and the other is its importance as an earner of foreign currency. It may be that the Government have decided that, ultimately, they will arrive at a different solution and that, after a few more years of Labour Government, no one will be able to afford to go abroad and no one abroad will want to come here.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

It is hard to find a better explanation of the Government's indifference to the problems of hotels and catering. The need to give the industry help is based on three considerations. First, the industry has to cope in a particular way with the vagaries of our climate. It is fighting a difficult battle of climate as well as fighting the proximity of the Continent, where many countries have better climates. When hon. Members visit countries like Italy and Switzerland, where so much money has been ploughed into the holiday industries with Government encouragement, one realises the immensity of the task.

I agree with my hon. Friend the Member for Bournemouth, West (Sir J. Eden) that there has been a significant improvement. This has been beneficial, because whereas, some years ago, a large majority of the foreign visitors seemed to limit their stay to a few days in London, there is now a good deal of evidence that they are staying longer and visiting other parts of the United Kingdom. But they will only spread their visits if the proper facilities are available. They will not bring the much-needed foreign currency unless this is done.

Secondly, there is a parallel need within the United Kingdom of those parts of the country most desperately in need of development. Such areas would benefit enormously from expansion of tourism. My right hon. Friend the Member for Argyll (Mr. Noble) knows how true this is of Scotland and it is similarly the case with the Lake District, the rest of the North of England, parts of Wales—

5.30 p.m.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

—and the Cotswolds, which my hon. Friend the Member for Worcestershire. South (Sir G. Nabarro) knows so well and whose praises he sings.

Many parts of the United Kingdom desperately need the infusion that only the tourist industry can possibly give in a short time. The Government are being extraordinarily short sighted in not meeting this need. Here is an opportunity for them to undo some of the considerable damage which has already been done The terms of the Amendments, especially the new Schedule, are extremely modest and are the minimum requirements to meet the need.

Hon. Members on both sides of the House will accept the need for the provision of private bathrooms. A few years ago, these were deemed a luxury, but in the modern hotel industry in most countries their provision is regarded as necessary, not merely on an increasing scale, but, in some countries, almost on a universal scale. The needs of our climate amply demonstrate the case for the provision of heating plant, and the need for the modernisation of lifts can be seen by visits to many hotels in London, without going outside the Metropolis.

Photo of Sir Tatton Brinton Sir Tatton Brinton , Kidderminster

My hon. Friend does not have to go outside the House of Commons.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

I was not referring particularly to the House of Commons, but within a short distance of it there are hotels desperately in need of modernisation of this kind

I sincerely hope that the right hon. Gentleman has listened carefully to the powerful case which my hon. Friends have made. This is an industry which can help the Government to solve some of their many problems. It could make an indispensable contribution to the very big job of helping to balance our payments, and I should have thought that the Government would have been tempted by that consideration alone to accept these modest proposals.

Mr..I. T. Price:

At frequent intervals during our debates last night and the early hours of this morning, I listened to loud moans from hon. Members opposite that no hon. Member on my side of the House was taking any part in the debate. That is the sort of comment which is always made on those occasions, of course, and hon. Members who have had the honour to be in the House for any length of time know perfectly well that on such occasions the Government, of whatever party holds the reins of power at a given time, are anxious about only one thing, which is to get the business before the House with the greatest speed in the given circumstances.

If I speak on these Amendments for a few moments it will be first to express to you, Mr. Deputy Sepaker, my pleasure at having been a member of the Standing Committee which discussed the Bill. If the hon. Member for Barry (Mr. Gower) had also had that pleasure, he would have known that the hon. Members on that Committee sat through many meetings in an atmosphere quite different from that which he has tried to inject into our discussions. I have to say, without malice, that he did not make any contribution to our enlightenment on this subject.

The hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis) and the hon. Member for Bournemouth, West (Sir J. Eden) both spoke with a good deal of knowledge of the hotel and catering industry because they represent very attractive seaside towns. No doubt they were also quoting extensively from adequate briefs provided by the Hotel and Catering Association, which is interested in these matters.

As they spoke, however, I wondered how many foreign tourists might be found in Morecambe or other areas of these rather nice parts of North Lancashire, as distinct from the more continental type of South Coast town like Bournemouth, which in many ways may be more cosmopolitan. This is the crux of the matter. If I make one or two critical comments, that does not mean that I am in any way hostile to the hotel and catering industry. I am as anxious as anyone else to see it as efficient and attractive as possible and giving the greatest degree of comfort to those who have to use the facilities which it offers.

But I have to raise a protest. One has to consider the heterogenous nature of the British catering industry, with its many ramifications—residential hotels, non-residential hotels, restaurants, public houses and all the minor branches of the industry which are to be found in every town. They cannot be lumped together so that it can be said that the industry must be especially cossetted and subsidised because it is catering for tourists. I do not know whether the figure of 10 per cent. as representing the tourist part of the industry is correct, but I doubt it and perhaps my right hon. Friend will tell us what the figure is. But even if 10 per cent. were the figure, that would still leave 90 per cent. of this extensive industry which could in no way be said to be producing something for the balance of payments by the receipt of dollars or other foreign exchange.

Mr. Geoffrey Wilson:

Mr. Geoffrey Wilson (Truro) rose

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

I will not give way at the moment. I will choose my own time for giving way. I am trying to make a serious argument as pleasantly as I can without being in any way offensive. Hon. Members opposite have put their case reasonably and forcefully as I would expect. The debate has been a little marred by some silly ideology and party claptrap which none of us wants to encourage in a debate of this kind. I can defend my party against that sort of attack, but we are anxious to consider the matter seriously and to encourage the greatest possible expansion and efficiency of the catering industry.

I am not satisfied that hon. Members opposite have taken sufficient account of the fact that in many ways this is a highly speculative industry. In every large town catering establishments are going up and coming down like mushrooms on a May morning. They appear overnight and they run for a few weeks and either become popular or fade out of sight. Not many of them cater for tourists. They mostly cater for the country's ordinary domestic traffic.

Mr. Geoffrey Wilson:

Does not the hon. Gentleman appreciate that the catering trade has a negative as well as a positive effect, and that if it gets people to take holidays in Morecambe instead of going abroad, in that way it helps the balance of payments?

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

I am well aware of that, although I am not sure that the hon. Gentleman's electronics metaphor was a good one. When I hear references to "negative" and "positive", I think in terms of electronics. But that point was made when the hon. Gentleman was not in the Chamber. However, we should not be expected to swallow hook, line and sinker the argument that this is an industry to be specially treated and to receive what in effect would be subsidies by way of capital grants, when a large section is concerned only with domestic needs and not with foreign tourists.

I do not have the slightest idea what my right hon. Friend will say in reply to the debate. I am not in his confidence at the moment. I have not consulted him. He is always very nice to me, but if he does not want to let anything out of the bag, he can be as close as a Trappist monk. I will not pursue that. One has to respect the relationship which exists between the Government and their own supporters and I am a strong supporter of the Government, albeit at times a very critical one. I have been critical upstairs of all sorts of things in the Bill, and I hope that my criticisms will have had some weight and influence upon my hon. and right hon. Friends who are piloting this Bill through the House.

In some ways it is inevitable that we should look at this from party angles, but we ought to try not to do so. Hon. Gentlemen opposite always seem to be Dressing their hardest for Government assistance by way of capital grants or allowances for the industries for which they are spokesmen, yet they do not seem to realise that there is a great contradiction in their thinking. They praise the benefits of private enterprise as distinct from State enterprise, condemning stupid people like me for being too Socialist and wanting the State to do so much, when if things were left to the good sense of the businessmen, we should make better progress. Hon. Gentlemen cannot have it both ways. They cannot proclaim the glories of private enterprise and at the same time want private enterprise to receive the maximum amount of Government money from the public purse in order to support their enterprises.

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

I will give way in a moment, because I want this to be a real debate and I do not want anyone to feel that people are neglecting their Parliamentary duties by not expressing a view which they hold and are prepared to defend.

We are discussing large sums of public money, of the order of £250 million which are to he paid out in hard cash.

Photo of Mr John Peyton Mr John Peyton , Yeovil

Where did it come from?

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

From the taxpayer, of course. If the hon. Gentleman wishes to intervene he should do so on his feet.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Worcestershire South

I apologise for interrupting the hon. Gentleman's magnificent flow of oratory. This is not a question of Conservatism or Socialism. This is a matter of logic and equity. Every other industry, with a few notable exceptions, is having cash grants in place of investment allowances. Why should the hotel industry be discriminated against and omitted from the schedule of what other industries are legitimately having?

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

That is a fair point made by the hon. Gentleman the Member for Worcester, South—

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

I stand corrected. This is a point on which different views can be held and it is a fact that in this year's Budget my right hon. Friend the Chancellor decided to discriminate in favour of manufacturing industries and against service industries, including the catering industry. I have certain doubts about parts of this policy. Investment allowances can be earned only if the business is making a profit. I have been critical of this policy, whereby capital grants of public money are paid to businesses without any test of profitability. I could not care less whether the President of the Board of Trade or any of his hon. or right hon. Friends agree with me. I hold this as a matter of principle.

Hon. Gentlemen opposite who represent seaside towns are entitled to press claims in respect of them, but let us not run away with the idea that in pressing these points of view, we are seeking to give preferential benefits to the catering industry, which are not given elsewhere. This is a matter of judgment. Hon. Gentlemen opposite do not seem to have got it into their heads, although it is two years ago, that they have lost the election. Some of these policies have to be argued out and only time can prove whether they are sound. Rightly or wrongly, my hon. and right hon. Friends have decided that the service industries shall be treated differently. This is a matter of judgment and if there is no undertaking from the President of the Board of Trade or one of his hon. Friends, there must be a Division. I shall have no hesitation in supporting my right hon. and hon. Friends, because I think that they are justified in what they are doing, in present circumstances.

5.45 p.m.

Photo of Mr John Peyton Mr John Peyton , Yeovil

Let me first of all say to the hon. Member for Westhoughton (Mr. J. T. Price) that we have no doubt at all that the Socialist Party is in Government. We are constantly reminded of this disagreeable fact by the views we see on the Treasury Bench, although I am bound to say that the other benches have more often been a chaste and unspotted green picture, unblemished by the presence of too many hon. Gentlemen. We agree enthusiastically with the hon. Gentleman the Member for Westhoughton, when he puts his finger, with unerring accuracy, on one of the weaknesses of the investment grant system, and says that there is no test of profitability. Is this a way of investing what he calls public money—without going into detail, almost indecent detail, of where that public money comes from?

It is right that the hotel industry should have its claims considered. I do not represent a seaside resort and I have no contact with the hotel industry nor do I have a brief from it. One thing which has struck me during debates on the Finance Bill is how the Government's attitude towards the hotel industry has been so studiously inept. How anyone can achieve such a combination I would not know. Studiousness and ineptitude are not readily married, yet this Government seem to have achieved it in a most extraordinary way, and one must congratulate them for that.

It is a great pleasure to support my hon. Friend the Member for Morecambe and Londsdale (Mr. Hall-Davis) because I found myself unable to support my hon. Friend in the last Division. Unhappily I was forced to abstain, but on this occasion I shall have great pleasure in supporting him. The hotel industry is fortunate to have him deploying arguments in its favour with such skill. I was not a member of the Standing Committee, but I understand, from my hon. Friends, that the President of the Board of Trade was not a very regular attender at the Committee's meetings. It is rather a shame that the right hon. Gentleman visited the House this afternoon and took part cursorily in an airy discussion on one issue, kissed the Minister of State's hand and went out. I do not think that the right hon. Gentleman should treat an issue of this nature as being of secondary importance to another meeting and I am very sorry that he is not here.

The Government have dealt very shabbily indeed with the hotel industry. This is not the only blow. There has been a policy of investment allowance and the Selective Employment Tax which bears so hardly upon the industry. These three make a real triple blow. We are perhaps better off in having the Minister of State with us rather than the President of the Board of Trade. But the right hon. Gentleman will find it very difficult to justify the Government's extraordinary attitude to this industry. Do not the Government want a thriving hotel industry? What is this poppycock argument that it is difficult to segregate one part of the industry from another? The hotel and catering industry must be healthy throughout. There is no case for making a distinction between hotels likely to be visited by foreigners with dollars in their pockets and those likely to be visited by the most impoverished natives.

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

Perhaps the hon. Gentleman would explain how he would distinguish between hotels and catering establishments which cater for tourist traffic and the vast number of cafés, restaurants, small eating *houses, public houses, and so on, which have nothing to do with catering?

Photo of Mr John Peyton Mr John Peyton , Yeovil

It seems necessary for me to repeat my argument. The hon. Gentleman has not followed what I have been saying. It is an idle pastime even to attempt to distinguish between different sections of the hotel and catering industry. Under the old system, this industry was treated properly, as the hon. Member for Westhoughton rightly recognised. Now the Government have in their folly created their own dilemma. But, in the circumstances, it is much better not to worry with this problem of discrimination. The worst choice which it is possible to make is that which the Government have made by saying, "We shall not give any assistance to this industry ". This is monstrous, because it will arrest the considerable progress which the hotel industry is making.

I have considerable respect for the judgment and common sense of the Minister of State. I cannot say that about many of his colleagues. I hope that he will be able to tell us what the Government's intentions are towards the hotel industry and that, having stated those intentions with clarity, he will say how the Government propose to carry out those intentions.

I affirm once again that in their treatment of this industry the Government have allowed their narrow-minded, pathological absorption with productive industry to run away with them and to blow out of their heads the last vestiges of common sense which the most optimistic of us hoped still remained.

Photo of Mr Nigel Birch Mr Nigel Birch , Flintshire West

Unlike my hon. Friend the Member for Yeovil (Mr. Peyton), I represent many hoteliers. In the North Wales strip, we have a very important tourist industry which attracts many people from foreign countries, particularly people of Welsh origin coming back to see the place from which their ancestors came.

The hotel industry has received a number of blows. The action taken in connection with the investment allowance is a very great blow and I should have thought that it was contrary to Government policy. The only way in which the hotel industry could save labour was by investing in labour-saving devices and equipment. This will now be much more difficult. In the North Wales strip, not only will we have to cope with the Selective Employment Tax, but the hotel industry is excluded from the Welsh development area. Therefore, we have had three blows in succession.

I attribute great importance to the positive and negative argument. The positive argument is to attract foreign visitors, but the negative argument is much stronger. People will not spend their holidays in this country unless the conditions are good. The Government may well be planning at this moment to stop people going abroad. That may be parr of their package deal. I should not be surprised if it was. But they will get into trouble if they take action to do that. If they do not do that, it is intensely important to keep holidaymakers here, and we shall not do that if the Government behave like this towards the hotel industry.

Photo of Mr William Rees-Davies Mr William Rees-Davies , Isle of Thanet

It is unlikely that we shall get a satisfactory answer from the Government, for one simple reason, namely, that I understand that the President of the Board of Trade proposes to make a statement before the recess about the Government's proposals to assist the tourist industry. The Minister of State, Board of Trade attended a completely open meeting of the tourist committee in the House last week, and not only indicated that intention but asked for suggestions as to how best one could assist the tourist industry, bearing in mind the very large currency earnings which it has achieved in recent years and which are steadily increasing.

A number of proposals were put forward at that meeting by hon. Members on both sides of the House, and they are directly relevant to this Amendment. This is a Bill to make provision towards expenditure on providing new business assets, particularly in new development areas and in relation to industrial development. This Amendment aims to widen the provision to cover not only machinery but equipment.

What are the things which the industry most wants? I do not speak in a partisan sense, because those who serve this industry, whether they be supporters of the Labour Party, the Conservative Party, or the Liberal Party, all agree about the priorities. The first priority is to find something which will replace the investment allowance. When we consider that Trust Houses loses no less than £320,000 in investment allowances in one year, which is the complete capital cost of the new hotel which it has built in Jermyn Street, we realise that such companies will not be able or willing to build any more hotels or provide more accommodation in this country unless their needs are met in some other way.

How is this to be done? One way to do it is by cash grants. I entirely agree that this is not the best way because the test of profitability is lost; there is no doubt about that. But it is the Government's way. They must find some means of putting the industry on its feet. They have made a number of serious errors, as the President of the Board of Trade realises. The difficulty is that the Treasury has completely and consistently failed to understand that a "buck" spent in this country by a foreigner is just as good as a "buck" earned by exporting bolts and screws to a foreign nation. There is a fundamental lack of understanding that money spent by foreigners in this country is just as good as money earned by exporting. This lies at the heart of the difficulty which we face in trying to introduce the right measures to solve this problem.

Suppose that it is possible to make a grant, albeit a discretionary grant, to the hotel and catering industry. By all means let it be discretionary. I do not agree with my hon. Friend the Member for Yeovil (Mr. Peyton) that we cannot draw a distinction here and that the grant must apply to every restaurant and hotel This must be done along the lines of the Local Employment Act. But if there is a discretion, it will be possible to make a cash grant in respect of the equipment.

6.0 p.m.

What is necessary is a very rapid increase in the amount of accommodation. There is an acute shortage in London, at the time of the World Cup, of the necessary accommodation to meet the needs of those who come to this country. The shortage is not apparent to this House or to the country as a whole. For example, 80 per cent. of the total turnover of the Savoy is in respect of foreign earnings on accommodation. Altogether, the whole of the main London hotels derive more than two-thirds of their entire receipts from accommodation for foreign visitors. The provincial hotels, too, are rapidly becoming foreign exchange earners.

The first way in which they can be assisted is to ensure that in replacement of the investment allowances we give them cash grants or, if that is not acceptable, loans at low fixed interest rates to enable them to provide the additional accommodation which is necessary. This involves the provision in particular of additional bathrooms, which is the main reason why people do not want to stay in provincial hotels and in the seaside resorts. Foreigners today expect to get the same facilities in this country as the amenities they enjoy in Europe and America, and these must be provided.

If the Government, having hit as hard as they can and clobbered the industry with the Selective Employment Tax, refuse to budge in that regard, the first and best thing that they can do is to find some other method as an alternative to investment allowances to enable us to have the buildings and the provision of modern accommodation and equipment which is necessary for such accommodation.

What are the figures? Year by year over the last five years there has been a steady rise of over 15 per cent. each year in the number of people from overseas who come to this country. The rise is rather more in the current year than it has been hitherto. The figures altogether show about £300 million, including transport, in the general roll-up figure. This could be increased, therefore, by 50 per cent. within three years, but to do this we will want between 30,000 and 40,000 extra modern rooms within the next three years.

One can ascertain the situation from any of the leaders of the industry. I have taken the trouble to do this. There is only one company of which I am aware in this country which is willing to build more accommodation under present conditions. That is the only company which is at present building. The others have now all come to a dead stop, including most of the famous names in the industry. They will not continue in this country. On the contrary, they will seek to do it overseas.

It is, therefore, extremely urgent to take measures which will combat this trend and which will, at the same time, provide additional and modernised accommodation and equipment. The Government received their mandate on a basis of modernisation, which in this industry is no less important. The equipment which needs to be provided represents an extremely high capital sum. Without any initial allowances, without any investment allowances and without getting any grants, those in the industry are quite incapable of meeting the demand at the present level of taxation.

When the Minister of State came to the all-party meeting on this matter, he pointed out that the development areas had been substantially widened. Scotland is now included entirely within a development area under the new proposals. It is proposed to include the whole of Scotland and the whole of Wales, except for Cardiff and, most important of all, the constituency of my right hon. Friend the Member for Flint, West (Mr. Birch). Why North Wales should be left out of a development area when it is the very area which most needs help from the viewpoint of the tourist industry, I fail to understand.

If I may say so as a Welshman, but a rather indifferent Welshman in that I do not usually speak for Welsh interests, it seems to me to be obvious that the first thing to be done is to extend the development area for the purpose of equipment of this kind to cover North Wales and Cardiff. That would be only a small concession. It would at least enable the tourist needs of Scotland and Wales to be met, because grants towards buildings and equipment would then be obtainable.

I should be out of order if I referred to new Clause No. 3, but I tabled new Clause No. 1 (Grants for hotels outside development areas) bearing in mind that this was exactly what the British Hotels and Restaurants Asociation and other bodies particularly wanted to suggest so that hotel undertakings outside development areas might qualify for assistance. The Amendment covers that situation in another sense. It goes wider. If I may be bold enough to say so, the Chair was absolutely right not to select new Clause No. 1, because it is completely covered by the Amendment which we are now discussing.

If the Government feel that they can make cash grants for equipment where hotels are being modernised throughout the country and, in particular, allow building grants in the development areas, this will go a long way towards enabling us to progress with the provision of the accommodation and equipment which we need.

It is quite true that if equipment were to be provided it would be of great assistance but, as the Government have specifically asked for requests at this time to enable the President of the Board of Trade to make his statement towards the end of the month, the position will not really be assisted unless they are willing to make provision for building grants, not necessarily outright grants, but loans at low fixed interest rates.

