The Government's policy is to reduce the cost to the balance of payments of private investment abroad has been implemented by measures under the Exchange Control Act, the Control of Borrowing Order, and the voluntary programme introduced in 1966. In addition, the establishment of the Corporation Tax system will exert a growing and permanent influence in this field.
These measures are working satisfactorily. I have no present proposals for further restriction.
Does my right hon. Friend recall that in last year's Budget statement he spoke of certain proposals whereby the return on investment would need to come within a period of two or three years? Will he now say how these stringent tests are being applied at present, and how successful they are?
There is evidence of their success and their value in determining the real return to us. The figures show a net disinvestment overseas in each of the past three years, and that continued in the first quarter of 1967.
Is my right hon. Friend aware that the outflow of £432 million of direct private investment, including oil, from this country abroad in 1966 was about £35 million higher than in the crisis year 1964? Will he reconsider his decision not to impose further restrictions on the outflow of direct private investment abroad, quite apart from the question of disinvestment or reinvestment or the question of the inflow of private capital to this country?
No, Sir. It is possible to select various indices, but, to take the general one which enters into the balance of payments, it shows a decline from 1964 to 1966 in the following terms: minus £405 million; minus £356 million; minus £315 million—a diminution in each year—and for the first quarter of 1967, minus £73 million.
The right hon. Gentleman referred to the Corporation Tax. Does not he recognise that what the Government have done is clean contrary to what the Reddaway Report suggested would be appropriate, that is, they have imposed long-term disincentives and have alleviated this by a few short-term palliatives?
The Reddaway Report did not support the view that there should be a continuing unrestricted outflow of investment from this country, and I know of no one who suggests it.