Charge of Import Deposits

Clause 1 – in the House of Commons at 12:00 am on 3rd December 1968.

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4.25 p.m.

Photo of Mr Peter Rawlinson Mr Peter Rawlinson , Epsom

I beg to move Amendment No. 85, in page 1, line 14, after 'Kingdom', insert: 'save for goods originating in and consigned from any member state of the European Free Trade Association or from the Republic of Ireland'.

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

With this Amendment, I think that we might discuss Amendment No. 98, in page 1, line 14, after 'imported', insert: 'excepting those from nations of the European Free Trade Area'. Amendment No. 35, in Clause 3, page 3, line 39, at end insert 'either (i)' and Amendment No. 42, in page 3, line 42, at end add: 'or(ii) at the expiration of a period of three months unless the duty has prior thereto been approved by a resolution of the Council of the European Free Trade Association'.

Photo of Mr Peter Rawlinson Mr Peter Rawlinson , Epsom

The purpose of the Amendment is to clarify the position which arises from the effects of Clause 1 and our treaty and convention obligations. I seek to exclude from these provisions the European Free Trade Area and the Irish Republic until it is clear that the inclusion of goods from those countries is not at the expense of a breach of our international agreements. It is right that the Committee should be given categorically the most authoritative advice that it can have, which is from the Law Officers of the Crown.

This point was first raised in the economic debate on 25th November, in an intervention by my right hon. Friend the Member for Streatham (Mr. Sandys) to the Chancellor of the Exchequer. At the time, the Chancellor did not appear able to give a full answer to the point. It is not surprising that Ministers cannot give sudden answers to legal points, but this must be a matter which was the subject of careful consideration before introducing the proposal. It must have been basic to the scheme to establish that it could be done within the framework of the Convention, otherwise it would suggest that this legislation has been very hastily conceived and ill-prepared.

As I say, the Chancellor was not able on that occasion to give a full answer to the House. In winding up the debate, the Chief Secretary said that the Government had taken the best advice available to them and that there is no specific prohibition in the Convention. He added that the Government are entitled to take this action and that no question of illegality arises.

When one examines the Convention and the Bill which ultimately has been produced, it is stating it a little high to say that there is no question of illegality. It may be that the advice that we shall receive from the Law Officers will be that, in their opinion, this is legal. But to say that no question of illegality arose surely was stating the case very high.

When we came to Second Reading, on 28th November, the Financial Secretary said that it was not appropriate to discuss whether this was legal, because it was for the E.F.T.A. Ministers themselves to decide. In winding up that debate, the Minister of State said that the matter would be taken up within the E.F.T.A. Council. The indication was that Ministers were saying, "It is not for us, it is inappropriate somehow for the House of Commons, to examine this question". The proposition that the House should merely accept, on the ipse dixit of Treasury or economic affairs Ministers, that everything is perfectly all right is one which the House ought not to accept.

My right hon. and hon. Friends and I have, therefore, requested the advice of the Law Officers so that we may have a categorical answer. The Attorney-General, as right hon. and hon. Members know, comes here in these circumstances not as a political Minister and not in his quasi-judicial rôle, but in his rôle as adviser to Parliament. I emphasise that it will be in this latter rôle that he will answer the debate today. On 27th May, 1963, it was said in the House that The Attorney-General, whoever he may be, is not only the legal adviser to the Crown and to the Government. He is also a servant of the House. It is from time to time his duty to advise the House on legal matters—a duty going beyond his responsibility to the Government and the Crown—and the hon. and learned Gentleman, like his predecessors, has frequently accepted this duty …"—[OFFICIAL REPORT, 27th May, 1963; Vol. 678, c. 993.] Those were the words of the present Prime Minister, when he was Leader of the Opposition, in speaking of what is generally accepted as the rôle of the Attorney-General.

The question which we put to the adviser to the House, in his rôle as counsel to this Committee, is this: does Clause 1 unamended breach the E.F.T.A. Convention of 20th November, 1959, and the Agreement for a free trade area established between Great Britain and Ireland? The answer to that question will amount to an opinion in law on the construction of the Bill's provisions and the Articles of the Convention. However, before coming to those matters, I have another question to put.

If it is the advice of the Law Officers that there is no breach, may we be told what argument will be advanced before the E.F.T.A. Council to establish that there is, prima facie, no breach? Further, turning, as it were, to the political Ministers, if that argument is presented to the Council and the Council rejects it, will the Government repeal the Bill? May we have their undertaking to that effect?

The Long Title of the Bill tells us that its purpose is To grant a new duty of customs repayable after a specified period. Next, subsection (1) provides that there shall be charged on all goods imported into the United Kingdom a duty of customs, to be known as an import deposit. … Again, I emphasise the words, "a duty of customs". Next, in subsection (3): The import deposit chargeable on any goods shall be payable in addition to any other duty of customs.… In the light of all those words, it is clear that there is here a duty of Customs about to be levied. It is said to be a duty of Customs, and the opening words of subsection (3) specifically speak of it as in addition to any other duty of customs". The Attorney-General will be well aware that the definition of such is A duty charged upon commodities on their importation into a country". Thus, Parliament is asked to give power to levy an extra duty, and this is explicable only if it be extra to what is now levied or, alternatively, if it be a levy, burden or duty which did not exist hitherto. The question is: can that duty be levied without breaching the Convention?

I turn now to the Convention. Article 1 establishes the association of nations to be known as the European Free Trade Association, hereinafter referred to 'the Association'". Article 2 sets out the objectives, and Article 3 deals with the matters relevant to the advice which we wish to receive, namely, import duties. Article 3(1) provides that Member States shall reduce and ultimately eliminate, in accordance with this Article, customs duties and any other charges with equivalent effect, except duties notified in accordance with Article 6. … Paragraph 2(a) provides that On and after each of the following dates, Member States shall not apply an import duty on any product at a level exceeding"— certain percentages, the levels of which have been altered since that date. There is specific provision there that Member States shall not apply an import duty. If the duty now proposed is an import duty, we want to know how it can be levied without breach of Article 3 of the Convention.

Next, one must consider whether what is proposed is, because of its character and despite what is said in the Bill, not an import duty. Accordingly, it is necessary to turn to Article 6: Member States shall not(a) apply directly or indirectly"— I emphasise the word "indirectly"— to imported goods any fiscal charges in excess of those applied directly or indirectly to like domestic goods… Paragraph 6 of the same Article, the definition paragraph, tells us that fiscal charges' means revenue duties, internal taxes and other internal charges on goods". The next question, therefore, is: if what is proposed is not an import duty, does it come within the terms of Article 6 and is it contrary thereto?

I hope that the Committee will forgive me for putting the matter in this way. I do so so that we may have an authoritative reply from the Attorney-General. I turn next to Article 10: Member States shall not introduce or intensify quantitative restrictions on imports of goods from the territory of other Member States". There is a plain prohibition there. On the question whether this is a quantitative restriction, one turns to Article 17(2): Any products which have been exported from the territory of one Member State to the territory of another Member State and have not undergone any manufacturing process since exportation shall, when reimported into the territory of the first Member State, be admitted free of quantitative restrictions and measures with equivalent effect. They shall also be admitted free of customs duties and charges with equivalent effect… Therefore, combining Articles 3, 6, 10 and 17, will the Attorney-General advise us under what provision it can be said that the Bill is not caught? If it is not an import duty, is it not caught under Articles 6, 10 and 17, or, alternatively, is it not caught under Article 3? I appreciate that, under the Convention, there is a complaints procedure, under Article 31, providing that any aggrieved member, because some objective of his has been frustrated, can refer the matter to the Council of E.F.T.A., which, by a majority, can arrange to examine the matter. The Council can then recommend certain sanctions and interim measures. That is the complaints procedure. That broadly is the form of the convention. I do not need to refer in detail to the Irish Agreement, save to say that Article 1 says: After 1st July, 1966, the Government of the United Kingdom shall not apply any import duty to goods which, in accordance with Article 2, are regarded as originating in and consigned from the Republic of Ireland. In fact, the same doubt and query arises with that agreement as under the E.F.T.A. Convention.

These, then, are my questions to the Attorney-General. Is he satisfied that, prima facie, on the wording of this Convention and having regard to the wording of the Bill and this Clause, there is no breach of the Convention? If so, would he give his reasons, relating them to the particular Articles? If not, I am sure that he will say so. There is a difference between saying, "In our view there is no breach of the Convention," and saying, "We accept that there is or may be a breach, but we are confident that our E.F.T.A. partners will understand and excuse our position." This is the distinction, and this is what we wish to discover. We look to the Attorney-General's advice to interpret this to us.

This, of course, is the legal issue. On the political issue, if there were and if there are sound legal doubts, it might be thought a cynical approach to an agreement and to one's partners to present them with a fait accompli by a Bill and then merely to rely on their mercy. I would therefore like the Attorney-General to tell us, as our adviser, whether or not the position of these duties is within or without the provisions of those Articles.

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

In view of the most courteous way in which the right hon. and learned Member for Epsom (Sir T. Rawlinson) has invited me to address myself to the questions which he has raised, I am, of course, most happy to do so, as I hope the Committee has generally found me willing to do when it has been good enough to seek my advice. I have carefully considered the Articles in question in the Stockholm Convention which give rise to consideration in dealing with the question whether the Bill's proposal is legal within the terms of the Convention. As the right hon. and learned Gentleman said, Article 3 requires the abolition of Customs duties on goods qualifying for E.F.T.A. treatment by 31st December, 1966. The Article prohibits Customs duty and any other charges with equivalent effect. It prohibits such Customs duties on imports of goods eligible for area tariff treatment from other E.F.T.A. countries.

The critical question, therefore, is whether import deposits of the type proposed in the Bill are Customs duties for the purposes of Article 3. I will deal first with the right hon. and learned Gentleman's first point, that they are so described in the Bill. This is a technicality which makes it possible to apply the machinery provisions of the Customs and Excise Act of 1952 to the collection and general control of the deposits, and it thus avoids the need for lengthy new legislation. The Committee will see that, by the terms of Clause 3(2), the Bill shall be construed as one with the Customs and Excise Act. This technicality avoids a massive Bill which would otherwise be necessary.

4.45 p.m.

However, I submit that this matter must be looked at in the E.F.T.A. context, which means that we must consider the substance of the matter as it affects imports of goods from E.F.T.A. countries. Import duties of the type which the Committee is discussing involve the temporary retention of funds which are reimbursable automatically after 180 days. I suggest that that is quite different from a Customs duty or charge with equivalent effect. To levy a duty or a charge is to take something without returning it, which is not what the Bill proposes. The fact that the importer—this point may be raised—may incur a loss of interest on his money does not alter the situation in that respect. This may be the consequences of the scheme in certain circumstances, but it would be stretching the meaning of words to say that any loss of interest would make the deposit a charge with equivalent effect to a Customs duty.

Photo of Mr Charles Doughty Mr Charles Doughty , East Surrey

The last line of Article 3(1) referring to Customs duty, or other charges, says: Any such duty or other charges is hereinafter referred to as an 'import duty'. It is the import duties in the Bill and the Convention with which we are concerned.

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

I thought that I had referred to duty and charge in seeking to distinguish between what the Bill does, which is to involve a temporary retention of funds, and a duty or charge which, in my understanding of the words in terms of Customs and Excise, means levying a duty or charge without returning it. That is a quite fundamental matter in approaching the meaning of the words in Article 3.

As the right hon. Gentleman has said, Article 6 prohibits member States from applying, as is said in paragraph 1(a): … directly or indirectly to imported goods any fiscal charges in excess of those applied directly or indirectly to like domestic goods …". The question arises what the phrase "fiscal charges" means under the terms of the Convention. Fiscal charges are defined in paragraph 6(a) of Article 6 as meaning revenue duties, internal taxes and other internal charges on goods. In my view, import deposits are not revenue duties, nor are they taxes. They are not imposed for the purpose of raising revenue, and the money is to be automatically returnable. In my view, therefore, the import charge is neither a revenue duty nor an internal tax, nor any other form of internal charge on goods.

Photo of Sir John Hall Sir John Hall , Wycombe

Does the right hon. and learned Gentleman not agree that the raising of money by the Government which they receive interest-free and which in turn has to be paid for by interest imposed on the deposit is equivalent to raising a tax?

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

I do not accept that as a correct interpretation. The purpose of the import deposit is not directed to the raising of Revenue, even though to a small degree in certain circumstances that may be an incidental effect of what is proposed.

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

Are we to treat as of no effect the preamble to the Bill, which includes the words: … towards raising the necessary supplies to defray Your Majesty's public expenses, and making an addition to the public revenue …

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

I would like to consider that, but I suspect that there are various matters related to the administration of the scheme which require that provision which, in any event, is the normal form of words for this kind of Measure. I do not think, in the context of the E.F.T.A. Convention or the meaning of a fiscal charge, that it is relevant or helpful. The Committee should again consider Article 10 of the Convention—

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

May I just continue. No doubt the hon. and learned Gentleman will catch your eye in due course, Mr. Irving, and he will then seek to deal further with the matter.

I was drawing the Committee's attention to Article 10 of the Convention. That prohibits member States from introducing quantitative restrictions on imports of goods from the territory of other member States. The right hon. and learned Gentleman takes the view that that is not applicable because what is proposed is not the introduction of quantitative restrictions on imports of goods from the territory or other member States. I respectfully agree with him. Quantitative restrictions are defined in paragraph 11(a) of that Article as meaning: … prohibitions or restrictions on imports from the territory of other Member States whether made effective through quotas, import licences or other measures with equivalent effect, including administrative measures and requirements restricting import; Quotas and licensing systems impose definite quantitative limits to imports of particular goods or to imports of particular importers. Import deposits of the type proposed in the Bill have no such effect and they are, as I understand it, essentially a device for restricting credit in a selective way, with a generally discouraging effect upon imports as a whole over the short term. That is their purpose, and that is the reason why his device is being introduced. Import deposits, therefore, are not prohibited under Article 10 of the Convention. In my view, the Articles which need examination in order to consider whether we are in breach of the Convention establish that we are not.

It may be said that, even though that may be so, what is proposed in the Bill is incompatible with the spirit of the Convention. I have looked carefully at that matter, and I would remind the House that the Convention itself, by Article 19, gives the right to Member States to take far more drastic measures in order to protect their balance of pay-merits than we have done by the terms of the Bill. Under Article 19 the stringent step of introducing quotas and licensing systems is permitted, and what my right hon. Friends have done by their proposal is—

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

Will the right hon. and learned Gentleman tell the Committee under what conditions?

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

Under what conditions what?

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

Under what conditions quotas and other restrictions may be imposed.

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

If the hon. Gentleman has the Convention before him he will see in paragraph 1 of Article 19: Notwithstanding the provisions of Article 10, any Member State may, consistently with its other international obligations, introduce quantitative restrictions on imports for the purpose of safeguarding its balance of payments.2. Any Member State taking measures in accordance with paragraph 1 of this Article shall notify them to the Council … There is then a procedure of notification and examination of the matter by the Council. The paragraph continues: If the balance of payments difficulties persist for more than 18 months and the measures applied seriously disturb the operation of the Association, the Council shall examine the situation and may, taking into account the interests of all Member States by majority decision, devise special procedures to attenuate or compensate for the effect of such measures. So that where a member State introduces the stringent protective device of quotas and licensing schemes, that is permissible under the Convention, and action in regard to it is taken only in the event of the event of the continuance of what is done for a term of more than 18 months.

Bearing in mind that provision in the Convention, therefore, I think that we are being unduly harsh upon ourselves if it is said against us that we are acting contrary to the spirit of the Convention.

Happily, as my right hon. Friend the President of the Board of Trade has told the House, and as has been said to the Committee, the measures that are proposed are about to be discussed in the E.F.T.A. Official Council, and my right hon. Friends are confident, and from my knowledge of the matter so am I, that we will in due course be able to reach a full understanding with our partners in E.F.T.A. on this whole matter.

As to the position under the Anglo-Irish Free Trade Area Agreement of 14th December, 1965, to which the right hon. and learned Gentleman referred, the language of the relevant provisions on Customs duties was taken directly, as I think he knows, from the E.F.T.A. Convention, and everything that I have said with regard to the position under the Convention applies equally to the Anglo-Irish Free Trade Area Agreement.

I understand that we are also discussing Amendments Nos. 35 and 42 on Clause 3, and, if I may be permitted, I will say a brief word about those.

5.0 p.m.

Photo of Sir Ian Percival Sir Ian Percival , Southport

It appears that the burden of the right hon. and learned Gentleman's argument is that this does not come within Articles 3 or 6 because this is not a charge; it is not a charge because it is repayable. On the face of it, it does not seem that anything can be repayable unless it has first been charged. I wonder whether there is any previous decision or interpretation which has escaped us on this side of the House. I am obliged to the Attorney-General for giving way, because I wish to know whether I have overlooked something so that I do not make a false point.

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

I have never known a levy or charge in the fiscal history of any nation to be repayable. In the ordinary meaning of the language—

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Worcestershire South

The Attorney-General has said that he has never known of a levy or charge which was repayable. That is manifest nonsense. We are doing this every day of our lives under the Customs Statutes. Goods are imported on drawback. When, subsequently, they are incorporated in manufactured goods for export, the amount of import duty is repaid.

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

In this case the machinery of the import deposit requires the payment of an import deposit which is reimbursable automatically after the specified period of 180 days. In my submission, within the meaning of the language of the E.F.T.A. Convention, the levy of a duty or a charge contemplates the taking of money without returning it as a positive step of creating the most active difficulties for importers. This falls far short of the imposition of a duty or charge and, accordingly, is not caught by the language of the Convention.

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

May I finish what I was about to say?

I had turned to Amendments Nos. 35 and 42. There is a suggestion that the scheme should be brought to an end after the period of three months unless it has previously been approved by a resolution of the E.F.T.A. Council. Article 31 of the Convention provides a procedure in the event of any member State wishing to complain of the action taken by another with adverse effect on its trade. As I have said, I am confident that the discussions which are about to take place will produce a satisfactory conclusion and that any Amendment of the kind which is proposed will prove, therefore, to be unnecessary and should be rejected.

Photo of Sir John Hall Sir John Hall , Wycombe

The Attorney-General, presumably, does not agree that the terms of the Convention require that any partner to it who wishes to introduce a measure of this kind should consult the Council beforehand. Secondly, can he say whether our partners in E.F.T.A. have the same view of the legality of the Government's Measures as he has himself?

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

In reply to the first point, the requirement of consultation certainly applies to Article 19 in relation to the introduction of quantitative restrictions in regard to quotas, but it does not apply to the measure that is proposed in the Bill, namely, the imposition of import deposits. There is, of course, no specific reference to import deposits in the Bill. In the Convention, there is certainly no specific prohibition of the use of import deposits and, as I have submitted, they are not contrary to either the letter or the spirit of the Convention.

As to the hon. Member's second question, my right hon. Friend the President of the Board of Trade has indicated that the Ministers from the member States have shown a good deal of sympathy with the difficulties which the Government have had to face in dealing with this problem, and I have reason to feel that the legal anxieties which seem to be troubling right hon. and hon. Members opposite—I am quite sure, entirely in the public interest, to protect the interest of the country—will not be reflected so eagerly in the Ministers of the member States.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

It seems to me that there are two specific arguments on the Amendment. One is the legal argument and the other the political argument, relating specifically to my Amendment No. 98. I will deal fairly briefly with the legal argument

I am certain that the Attorney-General has tried to do everything in his power to clear our minds, but I am nearly as befuddled now as I was before he spoke. From his answer to the question of when a duty is not a duty, it would appear that it is not a duty when it is to the convenience of the Wilson Government to call it something else. The right hon. and learned Gentleman's argument that because the charge was repayable it could not be considered as a duty or tax, is obviously demolished in the matter of duty drawback, Selective Employment Tax and a number of other industrial arid tax factors about which we all know a great deal.

I wonder, however, whether I can help the Attorney-General, as I should like to do. I would have been happier with his arguments had he based them on the balance of payments difficulty, on which ground it is possible and permissible to introduce quantitative restrictions. If the right hon. and learned Gentleman refers to paragraph 11(a) of Article 10 dealing with quantitative restrictions, he will see a definition. According to that article, "quantitative restrictions" means prohibitions or restrictions on imports from the territory of other Member States whether made effective through quotas, import licences or other measures with equivalent effect, including administrative measures and requirements restricting import". In the debate on 28th November, the Financial Secretary said that The Bill is intended to bring a selective pressure on liquidity affecting importers and to produce an immediate if marginal effect upon the total of our imports".—[OFFICIAL REPORT, 28th November, 1968; Vol. 774, c. 750–1.] The Attorney-General's case would be much stronger if he based it on that argument. I do not know whether this might be of assistance to him with his legal background.

Photo of Sir John Hall Sir John Hall , Wycombe

Would my hon. Friend agree that what he has said strengthens the point which I made earlier that we should have consulted the E.F.T.A. Council beforehand?

Photo of Sir Peter Emery Sir Peter Emery , Honiton

I am coming to that point. Perhaps my hon. Friend will allow me to make my speech. I sat through the debates on Monday and Thursday of last week and heard every speech and was not able to catch the eye of the Chair. I do not intend to make on this Amendment the speech which I wished to make then.

I tabled my Amendment excluding E.F.T.A. from the Bill for a basic reason. On the whole, our financial position and the position of sterling are based more than anything else on confidence in the Government and in the economic management of this country. Twice within four years the Government have broken the spirit, if not the letter of the E.F.T.A. Agreement. Article 14 of the E.F.T.A. Convention on public undertakings states: Member States shall ensure the progressive elimination, during the period from 1st July, 1960, to 31st December, 1969, in the practices of public undertakings, of (a) measures the effect of which is to afford protection to domestic production … Paragraph (b) deals with trade discrimination on grounds of nationality in so far as it frustrates the benefits expected from the removal or absence of duties and quantative restrictions on trade … Whether there is a let-out, there is no doubt that the Government have broken the spirit of the E.F.T.A. Agreement. If we want to build up confidence in sterling and our economic administration, breaching the spirit of agreements will have a very severe effect on our exports and the confidence in our economy of people with whom we do business.

In the last week, I have had communications from Norway, Sweden and Portugal condemning this unilateral action, as it is described by them. I pointed out that at a meeting on Friday the President of the Board of Trade put forward his point of view. I realise that that was not a consultation but a statement of what was to be done. This is the interpretation put on our action by people in these three countries, not perhaps by the politicians, but by business people and bankers.

5.15 p.m.

Secondly, the Government are entirely wrong in believing that their measures will have the effect which they have in mind. Four years ago, when the import surcharge of 15 per cent. was imposed, members of the Treasury Bench were not occupying the positions which they are occupying now, but I can recall Minister after Minister saying that the import surcharge would have a considerable effect in reducing imports. It was suggested that it would probably save up to £300 million. The right hon. Member for Battersea, North (Mr. Jay), who was then President of the Board of Trade, will know of the detailed study made by Johnson and Margaret Henderson and their paper assessing the effect of the import surcharge. They state that the overall effect could never have been more than £150 million and probably would be only just above £100 million. The impact of the Government's present measures will be very much less.

I objected most strongly to the speech made by the hon. Member for Ebbw Vale (Mr. Michael Foot). I warned him that I would mention this matter. He suggested that only he and some of his colleagues were patriotic in standing up to the demand that the Government took action. Apparently, anybody who criticised what was proposed was attempting to undermine Britain's position. That was a lot of crocodile tears. My desire to see us abide by the spirit of the E.F.T.A. agreement stems from the belief that by so doing we shall be standing up for our country a great deal more than by trying to find ways round it. It was apparent from the speech of the hon. Member for Ebbw Vale that he had not considered the long-term effects of the Government's proposals.

I am convinced that the best way to ensure that British industry is truly competitive is to allow buyers to buy from whatever market they believe is most beneficial. Buyers buy abroad not for fun or pleasure but for good reasons.

I refer to a study recently made by the Institute of Purchasing and Supply into the buying of machine tools. I accept that it was a limited investigation, but, because of its smallness, I think that it is all the more effective. Four pieces of evidence emerged from this inquiry: first, and most important, that people bought machine tools abroad and in Europe because they were not available in this country; secondly, that the performance of imported goods was more than marginally superior to the performance of anything which could be obtained in the United Kingdom; thirdly, that the ser- vice and delivery of the imported machine tools was considerably better than anything which British manufacturers could provide; and, fourthly, that the price was more favourable. If the hon. Gentleman believes—

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

Order. The hon. Gentleman was good enough to say that he would not make a Second Reading speech. He is now beginning to do so.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

Thank you, Mr. Irving, for bringing me gently back to the paths of the Amendment. A 10 per cent. deposit, which is likely to mean in real terms 2 to 2¼ per cent. extra on the price—

Photo of Sir Peter Emery Sir Peter Emery , Honiton

A 50 per cent. deposit. A 2¼ to 2½ per cent. increase in price will not affect the buyer who needs to go abroad to get the equipment necessary for his firm's operations. It would assist the Government to sustain the confidence of our trading partners and ensure that the E.F.T.A. nations do not take offence—because considerable offence is being taken by them in terms of the application to them of the provisions of the Bill.

The last argument to which I want to refer was brought forward by the Financial Secretary to the Treasury. He made it clear that importers would not go to the wall and that the basis of the exercise was not merely a question of import saving but a degree of liquidity control.

It is wrong for the Government to take these measures to impose a liquidity control on the economy. Many other ways are open to the Government to impose controls which do not affect E.F.T.A. and which do not put the E.F.T.A. Agreement in doubt. This Bill runs against the spirit of the E.F.T.A. Agreement, even if the Government can put forward a legal argument. That is why I strongly support the Amendment.

Photo of Mr David Weitzman Mr David Weitzman , Stoke Newington and Hackney North

I listened with interest to the legal argument put forward by the right hon. and learned Member for Epsom (Sir R. Rawlinson). I also listened to my right hon. and learned Friend the Attorney-General. A simple answer was given by my right hon. and learned Friend to the argument of the right hon. and learned Member for Epsom. Customs duty, which he suggested was forbidden under the E.F.T.A. Convention, remains a duty when it is repayable in certain circumstances. This import deposit is not a duty.

The Bill sets out clearly in Clauses 1 and 2 that it is from the outset a sum which is a deposit and which is repayable. It remains so throughout. That is the distinction between the two. Whereas Customs duty may be forbidden under the provisions of the Convention, import deposits are not. That is the simple answer to the legal argument put forward by the right hon. and learned Member for Epsom.

I do not pretend to be an expert on economics, and I do not remember ever having taken part in a debate on economic affairs, but I listened with interest to the remarks of the hon. Member for Honiton (Mr. Emery). I remember speeches made by leading members of the Opposition Front Bench in favour of this sort of deposit. Approving as they did of this kind of import deposit, it hardly lies in their mouths to condemn it now. The fact that they have put forward legal and other arguments today shows a Degree of hypocrisy on their part. At a time like this, when such a Measure as this is urgently needed, they would have done better to support it if they genuinely cared for the economic stability of the country.

Photo of Mr Peter Blaker Mr Peter Blaker , Blackpool South

The hon. and learned Member for Stoke Newington and Hackney, North (Mr. Weitzman) must have failed to notice that the remarks made by my right hon. Friends in the past concerning some sort of import credit restriction scheme have almost always related to the Italian scheme. The hon. and learned Member said that he was not well versed in economic affairs. If he had examined the details of that scheme he would have realised that it is totally different from the scheme that the Government are seeking to introduce. He would have realised that by no stretch of the imagination could it be regarded as having the inconsistency with international agreements which some hon. Members on this side of the Committee suspect to be the case with these import deposits.

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

Is not the hon. Member aware of the remarks made by his right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) during the main economic debate, when he said that of all the various schemes proposed he thought that this was the best?

Photo of Mr Peter Blaker Mr Peter Blaker , Blackpool South

Yes. I am grateful to be able to clear up this point, because in his very next sentence my right hon. Friend asked whether this scheme was consistent with our E.F.T.A. and other international obligations. It is clear from that passage that he was not suggesting that we should adopt it whether or not it was legal.

The hon. and learned Member for Stoke Newington and Hackney, North said that it was not a duty, but a few sentences later on he referred to it as a duty. That illustrates the intellectural acrobatics which hon. Members opposite are having to go through. The Attorney-General seemed to be arguing firstly that this is not a charge, and secondly that it does not have an effect equivalent to Customs duty. Some of my hon. Friends have pointed out that it is very difficult to distinguish it from other sorts of charges. Let us consider the other leg of that propostion. Does it not have an effect equivalent to Customs duty in the sense that it deters, and is intended to deter, imports?

To take the line that the Attorney-General is to strain the argument. Like his right hon. Friends, he takes comfort in the fact that this scheme will be referred to the E.F.T.A. Council and he is confident that the consultations at the Council will have a satisfactory result. He seemed to think that the E.F.T.A. countries are content with this proposal. He must know that the Danish Finance Minister said last week that this was a case of Britain, for the second time, violating the E.F.T.A. Convention. He will also know that the Prime Minister of the Republic of Ireland had consultations with the British Prime Minister last week.

If the Government are satisfied that both the E.F.T.A. countries and the Republic of Ireland are content with these proposals perhaps they will tell us. I hope that we shall have some comment from one of the political Ministers during the debate. Perhaps he will tell us whether any representations have been received from E.F.T.A. countries since the announcement of this proposal. Perhaps he will tell us something about the view expressed by the Prime Minister of the Republic of Ireland when he talked with our Prime Minister.

I do not want to go further into the question of the legality of this proposal. What my hon. Friends and I fear is that when the matter is discussed with the Republic of Ireland and the E.F.T.A. Council those countries—all of them smaller than ourselves—will be browbeaten into accepting the situation with which they have been faced as a fait accompli, regardless of the question of legality. The Government should not get the reputation for sailing close to the wind. The difficulty with which the Committee followed the argument of the Attorney-General was very worrying. It suggested that he was putting forward a most ingenious but very complicated argument. The Government should not put themselves into a situation in which, when dealing with some of our closest allies, they have to go through incredible antics to persuade those countries that they are within the law.

5.30 p.m.

It is important to preserve our reputation for sticking to our agreements, whether they are comfortable or not. The Government may perhaps find these two agreements uncomfortable, but other countries find agreements uncomfortable. too, and we hope they stick to them. If so, why should not we.

E.F.T.A. and the Republic of Ireland are important to us also in practical ways. The E.F.T.A. countries take almost as much by way of imports from us as the the whole of the Common Market countries. We shall need the help of the E.F.T.A. countries in future. When it again comes to negotiations to get into the Common Market, solidarity amongst the E.F.T.A. countries will be important. There is no doubt about the bitterness with which they received the 15 per cent. surcharge which the Government imposed in 1964. I fear that this measure will be taken by them as yet another reason for being cautious in their future dealings with this country.

The way we treat the E.F.T.A. countries and the Republic of Ireland concern- ing these agreements goes wider than those countries alone. We had a good example at Question Time, when we had the statement about the Falkland Islands, of the trouble we get into when we acquire a reputation for playing fast and loose with obligations. I believe, even if it is strictly in accordance with the letter of our obligations, that this proposal will give us further trouble and will further spoil our reputation. Moreover, it will add fuel to the opponents of freer trade in all countries.

To sum up, our behaviour now is giving us the reputation of being the exploiters of the fine print in our agreements. And to what purpose? The Government are doing this for what, on the repeated statements of the Financial Secretary on Second Reading, is a Measure which will have only marginal effect.

[Sir MYER GALPERN in the Chair]

Photo of Mr John Page Mr John Page , Harrow West

The Committee listened with absolute fascination to the Attorney-General this afternoon—a kind of Parliamentary Blondin walking along a blazing tightrope, hopping first on one foot and then on the other. I congratulate the right hon. and learned Gentleman on his mental dexterity and the wizardry with which he has used a magnifying glass to find the small print which helped him to produce his case.