I know that the Board of Trade feels that that is the right approach but is unable to shake the money out of the Treasury. I hope that the Treasury will take a different view about this industry. I hope that those in the Treasury who do not undstand the industry will take a little trouble to consult it in future and ascertain its needs. This has been rather the failing of the whole House, on both sides, for many years.

It is partly the fault of the industry, whose public relations have not been very well conducted in years gone by. I might add that that complaint is no longer true. The briefs from the industry are now imaginative, accurate and contain all the necessary figures. This was not done very well in years gone by, however, and consequently the industry has fallen behind in the race to try to get what I would call the Government grants or Government benevolence.

The first point which should be looked at is whether there should not be building loans at low fixed rates of interest to enable the accommodation to be provided. It is perfectly valid to say to the Treasury that if the Government make this industry pay, and pay through the nose, by the Selective Employment Tax, it is not a bad thing to hand back to those in the industry benefits in return for the tax which they will have to carry. Let us also bear in mind that these people have a heavy burden under the Industrial Training Act to provide for the levy and the moneys in that regard likewise.

Having provided the industry with the building grants that are necessary to enable it to provide the new accommodation, for the provincial hotels to be modernised and for boarding houses to be able to be modernised, all of which would provide the umbrella of advance in the modern age to provide amenities which will then be comparable with those to be found in Europe and America, the next stage is the Amendment to enable the industry to get advantage by way of cash grants in respect of the equipment which they provide for modernisation.

Having achieved those two things, I think that those in the industry will be able to say that they are ready to go ahead satisfactorily and to continue to provide places to become what will undoubtedly be not only the biggest dollar earner, because they are that at present, but the biggest foreign currency earner in this country. This could be done in a couple of years.

I am sure that I speak for all my hon. Friends on this side of the House in saying that everyone knows full well the bitter complaints that we have had from our constituents. One knows all about the way in which this industry has been clobbered by the Government. I hope that they will now wake up to a gradual realisation of the importance of the industry to the country as a whole. It ought not to be treated as being in the cockpit of party politics. It should be treated as an industry that can be helped.

One should not discriminate between the Savoy in London, on the one side, and a provincial hotel, on the other side. I do not think that that is possible. As I say, one can make quite sure that one gives grants only to those who will really modernise and do the job thoroughly, but if one tries to select as between one and another, one will get into an impossible difficulty.

Those of us associated with the tourist industry are anxious to see the new provincial associations growing in Yorkshire, the South-East, and the South-West.

We want to see the new tours set up throughout the country to ensure that people are attracted to spend more of their holidays at home rather than overseas, and to ensure that foreigners who come here have an opportunity not only to see London but the provinces as well in circumstances which they want, by the provision of tours round Wales, Scotland and the South-East as well as round the South-West. We must approach it along those lines, try to take the party bickering out of this and arrive at a solution which will be for the benefit of the country. I hope that the Board of Trade will win the battle with the Treasury and that, if not today, very soon we shall get a satisfactory statement about what it intends to do for the betterment and, one will hope, the contentment of the industry.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Worcestershire South

I rise to intervene in the debate because a half promise was made by the Chief Secretary during the course of our debate on Clause 33 of the Finance Bill to the effect that careful consideration would be given to the position of the hotel and restaurant industry. We did not press him on that, although my right hon. and hon. Friends and myself divided against the proposition in the Finance Bill to withdraw investment allowances.

The Minister of State at the Board of Trade might like to be reminded of the words used by the Chief Secretary on that occasion. So far as I am aware they have not been quoted today. The right hon. Gentleman said: Those who are interested in the hotel industry and particularly in tourism know that the combination of all the acts which have been referred to create a problem for tourism. The President of the Board of Trade is fully aware of that and he is at the moment engaged in discussions with the British Travel Association to see to what extent amelioration —the hon. Gentleman asked me to use that word—can take place. It is too early to say anything more than to advise the Committee that we are aware of the problem and are in the process of discussing it."—[OFFICIAL REPORT. 22nd June, 1966; Vol. 730, c. 6961] All that took place a month ago. I hope that when a decision is made about the way in which the hotel and restaurant industry is to be assisted or the harsh conditions put upon it ameliorated, the statement will be made in this House by the responsible Ministerial parent, who is the right hon. Gentleman the President of the Board of Trade.

All the arguments have been canvassed thoroughly by my hon. Friends and myself, and I intervene today because most of the speakers from this side of the House represent seaside constituencies, among them my hon. Friend the Member for Morecambe and Lonsdale (Mr. Hall-Davis), my right hon. Friend the Member for Flint, West (Mr. Birch), my hon. Friend the Member for Bournemouth, West (Sir J. Eden), my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) and my hon. Friend the Member for Barry (Mr. Gower). They all represent seaside constituencies.

A large part of my own constituency falls in that delectable area generally referred to as the Cotswolds.

Mr. Ress-Davies:

A great tourist area.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Worcestershire South

I am glad to have the support of my hon. Friend the Member for the Isle of Thanet. Many Americans come to London and then travel north via Oxford, Broadway, Chester to Hadrian's Wall. There are many inland areas in England like the Cotswolds which, for scenic and amenity reasons, are a major attraction for tourists.

We have heard over and over again the argument about foreign exchange, and it is true that about £320 million was earned last year from foreign visitors coming to Britain, including businessmen. I do not suggest that Revenue will collapse if we do not give appropriate tax allowances to the hotel and tourist industry: that would be a gross exaggeration. However, I do say, as I said in an intervention in the speech of the hon. Member for Westhoughton (Mr. J. T. Price), that it is most unjust to discriminate against a major industry in the sense that it has now been omitted from any kind of taxation allowances in respect of its capital equipment.

In a room of a modern hotel in Britain, a refrigerator is just as important as a power press is in an engineering factory. If I go to New York and stay at the Hilton Hotel, I expect to find in my air conditioned room an abundance of ice in a modern refrigerator. I expect to find a television set and a radio, a modern bathroom and shower, a com- fortable bed and good furniture. I expect also to have the customary facilities of air-conditioning, living on the 45th floor in August—[Interruption.] Does the hon. Member for Burnley (Mr. Dan Jones) wish to intervene?

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Worcestershire South

All these are the capital equipment stock in trade of a modern hotel. In my judgment, it is wholly wrong to deny appropriate capital allowances to such equipment in the case of the hotel industry in Britain. During the Committee stage on the Finance Bill, I said—and it is equally apposite today —that in the 21 years since the war we have had three forms of capital allowances. The first were the initial allowances, which were merely interest-free loans. The next were the investment allowances, brought in by the Tories a few years ago. The third are the cash grants under Section 1 of this Bill, which are designed to replace the investment allowances. But they do not replace the investment allowances entirely, because they leave out two large tranches of capital equipment in translating from investment allowances to cash grants. They leave out the whole of commercial and industrial transport, and they leave out the whole of the capital equipment for the hotel and tourist trade.

6.15 p.m.

As you will have observed, Mr. Speaker, I am addressing my remarks particularly to Amendment No. 3. My hon. Friend the Member for the Isle of Thanet, who referred to the Savoy Hotel, might also have alluded to the magnificent letter written to The Times by my hon. Friend the Member for Eastbourne (Sir C. Taylor), and I do so to support him now. It cannot be quoted too often. I quoted it during our debates on the Finance Bill, and it ought to be quoted again today because it puts the emphasis in the right place.

My hon. Friend the Member for Eastbourne correctly declared his interest as chairman of Grosvenor House, London, W.1, and his letter which appeared in The Times on 11 th May reads as follows: For its size, Grosvenor House must be one of the biggest foreign currency earners in British industry. Last year 73.5 per cent. of our room lettings were to visitors from over-seas including 56 per cent. from the United States and Canada. We have been disallowed investment allowances given to other industries as cash grants and now we estimate that the selective employment tax will cost us £80,000 a year directly, in addition to which, of course, all our supplies of food and drink, laundry services. etc., will cost us more. It is less irksome, and probably more profitable, to run a bassoon factory."—[OFFICIAL REPORT, 22nd June, 1966; Vol. 730, c. 682.]

At that point, my hon. Friend the Member for Carshalton (Captain W. Elliot) intervened and said, "Candyfloss", which is a favourite word of the present Prime Minister. It is one which he used over and over again in earlier years before he reached his present office to describe in derisory terms the kind of economy which he alleged the Tories were running.

It is the fact that these cash grants are available to the manufacturers of bassoons or the manufacturers of equipment for candyfloss or any other nonessential equipment in the context of the balance of payments, but they are not available to the hotel and restaurant industry, this very large earner of foreign exchange.

The First Secretary made valid fiscal points late in the debate by drawing attention to the difficulty of identification —to which my hon. Friend the Member for the Isle of Thanet alluded—in the matter of pots and pans, knives and forks, tablecloths, serviettes, and the remainder, as to whether they are capital equipment or revenue items of expenditure, and so on. I do not insist these items should be the subject of cash grants. I regard them as consumable equipment to be written off in the trading year or chargeable accounting period, in which they are purchased.

The kind of equipment for which I am seeking cash grants under this Bill can be delineated and identified, and my hon. Friend the Member for the Isle of Thanet was correct in saying that there are innumerable precedents in this House for delineating and describing under Statutory Instruments particular equipment which shall qualify for appropriate taxation relief. I cannot give a better example than those horrid Statutory Instruments presented from time to time by the Treasury delineating drugs and medicines which are free of Purchase Tax and those, on the other hand, which are regarded as proprietary drugs and medicines, and attract Purchase Tax.

This is a clear division between two sets of consumer goods. The kind of capital goods that I want specified for cash grant, and the kind of goods that I have in mind under Amendment No. 3, are items of capital equipment of a permanent character for hotels and restaurants and include the following: boiler and central heating equipment, and air conditioning plant. for example. Baths and showers, for example. Refrigerator and cold room equipment, for example, Television and radio sets in all the bedrooms, and lounges, for example. Furniture and carpets, for example. These are the items of very high capital cost which ordinarily, in the course of an hotel's business, attract a depreciation allowance from the Revenue at an agreed level annually, and which ought in equity and logic to be made the subject of a cash grant.

I am sorry that the hon. Member for Westhoughton has had to leave the Chamber and go to another engagement, because I want to say one word in response to the allegation that he made that my hon. Friends and I had endeavoured to say that on this series of Amendments was applied only to the question of increasing earnings of foreign exchange within the United Kingdom. That is not true. The majority of my hon. Friends seated in the House today will recall the long, tortuous, discussions which took place here some years ago on the Food and Drugs Act.

Of course domestic consumption from the point of view of tourism attracts a greater number of people other than the foreign tourists coming in. I do not dispute that, but the Food and Drugs Act, and the policies of clean food, as the policies of clean air, are dependent in large measure upon good, new, modern capital equipment. There are still in this country tens of thousands of tea shops and cafés for example, which are dirty, stuffy, insanitary, and fly-ridden, and every Member of this House knows that to be true. They can be improved only by the installation of good equipment for refrigeration and allied purposes.

I believe that every refrigerator, in every commercial premise, ought to be allowed to attract the appropriate taxation relief, and my final reply to the hon. Member for Westhoughton is that we are not asking for money from the Government. All that we are asking for, in equity and in logic, is similar taxation treatment for capital goods and equipment in the hotel and tourist trade as is applied to industrial equipment of an equivalent character in our factories. That is not asking for money from the Government. That is asking, in equity and in logic, for fair taxation treatment, and I believe that it ought to be accorded by the Government under this Bill.

I ask the right hon. Gentleman to apply himself particularly to the undertaking given by the First Secretary on 22nd June 1966. When are we to have this statement covering assistance for the hotel and tourist industry? I repeat that that statement must first be made in this House. It should not be made to some outside body of cafe proprietors or the equivalent, for we have argued the case here, and it is the right hon. Gentleman's ministerial responsibility to make the statement in this House.

Photo of Sir Stephen McAdden Sir Stephen McAdden , Southend East

It does not say very much for the purposeful planning of the new dynamic society that, no sooner has the Chancellor of the Exchequer made his famous speech exhorting us all to stay at home for our holidays, then he proceeds, with the assistance of his colleagues, to set in train such events as will inflict a grievous blow on the kind of places to which people would have to go if they were to spend their holidays at home.

So grievous are the blows which the right hon. Gentleman has inflicted on this industry that it may be he will discover that the only way to make us spend our holidays at home is to await the statement of the right hon. Gentleman the Prime Minister tomorrow afternoon. But, pending the advent of that statement it seems to me that my hon. Friends have made a very good case on behalf of the hotel and catering industry. What is more, they have done so not only for the industry, but for the users of the industry, who enter into the subject as much as the industry itself.

My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) is right when he says that when people come to this country they expect to find a standard of service at least comparable to that of the country from which they come. I know that if I have to stay at an hotel I expect to be at least as comfortable as I am when I am at home.

The really successful hotelier is the one who seeks to bring his equipment up to a modern and reasonable standard. In the past it was possible, through the use of investment allowances, to make some advance in that direction—not enough—but I know that I should be called to order if I were to attempt to make a dissertation on the respective merits of investment allowances and investment grants. This is a matter which, for better or for worse—and I think for worse—has been decided by the Government in the form that the Bill takes, and one which, as has been mentioned, takes no account of the profitability of the enterprise which will receive this grant, but nevertheless singles out this service industry as one which is not worthy of help.

I cannot understand the reasoning which says that it is right and proper that industries which are manufacturing goods should be encouraged and supported, while those which supply the food and refreshment which is consumed by those who are manufacturing goods should be singled out as something apart not worthy of encouragement. It seems to me that if we fail to provide the people of this country with food, refreshment, rest, and the places to which they can resort, we shall soon find ourselves in a difficult position from the point of view of manufacturing industry.

I am glad that my hon. Friends have made the point that this is not just a seaside problem. It is not merely a purist problem, although tourism and our seaside entertainments are of great importance to this country. As has been said, these are tremendous earners of foreign currency in the positive sense, and savers of foreign currency in the sense that they keep people at home. This is important, but the provision of decent accommodation for the ordinary commercial running of the country is also an important factor. It seems to me, therefore, that these modest Amendments, which seek to make at least some contribution to an industry which has been hit most severely by the Selective Employment Tax—an industry whose various activities have also been hit by the tax, in that laundry charges will increase, as will the cost of services and transport—should be accepted, so that the industry will at least have some encouragement from the Government.

I hope that the right hon. Gentleman will be able to take a more reasonable and less demanding attitude than that which was taken by the Chief Secretary, and that on this occasion we will be given a concession—something which we have so far signally failed to achieve.

6.30 p.m.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

The hon. Member for Southend, East (Sir S. McAdden) has rightly pointed out that he and his hon. Friends have deployed a comprehensive and well-reasoned case for the modernisation of the hotel and catering trades, with appropriate Government help. I agree with the hon. Member for Worcestershire, South (Sir G. Nabarro), who implied that this financial help is merely a return of some of the tax which those trades have paid.

If I may make this point to the hon. Member for Worcestershire, South—because he is so meticulous about our getting his constituency correct—he was referring not to the First Secretary but to the Chief Secretary. I can assure him that the promise made by my right hon. Friend in the debate on the Finance Bill will be carried out. At one point the hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis) staggered me. Again, in a very reasonable speech—I hope that he will not mind if I do not reply to it in detail, because I tried to do that in Committee—he suggested that our hotels would become ossified and almost derelict because they would not get the grants he thinks they should have. That has not been my experience, as I have travelled around. I do not represent a seaside constituency, but the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) would probably agree that during the present month we have had more foreign visitors in Sheffield than we have had in Morecambe.

Hotels, restaurants, clubs, and providers of recreational activities in Sheffield—including the local authority—have done a good job in giving these visitors an enjoy able time. I do not know what is going on in Morecambe and the other seaside resorts to which the hon. Member for Worcestershire, South referred, but I can assure the House that the catering trades are progressing very well in Sheffield, including the provision of baths in hotel rooms.

Photo of Mr Alfred Hall-Davis Mr Alfred Hall-Davis , Morecambe and Lonsdale

Will the right hon. Gentleman come to Morecambe?

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

Yes, if I have an invitation which is sufficiently attractive.

The hon. Member for Bournemouth, West (Sir J. Eden) has been very persistent in asking for better treatment for the hotel industry. He said that the withdrawal of investment allowances will hit hotels hard, and suggested that the Government did not intend to discriminate against hotels in the way that is being done. I must tell him, and also the hon. Member for Worcestershire, South, that we intended, and still intend, to discriminate in favour of manufacturing industry, for all the reasons put forward in the Second Reading debate and in our protracted but very pleasant debates in Cornmittee—and for similar reasons which will be repeated before we finish with the Report stage.

I would remind the hon. Member for Worcestershire, South that the discrimination in favour of manufacturing industry is not discrimination against hotels, catering and transport alone; it is discrimination against services generally. That is the basis of the Bill, and it is a principle to which we shall adhere.

I now turn to the Amendments. I want to point out—not in any critical spirit but merely to show that the first two Amendments introduce an element of ambiguity which I am sure hon. Members opposite did not intend—that they would make equipment generally eligible for all Clause I purposes and not only for the hotel and catering trades.

Investment allowances were given on plant and machinery and not equipment, and if equipment covers the same point as plant and machinery it is not necessary to move the first two Amendments. If it is intended to go wider, and to bring in assets not previously eligible for investment allowances, the first two Amendments must be resisted on those grounds.

Amendment No. 3 is the really important one. I agree with the hon. Member for Morcambe and Lonsdale, and other hon. Members who have spoken eloquently on the point, that the hotel and catering trades make a very useful contribution to our balance of payments by providing accommodation and sustenance for overseas visitors and also, on the negative side, by providing good accommodation for people living here, thereby persuading them to take their holidays at home instead of going abroad. We accept this. Last year overseas visitors spent nearly £200 million in drink, food, accommodation and travel, and I imagine that the hotel, food and drink side accounted for about £100 million. That is a substantial sum, but it represents less than 10 per cent. of the total turnover of the trades.

The hon. Member for the Isle of Thanet (Mr. Rees-Davies) was on a real point when he said that there must be some discrimination if we are going to use the argument that, whatever we do in respect of investment grants—or if we return to the previous system of investment allowances—we should direct our Measures as far as possible to improving our balance of payments. Considering the matter from this angle, we must remember that it will be difficult to find a way of distinguishing between hotels which cater mainly for foreign visitors and hotels which do not. We must have a shot at it, however, because the great majority of the 150,000 hotels and non-residential catering establishments which will have little or no dealings with foreign visitors, and relatively few dealings with British residents who may otherwise go abroad, will not come within the field of discrimination required by the hon. Member for the Isle of Thanet.

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough and Whitby

Surely the whole essense of the matter is to see that the general level in these establishments is raised throughout the country, so that accepted standards are raised all together. This is the only sure way of making this country attractive to foreigners.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

That is true, but within the resources at our disposal we shall concentrate on manufacturing industry, for quite good reasons. The same kind of argument—perhaps in a different degree—as that produced by the hon. Member for Scarborough and Whitby (Mr. Michael Shaw), could be used for many of the other service trades. However, I have noted the views of the hon. Member for the Isle of Thanet. He is asking, as we all are, for more and better hotel accommodation and better restaurants and suggesting that we should look again at building grants and loans at low rates of interest to see how far we can help—

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Worcestershire South

I listed those items of expensive equipment without the range of buildings. Before he leaves this point, will the right hon. Gentleman say something about that? I am not concerned with pots and pans, serviettes, or knives and forks. I am concerned with the list of equipment which I gave him, the heavy, expensive equipment in hotels.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

The hon. Member should not be quite so impetuous. This subject appears in the notes which I have taken of his speech and I will reply to him.

We are doing a great deal to help hotels now. Hon. Members will say that it is not enough, but I would remind them—taking development areas first, because they are important generally from the point of view of spreading industrial employment and better standards of living throughout the country—in those areas, new construction and extension of hotels and other catering establishments which create additional employment will continue to be eligible for a 25 per cent. building grant and, in certain circumstances, for a 35 per cent. building grant.

They are also available generally in the country and in the development areas. They can apply for tailor-made loans approved by the Board of Trade Advisory Committee under Part II of the Bill. Of course, the hotel and catering trades, like other excluded sectors of the economy, will benefit from the higher rate of initial allowance of 30 per cent. of their equipment. The Government also assist the industry through their annual grant to the British Travel Association.

As I said in Committee—this is the answer to the hon. Member—Part I of the Bill is not the relevant instrument for adding to the assistance already available to the tourist industry. I have taken note of his arguments about helping hotels to put in modern equipment, like boilers, refrigerators, baths and television and radio sets. I would point out, however, that there will be a great deal of trouble if we put too much portable equipment in hotels which could be used somewhere else. That is one of the problems, but I have taken note of the suggestion.