Photo of Mr David Weitzman Mr David Weitzman , Stoke Newington and Hackney North

Did the hon. Gentleman understand him?

Photo of Mr John Page Mr John Page , Harrow West

I have always found it a matter of real congratulation to the Attorney-General that I understand him, because he speaks with remarkable clarity. He speaks slowly and in a pleasant voice, and I was able to follow the snakes and ladders of his argument. But I leave it to my hon. and learned Friends to refute it in any way. I was merely saying that it seemed a bit complicated.

I should like to follow what was said by my hon. Friend the Member for Blackpool, South (Mr. Blaker). Is it really worth the money for us to bilk on our E.F.T.A. partners in this way? Having got away from the very poor reputation that we got after the 15 per cent. surcharge debate, I think that it would have been a wonderful opportunity for the Chancellor of the Exchequer if on Friday, 22nd November, he had been able to say, "This will apply to imports, but not to imports from the E.F.T.A.. countries."

I now want to make a rather guarded apology to the President of the Board of Trade. I rang his office at 3 o'clock this afternoon. Owing to the short time available I spoke to the E.F.T.A. Information Department, and not, as I normally would, to his private office to ask to be put through. I asked, "Can you give me the figures of the value of goods from E.F.T.A. countries covered by the exempted list and those which are not?". After a moment's silence I was told, "No, we have not been asked about this". I said, "I do not mind hanging on. Will you find out for me, because I feel sure that the figures must have been worked out?". I hung an for a few minutes and was then told that the figures had not been worked out. I hope that we will hear from the Government, before they wind up, what is the approximate value of the goods which would be exempted out of the total imported from E.F.T.A. countries, because it is vitally important to the discussion.

Having failed with the Board of Trade, at five minutes past three I got on to the House of Commons Library, and at quarter past I was given a rough breakdown which may be of interest to the House before the President, if he is to reply, gives us the full details. It will be interesting to see whether the Library guess, plus my own mathematics, work out at anything like the answer which I am sure the right hon. Gentleman will be able to give us. The total imports in 1967 from the E.F.T.A. countries amounted to £941 million. Of these food was 22·5 per cent., taking a monthly average. Putting that out on to the yearly figure I have made it £207 million. Manufactured goods represented 53·1 per cent., which I have made approximately £498 million. Then what are called crude materials, inedible—timber, pulp, wood, lumber and ore—21 per cent., which makes £198 million in a full year. It looks although about £400 million worth of imports from the E.F.T.A. countries would probably be exempted and about £500 million would have the duty deposit paid upon them. I should hardly think—[Interruption.] Some hon. Gentleman said that it is not duty. All I can say is that the short title of the Bill says: A Bill to grant a new duty … I do not know when a duty is not a duty if it is in the short title.

Does the President feel that it is worth while alienating our E.F.T.A. friends for him to go along again in the very worn sackcloth and rather dusty ashes which his colleagues have had to use so often with our E.F.T.A. partners and ask them to make allowances for us? I should hardly think that in this instance the prize was worth while. I hope that the Government might, even at this stage, accept the Amendment standing in the name of my hon. Friend the Member for Honiton (Mr. Emery) and myself so that the right hon. Gentleman can hold himself up straight again when he meets our E.F.T.A. friends in future.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

International trade is not a matter of nice legal points. I see the Attorney-General nodding his head. I think that he made some nice legal points this afternoon. The right hon. and learned Gentleman described this as a device. He said that there was no reference in the Convention to import deposits. It is clear that this is a device, a very nice legal point, because the Government have asked, "How can we get round the restrictions laid upon us by the E.F.T.A. Convention, and get away with it?" The Attorney-General says that this is not a Customs duty, but, as my hon. Friend the Member for Harrow, West (Mr. John Page) said, the purpose of the Bill is to Grant a new duty of customs repayable after a specified period. That does not make it any less a duty. Indeed, the Bill says at line 25: The import deposit chargeable on any goods shall be payable in addition to any other duty of customs for the time being … The right hon. and learned Gentleman has been treading a blazing tightrope, and not nearly as successfully as he had hoped. If we abide by the E.F.T.A. Treaty, we shall not take any steps which will artificially increase the price of goods from those imported into this country, but the whole purpose of the Bill is to do just that. The Bill is designed to increase the price of imported goods, and to make it so difficult for importers to get their merchandise that imports are cut. This is contrary to the E.F.T.A. Convention.

Article 6 of the Convention, which refers to fiscal charges imposed with the object of raising money, does not apply, says the Attorney-General, because the deposit is returnable in 180 days. It is an interest-free loan to the Government.

I come back to the main point, which is that the Bill will restrict imports from our E.F.T.A. partners. The Attorney-General has done his best to prove that this is legal. Why is it that the right hon. and learned Gentleman did not convince the Financial Secretary to the Treasury and the Minister of State at the Board of Trade of that? On 28th November the Financial Secretary said: It has been asked: is this scheme legal under E.F.T.A.? I think that there is some confusion of thought on this."— Not least on the Government's side— Whether or not this scheme is legal under E.F.T.A. is a matter for the E.F.T.A. Ministers to decide. That has not yet been fully considered by them. I should not have thought it appropriate to have discussion in this House on this matter when the tribunal appropriate to decide it has not yet pronounced upon it."—[OFFICIAL REPORT, 28th November, 1968; Vol. 774, c. 754.] That being so what confidence can we have in the Attorney-General's statement this afternoon that the Bill is legal?

The Financial Secretary said that the Government had no authority to decide whether or not this was legal, that the matter had to be pronounced upon by the E.F.T.A. Council. It is extraordinary that this measure was never disclosed to the E.F.T.A. countries at any time. The Financial Secretary admitted that he was not in a position to decide whether it was legal, and if we are to take the hon. Gentleman's statement as being accurate, we can assume that no Member of the Government, either, is able to decide whether it is legal.

In winding up the debate the Minister of State at the Treasury said: I was asked about the legal effect under the E.F.T.A. Treaty. The decision as to whether or not the measure is contrary to the E.F.T.A. Treaty is not a matter for an international court. It is taken un within the E.F.T.A. Council, where it is decided in the normal way, and we have every confidence that we shall reach an understanding with our partners."—[OFFICIAL REPORT, 28th November, 1968; Vol. 744, c. 866.] There was no suggestion by the Minister of State that this had been discussed, and that the Government were convinced the measure was legal. The fact is that it is not within their compass to decide whether it is legal, and yet we have the Attorney-General telling us that it is.

This is a most extraordinary situation, and I suggest that our E.F.T.A. partners have not yet had an opportunity to pronounce upon it. They will not be in a position to do so until the Council has met. I therefore ask the Government to withdraw the Bill until such time as it has been pronounced upon by the members of the E.F.T.A. Council.

5.45 p.m.

Photo of Mr Charles Doughty Mr Charles Doughty , East Surrey

I have the greatest sympathy for the Attorney-General in this matter. I know he will not mind if I take a totally different view from that which he announced. It is not uncommon for lawyers to disagree. They can always do so in a pleasant way, and I shall explain my disagreement with the right hon. and learned Gentleman.

I said that I have some sympathy for the Attorney-General. The reason is that I believe the Government drafted the Bill rather hurriedly and conceived this idea without considering whether they were breaking the E.F.T.A. Agreement, or any other agreement. When the Chancellor of the Exchequer came down to the House and was asked about that, he did not have the answer ready. I am sure that if somebody in his office had asked, "Before we introduce this Measure, is there any international agreement which we might be accused of breaking?", somebody would have said, "Be careful at least about the E.F.T.A. Convention", but that did not happen. The Chancellor came down to the House and made the announcement, which no doubt was necessary in view of the balance of payments position, but that is another matter.

After the matter was raised in the House and brought to the Chancellor's attention, the issue was, for the first time, referred to the Attorney-General, who was put on the spot.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

And a very hot one, too.

Photo of Mr Charles Doughty Mr Charles Doughty , East Surrey

The Attorney-General had to try to get the Government out of a great legal difficulty in which they found themselves.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Worcestershire South

What is shocking about that?

Photo of Mr Jack Diamond Mr Jack Diamond , Gloucester

I used the word "shocking" because of the suggestion that my right hon. and learned Friend adjusts his advice for the convenience of the Government when he is advising the House.

Photo of Mr Charles Doughty Mr Charles Doughty , East Surrey

I am not suggesting anything of the sort. I began by saying that I took a different view from that taken by the Attorney-General. I take a different view of the law. If I had thought the Attorney-General had done anything of that sort, I should have used different language at the beginning of my speech.

Photo of Mr Jack Diamond Mr Jack Diamond , Gloucester

On that assurance, perhaps I might withdraw the word "shocking".

Photo of Mr Charles Doughty Mr Charles Doughty , East Surrey

I am happy to accept that and shall make no further reference to it.

I propose to refute a number of matters referred to by the Attorney-General. It is true that when we have a balance of payments problem, we can, under Article 19, take certain actions, and those actions might be a great deal more serious than those proposed in the Bill. But to say that we could have done something else does not excuse what we are doing here. That is, therefore, a matter which is referred to in the Bill. The action which we are entitled to take—and, by implication, we cannot take any other—is referred to in Article 19.

If we had gone to the E.F.T.A. countries and told them that, because of our balance of payments position, we proposed to take action under Article 19, it may be that they would willingly have agreed to that less severe action. Whether they would agree to this action is a different and hypothetical question.

When I say that there is no justification under the E.F.T.A. Convention for taking this action, I refer, first, to Article 2 which sets out the objectives of the Convention: The objectives of the Association shall be:(a) to promote in the Area of the Association and in each Member State a sustained expansion of economic activity, full employ- ment, increased productivity and the rational use of resources, financial stability and continuous improvement in living standards. In order to carry that out, the question of import duties is a vital one.

Article 3 has been read by my right hon. and learned Friend the Member for Epsom (Sir P. Rawlinson), so I will not weary the House with it again, but it says clearly: Any such duty or other charge is hereinafter referred to as an 'import duty'", and import duties are expressly forbidden under the Convention, except under the provisions of Article 19 to which I have referred already.

To say that this is not an import duty within the meaning of that Article is contrary to the words used by the right hon. and hon. Gentlemen who have put their names to the Bill. Presumably, they chose the wording, because it is their Bill. It is a Government Bill, and they are Government Ministers. The Bill is entitled: A Bill to grant a new duty of customs repayable after a specified period. What is a "duty of customs" but an import duty? It is that and nothing else.

Further on in the Preamble to the Bill, one sees the phrase, … and grant unto Your Majesty the duties hereinafter mentioned", and in Clause 1(3), one sees a reference to, The import deposit chargeable on any goods shall be payable in addition to any other duty of customs for the time being chargeable. Then, in paragraph 9 of Schedule 2, one sees a reference to the Customs and Excise Act. It is nothing else but an import charge—

Photo of Mr David Weitzman Mr David Weitzman , Stoke Newington and Hackney North

The hon. and learned Gentleman knows perfectly well that, in construing the effect of legislation, one has to have regard to the words used Is he not neglecting the words in Clause 1(2), An import deposit shall become repayable …

Photo of Mr Charles Doughty Mr Charles Doughty , East Surrey

I am not neglecting them, because an import deposit is defined as an import duty repayable after a specific period. I have put the horse before the cart. The hon. and learned Gentleman is putting the cart before the horse. The horse pulling this into existence is an import duty. What happens to an import duty to make it an import deposit is a quite different matter which can be referred to afterwards. The hon. and learned Gentleman's suggestion does not hold water.

Therefore, we are committing an act which we are not allowed to do, apparently, under the E.F.T.A. Convention. We have proposed this import duty without any right to do it. If I am right, we have broken an agreement. If we have not, we have sailed so close to the wind that we may be accused of it. Whether it is necessary for our balance of payments is another matter. When we enter into international agreements which put obligations and limitations on our power in this House to pass Bills in breach of those agreements, we shall be held in the future to have broken them. We shall be accused all over the world of making agreements and breaking them when it suits us. The mere fact of necessity is no excuse. If we have to break an agreement because our balance of payments requires it, that is no excuse. This country must keep its word throughout the world. I hope that the House will accept the Amendment.

Photo of Sir Ian Percival Sir Ian Percival , Southport

I am sure that the Committee appreciates the Attorney-General's courtesy and good will in responding so readily to the invitation to give the Committee the benefit of his advice, even though he introduced a sour note at the end of his speech. Hon. Members on all sides of the House regard it as important that, when we make agreements with other countries, we keep them. It is a necessary corollary to that that, if we propose some new measure, we should see whether it can be done as a matter of law and we ought to do it beforehand, because it dictates our whole approach to the matter.

There may be occasions when we want to pass an unlawful measure having regard to the terms of an agreement, but, having discovered that fact, I hope that we shall then go to our partners and say "We have to introduce a Measure which is in breach of our agreement. Will you agree to our doing it?".

That is one approach. The other is that which the Government are proposing, which is trying to slide out of it by saying that it is not a breach. Whether or not it is a breach is a matter which must be clarified. For that reason, I hope that the Attorney-General will reconsider what he has said. If we could hear a more convincing argument, I am sure that we on this side of the Committee would consider changing our attitude.

I agree with him and disagree with my hon. Friend the Member for Honiton (Mr. Emery) about Article 10. I think that this is not a quantitative restriction, and there is no question of a breach of that which might have been justified under Article 19. That is a complete red herring.

I agree with him and disagree with my Gentleman, too, when he says that this is a breach of Article 3, or Article 6, or nothing. I accept that. As I understand it, in his opinion, the reason why it is not a breach of Article 6 or Article 3 is that it is not a charge. One does not even have to get it within the definition of "duties". "Duties" are defined in Article 3 as … customs duties and any other charges with equivalent effect". I think that the Attorney-General would advise us that, if what we are doing here is imposing a charge, we are in breach of Article 3, Article 6 or both. That is how I understand his argument, and I hope that he is with me at the moment.

Photo of Sir Ian Percival Sir Ian Percival , Southport

I am glad to see that the right hon. and learned Gentleman agrees. It comes down, therefore, to whether what we are doing here is levying a charge.

Reference has been made to the Bill several times, and it will bear repetition. The Attorney-General said that this was not in the nature of a revenue-raising exercise. I hope that I do not do him an injustice if I say that, when he was referred to the Preamble, he appeared to be a little surprised at what he said. It says that we, … towards raising the necessary supplies to defray Your Majesty's public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to give and grant unto Your Majesty the duties hereinafter mentioned". It says that we are raising revenue for Her Majesty. It goes on in Clause 1: … there shall be charged on all goods … a duty of customs The word to which 1 draw attention is not that drawn attention to by my hon. and learned Friend the Member for Surrey, East (Mr. Doughty), but the word "charged".

This word appears all the way through. In line 25, we read The import deposit chargeable on any goods shall be payable in addition … Over the page are the words … the charge of import deposits … I ask the Attorney-General and the Committee to consider very carefully this point. If he is right that this import deposit is not a charge, what sort of mockery is the Bill? It is not right for the Committee to try to get out of it by saying that this is a technical device. We cannot have a Bill in these terms and then seek to say that it is not a charge, despite what we have called it all the way through.

Even if that were a tenable argument, and one could say, "Never mind all the references to charges," is there any meaning in the right hon. and learned Gentleman's submission that one can say that it is not a charge because it is returnable? How can something be returnable unless it is charged? This money, like any other duty—that is why it is called a duty—is being charged. A charge means that someone must pay; that is what they will have to do if the Bill becomes law. If that is not a charge in the ordinary meaning of words, I shall be extremely surprised.

I therefore hope that, before the end of this debate, the Attorney-General will draw our attention to any support which there may be for his proposition, or give us the benefit of his further advice upon it after he has reconsidered it.

Photo of Mr John Biffen Mr John Biffen , Oswestry

I have listened fascinated to the legal eloquence with which my hon. and learned Friend the Member for Southport (Mr. Percival) has destroyed a good deal of the Attorney-General's argument and I crave the latter's indulgence if I offer the comments of a mere layman. The part of the right hon. and learned Gentleman's speech to which I took some mild exception was his suggestion that this Bill does not infringe the spirit of the Stockholm Convention. I do not for a moment pretend to be able to hold my own in any legalistic argument about whether it "can be deemed to be held to be consistent" with the finest print of that Convention, but it is, possibly, a little offensive to our E.F.T.A. partners to suggest that this action does not offend the spirit of E.F.T.A.

I had the privilege to be in Stockholm a few weeks ago when the British Trade Week was being held. It was pointed out to me then what a terrific market Sweden is for the United Kingdom. On that point, it seemed that there was a good deal to be said for the proposition that the European Free Trade Area was one of the fastest growing exporting markets for this country. It is a characteristic of this kind of trade that it will be dominated to an extent by rising trade in manufactured goods, the very goods which attract deposits under the Bill.

Article 2 of the Convention makes clear the desire for free trade. My hon. Friend the Member for Honiton (Mr. Emery) established by his quotation from the Financial Secretary's speech that the purpose of the Bill is to provide some harassment of free trade. When the Convention was signed in 1960, those were the halcyon days when the world seemed to be moving towards freer trade; we were on the threshold of discussions on the Kennedy Round and had seen the beginning of the E.E.C. negotiations. Little wonder that, in that part of the Convention dealing with balance of payments difficulties and the harassments to trade which would be permissible, it is provided that consultations shall take place before they come into force, and the harassments listed are quantitative restrictions on trade.

We have had a good deal of unhappy experience since then to show that there are many other more refined ways of harassing trade than the old fashioned idea of quantitative restriction. I would like to elaborate on one or two. Article 6 wisely anticipated one, the manipulation of internal excise duties, but there are also health regulations which can be operated to bring about a restrictive consequence, and there is also the manipulation of Government purchasing to that end. These are all areas well-known to our trading partners.

Therefore, when we plead that, somehow or other, we are not breaking the spirit of the Convention because we have found some new refinement—the prior deposits scheme—we are adding a great deal of insult to injury. As has been said, these are our trading allies. As a nation with a vested interest in free trade, we presumably hope to develop those areas of activity where we can trade carelessly and without restraint. Surely, the lesson to be learned from this is that if we engage in a certain amount of cleverness in trade harassment, we shall be engaging in a war of cleverness in which we shall be outwitted.

Photo of Mr Michael Alison Mr Michael Alison , Barkston Ash

I want to support what my hon. Friend the Member for Oswestry (Mr. Biffen) has said. The Government are following the familiar pattern of the villain of Scripture, who digged a pit, and then fell into it. One of the more sinister reasons why our E.F.T.A. partners are not making the running in pointing out the iniquity of this Bill, but are leaving it to the Conservative Opposition, is precisely that they are learning from the expert cracksmen how to open the safe themselves.

Under the E.F.T.A. Convention, we have an extremely good bargain. I do not know whether the President of the Board of Trade has seen the article in last week's British Industry Weekly, headed, "Britain's £100 Million E.F.T.A. Bonus." It related to the study, which I believe will be published in January next year, of how trade among the E.F.T.A. partners has surged up as a result of the agreement, and above all of how the principal beneficiary, of all the E.F.T.A. partners, of that surging trade created through the Free Trade Area has been the United Kingdom.

The actual figures are that our own bonus, the actual increase in British exports up to 1965 alone as a result of our membership of E.F.T.A. has been £100 million, against an increase in imports of only £25 million. The list given in the article of various commodities traded among the E.F.T.A. partners gives repeated evidence that Britain has nearly always done the best. One example is plastics, in which Britain has made a 5 per cent. gain in exports, having benefited most with Norway. In electrical machinery, Britain and Sweden have benefited most, with Britain's exports up and imports static in relation to E.F.T.A.. In the textile trade, Britain has benefited most in absolute terms. In motor cars, British exports' share of the E.F.T.A. market have risen from 12 per cent. to 18 per cent. between 1959 and 1966. In clothing, again Britain is the major beneficiary, along with Sweden.

Do the Government really believe that our E.F.T.A. partners, many of whom have unfavourable balances with us, will be anything but delighted at having handed to them a perfect protectionist instrument which Her Majesty's Government have fashioned for them? The Government have demonstrated to the whole world that the change is of the most pristine purity in terms of the Convention and of our moral obligation to E.F.T.A. Of course they keep quiet—they only want the Government to show them that what they do is perfectly reasonable, and then they can do the same. The more the Government establish that what they do is entirely fair, reasonable moral and legal, the more cause there is for fear.

The slightest deliberalisation of trade must be a nightmare to the President of the Board of Trade, because he knows that Mr. Catherwood has argued most cogently that we have a greater interest than probably any other country in trade liberalisation. We now have a Republican Government in America; France is in difficulty; there may be difficulties for Germany from Japanese competition, we have the present international monetary situation. The whole trend is towards deliberalising world trade, yet here is Britain, which has most to lose, playing this particular card at this moment. Nothing could be more lunatic—and, above all, to do it to our E.F.T.A. partners, who have everything to gain by using this instrument against us—

Photo of Mr John Pardoe Mr John Pardoe , North Cornwall

The hon. Gentleman is attacking the de-liberalising of world trade, and I agree with him, but how does he square that attack with the remarks of his right hon. Friends who support the Italian scheme, which I think is a deliberate attempt to deliberalise trade?

Photo of Mr Michael Alison Mr Michael Alison , Barkston Ash

The hon. Gentleman will appreciate that the Italian scheme did not involve the payment of the six months deposit, which is what we are now arguing about. We are talking about this freezing of liquidity which is described as a selective squeeze on the liquidity of importers. That is where it differs from the Italian scheme.

Mr. Catherwood was right in saying recently that Britain's balance of payments gap will only be closed, or the improvement will only come about, not through a restriction on imports, with all the consequential tendencies for world trade to contract and be de-liberalised, but through an upsurge and expansion of world trade. The nature of our position is such that, on the whole, our imports are relatively inelastic—a lot of them represent food and raw materials which we must always have in certain quantities.

Given an increase in world trade on the whole, there is more likelihood of our exports going up and our imports remaining steady than the other way round. We benefit in logic and by our structural position by an increase in world trade. What the Government should not now be doing is introducing into the world trade situation a deliberalising measure arid, above all, giving to our E.F.T.A. partners the answer on a plate. If our E.F.T.A. partners adopt the Government's case and say that they can do the same, we shall be the losers.

Photo of Sir John Foster Sir John Foster , Northwich

It has been pointed out that to impose any brake on world trade is contrary to the spirit of the E.F.T.A. Convention, and Article 19 provides the conditions justifying stringent measures when there is a balance of payments crisis. The legal argument can be fitted into the spirit of the E.F.T.A. Convention in this way, but the Attorney-General advanced a very interesting argument. He said, "It is called a duty in the Bill, but it is not really a duty. It has been called a duty for technical reasons." The technical reason is that the Act of 1968 requires it to be called a duty for the purposes of the Ways and Means Resolution.

6.15 p.m.

There are many occasions in ordinary life and in law where a certain rule lays down that such-and-such will happen in certain cases. The person, in this case, says to the Attorney-General, "Look—it is a duty." "No," the Attorney-General replies, "It is not really a duty." There are cases both ways. In some cases a person will say, "You cannot be heard to say that it is not a duty, because you have called it a duty," but there are other cases where a person can say, "It is quite true that I have called it a duty, but it is not really a duty—therefore it is not a duty."

I submit that in this case it falls the other way because of the spirit of the E.F.T.A. Convention. The argument about whether it is a duty or not really a duty is nicely balanced, but here the balance falls right down against the Attorney-General, because he has called it a duty. In deciding whether he is bound by what he has called it, one has to look at the spirit of the E.F.T.A. Convention, and that says that we shall not put trammels on world trade; that we shall not impose duties or charges.

Let us look at the word "charge". The Attorney-General says that it is called a charge and, as my hon. and learned Friend the Member for Southport (Mr. Percival) has so cogently pointed out, it is called a charge all the way through the Bill. Is it a charge? The Attorney-General says, "No, it is called a charge, but it is not really a charge because it is refundable." The argument is much more "dicey"—if I may use the word—for the Attorney-General, because it is very doubtful indeed whether a charge does not become a charge when it is refundable. Deposits on bottles of bitter lemon are usually called deposits on the bottle because they are refundable and I do not think that the grocer calls that a charge but, in most cases, where a charge is refundable it is still a charge.

My hon. Friend the Member for Harrow, West (Mr. John Page) very kindly said of the Attorney-General that he was courteous and that he talked slowly and clearly, but I would remind the right hon. and learned Gentleman that it was said of one Attorney-General that he was courteous, that he was slow, that he was always wrong. Therefore, let the Attorney-General beware of my hon. Friend.

The Attorney-General's case falls rather on the side of the Income Tax case in which a property company used to deduct the interest it had to pay on its developments. Up to a point, the tax inspectors said, "Yes, you have to pay interest, so it is deductible". After a year or two the inspector looked at the published accounts and saw that in order to present a more attractive picture to the shareholders the company had capitalised the interest and had said that the interest, for the purpose of the accounts of shareholders was not a revenue deduction but was capitalised. The courts, when I last left the Bar—they may have reversed their decision since, as it was some years ago—had said, "If you call it a capital expenditure, it is a capital expenditure. It does not matter that you say that it is not really a capital expenditure although you have called it so". I think that it was known as the Chancery Lane case.

I do not care whether or not the decision has been reversed, because my view is that the test is, if it is contrary to the spirit of the E.F.T.A. Convention, can you be heard to say, "Although I call it a duty, it is not really a duty"? Then those concerned with the E.F.T.A. Convention see that this Measure is obviously meant to catch not only duties and charges but everything of the sort that puts a kind of brake or impediment on foreign trade.

That is what destroys the Attorney-General's legal argument which, in vacuo might have held water. It might have been said, "I call a cat a dog, but it is not really a dog, it is still a cat". The Dogs Act of 1906 gave an example of that because, in Section 7, it is said: the expression cattle' includes horses …

Photo of Mr Myer Galpern Mr Myer Galpern , Glasgow Shettleston

Order. The hon. and learned Member is straying and must come back to the Amendment.

Photo of Sir John Foster Sir John Foster , Northwich

I was trying to give an example of the way in which the Attorney-General might, in certain circumstances, have said that poultry does not include cattle.

The right hon. and learned Gentleman has not satisfied the Committee. To say, "It is not really that because call it that for technical reasons", it is so near that one is entitled to go outside the strict wording to see what the E.F.T.A. Convention provides. The E.F.T.A. Ministers may say, "It is a breach, but we shall forgive you", or they may say, in the case of an indulgent Government, that it is not a breach at all. I hope that they will say that, but that does not stop the wrongness of introducing a Bill not knowing exactly what the E.F.T.A. Ministers will say.

Photo of Mr John Peyton Mr John Peyton , Yeovil

My hon. and learned Friend the Member for Northwich (Sir J. Foster) has been exceedingly merciful to the Attorney-General. It appeared that the Attorney-General this afternoon was answering the quite simple question, when is an import duty not an import duty? He conveniently forgot, or glossed over, the words in the Bill which have already been mentioned. I refer to only one instance, which says: The import deposit chargeable on any goods shall be payable in addition to any other duty of customs. The plain meaning of those words surely is that the import duty is to be regarded as just another form of customs duty. Those words cannot be read in any other way. Although I would not put myself forward against such an authority as my hon. and learned Friend, I nevertheless would have said that the Attorney-General, in his legal argument, stands stripped of any authority more profound than that of Humpty-Dumpty, who said that a word means exactly just what I choose it to mean.

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

What I endeavoured to say was that a payment which is repayable unconditionally and automatically after the efflux ion of a given period of time—and that is the arrangement—ab initio is not a charge within the meaning of the E.F.T.A. Agreement. That is the point on which I advised the Committee and, in my view, it is a valid point.

Photo of Mr John Peyton Mr John Peyton , Yeovil

I listened to every word the Attorney-General said and, with great respect for his office and himself, I find myself unable to accept that argument. I go back to the speech—as one would expect, a very cogent and courteous speech—made by my right hon. and learned Friend the Member for Epsom (Sir P. Rawlinson). At one point he menacingly reminded the Attorney-General that, in making the speech he was to make, it was his duty to advise not only the Government but the House of Commons. I felt quite unable to echo the remark of my hon. and learned Friend the Member for Southport (Mr. Percival), who thanked the Attorney-General. I feel no gratitude to him for the advice we had this afternoon, although I felt some sympathy with him in the awkward predicament in which he was placed.

I want to say a word or two about the second argument used by the Attorney-General on whether this was in breach of the spirit of the E.F.T.A. Agreement. It seems that the Government have been singularly inept, unprepared and clumsy in their approach to E.F.T.A. about whom they should have been warned because we have already trodden pretty firmly on E.F.T.A.'s toes. I entirely agree with my hon. Friends the Members for Barkston Ash (Mr. Alison) and Oswestry (Mr. Biffen). The Attorney-General this afternoon, in riding lightly off the argument, said that our friends—indeed, they are friends—will forgive us out of pity for our difficulties, for having cheated once more. This is a disgraceful position for any British Government to have got themselves into. It is impossible not to feel some sympathy with the right hon. and learned Gentleman in the acute embarrassment he was in this afternoon.

I remind the Committee of some words which were spoken by the Financial Secretary to the Treasury on 28th November. The Committee will recall this quotation from the Second Reading debate when we discussed what the Government had done and our relations with E.F.T.A. The Financial Secretary used these words, which seem extraordinary: On the other hand, I do not want to let any words fall which appear to prejudge the completely free discussion and decision of this matter by the E.F.T.A. Ministers themselves."—[OFFICIAL REPORT, 28th November. 1968; Vol. 774, c. 755.] In other words, discussions here would be very embarrassing because it could be that our partners in E.F.T.A., out of charity and kindness, would not wish to make this point. Therefore, we would be adding to the embarrassment of the Government if we unnecessarily called attention to the fact that they were cheating. I do not think the House of Commons should put up with that sort of thing. We should protest most strongly against it.

I do not want to take up the time of the Committee further because I am conscious that some of my hon. Friends who have far greater authority than I have wish to speak. I appreciate particularly what my hon. and learned Friend the Member for Northwich said. The Government have put the House of Commons and the country into an embarrassing and shameful position which the Attorney-General has done nothing this afternoon to alleviate.

Photo of Sir Douglas Glover Sir Douglas Glover , Ormskirk

We have had a very interesting debate. I have a great deal of sympathy for the Attorney-General. I agree with my hon. Friend the Member for Harrow, West (Mr. John Page) that the Attorney-General speaks slowly and with great charm, but, I regret to say, very often I cannot agree with him. It seems that the Government are turning the E.F.T.A. Convention into a scrap of paper like the Treaty which Germany had with Belgium before 1914.

This is the second or third occasion on which we have been in breach of the E.F.T.A. Convention, if not in law, certainly in the spirit of the Convention. E.F.T.A. people are our friends, but I think that a great many of them may be saying, "Lord protect us from our friends and put us in the hands of our enemies". The way in which Britain has behaved in this matter seems deplorable. What worries me is that all the things the Government have said have implied that the Opposition is wrong in raising this matter of legality and the spirit of E.F.T.A. and that we should allow all this to go through silently in the night. It implies that the Government are not criticising the Opposition but have guilty consciences. They knew perfectly well that they were sailing very close to the E.F.T.A. wind when they decided to do this.

If the President of the Board of Trade considers that consultation with our E.F.T.A. friends took place on the Friday afternoon when, more or less at the same time, the Chancellor of the Exchequer was making a categorical announcement in the House about the Government proposals, I should not have thought that that was giving our partners any chance to put forward their views.

6.30 p.m.

The Government say further that we should not argue about this matter on the Floor of the House because it might affect what happens when the E.F.T.A. partners meet to consider whether we are in breach of the Convention. This is standing honesty and integrity on its head. If the Government have made a mistake and if they know that they will not be able to refute the arguments likely to be put to them by their E.F.T.A. friends, they should, if they are honest, withdraw the Bill until they have cleared it with E.F.T.A. To proceed contrary to that after all the arguments put forward by hon. and learned Members is asking for trouble. It spoils, not the Government's name—I could not care tuppence about the Government—but Britain's name in international conferences and affairs, makes their word less credible and makes people more worried about whether they can accept Britain's word when they sign their name to a convention or treaty.

If, as appears, that is the position, the Government have been very ill advised in bringing this Measure before us in the form of a Bill until they have cleared it with E.F.T.A., and I still think that they should do that today.

Photo of Mr Thomas Boardman Mr Thomas Boardman , Leicester South West

On the legal point, I am at a loss to follow the distinction between a tax or duty and what is proposed here, which is to take from someone something to which he would otherwise be entitled, namely, the income on a sum of money which he has been forced to leave in the Government's hands. I do not see the distinction between that and taking apples off a tree, which is the illustration used in many legal circles. The tree is left, but it cannot be said that the owner has not been deprived of something. Clearly, this is a charge and a duty, as the Bill provides. My hon. and learned Friend the Member for Northwich (Sir J. Foster) referred to the bottle deposit but I would make the point that in that case the person has the use of the bottle during the period concerned. But here the person paying the deposit receives nothing.

The legal point has been widely argued. If this is not contrary to the spirit of the E.F.T.A. agreement, would it not be equally consistent with the spirit of that agreement if the Government decided to make interest-free loans to those who export measured against the value of the exports sent out? The Attorney-General might well say that this would be a subsidy, but for his argument to be consis- tent he could not say that. But it is beyond dispute that that would be against the spirit of the E.F.T.A. agreement.

For those reasons, it is deplorable to put this measure forward as neither a duty nor a charge.

Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby

Most hon. Members will be relieved to know that I am not a lawyer. I am quite incompetent to take part in the legal arguments exchanged across the Committee. But I am authorised by the Attorney-General to say that he, having listened to all the points which have been made, is not disposed to alter the legal advice which he tendered to the Committee earlier. A number of political points have been made and addressed more to me than to my right hon. and learned Friend. Perhaps I could deal with those.

A number of hon. Members opposite raised the point about possible consultation. Perhaps I could correct the hon. Member for Ormskirk (Sir D. Glover) on one point. When I intervened in the speech of the Leader of the Opposition on Monday last week, I did not claim that there had been consultation in any proper sense of the term. I was merely rebutting the statement which he had made that the matter had not even been discussed. I would not claim that there had been genuine consultation in the sense which hon. Members opposite and myself would attach to the word. But I wonder whether it is seriously suggested that in a case like this there could have been real consultation as to whether we should have introduced this Measure.

Perhaps I could put to the Committee the circumstances of the case. This decision was announced the week before last. That was a week of intense international monetary crisis when the Finance Ministers of the Group of Ten were meeting in Bonn. I cannot think that it is seriously suggested that during that week Her Majesty's Government, before taking a decision, should have gone to the other E.F.T.A. Governments which happened to be assembled at the Ministerial Council in Vienna, and said, "We should like to consult you, first, about whether we should do anything to restrain our imports and, secondly, if we are to do something, which of the possible measures you would prefer". Is it suggested that we should have had with them a consultation which, if it were to be real, would have taken, with their advisers, two or three days, the result of which would certainly have leaked?

I suggest that true consultation, which I am not pretending occurred, on a matter like this is no more possible than true prior consultation on, say, tax changes or exchange rate changes. Not one of the E.F.T.A. Ministers has criticised us for not consulting in this way. Article 19 of the E.F.T.A. Convention, which refers to quantitative restrictions, which in some sense are legal, does not suggest that there should be consultation before they are imposed. It suggests only that they should be notified to the Ministerial Council. To have proper prior consultation in those circumstances would be a derogation of the sovereignty of any British Government, which was never envisaged when the E.F.T.A. Convention was drawn up and which would never be accepted by either side of the Committee.

Photo of Mr John Biffen Mr John Biffen , Oswestry

I am interested in the right hon. Gentleman's comment about the difficulties arising from the international monetary crisis, but does he recollect that the Chancellor of the Exchequer argued that the package was not related to the international monetary crisis and that it was, to some extent, a coincidence that the two came together? Surely the question of import deposits was considered by the Government long before the international monetary crisis blew up. Was not that the time when consultations should have been considered?

Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby

Clearly the hon. Gentleman did not hear the speech of my right hon. Friend the Chancellor of the Exchequer, who made it clear that, on the one hand, these measures were not determined as a result of the Bonn meeting of the Group of Ten but that, on the other hand, they were linked to the international monetary crisis.

The second point which was raised concerned the spirit of the E.F.T.A. agreement. I hope that I am as anxious as any of the critics to maintain and enhance the spirit of E.F.T.A. Some of the language used by, for example, the hon. Member for Yeovil (Mr. Peyton) is quite inappropriate to these discussions and wholly out of line with any language used by any of the other E.F.T.A. Ministers.

We must all form our own judgment about the spirit of E.F.T.A.; I cannot claim unique accuracy for mine. I can only report my impression—and, after all, I was at the Ministerial Council—that the E.F.T.A. reaction was not as it has been painted today by hon Members opposite. There was a general recognition that we had to do something to restrain our imports and that of the possible measures open to us we had chosen the one least damaging to E.F.T.A. trade. As far as I remember, during the whole of that afternoon, the question of legality was not mentioned in the Ministerial Council. I can only give my impression as honestly as I can that what has been said about the threat to the spirit of E.F.T.A. today is not in accordance with the facts.

The next question raised was: should E.F.T.A. have been excluded from the operation of the import deposit scheme? This is the object of Amendment No. 98, in the name of the hon. Member for Honiton (Mr. Emery). I put it to the Committee that whatever international repercussions there are from the scheme as a whole, with E.F.T.A. in, would be as nothing to the international repercussions if we were to make this a positively discriminatory scheme. Successive British Governments, like almost all Governments of advanced countries in the world, have long been committed to the principle that, if they had to do something about imports, they would do it in a non-discriminatory way. I assure the Committee that any attempt to exclude E.F.T.A. would make the international repercussions of the scheme ten times worse than they can possibly be as it now stands.

I was asked what representations had been received. I assure the hon. Member for Worcestershire, South (Sir G. Nabarro) that I have read, as he heard reported on the radio, I think, the very critical speech by the Danish Finance Minister. We have, in addition, as the Committee knows, received representations from the Prime Minister of Ireland. Apart from those, no representations have been received since the Vienna Conference from any other E.F.T.A. country. All the other E.F.T.A. countries are satisfied that we should now follow the normal procedure in these matters, that is, that the question should go to the E.F.T.A. Official Council for its consideration in the weeks and months ahead.

Photo of Sir Arthur Harvey Sir Arthur Harvey , Macclesfield

The right hon. Gentleman explains away the E.F.T.A. countries, but will he say what representations have been received from the Government of Malta, a Government to which we are giving great support, which they most certainly require?

Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby

As this was a debate about E.F.T.A., I replied in terms of the E.F.T.A. countries. I understand that representations have been received from the Government of Malta, but I cannot say off-hand what they are. If their nature is not known, or if no announcement has been made, I shall discover what I can and write to the hon. Gentleman.

For me, this debate has had an unreal quality. Its tone and atmosphere has been strikingly different from the tone and atmosphere of the debate which took place in the E.F.T.A. Ministerial Council. I am sure that the motive of those who have spoken has been a genuinely patriotic motive. I do not question that, despite some of the excessively violent language used. I end by expressing my personal judgment that the repercussions in E.F.T.A. will be not one-tenth as serious or damaging to this country, to E.F.T.A. or the spirit of E.F.T.A. as some of the more violent speeches from the benches opposite today have suggested.

Photo of Mr Peter Rawlinson Mr Peter Rawlinson , Epsom

When the Minister, in winding up, refers to patriotism in those terms, I become suspicious. These Amendments were put down because it was the duty of the Opposition to press them. They were put down because it appeared to us that the Government had prepared this scheme ill-advisedly, without proper consultation and without recognition of the legal issues and the responsibilities and liabilities of this country under the Convention.

None of my right hon. and hon. Friends would wish to do anything which might damage or cause difficulty for Britain, but it is the duty of the House of Commons to examine closely the legislation which is put before it.

The right hon. Gentleman spoke of the urgency and agony of the crisis. I am sure that that was so and there was not time for consultation, but I remind him that, at the time of the European negotiations which were led by my right hon. Friend the Leader of the Opposition, there was conference and consultation with the E.F.T.A. countries in the 24 hours before an announcement was made in the House. However, perhaps because of the urgency and agony of the situation, the effect which the scheme would have under the E.F.T.A. Convention was not closely thought out, and, with the greatest respect to the right hon. Gentleman, the expression upon the Chancellor of the Exchequer's face when he had to meet that question revealed that in all the matters which he had to take into account his advisers had not gone into the point and had not considered the real legal position under the Convention.

I listened with care to the Attorney-General, who was invited to come here and give his advice as adviser to the House. I regret that, at the end of it, he introduced, by tone if not by word, the suggestion of some reflection on the patriotism of those who have raised the question.

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

If any such inference could have been drawn from what I said, I certainly did not intend it, and I withdraw it. I detected a slight element of party faction at one point in some of the speeches which I heard.

6.45 p.m.

Photo of Mr Peter Rawlinson Mr Peter Rawlinson , Epsom

With respect, I was the only one who had spoken at that stage, and I had not introduced the matter in terms of party faction. I made clear that what we wanted was advice. We wanted to hear the argument. I tell the right hon. and learned Gentleman categorically that, having listened to his argument—I am not alone in this—I cannot for the life of me see that it can be sustained. Knowing the Attorney-General's considerable powers of advocacy, I am certain that, if he had had to argue his case before the Revenue Court, with the judge able to interrupt, he would have had a far more difficult time than he had here in advising the House of Commons in Committee.

My right hon. and hon. Friends have discussed the detail of the argument, subjecting it to close analysis. It comes down to this: call it what one will, this is a duty, as it is described in the Bill. The right hon. and learned Gentleman may recite that it is not. He may try to explain it away. Although I accept that in his own mind he has explained it away, on his view of the law, by saying that the provisions are so drafted for a purely technical reason, we remain unconvinced. On 26th November, the Financial Secretary to the Treasury—perhaps it was at an early hour in the morning; I am not sure—flatly referred to it as a customs charge. We find his words in column 264 of the OFFICIAL REPORT. In reality, that is what it is, and that is what economics Ministers know perfectly well it is.

The Attorney-General was forced to examine the matter at a time when the Bill was coming before the House. I regret to say that I and, I think, some of

my right hon. and hon. Friends totally disagree with the argument which he has put to us. I accept the Attorney-General's advice as advice which he gives to the House, but other circumstances and issues still remain. I strongly suspect that Ministers did not go to the Attorney-General for advice earlier on. I believe that this point took them by surprise. Because of this revelation, once again, of the incompetence of the present Administration, I advise my hon. and right hon. Friends to vote for the Amendment.

Question put, That the Amendment be made:—

The Committee divided: Ayes 181, Noes 256.

Division No. 17.]AYES[6.48 p.m.
Alison, Michael (Barkston Ash)Gilmour, Sir John (Fife, E.)Mawby, Ray
Allason, James (Hemel Hempstead)Glover, Sir DouglasMaxwell-Hyslop, R. J.
Atkins, Humphrey (M't'n & M'd'n)Godber, Rt. Hn. J. B.Mills, Peter (Torrington)
Baker, Kenneth (Acton)Goodhew, VictorMills, Stratton (Belfast, N.)
Baker, W. H. K. (Banff)Gower, RaymondMiscampbell, Norman
Beamish, Col. Sir TuftonGrant-Ferris, R.Mitchell, David (Basingstoke)
Bell, RonaldGrieve, PercyMonro, Hector
Bennett, Sir Frederic (Torquay)Grimond, Rt. Hn. J.Montgomery, Fergus
Bennett, Dr. Reginald (Gos. & Fhm)Hall, John (Wycombe)More, Jasper
Berry, Hn. AnthonyHall-Davis, A. G. F.Morgan, Geraint (Denbigh)
Biffen, JohnHamilton, Lord (Fermanagh)Morrison, Charles (Devizes)
Biggs-Davison, JohnHamilton, Michael (Salisbury)Munro-Lucas-Tooth, Sir Hugh
Birch, Rt. Hn. NigelHarris, Frederic (Croydon, N.W.)Murton, Oscar
Black, Sir CyrilHarrison, Brian (Maldon)Naharro, Sir Gerald
Blaker, PeterHarrison, Col, Sir Harwood (Eye)Neave, Airey
Boardman, Tom (Leicester, S.W.)Harvey, Sir Arthur VereNott, John
Boyd-Carpenter, Rt. Hn. JohnHarvie Anderson, MissOnslow, Cranley
Boyle, Rt. Hn. Sir EdwardHastings, StephenOrr, Capt. L. P. S.
Brewis, JohnHawkins, PaulOrr-Ewing, Sir Ian
Brinton, Sir TattonHeald, Rt. Hn. Sir LionelOsborne, Sir Cyril (Louth)
Brown, Sir Edward (Bath)Heath, Rt. Hn. EdwardPage, Graham (Crosby)
Bruce-Gardyne, J.Heseltine, MichaelPage, John (Harrow, W.)
Buchanan-Smith, Alick (Angus, N & M)Higgins, Terence L.Pardoe, John
Buck, Antony (Colchester)Hiley, JosephPercival, Ian
Bullus, Sir EricHill, J. E. B.Peyton, John
Burden, F. A.Hirst, GeoffreyPowell, Rt. Hn. J. Enoch
Campbell, B. (Oldham, W.)Holland, PhilipPrice, David (Eastleigh)
Clark, HenryHordern, PeterPrior, J. M. L.
Clegg, WalterHornby, RichardPym, Francis
Cooke, RobertHowell, David (Guildford)Quennell, Miss J. M.
Cooper-Key, Sir NeillHutchison, Michael ClarkRawlinson, Rt. Hn. Sir Peter
Cordle, JohnIremonger, T. L.Rees-Davies, W. R.
Corfield, F. V.Irvine, Bryant Godman (Rye)Renton, Rt. Hn. Sir David
Costain, A. P.Jenkin, Patrick (Woodford)Rhys Williams, Sir Brandon
Cunningham, Sir KnoxJennings, J. C. (Burton)Ridley, Hn. Nicholas
Currie, G. B. H.Johnson Smith, G. (E. Grinstead)Ridsdale, Julian
Dalkeith, Earl ofJoseph, Rt. Hn. Sir KeithRossi, Hugh (Hornsey)
Dance, JamesKaberry, Sir DonaldRussell, Sir Ronald
Davidson, James (Aberdeenshire, W.)Kerby, Capt. HenrySandys, Rt. Hn. D.
d'Avigdor-Goldsmid, Sir HenryLancaster, Col. C. G.Scott-Hopkins, James
Dean, PaulLegge-Bourke, Sir HarryShaw, Michael (Sc'b'gh & Whitby)
Deedes, Rt. Hn. W. F. (Ashford)Lewis, Kenneth (Rutland)Smith, Dudley (W'wick & L'mington)
Digby, Simon WingfieldLubbock, EricSmith, John (London & W'minster)
Doughty, CharlesMacArthur, IanSpeed, Keith
Drayson, G. B.Mackenzie, Alasdair (Ross & Crom'ty)Staunton, Keith
Eden, Sir JohnMaclean, Sir FitzroySteel, David (Roxburgh)
Elliot, Capt. Walter (Carshalton)Macmillan, Maurice (Farnham)Stodart, Anthony
Emery, PeterMcNair-Wilson, PatrickStoddart-Scott, Col. Sir M.
Eyre, ReginaldMaddan, MartinSummers, Sir Spencer
Farr, JohnMaginnis, John E.Tapsell, Peter
Fletcher-Cooke, CharlesMarten, NeilTaylor, Sir Charles (Eastbourne)
Fortescue, TimMaude, AngusTaylor, Edward M. (G'gow, Cathcart)
Foster, Sir JohnMaudling, Rt. Hn. ReginaldTemple, John M.
Fraser, Rt. Hn. Hugh (St'fford & Stone)Thatcher, Mrs. Margaret
Thorpe, Rt. Hn. JeremyWard, Dame IreneWolrige-Gordon, Patrick
Turton, Rt. Hn. R. H.Webster, DavidWood, Rt. Hn. Richard
van Straubenzee, W. R.Wells, John (Maidstone)Woodnutt, Mark
Vaughan-Morgan, Rt. Hn. Sir JohnWhitelaw, Rt. Hn. WilliamWright, Esmond
Waddington, DavidWilliams, Donald (Dudley)
Wainwright, Richard (Colne Valley)Wills, Sir Gerald (Bridgwater)TELLERS FOR THE AYES:
Walker-Smith, Rt. Hn. Sir DerekWilson, Geoffrey (Truro)Mr. R. W. Elliott and
Wall, PatrickWinstanley, Dr. M. P.Mr. Timothy Kitson.
NOES
Abse, LeoFletcher, Rt. Hn. Sir Eric (Islington, E.)McKay, Mrs. Margaret
Albu, AustenFletcher, Ted (Darlington)Mackenzie, Gregor (Rutherglen)
Allaun, Frank (Salford, E.)Foley, MauriceMackie, John
Alldritt, WalterFoot, Rt. Hn. Sir Dingle Ipswich)Mackintosh, John P.
Allen, ScholefieldFoot, Michael (Ebbw Vale)Maclennan, Robert
Anderson, DonaldForrester, JohnMcMillan, Tom (Glasgow, C.)
Archer, PeterFowler, GerryMcNamara, J. Kevin
Ashton, Joe (Bassetlaw)Fraser, John (Norwood)MacPherson, Malcolm
Atkins, Ronald (Preston, N.)Freeson, ReginaldMahon, Peter (Preston, S.)
Atkinson, Norman (Tottenham)Gardner, TonyMahon, Simon (Bootle)
Bacon, Rt. Hn. AliceGarrett, W. E.Manuel, Archie
Bagier, Gordon A. T.Ginsburg, DavidMapp, Charles
Barnes, MichaelGordon Walker, Rt. Hn. P. C.Marks, Kenneth
Beaney, AlanGray, Dr. Hugh (Yarmouth)Marsh, Rt. Hn. Richard
Bence, CyrilGreenwood, Rt. Hn. AnthonyMason, Rt. Hn. Roy
Bennett, James (G'gow, Bridgeton)Grey, Charles (Durham)Mellish, Rt. Hn. Robert
Bidwell, SydneyGriffiths, David (Rother Valley)Mendelson, John
Binns, JohnGriffiths, Eddie (Brightside)Mikardo, Ian
Bishop, E. S.Hamilton, James (Bothwell)Millan, Bruce
Blackburn, F.Hamilton, William (Fife, W.)Miller, Dr. M. S.
Boardman, H. (Leigh)Hamling, WilliamMilne, Edward (Blyth)
Booth, AlbertHannan, WilliamMitchell, R. C. (S'th'pton, Test)
Boston, TerenceHarper, JosephMorgan, Elystan (Cardiganshire)
Boyden, JamesHarrison, Walter (Wakefield)Morris, Alfred (Wythenshawe)
Braddock, Mrs. E. M.Hart, Rt. Hn. JudithMorris, Charles R. (Openshaw)
Bray, Dr. JeremyHaseldine, NormanMorris, John (Aberavon)
Brooks, EdwinHattersley, RoyMoyle, Roland
Brown, Hugh D. (G'gow, Provan)Hazell, BertMulley, Rt. Hn. Frederick
Brown, R. W. (Shoreditch & F'bury)Healey, Rt. Hn. DenisMurray, Albert
Buchan, NormanHeffer, Eric S.Neal, Harold
Buchanan, Richard (G'gow, Sp'burn)Newens, Stan
Butler, Herbert (Hackney, C.)Henig, StanleyNoel-Baker, Rt. Hn. Philip (Derby, S.)
Callaghan, Rt. Hn. JamesHerbison, Rt. Hn. MargaretNorwood, Christopher
Cant, R. B.Hobden, DennisOakes, Gordon
Carmichael, NeilHorner, JohnO'Malley, Brian
Carter-Jones, LewisHowarth, Harry (Wellingborough)Oram, Albert E.
Coe, DenisHowie, W.Orbach, Maurice
Coleman, DonaldHoy, JamesOrme, Stanley
Conlan, BernardHughes, Emrys (Ayrshire, S.)Oswald, Thomas
Corbet, Mrs. FredaHughes, Hector (Aberdeen, N.)Owen, Dr. David (Plymouth, S'tn)
Cradclock, George (Bradford, S.)Hughes, Roy (Newport)Owen, Will (Morpeth)
Crawshaw, RichardHunter, AdamPadley, Walter
Crosland, Rt. Hn. AnthonyHynd, JohnPaget, R. T.
Cullen, Mrs. AliceIrvine, Sir Arthur (Edge Hill)Palmer, Arthur
Dalyell, TamJackson, Colin (B'h'se & Spenb'gh)Pannell, Rt. Hn. Charles
Darling, Rt. Hn. GeorgeJackson, Peter M. (High Peak)Park, Trevor
Davidson, Arthur (Accrington)Jay, Rt. Hn. DouglasParker, John (Dagenham)
Davies, Ednyfed Hudson (Conway)Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)Parkyn, Brian (Bedford)
Davies, G. Elfed (Rhondda, E.)Jenkins, Hugh (Putney)Pavitt, Laurence
Davies, Dr. Ernest (Stretford)Jenkins, Rt. Hn. Roy (Stetchford)Pearson, Arthur (Pontypridd)
Davies, Ifor (Gower)Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)Peart, Rt. Hn. Fred
Davies, S. O. (Merthyr)Jones, J. Idwal (Wrexham)Pentland, Norman
Delargy, HughJones, T. Alec (Rhondda, West)Perry, Ernest G. (Battersea, S.)
Dell, EdmundKenyon, CliffordPerry, George H. (Nottingham, S.)
Dempsey, JamesKerr, Mrs. Anne (R'ter & Chatham)Prentice, Rt. Hn. R. E.
Dewar, DonaldKerr, Dr. David (W'worth, Central)Price, Christopher (Perry Barr)
Diamond, Rt. Hn. JohnLawson, GeorgePrice, Thomas (Westhoughton)
Dickens, JamesLeadhitter, TedPrice, William (Rugby)
Dobson, RayLedger, RonProbert, Arthur
Doig, PeterLee, Rt. Hn. Frederick (Newton)Randall, Harry
Dunn, James A.Le, John (Reading)Rees, Merlyn
Dunnett, JackLever, Harold (Cheetham)Roberts, Albert (Normanton)
Dunwoody, Mrs. Gwyneth (Exeter)Lever, L. M. (Ardwick)Roberts, Gwilym (Bedfordshire, S.)
Eadie, AlexLewis, Arthur (W. Ham, N.)Robinson, Rt. Hn. Kenneth (St. P'c'as)
Edwards, Robert (Bilston)Lewis, Ron (Carlisle)Rodgers, William (Stockton)
Edwards, William (Merioneth)Lomas, KennethRoebuck, Roy
Ellis, JohnLoughlin, CharlesRogers, George (Kensington, N.)
English, MichaelLyons, Edward (Bradford, E.)Roes, Rt. Hn. William
Ennals, DavidMcBride, NeilRowlands, E.
Evans, Fred (Caerphilly)McCann, JohnShaw, Arnold (Ilford, S.)
Ewing, Mrs. WinifredMacColl, JamesSheldon, Robert
Fernyhough, E.Macdonald, A. H.Shinwell, Rt. Hn. E.
Finch, HaroldMcGuire, MichaelShort, Rt. Hn. Edward (N'c'tle-u-Tyne)
Silkin, Rt. Hn. John (Deptford)Varley, Eric G.Williams, Alan Lee (Hornchurch)
SKefffington, ArthurWainwright, Edwin (Deame Valley)Williams, Clifford (Abertillery)
Small, WilliamWalker, Harold (Doncaster)Williams, Mrs. Shirley (Hitchin)
Spriggs, LeslieWallace, GeorgeWilliams, W. T. (Warrington)
Steele, Thomas (Dunbartonshire, W.)Watkins, David (Consett)Willis, Rt. Hn. George
Stonehouse, Rt. Hn. JohnWatkins, Tudor (Brecon & Radnor)Wilson, William (Coventry, S.)
Strauss, Rt. Hn. G. R.Weitzman, DavidWinnick, David
Swain, ThomasWellbeloved, JamesWoodburn, Rt. Hn. A.
Swingler, StephenWells, William (Walsall, N.)Woof, Robert
Symonds, J. B.Whitaker, BenWyatt, Woodrow
Taverne, DickWhitlock, William
Tinn, JamesWilkins, W. A.TELLERS FOR THE NOES:
Tuck, RaphaelWilley, Rt. Hn. FrederickMr. loan L. Evans and
Urwin, T. W.Williams, Alan (Swansea, W.)Mr. Ernest Armstrong.

Photo of Mr Myer Galpern Mr Myer Galpern , Glasgow Shettleston

The next Amendment is Amendment No. 1, with which it might he for the convenience of the Committee to take Amendment No. 2, in page 1, line 16, leave out 'fifty' and insert 'twenty-five'.

[Mr. HARRY GOURLAY in the Chair]

Photo of Mr John Peyton Mr John Peyton , Yeovil

I beg to move, Amendment No. 1, in page 1, line 16, leave out 'fifty' and insert 'thirty'.

The charge that we on this side of the Committee make against the Measure is that it is vague, ill thought out and unpredictable in its effect. Because we believe it to be so full of those vices, we think that it would be a good thing if its immediate impact were lessened by the simple reduction from 50 to 30 per cent. This does not mean that we necessarily think that 30 per cent. would be a good thing.

7.0 p.m.

It is impossible not to admire the sagacity and dexterity of the Financial Secretary. On Second Reading he devoted no less than two-thirds of a column in HANSARD to the details of the Measure and thereafter skated on to talk of more joyous things such as the Opposition's Amendment, which gave him a good deal more joy than the Measure of which he was at least the foster-parent at that moment. I have never seen an example of anyone more ashamed of his own child than the Financial Secretary. One can always tell by the hon. Gentleman's attitude towards the subject he is discussing whether he is enthusiastic. When his enthusiasm is at a low ebb, he deals with the matter in hand very rapidly indeed. On that occasion the Bill received but scant attention from him.

The Government are exceedingly vague about what is being done in the Bill. In moving the Second Reading of the Bill the Financial Secretary said this: I shall leave the details of the Bill for more consideration as the debate develops". We greatly hope that the moment has now come when the hon. Gentleman will be able to open his mind and that his mind will have more in it as to the effects of the Bill than it evidently had on Second Reading. He said later: I do not know exactly, or even within a wide range, what the effect will be … I am hoping that there will be a significant and marginal effect in terms of imports themselves. It is impossible to read the hon. Gentleman's speech without concluding that the Government, in putting forward this hotch-potch Measure, have no idea whether it will have a serious effect or none. This gives us ground for great concern. It would at least appear to us that the Government have given little thought to the effects of the Measure upon those wretched people who have to conduct businesses in Britain and who trade overseas.

I have often wished that Ministers, particularly of this Administration, but I have wished it of others, could be obliged to take part in the business of trade so that they could feel at first hand the impact of the Measures they promulgate. It would not be such a bad thing if this practice were to be extended to the Treasury and other Government Departments, particularly the Customs and Excise.

I am sorry to quote the words of the Financial Secretary so often, but we have not got very much Government literature on this subject. Later in his Second Reading speech he said this: … there will be no one who cannot find the money. It could be, in these circumstances of squeeze, that many people conducting businesses, and not all of them small, find their resources stretched to the utmost and who, even if they can find the money, will not wish to undertake greater and more expensive commitments.

Still later in his Second Reading speech the hon. Gentleman repudiated the possibility of the Bill's bringing many businesses, small, medium or large, to bankruptcy."—[OFFICIAL REPORT, 28th November, 1968; Vol. 774, c. 750–2.] I would like to know the measure of the hon. Gentleman's confidence in that repudiation. Does he consider that the Bill will have only a marginal effect? We should like to know how slight the margin is. We warn the Financial Secretary that some margins can be oppressive and that, added to some of the other burdens which have been put upon businesses, this will bear harshly indeed.

How much though has gone into the organisation and the method of operation of this scheme? As to precedents and general design—

Photo of Mr Harry Gourlay Mr Harry Gourlay , Kirkcaldy District of Burghs

Order. I must ask the hon. Gentleman to address his remarks to the Amendment which is to leave out "fifty" and insert "thirty".

Photo of Mr John Peyton Mr John Peyton , Yeovil

I am sorry, Mr. Gourlay. I have failed to make my argument clear. The whole point of this, if I may repeat words I used at the very beginning of my speech, is that the Bill is a vague, ill-thought-out hotch-potch. Therefore, with great respect, I think that I am entitled to argue that it would be less vicious in its effect if it had an experimental period, at, say, 30 per cent. rather than the proposed 50 per cent. With respect, 1 do not believe that I have strayed very far from that point, but I will certainly do my best to comply with your requirement.

The only people whose convenience has been consulted are the Commissioners of Customs and Excise. I do not know whether the Financial Secretary has seen the first letter in today's Financial Times. It is from a Mr. Arditti, an accountant, who writes: Whether or no this is convenient for Customs and Excise is not relevant. It would suit the business man who is forced to lend huge sums of money free of interest. That is the alternative method which the correspondent suggests.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

I am listening attentively and am anxious to answer every point, but I am not clear what the point is that the hon. Gentleman is making. He has read part of a letter which I regret has not yet come to my attention. I do not know what the complaint is.

Photo of Mr John Peyton Mr John Peyton , Yeovil

I will willingly give the Financial Secretary my copy. I read the letter only to indicate the indignation of business men and the feeling that their suggested methods have not been considered but only the suggestions and convenience of the Commissioners of Customs and Excise have been considered.

I am also very concerned as to how the Government reached their conclusions about what should be in and what should be out of the Bill. The Financial Secretary made it clear that £3,000 million would be inside the Bill whereas about £6,000 million would be excluded. I wonder how some of these decisions have been arrived at. I cannot see why all food should be excluded. Britain is suffering at the moment from a considerable glut of imports of so-called Cheddar cheese.

Photo of Mr John Peyton Mr John Peyton , Yeovil

I agree. Perhaps the Financial Secretary can explain the justification for excluding caviar.

Photo of Mr Harry Gourlay Mr Harry Gourlay , Kirkcaldy District of Burghs

Order. We are not debating what should be in the Bill and what should not. We are discussing whether it should be "thirty" or "fifty".

Photo of Mr John Peyton Mr John Peyton , Yeovil

I am sorry, Mr. Gourlay. I am endeavouring to suggest that the Bill has been ill-thought-out. I seek to illustrate that point. Because it has been ill-thought-out, I suggest that the percentage should be reduced from 50 to 30. I am sorry if I have appeared to transgress your Ruling, but, with respect, I do not think I have done so.

I am not going into any of these points in detail. I am asking what thought has been given, for instance, to goods which are required to fulfil Government defence contracts. What thought has been given, for instance, to finished specialised steels which are not available in this country? As the Bill stands, these matters have evidently not received any or adequate thought. That is the point which I wish to ram home to the Financial Secretary and the Government.