I still take the view that this Bill is not a proper vehicle for the kind of assistance for which the tourist industry is, quite properly, asking. There are other methods of helping the industry, particularly those parts of it with a high potential for increasing business with foreign customers. The Government are exploring these other methods with the British Travel Association.

I am afraid that I must tell the hon. Member for Bournemouth, West that the answer stands which I gave him on 29th June. We are discussing this matter and I am sorry that the discussions are not yet completed. As the hon. Member for the Isle of Thanet said, after the discussions which my hon. Friend the Minister of State has had with the tourist group, we intend to make a statement as soon as possible. I will pass on to the President of the Board of Trade the suggestion of the hon. Member for Worcestershire, South that the statement should be made in the House.

For the reasons which I have given, that we intend to adhere to the discrimination which we have put into the Bill, that we are going—

Photo of Mr John Eden Mr John Eden , Bournemouth West

The right hon. Member was referring to the discussions with the British Travel Association. Would he confirm that it is the Government's intention to differentiate between individual hotels? Is he trying to find some means of singling out and giving preferential treatment to those hotels which, in the Government's view and that of the Association, are substantial earners of foreign currency?

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

This is one of the proposals put forward among many. Whether the Government will accept this approach or not, I do not know: I am not involved in the discussions.

Whether we can ever find a workable scheme is another matter. Hon. Members probably know that an attempt was made to find a scheme immediately after the war. As I tried to explain in Standing Committee, that never got off the ground. We adhere to the discrimination which is fundamental to the Bill, that we shall devote all the resources we can to investment in manufacturing industry. For these reasons, I am afraid that we cannot accept the Amendment.

6.45 p.m.

Photo of Mr Michael Noble Mr Michael Noble , Argyll

I should like to reply to the right hon. Gentleman in very much the same spirit as he attempted to reply to this debate and to those in Committee. One of those who heard him, my hon. Friend the Member for Yeovil (Mr. Peyton), went nearer to paying a compliment to anyone sitting on the Government Front Bench than he has come for 19 months. That is always quite an event.

The right hon. Gentleman has appreciated that, at long last, the series of blows which this Government have deliberately taken against the hotel industry has come an an end and that they must try, by hook or by crook, to find some way of helping the industry. Unfortunately, we cannot, however much we want to, accept the good will of the Minister in the face of the fact that he and his right hon. Friend have been undoubtedly overtaken by events.

We know very well that, whatever the statement may be which the Prime Minister will make tomorrow, the chances of the Government and the Treasury helping the hotel industry and encouraging new building have been overtaken by events. Building grants are the only things which the Minister has specified as a "plus" for the hotel industry. There will be nothing for modernisation and nothing for re-equipment.

By bad luck or bad management—he can take his choice—he has been overtaken by events. The hotel industry will not get the help it deserves. Therefore, as a protest against the dilatory nature of the Government's handling of this matter, I and my right hon. and hon. Friends, I am sure, will wish to divide the House.

Question put, That "or" stand part of the Bill:—

The House divided: Ayes 170, Noes 120.

Holland, PhilipMaddan, MartinRussell, Sir Ronald
Hordern, PeterMaginnis, John E.Scott, Nicholas
Hornby, RichardMathew, RobertShaw, Michael (Sc'b'gh — Whitby)
Howell, David (Guildford)Mawby, RaySinclair, Sir George
Hunt, JohnMaxwell-Hyslop, R. J.Smith, John
Hutchison, Michael ClarkMaydon, Lt.-Cmdr. S. L. C.Summers, Sir Spencer
Iremongur, T. L.Mills, Peter (Torrington)Taylor, Edward M. (G'gow, Cathcart)
Irvine, Bryant Godman (Rye)Mills, Stratton (Belfast, N.)Taylor, Frank (Moss Side)
Jenkin, Patrick (Woodford)Mitchell, David (Basingstoke)Thatcher, Mrs. Margaret
Jennings, J. C. (Burton)Morgan, W. G. (Denbigh)Thorpe, Jeremy
Johnston, Russell (Inverness)Nabarro, Sir Geraldvan Straubenzee, W. R.
Jopling, MichaelNoble, Rt. Hn. MichaelVickers, Dame Joan
Kaberry, Sir DonaldOnslow, CranleyWalters, Dennis
Knight, Mrs. JillOsborn, John (Hallam)Ward, Dame Irene
Lambton, ViscountOsborne, Sir Cyril (Louth)Weatherill, Bernard
Lancaster Col. C. G.Page, Graham (Crosby)Webster, David
Langford-Holt, Sir JohnPardoe, JohnWhitelaw, William
Legge-Bourke, Sir HarryPeel, JohnWills, Sir Gerald (Bridgwater)
Lloyd, Rt Hn. Selwyn (Wirral)Peyton, JohnWilson, Geoffrey (Truro)
Loveys, W. H.Pink, R. BonnerWood, Rt. Hn. Richard
Lubbock, EricPounder, RattonWylie, N. R.
McAdden, Sir StephenPowell, Rt. Hn. J. EnochYounger, Hn. George
Mackenzit,Alasdair(Ross—Cromly)Pym, FrancisTELLERS FOR THE NOES:
Maclean, Sir FitzroyRidley, Hn. NicholasMr. Grant and Mr. Blaker.
McMaster, StanleyRossi, Hugh (Hornsey)

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough and Whitby

I beg to move Amendment No. 5, in page 2, line 'N, after "packing" to insert: weighing, measuring, or testing ".

Photo of Dr Horace King Dr Horace King , Southampton, Itchen

I suggest that, with this Amendment, we discuss Amendment No. 8, in line 28, at end insert: Provided that where in the course of the making of an article or in the course of any storing Dr packing of any article which by virtue of paragraphs (b) or (c) of this subsection is treated as a process incidental to any of the purposes mentioned in subsection (2) of this section, any article is weighed measured or tested, such weighing measuring or testing shall themselves each be treated as processes incidental to the said purposes.

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough and Whitby

This matter was the subject of a short debate in Committee. The Minister of State then said that he would reconsider the matter, but he felt that it was probably covered. I feel somewhat encouraged by the statement of the right hon. Gentleman in the debate on the previous Amendment that he could not accept it because it would introduce an element of ambiguity.

The objective of the Amendment, which I concede may not be perfectly drafted, is to abolish a certain amount of ambiguiity. The whole thesis behind the Amendment and, indeed, the thesis behind many of the Amendments we put forward in Committee, lies in the difference between the philosophies held by the two sides of the House. We believe that, wherever possible, an attempt should be made to spell out exactly the powers of the Minister, on the one hand, and the rights of the taxpayer and the claimant, on the other. We believe par- ticularly that if it is not completely clear under the terms of the Bill there should be the right of appeal as well. There are built into the Bill a tremendous number of discretions which are given to the Minister. A feature throughout the Committee stage and as we have gone on with the Bill has been the claim of how narrow has been the discretion given to the Minister, but as each Clause has gone by we have found that there is a further widening of the powers of discretion.

7.0 p.m.

The possible discretions given to the Minister are enormous. The Bill itself could be used as an economic regulator. It is right that we should discuss how the discretion used by the Board of Trade should be used in deciding what is and what is not a qualifying process. The same process might be regarded differently in difference cases and there could be no certainty in the minds of industrialists. I quote from what the Minister said in Committee on 15th June when he was dealing with these matters and we raised questions about weighing, measuring and testing during industrial processes. The Minister said: I agree with the hon. Gentleman that these activities are incidental to manufacturing processes. and they are covered. we believe, in the Bill as it stands.

He went on to say, and this is very significant: There are objections to spelling out these processes in the Bill. If they were spelt out, they would probably limit the Bill in ways in which the hon. Gentleman does not want it to be limited.

Of course we want it limited, but I do not accept for a moment that it need necessarily be limited in a way we do not wish. The Minister went on to expand this point and said that these processes of weighing, testing and measuring: …could be part of a distributive trade, such as the weighing out of coal in a coalyard. This would certainly not qualify. But some cases might arise in which it was desirable to regard the simple process of testing, for instance, as a qualifying process."—[OFFICIAL REPORT, Standing Committee D, 15th Tune. 1966, c. 168 and 169.]

In other words, it will be entirely at the discretion of the Board of Trade and the Minister whether or not a particular process and the machinery involved qualifies for grant. Over a number of years this could open up very wide and undesirable possibilities. It would be completely without the power and authority of this House to control or to check.

We believe profoundly that specific powers should be laid down in the Bill wherever possible and that we should not leave the matter to the discretion of the Minister. I have said this so many times that perhaps the Minister will feel that I view him and all his works with a great deal of suspicion, I tell him quite sincerely that I do not do so, but this is not the way to approach legislation of this sort when it comes before the House. We must judge it on its merits and make quite sure that the rights of individuals are clearly stated and that wide powers in matters such as this are not left entirely to the discretion of the Minister.

We have been told that in all probability and subject to reflection on the Clause possibly the point is covered, but if so, that will be only so long as the Minister wishes it to be covered. I make another quotation from the Report of the sitting of 16th June. I put this point to the Minister: Whatever the intentions of the Minister or the Board of Trade, I understand that the Board has complete power within the general framework of the Bill to pay grants or not to pay them, to pay grants in certain parts of the country more readily than in others, to differentiate between different types of manufacture and to delay payment. The Minister of State shakes his head. I should be grateful if he would point out in the Bill where he is limited in this respect.

I never got an answer to that because, of course, he has complete discretion as he admitted when he said: When the hon. Member, rightly from his point of view, says that there is nothing in the Bill to prevent the Board of Trade introducing greater discretion and assessing, delaying the payment of grants or going beyond the development areas now defined— that there is nothing in the Bill to prevent the Board of Trade doing this—that might be true if we look at the Bill in this negative way.…."—[OFFICIAL REPORT, Standing Committee D, 16th June, 1966; c. 233 and 235.]

I accept the fact that he may not himself look at the Bill in a negative way, but what about his successors, what about the change in circumstances in the country when, but for this Amendment or similar ones if successive Governments look at it in a negative way they might choose to use the discretion in a different way from the way in which the right hon. Gentleman intended? Even though we differ in our general approach to this question, it is important to lay down specifically and whenever possible exactly what are the industrial, processes permitted under this Bill.

While I fully agree that it is very often quite easy to decide that certain instruments and machines are undoubtedly necessarily used in manufacturing industries and can be used only in those processes, it may be that from time to time in other circumstances about certain machines there may be a doubt. Then there may be this power of discretion which might act against the interests of the claimant. For this specific reason and for the more general reason that where-ever possible we wish to see the powers of the Minister for making these grants spelled out in the Bill, we put forward this Amendment.

The Clerk-Assistant at the Table informed the House of the unavoidable absence of Mr. SPEAKER from the remainder of this day's Sitting.

Whereupon Sir ERIC FLETCHER. The CHAIRMAN OF WAYS AND MEANS, took the Chair as DEPUTY SPEAKER, pursuant to the Standing Order.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

The hon. Member for Scarborough and Whitby (Mr. Michael Shaw) has put forward his case On the basis that we ought to spell out in the Bill all the processes and all the activities that will qualify for grants. In these two Amendments he has given an example of how he thinks the job should be done. In Committee I pointed out time and again how difficult it would be to try to spell out the processes, the qualifications and so on in the Bill in the specific way in which the hon. Member wants them to be spelled out. I tried to explain that even if they were spelled out, to do so would place applicants for grants in a far more difficult position than they will be in under the terms of the Bill as it stands.

The examples which are given are unnecessary even to achieve what the hon. Member wants. As he said during Committee stage, I undertook to confirm that weighing, measuring and testing, including the testing of finished products, are all processes incidental to manufacture and are therefore covered by the Bill. The answer is, "Yes, wherever the weighing, measuring and testing can properly be regarded as incidental to qualifying industrial processes mentioned in subsection (2)". In some cases these will be processes which intervene between the completion of the manufacture and the packing of the finished goods for sale. We discussed that in Committee. In the engineering, construction and chemical industries, the equipment for measuring and testing may be necessary at various stages in the production process to ensure that one has the requisite standards of quality and so on. In those cases weighing, measuring and testing may be treated as a process for or incidental to, and are so provided for by subsection (2).

To specify weighing, measuring and testing in subsection (3) as the Amendments would do, is unnecessary. It is undesirable to specify these particular incidental activities because to do so would tend to cast doubt on the eligibility of other processes which could be regarded as forming part of the qualifying process but which are not specified because we are specifying only a narrow range of activities.

Secondly, the Amendment would narrow the area within which the Board can exercise its discretion to admit weighing, testing and so on in that subsection (3)—this is where the trouble begins with the Amendment—is limited to activities which are not eligible in themselves but which are treated as eligible to the extent that they are carried on by the manufacturer or a mining or a building firm. Subsection (3) refers to repairs, maintenance, storage and packing. As amended by the hon. Member's Amendment, subsection (3) would debar any other person from claiming that carrying out weighing, measuring or testing of goods which someone else has made or someone else was to use was in itself a qualifying incidental process.

There may be some cases in which the simple process of testing could properly be regarded as a qualifying process in itself but it is absolutely essential to the manufacturing process and therefore could be regarded as a qualifying process. These Amendments would prevent our accepting a testing process of that kind and treating it as a qualifying process. These are the difficulties which we get into if we try to specify the processes of qualification in the way in which the hon. Member suggests.

In fact the Amendments would add nothing to the coverage of the provisions in Clause 1. My difficulty about accepting this approach, using the Amendments as examples, is that it might cast doubt on the eligibility of incidental processes which are not specifically mentioned and might in some cases prevent what would otherwise be an eligible process of weighing, measuring or testing from qualifying under the terms of the Bill. I hope that I have made that clear. This is rather a complicated business because of the way in which the Amendments could be spatchcocked in subsection (3).

But I can assure the hon. Member that what he is asking for would in fact limit more severely than he expects the opportunity which may come our way to treat weighing, testing and measuring as qualifying processes. The more that the discussion of the Bill goes on, the more I am convinced that to retain the discretion given to us in the Bill rather than to spell out all the details which hon. Members want spelled out is the right way of doing it.

7.15 p.m.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

I found it a little difficult to follow the right hon. Member when he said that these Amendments would introduce a doubt. He says, in effect, that in most cases these operations of measuring and testing will be incidental to the manufacturing process in subsection (1), but the difficulty that arose in our minds was the fact that in subsection (3) the Bill specified three operations as being, in particular, incidental or to be treated as incidental to the processes mentioned in subsection (2). These are a certain limited range of repairing, a limited range of packing and a limited range of storing. It seemed to us, therefore, that, having had in the Bill a restrictive list, it was necessary to ensure that it was not as restrictive as it appeared to be.

We have appreciated that the right hon. Gentleman personally, despite the fact that he has been thwarted throughout by the Government's rigidity over the Bill, has tried to meet us on matters and that there have also been occasions, with all due respect, on which he has given us assurances that things were in the Bill which, as a lawyer, I am bound to say I find it very difficult to see in the Bill. We were told that the pasteurisation of milk was in the Bill. How on earth he maintains that it is manufacturing an article and that pasteurised milk is completely different from the milk when it came from the cow I am unable to understand, either as a farmer or as a lawyer. This is why we have been a little suspicious of some of these assurances—not suspicious of the right hon. Gentleman's integrity or good taste, of course not, but suspicious of the legal interpretation which he has been advised should apply. But in this case we are willing to accept his assurance.

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough and Whitby

In view of that assurance, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Photo of Mr John Osborn Mr John Osborn , Sheffield, Hallam

I beg to move Amendment No. 65, in page 2, line 24, at the end to insert: (d) the recording, duplicating, filing or dissemination in the course of a business of any material which is required to be recorded, duplicated, filed or disseminated in the course of that business. As we have pointed out before, this Bill is discriminatory. Here we raise the question, where does equipment required for production start and where does equipment required for production end? Production involves many factors but particularly the ordering of the materials through a factory. There is the paper work connected with the movement of that material through a factory and there is duplicating.

Many years ago I was connected with the installation of a production control system, and I can assure hon. Members that an immense amount of paper work goes into the normal processes of engineering whether the product be the manufacture of a car, jobbing, work or, for that matter, in a steel factory. Part of the production process is methods development. This requires a draughtsman and his equipment, and subsequently this work may be printed, copied and duplicated. This is all part of the production, although it cannot be said to take place on the factory floor. Because the Bill is so discriminatory it is very hard to define the equipment which is connected with manufacture and the equipment which is part of servicing. To clarify the point it is essential that there should be an additional Amendment of the kind I have moved so that there shall be no misunderstanding.

One of the essentials in many factories with which I have been connected is that records of the machining operations should be kept for very many years so that if a spare part or a short batch repetitive order has to be manufactured, the records are readily accessible and can be put on to the job. This type of equipment, where it is associated with production, should go under that category, and I consider it essential that the House accept the Amendment.

Photo of Mr Robert Sheldon Mr Robert Sheldon , Ashton-under-Lyne

The hon. Member for Sheffield. Hallam (Mr. J. H. Osborn) mentioned that the Bill has been discriminatory time and time again, but we have all lived with it long enough to know that its whole purpose is to introduce discrimination. Although one cannot be certain at all times that the line is clearly drawn between one type of investment which one wishes to encourage and another that one does not wish to encourage quite so much, nevertheless if public money is going to be used it is essential that some discrimination be employed.

In this case, I would accept that there is much argument in favour of investment grants extending to business machinery and particularly that kind which assists industrial development. I accept that there is very much in that argument, but essentially investment grants are to promote the modernisation of industry and this is clearly where we should all take our stand. The lack of receipt of the investment grants does not necessarily mean that the modernisation will not go ahead; it means that the Government do not provide the money to encourage such modernisation and any plant or machinery that seeks to qualify for investment grants must prove as conclusively as one can in a Bill of this kind its eligibility for the grant. The eligibility of certain kinds of business machinery is so proved.

Certain kinds that save work, that accomplish something new that cannot be done without them, and perhaps most important of all, the kind of business machinery that teaches new skills which can he quickly diffused throughout a number of branches of industry and commerce, which can spread the application and the understanding of these skills very widely —these are of value. I am thinking here about such pieces of equipment as accounting machines, dictating machines and electric typewriters, among others. We use these far too rarely and their value in commerce and in parts of industry will increase, and their use should he encouraged.

We should not be too dogmatic about what particular classes of investment we should encourage, and because of this I am happy to see a large amount of discretion placed in the hands of the Board of Trade under the Bill. Discretion has had some very hard words said about it today. But we must always understand that if we do not have this discretion and rely entirely on the legislation we must accept the consequence, that the legislation will always be many months or years behind the modernisation for which it is legislating.

If one accepts that one's interest is in a Bill that will promote modernisation, then the Bill itself can never keep pace with that modernisation if it states precisely the items which qualify. The only way is to put certain powers of discretion in the hands of the President of the Board of Trade and ensure the control of their use by constant inquiry. That is the only way in which one can ever pursue a policy of assisting modernisation.

Having said that, I accept that the Bill is very much in its infancy and we shall see very great changes. At the beginning, may not get everything quite right. I look forward to seeing at a subsequent stage business machinery being included in the provisions of the Bill. It is possibly a little too early at this stage to expect this now, but I look forward to it at some time in the future. Its inclusion will help not only in modernising the industrial side of manufacturing industry but the necessary paperwork that always accompanies it.

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough and Whitby

I listened with a great deal of interest to what the hon. Member for Ashton-under-Lyne (Mr. Sheldon) said. I wish that he had been able to be with us in many of our debates in Standing Committee, because he has produced some of the arguments that at least one of his hon. Friends produced there, which I, perhaps unkindly, dubbed as a policy of, "act first and think afterwards". This was said with more particular reference to the Selective Employment Tax provisions, but I gave the Minister the benefit of the doubt and assumed that it had not happened in the case of this Bill.

If this is to be regarded as a brand new Bill, with a new approach to the problem, but which is likely to creak pretty badly during the first year or two, and need some fairly hefty changes at the end of the first year, that is a great fault in the Bill and also a great criticism of the Ministers who introduce it. The Bill is not nearly as novel at that.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

Order. We are not now talking about the Bill. The hon. Member must confine his remarks to the Amendment.

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough and Whitby

I am most grateful, Mr. Deputy-Speaker. I was trying to reply to some of the arguments. Listening to the hon. Member for Ashton-under-Lyne, we came up against the whole problem of discretion, which is inherent in the Amendment. The hon. Member said that there is a good case for the equipment mentioned in the Amendment where it can be clearly shown to save work and to do something that it was not possible to do before.

But one can mention this sort of reason for umpteen different facets of our commercial, industrial and professional life.

All the modernisation of our services is related to this, and therefore there is a good case for all this type of equipment, be it in industry or in the services. In so far as we can prevail upon the right hon. Gentleman to accept the Amendment, we shall be getting rid once more of a certain measure of discrimination.

I fully support the hon. Member for Ashton-under-Lyne and my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) on the beneficial effects that the introduction of new machinery in duplicating and filing, and particularly in accounting, can have on industry and on the production processes themselves, because in so many cases the success of a business depends initially on having the accurate information in the mill or factory on which to base one's production plans, on having accurate and up-to-date costings, accurate and up-to-date accountancy methods, and accurate and up-to. date forecasts for the future.

All these depend on modern and up-to-date machinery. They are another arm to the manufacturer, just as much as many of the manufacturing machines themselves. Without this ancillary equipment, in many cases the machines will not be used to their best advantage. If we are to get the best out of our manufacturing machines in the widest possible sense, it is essential that we have going along with them modern and up-to-date machinery of the sort mentioned in the Amendment.

7.30 p.m.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

The answer to the hon. Member for Scarborough and Whitby (Mr. Michael Shaw) is the same as he has had so often and will have again, that the Government have given careful consideration to the needs of the economy when coming to the decision that the most important need was for industry to concentrate on raising its level of investment in plant and machinery used for production processes, which, over many years, has been disappointingly low.

I agree that, if one could persuade all firms which need to use business machines to have up-to-date and modern machinery, the whole economy would be better off. But there is no reason why businessmen should rely on investment grants to modernise their equipment. In any case, to make equipment used for office purposes eligible for grant would diminish the concentration of the incentive on production processes. The line we have taken is that to include plant and machinery used for repair and maintenance, storage, packing, protection and conveyance within premises, all assets directly related to the productive processes, is the extent to which we are prepared to go beyond the strict confines of manufacturing processes themselves.

On several occasions, my right hon. Friend and I have tried to make clear that it is not our intention to extend this eligibility for grant to general purpose office equipment. Although I take the point made by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) about the need for modernisation in offices associated with production and, I suppose, services as well, there would be considerable administrative difficulty if we accepted the Amendment or tried to give widespread help in respect of business machinery of all kinds.

In the first place, practically all of it is portable and there would be a risk of abuse because it could be used for many purposes. There would be abuse in that way if we tried to retain the investment grants, as we intend to do, for production purposes. For those reasons, we cannot accept the Amendment.

There is this further point that we must emphasise all the time. It was the extension of investment grants over this field which diminished the effectiveness of the old investment allowances. They went much too far, and it is precisely this that the Government are determined to prevent happening again under the new system of grants.

Photo of Mr Michael Noble Mr Michael Noble , Argyll

I half understand the right hon. Gentleman's argument, even though I do not agree with the reasoning behind it, but does not he realise that the production of office machinery is now a big part of the new growth industries of Scotland, and his effort to diminish the attractiveness of buying such equipment and machinery will have repercussions in an area which cannot easily afford them?

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

I am not sure that that will happen. I am willing to discuss it with the right hon. Gentleman in a different context, and it may be that we shall stimulate the export of office machinery.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

It would be wrong to alloy, the Minister of State to believe that he has satisfied this side of the House. He began by saying that the Government had been giving careful consideration to the needs of the economy. All I can say is that, if tomorrow's statement is to he any guide on that, the sooner they stop thinking about it the better.

The case for the Amendment has been very cogently put from this side. It is one of the nonsenses of the whole pattern of this legislation that the Government seek to draw an arbitrary line between those parts of a business machine— I use that term in a organisational sense—which handles the products and those which handle the necessary administration providing for buying and selling, for recording and all the other administrative work which goes on in relation to the products. It is an utterly unreal distinction.

Businesses which do not modernise their offices with the attention they devote to modernising their factories are likely to fall behind in the competitive race. This is the case for the Amendment, and the idea that by giving grants for typewriters, calculating machines, elaborate filing systems and other office equipment one somehow diminishes—another of the right hon. Gentleman's phrases—the concentration on productive machinery merely shows the delusion into which the Government have allowed themselves to be led in drawing a distinction in this way.

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

I agree with some of the hon. Gentleman's observations, but, surely, with his intelligent grasp of these matters, he knows perfectly well that no Government of whatever political complexion could draft a piece of legislation which, on the one hand, recognised business equipment, typewriters, duplicators, printing machines and so on in a factory making machinery and capital goods and, on the other hand, denied the same facility to banks, insurance offices, exporters and every other kind of business office. It would have to be applied to the whole lot. Why should it he financed out of the Government's "kitty"? If private enterprise is doing its job, it should find the money to finance itself.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

That intervention illustrates once again the depth of delusion about the whole of this legislation in which the hon. Gentleman has been wallowing ever since the Bill was introduced. His point about handing money out of the Government's "kitty" is a bad one. He has made it ever since this legislation was foreshadowed in the White Paper. It is a bad point because these investment grants are intended to replace investment allowances which operated as a reduction of the overall level of taxation on firms investing in machinery and capital equipment. The investment grant is intended to do just that, but the Bill has been drafted in such a way as to limit it to certain categories of goods.

The hon. Gentleman asks how one could distinguish between office machinery in factories and office machinery used elsewhere. It is a nonsensical question. That is exactly what the Bill does in respect of a great deal of other equipment. There are all sorts of pieces of equipment which qualify for grant if they are bought by people operating industrial processes but which do not rank for grant if bought by others. It is identical machinery. There is no distinction. One does not have to tie a piece of red string round it to mark one from the other.

Another matter showing the nonsense of refusing this Amendment is the introduction of a special Clause dealing with computers. The Government regard the computer as a more worthy form of office machinery than the computer's more humble brethren the desk calculator, the typewriter and various forms of storage equipment. This shows the extent to which the Government feel themselves able to make judgments in these matters. They say that firms should put in computers but that lesser pieces of equipment which are somehow less worthy of encouragement should not qualify for grant. This is all part of the pattern of playing chess with the economy of which this Bill is such a notable example.

I cannot believe that it is right to give grants for productive machinery and at the same time deny them for the machinery necessary efficiently to buy the raw material and sell the finished product. It is an unreal distinction. It is trying to erect an artificial barrier around part of one continual industrial process.

My right hon. Friend the Member for Argyll (Mr. Noble) made an effective intervention when he asked what was the effect of this refusal to give grants for office machinery on the very substantial office machinery business. I do not know whether the Minister of State has been, as I have, to the business efficiency exhibitions in London. I am always impressed and almost overwhelmed by the enormous variety and huge value of the products of this British industry. It is a booming, thriving and growing trade as more and more offices realise that, in order to get their businesses efficient, they

Division No. 132.]AYES[7.41 p.m
Alison, Michael (Bankston Ash)Grant, AnthonyOnslow, Cranley
Baker, W. H. K.Grimond, Rt, Hn. J.Osborn, John (Hallam)
Batsford, BrianHall-Davis, A. G. F.Osborne, Sir Cyril (Louth)
Bessell, PeterHeseltine, MichaelPage, Graham (Crosby)
Bitten, JohnHiley, JosephPardoe, John
Black, Sir CyrilHogg, Rt. Hn. QuintinPeel, John
Boyle, Rt. Hn. Sir EdwardHolland, PhilipPink, R. Bonner
Brinton, Sir TattonHowell, David (Guildford)Pounder, Rafton
Bromley-Davenport,Lt.Col.Sir WalterHunt, JohnPym, Francis
Brown, Sir Edward (Bath)Hutchison, Michael ClarkRidley, Hn. Nicholas
Bruce-Gardyne,J.Iremonger, T. L.Rossi, Hugh (Hornsey)
Buchanan-Smith,Alick(Angus,NS,M)Jenkin, Patrick (Woodford)Russell, Sir Ronald
Bullus, Sir EricJennings, J. C. (Burton)Scott, Nicholas
Burden, F. A.Johnston, Russell (Inverness)Shaw, Michael (Sc'b'gh — Whitby)
Campbell, CordonKaberry, Sir DonaldSinclair, Sir George
Chichester-Clark, R.Knight, Mrs. JillSmith, John
Clegg, WalterLambton, ViscountSummers, Sir Spencer
Cooke, RobertLangford-Holt, Sir JohnTaylor, Edward M. (G'gow, Cathcart)
Cooper-Key, Sir NeillLegge-Bourke, Sir HarryThatcher, Mrs. Margaret
Corfield, F. V.Lloyd, Rt. Hn. Selwyn (Wirral)Turton, Rt. Hn. R. H.
Craddock, Sir Beresford (Spelthorne)Loveys, W. H.van Straubenzee, W. R.
Crowder, F. P.Lubbock, EricVickers, Dame Joan
Cunningham, Sir KnoxMackenzie,Alasdair(Ross—Crom'ty)Wainwright, Richard (Colne Valley)
Dalkeith, Earl ofMcMaster, StanleyWalters, Dennis
Dance, JamesMadden, MartinWard, Dame Irene
Davidson,James(Aberdeenshire, W.)Maginnis, John E.Weatherill, Bernard
Dean, Paul (Somerset, N.)Mathew, RobertWills, Sir Gerald (Bridgwater)
Deedes, Rt. Hn. W. F. (Ashford)Maxwell-Hyslop, R. J.Wilson, Geoffrey (Truro)
Eden, Sir JohnMaydon, Lt.-Cmdr. S. L. C.Wood, Rt. Hn. Richard
Eyre, ReginaldMills, Peter (Torrington)Wylie, N. R.
Farr, JohnMills, Stratton (Belfast, N.)Younger, Hn. George
Fletcher-Cooke, CharlesMitchell, David (Basingstoke)TELLERS FOR THE AYES:
Fortescue, TimMorgan, W. G. (Denbigh)Mr. R. W. Elliott and Mr. Blakey
Giles, Rear-Adm, MorganNabarro, Sir Gerald
Glover, Sir DouglasNoble, Rt. Hn. Michael
NOES
Alldritt, WalterBlenkinsop, ArthurChapman, Donald
Archer, PeterBoardman, H.Coe, Denis
Armstrong, ErnestBooth, AlbertColeman, Donald
Atkins, Ronald (Preston, N.)Braddock, Mrs. E. M.Concannon, J. D.
Atkinson, Norman (Tottenham)Bradley, TomCraddock, George (Bradford, S.)
Bagier, Gordon A. T.Brooks, EdwinCrawshaw, Richard
Baxter, WilliamBrown, Hugh D. (G'gow, Proven)Cullen, Mrs. Alice
Beaney, AlanBrown, R. W. (Shoreditch — F'bury)Darling, Rt. Hn. George
Bence, CyrilBuchan, NormanDavidson, Arthur (Accrington)
Bennett, James (G'gow, Bridgeton)Buchanan, Richard (G'gow, Sp'burn)Davies, Dr. Ernest (Stretford)
Bishop, E. S.Cant, R. B.Davies, G. Elfed (Rhondda, E.)
Blackburn, F.Carmichael, NeilDavies, Ifor (Gower)

must make sure that they have the most modern equipment.

Are not the Government, by restricting home demand, destroying their hopes of increasing exports? Here, surely, is an industry for which a buoyant, thriving, growing home market is the best possible foundation for a thriving export market. Whichever way one looks at it, the refusal of the Government to accept the Amendment or even to introduce one themselves to cover the point is something that we must protest against and I ask my right hon. and hon. Friends to support the Amendment in the Division Lobbies.

Question put, That those words be there inserted in the Bill:—

The House divided: Ayes 102, Noes 155.

Davies, S. D. (Merthyr)Hughes, Roy (Newport)Pannell, Rt. Hn. Charles
Dempsey, JamesHunter, AdamPark, Trevor
Dewar, DonaldHynd, JohnPearson, Arthur (Pontypridd)
Dickens, JamesIrvine, A. J. (Edge Hi,l)Pentland, Norman
Dobson, RayJackson, Colin (B'h'se — Spenb'gh)Perry, George H. (Nottingham, S.)
Doig, PeterJohnson, James (K'ston-on-Hull, W.)Price, Thomas (Westhoughton)
Eadie, AlexJones, Dan (Burnley)Price, William (Rugby)
Edwards, Rt. Hn. Ness (Caerphilly)Jones, J. Idwal (Wrexham)Pursey, Cmdr. Harry
Fernyhough, E.Kenyon, CliffordRankin, John
Finch, HaroldLawson, GeorgeRedhead, Edward
Fitch, Alan (Wigan)Leadbitter, TedReynolds, G. W.
Fletcher, Ted (Darlington)Ledger, RonRoberts, Albert (Normanton)
Floud, BernardLestor, Miss JoanRoberts, Goronwy (Caernarvon)
Foot, Sir Dingle (Ipswich)Lever, L. M. (Ardwick)Robertson, John (Paisley)
Foot, Michael (Ebbw Vale)Lewis, Ron (Carlisle)Roebuck, Roy
Forrester, JohnLomas, KennethShaw, Arnold (Ilford, S.)
Fowler, GerryLyons, Edward (Bradford, E.)Sheldon, Robert
Fraser, Rt. Hn. Tom (Hamilton)McBride, NeilShinwell, Rt. Hn, E.
Freeson, ReginaldMacdonald, A. H.Silkin, S. C. (Dulwich)
Gardner, A. J.McKay, Mrs. MargaretSilverman, Julius (Aston)
Garrow, Ale xMackintosh, John P.Silverman, Sydney (Nelson)
Gordon Walker, Rt. Hn. P. C.McNamara, J. KevinSmall, William
Gray, Dr. Hugh (Yarmouth)MacPherson, MalcolmSpriggs, Leslie
Grey, Charles (Durham)Mahon, Peter (Preston, S.)Steele, Thomas(Dunbartonshire, W.)
Griffiths, David (Rother Valley)Manuel, ArchieSymonds, J. B.
Griffiths, Rt. Hn. James (Llanelly)Mapp, CharlesThomas, lorwerth (Rhondda, W.)
Hamilton, James (Bothwell)Marquand, DavidTinn, James
Hamilton, William (Fife, W.)Maxwell, RobertUrwin, T. W.
Hamling, WilliamMendelson, J. J.Varley, Eric C.
Hannan, WilliamMilian, BruceWainwright, Edwin (Dearne Valley)
Harper, JosephMitchell, R. C. (S'th'pton, Test)Walden, Brian (All Saints)
Harrison, Walter (Wakefield)Morgan, Elysian (Cardiganshire)Walker, Harold (Doncaster)
Hazell, BertMorris, Charles R. (Openshaw)Watkins, David (Consett)
Henig, StanleyMoyle, RolandWhitlock, William
Hooley, FrarkNeal, HaroldWilliams, Alan Lee (Hornchurch)
Howarth, Harry (Wellingborough)Noel-Baker, Francis (Swindon)Williams, W. T. (Warrington)
Howarth, Robert (Bolton, E.)Norwood, ChristopherWinterbottom, R. E.
Howie, W.Ogden, EricTELLERS FOR THE NOES:
Hoy, JamesO'Malley, BrianMr. Gourlay and
Hughes, Ennys (Ayrshire, S.)Oswald, ThomasMr. Joan L. Evans.
Hughes, Hector (Aberdeen, N.)Page, Derek (King's Lynn)

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

I beg to move Amendment No. 9, in page 2, line 28, at the end to insert: (4) Machinery or plant provided by a company which carries on a business in Great Britain and which is a member of a group or of a consortium of companies for use in Great Britain by another company in the group or consortium for carrying on a qualifying industrial process in the course of that other company's business, shall be deemed to be provided by the first-mentioned such company for the purpose of carrying on a qualifying industrial process in the course of its business and the Board of Trade's power to make a grant to that company under this section shall apply accordingly.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

With this Amendment can also be discussed Amendment No. 43, in Clause 13, page 11, line 17, at end insert: (2) A company shall be deemed to be a member of a group of companies if not less than 10 per cent. of the ordinary share capital of the company is owned directly or indirectly by another company in the group or if the company owns directly or indirectly not less than 10 per cent. of the ordinary share capital of that other company or if not less than 10 per cent. of the ordinary share capital of the company and of that other company is owned directly or indirectly by a third company in the group.(3) A company shall be deemed to be a member of a consortium of companies if it is one of six or fewer companies where three-quarters or more of the ordinary share capital of one of such companies is owned between them by the rest of such companies and of which none owns less than one-twentieth of that capital. and Amendment No. 87, in Clause 1, page 3, line 5, at end insert: (8) If all members of a consortium so elect in respect of any expenditure, then, for the purposes of subsection (1) of this section, approved capital expenditure incurred by the related company in providing new plant and machinery for use in Great Britain in the course of the related company's business shall be deemed to be incurred by its pricipal company or companies to the extent that the machinery and plant in question is used by the related company for the purpose of indirectly carrying on a qualifying process of the principal company or companies and, accordingly, the related company shall not be eligible to grant in respect of such expenditure and the Board of Trade shall, in such cases, determine to what extent the plant and machinery in question is to be regarded as being used for the purpose of indirectly carrying on a qualifying industrial process of any principal company and shall make such apportionments as may seem just in cases where machinery and plant is provided by a related company for indirect use by more than one principal company and by persons not being members of the consortium; for the purposes of this subsection a consortium shall exist if more than three-quarters of the ordinary share capital of a body corporate (the related company) is owned by five or fewer bodies corporate (the principal company or companies) none of whom owns less than one-twentieth of that share capital.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

I should like by way of a brief introduction to these Amendments, which deal with groups of companies, to say a word about what I have found to be the attitude of a number of Departments to the problems which arise when large industrial or commercial enterprises carry on their business through the medium of a group of companies rather than under one umbrella. I have had to move Amendments to a number of Bills, notably last year's and this year's Finance Bills and this Bill, to try to modify the Government's draft legislation so that it takes account of the particular problems and the particular difficulties which arise in relation to groups of companies.

To begin with, the reaction which was provoked from the Government Front Bench to those Amendments was hostile and unsympathetic. More recently, that attitude has been somewhat modified and this year, for instance, when I moved the grouping Amendment to the Finance Bill for Corporation Tax, the Chief Secretary took a distinctly more forthcoming attitude. In the same way, when I moved an Amendment in Committee on this Bill to deal with the problem of related companies, the Minister of State was rather more sympathetic than one had been led to expect might be the case. Perhaps "unsympathetic" is not the right word, because the Government have not been lacking in sympathy on this matter. What they appear to have been lacking and still appear to lack is comprehension of the problems involved.

It so happens—and if I have an interest to declare, I do so freely and the right hon. Gentleman knows all about it—that I have a humble appointment in one of a large group of industrial companies in the chemical industry and I have therefore had some eight or nine years' experience of working at the head office of a group of companies and I have therefore seen at first hand the sort of problems which arise and the sort of reasons and motives which inspire industrialists to organise their affairs on this basis. I think that the Government have recog- nised that firms adopt this form of organisation for very good financial, economic and business reasons. If the Government continue to draft their legislation, as Finance Bills and this Bill have been drafted, taking no account of the particular problems which arise with groups of companies, they will find that they create for those companies difficulties and problems which ought not to exist.

I turn now to the Amendments. The Bill, and the pattern on which it has drafted, contains a definition of a qualifying industrial process and links the expenditure which qualifies for grants to assets which are used in a qualifying industrial process, which poses major problems for groups of companies. It is only if an asset is used for use in the purchaser's own trade or business that the asset qualifies for grant. In that way, the Bill entirely leaves out of account what is becoming the more and more usual pattern of industrial groups of companies, namely, the group one member of which is a service company which buys capital equipment, particularly maintenance and other equipment of that sort, for the benefit not of its own business—and, of course, for tax purposes it is running a business—but for the benefit of the business of the group as a whole, assets used not so much by itself, as by other members of the group.

This may happen because it is a convenient way to organise a factory site where a number of different companies are in operation, or, with large business enterprises operating a number of large sites, it may be convenient to have one company performing services for all. There is thus the anomalous position—and I am sure that the right hon. Gentleman recognises the anomaly—that if a manufacturing company were to buy the asset in question for its own business, it would qualify for grant, whereas if the asset is bought by the service company for use by the manufacturing company, there is no grant.

Such transactions are becoming a far from unusual practice in industry. One needs to mention only the need to have separate companies for patent purposes and for technical "know-how" and often for the management advantage of putting a general manager in charge of his own company and for giving participation to outside shareholders in part of the business.

All these are reasons why groups like to organise their enterprises in separate companies. It is often the only way in which to achieve that when dealing with mixed ownership. The pattern can be not only that of parent and subsidiaries, but that which is becoming increasingly common both here and overseas of a number of parents and one subsidiary, a pattern which the Finance Bill has recognised, the consortium of companies.

These arrangements can give rise to a number of different situations with which the Bill will be concerned. The simplest case is the group or consortium of companies in which company A is the manufacturing company and company B is the service company. Another pattern is where there is a group or consortium in which company A is the company' which purchases the qualifying asset, invests the money, while other companies in the group, which may or may not be wholly owned, make contributions towards the cost. Their capital expenditure is not towards an asset which is to be used in a qualifying industrial process in their own business, and so, as the Bill stands, such contributions will fall.