One might ask what about goods imported by one person for re-export by another. The Bill makes—

Photo of Mr Harry Gourlay Mr Harry Gourlay , Kirkcaldy District of Burghs

Order. The hon. Member must come to the subject of the Amendment, which is whether the rate should be 30 per cent. or 50 per cent. So far, he has made very little reference to the Amendment.

Photo of Mr John Peyton Mr John Peyton , Yeovil

I would not, of course, wish to argue at length with the Chair, Mr. Gourlay, but I think, with respect, that the alteration of that rate from 50 per cent. to 30 per cent. raises almost every issue which is relevant to the Bill.

Photo of Mr Harry Gourlay Mr Harry Gourlay , Kirkcaldy District of Burghs

Order. I thought that the Amendment was perfectly clear. The hon. Member cannot make a Second Reading speech on it.

Photo of Mr John Peyton Mr John Peyton , Yeovil

I have made most of the detailed points I wished to make and I am obliged to you for your Ruling, Mr. Gourlay. I nevertheless suggest that the points which I have dealt with are evidence of my charges that the Bill is vague and will be unpredictable in operation, that it has little consideration for the impact that it will have on business men and that inclusions and exclusions are haphazard and ill-thought-out.

Believing those charges to be justified, I suggest to the Government that they should—quite exceptionally, of course—show a measure of modesty and that before honouring the nation with this Measure, which is untested, untried and unpredictable, they should reduce its impact for an experimental period. I would be content to withdraw my Amendment if they would substitute one of their own and say that they would make the rate 30 per cent. for the first six months while they see how it works. I suspect, however, that the Government are probably not of that reasonable frame of mind and do not feel sufficiently strong in morale at present to make concessions anywhere, otherwise they would have to run all along the line.

I believe that despite the rebukes which you have administered to me during my speech, Mr. Gourlay, I have made in outline, and very briefly, a case for suggesting that the Bill is clumsy, ill-prepared and vague and that its impact could properly be reduced, at least for a trial period, from 50 per cent. to 30 per cent.

7.15 p.m.

Photo of Mr John Pardoe Mr John Pardoe , North Cornwall

I wish to associate my remarks, brief as they will be, with some—rather few—of the remarks of the hon. Member for Yeovil (Mr. Peyton) and to link with his Amendment my Amendment No. 2 to reduce the 50 per cent. deposit to 25 per cent. I do not quarrel very much with the hon. Gentleman about the odd 5 per cent. I thought that the intention of our two Amendments was the same but, having heard the hon. Member's speech, I am not so sure that they are.

I have re-read my Second Reading speech. I was rather happy with it and I shall not make it again. The Government have been at pains, so far in these debates, to minimise the effects of the Bill, and I am not very surprised. I am rather reminded of the girl who had to tell the vicar that she had had an illegitimate child, and said, "Well, it was a very small one, Vicar". The Government's motto seems to have been that if we have to have a bastard, let it be a small one. I am trying to help them and to make it a little smaller.

I wish to use my Amendment as a probing Amendment to elicit from the Financial Secretary exactly why the rate of 50 per cent. was fixed, what effect he thinks that rate will have and how its effect would be changed by my Amendment to reduce it to 25 per cent. I asked the hon. Gentleman when we debated the Ways and Means Resolution the exact value of the imports to which the deposits were being applied, but I got no very satisfactory answer. I have not seen any satisfactory answer to the question since.

I would very much like to know from the Financial Secretary—I hope that he can give the figure in reply—what assessment the Government have made of the value that the 50 per cent. will be. What will it build up to in six months? What is the highest point at which it will be and what difference would it make, for instance, if my Amendment were enacted?

I put down the Amendment to elicit further information. We in the House of Commons cannot support a Measure the effects of which we do not know. I am still incredibly vague, and I believe that the Government, too, are vague, about the full effects of the Bill. I hasten to say that it would not be a good Bill even with my Amendment or the Amendment of the hon. Member for Yeovil. I made it clear in my speech on the Ways and Means Resolution and on Second Reading that I am against protection and against this form of it. I would be about half as much against the Bill if my Amendment were carried, but only half as much.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Worcestershire South

What, I think, my hon. Friend the Member for Yeovil (Mr. Peyton) was saying—and I express it in different terms—was that rather than drop the fully-clothed importer into the deep end of the bath, he would drop him in three-fifths of the way along the bath from the shallow end to the deep end measured in that direction. The hon. Member for Cornwall, North (Mr. Pardoe), however, would drop him halfway along the bath from the shallow end to the deep end.

I support my hon. Friend the Member for Yeovil, because we are now embarked on a path which, in my judgment, has an unpredictable ending. We do not know where this kind of dubious device of extracting large sums of money from legitimate importers will lead us. One thing which is perfectly certain is that we cannot constrain imports without, in the medium term and the long term, detrimentally affecting our exports, because all trade is a two-way affair and if we take this kind of discriminatory action against imports, it invites reciprocity.

A number of hon. Members have said that they have not been able to gauge what the arithmetical or financial effects would be. I do not find that particularly difficult, and I want to dwell on what would be the financial implication of making the rate 30 per cent. instead of 50 per cent., because that is the nub of the matter.

As I understand it, the 50 per cent. import deposit applies to £2,800 million worth of imports per annum. As the import deposit applies for a period of six months, it cuts that figure in half, to £1,400 million. As it is only for a period of six months, however, and at the rate of 50 per cent., the amount of money extracted from importers at any one time is £700 million. If imports continued at the same level it would remain fairly constant at £700 million, subject only to certain seasonal variation. If that £700 million is quantified for interest purposes at the rate of 10 per cent.—not 8 per cent., but 10 per cent. because of the difficulties of borrowing—it would mean an additional charge on primary importers of the order of £70 million per annum.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

Did the hon. Member say 7 per cent.?

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Worcestershire South

I said 10 per cent. I am taking it at 10 per cent. because, whereas preferential borrowers from banks getting a preferential rate of 7 per cent. may be able to borrow at 8 per cent., an importer would not be able to borrow at 8 per cent., in view of the Treasury instruction that facilities should not be granted to importers to meet this deposit. Therefore, I am afraid that importers, in order to get their goods, will have to resort to dubious methods of raising short-term loans and will probably have to pay 10 per cent., a usurious rate, for the purpose of bringing their goods into the country.

I believe that the Financial Secretary in his reply will say that the figures which I am employing are approximately correct, and they are all dreadfully inflationary. No one on the Government Front Bench has yet contradicted this statement. The combined effect of £250 million of additional indirect taxation in the Chancellor's package and this 50 per cent. import deposit is all dreadfully inflationary. If the Amendment in the name of my hon. Friend the Member for Yeovil were carried, it would diminish the inflationary effect of the import deposit scheme by 40 per cent., from the 50 per cent. level to the 30 per cent. level, which is the purpose of the Amendment.

There could be no better example of the inflationary effect of the import deposit proposals and the increase in indirect taxation, notably the petrol duty, than the announcement this morning from the Road Haulage Association that their charges are to be increased by Is. in the £. That means that goods brought into the country under the import deposit scheme, whether through the port of Liverpool, the port of Southampton, the port of Bristol or any one of 20 other ports, will all be carried to their inland destinations at a higher rate by 5 per cent. on account of the increased road haulage charge.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

I am anxious to answer the questions raised by all hon. Members. Will the hon. Gentleman assist me by explaining how the increased charge for road haulage relates to the Amendment, so that I may be in order in replying to him?

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Worcestershire South

I used the words "combined effect". I am skating on very thin ice, but that is characteristic. I cannot talk about this in isolation from the rest of the package, and I apologise. The fact is chat the combined effect of the £250 million additional taxation plus this inflationary proposal for deposits on imports together add a sum of money to the cost of living approximately equivalent to the rise we have suffered since the devaluation of sterling.

I quantify the import deposit proposal of 50 per cent. as approximately 6d. in the £ on retail prices. I quantify the extra taxation charges at 6d. in the £. The two together are 1s. in the £. and the rise since devaluation before these charges was also Is. in the £. We are now consciously putting an extra 6d. in the £ on the cost of living by the import deposit proposal. If my hon. Friend's intentions were brought to fruition, God bless his noble ideals, the 6d. would become 3⅗d., thereby softening the inflationary effect of the proposals, dropping the clothed importer in the bath three-fifths of the way between the shallow end and the deep end.

With that metaphorical allusion I conclude that this is a commendable proposition, which I hope will command the respect of the Committee. It is not obstructionist in character, and when the Financial Secretary replies I want him to be particularly careful to confirm all my figures.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Worcestershire South

I am glad that the hon. Gentleman is nodding assent. I do not like to see him wriggling; he is as good at mental arithmetic as I am. I want to be able to confirm the figures in order to reinforce the proposition which I put to the Committee, which is that the import deposit scheme is highly inflationary in character, and the inflationary influences ought to be slightly diminished in accord with the proposition of my hon. Friend the Member for Yeovil.

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

I have listened with my usual rapt attention to the rumbustious discourse of the hon. Member for Worcestershire, South (Sir G. Nabarro). His interesting curtain lecture on simple arithmetic has helped. so far as it goes. I have not yet checked up his calculations. I, too, am quite good at mental arithmetic; at one period in a previous existence I had to deal with Lloyd's underwriters, and it was necessary to be able to do mental arithmetic in order to deal with those gentlemen.

What the hon. Gentleman has put to the Committee is interesting, but it is only part of the story. I am prepared to concede, as a matter of logic and fair reasoning, that if this measure results merely in borrowing at fancy rates on the black market it will have failed. We on this side of the Committee are intelligent people not without business knowledge. Hon. Gentlemen with City connections who speak with great authority must not assume that we on this side of the Committee have no business experience. Some of us have considerable business experience, but we do not boast about it as do hon. Gentlemen on occasions like this. They try to create the impression that we on this side who support the Government, and sometimes are critical of the Government, do so purely as theoreticians. I speak for myself, not as spokesman of a group, cabal or little clique. I have not necessarily always supported the Government. If I think that the Government are wrong I will stand up here and tell them so.

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

Will the hon. Gentleman take it from us that it is the fact that he is so often alone in his remarks that has caused us regret.

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

I am grateful for the implied compliment, if it is a compliment. I am not looking for a compliment, I am trying to get at the truth of the matter.

The hon. Member for Yeovil (Mr. Peyton), addressed us engagingly, and his hon. Friend the Member for Worcestershire, South dotted the i's and crossed the t's in what he had to say, much of it out of order—

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Worcestershire South

On a point of order. Would you, Sir, cause the withdrawal of that stigmatising reference to the Chair.

Photo of Mr Harry Gourlay Mr Harry Gourlay , Kirkcaldy District of Burghs

Certainly not. I think that the hon. Member for Westhoughton (Mr. J. T. Price) should finish his remarks on this aspect of his speech.

7.30 p.m.

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

If I have said anything out of place, certainly I will withdraw it and do all that I can to restore peace and amity. I have always taken it for granted that, if an hon. Member was called to order on a number of occasions in the course of his speech, it was in order to refer to the fact that he was partly out of order. However, this is a matter of record. It will appear in the OFFICIAL REPORT tomorrow. As I say, if it will restore peace, I withdraw my remarks.

In spite of the arithmetic presented to us so vigorously by the hon. Member for Worcestershire, South, the fact is that he misses the whole object of the exercise. It may be that he wishes to do it for the purposes of his argument. The object of the exercise is to put a brake on imports of goods which we do not need and cannot afford.

I hope that the inflationary consequences which have been so dogmatically predicted by the hon. Gentleman do not prove to be right. The hon. Gentleman often vies with Gipsy Petulengro by making all sorts of diabolical forecasts. I have never been able to understand why the editors of Old Moore's Almanack do not engage him as a script writer. He is always the prophet of doom when a proposal comes before the House which he does not like. I hope that he will be proved quite wrong in the forecasts that he has made.

These restrictions require a deposit of 50 per cent. of the value of goods to be imported, subject to the exemption list. I should regret it very much if it resulted in the requirement of large financing. On the contrary, I hope that the effect will be to put a very heavy brake on the flood of imports unrequited by a corresponding number of exports.

In the past, right hon. and hon. Gentlemen opposite have pleaded with the Government to stop the import of all kinds of foodstuffs which they say that the British farmer could provide if he were given a little more encouragement. Our farmers have done pretty well out of the Annual Price Review, but right hon. and hon. Gentlemen opposite say that, if they had a bigger cut, they would produce better results. I cannot deal with that now, of course. If I do, I shall commit the error of judgment which the hon. Member for Yeovil committed a few moments ago—

Photo of Mr John Peyton Mr John Peyton , Yeovil

I want to felicitate the hon. Gentleman on his very long and free run.

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

That is a matter for the Chair entirely, and I do not wish to take advantage of the Chair. I always try to keep in order.

I am astonished that intelligent hon. Members, some of them of very long standing, can put forward seriously as a pure debating point the idea that they expect the same number of imports to flood through British ports as a consequence of this Measure as we have been complaining about in Lancashire for so long. We hope that this legislation will have a salutary effect on people whose chief interests lie in the import of all kinds of goods that we do not need and cannot afford. Many of the people have no commercial interest in them except from the point of view of the commission that they earn. I hope that the hon. Member for Worcestershire, South will be wrong in his forecast and that 10 per cent. finance will not be required to the extent that he believes.

Mr. Gourlay, I ought to apologise to you for straying a little off the mark. I hope that my comments have put the arguments in a better perspective than that left by the hon. Member for Worcestershire, South.

Photo of Mr Patrick McNair-Wilson Mr Patrick McNair-Wilson , New Forest

We all appreciate the problems which the Government now face with the economic situation which they have created. They find a situation where they have an extremely unfavourable balance of payments which they feel that they have to try and correct. Earlier today, the President of the Board of Trade explained that, while the Measure that we are discussing now was only marginally related to the discussions which took place in Bonn, the fact is that this Bill obviously has been put together in great haste.

The burden of the Amendment is to seek from the Financial Secretary an assurance that 50 per cent. is the figure which should be imposed rather than 60, 25 or 30 per cent.

I want to make a plea for the small traders who are hurt severely by this Measure. I have a letter from a constituent who imports material from the United States for sail-making. Of course, he was not consulted by anyone when this Measure was considered, and he had goods in transit at the time that it was introduced. However, we have another Amendment to deal with that position.

By taking what I believe to be an arbitrary figure of 50 per cent. without considering in detail what its effects would be, the Government have created a situation for British industry and commerce where we shall see a substantial rise in costs. My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) was careful to point out the very substantial increases of costs which would result from this Measure as well as from others. In a sense, it is not dissimilar from the Selective Employment Tax. It is one of those additional burdens which have to be carried.

Many companies import machinery and use it to help them export—and, by so doing, help our balance of payments. Such a company is now at a substantial disadvantage. Why should it be expected to find 50 per cent.? Why has it been decided that that is the figure which will correct the situation?

Taking the matter a stage further, I come to the developing countries of the Commonwealth which are selling goods to Britain. I have in mind Jamaica, which I happen to know very well. We hear a lot about the problem of people from Commonwealth countries coming to live in Britain. Surely the way to help solve that problem is for Britain to allow such countries to develop their industries. The Jamaican Government are anxious to export, and they are already selling Jamaican fashions to the shops of Britain. The 50 per cent. deposit imposes a severe brake on the development of the economy of such a country.

This Amendment seeks to ensure that the Financial Secretary explains clearly what it was decided that 50 per cent. was the correct figure. If he cannot do that, I urge him to consider the Amendment. We know the balance of payments and other problems of the Government, but I believe that we should not hammer the small companies in trying to put them right.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

I support the Amendment standing in the name of my hon. Friend the Member for Yeovil (Mr. Peyton) because it is a matter of principle with me to support anything which decreases limitation on the freedom of trade.

I want to follow up the important point made by my hon. Friend the Member for New Forest (Mr. McNair-Wilson) concerning the small importer. On Second Reading the Financial Secretary gave the impression that, on the whole, he did not think that any small firm would go to the wall because it found it impossible to meet the financial effect of the Bill. I would appreciate it if the hon. Gentleman could take this point further in reply. I should like to quote one example. I do not want to give the name of the firm, although I could do so in correspondence if the hon. Gentleman required it. I am not referring to the type of importation mentioned by the hon. Member for Westhoughton (Mr. J. T. Price), namely, goods that we do not need and cannot afford. I refer to goods being imported for industry for specific purposes.

In this case the importer has a working capital of £30,000 and his turnover is just below £400,000 a year. In the first full year he will have had about £100,000 on free loan to the Government after six months. To be fair, it will have been working up in steps to that figure in the first six months. With his capital resources, if this man has to go out and borrow that money he will find, taking 10 per cent.—I am doing it in round figures—

Photo of Sir Peter Emery Sir Peter Emery , Honiton

I am asked: why 10 per cent.? The main reason is because of the Government's instruction that they wish the banks to decrease their ordinary lending. Therefore, the importer will not be able to get from his bank manager, in the way he would normally expect, the type of assistance he will require, which will be about £100,000. Also because of the size of his business, it may be considered in normal credit terms to be something of a risk. Therefore, he will have to go to markets charging 1 or 2 per cent. above the Bank Rate. The point is that this man is likely to find himself having to meet a position of £7,500 for interest payments. If it is less than 10 per cent. it will be scaled down. I do not wish to annoy the Committee. I should like my example to be relevant. Let us assume it is only 1 per cent. above Bank Rate and it is down to about £6,000. If the normal net back is at a rate of 5 per cent., he is therefore attempting to obtain from his turnover—and he has to pay all his expenses, staff and everything else—£20,000 a year. This is a successful business doing a service for industry.

Many industrial undertakings—Leyland's is a good example—which purposely do not get into this specialist import sphere, use this type of person because of his specific contacts in the world in the areas in which Leyland's happen to be interested. This man will find himself having to meet an extra bill of between £6,000 and £7,500 on a figure of £20,000. I wonder whether I would lend him money on that. How will he be able to make it unless I extend the loan for a period of two to three years in the hope that he will pay it back from profits later. That being the case, it will cost him even more.

7.45 p.m.

It was said that the 15 per cent. surcharge was pretty rough justice. I sug- gest that this is so rough that the suggestions made by the Financial Secretary on Second Reading, concerning the small importer, are highly misleading. I suggest that a number of these people will find the situation very difficult to cope with. The Amendment put forward by my hon. Friend the Member for Yeovil makes considerable sense. I should like the figure to be nil, but if the Government insist on this proposal, let us decrease it. For that reason, I shall be delighted to support my hon. Friend in the Lobby.

Photo of Mr John Smith Mr John Smith , Cities of London and Westminster

I am not inflexibly opposed to this Measure. I just think that it is unworkable and that its effects are unpredictable. If we are to do something which is probably impossible and possibly undesirable, then the less we do of it the better.

As it is the Government are asking importers to put up fresh working capital equivalent to a quarter of their turnover, since the deposit is for six months at the rate of 50 per cent. This is by far the easiest sum that we have been asked to do; it is fresh working capital equivalent to 25 per cent. of an importer's turnover. We hear that this is not to come from the banks. There has been a good deal of muddled thinking about this. Some of the time we are told that it will be a highly selective and powerful pressure on liquidity because the deposits are not to come from the banks. The rest of the time we are told that no importer is to worry much about it because it will be easy to borrow the money. So far as it is met by borrowing from the banks, it will be a general pressure on liquidity. Therefore the less successful it is in restraining imports, the less selective a squeeze it will be and the more it will squeeze the economy as a whole, including exports.

I do not in fact think that those who are lucky enough to borrow money will have to pay high rates; but if we assume that they cannot borrow the money at all then we must recognise it is a very heavy burden. The sum involved over the country as a whole is £600 million or £700 million, but it comes from relatively few firms.

I have a letter from a firm in my constituency of which I have never heard—[HON. MEMBERS: "Shame."] A great deal goes on in my constituency. Although I have never heard of this firm, it will have to provide a continuous interest-free loan to the Government of the sterling equivalent of one million dollars, because its business is entirely concerned with imports from the United States. What is it importing? Is it importing candy floss! The letter says: If the banks are precluded from lending money for this purpose we shall he forced out of business. This firm—and we must move by examples—imports lifting equipment for heavy pressure vessels and the principal equipment for oil drilling and prospecting rigs in the North Sea. We do not wish to keep out any of those things. They are things which cannot be produced here, in some cases because they are subject to patents. They have to be imported through certain people because these people have exclusive agencies.

These are things which I daresay have not been thought of. If we are to embark on a Measure whose effects are as unpredictable as this, would not it be better to start with something less violent than obliging firms to raise fresh working capital and lend it free to the Government, equivalent to 25 per cent. of their annual turnover?

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

I support the Amendment, and I rise to speak principally because of something said by the hon. Member for Westhoughton (Mr. J. T. Price). He said that it was his hope that this Measure would stop the flood of imports of unnecessary goods. As far as I can see, that is not the belief of the Government. I certainly hope that it is not, and I trust that in due course the Financial Secretary will confirm that.

If that were the result of this Measure, I believe that it could be very harmful. If there is a sudden stop of a flood of imports by means of a temporary Measure, it means, in effect, that the Government are applying a Measure which will completely cut across developing trades and stifle them, and put them out of business forever. I believe that that is the last thing we want, because in the long-term we want trade of all sorts to continue to expand.

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

I am familiar with the classical argument of free trade as distinct from protection. All I say is that if this Measure is harsh, it is pallid in comparison with those taken by some of our trading partners when they have balance of payments problems. The hon. Member for the Cities of London and Westminster (Mr. John Smith) is a considerable authority on financial matters. He knows that when the Australians have balance of payments problems, as they have had on many occasions, they do not play about with devices like this. They just clap on physical controls and close the ports, much to our discomfort on many occasions. Would the hon. Gentleman like the Government to do that?

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

I am grateful to the hon. Gentleman, because that opens up an even greater area of disagreement between himself and his Front Bench, and it is therefore all the more important for the Financial Secretary to make the matter clear.

I believe that there is great doubt about what will be the effect of this legislation, and on re-reading the speeches of Ministers I have come to the conclusion that they themselves are in doubt about it. I believe that in many cases the effect will be very small, and that people will find their way around this quite easily. On the other hand, I believe that there will be certain cases where this Measure will hit very hard. It will be a blunt instrument. As my hon. Friend the Member for the New Forest (Mr. McNair-Wilson) and others have said, it will hit the smaller companies. Because of the uncertainty, there is real merit in the Amendment. Let us take this thing gradually, to see what the effect is, before putting on the full impact, if that is justified.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

There seems to be some confusion in the minds of the Opposition. They suppose that because the Government cannot predict, or pretend to predict, with exactness what will be the consequence of what they do, they are entitled to describe this Measure as impracticable. The hon. Member for the Cities of London and Westminster (Mr. John Smith), on no evidence, asserted that the scheme would prove unworkable. I do not know what he means by unworkable. It will work in the sense that its intention will be effective, namely, that it will collect a 50 per cent. deposit on the appropriate imports. I can put the hon. Gentleman's mind at rest if he feels that that will not happen. We have every reason to believe that it will. It will be workable in the sense that we want it to work, namely, to collect a deposit of 50 per cent. on the appropriate goods.

Hon. Gentlemen opposite must not make debating points on a serious issue of this kind, points in which they cannot seriously believe. They cannot seek to impale me on juvenile argumentative forks of saying that I cannot predict what it will be, it may be very grave, or it may be nothing at all, and they want me to commit myself either to saying that something major and injurious will result from the 50 per cent. deposit, or something so trifling that it was not worth bringing in the Bill.

When I discussed this on Second Reading I made it clear, and my hon. and learned Friend the Minister of State at the Treasury reinforced this in his reply, that what we expected to happen was not a major cut-down of imports but a significant and useful marginal effect, the exact amount of which could not be determined. The effect could not be determined, not because we did not give enough thought to it, but because, in the nature of things, one cannot determine in advance what will be the precise effect of a precise level of deposit upon our imports.

I have no doubt that that consideration was in the minds of those distinguished Members of the Tory Party who were enthusiastic for a Measure of this kind until we brought it about. The right hon. Member for Barnet (Mr. Maudling) has no greater powers of prediction than I have on this matter, nor has the Leader of the Opposition, nor have the other numerous Tories who were anxious to have this Measure. It does not imply idleness, so I can only say that those hon. Gentlemen opposite who rose, one after the other, from the Opposition benches and wanted this 50 per cent. applied, not reduced, to an even wider range of goods, including food, also presumably did not know what would be the consequence. It is a juvenile argument, if I may say so with respect to the Opposition. When one puts on a tariff, one does not know with any precision what will be the effect, but with a new deposit scheme of this kind it was in- evitable that there would be a fairly wide range within which one could not guess the effect.

As my hon. Friend the Member for Westhoughton (Mr. J. T. Price), who seems to be the only Member to take this point as a premise to his argument, said, this is not a scheme intended to encourage imports. It is intended to have a marginal and useful effect on imports, without causing serious disruption or dislocation to anybody, but still to have that marginal effect in reducing an import bill which is high in relation to our exports.

It is suggested that we ought to try a lower rate than 50 per cent. Why did we pick on 50 per cent.? The hon. Member for Worcestershire, South (Sir G. Nabarro), with immense arithmetical acumen—and others have followed closely on his heels—has come to the conclusion that when the scheme has reached its maximum we shall be taking the equivalent of one quarter of the annual turnover of a firm exclusively dependent on imports, or one quarter of the import turnover of any firm, and this will result, on the calculation of an 8 per cent. interest rate of borrowing, in the equivalent of 2 per cent. of the costs of that firm.

The whole point of the scheme in marginally discouraging the importer is to make him think twice, particularly in the area of over-ordering. When someone is deciding on the orders he will give, we want to get a deposit of a size which, while not crippling anyone, will cause him to query whether the import is basic to his business, and whether he must have it. We want a deposit which will be sufficiently discouraging to keep imports to the necessary minimum, and we are confident that this figure will have that effect.

8.0 p.m.

I am asked why the rate should be 50 per cent. instead of 30 per cent. I shall not content myself by asking, in reply, why it should be 30 per cent. rather than 50 per cent. The answer is that 50 per cent., as calculated in the manner initiated by the hon. Member for Worcestershire, South shows that, on the turnover we would expect to have, a liquidity effect at the rate of £100 million a month, roughly, from non-bank sources, namely, a sum building up to £600 million in the course of the next six months. If we had a lower rate we would have proportionately a smaller sum of money.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

I was considerably distressed by one point made by the Financial Secretary. He suggested that the rate was imposed to ensure that ordering would be kept to a minimum. is he suggesting that industry should get away from the economic order quantity, thereby increasing industrial costs even more?

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

I am sorry to have caused the hon. Member unnecessary distress. I shall spell out my arguments in more detail so that he will apprehend them. When I said that it would keep orders to a minimum, I did not mean that firms should order the minimum in relation to some abstract need; I meant the minimum in relation to the needs of the firm, taking into account the obvious point that he has made that, in certain circumstances, a larger quantity is compatible with efficiency and the needs of the firm.

I was making the point that if an import house was bringing in foreign motor cars, in envisaging its import schedule over the months ahead, instead of taking a rather generous view and erring on the over-optimistic side in respect of the stock it should take it would have second thoughts and try to keep down its order in the future to the minimum required for the legitimate and necessary purposes of its business.

This scheme will act as a marginal discouragement to what might be called anticipatory buying when firms are making up their minds about their import schedules.

Photo of Mr John Smith Mr John Smith , Cities of London and Westminster

This is a new point in our discussions and a very good and interesting one. But is it not clear that those who, in the past, have been in a position to stock up are still in a position to do so? The people who will be squeezed are those without the money to stock up. They will have to resort to other means of getting it, or will have to cut their orders because they have not got it.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

That intervention was on a less sophisticated level than one would have expected from the hon. Member. If a man uses his cash in the form of an interest-free deposit the economic and financial pressure is the same as if he went out to borrow the money. In one case he pays interest in order to stock up and in the other he forgoes interest in order to indulge in the luxury of stocking up. In any case this marginal pressure tends to affect decision-making on import ordering. It is not a harsh pressure but a reasonable and gentle pressure, which will marginally improve the import situation.

Why should the rate be fixed at 50 per cent.? As far as good judgment can go, we believe that we should begin the scheme, at any rate, on the basis that we shall get a liquidity effect of approximately £100 million a month. We have taken power in the Bill to reduce that liquidity effect if we find, as the £100 million a month builds up, that it should be moderated. We have taken power not to increase the rate but to decrease it.

We believe that for an immediate impact £100 million a month is a good starting point, but we are ready to see the effects of that liquidity pressure, month by month or even week by week, always having in our hands the right to reduce the rate.

Photo of Mr John Pardoe Mr John Pardoe , North Cornwall

Can the hon. Gentleman relate that £100 million a month, in terms of the liquidity which he is removing, to the increase that he would expect in total bank lending each month during that period? If the £600 million or £700 million figure is the top level, what would that be as a proportion of bank lending to industry?

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

Speaking without notice, I believe that the total amount of bank lending is about £5,000 million and that the last reduction in the ceiling amounted, in total bank lending, to £100 million. The trouble about the bank lending ceiling is that it has no direct impact upon non-bank liquidity—the liquidity of private companies and individuals outside the banking system.

We believe that it will be desirable and helpful in judging the amount of liquidity required to have regard to the general strategy, which is to move our balance of payments into surplus. This is an intermediate measure to speed up the process of moving into surplus.

I want to make one other point relating to the fears which have been expressed that some people may be driven into bankruptcy, or that small firms will be specially hit by this Measure. The answer is that all firms will be affected only in relation to non-exempted imports. All firms will have to find deposits strictly in relation to their turnover. The bigger the turnover, the bigger the deposit. The smaller the firm, the smaller the turnover, presumably, and the smaller the deposit. All firms, big, medium and small, will not be paying away the money; they will be depositing it with the customs.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

I hope that the hon. Member will let me finish this point. I promise him that he will get his impetuous urge to question me gratified before I am finished. All firms, large, medium or small, will pay this to the customs. It may be paid into any name they designate. Those who are named will get the money back. if a firm names its bank—the bank which has paid it the money—the bank will get that money back. Every person who is subjected to this deposit liability will have in his possession a gilt-edged, guaranteed, six-months' Government obligation, and it is not conceivable that any firm which is not wholly incompetent will allow itself to be ruined rather than to make the necessary financial arrangements.

Hon. Members must bear in mind that this scheme ruins nobody. They must not argue, as has been argued, that because it ruins nobody it will have no effect. It is not intended to ruin anybody, and it will not ruin anybody. No firm need to go into bankruptcy because of the relatively modest amount of interest charged that it will have to pay in procuring the necessary finance, and it is inconceivable that any firm will be without the finance.

I have dealt with the availability of finance; it is equally available to the small, medium and large firm. This is a selective import deposit on certain goods and not on others but, as between all importers and some classes of goods, there is an equal effect, so that when firms market their goods the additional burden of this import deposit on them will be exactly the same as it is on all their competitors. The notion that this will ruin them in relation to their competitors because of the interest charge—because their competitors will be paying the same interest charge—or because they cannot lay their hands on the money, is entirely unjustified.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

I apologise for not having been present throughout the debate. It is not true to say that small firms will not be affected more than bigger firms. Some small firms live entirely on imports. Some big firms are in the same position. There is also a spreadover. But a small importer with a small liquidity will find it far more difficult to cover the money that he has to find to pay the import charge.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

It is not the size of the firm that will determine the amount of the deposit; it is the size of the import turnover in non-exempted goods. It does net necessarily have an impact on liquidity. It has an impact of a more diffuse character on the liquidity which exists in the country and which, for the reasons I have given, will be available to all firms, small, medium and large, because a direct Government security will be available to the lenders—

Photo of Mr John Smith Mr John Smith , Cities of London and Westminster

I do not want to be a bore, but surely the Government must make up their minds whether this is intended to squeeze imports or the economy. Everything that the hon. Gentleman has said—that these firms will be able to get the money at the drop of a hat—shows that it is nothing more than a general squeeze on the economy. Which is it meant to be?

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

The hon. Member must not present me with these simpliste either/or propositions. The answer is that It will do both. The hon. Member seems to think that doing one excludes doing the other—[An HON. MEMBER: "You said that."]—I have said nothing of the kind. If the hon. Member does not mind the boredom of reading my Second Reading speech, he will find that I explained then that it will do both these things. It will, on the one hand, bring a marginal pressure of the kind I have described again today on importers, calculated, because of the 50 per cent. deposit, to induce them to get their import needs down to the minimum which they believe essential for their business. The second effect of the deposit is that it will produce a general liquidity off-take from the non-banking centre of our economy. I made all that clear on Second Reading, but I am happy to repeat it.

It is not a crime, however, to have regard to the liquidity situation in one's country, nor is it foolish to suppose that some withdrawal of liquidity would also be desirable in speeding up the process of bringing our exports into surplus against our imports—

Photo of Mr Thomas Boardman Mr Thomas Boardman , Leicester South West

The import deposit, the hon. Gentleman says, will not hit the small or medium firm any more than the large firm, but he does not appear to recognise that many small firms with small capital and limited liquidity are marketing vast quantities of goods and they will not be exempt. How will they overcome this cost?

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

I will try again. I have obviously been very incompetent in explaining this on Second Reading and, twice, today. The size of the firm is irrelevant. The amount of its personal liquidity does not mean that it cannot find the money for these deposits—

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

I will not give way and allow the hon. Member to interject a question within a question before I have replied. I will be happy to answer any of his questions after that.

The small firm which has not got at its own command the money to pay the deposit may be paid—

Photo of Sir John Foster Sir John Foster , Northwich

What about the interest?

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

I will deal with the interest. I have already tried to do so, but I will try again. I will deal first with the capital and then with the interest, which seems to be a less acute question, since the questioner remained seated and did not get up, like the hon. Member for Worcestershire, South.

The small firm can go to any banking or finance house and ask it to advance the deposit in the firm's name to the Customs. That finance or banking house, or firm, or individual, will have 100 per cent security—

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

It is no good the hon. Member shaking his head. What I am saying is the fact. What he is shaking his head about is his fantasy.

Finance houses will be able to deposit this money with the Customs and the finance house will then enjoy a 100 per cent. Government obligation, repayable in six months. That is the fact; anything else is fantasy. If the hon. Gentleman questions that fact, I will give way to him again.

Photo of Mr Thomas Boardman Mr Thomas Boardman , Leicester South West

I do not want to get on to the next Amendment, but perhaps the hon. Gentleman will say something about the degree of security which is obtained by a non-negotiable document. Second, what about the interest by which the deposit will be discounted by a substantial amount?

8.15 p.m.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

The hon. Member appears to be satisfied about the security of the capital. If not, I will have to take him aside afterwards and go into it in greater detail. As to the interest charged—I do not know whether the hon and learned Member for Middleton and Prestwich (Sir J. Foster) has just arrived or whether he has heard me deal with the point before—that is a relatively small matter. It comes to about 2½ per cent. on turnover, and while this scheme is in force, it will be an outgoing common to every other trader in that line of business.

Therefore, if I am an importer of wheelbarrows or tin whistles, I will have an additional interest charge—if I am doing £ 1 million turnover, even at 10 per cent.—of about £25,000 a year. That is not insupportable on £1 million turnover. Moreover, I will do that turnover in the confident knowledge that every other importer of tin whistles has the same 2½ per cent. addition to his charges, which he can presumably pass on, or which, if he cannot pass it on, because of the marginal increase in prices, will produce a marginal reduction in imports.

Again, I say that the object of this scheme is not to encourage imports. Some hon. Members speak as if criticism is justified because the scheme does not actually produce a positive encouragement to imports. That is not the intention of the scheme. It is to impose a marginal additional burden on imports, combined with a selective pressure on liquidity.

Photo of Sir John Foster Sir John Foster , Northwich

But the hon. Member does not deal with the firm which does not have £25,000. It is as simple as that. A firm which is teetering will not be able to pay that interest. The hon. Gentleman must admit that that is a fact.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

I must confess that the number of firms importing to the tune of £1 million a year which are teetering and are without £25,000 must be singularly small. The answer is that the hon. and learned Gentleman's argument could equally apply if we said that a purchase tax charge placed on firms was liable to bankrupt then because they had not the additional working capital—[An HON. MEMBER: "That is not the same thing."] But it is precisely the same thing. The additional working capital for wholesalers and other who have to meet the charge.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

With respect, the hon. Member knows that he is out of step here. Wholesalers and manufacturers collect the purchase tax long before they pay it to the Inland Revenue.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

We can take other cases of duty. That is not always so, but, so as not to get into side points unduly, I would say that there are many impositions of taxation which impose a 2½ per cent. on turnover burden, such as the much greater burden in tobacco and liquor duties, where bond does not altogether cover it and shop keepers must carry stock, and we are not harried there with ridiculous suggestions that a 2½ per cent. burden shared by every competitor of the business concern is calculated to drive it to bankruptcy.

The answer is that this is intended to, and will, produce a marginal—only a marginal, not a seriously disruptive—effect on any trader of any size dealing with imports. Therefore, the Committee would be well advised, I think, to accept the Treasury's broad judgment that 50 per cent. is how we should start. We will watch it carefully. Perhaps hon. Members have failed to realise that we have taken the power not to increase this but to reduce it. We will watch it very closely to see what the effects are as this £100 million a month starts to come back.

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

After listening to the hon. Gentleman, I suggest that my hon. Friends would be wise to invite us to vote on the Amendment. The Financial Secretary asked us to desist from seeking to impale him on juvenile argumentative forks. We on this side ask him to depart and to desist from the juvenile habit of misrepresenting his political protagonists. My right hon. Friends the Members for Barnet (Mr. Maudling) and Enfield, West (Mr. lain Macleod), who spoke of some sort of restraint on import credit, were referring to an Italian system, which as the hon. Member knows, is a world away from the much tougher and tighter scheme which the Government has seen fit to introduce.

The hon. Gentleman has at this stage defended the choice of 50 per cent. deposit with his usual lucidity, within his own assumptions, but we on this side question the Government's strategy and we question the Bill. We dislike the Government's strategy, because we think that what the country needs is not stifling with marginal increases of protection and marginal increases of bureaucracy, but a great increase in incentives and competition and a great reduction in public expenditure.

It is all very well for the Financial Secretary to speak of the limitless credit available to businessmen and importers big and small. There will be credit—suppliers' credit, bank credit, credits through various brokers, and even from the reserves of individual importing companies. Large firms of importers will be able to tan these funds, but what the hon. Gentleman totally fails to touch on is the lack of sophistication of the small importer in the credit field. It may well be that there will shortly be consultants in finding the money for deposits. It may well be that the infinite flexibility and variety of our capital market will in a few months enable small importers to cope with the deposits. But, in the immediate future, many small importers face—and the Financial Secretary must understand that we learn this from our constituents—a real danger to the survival of their businesses. There is the credit, but they are not, in the short term, sophisticated enough to collect the money for the deposit.

We fear that within a bad strategy and with a bad Bill all that will be achieved will be a marginal reduction in imports, a marginal reduction in stocks of imports, which will be more than offset by a surge of imports when the provision in the Bill is brought to an end. The Measure does no more than apply a short-term palliative to the problems of our economy, and in that we believe that it is damaging to the public interest because there are not the reserve funds available for investment by companies.

We dislike the strategy and we dislike the Bill. The Financial Secretary admits, as he cannot but admit, that the 50 per cent. is a perfectly arbitrary figure chosen within an area of great imposition to achieve what he rightly admits is only a marginal change. My hon. Friend the Member for Yeovil (Mr. Peyton) has just as much right to pick on 30 per cent. as the Government have to pick on 50 per cent., and I very much hope that he will press the issue to a Division.

Photo of Mr John Peyton Mr John Peyton , Yeovil

Encouraged by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), I will in a very few moments suggest that we should divide. Before doing that, I would endorse his advice to the Financial Secretary, who is exceedingly skilful in answering a case which he is not invited to answer. The hon. Gentleman used the words "idle" and "inefficient". No one has said that he is idle or inefficient; in fact, most of us believe that he is very energetic and immensely efficient. We do not extend the same

compliment to all his colleagues. We think that of him, but when we say that this measure is unpredictable in its effect, we do not state it as advice but as a fact. Particularly, we do not agree about the effect on the small business being unpredictable. As the Financial Secretary himself has admitted some unpredictability, we say that at least for an interim period, until the way the Bill works is seen more clearly, it would be sensible to make the rate 30 per cent. rather than 50 per cent.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

Let me make it quite clear, so that it does not go abroad from here, that I said that it was unpredictable in its effect on small businesses. What I did say was that one cannot predict with any exactness the effect on the total volume of our imports.

Photo of Mr John Peyton Mr John Peyton , Yeovil

I entirely accept that. I did not in any way wish to misinterpret the hon. Gentleman, but he admitted that over the general field there was a certain unpredictability. One accepts that as being so, and the Government would even now be more modest if they selected the lower starting point of 30 per cent. rather than 50 per cent. But as we are obviously in very severe difficulty when it comes to convincing the Government of either rectitude or discretion, we must accept that the only thing we can now decently do is to divide the Committee.

Question put, That the Amendment be made:—

The Committee divided: Ayes 174, Noes 252.

Division No. 18.]AYES[8.24 p.m.
Alison, Michael (Barkston Ash)Bullus, Sir EricErrington, Sir Eric
Allason, James (Hernel Hempstead)Burden, F. A.Farr, John
Atkins, Humphrey (M't'n & M'd'n)Campbell, B. (Oldham, W.)Fletcher-Cooke, Charles
Awdry, DanielClegg, WalterFortescue, Tim
Baker, Kenneth (Acton)Cooke, RobertFoster, Sir John
Baker, W. H. K. (Banff)Cooper-Key, Sir NeillGibson-Watt, David
Beamish, Col. Sir TuftonCordle, JohnGilmour, Sir John (Fife, E.)
Bennett, Sir Frederic (Torquay)Corfield, F. V.Glover, Sir Douglas
Bennett, Dr. Reginald (Gos. & Fhm)Costain, A. P.Godber, Rt. Hn. J. B.
Berry, Hn. AnthonyCunningham, Sir KnoxGoodhew, Victor
Biffen, JohnCurrie, G. B. H.Gower, Raymond
Biggs-Davison, JohnDalkeith, Earl ofGrieve, Percy
Black, Sir CyrilDance, JamesGriffiths, Eldon (Bury St. Edmunds)
Blaker, PeterDavidson, James (Aberdeenshire, W.)Hall, John (Wycombe)
Boardman, Tom (Leicester, S.W.)d'Avigdor-Goldsmid, Sir HenryHall-Davis, A. G. F.
Body, RichardDean, PaulHamilton, Lord (Fermanagh)
Boyd-Carpenter, Rt. Hn. JohnDeedes, Rt. Hn. W. F. (Ashford)Hamilton, Michael (Salisbury)
Boyle, Rt. Hn. Sir EdwardDigby, Simon WingfieldHarris, Frederic (Croydon, N. W.)
Brewis, JohnDoughty, CharlesHarrison, Brian (Maldon)
Brinton, Sir TattonDrayson, G. B.Harrison, Col. Sir Harwood (Eye)
Bromley-Davenport, Lt.-Col. Sir WalterEden, Sir JohnHarvie Anderson, Miss
Brown, Sir Edward (Bath)Elliot, Capt. Walter (Carshalton)Hastings, Stephen
Buchanan-Smith, Alick (Angus, N & M)Elliott, R. W. (N'c'tle-upon-Tyne, N.)Hawkins, Paul
Buck, Antony, (Colchester)Emery, PeterHay, John
Heald, Rt. Hn. Sir LionelMiscampbell, NormanStainton, Keith
Heath, Rt. Hn. EdwardMitchell, David (Basingstoke)Steel, David (Roxburgh)
Heseltine, MichaelMonro, HectorStodart, Anthony
Higgins, Terence L.Montgomery, FergusStoddart-Scott, Col. Sir M.
More, JasperSummers, Sir Spencer
Hiley, JosephMorgan, Geraint (Denbigh)Tapsell, Peter
Hill, J. E. B.Morrison, Charles (Devizes)Taylor, Sir Charles (Eastbourne)
Hirst, GeoffreyMunro-Lucas-Tooth, Sir HughTaylor, Edward M. (G'gow, Cathcart)
Holland, PhilipMurton, OscarTaylor, Frank (Moss Side)
Hordern, PeterNabarro, Sir GeraldTemple, John M.
Howell, David (Guildford)Nott, JohnThatcher, Mrs. Margaret
Hutchison, Michael ClarkOnslow, CranleyTurton, Rt. Hn. R. H.
Iremonger, T. L.Orr, Capt. L. P. S.van Straubenzee, W. R.
Irvine, Bryant Godman (Rye)Orr-Ewing, Sir IanVaughan-Morgan, Rt. Hn. Sir John
Jenkin, Patrick (Woodford)Osborne, Sir Cyril (Louth)Vickers, Dame Joan
Jennings, J. C. (Burton)Page, Graham (Crosby)Waddington, David
Joseph, Rt. Hn. Sir KeithPage, John (Harrow, W.)Wainwright, Richard (Colne Valley)
Kaberry, Sir DonaldPardoe, JohnWalker-Smith, Rt. Hn. Sir Derek
Kerby, Capt. HenryPercival, IanWall, Patrick
Kershaw, AnthonyPeyton, JohnWard, Dame Irene
Kitson, TimothyPowell, Rt. Hn. J. EnochWebster, David
Lancaster, Col. C. G.Price, David (Eastleigh)Wells, John (Maidstone)
Legge-Bourke, Sir HarryPrior, J. M. L.Whitelaw, Rt. Hn. William
Lewis, Kenneth (Rutland)Pym, FrancisWilliams, Donald (Dudley)
Lubbock, EricQuennell, Miss J. M.Wills, Sir Gerald (Bridgwater)
MacArthur, IanRenton, Rt. Hn. Sir DavidWilson, Geoffrey (Truro)
McNair-Wilson, PatrickRhys Williams, Sir BrandonWinstanley, Dr. M. P.
Maclean, Sir FitzroyRidley, Hn. NicholasWolrige-Gordon, Patrick
Macmillan, Maurice (Farnham)Ridsdale, JulianWood, Rt. Hn. Richard
Maddan, MartinRossi, Hugh (Hornsey)Woodnutt, Mark
Maginnis, John E.Russell, Sir RonaldWright, Esmond
Marten, NeilScott-Hopkins, James
Maude, AngusShaw, Michael (Sc'b'gh & Whitby)TELLERS FOR THE AYES:
Maxwell-Hyslop, R. J.Smith, Dudley (W'wick & L'mington)Mr. Anthony Royle and
Mills, Peter (Torrington)Smith, John (London & W'minster)Mr. Reginald Eyre.
Mills, Stratton (Belfast, N.)Speed, Keith
NOES
Abse, LeoDavies, Ednyfed Hudson (Conway)Hamilton, William (Fife, W.)
Albu, AustenDavies, G. Elfed (Rhondda, E.)Hamling, William
Allaun, Frank (Salford, E.)Davies, Dr. Ernest (Stretford)Hannan, William
Alldritt, WalterDavies, Harold (Leek)Harrison, Walter (Wakefield)
Allen, ScholefieldDavies, Ifor (Gower)Hart, Rt. Hn. Judith
Anderson, DonaldDavies, S. O. (Merthyr)Haseldine, Norman
Archer, PeterDelargy, HughHattersley, Roy
Ashley, JackDell, EdmundHazell, Bert
Ashton, Joe (Bassetlaw)Dempsey, JamesHealey, Rt. Hn. Denis
Atkins, Ronald (Preston, N.)Dewar, DonaldHeffer, Eric S.
Atkinson, Norman (Tottenham)Diamond, Rt. Hn. JohnHenig, Stanley
Bacon, Rt. Hn. AliceDickens, JamesHerbison, Rt. Hn. Margaret
Bagier, Gordon A. T.Dobson, RayHilton, W. S.
Barnes, MichaelDoig, PeterHobden, Dennis
Beaney, AlanDunn, James A.Howarth, Harry (Wellingborough)
Bence, CyrilDunnett, JackHowie, W.
Bidwell, SydneyDunwoody, Mrs. Gwyneth (Exeter)Hoy, James
Binns, JohnEadie, AlexHughes, Emrys (Ayrshire, S.)
Bishop, E. S.Edwards, William (Merioneth)Hughes, Roy (Newport)
Blackburn, F.Ellis, JohnHunter, Adam
Boardman, H. (Leigh)English, MichaelHynd, John
Booth, AlbertEnnals, DavidIrvine, Sir Arthur (Edge Hill)
Boston, TerenceEvans, Fred (Caerphilly)Jackson, Colin (B'h'se & Spenb'gh)
Boyden, JamesEvans, Ioan L. (Birm'h'm, Yardley)Jackson, Peter M. (High Peak)
Braddock, Mrs. E. M.Fernyhough, E.Jay, Rt. Hn. Douglas
Bray, Dr. JeremyFinch, HaroldJeger, George (Goole)
Brooks, EdwinFletcher, Rt. Hn. Sir Eric (Islington, E.)Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)
Brown, Hugh D. (G'gow, Provan)Fletcher, Ted (Darlington)Jenkins, Hugh (Putney)
Brown, R. W. (Shoreditch & F'bury)Foley, MauriceJenkins, Rt. Hn. Roy (Stechford)
Buchan, NormanFoot, Michael (Ebbw Vale)Johnson, James (K'ston-on-Hull W.)
Buchanan, Richard (G'gow, Sp'burn)Forrester, JohnJones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Callaghan, Rt. Hn. JamesJones, J. Idwal (Wrexham)
Cant, R. B.Fowler, GerryJones, T. Alec (Rhondda, West)
Carmichael, NeilFraser, John (Norwood)Kelley, Richard
Carter-Jones, LewisFreeson, ReginaldKenyon, Clifford
Coe, DenisGardner, TonyKerr, Mrs. Anne (R'ter & Chatham)
Coleman, DonaldGinsburg, DavidKerr, Dr. David (W'worth, Central)
Conlan, BernardGordon Walker, Rt. Hn. P. C.Lawson, George
Corbet, Mrs. FredaGray, Dr. Hugh (Yarmouth)Leadbitter, Ted
Craddock, George (Bradford, S.)Greenwood, Rt. Hn. AnthonyLedger, Ron
Crawshaw, RichardGrey, Charles (Durham)Lee, Rt. Hn. Frederick (Newton)
Crosland, Rt. Hn. AnthonyGriffiths, David (Rother Valley)Lee, John (Reading)
Cullen, Mrs. AliceGriffiths, Eddie (Brightside)Lever, Harold (Cheetham)
Dalyell, TamGriffiths, Will (Exchange)Lever, L. M. (Ardwick)
Davidson, Arthur (Accrington)Hamilton, James (Bothwell)
Lewis, Arthur (W. Ham, N.)Oakes, GordonSilverman, Julius
Lewis, Ron (Carlisle)O'Malley, BrianSkeffington, Arthur
Lomas, KennethOram, Albert E.Small, William
Loughlin, CharlesOrbach, MauriceSnow, Julian
Lyons, Edward (Bradford, E.)Orme, StanleySpriggs, Leslie
Mabon, Dr. J. DicksonOswald, ThomasSteele, Thomas (Dunbartonshire, W.)
McBride, NeilOwen, Dr. David (Plymouth, S'tn)Stonehouse, Rt. Hn. John
McCann, JohnOwen, Will (Morpeth)Strauss, Rt. Hn. G. R.
MacColl, JamesPadley, WalterSummerskill, Hn. Dr. Shirley
Macdonald, A. H.Page, Derek (King's Lynn)Swain, Thomas
McGuire, MichaelPalmer, ArthurSwingler, Stephen
McKay, Mrs, MargaretPannell, Rt. Hn. CharlesSymonds, J. B.
Mackenzie, Gregor (Rutherglen)Park, TrevorTaverne, Dick
Mackintosh, John P.Parker, John (Dagenham)Tinn, James
Maclennan, RobertParkyn, Brian (Bedford)Urwin, T. W.
McMillan, Tom (Glasgow, C.)Pavitt, LaurenceVarley, Eric G.
McNamara, J. KevinPearson, Arthur (Pontypridd)Wainwright, Edwin (Dearne Valley)
MacPherson, MalcolmPeart, Rt. Hn. FredWalker, Harold (Doncaster)
Mahon, Peter (Preston, S.)Pentland, NormanWallace, George
Mahon, Simon (Bootle)Perry, George H. (Nottingham, S.)Watkins, David (Consett)
Manuel, ArchiePrentice, Rt. Hn. R. E.Watkins, Tudor (Brecon & Radnor)
Mapp, CharlesPrice, Christopher (Perry Barr)Weitzman, David
Marks, KennethPrice, Thomas (Westhoughton)Wells, William (Walsall, N.)
Marsh, Rt. Hn. RichardPrice, William (Rugby)Whitaker, Ben
Mellish, Rt. Hn. RobertProbert, ArthurWhitlock, William
Mendelson, JohnRandall, HarryWilkins, W. A.
Mikardo, IanRees, MerlynWilley, Rt. Hn. Frederick
Millan, BruceRoberts, Albert (Normanton)Williams, Alan (Swansea, W.)
Miller, Dr. M. S.Roberts, Gwilym (Bedfordshire, S.)Williams, Alan Lee (Hornchurch)
Milne, Edward (Blyth)Robinson, Rt. Hn. Kenneth (St. P'c'as)Williams, Clifford (Abertillery)
Mitchell, R. C. (S'th'pton, Test)Rodgers, William (Stockton)Williams, Mrs. Shirley (Hitch'n)
Morgan, Elystan (Cardiganshire)Roebuck, RoyWilliams, W. T. (Warrington)
Morris, Alfred (Wythenshawe)Rogers, George (Kensington, N.)Wilson, William (Coventry, S.)
Morris, Charles R. (Openshaw)Rose, PaulWinnick, David
Moyle, RolandRoss, Rt. Hn. WilliamWoodburn, Rt. Hn. A.
Mulley, Rt. Hn. FrederickRowlands, E.Woof, Robert
Murray, AlbertShaw, Arnold (Ilford, S.)Wyatt, Woodrow
Neal, HaroldSheldon, Robert
Newens, StanShort, Rt. Hn. Edward (N'c'tle-u-Tyne)TELLERS FOR THE NOES:
Noel-Baker, Rt. Hn. Philip (Derby, S.)Silkin, Rt. Hn. John (Deptford)Mr. Joseph Harper and
Norwood, ChristopherSilkin, Hn. S. C. (Dulwich)Mr. Ernest Armstrong.

Photo of Mr John Page Mr John Page , Harrow West

I beg to move Amendment No. 4, in page 1, line 17, at end insert: (2) The Commissioners shall in every case issue a receipt of an import deposit to the person by whom it was paid, which receipt shall be equally acceptable as a negotiable instrument as is a warehouseman's warrant issued by an authorised warehouseman.

Photo of Mr Harry Gourlay Mr Harry Gourlay , Kirkcaldy District of Burghs

With this Amendment it will be convenient to discuss Amendment No. 10, in line 22, at end insert: 'or to any assignee of that person where notice of such assignment has been given in writing to the Commissioners'. Amendment No. 81, in line 22, leave out: 'by the Commissioners to that person' and insert: 'shall be made by the Commissioners to that person or to his assignee and when so made'. Amendment No. 82, in line 24, at end insert: (3) For the purposes of this section an assignee shall be the person to whom the person who has paid the import deposit has assigned the right to repayment thereof and shall include the assignee of an assignee.(4) Written notice of an assignment shall he given to the Commissioner not less than seven days before the date on which the relevant repayment is due to be made. Amendment No. 14, in page 2, line 46, leave out subsection (10).

Amendment No. 83, in Clause 2, page 3, line 32, at end add: When an assignee (as defined in section 1 of this Act satisfies the Commissioners that if he had imported the goods upon which the import deposit has been paid he would have been entitled to remission of such import deposit under the provisions of Schedule 2 to this Act the Commissioners shall forthwith repay the import deposit to such assignee but such repayment may be subject to such conditions and restrictions as the Commissioners may think fit to impose for the purpose of securing that the goods are disposed of or used in a way qualifying for remission.

Photo of Mr John Page Mr John Page , Harrow West

This is a small and rather detailed Amendment but one which has real importance and significance. It deals with the receipt given by the Commissioners for the duty deposited for the period of 180 days. Nowhere in the Bill or in the Customs and Excise instructions on the scheme—that is, Notice No. 481—is any mention made of a receipt, how it is to be given, or what form it shall take.

I have twice inquired of the Customs and Excise Department of the Board of Trade about this receipt. I congratulate the Department on its extreme courtesy and remarkable calmness under fire. I imagine that the number of inquiries from importers must be great. On the occasions when I and when friends of mine have spoken to the Department, those responsible have been calm, efficient and helpful.

I understand that at present no receipt is given for this deposited duty. I find this surprising, because I am not in the habit of putting down £5,000 or £5 million, or whatever one has to put down nowadays under such schemes, without obtaining a receipt. However, the practice apparently is that an importer goes to the Customs and Excise taking with him two copies of Form 139 which have to be deposited with the Collector concerned. Form 139 is difficult and badly worded. This matter should be considered over the next year or however long the new imposition is in force.

If the importer, or the person making the deposit, who can be someone else, wishes to have an acknowledgment that the deposit has been left, he can produce a third copy of Form 139, which is then stamped with the Collector's office stamp. I was courteously informed by the Customs and Excise Department that this is considered to be, not a receipt, but an acknowledgment.

When goods are left with an accredited warehouseman in present circumstances, and even in the good old days pre-22nd November, the importer or the person who caused the goods to be left with the warehouseman is given a receipt or a certificate, and this is considered to be negotiable. I want confirmation that the receipt acknowledgment which the Customs and Excise gives to an importer will be equally negotiable.

Although, after the Second Reading and the debate on the last two sets of Amendments, there may be a sense of déjà vu about it, I am jolly well going ahead to consider the objects of this scheme and to put the matter in its full context. First, is it the Government's intention to ruin a number of small im- porters? Certainly not, we have been told, but if it happens, that is too bad. I assure the Minister that a good many small importing firms are extremely worried.

Is it the object to put up the basic price of imported goods by 2 to 2½ per cent.? I understand that the answer to that question is, "Yes". [An HON. MEMBER: "More."] I hear one of my hon. Friends say "More", and that may well be so. Many of the non-exempted goods are raw materials, certain kinds of steel, for example, or, in the industry in which I have an interest, synthetic rubber. These basic raw materials for manufacturers will go to one factory for fabrication, perhaps to another for further fabrication, next to a third for assembly into whatever the finished article may be, a motor car, domestic appliance, television set, and so forth. Then the articles will go to the public. When the 2½ per cent. basic increase is taken into account at the retail end, it will mean a rise of about 6 per cent. in the price of the component within the finished article which is sold.

If the imported article is, say, a Japanese transistor radio—

Photo of Mr Harry Gourlay Mr Harry Gourlay , Kirkcaldy District of Burghs

Order. The hon. Gentleman must address his remarks to the Amendment, which deals with the receipt given for the deposit and would require that that receipt shall be acceptable as a negotiable instrument. His present observations are somewhat wide of the Amendment.

Photo of Mr John Page Mr John Page , Harrow West

I accept your reproof, Mr. Gourlay. You have been sitting in your place, and I missed the last Amendment, for a reason which I could not avoid, so I shall try to be particularly gentle with you, though I think it important that the background should be fully realised.

8.45 p.m.

I come now to a critical point in my argument, the question of the reduction of the amount of cash in circulation. If the Customs receipt is negotiable, it may be used as a collateral for a further loan from a foreign bank or merchant bank to provide the cash needed to pay the duty deposit. I cannot believe that it is the Government's intention to drive the importer to borrow more foreign currency.

The Minister of State has said—I think that it was on Second Reading—that there are quite a lot of advantages. If the money is lent to us, we have more foreign currency brought into the country for six months. I see the force of that argument, but the interest rates may be very high. Though it may be nice for the Treasury to have that cash in hand for six months, it may have to pay 4 or 5 per cent. on the total at the end of the period across the exchanges to the foreign lender.

[Mr. GURDEN in the Chair]

While there is no statutory authority that warehousemen's certificates and warranties may be used as collateral for security, there is judicial authority, with many cases on record, recognising the commercial procedure of using such warranties for collateral at banks. Moreover, by specific exclusion under the Bill of Sale Act, 1878, whereby such warranties became valid without central registration, there is a tacit recognition that in the general course of business those warranties are acceptable for collateral.

That is the nub of the point I am trying to make, and I hope that we shall have confirmation from the Minister of State that what I have just said applies to the receipts and acknowledgments given by the Customs and Excise. I hope that he will tell the Committee that he will look into the whole question of the form in which the receipt is given.

What is the maximum time that an importer may have to make some kind of deposit? People say that it is 180 days, and that is what it would be generally thought to be, except by experts, such as there are in the Committee. In fact, by the time the Bill becomes an Act it might be about 200 days, by the use of the bond procedure which was permitted under the previous Order.

The fact that the time that the bond was held by the Customs is not deducted from the 180 days is small-minded, mean, tricky, vicious, vindictive, dishonourable and altogether typical of the present Government.

Photo of Mr Kenneth Baker Mr Kenneth Baker , Acton

The Amendments are meant to be helpful, and therefore I hope that they may be accepted by the Government. The whole purpose of the six Amendments is to help the importer to find the money to pay the deposit. We are trying to create negotiable documents, which is our way of trying to meet the suggestions made by the Financial Secretary on Second Reading.

The hon. Gentleman spoke at length about the ingenuity of the London capital market and of financiers to find a way to produce the money required for these deposits. I agree with him. The London capital market is the most sophisticated in the world. It still works very well, even after four years of Socialism. There is no doubt that it will find ways of raising this money.

There are many ways of raising it. Anyone opening his newspaper on Monday morning this week will have seen the advertisements from estate agents, for example, offering to lend money on a sale and leaseback basis. This is one way of helping importers faced with finding the deposit. Other ways have been suggested. The most obvious way, which has been overlooked by the Government, is that many large companies tend to be flush with cash at the moment because their dividends have been restrained and, on the whole, wages have been restrained. One of the features of the balance sheet of many large companies is a preponderance of cash. These are two obvious ways in which importers will find the money.

We suggest a third way—by making the receipt of the warehouseman discountable. As the Financial Secretary said, one cannot get a better security than a receipt which has the Government's name to it payable in six months. This is gilt edged and quite acceptable. The Financial Secretary said that only a quarter of an hour ago. We ask that these gilt-edged guarantees, the 100 per cent. securities, should be negotiable documents, which means very simply that it can be passed from hand to hand and is just like a bill of exchange. To use the analogy of the Financial Secretary, it is like the tins of salmon which are moved round and round, and eventually they will be cash. This will certainly ease the situation of importers, large and small, in finding the deposit. It is a sophisticated financial device, but one which we should create.

Incidentally—and here I anticipate the reply of the Minister of State because he is probably as unfamiliar with the workings of the London money market as the Chief Secretary was with of the workings of the Foreign Exchange market—if it is a negotiable and discountable document, it does not increase the credit base. I suspect that is one of the arguments which he will adduce in trying to defeat our Amendment. It simply makes it very much easier for importers to raise the money. Such a Bill could be discounted in the London money market and it would be a very good Bill indeed.