There is another situation in which company A is the manufacturing company and if it invested in plant used for an incidental process, that plant would qualify, but company B is the company which invests in the plant used in an incidental process which would not qualify.

The result of these situations is that if the Bill is left unchanged, these companies will have to depart from the organisation which for economic, financial and business reasons they have chosen for themselves and they will somehow have to adapt or twist or even distort their organisations in order to try to fit the pattern which the Bill recognises.

In each of these cases, if the asset were bought by the manufacturer, it would qualify, but, because it is bought by a different company in the group, it does not qualify. I believe that that is not what is intended. I believe that it is not intended to deprive these companies of the benefits of trading as groups and that somehow the Government believe that what would otherwise be an economic nonsense can be surmounted by other means. The Minister of State recognised the problem when we raised it in Committee. He said at col. 85 on the 26th May: The Amendment raises a new point which we should very much like to consider. The hon. Gentleman's arguments are very sound and reasonable."—[OFFICIAL REPORT, Standing Committee D, 26th May, 1966; c. 85.] My arguments are not always sound and reasonable, but the right hon. Gentleman recognised them as such on this occasion. He went on to say that he would look at it and that he thought that possibly the matter could be dealt with, and an Amendment would be put down.

8.0 p.m.

We are disappointed to find that the Government have put down no Amendments. There is nothing in the Order Paper to suggest that they recognised any difficulty in this. I do not find the Government unsympathetic on these problems as much as lacking in comprehension, failing to understand the nature of the problem. I understand that the Government are going to contend, and the Minister of State may reply to this effect, that this problem can be overcome by using the hiring Clause. Clause 4 of the Bill makes provision for grants payable in respect of assets where the asset is to be hired to a manufacturer. The grant can be paid to the person who provides the plant for the manufacturer.

A hires to B, A gets the grant and the value of the grant is reflected in the hiring price paid by B. Even if this were right, and I will turn to it in a moment, it is totally unsatisfactory as a solution to the problem which I have been outlining. It involves groups of companies entering into what are fictitious transactions, bogus hirings at peppercorn rents, entering into complicated agreements in order to qualify for the provision of legislation which has been basically designed for something else.

It involves them in all sorts of unnecessary internal accounting in order to obtain the advantage of grants that would otherwise be unavailable simply because this pattern of legislation does not recognise the peculiar characteristics of groups of companies. It would be a condemnation that legislation should be passed and enforced and that large industrial enterprises, which have very much better things to do, should have to enter into this sort of transaction in order to obtain benefit.

However, I do not admit that this solution is even workable. There may be cases where it is, possibly in respect of a machine tool used for maintenance, which can be hired for a period long enough to qualify for the hiring advantage to one company for use in its qualifying industrial process, so that the company receives the benefit of the grant. But if one takes the case I mentioned earlier of a single factory site, with one service company servicing three or four different companies, also operated on the site, in different ownerships, with different proportions of ownerships, some owned by foreign shareholders and others by United Kingdom shareholders—this is not a hypothetical example, it is one known to me—then the hiring solution breaks down entirely.

It could not be operated in that way, particularly if the hiring solution is to be on the basis of the system outlined by the President of the Board of Trade when he dealt with the hiring Clause in Committee. He said that the Board was going to lay down three conditions for hiring. The first would be that the lease must be for a minimum period of three years after the commencement of the lease. One has only to mention this point to show that it is wholly impractical, in the case of, say, a piece of equipment used for maintaining plant, which is to be used by a group of companies. To say that it should somehow be hired out for three years to one member and in some way not be available for use to other members of the group for that period is an inappropriate solution. The President went on to lay down other conditions which were going to surround the hiring Clause in order to prevent abuse.

The Government must look at this again and the Amendment which I have moved offers a reasonable and practical solution. It says that where an asset is bought by one company, for use in a qualifying industrial process by another company of the same group or consortium, it will be deemed to be used by the company which has bought it and that the company which has bought it will qualify for the grant. I concede that a group is generously described in the definition Amendment as a company in which broadly, there is a 10 per cent. ownership. This figure can be justified in that it is the borderline between direct and portfolio investment for overseas investment. This is the line taken in Commonwealth countries and double taxation Conventions as the proportion which a British shareholder needs to have in a foreign company in order to qualify for the tax advantages which would come through direct investment.

The Clause similarly applies to a consortium of companies. Here again I have adopted the pattern which appeared in legislative form for the first time in last year's Finance Act, that of five or fewer companies owning 75 per cent. of the shares in one company, where no one of those five owners has less than 5 per cent. of the shares. This is a common pattern.

My Amendment would deal with the problem which I have outlined. It would be commonsense and it would be a simple, realistic and practical solution. It would be comprehensive and deal with a large number of the problems which will arise and I hope very much that the Government will accept it. I must go on to add that the drafting may be defective and that it may not be possible to accept the Amendment in its present form. The Government have another opportunity when the Bill goes to another place to do something about this, and they have yet another opportunity, if they wish to accept the burden of my case, to introduce their own Amendment to meet a case which the Minister of State recognised was "sound and reasonable" when it was put to him last time.

Photo of Mr Michael Alison Mr Michael Alison , Barkston Ash

I would like to follow the remarks of my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) and speak to Amendment No. 78 which aims to carry through the same principles of dealing with related companies which are service companies and attempts to do this by taking a particular case and weaving an Amendment round it. If the Minister of State agrees that the principles is good, he could re-draft it and include it in the Bill for a later stage.

I want to deal with the oil industry. I have no interest to declare other than that of the British economy and the situation that I want to speak about is that in which a service company is owned jointly by a consortium of three or four principal oil refining companies. The service company is engaged in the trans-shipping from tanker to harbour of crude oil and the pumping of it from storage stations, or tanks at the harbour point, through pipelines, or the jetty, to the refineries. The crude oil goes to the refineries owning the service company, which may be some distance inland and which are owned by independent companies. The service company, being an independent entity for tax purposes is not eligible for grants under the Bill.

But the crude oil is material incident to a qualifying industrial process and if the subsidiary was wholly owned by the principal then it would be eligible for grant. All we have attempted to do in the Amendment is to make it possible for the service company, which is described as a related company, to be treated in such a way that its expenses are held to be incurred by the principal companies and thereby qualifies for grant.

Objections have been raised to this in that on occasion the service company engaged in landing the oil and pumping it to or storing it in the refinery does a side deal. Oil is tapped off before it gets to the refinery and is, in a sense, sold as part of a retail distributive operation to a commercial firm not in the consortium. When this occurs, a difficulty arises because a grant has been given to the service company which is used not for a qualifying industrial process but in this side operation.

In this complicated and cumbersome Amendment we have tried to encompass this situation by making provision for an apportionment by the President of the Board of Trade to make an apportionment of such part of the subsidiary company's operation which might be held to be retailing or distributing directly on its own account and an apportionment of the grant which might be incurred by the principal companies. This makes allowance for the fact that not all the plant and equipment will be used wholly for a qualifying industrial process. I am afraid that this is a complicated and difficult subject to describe orally. I believe that the Minister of State understands the problem, namely, that it is desirable that these service companies should be jointly owned in many cases on a tripartite or quadripartite basis. It does no harm to anybody that a service company should be jointly owned by different refineries making use of its operations.

In view of the attempt which we have made to make an apportionment of the grant in respect of those parts of the subsidiary's activities which might be held to be non-qualifying industrial processes I hope that the Minister of State will respond to this constructive and reasonable request by the oil industry that it should be allowed to carry on in this way in order to facilitate the specialisation of certain kinds of operation related to their qualifying industrial activity.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

May I deal first with Amendment No. 9. It is true as the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) said, that in Committee we had a number of discussions about the problem of related and associated companies. At one point, we were confused—at least I was confused —because we were dealing at the same time with three different propositions concerning associated companies and they did not really get together. In Committee I gave an undertaking to consider very closely one of the related company problems. This problem arises when one company pays for an asset but another company, such as a subsidiary Company, uses the asset to carry on a qualifying process. We undertook to look at the problem again to see whether any alteration of the Bill was needed. After our examination our general conclusion is that no Amendment is necessary.

8.15 p.m.

It seems to us that when two companies are closely associated in the way referred to in these Amendments it will always be possible, or at least comparatively simple, for them to adjust their financial arrangements so that a grant can be properly claimed. The hon. Member for Wanstead and Woodford argued that we are asking companies to do something which they should not do. We think that the user company can purchase the asset in the first place and later obtain reimbursement from its associated company. Or the company which bought the asset might lease it—this is where the hon. Member starts quarrelling with it—to the associated user company on special terms.

The hon. Member says that we do not comprehend these things, that we do not understand how industry works or the problems which industry has to face. There may be some truth in this. Therefore, we have discussed various aspects of this question with representatives of industry since the Committee stage and we have put the possibilities which we envisaged before them. They agree with us that in practice there would be no difficulty in establishing a claim to grant in the cases which I have mentioned.

The hon. Member for Wanstead and Woodford said that we are probably asking industries to resort to devices to which it should not be invited to resort to get grants. I am sure that the hon. Gentleman will agree that industry will always make whatever financial arrangements will enable it to take full advantage of the tax system or of any other kind of assistance. It has been doing it in respect of the grants made under the Local Employment Act, 1960, and the standard grants and free depreciation provisions introduced in 1963. The representatives of industry to whom we have spoken see no real difficulty in adapting industry's needs to the system laid down in the Bill.

There is one further important point which I should make. With the sole exception of leased assets which are covered by special provisions, entitlement to grant under the Bill will always rest with the company which is to use the asset in its own business. This is an important safeguard against double payment. I do not know whether the hon. Gentleman has paid enough attention to this. Once we allow it for more than one possible claimant on an asset, we greatly increase the risks of abuse.

For these reasons, we do not think that there is any need to accept Amendment No. 9.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

The right hon. Gentleman refers to hiring as being one of the devices to which companies must resort to get the benefit of the grants. Is it intended in these circumstances to adhere to the three conditions which the President of the Board of Trade spelt out in Committee? If it is, it is wholly impracticable when the asset may be hired to several companies in a group at different times.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

I do not think that it will be. I am advised that the conditions of hiring would apply but that the associated firms can make these arrangements among themselves and come within the terms of the Bill.

The main effect of Amendment No. 87, which I agree is very complicated, would be to allow a related service company which is within a group to have its expenditure on equipment treated as if it were expenditure by a principal company or companies within the same group which are carrying on the qualifying processes under the Bill.

As we see it, the Amendment would introduce a new and complex provision into the Bill to make eligible certain expenditure by companies which are themselves, as the hon. Member has said, not carrying on qualifying processes; they are engaged in service activities of some kind. If the Amendment were accepted, the Board of Trade would require to attempt to establish, at the time when a claim was made, to what extent such a company would be carrying on its service activities on behalf of the other companies in the group and to what extent it would be doing it for outside companies.

I am not sure whether that is a practical proposition. It would certainly be difficult to enforce. Moreover, it would discriminate unfairly in favour of the larger organisations since the smaller firms would be obliged to make use of independent service companies which would themselves, under the terms of the Bill, not be able to get the financial assistance for which the hon. Member is asking.

We have discussed with representatives of industry the problem that arises from the experience of oil companies. It appeared to be generally accepted that it would always be possible for companies closely associated within a group consortium to organise their affairs in such a way as to take advantage of the grant system, just as they have done with previous tax arrangements. The Amendment would, however, bring within the scope of the scheme companies which are carrying on purely service activities, such as storage or packing, which would conflict with the declared intentions of the Bill. Therefore, I must ask the House to reject the Amendment.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

The Minister's reply was not in any way reassuring. He told us that the way to overcome the position with regard to Amendment No. 9 was a series of hire agreements.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

It was one of the ways around it. When my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) intervened to ask whether the Minister confirmed the original conditions mentioned in Committee, one of which was a minimum three-year period, the right hon. Gentleman said, "Yes". One does not require to be an industrialist to realise that this is nonsense. It is against all concepts of commonsense.

There is no point in having the service company to acquire machinery which will be required for one parent company for three years. If that is the type of machinery concerned, it is equally in the interests of the parent company to purchase it itself. The whole purpose of these wholly-owned service companies is surely to use machinery for which the parent companies individually do not have full-time use but which they can use full-time collectively. To tie this up on a three-year hire system is nonsense. It is not something that we can accept.

On alternative Amendment No. 87, put forward by my hon. Friend the Member for Barkston Ash (Mr. Alison), we were told that the matter would be one of great complexity and might include service companies specialising in packaging or storage. Why not? In Clause 1(3), we have been particularly told that if packaging or storage is incidental to the manufacturing process, it is included. Why this horror that because it is carried out by a separate company with specialised equipment, which is probably much more efficient at doing it, it might get a grant? This is the sort of nonsense into which this basic discrimination leads us.

Division No. 133.]AYES[8.28 p.m.
Alison, Michael (Barketon Ash)Beamish, Col. Sir TuftonBlack, Sir Cyril
Baker, W. H. K.Beesell, PeterBlakey, Peter
Batsford, BrlanBiffen, JohnBoyle, Rt. Hn. Sir Edward

The Government having got themselves into this state, it is up to them to produce a workable way in which to meet the problem. As was said in Standing Committee, it is clear that in many industries the concept of a highly specialised service company is growing in popularity because it is efficient.

We are constantly preaching about modernising industry, but all that the Government can think of is a couple of computers, which they regard as the be-all and end-all of modernisation. They produce legislation which will inhibit a trend in modernisation which has been adopted in other countries which lead us in productivity.

The right hon. Gentleman has not faced the arguments and I must, therefore, advise my hon. Friend to divide the House. First, however, I make one other comment. Over and over again on this Bill, on the Finance Bill and on everything else, we are told that there might be abuse. We are told that an electric typewriter could not be included because somebody might tuck it under his arm and take it away. I have no doubt whatever than an electric drill would be an allowable item of machinery if it was expensive enough for the minimum grant, but an electric drill is something that can be taken away with the greatest of ease. There are dozens of tools of that sort.

If we are to govern our legislation for industry always on the possibility that there might be abuse and that we must block every possible loophole, we will end up with such restrictive legislation and such constant wangling in the courts that we will defeat the whole object of the exercise for which we set out.

The object must be to get the grants to the places where they will do most good. If there is abuse, let us have whacking great swingeing penalties, but do not penalise all the honest industrialists in advance by tying things up so tightly that those who deserve grants do not get them.

Question put, That those words be there inserted in the Bill:—

The House divided: Ayes 100, Noes 154.

Brinton, Sir TaltonHooson, EmlynPounder, Rafton
Bromley -Davenport, Lt.Col.Sir WalterHunt, JohnPowell, Rt. Hn. J. Enoch
Brown Sir Edward (Bath)Hutchison, Michael ClarkPrior, J. M. L.
Bruce-Gardyne,J.Iremonger, T. L.Pym, Francis
Buchan-Smith,Alick(Angus,N—M)Jenkin, Patrick (Woodford)Ridley, Hn. Nicholas
Bullus, Sir EricJennings, J. C. (Burton)Ridsdale, Julian
Burden, F. A.Johnston, Russell (Inverness)Rossi, Hugh (Hornsey)
Campbell, GordonKaberry, Sir DonaldRussell, Sir Ronald
Chichester-Clark, R.Knight, Mrs. JillScott, Nicholas
Clegg, WalterLambton, ViscountShaw, Michael (Sc'b'gh — Whitby)
Cooke, RobertLangford-Holt, Sir JohnSinclair, Sir George
Corfield, F. V.Legge-Bourke, Sir HarrySmith, John
Craddock, Sir Berestord (Spelthorne)Loveys, W. H.Summers, Slr Spencer
Crowder, F. P.Lubbock, EricTaylor, Edward M. (G'gow, Cathcart)
Cunningham, Sir KnoxMackenzie,Alasdair(Ross—Crom'ty)Thatcher, Mrs. Margaret
Dalkeith, Earl ofMcMaster, StanleyTurton, Rt. Hn. R. H.
Dance, JamesMadden, Martinvan Straubenzee, W. R.
Davidson,James(Aberdeenshire,W.)Maginnis, John E.Vickers, Dame Joan
Dean, Paul (Somerset, N.)Mathew, RobertWainwright, Richard (Colne Valley)
Deedes, Rt. Hn. W. F. (Ashford)Maxwell-Hyslop, R. J.Ward, Dame Irene
Eden, Sir JohnMaydon, Lt.-Cmdr. S. L. C.Weatherill, Bernard
Eyre, ReginaldMills, Peter (Torrington)Whitelaw, William
Farr, JohnMills, Stratton (Belfast, N.)Wills, Sir Gerald (Bridgwater)
Fletcher-Cooke, CharlesMorgan, W. G. (Denbigh)Wilson, Geoffrey (Truro)
Fortescue, TimNabarro, Sir GeraldWood, Rt. Hn. Richard
Giles, Rear-Adm. MorganNoble, Rt. Hn. MichaelWylie, N. R.
Clover, Sir DouglasOnslow, CranleyYounger, Hn. George
Grant, AnthonyOsborn, John (Hallam)TELLERS FOR THE AYES:
Hall-Davis, A. G. F.Page, Graham (Crosby)Mr. David Mitchell and
Heseltine, MichaelPardoe, JohnMr. R. W. Elliott.
Hiley, JosephPeel, John
Holland, PhilipPink, R. Bonner
NOES
Alldritt, WalterFinch, HaroldMacdonald, A. H.
Archer, PeterFitch, Alan (Wigan)McKay, Mrs. Margaret
Armstrong, ErnestFletcher, Ted (Darlington)Mackintosh, John P.
Atkins, Ronald (Preston, N.)Floud, BernardMcNamara. J. Kevin
Atkinson, Norman (Tottenham)Foot, Sir Dingle (Ipswich)MacPherson, Malcolm
Bagier, Gordon A. T.Foot, Michael (Ebbw Vale)Mahon, Peter (Preston, S.)
Baxter, WilliamForrester, JohnManuel, Archie
Beaney, AlanFowler, GerryMapp, Charles
Bence, CyrilFraser, Rt. Hn. Tom (Hamilton)Mendelson, J. J.
Bennett, James (G'gow, Bridgeton)Freeson, ReginaldMilian, Bruce
Bishop, E. S.Gardner, A. J.Mitchell, R. C. (S'th'pton, Test)
Blackburn, F.Garrow, AlexMorgan, Elystan (Cardiganshire)
Blenkinsop, ArthurGordon Walker, Rt. Hn. P. C.Moyle, Roland
Boardman, H.Gray, Dr. Hugh (Yarmouth)Neal, Harold
Booth, AlbertGrey, Charles (Durham)Noel-Baker, Francis (Swindon)
Braddock, M a. E. M.Griffiths, David (Rother Valley)Norwood, Christopher
Bradley, Tom Brooks, EdwinGriffiths, Rt. Hn. James (Llanelly)Ogden, Eric
Brown, Hugh D. (G'gew, Provan)Hamilton, James (Bothwell)O'Malley, Brian
Brown,Bob(N'c'fie-upon-Tyne,W.)Hamilton, William (Fife, W.)Oswald, Thomas
Brown, R. W. (Shoreditch — F'bury)Hamling, WilliamPage, Derek (King's Lynn)
Buchan, NormanHannan, WilliamPannell, Rt. Hn. Charles
Buchanan, Richard (G'gow, Sp'burn)Harper, JosephPark, Trevor
Cant, R. B.Harrison, Walter (Wakefield)Pearson, Arthur (Pontypridd)
Carmichael, NeilHazell, BertPentland, Norman
Chapman, DonaldHenig, StanleyPerry, George H. (Nottingham, S.)
Coe, DenisHooey, FrankPrice, Thomas (Westhoughton)
Coleman, DonaldHowarth, Harry (Wellingborough)Price, William (Rugby)
Concannon, J. D.Howarth, Robert (Bol:On, E.)Pursey, Cmdr. Harry
Craddock, George (Bradford, S.)Howie, W.Rankin, John
Crawshaw, RichardHoy, JamesRedhead, Edward
Cullen, Mrs. AliceHughes, Emrys (Ayrshire, S.)Reynolds, G. W.
Darling, Rt. Hn. GeorgeHughes Roy (Newport)Roberts, Albert (Normanton)
Davidson, Arthur (Accrington)Hunter, AdamRoberts, Goronwy (Caernarvon)
Davies, Dr. Ernest (Stretford)Hynd, JohnRobertson, John (Paisley)
Davies, G. Elfed (Rhondda, E.)Irvine, A. J. (Edge Hill)Roebuck, Roy
Davies, S. O. (Merthyr)Jackson, Colin (B'h'se — Spenb'gh)Shaw, Arnold (Ilford, S.)
Deli, EdmundJohnson, James (K'ston-on-Hull, W.)Sheldon, Robert
Dempsey, JamesJones, Dan (Burnley)Silkin, S. C. (Dulwich)
Dewar, DonaldJones, J. Idwal (Wrexham)Silverman, Julius (Aston)
Dickens, JamesKenyon, CliffordSilverman, Sydney (Nelson)
Dobson, RayLawson, GeorgeSmall, William
Doig, PeterLeadbitter, TedSpriggs, Leslie
Dunn, James A.Ledger, RonSymonds. J. B.
Dunwoody, Mrs. Gwyneth (Exeter)Lestor, Miss JoanTaverne, Dick
Eadie, AlexLever, L. M. (Ardwick)Thomas, Iorwerth (Rhondda, W.)
Edwards, Rt. Hn. Ness (Caerphilly)Lewis, Ron (Carlisle)Tinn, James
Evans, loan L. (Birm'h'm,Yardley)Lomas, KennethUrwin, T. W.
Fernyhough, E.Lyons, Edward (Bradford, E.)Vartey, Eric G.
McBride, NeilWainwright, Edwin (Dearne Valley)
Walden, Brian (All Saints)Williams, Alan Lee (Hornchurch)TELLERS FOR THE NOES.
Walker, Heirold (Doncaster)Williams, W. T. (Warrington)Mr. Gourlay and
Watkins, David (Consett)Winterhottom, R. E.Mr. Charles R. Morris
Whitlock, William

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

I beg to move Amendment No. 10, in page 2, line 28, at the end to insert: (5) Machinery or plant provided for use by a person carrying on a business in Great Britain which consists substantially of the maintenance or repair of assets used in a qualifying industrial process by another person carrying on a business in Great Britain shall be deemed to be provided by the first mentioned such person for the purpose of carrying on a qualifying industrial process in the course of his business and the Board of Trade's power to make a grant to that person under this section shall apply accordingly. This Amendment deals with a related point to the one which we have just discussed, but it is different, and I hope that I can deal with it rather more shortly. It is aimed at what I might call the specialist maintenance firm, nothing to do with groups of companies, nothing to do with related companies, but an independent specialist maintenance firm performing a maintenance service for the benefit of firms carrying on qualifying industrial processes.

Here again is an example of an asset, a particular piece of plant used by the maintenance companies, which, if bought by the manufacturer and used in his business, would qualify under subsection (3.a), but if used by the independent maintenance company, because it was not carrying on a qualifying industrial process, would not qualify for grant.

We moved a similar Amendment in Committee. It went very much wider and covered not only maintenance and repair, but also packing and storing. The Minister of State dismissed it, and said that to go as wide as is suggested here would bring in wholesaling storage activities not really associated with manufacture. The Amendment would go extremely wide."—[OFFICIAL REPORT, Standing Committee D, 14th June, 1966; c. 148–49.] We recognise that it is the Government's intention to exclude these people from grant, and we recognise that it might, therefore, be difficult to devise an Amendment which would bring in a man who performed storage and packing activities wholly for qualifying manufactures, and to exclude him where he did it for ordinary wholesaling activities. But when one comes to maintenance and repair, one is in a different case. In defining the chaps who will get grants, and the plant will qualify for grant, the Amendment refers to the maintenance of assets used in a qualifying industrial process, which means that we have overcome the difficulty to which the Minister of State drew our attention on that occasion. The Amendment is specifically tied to what is described as the maintenance or repair of assets used in a qualifying industrial process. The economic case for the Amendment is that there is a developing pattern, which has gone on for many years, but is continuing hard, of specialisation in industry. In particular, in American industry there is a growing trend to specialisation in the ancillary services performed for manufacturing industry. Obviously there are enormous advantages to this, particularly in productivity, and in saving labour, through the much greater utilisation that one can get than if the manufacturing firm buys a piece of equipment which it may use for only part of the time.

It is completely illogical to provide that because a firm sets itself up to perform—much more efficiently than has hitherto been done—a maintenance and repair service for manufacturers it should be denied a grant, whereas if the manufacturers had bought the plant themselves they would get the grant.

We realise that the disallowance which now exists in the Bill stems from the Government's determination to discriminate against hairdressers, photographers, travel agents and the rest of the people whom they class as members of service industries, but what is the Minister of State or the President of the Board of Trade going to tell a firm which invests heavily in maintenance machinery which is used solely for maintaining heavy plant in manufacturing industry? How will he tell it that it will be classed as a service industry and will not qualify for a grant? That is the effect of the Bill. What explanation will he give?

Will he say, "If your customers buy your machinery and use it much less efficiently than you do, and perhaps have to use more labour to operate it spasmodically, and even though they will not be able to use it all the time, they will get the grant, but because you operate it efficiently but do not happen to be carrying on a qualifying industrial process within the terms of the Clause, you will not get the grant"? How will he justify this astonishing discrimination?

It is no answer—and this was suggested as a result of the confusion that we got into at one point—to say that the matter can be dealt with by using the "related company" solution, such as it is. That is no answer in this case, because we are dealing with a completely independent specialist maintenance company.

In Committee the President of the Board of Trade said—and I commend this to the right hon. Gentleman when he faces the maintenance director— It is absolutely necessary in the national interest."—[OFFICIAL REPORT, Standing Committee D, 15th June, 1966; c. 154.] I should like to see the look on the man's face when the President of the Board of Trade says, "It is absolutely necessary in the national interest that you should not get a grant for the maintenance of equipment in respect of which your customer will receive a grant if he uses it himself." How silly can one get?

Yet it is at this point that the Government have chosen to draw the line. And then they criticise us for being highly critical of this legislation. They must be sensible here. They have to draw a line somewhere, but they have drawn it in the wrong place. They must bring in the maintenance contractors, otherwise they will deserve the condemnation and mockery which will pour down on their head.

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough and Whitby

I want to intervene briefly to give a practical example of the case so ably presented by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin). It is the example of the textile engineers who often specialise in two facets. First, they deal in the repair of textile machinery. They send their staff round the various mills all over the country and to Ireland repairing this machinery, and often bring machinery back into their works and carry out a complete overhaul. But they also go round specialising in buying up textile machinery, stripping it down and reconditioning it from the word "go" and then selling it as reconditioned equipment.

For this work they need many tools and much plant. It is in the national interest that such firms should have grants in just the same way as if they were manufacturing new machines. I give this to the right hon. Gentleman as a practical example of the situation. Such firms should have the grant, as they would have if they manufactured new plant and machinery.

8.45 p.m.

Photo of Mr Michael Alison Mr Michael Alison , Barkston Ash

I want to add my mite of criticism to the distinction which has been drawn in this case. This provision represents a fundamental flaw in Government thinking, and their failure to understand what enterprise and productivity consists of in the economy. This is an attack on enterprise, on the sort of activities in industry by a bright boy specialising in service activities and the bright idea of management to abolish inefficient service branches in their undertakings. That is the sort of enterprise which leads to increased productivity, both in the specialised firm and in the manufacturing undertaking which has jettisoned an inefficient maintenance department.

The Government have got into their heads the mistaken idea that productivity can be increased simply by adding more physical assets to an undertaking, as though one could increase the whole to a greater dimension than the totality of the individual parts. One cannot. If there are more physical assets for a particular undertaking or a particular operation, there will be financial loss through friction or evaporation. The only way in which to increase productivity and the sum of the individual parts is by management, the "mix" and the way the asset is arranged.

It is against this sort of enterprise that the Government are driving. In their policy they think that by throwing in a few more spanners and tools, productivity will be increased. They neglect the principle of management and the arrangement of the "mix". This is how they are discriminating. This is illogical. They will not get higher productivity or an expanding industry in this way. The way to do so is only through enterprise. It is precisely this sort of managerial enterprise which they are specifically and deliberately discriminating against by this sort of irresponsible and illogical provision.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

I am astonished by the argument of the hon. Member for Barkston Ash (Mr. Alison), who apparently thinks that management alone, with no machinery or equipment, can be enterprising and do all kinds of things. The Bill is concerned to make sure that enterprising management has the right kind of tools. We are prepared to do all we can to make sure that industrial management is efficient, up to date and enterprising. Much of it is not at the moment, as I am sure the hon. Member would agree. A great deal needs to be done, but what the Bill is concerned about is not industrial management in that sense, but with whether we can provide industrial management with the right tools to do the job. The resources of the country are limited and we have said—I repeat it for, I should think, the 365th time —that we are concentrating on the tools which are required for the development of manufacturing industry.

We have, therefore, laid down the discrimination which appears in the Bill. It may be crude and have anomalies here and there on the margin. I would not dispute this. Nor would I dispute the case which has been put forward that there are all sorts of activities which may be carried on by specialist firms more efficiently, perhaps, than the qualifying firms themselves. But this argument cannot be confined to repair and maintenance. in spite of the discussion which we had in Committee and which got somewhat confused on this point.

Obviously, it could cover transport, market and distribution and all kinds of specialist firms could be set un. What we are concerned with here is the extent to which we give Government assistance to the development of these activities. We are discriminating: we have admitted that that is the purpose of the Bill.

Of course, if we had aimed at the utmost consistency in this matter, we should have excluded all those activities even if carried on in association with the manufacturing processes which qualified for grant. But this, of course, would have been too restrictive. We should have had more anomalies if we had done it that way. There are, in any case, repair, packing, maintenance activities which are quite inseparable from the other activities in a factory. So long as they are carried on in the same business, it is a reasonably simple matter to identify them and to be sure that they are being entirely undertaken in relation to a qualifying process.

I must tell the hon. Member for Wan-stead and Woodford (Mr. Patrick Jenkin) that whatever he may think about our views on industry, we have discussed this matter, as we promised in Committee, with representatives of industry, and it seemed to us to be generally agreed in those discussions that it would be very hard indeed to identify a repair and maintenance business as one which was concerned only with repairing equipment—and equipment in qualifying processes. We feel that if the Amendment is accepted the repair or maintenance equipment is likely to be just as capable of being used to repair or maintain non-qualifying items. In effect, the Amendment would turn the repair or maintenance of production plant into a qualifying process in its own right.

Since we have decided that services generally are excluded, we are not prepared to make an exception for repair and maintenance services when they arc carried on quite independently. The hypothetical examples which have been given to us this evening seem to me to have no basis in fact. I make an exception of the example of textiles. In any case, we have discussed these questions with representatives of industry, and I am sure that we are on firm ground in rejecting the Amendment.

Photo of Mr Alfred Hall-Davis Mr Alfred Hall-Davis , Morecambe and Lonsdale

I must add a word briefly to the debate, and I do so more in anger than in sorrow, having heard the right hon. Gentleman's reply. His rejection of the Amendment is part of a much wider and extremely disturbing pattern of Government policy. One cannot just take this individual Amendment or even the right hon. Gentleman's attitude and Government policy towards the Bill in isolation. This is part of a much wider pattern.

Industry will shortly be engaged in a game of musical chairs in order to adapt itself to the discriminatory Government polices. I remember rather dimly—and I cannot describe it very well—a game which we played when small children. We stood in a circle, somebody called out two names and two small children flew across the room trying to fit themselves into a new pattern. This is what will happen as a result of some of the anomalies which the right hon. Gentleman admits to exist and as a result of S.E.T.

He chided my hon. Friend the Member for Barkston Ash (Mr. Alison) on some of his comments about management. I am sure that what enterprising management will be doing in the months ahead is trying to recast the organisational strut, ture of the business in order that it shall not be arbitrarily penalised by the discrimination of ill-thought-out Government legislation. Its position will be distorted and its attention will be diverted. I do not believe that this will add to the efficiency of industry. One can stand a little of it, but when one has a great deal of it the economy must be the sufferer. I am therefore sad and angry that this very logical Amendment has not been accepted, even in spirit, by the Government.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

I do not want to delay the House, but after a very co-operative Committee stage which we managed to get through in a period short of the maximum time allowed, we are entitled to expect a little give-and-take from the

Division No. 134.]AYES[8.57 p.m.
Alison, Michael (Barkston Ash)Dean, Paul (Somerset, N.)Loveys, W. H.
Baker, W. H. K.Deedes, Rt. Hn. W. F. (Ashford)Lubbock, Eric
Batsford, BrianEden, Sir JohnMackenzie, Alasdair(Ross—Crom'ty)
Beamish, Col. Sir TuftonEyre, ReginaldMcMaster, Stanley
Bessell, PeterFarr, JohnMaddan, Martin
Biffen, JohnFletcher-Cooke, CharlesMaginnis, John E.
Black, Sir CyrilFortescue, TimMathew, Robert
Blaker, PeterGiles, Rear-Adm. MorganMaxwell-Hyslop, R. J.
Boyle, Rt. Hn. Sir EdwardGlover, Sir DouglasMaydon, Lt.-Cmdr. S. L. C.
Brinton, Sir TattonGrant, AnthonyMills, Peter (Torrington)
Brown, Sir Edward (Bath)Grant-Ferris, R.Mills, Stratton (Belfast, N.)
Bruce-Gardyne, J.Hall-Davis, A. G. F.Morgan, W. C. (Denbigh)
Buchanan-Smith,Alick(Angus,N—M)Heseltine, MichaelNabarro, Sir Gerald
Bullus, Sir EricHiley, JosephNoble, Rt. Hn. Michael
Burden, F. A.Holland, PhilipOnslow, Cranley
Campbell, CordonHooson, EmlynOsborn, John (Hallam)
Chichester-Clark, R.Hunt, JohnPage, Graham (Crosby)
Clegg, WalterHutchison, Michael ClarkPardoe, John
Cooke, RobertIremonger, T. L.Peel, John
Cooper-Key, Sir NeillJenkin, Patrick (Woodford)Pink, R. Bonner
Corfield, F. V.Jennings, J. C. (Burton)Pounder, Rafton
Craddock, Sir Beresford (Spelthorne)Johnston, Russell (Inverness)Powell, Rt. Hn. J. Enoch
Crowder, F. P.Kaberry, Sir DonaldPrior, J. M. L.
Cunningham, Sir KnoxKnight, Mrs. JillPym, Francis
Dalkeith, Earl ofLambton, ViscountRidley, Hn. Nicholas
Dance, JamesLangford-Holt, Sir JohnRossi, Hugh (Horneey)
Davidson,Jarnes(Aberdeensbire, WLegge-Bourke, Sir HarryRussell, Sir Ronald

Government. Yet when we win arguments hands down and there is no reply whatever. The Minister said that the purpose of the Bill was that management should have the right tools, but in many cases the right tools will be tools in specialist hands. They will not be the right tools if they are in the hands of people who have not the work to keep them fully utilised.

It is absolute nonsense to say that this Amendment would make repair and maintenance a qualifying practice. There has never been a rational reason for making this distinction. The Minister said that if these operations were within the same firm and the same ownership and management they would be very simply identified. The Government have created for themselves an administrative problem which is difficult. They are deciding that problem purely on administrative convenience and the simplest way of identifying the operation.

The Prime Minister may come forward tomorrow with pleas of ill-fortune and inheritance of a situation in the economy, but the Government will have themselves to blame when they treat these matters in this cavalier fashion. I therefore advise my hon. Friends to vote against the Government.

Question put, That those words be there inserted in the Bill:—

The House divided: Ayes 101. Noes 157.

Scott, NicholasTurton, Rt. Hn. R. H.Wilson, Geoffrey (Truro)
Shaw, Michael (Sc'b'gh — Whitby)van Straubenzee, W. R.Wood, Rt. Hn. Richard
Sinclair, Sir GeorgeVickers, Dame JoanWylie, N. R.
Smith, JohnWainwright, Richard (Colne Valley)Younger, Hn. George
Summers, Sir SpencerWard, Dame IreneTELLERS FOR THE AYES:
Taylor, Edward M. (G'gow, Cathcart)Weatherill, BernardMr. David Mitchell and
Thatcher, Mrs. MargaretWhitelaw, WilliamMr. R. W. Elliott.
Thorpe, JeremyWills, Sir Gerald (Bridgwater)
NOES
Alldritt, WalterForrester, JohnManuel, Archie
Archer, PeterFowler, GerryMapp, Charles
Armstrong, ErnestFraser, Rt. Hn. Tom (Hamilton)Mendelson, J. J.
Atkins, Ronald (Preston, N.)Freeson, ReginaldMilian, Bruce
Atkinson, Norman (Tottenham)Gardner, A. J.Mitchell, R. C. (S'th'pton, Test)
Bagier, Gordon A. T.Garrow, AlexMorgan, Elystan (Cardiganshire)
Baxter, WilliamGordon Walker, Rt. Hn. P. C.Morris, Charles R. (Openshaw)
Beaney, AlanGourley, HarryMoyle, Roland
Bence, CyrilGray, Dr. Hugh (Yarmouth)Neal, Harold
Bennett, James (G'gow, Bridgeton)Grey, Charles (Durham)Noel-Baker, Francis (Swindon)
Bishop, E. S.Griffiths, David (Rother Valley)Norwood, Christopher
Blackburn, F.Griffiths, Rt. Hn. James (Lianelly)Ogden, Eric
Blenkinsop, ArthurHamilton, James (Bothwell)O'Malley, Brian
Boardman, H.Hamilton, William (Fife, W.)Oswald, Thomas
Booth, AlbertHamling, WilliamPage, Derek (King's Lynn)
Braddock, Mrs. E. M.Hannan, WilliamPannell, Rt. Hn. Charles
Bradley, TomHarper, JosephPark, Trevor
Brooks, EdwinHarrison, Walter (Wakefield)Pearson, Arthur (Pontypridd)
Brown, Hugh D. (C'gow, Proven)Hazell, BertPentland, Norman
Brown,Bob(N'c'tle-upon-Tyne,W)Henig, StanleyPerry, George H. (Nottingham, S.)
Brown, R. W. (Shoreditch — F'bury)Hooley, FrankPrice, Thomas (Westhoughton)
Buchan, NormanHowarth, Harry (Wellingborough)Price, William (Rugby)
Buchanan, Richard (G'gow, Sp'burn)Howarth, Robert (Bolton, E.)Pursey, Cmdr. Harry
Cant, R. B.Howie, W.Rankin, John
Carmichael, NeilHoy, JamesRedhead, Edward
Chapman, DonaldHughes, Emrys (Ayrshire, S.)Reynolds, G. W.
Coe, DenisHughes, Hector (Aberdeen, N.)Roberts, Albert (Normanton)
Coleman, DonaldHughes, Roy (Newport)Roberts, Goronwy (Caernarvon)
Concannon, J. D.Hunter, AdamRobertson, John (Paisley)
Craddock, George (Bradford, S.)Hynd, JohnRoebuck, Roy
Crawshaw, RichardIrvine, A. J. (Edge Hill)Shaw, Arnold (Ilford, S.)
Cullen, Mrs. AliceJackson, Colin (B'h'se — Spenb'gh)Sheldon, Robert
Dalyell, TamJay, Rt. Hn. DouglasSilkin, S. C. (Dulwich)
Darling, Rt. Hn. GeorgeJohnson, James (K'ston-on-Hull, W.)Silverman, Julius (Aston)
Davidson, Arthur (Accrington)Jones, Dan (Burnley)Silverman, Sydney (Nelson)
Davies, Dr. Ernest (Stretford)Jones, J. Idwal (Wrexham)Small, William
Davies, G. Elfed (Rhondda, E.)Kenyon, CliffordSpriggs, Leslie
Davies, Ifor (Gower)Lawson, GeorgeSymonds, J. B.
Davies, S. O. (Merthyr)Leadbitter, TedThomas, lorwerth (Rhondda, W.)
Dell, EdmundLedger, RonTinn, James
Dempsey, JamesLestor, Miss JoanUrwin, T. W.
Dewar, DonaldLever, L. M. (Ardwick)Varley, Eric G.
Dickens, JamesLewis, Ron (Carlisle)Wainwright, Edwin (Deane Valley)
Dobson, RayLomas, KennethWalden, Brian (All Saints)
Doig, PeterLyons, Edward (Bradford, E.)Walker, Harold (Doncaster)
Dunn, James A.McBride, NeilWatkins, David (Consett)
Dunwoody, Mrs. Gwyneth (Exeter)Macdonald, A. H.Williams, Alan Lee (Homchurch)
Eadie, AlexMcGuire, MichaelWilliams, W. T. (Warrington)
Edwards, Rt. Hn. Ness (Caerphilly)McKay, Mrs. MargaretWinterbottom, R. E.
Fernyhough, E.Mackintosh, John P.TELLERS FOR THE NOES:
Finch, HaroldMcNamara, J. KevinMr. loan L. Evans and
Fletcher, Ted (Darlington)MacPherson, MalcolmMr. Whitlock.
Floud, BernardMahon, Peter (Preston, S.)
Foot, Michael (Ebbw Vale)

Mr. Jay: I beg to move Amendment No. 11, in page 2, line 33, at the end to insert: (5) Machinery or plant provided by a person for protecting against fire or other risks any premises, or property in any premises, used by him 'for carrying on any process for or incidental to any of the purposes mentioned in subsection (2) of this section, or for carrying on such research as is mentioned in subsection (1)(b) of this section, shall be treated for the purposes of this section as provided by him for use for carrying on a process incidental to that purpose or, as the case may be, for carrying on such research.