These are constructive Amendments. They are not aimed at trying to undermine the Government's strategy, mid-term or long-term. I hope that the Government will be reasonable and will accept them.

Photo of Mr Thomas Boardman Mr Thomas Boardman , Leicester South West

I wish to take up what my hon. Friend the Member for Acton (Mr. Kenneth Baker) said about the need for negotiability. The Government seem to have completely overlooked the commercial necessity of providing some form of security if the necessary liquidity is to be found. I am sorry that the Financial Secretary is not present, because when we were debating the last Amendment he made light of this problem and suggested that it presented no difficulty for firms, small or large, in finding the necessary cash.

The Clause provides that the deposit shall be repaid to the person who paid it. That does not mean that it must be paid by the importer, as the Financial Secretary agreed; it can be paid by a merchant bank which can have it repaid to it. If we overlook the large burden of interest rates and the trouble with the discount rate, this is practicable. But it will not always happen in that way. Often, a person may wish to import and to use his own resources and pay for the goods himself in the expectation that he will complete the order and get the money back.

There are such things, even under the Labour Government, as death, bankruptcy and liquidation. What will happen if an importer, having put down a deposit and having received the goods, is killed, or goes bankrupt, or goes into liquidation? These deposits are not negotiable. In practice, what will probably happen, and what is happening today, is that many small firms which have not managed to tap these resources, some of them overseas perhaps, at high rates of interest, will go to their bank manager and say, "Will you please help us out?". Despite the difficulties which they now suffer, the banks are trying to co-operate, but on a short-term basis. They agree to help until the importer can find a more permanent source of finance.

Once the bank has put down the deposit, however—even if the bank puts it down itself and, therefore, has the receipt made in its name—renegotiation will be impossible because the importer could not go to somebody like a merchant bank and say, "The bank has loaned me £X to get me out of the awful mess caused by the Government, but only for one month. Can you help me when I have to refund it?" because the repayment cannot be endorsed across to the merchant bank. It is not a negotiable document. The purpose of the Amendment is to make it negotiable.

I make no argument about whether the Amendment of my hon. Friend the Member for Harrow, West (Mr. John Page) concerning warehousemen's receipts, or whatever they are called, is better than the Amendment of myself and my hon. Friend the Member for Acton. The documents must, however, be in a form which can be negotiated if we are to avoid all the difficulties for these small importers, who will have a big job to make ends meet and to survive the next year or so.

Although the Financial Secretary later went back on his argument, he implied that the size of the deposit would depend on the size of the firm; it would hit the large firm harder than a small one, on whom the load would be less. What, clearly, was not recognised is that a very large number of importing agents import millions of Es worth of goods on very small margins, possibly of 2½ per cent. If they are financed in the way that the City can arrange these things, their margins might very often be even smaller. If those firms have to provide deposits on imports of, say, £2½ million, they might have to find interest of up to or over £100.000.

Amendment 83 deals with the slightly different point of the remission of duty when the exporter is not the importer. Under the Bill, I understand, the duty will be remitted to the importer under certain conditions. One of the conditions which an importer has to meet in the majority of cases is that he exports either all the imports or a proportion of them.

What the Bill does not provide is that the duty will be remitted, although the exporter is not himself the importer. No doubt, the Minister of State will put me right if I have misunderstood the point, but as the Bill is drafted, to get remission of duty, the importer must satisfy the commissioner that the goods will be used for export by him. In practice, in the majority of these operations, somebody imports a raw material which is not excluded from the schedule.

9.0 p.m.

For instance, finished leather is not excluded from the Schedule. Finished leather is imported by firms which have been established in the trade of leather importers for generations, and which have expert knowledge of markets and leathers. At the moment of import they do not know to whom the leather will go; some will go for home consumption and some for export. The purpose of the Amendment is to provide that the importer can sign the import receipt to a purchaser, a manufacturer-exporter, so that the manufacturer-exporter can, with that receipt, on satisfying the Commissioner of the quantity which he is exporting, reclaim the deposit paid for the material. It is on a slightly different but very important point.

I emphasise that by quoting from a letter which I have received from a well-known firm of shoe manufacturers which is a leader in the export market: On checking with the local customs officer today, we understand that some relief from this measure could be obtained by us if we became our own importers. The amount would be calculated on a percentage basis from historical records of what we normally re-export in the form of shoes. The first point is that the firm can only get the deposit back if they become their own importers. The letter continues: It will not be easy for us to suddenly become importers of leathers, as this we con-skier to be the function of agents in this country who have to stand by deliveries with regard to grades, quality, selections etc.From inquiries we have made it is obvious that some of the smaller agents or importers, who are without financial backing, will find it impossible to make these deposits and it would appear that the onus to do so in order to obtain adequate supplies will be on us.Whichever way it is done in order to maintain supplies, it will, in our opinion, mean increases in the prices of our raw materials of something in the order of 4 per cent. That is the problem of a company with a large export trade, and it is precisely the sort of case which has inspired the Amendment.

Amendments Nos. 81 and 82, which support my hon. Friend's Amendment No. 4, are in order to make the receipt for the deposit in the form of a negotiable document. Amendment No. 83 is on a different point, to enable the firm which does not itself import to be in a position to reclaim the deposit on that portion of the goods which is re-exported.

If the Government have a genuine interest in trying to avoid the bankruptcy and liquidation of small firms and in encouraging increased export trade, they will accept the Amendments, or at any rate, the principles behind them.

Photo of Sir John Foster Sir John Foster , Northwich

The necessity for the Amendment is that Clause 1(2) does not allow for the import deposits to be either assignable or negotiable. Is the Minister able to say whether the scheme under Clause 1(2) which I am about to put forward will work? The importer tells a bank that he must find £100,000 for a deposit. The bank agrees to pay the deposit for him. The Government then owe the bank £100,000. The difficulty which the Amendment is designed to overcome is that the owing is not represented by a document saying, "H.M.G. owe the XY bank £100,000". I agree that the credit base would not be extended by the Amendment, but could the bank take the form of acknowledgment for the deposit referred to by my hon. Friend the Member for Harrow, West (Mr. John Page), and write an order saying, "Please pay to the blank account the sum of £100,000"?

It is assumed that, as in the City of London, there are names which can be relied upon not to go back on their word. That is the whole basis of credit in the City of London. It occurred to me that a signed order to the Government with the name of the account not filled in might satisfy Clause 1(2).

Obviously the Commissioners will not press £100,000 into the hands of the XY Bank. When the 180 days terminate, the Commissioners will pay it into the bank account of the person paying the deposit. On the 180th day, the Customs could not say, "But the account named is not your account; it is just a number." Again, ex hypothesi, the person who signed the order to H.M. Customs saying, "Please pay £100,000" will not write another order to get the money himself.

I would have thought that the Commissioners had to obey the order of the person who paid the deposit. They must pay the account designated by the person who pays the deposit. They will not have a lot of detectives going round saying, "This is not your account. We are not really paying the person who paid the deposit, because here is his signature properly sealed, and so on."

Would the Minister of State hazard an opinion as to whether that kind of document might not get a certain amount of assignability and negotiability? Let us assume that the XY Bank hands it to AB, who is willing to discount it. Let us say that he works on a 6 per cent. discount and gives the bank £94,000, expecting to get £100,000 on the 180th day. The person making the deposit writes into the Customs merely filling up the number of the account, saying, "I will leave it blank so that AB can pass it down the line and anyone can fill in the account name." When the Customs get it on the 179th day, surely they are bound to pay at the order of the person who made the deposit? I do not see how they can refuse.

Can the Minister of State comment on that? It is relevant, because it throws some light on the need for the Amendment. The hon. and learned Gentleman may say that such a scheme will not work at all. In that event, the Amendment is all the more necessary from our point of view.

Photo of Mr John Nott Mr John Nott , St Ives

My hon. Friend the Member for Harrow, West (Mr. John Page) has raised an interesting point. Customs and Excise Form 139 which, with a stamp, is the form which the importer can receive from the Customs and Excise if he so desires, could be used as collateral for a loan from a bank. Indeed, it would be open to the person who has received Form 139 to assign it to a bank so that it could be used as collateral for a loan.

But I do not see how Form 139 could possibly be deemed to be a negotiable instrument. I understand the definition of a negotiable instrument to be something which has an inherent title embodied in it so that, without any kind of assignment whatsoever, as a piece of paper it gives title to whomsoever holds it at any point of time, whether a Treasury bill, a bill of exchange, or a bearer bond as opposed to registered stock. I do not see that this is a negotiable instrument. But Form 139 would, to any banker who desired to accept it as collateral, be acceptable as such, and the banker could ask that the title to it should be assigned to him to provide proper security.

If this is right—it may not be—it seems that the interesting point in the Amendment revolves around the rate of interest. If the Customs issued a receipt for the imported item which said "Customs and Excise promise to pay after 180 days" a particular sum, this would command Government rates of interest or quasi Government rates of interest, because it would in effect be a Government guarantee to repay after 180 days. If it was a receipt whereby a Government agency promised to repay, it is probable that the importer could borrow against the security of that receipt at a highly favourable rate of interest, whereas he could only borrow against Form 139 at the going market rate or at what the banker thought to be the credit rating of the importer if the security of the Government was not involved, but it was purely the security of the person to whom Form 139 had been made out by the Customs.

This may or may not be right. Therefore, the important point is: do the Government wish to help the financing of these import deposits or do they wish to inhibit them? If they wish to help the financing of these import deposits it seems perfectly reasonable for the Customs and Excise to issue a receipt which will enable the importer to borrow against it at Government rates of interest. If the Government do not wish to help, it merely allows Form 139 to be issued and for it to be used as collateral against a loan. I wonder whether the Minister of State could clarify this point when he answers the debate.

Photo of Mr Charles Fletcher-Cooke Mr Charles Fletcher-Cooke , Darwen

We owe a debt to my hon. Friend the Member for Harrow, West (Mr. John Page) for starting this interesting debate. It became clear as the debate progressed, particularly from the flood of light that my hon. Friend managed to throw on the practice of the Customs and Excise, that, whatever else might be right or wrong, we need a proper receipt for these deposits from the Customs and Excise as a matter of course, not merely on demand. It is absurd in a commercial and mercantile country that the Customs and Excise should not automatically give a properly authenticated receipt for the deposit of what will be large sums of money in many cases, that it should only be obtainable on request and that, even in those circumstances, it should not be considered a receipt.

9.15 p.m.

Then comes the interesting problem, raised by various Amendments, as to what is or should be the status of this receipt. My hon. Friend the Member for Harrow, West suggested that it should be made a negotiable instrument, and he parallels this with the warehousemen's warrant, which has never been made a negotiable instrument, but which has been accepted as such in commercial circles ever since it was excluded from any possibility of operation as a bill of sale by the Bill of Sale Act. My hon. Friend asks that the Government should proclaim it a negotiable instrument, and thus make the right to the deposit returnable to whoever produces the negotiable instrument, even though no notice has been given to the Customs and Excise that the receipt has been transferred. As my hon. Friend the Member for St. Ives (Mr. Nott) said, that is the difference between negotiability and assignability. The assignabality arises only when notice is given to the debtor, but with a negotiable instrument no such notice is required.

I think the Minister of State will say that negotiability would have the effect of monetising these receipts. If they are negotiable in this way, it will mean that they will become monetised, and this will increase the velocity of credit and thus increase its base. I fear that that is what we shall be told, and that one of the object; of the Bill is to decrease the credit base rather than to increase it.

I do not think that that objection would arise, or arise in any material way, if these receipts were made assignable, because that would not materially increase the velocity of their movement, and it would, as so many of my hon. Friends have said, enable some very important credit to be obtained which I do not think will be obtainable under present circumstances, in the sense that, as I read the Bill, Customs and Excise are only obliged, and perhaps only entitled, to pay to the person who originally made the deposit.

I should very much like to hear from the Minister of State whether he accepts the modifications to that obligation proposed by my hon. and learned Friend the Member for Northwich (Sir J. Foster), who suggested that that obligation and that privilege of repaying only to the person who made the deposit could somehow be modified by the instructions of that person to pay to somebody else or to someone else's account, whether numbered or named. As I read it, there is no possibility of that in the Bill as drafted.

We say that because we think these should be made assignable, that does not really arise. They should be made assignable for the many examples given by my hon. Friend the Members for Acton (Mr. Kenneth Baker) and Leicester, South-West (Mr. Tom Boardman). I think perhaps the most vivid is the case of the importer who may himself have paid the deposit in the first instance, thinking that he would be able to afford to be out of his own money before the six months, and be able to weather that storm, but who, after a month, having paid his deposit, finds that he is desperately short of working cash, perhaps not for reasons connected with importing at all, but for other reasons, and wishes to take his receipt to a bank or to some other person and say, "This is very good security. I want to assign this to you, in return for your letting me have my deposit sufficiently discounted".

For the life of me, I cannot see why that cannot be done in just the same way as it would be done in the case of an ordinary commercial document. Why should not this document of title be assignable and thus enable the importer to get the money that he needs so desperately?

If it is not assignable—if the payment has to be made to the importer after the six months are up—the bank, or whoever it is, will charge the importer a very much higher rate of interest, because during those five remaining months the importer may go bankrupt. If he goes bankrupt, the money will go into the general pool and the person who has left the money will have no preferential claim on whatever is left from the bankrupt's estate. It therefore seems to be quite wrong to leave this monopoly repayment in the hands of the importer because money will be very tight. I know that the Government want it to be tight but, as we heard in answer to the last Amendment, they do not want it to be so tight that it will bankrupt many small traders.

In the example that I have given, unless after a month or so of having his money on deposit the trader can get money on reasonable terms he will go bankrupt, and he will be able to get it on reasonable terms only if he can assign, in the proper legal sense of the word, the document of title to his deposit. It is not possible to elaborate the case. It seems so reasonable, on commercial grounds, that I shall wait with interest to hear why the Minister of State says that it cannot be done—if he has to say that. If he were going to accept one or more of our moderate Amendments I feel that he would have risen earlier.

I come finally to the Amendment on a somewhat different subject—Amendment 83. That was the one on which my hon. Friend the Member for Leicester, South-West spoke so cogently. That tries to prevent a distortion of our export trade by widening the import privilege or the import allowance—if I may so phrase it—in the case where the importer is not the same person as the exporter but when the article imported is genuinely and demonstrably included in the exported article, albeit exported by someone else.

If this Amendment or one on the same lines is not accepted, we fear that the course of trade will be enormously distorted, because it will be in the interest of importers to identify themselves with export businesses of which they may have very little knowledge, and which they may have very little skill in dealing with. This will lead to all sorts of impromptus and tergiversations in order to get the benefit of a very reasonable drawback and one which in other circumstances has always been extended in the cases envisaged in Amendment No. 83.

The Minister of State will know that an Amendment to like effect appears as an Amendment to the Chancellor's Amendment at the end of the Schedule. This point is raised now in the form of a preliminary canter. If the Minister of State cannot tell us tonight I hope that he will tell us tomorrow, or whenever it comes up, that this reasonable suggestion has been adopted, because the alternatives—if he considers what may happen if the Amendment is not adopted—are very serious.

Therefore, I hope that he will tell us that the Customs and Excise will pay the import deposit back to persons to whom, they have had notice, the certificate has been assigned. I hope that he will see that a proper form of certificate is automatically issued and that he will view favourably the suggestion in Amendment No. 83 that the export privilege should be assignable—this is another aspect of assignability—and not restricted to the named importer, in which case it might be of very little value to the importer, the exporter or the country.

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

There are some points raised by the hon. Member for Harrow, West (Mr. John Page) and one raised in one other speech with which I do not intend to deal now, if the Committee will excuse me. The hon. Member for Harrow, West discussed briefly what goods should or should not be exempt. Of course, we will have ample opportunity to discuss this on the Schedule. He also went into a tirade about the inequity, as he saw it, of making the maximum time before repayment 200 days. That also arises on another group of Amendments and would be better discussed then.

Issues arise over the very interesting Amendment No. 83, forcefully moved by the hon. Member for Leicester, South-West (Mr. Tom Boardman), which, as the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) recognised, fall to be considered when we discuss the problems of re-exports under the Second Schedule. I shall certainly consider with care all that he has said, and the particular difficulties which arise and how far they can or cannot be met in terms of the Government Amendment, at that stage of the Bill.

Apart from these issues, a number of very important points have been brought forward. First is the question of the form on which the name of the person concerned will be entered and how far this can be left blank. Subsection (2) of Clause 1 provides that the import deposit is repayable to the person named on the entry as having paid it. This does not necessarily mean the importer. It would, of course, be impossible to restrict it to the importer, if we had wished to do so in any event, because, in many cases, duties will be paid by forwarding agents and it would have caused unreasonable inconvenience if we had refused this facility for the import de posit.

We shall not always know who the importer is, so an importer can arrange for the deposit to be paid for him by someone else and can assign to that person at the time of payment the right to receive the repayment. But somone must be named. One cannot say that the repayment must be made to a particular account. There is no reason why the bank should not be named if that is the arrangement which the importer has reached. If a receipt for the deposit payment is asked for, that person can hold the receipt. How far this is collateral or not is a question which shows a wrong approach. As the Clause stands, this receipt, if requested, would be evidence of credit-worthiness and could be used by someone in need of money to show his credit-worthiness and obtain that money.

Photo of Sir John Foster Sir John Foster , Northwich

If the hon. and learned Gentleman meant to dismiss my scheme on the grounds that one cannot leave the name out, I would point out that that was not my suggestion. The name at the bottom would be A.B., the person who paid the deposit. It would be a mandate on the certificate telling the Customs to pay account No. N.61, say. I challenge the hon. and learned Member to say that that is not a valid mandate.

9.30 p.m.

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

The only obligation of the Customs is to pay the person named—

Photo of Sir John Foster Sir John Foster , Northwich

is the Minister of State suggesting that the Customs will go round with £100,000 in notes? He cannot be. The Customs have to pay into an account. The hon. and learned Gentleman cannot mean that the Customs go round with the notes. If he does—God help him.

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

The Customs pay the person named, and as I understand it there is no reason why they should not pay the person named in the form in which he asks to be paid. If it is paid for someone else it can also be assigned to that person at the time of payment—

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

I will give way in a moment, but let us just go on to what actually happens now. The hon. Member for Harrow, West (Mr. John Page) is quite right in saying that form C139 is the form on which a stamp can be placed by the Customs if the importer or the person named wishes to have a receipt. I will certainly see that the form is looked at in order to find out whether it is possible to improve on it, but that is what happens now.

A receipt will be issued, if desired, through Form C139. It is the intention to convert the lower part of C139 into a payable order, and to send that to the address originally filled in. That is the shape that Form C139 can take—

Photo of Mr John Nott Mr John Nott , St Ives

I understood the point made by my hon. and learned Friend the Member for Northwich (Sir J. Foster) to be that either the money can be paid in to the account of the depositor at, say, Barclays Bank, or the depositor can give an instruction that the money be paid to Barclays Bank. Those are quite separate things. Can a depositor give instructions at the time of paying the deposit that he wishes it to be repaid to someone else? That is the important point.

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

If that is the form it takes, in effect what is happening is that one is getting an assignable document, which is the point that I intended to deal with later.

Photo of Mr Thomas Boardman Mr Thomas Boardman , Leicester South West

Does the Minister of State say that the document itself will be evidence of credit? The document itself is no more evidence of credit than is a share certificate in someone else's name. To be shown a share certificate in a person's name is no evidence of his credit, unless it can be transferred. One does not advance large sums of money until one has security for it. The person having the share certificate may owe £1 million elsewhere, so the certificate itself is no evidence of credit.

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

It is certainly evidence of creditworthiness to the extent that it is clear that at the end of 180 days he will receive from the Customs the sum received as deposit.

Photo of Mr John Page Mr John Page , Harrow West

We are delighted to see that one of the four Board of Trade Ministers has at last joined him in his lonely moment on guard, because this is essentially a Board of Trade matter. I understand the hon. and learned Gentleman to have said that something could be written at the bottom of form C 139. For the sake of clarity, would he repeat that statement? It did not come across to me?

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

The intention is to convert the lower part of form C 139 into a payable order and to send that to the address originally filled in.

The substantial question raised by this Amendment is whether or not this should become a negotiable instrument.

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

I do not know whether I am being unduly obtuse, but I have totally failed to understand the effect of what the hon. and learned Gentleman has told the Committee. Is this a form which will be sent to the person who has paid the deposit so that the money still belongs to that person? There is no possibility of his having to charge it or assign it? Is that the effect?

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

This is not something which makes it into an assignable document. The actual issue before the Committee is whether or not (a) this should be a negotiable document and (b) whether there are advantages in making it assignable. The hon. Member for Acton (Mr. Kenneth Baker) said that he anticipated the answer I would give, but I do not think he has anticipated entirely correctly. It is very much part of this scheme to restrict credit. That is the whole purpose about which the Financial Secretary spoke earlier. This is on top of the restriction of lowering the bank ceiling. There is £600 million worth of deposits which will build up and which in themselves in so far as they are not composed of money lent from abroad go to restrict the amount of liquidity available in the economy.

To some extent making this negotiable would tend to defeat the intention of the scheme in that respect because the importer through the return for his deposit will be provided as is the intention of the Amendment with a marketable security which at an appropriate rate of discount he could use to put himself in funds. Quite apart from the question of the velocity of turnover of credit to which the hon. and learned Member for Darwen referred there is a further answer which I must give to the hon. Member for Acton. If this happens it is bound to reduce to some extent the effect of the scheme on the liquidity of the economy because what would be created in effect would be a negotiable instrument payable by the Customs which is the equivalent of a gilt-edged security so the funds would be drawn almost entirely into the market for import deposits at the expense of public sector debt and that would be bound to have some effect on liquidity. The whole purpose of the scheme is twofold. One part of the main purpose is to reduce the amount of liquidity.

The alternative was put forward by the hon. and learned Member for Darwen that these certificates should be made assignable even if they were not negotiable. The difference between the two points in practice will not be very great because if notice is given these documents will be negotiable. They can be sold, they will have the same effect although to a lesser degree and this is less objectionable than making them fully negotiable when notice is given to the Customs.

Photo of Mr John Nott Mr John Nott , St Ives

I understand the argument of the hon. and learned Member but surely it only expands the amount of liquidity in the system at any time if this particular type of receipt can be used as a collateral against loans from the Bank of England. If it is just a promise to pay by the Government and the banking system cannot borrow against it from the Bank of England I do not think it will expand the credit base at all. Only if the banks can use it as part of their liquidity ratio that it expands the credit base.

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

I do not think the hon. Member can deny that this is bound to have effect on the public sector debt and in this respect it is bound to have an effect on liquidity as a whole. These are some of the reasons why, somewhat reluctantly, I must oppose these Amendments. I understand the motives of hon. Members who have put them forward, but it is our major purpose to see that liquidity is restricted and this is something which will have a major effect on the economy and an interim effect on imports, quite apart from the particular deterrent effects it will have on individual importers. For these reasons I must ask the Committee not to vote for these Amendments.

Photo of Mr Charles Fletcher-Cooke Mr Charles Fletcher-Cooke , Darwen

The Minister of State has been somewhat obscure on the crucial issue as to the degree of assignability of these receipts. As I understand it, though I may have got it wrong, there is what might be called a degree of assignability permitted at the beginning of the six months; there is total assignability permitted at the end of the six months, because, to quote the Minister's words, which I took down, there is "no reason why it should not be assigned at the time of the payment"; but there is no assignability allowed between the two.

It is just between the two—the beginning and the end—that there needs to be assignability. It is just in those cases where the importer needs to replenish the capital of which he may have exhausted himself, thinking that he would be able to ride out the six months but finding that he cannot. It is clear, particularly from the intervention of my hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) that, unless these receipts are assignable in the sense that a good title to this repayment can be transferred from the original payer to a third person, they are not much use to the person wishing to borrow money. This much has emerged from this somewhat obscure debate.

Photo of Mr John Page Mr John Page , Harrow West

I seek knowledge, which I am sure will be helpful to those on the Treasury Bench. Any form of receipt which is given, if it ultimately becomes a receipt, could be used as collateral if there were a lender prepared to consider it. Is it fully understood that the Minister of State said that it must not be used? By making it a nonnegotiable document the Minister of State said that it must not be negotiated.

Photo of Mr Charles Fletcher-Cooke Mr Charles Fletcher-Cooke , Darwen

I do not think that that Minister of State forbade people to lend money on the security of these receipts. I say that in the commercial world such a receipt would not be much use as security in the circumstances of a borrower of doubtful credit. This is a great imposition on the small trader, who will not be able to assign the debt which is owing to him by the Government during the period in which it is maturing. It is a monstrous interference with the normal course of business and finance that a debt cannot he assigned if it is desired to be assigned. It is an innovation in our financial arrangements. I do not think that it would happen very frequently.

I do not think it was right of the Minister to say that there is not much difference between negotiability and assignability. There is all the difference in the world. A negotiable instrument is monetised. A debt that can be assigned is not monetised, because the velocity is infinitely less, but it is a great convenience and a great reassurance to the trader.

Unless the Minister of State can give an assurance that he will reconsider this, as I think he should, I suggest to my hon. Friends that we in due course recognise that the Government, having given great and smooth words to small traders when we were dealing with the last group of Amendments, now show their true spots, because they are perverting the normal course of trade and finance in such a way as to say that the man who really needs his credit desperately while what is owing to him is maturing, cannot get it. For these, amongst other reasons, I suggest that in due course we divide.

9.45 p.m.

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

I take the hon. and learned Gentleman's last point, that there is a difference between assignability and negotiability, and that the effect on liquidity is much less in the case of assignment. Without any undertaking that we shall meet the point which the hon. and learned Gentleman made, I give the assurance that I shall look at the question of assignment again.

Photo of Mr Thomas Boardman Mr Thomas Boardman , Leicester South West

In view of that assurance, I shall not press the point which I had intended to make, but I ask the Minister of State to bear in mind that a document showing that someone is entitled to money is no assurance or guarantee whatever to another person lending money unless he is guaranteed that it is not also available to cover borrowing elsewhere.

Will the hon. and learned Gentleman read what was said by the Financial Secretary on the earlier Amendments, when he gave bland assurances that the small importer had no cause for concern, that liquidity was all right, and the cash would be there? There is a stark contrast between that speech and what the hon. and learned Gentleman has said in reply to these Amendments. I welcome the assurance that he will look at the matter again.

Photo of Mr John Page Mr John Page , Harrow West

In the last minute and a half, the Minister of State went a long way to help us on this Amendment. He has told us that, after the points which have been raised in the debate, he is prepared to look again at the question of the assignability of the receipt and give us his second thoughts, presumably on Report, if not before if he can find a way of bringing the matter up for discussion. That being so, the position is somewhat altered.

May I have an assurance also on the form of the receipt? The hon. and learned Gentleman said that he would look at the receipt carefully, but I understood from the Board of Trade that it did not regard the present form with the stamp as a receipt. There must be a proper receipt automatically given. Unless such a receipt is available, import depositors are put in a difficult position. An acknowledgment for an interest-free loan for six months is not enough. A proper receipt on an appropriate form should be given.

Will the Minister of State also discuss with his right hon. Friend at the Board of Trade whether better instructions can be given immediately, as from tomorrow morning at 10 o'clock, to the Commissioners on the kind of receipt or acknowledgment which they give to depositors of cash? Such a receipt is vital to all concerned in the commercial and importing world. Perhaps the hon. and learned Gentleman will comment on these other questions.

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

We shall look at the form again, and, as I said, part of it would be altered. That will be the form to be retained by the Customs, which will then automatically become the order for payment. The form will, therefore, be altered, and I can look also to see whether a receipt could be incorporated which could be handed to the importer.

Photo of Mr John Page Mr John Page , Harrow West

The tear-off "gift coupon" at the bottom of the form is in no way a receipt. This is a convenience. I take it that the Minister will look at the receipt and the assignability again. With those undertakings, I beg leave to withdraw the Amendment.

9.30 p.m.

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

There is the very important point that when we were discussing the whole purpose of the Bill one of the arguments in its favour was the reduction of liquidity. If my hon. and learned Friend now makes the documents negotiable we shall create a new kind of bank note, which will completely destroy that purpose of the Bill.

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

I do not know whether my hon. Friend was present when I made this point. I said that I could not meet the Amendment on making the documents negotiable, but that I would look at the question of assignability, which does not have such a great effect on liquidity as creating a new negotiable instrument would have.

Amendment negatived.

Photo of Mr Harold Gurden Mr Harold Gurden , Birmingham, Selly Oak

The next Amendment selected is Amendment No. 6, with which we may discuss Amendments No. 97, in page 1, line 19, leave out from 'paid' to complete' in line 23 and insert: 'in the form of a warrant issued by the Commissioners dated for payment 180 days after the receipt of the import deposit and issued on the receipt of the import deposit as proof by the Commissioners of the'. No. 11, in page 1, line 24, at end insert: (3) Any such payment by the Commissioners shall be, at the request of that person, by way of a post-dated warrant made payable to that person aid sent to him prior to the date on which the import deposit becomes repayable. The date of the post-dated cheque shall be the date on which the import deposit becomes repayable. and No. 12, in page 1, line 24, at end insert: (3) There shall be issued to the person paying the import deposit, if he so wishes, sterling certificates of deposit maturing six months from the date of issue, of value equivalent to the nearest £50,000 to the import deposit paid; and whenever, such sterling certificates of deposit are issued, payment by the Commissioners under subsection (2) above shall be made to the bearer of such certificates upon their maturity.

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

I beg to move Amendment No. 6, in page 1, line 18, after 'repayable', insert: 'forthwith and without demand having been made'. We very much appreciated the Minister of State's readiness to look again at the question of assignment, and I move the Amendment without prejudice to the question of assignability.

The Amendment is directed to a different point—the intention that the money should be repaid on the 180th day. Its purpose is to place on record in the Bill clearly and unequivocally that it is the duty of the Customs and Excise to repay the deposit automatically on the due date. I have no doubt that the Minister will say that that is the Government's intention. If so, let it be clearly stated in the Bill.

The Financial Secretary has made great play of his belief that the money market will be able to provide the credit necessary to pay the deposits, and that credit will be available even to the smallest importer. It is clear that in some cases it will be more appropriate that it should be the lender who pays the deposit and is the person named in the document. Any doubt as to the certainty and immediacy of repayment on the 180th day is bound to make it much more difficult to obtain loans.

There is apprehension in business circles on this point. Those who have tried to obtain repayment of import duty in the past have experienced long and exasperating delays. In some cases they have not been able to obtain repayment for up to nine months. It will be of value to them in giving them confidence in the operation of the scheme if the Bill contains the words in the Amendment.

The mills of the Customs and Excise may grind very small, but they grind exceedingly slow. It would utterly defeat the purpose, which is that importers should obtain the credit in order to make their imports, and would merely increase the cost of the scheme to the importer, if the repayment were not made on the due date. Therefore, the Amendment is essential. It in no way detracts from the Government's intention; it merely implements it, and dots the i's and crosses the t's.

I shall leave it to my hon. Friends the Members for Honiton (Mr. Emery) and Yeovil (Mr. Peyton) to advance the arguments in greater detail on how the object of the other two Amendments should be achieved. However, on the last Amendment, the Minister of State said that, even without assignability, the document which the Customs and Excise would issue would have the effect of a warrant payable in the forms set out in Amendment No. 97. It may well be that the hon. and learned Gentleman will be able to meet that, too, without prejudice to the question of assignability. Whether the more elaborate suggestion of my hon. Friend the Member for Yeovil—that it should be sterling certificates of deposit—is acceptable is rather more doubtful, but no doubt the Minister of State will wish to comment on that.