The purpose of the Amendment is to ensure that grants should be payable on fire, safety and other equipment required to protect premises, plant and machinery used for carrying on industrial processes or research activities. Various hon. Members very reasonably expressed a desire in Committee that various kinds of ancillary equipment used at industrial premises should be included as eligible for grant.

The Bill already provides without any doubt that items used in relation to a qualifying industrial process, such as effluent treatment, ventilation and clean air plant and heating and lighting equipment are already covered. We have ascertained, however—and this was not our intention—that fire fighting equipment would not have been covered by the Bill as originally drafted because it cannot be said, in the view of out legal advisers, to be used in any sense for a qualifying industrial process. Therefore, since it is our intention and that of every right hon. and hon. Gentleman that firefighting and safety equipment should be covered, we have introduced the Amendment to ensure that it is.

The Amendment will secure that all items such as fire sprinkler equipment, burglar alarm systems, fire engines and so on used in factory premises in association with a qualifying process are covered. I think that that would be the intention of the House.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

We are delighted that the President of the Board of Trade has seen just a little light at the end of the tunnel, although it is precious little. I refer him to column 86 of the Committee stage report of 26th May, when we were assured that these things were in. This takes me back to what I said a little earlier when the right hon. Gentleman was not present. Our confidence in the legal advice that he receives has been a little undermined. This has prolonged the proceedings a little, in that we have had to put down Amendments to find out if the advice is sound. The Minister of State said: I suppose that it would cover ambulances as well."—[OFFICIAL REPORT, Standing Committee D, 26th May, 1966; c. 86.] An ambulance is, in this context, closely related to a fire engine. If one has a fire and there are casualties, the ambulance is as essential as the fire engine. I hope that the President of the Board of Trade will take further legal advice—there are some very good people in the Temple if he gives them a fee—to find out whether this is in and to ensure that it is, because I am sure that he believes that it should be.

However, we are very grateful. We have made a little progress, and I hope that this is a precedent for a little more give rather than take in the remainder of the proceedings.

Photo of Mr Michael Alison Mr Michael Alison , Barkston Ash

Has the President of the Board of Trade considered whether this provision might be extended in respect of a particular contracting firm —I agree that it is a service undertaking —namely, the Securicor operators who are now playing an increasingly important part in providing the sort of protection against burglary and other hazards for companies engaged in qualifying manufacturing processes which has proved necessary because of the current inadequacy of police supervision at night, or the absence of police supervision which has proved the inadequacy of many of the qualifying industrial assets that might be installed by the company itself. Safes are notoriously easy to crack once one gets into premises, and burglar alarms are easily disconnected.

Clearly, Securicor has come to stay and is developing a systematic, elaborate and, on the whole, effective way of providing safeguards for commercial and manufacturing undertakings which should be encouraged. Can the President of the Board of Trade see any way to extend the eligibility for grant to such an undertaking?

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

The hon. Gentleman has raised a relevant point but, as he will understand, having following the Bill carefully, what we have decided to do is to extend the eligibility of manufacturing assets to certain associated assets if they are used by the manufacturing firm in the manufacturing establishment. If we go beyond that, as we found out on repairing, storage and many other things, to include, as it were, the professional whole-time provider of services, we take steps which virtually force us in the end to include services as well as manufacturing within the ambit of the Bill.

The hon. Gentleman's suggestion would carry us straight into that difficulty. Therefore, although I hope that we have come a considerable way to meet the House on this Amendment, it is not possible to go further.

Amendment agreed to.

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

The next Amendment selected is No. 49. I draw the attention of the House to a misprint in the opening words. The fifth word should be "discretion" and not direction".

Mr. Noble: I beg to move Amendment No. 49, in page 2, line 39, at the end to insert: Provided that the Board's discretion shall include power from time to time to determine a minimum value of any single asset below which no grant shall be payable unless the Board are satisfied that it is reasonable to make a grant in respect of a number of such assets the aggregate value of which exceeds 4 times the said minimum value. I am grateful to you, Mr. Deputy Speaker, for drawing our attention to the misprint. I feared that I should have to apologise for it. I was not certain whether the cause was rather bad handwriting by one of my hon. Friends or whether it was a feeling somewhere in the Table Office, perhaps, that the situation was so developing that discretion was no longer the better part of valour and direction would have to take over.

This is a comparatively minor and probing Amendment. In Committee, it was clear that there was difficulty in considering what help should be given to those industries which, because of their nature, used individual assets of comparatively small value but used them in large numbers so that the total value was quite considerable.

Seeing one or two of my hon. Friends, if I may so call them, that is, hon. Members from Scotland on the benches opposite, as well as my hon. Friends on this side, I give the obvious example of the whisky barrel. A firm may need a great number of whisky barrels as part of its productive system. Each barrel may be of comparatively small value but in aggregate they have substantial value from the point of view of its investment programme. Other examples such as gas or oxygen cylinders come to mind.

In Committee, it was clear that Ministers in charge of the Bill realised that this was an important problem but could not at that stage see how they could get round it without causing difficulty to other sections. We have, therefore, put down this Amendment once again in the hope that, even if the wording is not perfect from the Department's point of view, the right hon. Gentleman will he able to do something to help firms which find themselves in that kind of situation.

I have said enough to introduce the Amendment. I hope that the right hon. Gentleman will now tell us that he accepts at least the substance of it.

9.15 p.m.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I agree that the scheme we are introducing raises the question of where the minimum limit should lie. All the way through we have made it clear that we do not intend to pay grants on small tools and small, short-lived items of that kind. We had considerable discussion with representatives of industry about this and decided to exercise the power in the Bill to set a low limit and exercise it in such a way that the figure was placed at what we consider to be the very low level of £25.

Having done that, we do not think that, for the sake of efficiency of administration and the convenience and, indeed, intelligibility to industry generally, it would be wise to go below that figure. I am not absolutely clear what the whisky barrel problem, referred to by the right hon. Member for Argyll (Mr. Noble), was. He is probably more of a technical expert on that than I.

In cases where individual items of plant or equipment were actually linked together to the satisfaction of the Board of Trade within a total figure which came to over £25, it could be taken into account. But where an individual item is concerned and goes below that level it would not be our intention to cover it. Although I could not meet the Opposition by accepting the Amendment by setting the limit quite so low as they wish, we have gone a good long way to meet the substance of what they want.

Photo of Mr Alfred Hall-Davis Mr Alfred Hall-Davis , Morecambe and Lonsdale

Do I understand that the right hon. Gentleman discussed this with industry and found that the figure of £25—this is the first time I have heard it mentioned—was acceptable? The immediate illustration which comes to mind is similar to the one posed by my right hon. Friend the Member for Argyll (Mr. Noble). It is one in which I have an interest—the question of beer casks. The figure of £25 is one which certain types of beer casks go alongside whereas other types go below. Hundreds are ordered for smaller firms and thousands for the larger. It seems strange that, if one conveys liquid in tanks, one gets the grant but if it is in casks one does not. I am sure that this could apply to other illustrations.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

Perhaps I may reply by leave of the House. It is true, as the hon. Gentleman points out, that if one draws a line of this kind some items come on one side and other items are on the other. We had considerable discussion with the C.B.I. and representatives of industry and there was a wish to put the minimum limit low. But we did not wish to put it so low as to impede administration of the scheme. Having taken into account the items which seemed likely to be included, our view was that this was about the right limit. That is still my opinion.

Amendment negatived.

Clause 2.—(COMPUTERS.)

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I beg to move, Amendment No. 14, in page 3, line 15, at end to insert: provided solely or primarily .

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

I suggest that the House might like to consider at the same time the two following Amendments, No. 15 and No. 16, also standing in the name of the President of the Board of Trade.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

That would be convenient, Mr. Deputy Speaker. These Amendments meet a point raised by hon. Members opposite during the Committee stage and this is another example of how valuable our Committee stage was in improving the Bill. It was originally provided that a computer, if it was to qualify for the 40 per cent. grant in development areas, had to be, as the phrase goes, "on line", or wholly integrated with the plant in question or, alternatively, if it was used for research purposes, had to be solely so used.

It was argued, however, that there might be some computers installed in manufacturing units in a development area which, although predominantly used for research purposes, nevertheless occasionally might be used for other purposes. That seemed to us to be a valid argument. I do not think that we want to limit too rigidly the 40 per cent. grant in development areas. It is, therefore, proposed that the words should not be "provided solely", but should be "provided solely or primarily" for research purposes. I think that this meets the point put forward in Committee, and I hope that hon. Members will agree to the Amendment.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

It is interesting to hear the President of the Board of Trade recognise openly the value of the Committee stage of this Bill in putting forward considerations which have resulted in the Government's tabling Amendments. It is only a pity that he was not here last night to put those arguments to his right hon. Friend about the Selective Employment Payments Bill, because we shall be deprived of adequate discussion of that Bill, with the result that the anomalies and difficulties will go through.

However, we recognise that the right hon. Gentleman has met us on this item and we are grateful. We hope that this is a foretaste of more good things to come out of the debate on which we are shortly to embark.

Amendment agreed to.

Further Amendments made: In page 3, line 16, leave out "provided solely or primarily".

In page 3, line 20, leave out "provided solely".—[Mr. Jay.]

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

I beg to move Amendment No. 17, in page 3, line 28, to leave out "controlling, or".

This is a brief probing Amendment and is concerned with the doubt which we raised in Committee in connection with computers which are, as the phrase is, "on line". As drawn, the Bill requires that to qualify for the higher rate of grant in a development area, the "on line" computer should be used for controlling or recording or analysing data as to the operation of the machinery and be linked to the machinery by the automatic transmission of signals. If it is to be applied strictly, the wording implies that the computer should not only be , fed by the reading of signals from the machinery or plant, but also itself send signals to the plant to control its operation.

I said in Committee that this was the ultimate form of the on-line computer, and that in industries now developing the use of on-line computers, it was likely to be a good many years before there was reached the stage of what is called "closing the loop", which is making sure that there is a complete circuit between the plant operating, the computer analysing and recording and controlling the plant being operated. There is an interim stage when the computer is used merely to record and analyse the data and then to punch out on tape or print the results, the plant being operated as at present manually.

If it is intended that the higher rate of grant should be confined to the computer where the loop is closed from the outset, this provision will be of very limited application. There are some industries, notably the steel industry, which have been operating on this basis for some time, but in other industries where the problems are much more complex—and I instance the industry which I know best, the chemical industry—it is likely to be some time before one reaches the stage of being able to put a computer on line and close the loop forthwith.

I would be grateful if the President of the Board of Trade could confirm what understood from the Minister of State in Committee—that there will be some latitude n this and that if the computer is clearly designed to operate with the plant, as the plant's brain, as it were, even if it is not to be used to control the operation of the plant at the outset, it will nevertheless qualify for the higher rate of grant in development areas.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I think that I can reassure the non. Gentleman on this issue. I am advised that provided there is a link between the computer and the plant, even only a first-stage link, transmitting data from the machine to the computer in the open loop system, as the hon. Gentleman called it, grants at 40 per cent. will be available where the other conditions affecting development area expenditure are met.

In particular the hon. Gentleman has asked about the treatment of the open loop systems, where the computer records and analyses and processes the data as to the operation of the plant with which it is integrated. I am advised that in such a case a computer is not used to feed back and control the operation of the plant, which may be done manually. I think that:his is what the hon. Gentleman had in mind and I can assure him about this.

There must be some link between the computer and the plant for the automatic transmission of the signals, as I think they are called, which may be of various kinds, electrical, mechanical or radio. I assume that in a case which the hon. Gentleman has in mind there is such a link so that, without any human intervention information is transmitted from the plant to the computer, even though it is not transmitted in this way in the reverse direction from the computer to the plant. I do not want to make the argument more complicated and I hope that the hon. Gentleman will agree that in these cases the transmission will satisfy the test of integration, and therefore, if the other conditions are fulfilled there will be eligibility to grants at the 40 per cent, rate applicable to development area expenditure. We have met his main point, although I do not pretend that there may not be some technicalities which we have not fully covered.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

With the leave of the House, may I congratulate the President on his astonishing grasp of what is a highly technical matter. He has entirely met the point and I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 3.—(HOVER VEHICLES.)

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I beg to move Amendment No. 19, in page 3, line 34, leave out "wholly or partly" and insert "whether or not".

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

With this we can discuss Amendment No. 18, in page 3, line 34, leave out from "use" to "for" in line 35.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

The purpose of these two Amendments is again to meet the point made in Committee relating to hovercraft and hover vehicles operating overseas. As the Bill was introduced, a hovercraft was eligible for grant only if it was both operated by a company resident in the United Kingdom, and if the hovercraft was operating in the United Kingdom.

It was represented to us that there might be cases, as with ships, as they are treated under the Bill, where the company was resident in the United Kingdom but the hovercraft might be operating under its control between two areas abroad. We have come to the conclusion that it would be right to treat hovercraft in the same way as we are treating normal ocean-going ships, provided that the hovercraft is operated by a business resident in the United Kingdom. If that were not so the earnings of the hovercraft would not accrue in terms of foreign exchange to the United Kingdom, and there would be no point in the British Exchequer paying out investment grants for this purpose. Provided that this condition is met, it seems that hovercraft should be treated in the same way as ships and that is the purpose of this Amendment.

Photo of Mr Michael Alison Mr Michael Alison , Barkston Ash

May I acknowledge gratefully the little bouquet which the President of the Board of Trade has given us for an Amendment which we moved in Committee. We hope that this will be the instrument which will enable the President of the Board of Trade to visit Moscow in a hovercraft before many months have passed and possibly to show Mr. Kosygin round a hovercraft in Moscow instead of a bus. I hope that if this happens it will be interpreted in Moscow as a sign of the wisdom and insight of the Conservative Party rather than of the Government.

Amendtnent agreed to.

Clause 4.—(HIRED ASSETS.)

9.30 p.m.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

I beg to move Amendment No. 68, in page 4, line 15, after "only" to insert: (a) in the case of any such asset as aforesaid.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

It will be convenient to discuss at the same time Amendment No. 21, in page 4, line 23, at end insert: (3) Notwithstanding the provisions of subsection (2) of this section, the Board may make to any person carrying on the business in Great Britain of hiring contractors' plant, a grant towards approved capital expenditure incurred by that person in providing for the purposes of the business a new asset such as is mentioned in subsection (1) of this section.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

The purpose of these Amendments is to provide scope for the Board to make suitable arrangements for paying grants on construction equipment bought by contractors' plant firms for the purpose of hiring for relatively short periods.

The House will be aware that when the Bill was drafted the construction industry was not to be eligible for grants. The decision to bring in the industry was announced in the Budget speech. Therefore, we have not had as much time to discuss the scheme of grants with representatives of the construction industry as we have had with the representatives of other industries. We were, however, aware of the importance in this industry of plant hiring under which equipment is hired for periods which may vary from a week to a year or more.

On Second Reading, my hon. Friend the Minister of State, Department of Economic Affairs indicated that we intended to discusss with the industry what could be done to cover this form of equipment. We invited representatives of the construction industry to put proposals to us to deal with short-term leasing, and it has done so. We have not been able to study all the implications or to have full discussions with them, but it quickly became apparent that the provisions of Clause 4, particularly subsection (2), were inappropriate to deal with this kind of plant.

There is nothing in the Clause to prevent the Board of Trade from giving grants on leased assets merely because they are hired for short periods. We intend, as we have announced, to make grants on computers which are hired out for short periods. But there is in the case of construction plant the special problem that some of the hirings of plants will be to people not eligible, such as local authorities.

If it were possible to do so, we should have wished to make it a condition of grant that the plant hire firm must undertake not to hire out plant on which grant had been given to ineligible people. But we have been convinced that this is not practicable. It would involve the firms in considerable extra costs and might lead to a fall in the efficiency of the utilisation of the plant.

I stress that the extent to which the plant is hired out is much greater in construction than it is in other industries. In the circumstances, we think it right to make an exception in the case of contractor's plant and to allow grants to be given when the plant hire firm acquires equipment for the purpose of hiring it out for construction purposes even if the hirings are to ineligible people. The plant must, however, be for use in Great Britain. That is implicit in the Bill.

We have not yet had time to work out with the industry what detailed arrangements will be needed. The Amendments would give us the maximum flexibility to settle on a sensible way of handling the problem. They remove in respect of construction plant for hire the requirement that the lessee must always be an eligible person. We shall, however, still want to devise reasonable safeguards against abuses.

I hope that the House will agree that we have responded to the arguments put to us and that we have met the points by these Amendments. They give us sufficient flexibility to have further discussions with the construction industry to make sure that we can work out satisfactory arrangements for the application of this part of the Bill.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

We saw with interest when the Amendment was put down that the Government had found it necessary to deal with the problem of hiring in the construction industry as a separate matter. I am sure that this is right. The Government had not, perhaps, appreciated the extent to which the impact of the Clause would be altered by the introduction into the Bill of the construction industry. This became obvious and in talks which I had had with representatives of firms which lease machinery in the contracting industry it was obvious that Clause 4 as it then was simply would not work.

The Minister of State will remember how his hon. Friend the Member for Chislehurst (Mr. Macdonald) uttered what he called a wee warning in Committee that the Government were heading for trouble in this matter. We therefore welcome this aspect of the Government's Amendment. It should not be allowed to pass unnoticed, however, that this is introducing yet one more element of distinction, ,discretion and discrimination in the Bill in that plant which is hired for the construction industry will be subject to one set of rules and plant hired for other purposes will be subject to other rules.

One can well imagine examples of plant—generator plant, for instance—which could be used equally well for both. One sees, therefore, that all sorts of administrative discretions must be used to make this provision work. It is merely one more element of the mischief which is introduced into legislation of this sort when one starts to try to discriminate between one sort of business and another and one sort of plant and another.

The Board of Trade is landing itself with considerable administrative problems. As each new problem arises, a new solution appears to have to be made for it, such as the one now moved by the right hon. Gentleman. Once the Bill is an Act, no new statutory solution will be able to be made and so, I suppose, we will have a set of administrative discretions and an extra set of statutory discretions will be published, as is done in the case of the Inland Revenue. I must not allow these strictures to drown our general recognition that such an Amendment as this was essential if the problems of hired plant in the construction industry were to be solved.

Amendment agreed to.

Further Amendment made: No. 69, in line 16, leave out "(a)" and insert "(i)".—Darling.]

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

I beg to move Amendment No. 20, in page 4, line 16, at the end to insert: for a period of at least six months ". The Amendment concerns a point to which we on this side attach a good deal of importance. It came as a considerable surprise to hon. Members, on both sides of the Committee, when, on 21st June, the President of the Board of Trade suddenly announced the leasing conditions which he had in mind to apply to hired assets that would qualify for grant. We now know that they will not apply to assets used in the construction industry. They therefore apply to the much more limited category of assets which will be used in other qualifying industrial processes.

On 21st June the President of the Board of Trade said that the Department would apply three conditions: The first will be that the lease must be for a minimum period of three years after the I3 commencement of the lease; the second will be that any change in the place of use within this period must be notified to the Board of Trade; and the third will be that repayments of grants may in certain circumstances be exacted. Those are the general rules which we propose to apply."—[OFFICIAL REPORT, Standing Committee D, 21st June, 1966; c. 280] One might describe the last two of those as normal administrative provisions to prevent abuse. I do not think that we would have serious objection to them. One might ask that they should be spelled out in the Bill, but perhaps they are covered by the normal conditions which the Board of Trade has power to apply under the Bill as it is drafted.

However, the first one, the three-year condition, is one which ought to be spelled out. In any event, we do not accept that three years is the appropriate period to apply to a hiring of this sort. There must be a great many hirings of equipment for use in qualifying industrial processes where the normal period of hire is substantially less than three years, where the equipment can be used only for qualifying industrial processes because it is that sort of equipment, and where, if there were to be a series of hirings shorter than three years to a series of manufacturers, the loss of grant would be totally illogical.

In our Amendment, we propose that not only should the period be specified in the Bill but that it should be a period of six months, and not three years. We concede that there has to be some period, otherwise the owner could get a grant, hire it to a qualifying operator for two days—in other words, a fictitious hiring —and that could be followed by a hiring which would not be eligible for grant. In those circumstances, the Board of Trade would feel that it had been taken for a ride. We suggest that six months is much more appropriate than three years.