As to the immediacy and the automaticity of the repayment, let it be stated firmly and unequivocally in the Bill.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

In view of what the Minister of State said on the last Amendment, I hope that my Amendment will be acceptable to the Government.

Instead of the elaborate procedure in subsection (2), Amendment No. 97 simplifies the matter and tells the Commissioners what they will do. Their responsibility to repay the money 180 days after the receipt of the import deposit is made definite by instructing them to issue a warrant to repay the money 180 days from receipt of the import deposit.

From a purely administrative point of view, that is something which the Government must welcome. It stops them having to issue a receipt. It stops them having to file the receipt. It stops them having to take action later to issue a cheque and to have that cheque put in an envelope, posted and crossed off. It meets the point of Amendment 6 that payment shall be made on the day that it is due. The Government must know that, unless they are willing to send out some cheques way before the date on which they are due, they will not available for payment into banks exactly 180 days after the deposit has been received. That difficulty can be overcome by accepting my Amendment.

It is obvious that a warrant could be assigned. In a legal sense, one can always argue about what is an assignment and what is negotiability. All I ask the Minister to do is to follow the criteria which he expounded on the last Amendment so that the warrant may be assigned. This would simplify the procedure in every way and make for greater efficiency in operating the scheme.

10.0 p.m.

I am against the scheme, but if we are to have it, let us have it operating sensibly. Let us, as the Opposition, try to ensure that the Government make some sense of it. I must not pursue that line too strongly in case the Government feel that something is hidden in my Amendment when it is not. It is purely an administrative convenience to simplify the procedure and to ensure that the person having made the deposit can have in his possession as a receipt a warrant which is encashable 180 days after the deposit has been made. If that does not make business sense to the Government, we will never get anything out of them.

Therefore, in the most serious plea that I can make to the Minister of State, I hope that he will accept the principle, if not the wording, of the Amendment. I am not necessarily a Parliamentary draftsman. If the hon. and learned Gentleman assures us that he will deal with the matter on Report, I am willing to accept his assurance. What we want is the principle. I believe that it makes sense. It is what industry, commerce and the small trader would like and I am certain that it would be sensible for the Civil Service, because it would be bound to cut down a considerable amount of its work.

[MR. SYDNEY IRVING in the Chair]

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

I support as strongly as I can both the Amendment moved by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) and Amendment No. 97 of my hon. Friend the Member for Honiton (Mr. Emery). It is essential to have certainty about the time of repayment of the deposit. Here again we come down in particular to the smaller company.

During the last few years of almost continuous credit squeeze, time and time again one has seen the smaller companies faced with additional demands for cash resources in one way or another because of the greatly extended credit which has been taken generally by trade, working on very narrow margins between their bank balance and their limit with the bank, having to budget carefully every month to keep within the limit. If even Government money which is owed to them on a specific date cannot be guaranted to them on that date, there will be trouble in many businesses.

A typical example has been the switching over of the Selective Employment Tax to computer repayments. They have not been coming through on the dates specified but many companies have relied on receiving the money on a given date. When it has not come through by the end of the month, they have had to do a lot of explaining to their bank managers. Those sums, however, are nothing like the amounts which could be paid by way of import deposits.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

Would my hon. Friend continue his argument by saying that where repayment has not come by the automatic procedure and somebody then has to claim for it, the repayment does not appear in 24 or 48 hours but is delayed sometimes for weeks or months? That is something that we could avoid by the Amendment.

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

There are all sorts of possibilities which could lead to embarrassment, particularly for the smaller firm. What we must provide—the right is built into the Bill, and we are trying to protect that right—is that the money comes automatically into the hands of those who have paid the deposit at the time when it has been promised. I therefore wholeheartedly support these Amendments and plead with the Minister of State to give them the utmost sympathetic consideration.

Photo of Mr John Nott Mr John Nott , St Ives

There are four possible ways in which the money can be repaid. First. there is the method which, I understand, exists as the Bill is drafted, that form C139 can be used as evidence of the creditworthiness of the importer. Secondly, the Minister of State has said that he will consider whether something can be worked into that procedure to enable Form C139 to have some assignability so that it can be lodged as collateral security and the persons lending the money will know that they are entitled to receive payment when it is due.

Thirdly, there is the system under the Amendment, namely, a form of certificate of deposit under which a document would be created payable forthwith on the due date. The objection of the Minister of State to this will be one objection which he had to the so-called negotiable instrument referred to in a previous Amendment, namely, that if a certificate of deposit is created, money will be drawn out of the market which would otherwise be lent to the Government. I think that this would be an admirable solution, and I can think of nothing better than a system which would divert money on the gilt-edged market which is now being lent to the Government to finance the private sector.

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

There is one other argument, the question of what happens if the date of repayment is short.

Photo of Mr John Nott Mr John Nott , St Ives

In that case there is a fourth alternative, and that is the suggestion that the document should be a full-blooded negotiable instrument, the same as a Treasury Bill, to count as part of the liquidity of the banks, which could be lodged as collateral with the Bank of England and would therefore expand the credit base.

In replying on the previous Amendment the Minister of State implied that a negotiable instrument was unacceptable to the Treasury as it would increase liquidity in the economy. In my view the certificate of deposit does not increase liquidity in the economy, since it cannot be lodged as collateral with the banks. When last year the Chief Secretary to the Treasury introduced the Clause in the Finance Bill on certificates of deposit he made it clear that this was an acceptable development because the sterling certificate of deposit does not expand the credit base.

The only possible objection by the Treasury is that money which would otherwise be lent to the Government might now be diverted into certificates of deposit and, in effect, lent to the private sector. I fully support the Amendment, because this is a highly desirable objective. The Government are able to borrow money on the gilt-edged market far too freely, and I fully support any Amendment which would prevent them doing so.

Photo of Mr Michael Alison Mr Michael Alison , Barkston Ash

I wish to elaborate on Amendment 12, dealing with sterling certificates of deposit. It follows on logically from the series of Amendments to which the Minister of State has already directed his mind. In the proposal for sterling certificates of deposit we are putting before the Minister of State an idea which already bears the imprimatur of the Government's approval, since it was a feature of the 1968 Finance Bill.

If the form of words relating to the sterling certificate of deposit is accepted, this is what I understand will happen, the deposit will come to the Customs and Excise with his deposit of £50,000. I mention this sum since it is the minimum sum for which a sterling certificate of deposit is available. On receiving the £50,000, the Customs and Excise will make available through the banking system a sterling certificate of deposit for the equivalent amount. I ask the Minister of State to bear in mind that when the importer has deposited his £50,000 with Customs and Excise and Customs and Excise have, through the banking system made available to him a sterling certificate of deposit, from the Government's point of view that £50,000 is now tied up and the liquidity has to that extent been immobilised or frozen. The advantage of the sterling certificate of deposit from this moment on is that, while the Government remain in the position of having had this amount of liquidity immobilised, the individual importer, because he is holding a recognised and authorised bearer negotiable instrument, can walk out into the market, discount it and get his own money back. But he will only get it back from another saver, so that there is thereby no extra liquidity injected into the system.

I hope that the Minister of State will bear in mind that this is a perfectly reasonable proposal which ensures that the same amount of liquidity is frozen but that the saving effect is achieved by people who want to save and not people who have been forced to save. There will always be some companies which have liquid funds against a Bill coming in and which are happy to buy these certificates of deposit off the individual importer. It leads to a freezing of the market and the most rational use of resources. In addition, the Government's purpose in securing the freezing of liquidity remains intact.

I want to remind the Minister of State of two key comments of his hon. Friend the Financial Secretary about the idea behind the sterling certificate of deposit. On Second Reading, he said: … what is intended to happen, is that a man who really must have the import will go to the inconvenience and modest expense required to obtain finance. All that the Financial Secretary envisaged for the importer was some inconvenience and modest expense. I suggest that a sterling certificate of deposit amply meets those criteria. It is moderately inconvenient because he has to discount it and suffer the modest expense of losing the interest on the money if he discounts it before it matures.

The Financial Secretary's other comment was to make it clear that the idea was not to immobilise importers and make it impossible for them to obtain their finance. He said: It will, of course, be said that people can borrow to cover the deposits that are required and that they may borrow at home and abroad. This was perfectly well taken into account and foreseen by the Government. If people borrow at home, they will be mopping up liquidity which would be available to finance other consumption."—[OFFICIAL REPORT, 28th November, 1968; Vol. 774, c. 752–60.] That is what happens with the sterling certificate of deposit. He recognises that people can borrow from other people and is happy that they should do it.

All that we propose in the sterling certificate of deposit is that there is an open, above board and recognised fashion by which the person who wants to save at a given moment is able to do so and the person who wants his liquidity at a given moment is able to do so by discounting these certificates.

I want the Minister of State to confirm categorically that it is the aim and object of the Government not to immobilise the funds in the hands of importers but merely to make it more inconvenient for them. We want to be sure that he is not trying simply to force importers to lodge millions of £s worth of their assets for six months.

As we understand the scheme, the Government intend that there should be a reasonable let out. These sterling certificates of deposit will have that effect. I hope that the Minister of State will not tell us, as he tried to do on the basis of the assignable instruments which we discussed earlier, that sterling certificates of deposit are in danger of adding to the liquidity of the system.

The recent issue of "The Barclays Bank Review", dealing with this question of liquidity and sterling certificates of deposit, said: They will not be eligible at the Bank of England as security or as margin for advances to the discount market. The bank will neither discount nor purchase C.D.s either on its own initiative or, if they are tendered to it, on the initiative of the discount market. The Bank of England will not regard C.D.s held by clearing banks as liquid assets for the purpose of the agreed liquidity ratio. It is clear that not only do the sterling certificates effectively tie up liquidity as the Government wish for six months, although they tie it up in the hands of those who want it tied up, but at the same time they have no effect on the liquid basis of the joint stock banks or of the wider banking system. The Government cannot disallow this proposal on the basis of adding to liquidity.

The Minister of State must bear in mind that the Government are squeezing importers more severely in reality than they claim to be doing in their overt statement. The Chancellor, on Friday, 22nd November, when he announced these Measures, said two things which do not marry up. He told us that the joint stock banks, the London clearing banks and the Scottish banks would have to reduce their advances by £100 million. He went on, almost in the same breath, as we have been reminded by the Minister of State this evening, to point out that the deposits required by the Customs and Excise would run at the rate of £100 million a month. He is taking £100 million out of bank credit, on the one hand, and is trying to press £600 million into bank credit, on the other. It will not in fact fit into that source of credit. The Financial Secretary said that there is no intention of making life unbearable, so why are we not to be given the sort of let out provided by C.D.S?

I remind the Minister of State that the squeeze on the banks will be more severe than he pretends. Barclays Bank says that it proposes to call in up to £50 million worth of advances in response to the Chancellor's squeeze, and they represent merely a quarter of the advances of the London clearing banks. I believe that overall their restrictions will run into £200 million. I believe that the Government must give some flexibility and the c.d.s should do that without harm to the scheme. May we have a positive and constructive reply?

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

My hon. Friends have spoken mainly about the financial aspects of these Amendments. Briefly, I should like to refer to the administrative aspects.

We have heard that the purpose of the enactment is to mop up liquidity and to restrict credit. I hope that the Minister of State will make it clear that the object of the Bill is not to mop up manpower. We have enough people engaged in a form of bureaucratic occupation in the economy at present as a result of the various statutes of this Government. It would be a great pity if this number was further increased unnecessarily by the method of operation of the Bill.

We had an interesting exchange on this point on Second Reading. My hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), with his usual acumen, referred to the Prime Minister's undertaking that future Bills should include any forecasts of changes in the non-industrial and industrial staff in Government Departments. This drew from the Minister of State, who I under- stand will be replying, the fact that some 250 members of the Customs and Excise would be drawn into the operation of the Bill. I do not suppose that I could draw the Minister of State into giving an estimate of the number of staff in the private sector who would be drawn into the operation of the Bill who were not previously required for this type of activity, but I suspect it may be very large.

I think it likely that many firms and offices not normally concerned with import documentation will feel the administrative impact of the Bill. This is another reason why, wherever possible, the administrative aspects should be made simple. I suggest that if Amendment No. 6 is accepted it might help companies and enterprises to decide what system of documentation to initiate to ensure that their credit, extended for the Government, is not for one day longer than it need be. This might help them to devise a simpler system, without so many checks and counterchecks as will be necessary otherwise. I hope that not only when discussing this Amendment, but generally in the Bill, the Minister of State and his colleagues at the Treasury will pay attention to making the administrative burden on the private sector as light as possible. I hope that the Minister will consider this series of Amendments with that in mind as well as the financial aspects.

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

Perhaps I might refer, first, briefly to the question of the sterling certificates of deposit. On the last Amendment—and it is really with very much the same subject that the hon. Member for Barkston Ash (Mr. Alison) was concerned—I said that the main aim of the Government was to reduce liquidity, and that we would therefore look at the question of the assignments which would not necessarily have a great impact on liquidity as a way in which the question of borrowing could be dealt with, and the same would apply to the sterling certificates of deposit.

The hon. Member for Honiton (Mr. Emery) should not read too much into what I have said. I have made it clear that I shall look at the question again with an oven mind. I have not committed the Government to implementing the kind of Amendment which was put forward. We have to look at the questions which have been raised in the debate. We also have to look at how this will affect the automatic payment of the deposits, with which Amendment No. 6 is concerned. It is the desire of all concerned that these payments should be made automatically, and we would not wish to introduce anything which would make it more difficult, or which would attract more manpower, to secure this automatic repayment. All these questions will have to be gone into.

The objection to the form of the Amendment put forward by the hon. Member for Honiton is that again one is in the realm of negotiable instruments. This is something which I rejected, and it will not be in our review when we look at the question of assignments.

The real question is whether one should insert words of the kind asked for by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin). There is no dispute about the aim. Hon. Gentlemen opposite and the Government want to ensure that these deposits are repaid on the dot, and that there is no delay. It is not like the cases in the past where there have been delays by Customs. There have been disputed cases. In this kind of case there will be no difficulty, or at least one cannot foresee any difficulty, in deciding when, and to whom, this particular deposit will be repayable. It is not like those other cases, as I think the hon. Member for Wanstead and Woodford appreciated, where there have been disputes and delays. As I read the Clause, I do not see that anything of value will be added if one inserts the words "forthwith and without demand" because it is clear that this will have to be repaid at the end of the 180 days.

As I said to the Committee before, the repayment system is intended to be worked by means of control forms which will be filled up at the time the deposit is paid. The lower part of the form, C139, which bears the name and address of the person paying the deposit, will be converted by means of a special overprinting machine into a repayment document. It is in any event intended to make this into the repayment document. These forms will be filled in in date sequence, and repayment will be posted in time to reach the recipient by the 180th day.

The trader will not need to apply for repayment. I can give a complete assurance to the Committee that there will be no such need. There will be automatic repayment, which will reach the person by the 180th day and the addition of the word "forthwith" might even add some uncertainty, because even last week there was some discussion about what it meant. It would be much better to leave the wording as it stands, with the clear obligation that repayment must be made after 180 days.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

I must press the hon. and learned Gentleman on this point so that he can help the Committee. If, due to Government error, repayment is not made available to the company after 180 days, will the Government undertake to be responsible for the interest on the money due to their error, when the money is not received by the person making the deposit?

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

I shall consider the question whether provision should be made if repayment is late. I do not think that the hon. Member is worried about its being one day late. If the scheme and the law are to be complied with, there will have to be repayment by the Government after the 180 days and there is every intention that this will be part of the automatic process. The care that we must exercise in considering the question of assignment is to see that this automatic process is not interfered with. I agree that it is vital that this period of 180 days shall not even be a period of 181 days.

Photo of Mr John Wells Mr John Wells , Maidstone

In cases where a unit is assigned to a third person, will the 180 days apply to the third person without any fault or fail?

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

I do not believe that the hon. Member was present when we discussed the last series of Amendments. The question of assignment is one which we shall re-examine. No specific undertaking has been given that we shall provide for assignment, but we must ensure that the automatic principle is not infringed.

Photo of Mr Michael Alison Mr Michael Alison , Barkston Ash

Are we to understand by the Minister's helpful indication that he will again consider the question of assignment and, by implication, negotiability? Do we understand that the Government accept in principle that the concept of the burden of lending to the Government being transferred from shoulders which do not wish to bear it, namely, the importer, to shoulders which may be willing to bear it, the intermediate lender, has been accepted, and that this principle will be followed through, provided that it does not lead to extra liquidity?

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

I do not go back on anything that was said by my hon. Friend the Financial Secretary. This is a form of credit selection which works through the importer, and in the first place it is the importer who will have to find the money.

Photo of Sir Douglas Glover Sir Douglas Glover , Ormskirk

I do not know about my hon. Friends, but I thought that that reply was most unsatisfactory. I thought that the hon. and learned Gentleman would thank my hon. Friend the Member for Honiton (Mr. Emery) for his Amendment and accept it without any further argument. I cannot see why he has to say that he will take it back and consider the question of negotiability. So long as the Government do not increase credit rates it does not make a ha'p'orth of difference to the Government whether the deposit is paid to a third or fourth party at the end of six months.

If the Amendment were accepted it would cut down 75 per cent. of the administration. It would make it far easier for people to organise this scheme. Some hon. Members have talked about depositors with £50,000, but the sort of people that I visualise will get into serious trouble over these import deposits. After listening to the Government we would be far wiser to call them credit deposits. It is really a credit deposit, since it has little to do with imports. The importers who will face serious difficulty are not those who can put down £10,000, £50,000 or £100,000, but the small manufacturer importing one component, a replacement for his machinery, on which he would have to put down £1,000 or £2,000. He has no creditability at all. He will be prepared, because he has to have that component, to sell his £1,000 deposit for £900 or even £800. He will not have that creditability to borrow that money on the open market.

10.30 p.m.

But if the Chancellor would allow this to be a negotiable security, the difficulty would be removed. The Government do not seem to appreciate that, if the money has to be paid to the original depositor, people who do not know much about the small firms will not help to finance the deposit. By allowing a negotiable bond to be arranged, the Government would overcome the Customs administration and this great difficulty for small people. The Minister of State gave us little assurance that the Government were seized of the urgency of this problem and would deal with it before Report.

Photo of Mr John Nott Mr John Nott , St Ives

The Minister of State dealt very lightly with the possibility of the payment arriving a day late, which is conceivable when we know that the mails cannot be relied upon. Therefore, when considering the form and the assignability on it, he must give the depositor the option of getting his money back by a banker's payment, so that he knows he will get it on the due date and will not have to rely on the mail. Sums of £100,000 or £200,000 may be involved and it is not good enough to hope that the mail will arrive on the due date.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

The Minister of State dealt with my points in cavalier fashion. He entirely set aside the efficiency point, of ensuring that there are not two sets of documents issued by the Commissioners, one being the warrant. If he wants to hold the increase in the Civil Service to 250, he must accept my Amendment immediately.

I was most concerned that he seemed to misunderstand the fact that a day late, on £600 million, could mean an expense of £120,000 or £130,000. That may not mean very much to the Minister, but it certainly does to industry and commerce, and particularly to the small firm.

If the Government are so sincere and so desolate, and do not want to see anything go wrong, if they want to be sure that payment shall be on the correct date, why do they not give an undertaking that if payment is late they will be responsible for paying the consequent interest? If they mean all they say, let them put their faith in the efficiency of their administration, and say: "If anything goes wrong, we must pay the cost." Why must industry always have to pay the cost—why must it always be the importer? The Minister should give the Committee a much fuller answer than we have so far had.

Photo of Sir Albert Costain Sir Albert Costain , Folkestone and Hythe

Is not the right answer to give a Post-dated order at the time the deposit is made? Would not that meet the problem?

Photo of Sir Peter Emery Sir Peter Emery , Honiton

That is really what my Amendment seeks.

Photo of Mr George Drayson Mr George Drayson , Skipton

I am astonished that the Minister of State should even suggest that these payments might be late. When he was talking about automatic repayment, he said: "This is something which will hive to be gone into". Is he telling the House that the Bill has been brought before us without the Government having gone into the question of how repayment is to be made?

Photo of Mr Dick Taverne Mr Dick Taverne , Lincoln

I do not know whether the hon. Gentleman was present during our debate on the previous group of Amendments, but the point was made that we would look at the question of whether or not these receipts should be made assignable. On automatic repayment, I said that we would like to look at the possibility of assigning the receipts. As the scheme stands, there is no doubt that the repayment will be automatic.

Photo of Mr George Drayson Mr George Drayson , Skipton

The chance of a person receiving his repayment late can be guarded against by making certain that the documents arrive several days, if not weeks, early, and bear the date on which repayment is due. If payment is made in the form of post-dated cheques, there is no question of their arriving late. I am sorry if I misunderstood the hon. and learned Gentleman on the question of automatic payment.

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

We have had a good debate on this series of Amendments, and perhaps we should draw it to a close. I say at once that the Minister has gone some way to meeting some of the points we have made. We particularly note his unequivocal statement about the date and the immediacy of repayment, and the fact that the deposits will be repaid without demand. I have no doubt that traders will take comfort from what he has said.

In passing, I point out that lie said that it would have to be repaid. The words in the Bill are "become repayable", and a number of people have thought that this might be one of those things known to the law as debitum in praesenti solvendum nunquam, which I translate as money which is owed but which never is actually paid. It is therefore right that we should have had the reply we got on that point.

The Minister of State paid scant respect to the varied points made by my hon. Friends the Members for Honiton (Mr. Emery) and Barkston Ash (Mr. Alison). It is perfectly clear that the Amendment tabled by my hon. Friend the Member for Honiton does not enter into the realms of negotiability at all, but deals purely with the question of assignability. The Minister has said that he will look at that point, but he might perfectly well have said that he would examine it in relation to this particular form of machinery. My hon. Friend made clear that he looked on this Amendment primarily as machinery to simplify administration.

As to the argument about certificates of deposit, my hon. Friend the Member for Barkston Ash made a very convincing case which went a long way to meet any reasonable objection the Government might have. While recognising that the Minister of State has gone some way, we nevertheless regard these matters of sufficient importance as to advise my hon. Friends to put down a marker and to vote for this Amendment.

Question put, That that Amendment be made:—

The Committee divided: Ayes 164, Noes 232.

Division No. 19.]AYES[10.41 p.m.
Alison, Michael (Barkston Ash)Boyd-Carpenter, Rt. Hn. JohnDance, James
Allason, James (Hemel Hempstead)Brewis, JohnDavidson, James (Aberdeenshire, W.)
Astor, JohnBrinton, Sir Tattond'Avigdor-Goldsmid, Sir Henry
Atkins, Humphrey (M't'n & M'd'n)Bromley-Davenport, Lt.-Col. Sir WalterDean, Paul
Awdry, DanielBrown, Sir Edward (Bath)Deedes, Rt. Hn. W. F. (Ashford)
Baker, Kenneth (Acton)Buchanan-Smith, Alick (Angus, N & M)Digby, Simon Wingfield
Baker, W. H. K. (Banff)Buck, Antony (Colchester)Donnelly, Desmond
Beamish, Col. Sir TuftonBullus, Sir EricDoughty, Charles
Bennett, Sir Frederic (Torquay)Burden, F. A.Drayson, G. B.
Bennett, Dr. Reginald (Got. & Fhm)Campbell, B. (Oldham, W.)Eden, Sir John
Berry, Hn. AnthonyCarlisle, MarkElliot, Capt. Walter (Carshalton)
Biffen, JohnClegg, WalterEmery, Peter
Biggs-Davison, JohnCooke, RobertErrington, Sir Eric
Birch, Rt. Hn. NigelCooper-Key, Sir NeillEyre, Reginald
Black Sir CyrilCorfield, F. V.Farr, John
Blaker, PeterCostain, A. P.Fletcher-Cooke, Charles
Boardman, Tom (Leicester, S.W.)Currie, G. B. H.Fortescue, Tim
Body, RichardDalkeith, Earl ofFoster, Sir John
Gibson-Watt, DavidMaddan, MartinScott, Nicholas
Gilmour, Sir John (Fife, E.)Maginnis, John E.Scott-Hopkins, James
Glover, Sir DouglasMarten, NeilShaw, Michael (Sc'b'gh & Whitby)
Godber, Rt. Hn. J. B.Maude, AngusSmith, Dudley (W'wick & L'mington)
Gower, RaymondMaxwell-Hyslop, R. J.Smith, John (London & W'minster)
Grieve, PercyMills, Peter (Torrington)Speed, Keith
Griffiths, Eldon (Bury St. Edmunds)Mills, Stratton (Belfast, N.)Stainton, Keith
Hall, John (Wycombe)Miscampbell, NormanSteel, David (Roxburgh)
Hall-Davis, A. G. F.Mitchell, David (Basingstoke)Stodart, Anthony
Hamilton, Lord (Fermanagh)Montgomery, FergusStoddart-Scott, Col. Sir M.
Hamilton, Michael (Salisbury)More, JasperSummers, Sir Spencer
Harrison, Brian (Maldon)Morgan, Geraint (Denbigh)Taylor, Sir Charles (Eastbourne)
Harvie Anderson, MissMorrison, Charles (Devizes)Taylor, Edward M. (G'gow, Cathcart)
Hawkins, PaulMunro-Lucas-Tooth, Sir HughTemple, John M.
Hay, JohnMurton, OscarThatcher, Mrs. Margaret
Heald, Rt. Hn. Sir LionelNabarro, Sir GeraldThorpe, Rt. Hn. Jeremy
Heseltine, MichaelNott, JohnTilney, John
Higgins, Terence L.Onslow, Cranleyvan Straubenzee, W. P.
Hiley, JosephOrr, Capt. L. P. S.Vaughan-Morgan, Rt. Hn. Sir John
Hill, J. E. B.Osborn, John (Hallam)Vickers, Dame Joan
Holland, PhilipPage, Graham (Crosby)Waddington, David
Hordern, PeterPage, John (Harrow, W.)Walker-Smith, Rt. Hn. Sir Derek
Hornby, RichardPardoe, JohnWall, Patrick
Howell, David (Guildford)Peel, JohnWalters, Dennis
Hutchison, Michael ClarkWard, Dame Irene
Iremonger, T. L.Percival, IanWeatherill, Bernard
Jenkin, Patrick (Woodford)Peyton, JohnWebster, David
Joseph, Rt. Hn. Sir KeithPike, Miss MervynWells, John (Maidstone)
Kershaw, AnthonyPrice, David (Eastleigh)Whitelaw, Rt. Hn. William
Kitson, TimothyPrior, J. M. L.Williams, Donald (Dudley)
Lancaster, Col. C. G.Pym, FrancisWilson, Geoffrey (Truro)
Legge-Bourke, Sir HarryQuennell, Miss J. M.Winstanley, Dr. M. P.
Lewis, Kenneth (Rutland)Renton, Rt. Hn. Sir DavidWolrige-Gordon, Patrick
Lubbock, EricRhys Williams, Sir BrandonWoodnutt, Mark
McNair-Wilson, PatrickRidley, Hn. NicholasWright, Esmond
MacArthur, IanRidsdale, JulianTELLERS FOR THE AYES:
Maclean, Sir FitzroyRoyle, AnthonyMr. R. W. Elliott and
Macmillan, Maurice (Farnham)Russell, Sir RonaldMr. Hector Munro
NOES
Abse, LeoDavies, Ifor (Gower)Hamilton, James (Bothwell)
Albu, AustenDelargy, HughHamling, William
Allaun, Frank (Salford, E.)Dell, EdmundHannan, William
Alldritt, WalterDempsey, JamesHarper, Joseph
Allen, ScholefieldDewar, DonaldHarrison, Walter (Wakefield)
Anderson, DonaldDiamond, Rt. Hn. JohnHart, Rt. Hn. Judith
Atkins, Ronald (Preston, N.)Dickens, JamesHaseldine, Norman
Atkinson, Norman (Tottenham)Dobson, RayHattersley, Roy
Bagier, Gordon A. T.Doig, PeterHazeil, Bert
Barnes, MichaelDunn, James A.Hefter, Eric S.
Bence, CyrilDunnett, JackHenig, Stanley
Bidwell, SydneyDunwoody, Mrs. Gwyneth (Exeter)Herbison, Rt. Hn. Margaret
Binns, JohnEadie, AlexHilton, W. S.
Bishop, E. S.Edelman, MauriceHobden, Dennis
Blackburn, F.Edwards, Robert (Bilston)Horner, John
Boardman, H. (Leigh)Edwards, William (Merioneth)Howarth, Harry (Wellingborough)
Booth, AlbertEllis, JohnHoy, James
Boston, TerenceEnglish, MichaelHughes, Emrys (Ayrshire, S.)
Boyden, JamesEnnals, DavidHughes, Roy (Newport)
Braddock, Mrs. E. M.Ensor, DavidHunter, Adam
Bray, Dr. JeremyEvans, Fred (Caerphilly)Hynd, John
Brooks, EdwinEvans, Ioan L. (Birm'h'm, Yardley)Irvine, Sir Arthur (Edge Hill)
Brown, Hugh D. (G'gow, Provan)Ewing, Mrs. WinifredJackson, Peter M. (High Peak)
Buchan, NormanFaulds, AndrewJeger, Mrs. Lena (H'b'n & St. P'cras, S.)
Buchanan, Richard (G'gow, Sp'burn)Fernyhough, E.Jenkins, Hugh (Putney)
Callaghan, Rt. Hn. JamesFitch, Alan (Wigan)Jenkins, Rt. Hn. Roy (Stechford)
Cant, R. B.Fletcher, Rt. Hn. Sir Eric (Islington, E.)Johnson, Carol (Lewisham, S.)
Carter-Jones, LewisFletcher, Ted (Darlington)Johnson, James (K'ston-on-Hull, W.)
Chapman, DonaldFoley, MauriceJones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Coe, DenisFoot, Michael (Ebbw Vale)Jones, J. Idwal (Wrexham)
Coleman, DonaldForrester, JohnJones, T. Alec (Rhondda, West)
Conlan, BernardFowler, GerryKenyon, Clifford
Corbet, Mrs. FredaFraser, John (Norwood)Kerr, Mrs. Anne (R'ter & Chatham)
Crawshaw, RichardFreeson, ReginaldKerr, Dr. David (W'worth, Central)
Crosland, Rt. Hn. AnthonyGardner, TonyLawson, George
Cullen, Mrs. AliceGarrett, W. E.Leadbitter, Ted
Dalyell, TamGordon Walker, Rt. Hn. P. C.Lee, Rt. Hn. Frederick (Newton)
Davidson, Arthur (Accrington)Gray, Dr. Hugh (Yarmouth)Lever, Harold (Cheetham)
Davies, Ednyfed Hudson (Conway)Greenwood, Rt. Hn. AnthonyLever, L. M. (Ardwick)
Davies, G. Elfed (Rhondda, E.)Gregory, ArnoldLewis, Arthur (W. Ham, N.)
Davies, Dr. Ernest (Stretford)Grey, Charles (Durham)Lewis, Ron (Carlisle)
Davies, Harold (Leek)Griffiths, Eddie (Brightside)Lomas, Kenneth
Griffiths, Will (Exchange)Loughlin, Charles
Lyon, Alexander W. (York)Oakes, GordonSnow, Julian
Lyons, Edward (Bradford, E.)O'Malley, BrianSpriggs, Leslie
Mabon, Dr. J. DicksonOram, Albert E.Steele, Thomas (Dunbartonshire, W.)
McBride, NeilOrme, StanleyStonehouse, Rt. Hn. John
McCann, JohnOswald, ThomasStrauss, Rt. Hn. G. R.
MacColl, JamesOwen, Dr. David (Plymouth, S'tn)Summerskill, Hn. Dr. Shirley
Macdonald, A. H.Owen, Will (Morpeth)Swain, Thomas
McGuire, MichaelPage, Derek (King's Lynn)Swingler, Stephen
McKay, Mrs. MargaretPalmer, ArthurTaverne, Dick
Mackenzie, Gregor (Rutherglen)Pannell, Rt. Hn. CharlesTinn, James
Mackintosh, John P.Park, TrevorUrwin, T. W.
Maclennan, RobertParker, John (Dagenham)Varley, Eric G.
McMillan, Tom (Glasgow, C.)Parkyn, Brian (Bedford)Walker, Harold (Doncaster)
MacPherson, MalcolmPavitt, LaurenceWallace, George
Mahon, Peer (Preston, S.)Peart, Rt. Hn. FredWatkins, David (Consett)
Mahon, Simon (Bootle)Pentland, NormanWatkins, Tudor (Brecon & Radnor)
Manuel, ArchiePerry, George H. (Nottingham, S.)Weitzman, David
Mapp, CharlesPrentice, Rt. Hn. R. E.Wells, William (Walsall, N.)
Marks, KennethPrice, Christopher (Perry Barr)Whitaker, Ben
Marsh, Rt. Hn. RichardPrice, William (Rugby)Whitlock, William
Mulish, Rt. Hn. RobertProbert, ArthurWilkins, W. A.
Mondelson, JohnRees, MerlynWilley, Rt. Hn. Frederick
Mikardo, IanRichard, IvorWilliams, Alan (Swansea, W.)
Millan, BruceRoberts, Albert (Normanton)Williams, Alan Lee (Hornchurch)
Milne, Edward (Blyth)Roberts, Gwilym (Bedfordshire, S.)Williams, Clifford (Abertillery)
Mitchell, R. C. (S'th'pton, Test)Rodgers, William (Stockton)Williams, W. T. (Warrington)
Morgan, Elystan (Cardigarshire)Roebuck, RoyWilson, Rt. Hn. Harold (Huyton)
Morris, Alfred (Wythenshawe)Rose, PaulWilson, William (Coventry, S.)
Morris, Charles R. (Openshaw)Ross, Rt. Hn. WilliamWinnick, David
Moyle, RolandRowlands, E.Woodburn, Rt. Hn. A.
Mulley, Rt. Hn. FrederickShaw, Arnold (Ilford, S.)Woof, Robert
Murray, AlbertSheldon, RobertWyatt, Woodrow
Neal, HaroldSilkin, Rt. Hn. John (Deptford)
Newens, StanSilkin, Hn. S. C. (Dulwich)TELLERS FOR THE NOES:
Noel-Baker, Rt. Hn. Philip (Derby, S.)Silverman, JuliusMr. Ernest Armstrong and
Norwood, ChristopherSkeffington, ArthurDr. M. S. Miller.