The fact that the plant is being hired at all probably means that it is a short-term requirement, because otherwise the operator would buy the plant. A great deal of machinery has a life of only three, four or five years. Machinery which operates at high speeds wears itself out quickly. If an operator elects to hire such machinery rather than buy it, it is because he intends to use it for only a short period. He may intend to have a special machine made and he may have to wait for it to go into production and become available. It may be that some new prototype is in development and that he would rather wait and spend capital on a new machine when it is in production and, pending that, would hire.

In those circumstances, to deprive the owner of a hired machine of grant unless it is hired for a period of three years seems unduly harsh, and six months would be a better period. I hope that the Government will accept that.

Photo of Mr Alistair Macdonald Mr Alistair Macdonald , Chislehurst

have thought from the beginning that, in a sense, Clause 4 was the most important Clause of the Bill, and it might possibly be argued that this Amendment is one of the most important Amendments.

In Committee, I heard the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) say that the only possible advantage of replacing investment allowances by investment grants was that which the grant would bring to hiring companies. I believe that that goes too far, but even if it were true, that alone would justify the Bill. By their very nature, hiring companies often do not show profits in the early stages of a transaction, and, though they may qualify for the old allowances, they mount up allowances and have no profits on paper to set off against them. That is why grants are superior, and that is where I take issue with my hon. Friend the Member for Westhoughton (Mr. J. T. Price), who insists that public money should be available only where profits can be shown on paper.

This is particularly important, because hiring is coming in more and more. It is an element of specialisation. I agree with the hon. Member for Wanstead and Woodford that it is excellent to see specialist firms coming in, and hiring is a more economic way of dealing with equipment. This type of hiring is coming in, and not only with contractor's plant. The Minister of State has conceded the point about contractor's plant, but we must not assume that this plant is the only kind of item where there will be short-term hiring, and this is why I should like to see some Amendment of this kind.

9.45 p.m.

I remember in Committee with what astonishment I heard the President of the Board of Trade say, almost as an aside, that there was to be this three-year limit upon hiring transactions for which the grant would be available. I think that if there is to be some major restriction of this kind, it ought to be in the Bill, because, with respect, if justice is not to be done, at least it ought to be seen not to be done. [Laughter.] It is very nice of hon. Members to laugh, but I cannot claim credit for that. The credit must go to my friend Councillor Jim Mansfield of the London Borough of Bromley, the wittiest councillor that I know. I picked it up from him the other day.

I wonder whether the Board of Trade realise the profound effect which this restriction, which was so casually mentioned in Committee, will have? I agree that there are many hiring transactions which will otherwise qualify for grant, which are for a period shorter than three years, and therefore if this regulation comes into force will not qualify. But, having said that, I am bound to say that although I support the principle behind the Amendment, and therefore put my name to it, I cannot go all the way with it, and I disagree with the hon. Member for Wanstead and Woodford that there should be a period.

I do not think that there should be a period at all. My reason for saying this is that when a hiring company is about to enter into a series of transactions with a number of customers, it is obviously important that it should calculate with a great deal of care the charges that it will make. It has to work out the costing very nicely indeed. Obviously it is necessary to foresee a year, or two years, or three years, ahead what the overheads will be, what the costs of repairing the equipment will be, and so on. It has to foresee three years ahead what the Bank Rate will be, because it will have to borrow money to do this. I am sure that the Chancellor cannot foresee what that will be and therefore it must be extremely difficult for a business firm to foresee what the Bank Rate will be in two or three years' time. It is difficult for a firm to know with any degree of exactitude what its costs will be, and it is therefore a difficult and nice calculation to get its costing right.

We are proposing to add an additional complication in that if the hiring period is longer than a stated amount a firm will get the grant, but if it is shorter than a set period it will not, but at the time when the firm is buying the equipment, how can it know what lies ahead? It cannot know who its customers will be for this type of equipment. It may be the manufacturers of the equipment themselves. It is impossible for the firm to foresee the kind of customers that it will have, and therefore to know what kind of grant there will be.

I would like to see no period at all set in the Bill. I cannot put down an Amendment to that effect, because what I want to see is nothing at all, and I cannot put down an Amendment saying that the Board of Trade cannot make regulations when it has announced that it is to make this kind of regulation. I make this point now because I can see that in a year or two the Board of Trade will come back to the House and say, "We have a smashing Act. It is going like a bomb, but we want one or two tiny Amendments", and this is the kind of Clause which it will want to amend. I regret that we are to have this embargo. I feel that it will have a most deleterious effect on the otherwise beneficial effects of the Bill.

Photo of Mr Eric Lubbock Mr Eric Lubbock , Orpington

I am very impressed by the argument put forward by the hon. Member for Chislehurst (Mr. Macdonald) for not having a six-month period, but I nevertheless support the Amendment. In doing so I ask the right hon. Gentleman one question which I hope he can answer. As he knows, a number of companies are at the moment exploring for natural gas in the North Sea. We hope that they will discover sufficient quantities to make a significant contribution towards our balance of payments position and greatly to improve our economy.

The Minister is probably aware, however, that the oil companies themselves do not carry out the drilling work. Normally they hire a platform from a company whose expertise is to drill and explore for natural gas on their behalf, whether it be for B.P., Phillips, or the Gas Council. These companies, and the Gas Council, do not own the drilling rigs; they hire them from specialists who have knowledge of drilling operations and who may be working in many different parts of the world simultaneously—Nigeria, the North Sea, the Middle East, and so on.

I understand that it is quite possible for a rig to be in the North Sea in 1966 and then, operating on behalf of another company, in the Middle East in 1967 It is therefore quite possible that the hiring period during which such a rig would be in use in the North Sea would be much less than the three-year period mentioned—although almost inevitably it would be longer than six months, so that the hon. Member for Chislehurst need have no worries on that score.

I should like to be assured by the Government that if a company providing drilling rigs is set up in the United Kingdom and is hiring out the use of these rigs to oil companies operating in the North Sea it will be eligible for this grant under the proposals of the Board of Trade.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

The short discussion that we have had proves the point made by my hon. Friend the Member for Chislehurst (Mr. Macdonald) that there should not be any period in the Bill, and that the Board of Trade should have discretion in this matter. The hiring of plant will increase. This will be a growing method of getting industrial equipment in many industries, and different conditions will operate in different industries. For this reason there must be some flexibility, and the discretion that we are asking for is therefore necessary.

As my right hon. Friend has said, we intend in general to make investment grants to the lessor of hired assets only when the assets are leased initially to qualifying users for a minimum period of three years, and we will operate the three-year rule in the discretionary way that I have suggested. The Amendment would in no way restrict our discretion to impose a minimum period of three years or any other period longer than six months, but it would make it impossible for us ever to give a grant on an asset acquired for the purpose of being hired out for shorter periods than six months.

We have already announced our intention to pay grants on computers leased for short periods and we are making special provisions for giving grants on construction equipment for the purpose of short-term leasing. We may later de- cide that other kinds of asset, that we have not yet looked at or discussed either in the House or in Committee, should be made subject to short-term leasing.

The answer to the question put by the. hon. Member for Orpington (Mr. Lubbock) is that the asset leased by the drilling company to the oil company would qualify for grant for whatever period it was hired out for operations from Great Britain, and this would primarily be on the Continental Shelf. The Amendment would simply make it impossible for us to do the flexible job which we want to do effectively if the practice of the trade were to hire out assets for periods of less than six months. I do not believe that it is the intention of the hon. Member and his Friends to be so rigid in this matter. I will therefore ask the House to reject the Amendment.

There is a good deal of substance in the hon. Member's arguments, but he would be defeating his own purpose if any time limit were put in the Bill. In order to deal with the different conditions including the oil industry, we must have this discretion.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

Before the right hon. Gentleman sits down, to what extent is he resiling from the clear and categorical statement of the President in Committee that the normal rule would be three years?

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

This is the general rule, which would be required in the general run of industries. We are talking now about the exceptions. The hon. Member must remember that a number of industries do not buy their own machinery at all. It is all hired. This is the kind of situation which we had in mind, where the plant and machinery is almost completely hired, When the marginal cases occur we want this flexibility to deal with different circumstances in different industries.

Amendment negatived.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

I beg to move Amendment No. 70, in page 4, line 18, to leave out "(b)" and to insert "(ii)".

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

Perhaps it would be for the convenience of the House to take this Amendment with No. 71.

Photo of Mr Michael Alison Mr Michael Alison , Barkston Ash

May I speak on these Amendments?

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

On a point of order. In order to find out where we are, surely these are consequential on an Amendment which we have already discussed.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

They have been discussed. Therefore, no further discussion is permissible.

Amendment agreed to.

Further Amendment made: In page 4, line 23, at. end insert:

" or

(b) in the case of machinery or plant, if it is provided for the purpose of being hired out for use in Great Britain for carrying on any process for or incidental to the purpose mentioned in section 1(2)(e) of this Act ".—[Mr. Darling.]

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

I beg to move Amendment No. 72, in page 4, line 24, after "Act", insert "(a)".

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

Perhaps it would be convenient to take this Amendment with Nos 73 and 74.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

These are consequential on an earlier Amendment.

Amendment agreed to.

Further Amendments made: In page 4, line 25, leave out "under" and insert: made by virtue of paragraph (a) of subsection (2) of ". In line 27 leave out "subsection (2)(b) of this section" and insert: sub-paragraph (ii) of that paragraph ".—[Mr. Darling.]

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

I beg to move Amendment No. 75, in page 4, line 30, at the end to insert: and(b) the amount of any grant made by virtue of paragraph (b) of subsection (2) of this section shall be twenty per cent. of the expenditure in respect of which it is made ".

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

Perhaps we could take with this Amendment No. 76.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

These are consequential Amendments.

Amendment agreed to.

Further Amendment made: In page 4, line 35, leave out "(b)" and insert"(a)(ii)".—[Mr. Darling.]

Clause 7.—(POWER TO VARY RATES OF GRANT AND ADD FURTHER ASSETS ELIGIBLE FOR GRANT.)

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

I beg to move Amendment No. 50, in page 6, line 16, at the end to insert: (c) make provision for the licensing of vehicles to be used primarily for the conveyance or haulage of loads in or about private premises including the site of building or civil engineering operations.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

Perhaps it would be convenient to discuss also Amendments Nos. 53, 54 and 55.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

The Amendment deals with Clause 7, but its main point relates to Clause 13, because that deals with the definition of the very limited class of vehicles which will qualify for grant. On page 11, in Clause 13, the definition of plant and machinery includes:

4… any vehicle except a vehicle constructed or adapted for the conveyance of a machine….".

That is one sort. The other is: …a vehicle constructed or adapted for the conveyance or haulage of loads in of about private premises.

It will be recalled by those of my hon. Friends who were in Standing Committee, that the point at which the Minister of State floundered in the most abject confusion—I hope that I am not insulting him—was when he tried to define vehicles for the making of grants, and whether the vehicle had been adapted or constructed for the conveyance or haulage of loads in or about private premises.

The point made over and over again from our side of the Committee was, how on earth was one to know that a vehicle had been constructed for conveying loads about private premises? We argued that it was not the actual construction or adaptation of the vehicle which should determine the sort of vehicle which qualified for grant but whether it was used for conveying goodc in or about private premises.

It being Ten o'clock, further consideration of the Bill, as amended, stood adjourned.

Ordered,

That Proceedings on the Industrial Development Bill be exempted, at this day's Sitting, from the provisions of Standing Order No. I (Sittings of the House).—[Mr. Jay.]

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

Even if one accepts, which we do not, that it is right to exclude vehicles used for normal transport around the country from qualifying for grant, it is ludicrous to draw a distinction based on the construction of the vehicle rather than on the use. The purpose of this group of Amendments is to substitute a different test, not the test of construction or adaptation but the test of licensing. We pressed this on the Minister of State in Committee and he told us that his Department had carried out discussions with the Ministry of Transport and other appropriate Ministries to find out whether there was some way in which we could earmark vehicles which would qualify for grant—namely, those vehicles used purely within factory perimeters and not used for general haulage on the open road.

I found myself entirely unconvinced by the right hon. Gentleman's argument that it was quite impossible to devise a system of licensing which would draw a distinction between qualifying and non-qualifying vehicles. He was therefore forced to fall back on the quite ludicrous conception in the Bill that the particular construction or adaptation of the vehicle was intended to be the test. It is obvious that vehicles should qualify which are used inside the factory perimeter even if they have absolutely no distinguishing characteristic which would confine their use for such purposes. The vehicles may be identical in all respects with vehicles for normal carriage in and about the country. Nevertheless, they ought to qualify because they are part of the manufacturing process carried out within the factory perimeter.

How we shall be able to decide whether a vehicle is "constructed or adapted" passes my understanding. No examples were given. We have other Amendments on the paper dealing with such vehicles as fork-lift trucks, which are special cases, but if the ordinary general haulage vehicle for carrying, let us say, bulk material or drums or packing cases, operates within the factory perimeter it is the Government's intention that it should qualify. If such a vehicle goes outside the gate, apart from going between two linked sites, it will not qualify. But how we shall tell by looking at a vehicle whether it is "constructed or adapted" is incomprehensible.

I am certain that the Government must substitute a test of user, and the only way in which they can do that is in the quite simple form of licensing—some form of plating of the vehicle. The Ministry of Transport is considering regulations for the plating of vehicles under the carrier's licensing system. The plating recommendation was made by the Geddes Committee for the carrier's licensing system. This would be simple procedure, simple to adopt. A vehicle which carried such a plate would not be allowed to go on to the roads at all. A vehicle which was qualifying for grant would carry this conspicuous distinguishing mark.

Clearly this system would have to be embodied in some simple form of regulation, and that is why in Amendment No. 50 we say that the Board of Trade should have power to make regulations for this purpose. This is picked up in Amendments Nos. 54, 55 and 56, which deal with the definition of vehicles for the purposes of Clause 13. This is an Amendment which the Government will have to accept, if not in these words at any rate in substance, because the provision which they have written into the Bill is totally unworkable.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

The hon. Member for Wanstead and Woodford has brought forward much the same argument as he used in Committee. Again he is asking for a licensing system to be introduced in order that we could discriminate between vehicles which should qualify for grant in the way we have laid down in the Bill and those which should not. The test which the hon. Member wants to make is that of use rather than of construction and adaptation which we have in the Bill. If we were to have the test of use some kind of licensing system, I agree, would be needed to prevent abuse and to make sure that vehicles which qualified on the test of use were those which got the grant.

Having looked at this again since we had our discussion in Committee, we find that the bureaucratic, cumbersome machine which we would have to set up within the Board of Trade—not the Ministry of Transport which would be dealing with these matters—would make the Amendment quite impossible to operate. We take the view that the discrimination provided in the Bill should operate and certain vehicles should get the grant while others would not, depending on their construction rather than their use. The reason why we take that line is that where there is a general purpose vehicle its use cannot be controlled.

It may be used internally in a large works for taking articles about the factory space or it may be run out on the road and become part of the public transport system. I am not sure that it would be possible with anything like the present methods of enforcement to make sure that when it went on the public road it was used for the proper purpose. In any case we cannot give the Board of Trade the power and authority to licence vehicles in the way suggested. It would be very difficult, bureaucratic and cumbersome if we accepted it, and we have no intention of accepting it.

Amendment No. 53 would have the effect of making grants available in respect of a vehicle used solely or primarily for conveyance or haulage in roads in or about private premises. Our difficulty over that is similar to that concerned with the main Amendment because there is no means of establishing the primary use of such a vehicle. It may be used for one purpose at one time and then, for quite good commercial reasons, it may be used for another purpose. We have gone as far as we can by specifying that special vehicles such as fork-lift trucks and dump trucks can receive the grant.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

The right hon. Gentleman is making heavy weather of this matter. He has spoken about an

Division No. 135.]AYES[10.11 p.m.
Alison, Michael (Barkston Ash)Davidson,James(Aherdeenshire, W.)Iremonger, T. L.
Baker, W. H. K.Dean, Paul (Somerset, N.)Jenkin, Patrick (Woodford)
Batsford, BrianDeedes, Rt. Hn. W. F. (Ashford)Jennings, J. C. (Burton)
Beamish, Col. Sir TuftonEden, Sir JohnJohnston, Russell (Inverness)
Bessell, PeterElliott, R.W. (N'c'tle-upon-Tyne,N.)Langford-Holt, Sir John
Biffen, JohnEyre, ReginaldLubbock, Eric
Black, Sir CyrilFarr, JohnMackenzie,Alasdair(Ross—Crom'ty)
Boyle, Rt. Hn. Sir EdwardFletcher-Cooke, CharlesMaddan, Martin
Brinton, Sir TattonForrest, GeorgeMaginnis, John E.
Brown, Sir Edward (Bath)Fortescue, TimMaxwell-Hyslop, R. J.
Bruce-Gardyne, J.Gibson-Watt, DavidMaydon, Lt.-Cmdr. S. L. C.
Buchanan-Smith,Alick(Angus,N—M)Giles, Rear-Adm. MorganMills, Peter (Torrington)
Bullus, Sir EricGrant, AnthonyMitchell, David (Basingstoke)
Burden, F. A.Grant-Ferris, R.More, Jasper
Campbell, GordonHall-Davis, A. G. F.Morgan, W. C. (Denbigh)
Chichester-Clark, R.Heseltine, Michael Hiley, JosephMurton, Oscar
Cooke, RobertHogg, Rt. Hn. QuintinNaharro, Sir Gerald
Cooper-Key, Sir NeillHolland, PhilipNoble, Rt. Hn. Michael
Corfield, F. V.Hooson, EmlynOnslow, Cranley
Crowder, F. P.Howell, David (Guildford)Osborn, John (Hallam)
Cunningham, Pr KnoxHunt, JohnOsborne, Sir Cyril (Louth)
Dalkeith, Earl ofHutchison, Michael ClarkPage, Graham (Crosby)
Dance, JamesPardoe, John

enormous bureaucratic machine. If that is not a case of the pot calling the kettle black, I do not know what is. We started today with new Clause No. 3, which would amend another Bill. On the assumption that this is a Government and not merely a collection of Departments with no co-ordination—which, I admit, needs a stretch of the imagination—it should not be beyond the wit of the party opposite to introduce a Clause similar to new Clause No. 3, which affects a relevant provision in the Road Transport Bill. It would simply extend a provision which already existed in regard to licensing of agricultural tractors in a similar way to enable identification by a licence plate put on vehicles purchased virtually entirely for use on private premises. With the licence payable it would be possible for that vehicle to cross the road to other premises or to maintenance workshops for repair.

This is not difficult. It is nonsense to assert that it would be a bureaucratic empire. If the Ministry of Transport is beginning to be efficient—if that is possible under this Government—it is obvious that it could easily accept such an operation. If at the behest of the Government we can put a Clause into the Bill which affects another Bill, it is obvious that this could be done in regard to transport. We cannot accept the right hon. Gentleman's arguments.

Question put, That those words be there inserted in the Bill:—

The House divided: Ayes 92, Noes 144.

Peel, JohnShaw, Michael (fteb'gh — Whitby)Whitelaw, William
Pink, R. BonnerSinclair, Sir GeorgeWills, Sir Gerald (Bridgwater)
Powell, Rt. Hn.J. EnochSmith, JohnWilson, Geoffrey (Truro)
Prior, J. M. L.Summers, Sir SpencerWood, Rt. Hn. Richard
Pym, FrancisTaylor, Edward M. (G'gow, Cathcart)Wylie, N. R.
Ridley, Hn. NicholasTaylor, Frank (Moss Side)TELLERS FOR THE AYES:
Rossi, Hugh (Hornsey)Thorpe, JeremyMr. Younger and Mr. Blaker.
Russell, Sir RonaldTurton, Rt. Hn. R. H.
Scott, NicholasWainwright, Richard (Colne Valley)
NOES
Abse, LeoFinch, HaroldMacPherson, Malcolm
Archer, PeterFletcher, Ted (Darlington)Mahon, Peter (Preston, S.)
Armstrong, ErnestFloud, BernardManuel, Archie
Atkins, Ronald (Preston, N.)Foot, Michael (Ebbw Vale)Marsh, Rt. Hn. Richard
Atkinson, Norman (Tottenham)Forrester, John Fowler, GerryMendelson, J. J.
Bagier, Gordon A. T.Fraser, Rt. Hn. Tom (Hamilton)Milian, Bruce
Beaney, AlanGardner, A. J.Mitchell, R. C. (S'th'pton, Test)
Bence, CyrilGarrow, AlexMorgan, Elystan (Cardiganshire)
Bennett, James (G'gow, Bridgeton)Gourlay, HarryMorris, Charles R. (Openshaw)
Binns, JohnGray, Dr. Hugh (Yarmouth)