Photo of Mr John Smith Mr John Smith , Cities of London and Westminster

I beg to move Amendment No. 7, in page 1, line 19, leave out '180' and insert '90'.

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

With this Amendment we may discuss the following three further Amendments:

No. 8, in page 1, line 19, after 'days' insert: ', or such shorter period as the Treasury may by order made by statutory instrument provide'.

No. 9, in page 1, line 20, after 'paid', insert: ', or a bond for the deposit given'.

No. 80, in page 1, line 20, after 'paid', insert: 'or on the 27th November 1969 (whichever shall be the earlier)'.

If the Committee wishes, we may have a Division on Amendment No. 9.

Photo of Mr John Smith Mr John Smith , Cities of London and Westminster

I am still in as much of a fog about the exact aim of the Bill as I expect you are, Mr. Irving. I suspect that the Treasury bunch are in the position which I have sometimes been in as a banker—they do not know for certain what they are doing, but they think that they know how to do it. We have been told by the Chancellor himself that this is to be a selective squeeze against importers. When we ask, with some anxiety, whether some importing firms will go bankrupt—as they certainly should if it is that sort of squeeze—we are told that they will be able to borrow easily against deposit receipts. That has been said several times, including today.

When we ask whether the deposit receipts are to be assignable or negotiable so that importers can in fact borrow against them, we are told "No"—we must remember that the scheme is intended to restrain the liquidity of importers. We are told that importers will be encouraged to borrow abroad but how can they if they cannot give a security over their deposit receipts. Form 139 is no evidence of creditworthiness; it merely means that a man has assets, excellent assets, no doubt, but he may have enormous liabilities as well.

Even if the receipts were absolutely freely negotiable, which we are told they are not to be, this would still be a squeeze because it would convert cash into money at six months. It has been correctly said already that, whatever happens to them, these deposit receipts will not be in the nature of bank bills. They would be, if they were freely negotiable, simply in the nature of trade bills, so it would still be a squeeze of a sort.

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

Order. I am having difficulty in relating what the hon. Gentleman is saying to the Amendments. I understand that the one he is moving refers to a question of shortening the period.

Photo of Mr John Smith Mr John Smith , Cities of London and Westminster

It is going to be all right, Mr. Irving. because 90 days, which is the period that I seek to insert, is the period of a trade bill or bank bill, to which I am perhaps too gradually, coming.

Even if the squeeze is applied with full rigour—if the whole £600 million or £700 million comes straight out of the pockets of the importers and goes straight into the Bank of England and remains there, and there is no borrowing against it, it will still not withdraw cash from the system for very long. It will simply help the Government over their next funding operation. Therefore, it should be accepted that the receipts can be borrowed against. Now if money is to be borrowed it is much better that it should be borrowed against something with a currency of 90 days than 180 days. Ninety days is a well-known, commonly accepted period for the financing of imports; 180 days is not.

It is true that one can get a credit for 180 days through an acceptance house, by arranging that one's 90 day bill will be renewed. Nevertheless, a six-month period is a very tiresome thing, and a 90-day period is absolutely acceptable in all circles all over the world. Such a thing fits perfectly into our financial system.

An additional reason for making the Amendment has emerged from our discussions. We have in effect been trying today to devise a new financial instrument, and that is very difficult. It cannot be done in one afternoon. It would probably take a Bill of its own, and a lot of case law. For example, we have been talking about the making of payments late.

What would the Minister say about the idea of paying a bill of exchange a day late? There was talk of posting cheques to people, and that at a time when the Government had introduced, to their great credit, the Giro system, which is an up-to-date and flexible method of making payment. The whole discussion about payment was steam-age stuff. The Government had much better accept that the deposit receipts should in effect be 90-day trade bills of exchange. They will then be a form of squeeze on importers that everybody understands and which will not take a moment of explanation. They will be absorbed into the system, but will be a squeeze nevertheless. The Government will in this way also have what in their rather split way, they want—a simultaneous general squeeze on liquidity.

It is for that reason that I propose that we leave out 180 and insert 90. In case that is too categorical and unacceptable, I have also put down Amendment No. 8, to enable the Government to shorten the period from 180 days should they ever wish to do so. If we are to have this completely untried expedient, it is very foolish for the Government to tie their hands as to the period and to leave themselves no flexibility. They have a flexibility with the rate, but it would be as well to have flexibility with the period as well, so that they can either reduce the impact of the scheme or, if it appears desirable, can make these deposit receipts conformable to the existing financial system, which depends on the 90-day bill.

11 p.m.

Photo of Mr Patrick McNair-Wilson Mr Patrick McNair-Wilson , New Forest

I support my hon. Friend for the Cities of London and Westminster (Mr. John Smith). We put down this Amendment because so far we have had an unconvincing answer from the Financial Secretary on the reasons for the 50 per cent. deposit. He was unable to satisfy us as to why that figure was arrived at.

We are now in the presence of another situation where the Government will have to give us a clear indication of why they have settled on 180 days and not another period. I fear that we are making slow progress with this Bill, but this is largely due to the Government's intransigence.

We are assured that there is no intention of ruining companies, and here is a reasonable Amendment suggesting that we should try, to some extent at least, to lessen the burden on import companies. We are asking the Government to realise that this sensible Amendment will make it possible for a number of small companies who will be hit by this legislation to find the money more easily and to pay interest over a shorter period. If we can look at the 90 days in the concept of keeping down costs to the people of this country, if we can keep down interest, we shall help to solve this problem. This is important to many companies with goods in transit. I know that a later Amendment covers this point, but many companies will find themselves with goods on the high seas for which they will have to pay a deposit. If they could have this relief it would go a long way to mitigating their situation.

A small company which is an importer of high capital cost goods is, as the Bill stands, likely to have to find large sums of money. If we can get the Government to accept this Amendment, so that they have to find the money only for 90 days instead of 180, we would go some way towards meeting a valid point.

Photo of Mr Thomas Boardman Mr Thomas Boardman , Leicester South West

I support this Amendment for the reasons given by my hon. Friends the Members for the Cities of London and Westminster (Mr. John Smith) and the New Forest (Mr. McNair-Wilson). I support it, too, because of what we have been told tonight about the problems which will face importers, particularly small ones, of raising capital. I shall confine myself to Amendment No. 80 which is in my name and is being discussed at the same time. This puts a term on the period for repayment, to provide that it shall be after 90 days, as I hope, or 180 days as the Bill stands. or 27th November, 1969, whichever shall be the earlier.

I recognise that this involves the problem that large sums of money might be flooded into the economy on 27th November, 1969, if all the import deposits that have been paid over the preceding six months are then repayable. I recognise that this is a problem, but it is not one of our seeking.

First, however, I query the position under the Bill as drafted. Clause 3(4) causes me confusion. It states that Duty under section 1 of this Act shall cease to be in force at the expiration of a period of one year beginning with the date on which this Act is passed". We were told this afternoon that no duty was imposed by the Bill. It was, only, a question of money being loaned to the Government interest-free. Does the fact that duty ceases to be in force mean that all deposits will be automatically repaid on that day, or what does it mean?

To be consistent with the argument put to us earlier by the Attorney-General that import deposits are not a duty, when the duty ceases to be in force the lending of the deposits must automatically terminate and the deposits must forthwith be repaid. If that is the correct interpretation, as it appears to me to be the logical one, my Amendment is quite unnecessary and I will not take further time to debate it. My interpretation is that the duty ceases to be in force because it would be repaid on the day stated in Clause 3 (4), but on the assumption that I may be wrong, I press the Amendment for other reasons.

I ask the Committee to consider the problem that will arise when deposits are paid by a number of firms over a period towards the end of the life of this short-term Bill or when it is suddenly brought to an end, either on the date provided in Clause 3 (4) or as provided in a subsequent Measure.

Money which has been deposited by firms on the preceding day will be stuck in the Government vaults free of interest for a further 180 days. Firms which, by good luck or for other reasons, have deposited the money on the day after it ceases to he in force, will not have to give a deposit. Therefore, there will be two types of importer. For six months, one importer will have deposited a large sum of money which will not earn anything for him, whereas his next-door neighbour, who happened by chance to import the goods or get them released a day later, will not be faced with that burden. That is monstrously wrong and it will make for unbalanced competition between the two.

I ask the Minister, in replying, to give an assurance about this. I hope that he will go so far as to accept Amendment No. 80, which would set a terminal date for the repayment of all deposits. Otherwise, how will he play fairly with those two categories of people? It will distort competition and result in unfairness, and so I hope that the Government will consider carefully the point made in the Amendment.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Glasgow Cathcart

My hon. Friends who have spoken to the Amendment have concentrated on the effect which the Amendment will have on small importers. The reason for my intervention is one which you, Mr. Gourlay, will appreciate, and that is the effect of the Amendment on large heavy industries. There is a concentration of heavy industry in Scotland. There is an important ship-building industry and an important engineering industry, and I feel that the Government cannot have considered the effect of the 180 days on industries the reorganisation of which is being given every encouragement and incentive by the Government.

I know that you, Mr. Gourlay, have a special interest in ship-building. The Government have introduced a Bill and have published the Geddes Report giving industry encouragement to go ahead with a major programme of reorganisation, involving substantial capital spending and the importing of substantial quantities of machinery. The importation of machinery is not a matter of choice. It is not a matter of considering the purchase of a German, Italian or American machine when there is a perfectly good British equivalent. The industries are so large and involve such substantial sums of money that certain machines can be bought only abroad. Unless there is the freedom and facility to import such foreign machines, the prosperity and capital reorganisation of the industry insisted on by Government Ministers will be held back. Machines like the Schichau Monopol and the Sicomat, which have an important part to play in shipbuilding reorganisation, cost a great deal of money. The payment of a deposit of 50 per cent, for 180 days could seriously affect the liquidity of shipyards, and the liquid position of the shipbuilding industry is serious.

Substantial numbers of orders have fortunately been received in some areas. Employment is guaranteed for a certain period, but not on a profitable basis. One shipyard in Scotland is faced with a liquidity problem, which hon. Members representing the Fife area have been fighting strenuously. I hope that the Government will support the Amendment—

Photo of Mr Jack Diamond Mr Jack Diamond , Gloucester

I have been listening carefully to the hon. Gentleman, but I still do not know which Amendment he is speaking to. Several Amendments are being discussed. Would he be kind enough to say to which Amendment he is speaking?

Photo of Mr Teddy Taylor Mr Teddy Taylor , Glasgow Cathcart

I suggest to the Minister that when I am speaking of such an important industry as the shipbuilding industry he should not make such an intervention. The Minister well knows that the Amendment to which I am speaking is the one relating to 180 or 90 days. This could be life or death to the shipyards, and an intervention asking what Amendment I refer to will not be received very graciously in places where industrialists are wondering where the money to pay the import deposits will come from. This kind of attitude causes resentment on the part of industrialists when they are faced with a serious problem. I hope that the Minister will give serious attention to the effect of the Amendment on the shipbuilding and engineering industries which are facing reconstruction. Have the Government considered this?

In every measure imposing import duties since 1932 special regard has been had, and exemption has been given, to the shipbuilding industry. The Bill gives exemption only for components of ships and not for machinery imported for a major reconstruction. It might be sensible if the Government said that they wanted to discourage this kind of spending and to stop shipyards buying foreign machines. But they do not say that. They have introduced another Shipbuilding Industry Bill which encourages firms to do it and provides some of the cash for it. Now the Government come forward with a policy providing exactly the reverse. They have two policies put forward by two Ministers which conflict with each other.

11.15 p.m.

In replying to the Amendment on whether the period should be 90 or 180 days, perhaps we could be told whether any calculation has been made of the cost of 180 days to the shipbuilding industry, at present engaged in a massive programme of reorganisation. At present, the industry is in a desperately ill-equipped state, with most of its money tied up in contracts. It has a very real problem to find cash. Has the industry been consulted about the effect that 180 days will have upon it? Has anyone outside been asked to estimate it? Have the Government considered the relative effects of 180 and 90 days on Scottish industry generally?

We have heard how the Government's proposal will affect the financial institutions in the City of London, and certainly they are important. Anything which interferes with the natural movement of money is important to the country. We have heard about the likely effect on small importers and on agriculture. But surely it is clear that the major effect of this kind of Measure will be on heavy industries which are engaged on reorganisation and require to import substantial amounts of foreign machinery which they cannot obtain at home. Industry in Scotland is basically heavy industry. In some cases, it is declining; in others, it is reorganising. What will be the relative effects in Scotland, and what will be the effects on the United Kingdom generally?

So often, the Government bring forward Measures without thinking about the effect of them on different industries and different parts of the country. We had an outstanding example with the Selective Employment Tax, and we know the effect that that has had on Scotland. This Measure should be considered in the same light: will it have the same effect throughout the country?

I hope that this part of the Bill will not have a seriously adverse effect on the shipbuilding industry and that it will not discriminate against Scotland, where so many of our people are employed in heavy industries. My fear is that it will have both results and, for that reason, I am solidly behind my hon. Friends in supporting this Amendment.

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

I want to address my remarks specifically to Amendment No. 8, and I start with the very strong point made by my hon. Friend the Member for Cities of London and Westminster (Mr. John Smith) that this is a new procedure and must be, to a large degree, a leap in the dark.

There has been much discussion on the basis that, in terms of restricting the volume of imports, it may have little effect. But at this stage of the Bill, we should consider its provisions in the light of what should be done if we find that it bites very deeply into imports.

It is certain that it will bite progressively. The first deposits will be found more readily, but, as the weeks go by, importers will have increasing difficulty in finding the deposits. It has been suggested that those dealing with imported goods entirely will have 25 per cent. of their annual turnover locked up at the end of the relevant period.

Let us consider that it does bite deeply and perhaps sufficiently deeply to be disruptive of our commercial and industrial activities; or, perhaps, if hon. Members think that is unlikely, let us consider what I think is a more probable eventuality, but at least one which the Chief Secretary would be prepared to consider. Let us suppose that the British people overcome the handicaps of an incompetent Government and that the economy comes back on course smartly in the next few months. In that event, what would be the best way of relaxing the impact of these levies? Would it be better to reduce the percentage of value deposited, or would it be better to shorten the period?

In Clause 1(11) the Government have given themselves full flexibility as to the percentage on deposit and the categories of goods. I suggest—I hope constructively, like my hon. Friends have done—that he should give reasons why, in either of the circumstances to which I have referred, a reduction in the period of deposit would be preferable to a reduction in the percentage. I think there would be more impact on the level of imports from a 50 per cent. deposit for three months than from a 25 per cent. deposit for six months.

There will be a critical percentage below which overseas exporters will extend credit in the form of deferred payment for the whole of the six months because they will look on it as merely deferring the profit element of their price. In addition, if we have a deferment of payment by overseas exporters to us, it will result in a short-term benefit to our balance of payments, but it will not reduce imports and it will not help us to reduce the fearsome amount of overseas debt.

I hope the Chief Secretary will pay more attention in his arguments and considerations to a true improvement in the balance of payments rather than a temporary influx of hot money or a deferment of payments overseas. That is what we should be aiming at. A reduction in the period rather than in the percentage will help towards an early winding up of the scheme; at least, so it seems to me.

If one is not going to chop it off suddenly, and it may not be desirable to do this, there are reasons of administrative convenience for reducing the period rather than reducing the percentage. The Government have given themselves the flexibility in subsection (11), and I believe that by tabling this Amendment No. 8 my hon. Friends have drawn attention wisely to the desirability of having the same flexibility in terms of the time for which the deposits would be held. The Government would be well advised in their own interest to give themselves this flexibility in respect of this Amendment.

Photo of Mr Charles Fletcher-Cooke Mr Charles Fletcher-Cooke , Darwen

May I refer to Amendment No. 9, if I dare, and ask the Chief Secretary to consider whether the Government are really taking gracefully the percentage they had to concede over the Ways and Means Resolution.

Amendment No. 9 seeks to insert into the subsection the provision that the beginning of the period of 180 days should start either on the day on which the deposit was paid or a bond for the deposit given. The Chief Secretary will recollect that the House triumphantly enforced, if that is not too strong a word, its right to guard most jealously the powers of the Executive under the Provisional Collection of Taxes Act concerning the Ways and Means Resolution. It was conceded that for the deposits required on the day after the Ways and Means Resolution was passed, the duty need not be paid, but that a bond was acceptable in lieu. From the way that the subsection is now drafted, it looks as if the Government are, in practice, concerning all material things, trying to claw back what the House insisted upon. I do not think that this is right. It means that those importers who took advantage of the vigi- lance of the House and on that day deposited a bond instead of paying the money will be without their money for about 200 or 210 days, according to the date of receipt of the Royal Assent, which was not what the House intended when it extracted from the Government the admission that a bond was a suitable alternative.

A bond costs money, very often. An importer would have to get security from a reputable bank. A small man would need an indemnity from a person of substance, for which he would have to pay. So that, for the period from the passage of the Ways and Means Resolution until the Royal Assent to the Bill, such an importer will be paying something for those days to get his goods out of the warehouse. If the Bill is left unamended, he will have to pay a further full amount of 180 days of interest. Therefore, such a man who took advantage of the vigilance of the House, as he was entitled to do, will be prejudiced to the extent of having to pay interest on money, or charges for a bond, not for 90 days as we hoped, not for 180 days as the Government pretend, but for something over 200 days. This is wrong. Therefore, I hope that the Chief Secretary will accept Amendment No. 9, which I regard as a symbol of the importance of the House of Commons over the raising of taxes and revenue.

Photo of Mr John Biffen Mr John Biffen , Oswestry

My hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) has spoken very cogently about the reasons why the Government should accept Amendment No. 9 and so vindicate the watchfulness of the House.

I will speak briefly to Amendment No. 7. I do so on very much broader grounds than those indicated by my hon. and learned Friend. We are being asked to pass this legislation against a developing background of very tight general credit conditions. The totality and extent of that may not have been apparent on Second Reading, but I believe that it is more apparent now, particularly after the remarks of Mr. Robarts and the clearing banks about the significance that they saw in the totality of the Government's proposal.

If this Measure is being enacted against the background of a general credit squeeze, it invalidates the argument for various aspects of the credit squeeze, and also highlights the immense unfairness that can derive to certain people who are caught by the particular credit squeeze conducted against the background of a general credit squeeze.

11.30 p.m.

There are many reasons why we should be suspicious of the Government's attitude. Perhaps the brief exchange between my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) and the Chief Secretary a few moments ago indicated the casual attitude of the Government to matters which are deeply felt on this side of the House, and by people outside the House whose interests are affected.

I ask the Committee to reflect on the words of the Financial Secretary during the Second Reading of the Bill, when he said: The most that will happen here, and what is intended to happen, is that a man who really must have the import will go to the inconvenience and modest expense required to obtain finance."—[OFFICIAL REPORT, 28th November. 1968; Vol. 744, c. 760.] Anybody who believes that those calm words will assuage the fears of those who read this morning's statement by Mr. Robarts and the clearing banks is a born optimist.

We know that in as much as this Measure bites it will bite particularly severely on that element of the business community which always finds trading difficulties in periods of particularly tight credit, namely, the small business community. If one wanted to make a catalogue of thoughtless and foolish activities by this Government against any one section of the community, that catalogue would be longest in respect of the small business community, and, if only as some penance for their past misdeeds, the Government should be prepared to accept the Amendment.

Photo of Sir John Foster Sir John Foster , Northwich

I propose to speak briefly to Amendment No. 9, and to remind the Chief Secretary that on a previous Amendment the Financial Secretary said that the position would be the same for people importing the same kind of goods. Because of the way in which the Bill is drafted, a person who imported goods before the Bill became law will have to pay more. As my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) said, a person who imported goods on 27th November will have paid for a bond, he will pay the deposit, and he will then have to pay the interest for 180 days from the day on which he paid the deposit, plus the cost of the bond. That is contrary to the assurance given by the Financial Secretary that the position would be the same for everybody.

It is no use the Chief Secretary saying that the man should have foreseen this and paid the deposit on 27th November. The whole point of the argument is that he could not pay the deposit. He could only give security, and therefore, as the Bill is drafted, Customs and Excise could not say that the deposit had been paid on 27th November. Surely the right hon. Gentleman will agree that it is unfair on those importers who happened to be importing goods between 27th November and when the Bill became law that they should pay more than those importers who imported after the Bill became law?

I do not know whether the right hon. Gentleman was in the House at the time, but it is within the recollection of my hon. Friends that the Financial Secretary said several times—because he got rather impatient with us as he thought we were rather dumb—that the position would be the same for all importers. Because of the way the Bill is drafted, a person who imports goods from 27th November to when the Bill became law will have to pay the cost of the bond—£X. He will have to pay the interest on the money he borrows for 180 days, plus £X, and he will be at a disadvantage compared with those who imported after the Bill became law.

I hope the Chief Secretary will assure us that the position will be the same for all importers. If the hon. Gentleman meant all importers of the same kind, I think that that is rather a specious answer. If the hon. Gentleman meant that that was the position for all importers who imported on the same day, the assurance was worth nothing. For those reasons I hope that the Chief Secretary will look at Amendment No. 9 again and explain why—if he wants to retain the Bill in its present form—he thinks it fair that importers of goods between 27th November and the date when the Bill became law should pay more than importers of the same kind of goods after the Bill became law.

Photo of Mr John Peyton Mr John Peyton , Yeovil

I feel sure that the Committee is grateful to you, Mr. Gourlay, for having in your wisdom permitted a fairly wide-ranging debate on the Amendments, although this may have been confusing to the Chief Secretary, who was rather unwisely led—perhaps he was not the first—to under-rate the Parliamentary skill and strength of conviction of my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor). The Committee was happy to see my hon. Friend winning that brief but heated exchange.

I want only to go back to the point raised by my hon. Friend the Member for Oswestry (Mr. Biffen) and to refer to the general background against which the Amendment was moved. We always regret the doctrinaire approach of the Treasury, the Board of Trade, and the customs and excise authorities to these problems. They say that it will be the same for everybody. The inconvenience of borrowing money and the cost of borrowing money are waved aside, and the impact upon the individual firm is forgotten. The Government are playing a game which might be called the game of the last straw. We have a camel, and we go on and on and on piling straws on its back, and at some time, somehow, that almost invincible, almost unconquerable camel will fall down; one of its vertebrae will give way. The only point of real and vibrating interest to me is the question whether there will be a cheer or a sigh from the Treasury when that happens.

Photo of Mr John Smith Mr John Smith , Cities of London and Westminster

Surely this situation is much more like the story of the donkey. A man had a donkey and was training it to live without food, and just as the donkey was getting used to this it died.

Photo of Mr John Peyton Mr John Peyton , Yeovil

That modesty which I have been endeavouring to advocate to the Treasury Bench leads me to say "Thank you very much" to my hon. Friend. I do not think that I can usefully add to what he has so eloquently said. I hope that the Treasury will at some time learn something about camels and donkeys, and I also hope that those who advise the present incumbents of the Treasury Bench will begin to learn some degree of the modesty which they evidently cannot teach their masters.

Photo of Mr Jack Diamond Mr Jack Diamond , Gloucester

I owe it to the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) to explain something which he has completely misunderstood. Those who have known over many years how I conduct my Committee work will have no difficulty, I hope, in accepting what I am about to say. Your predecessor in the Chair, Mr. Gourlay, called a number of Amendments and said that there would, if necessary, be a Division on Amendment No. 9, the only one which is "top-hatted", that is, which has the name of a Member of the Opposition Front Bench attached to it. I naturally thought that this was the main Amendment. Until the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) spoke, no one referred to that Amendment; I thought that it would not be moved and that I would not have to reply to it.

I have listened to every speech, and I listened with care and patience to the hon. Member for Cathcart, who was speaking about shipbuilding, which is dealt with in the Schedule, where there is a number of relevant exceptions, which would be discussed when we reached the Schedule. I was, therefore, honestly wondering which Amendment the hon. Member was speaking about, and when he said "this Amendment" I naturally asked "Which?". He did not follow me, so I got up to make it clear—

Photo of Sir John Foster Sir John Foster , Northwich

I thought that my hon. Friend had mentioned the 90 or 180 days question before he referred to shipbuilding. If that is in HANSARD, the right hon. Gentleman will agree that he is wrong, and if it is not, I will agree that I am wrong. I believe that it is a simple mishearing.

Photo of Mr Jack Diamond Mr Jack Diamond , Gloucester

That may be so, but I am not accusing the hon. Member for Cathcart; I am simply explaining why I asked which Amendment it was.

The essential point in Amendment No. 7 is a reduction from 180 to 90 days, which, as the hon. Member for the Cities of London and Westminster (Mr. John Smith) said, is a familiar period. But that does not alter the fact that the Government feel that, with the other elements of the scheme, we need 180 days to make a sufficient impact in both respects which have been discussed time and again on Second Reading and in Committee. Therefore, I can hold out no hope that we shall reduce the period.

On the following Amendment, a number of hon. Members kindly suggested that the Treasury should take power to alter the period by Statutory Instrument if we changed our minds in future. I am grateful for that suggestion, but so satisfied are we that this part of the scheme must be maintained that we are not seeking that power and must reject that suggestion.

The Committee will appreciate that there are four major elements in this scheme, on three of which powers are taken in the Bill, and, if Amendments are accepted, Orders will be laid before the House under which a reduction can take place in those three aspects of the Bill.

11.45 p.m.

As to the fourth aspect, we are not even asking for power to reduce that period of 180 days, so satisfied are we that we do not need it by itself. Obviously, if power to reduce the whole scheme is taken, that will have its effect on the period for which deposits are payable but, by itself, we are satisfied that this power will not be needed, and, indeed, it is an essential part that there shall be what I might call an orderly repayment.

Photo of Mr Graham Page Mr Graham Page , Crosby

Do I understand correctly from the right hon. Gentleman that if power is exercised under Clause 3(4) to terminate the whole of the Act, the deposits will thereupon become repayable? If not, they will be held illegally, because there will then be no Act in operation authorising the Government to hold them.

Photo of Mr Jack Diamond Mr Jack Diamond , Gloucester

That is not what I am advised. I take the point, and in fact an hon. Gentleman has mentioned it in this very debate. I am advised that the effect of the subsection is that the deposits will be repayable, notwithstanding the scheme has ceased to be in force, 180 days after they have been paid. That is the intention, that is the proposal, and that is the effect, I am advised, of that subsection.

Photo of Mr Jack Diamond Mr Jack Diamond , Gloucester

We are in Committee and I shall give way again if the hon. Gentleman wishes to pursue the debate—it must be for him—but I have answered him, I think, very clearly. No Amendment has been tabled on that point. I have been asked about it now by two hon. Gentlemen, and I hope that I have given a very clear answer. The effect and the intention go hand in hand. If the whole scheme comes to an end under that subsection, deposits are repayable 180 days after they have been paid, and not before, and certainly not on the cessation of the scheme, just as, if the Act continues for a year in the normal way, the deposits will be repayable 180 days after they have been paid.

The fourth Amendment seeks to make all the repayments on a certain day. The hon. Member for Leicestershire, South-West (Mr. Boardman) wanted a terminal date. He put the case, which the Government feel is overwhelmingly true, in better language than I myself could have used. He said that he recognised that this would have the danger of large sums flooding into the economy. That is the situation. That is why it is essential that there should be orderly repayment, and that is why I am sorry I cannot accept the Amendment, or anything approaching it, or any variant of it. There has to be orderly repayment, and that means 180 days after each deposit has been paid.

Amendment 9 stands out on its own, and my answer is that in this part of the Bill, as in any other part, a deposit will be repaid 180 days after the cash has been paid. The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) put the case very fairly—and he was supported by his hon. and learned Friend the Member for Northwich (Sir J. Foster)—not that the importer would be out of the deposit on the goods for more than six months but that he would be out of that money and might, in addition, be out of further money, and the further money would be the premium he paid, if such were paid, on obtaining the bond. As the hon. and learned Member for Darwen was the first to admit, it does not necessarily follow that in every case payment is made for a bond. A bond may be given for any consideration between the banker and his customer. One could not possibly know without inquiry. In some cases a bond is given without any additional cost to the borrower, the giver of the bond. In other cases a premium may have been paid.

I have tried to find what sort of premium each person has paid. One can only get a line on what the market is and what it might be for a variety of importers. The figures I have been given go down to as far as a small fraction of 1 per cent. I cannot say what they go up to. I have already dealt with cases in which some ay have paid nothing at all. Either the bond giver has paid nothing or a fraction of 1 per cent., or conceivably at the highest, he might have paid a half of 1 per cent. I cannot see that the market is such that he would have to pay more than that.

The question is, should that be taken into consideration somehow or other and inquiries be made from the depositor of the bond whether he paid anything and whether this should be taken specially into consideration. This is a very small sum. In some cases—I do not know in exactly how many—the security has taken the form of cash. That, of course, would be 100 per cent. cash. In those cases where cash has been paid we are certainly prepared to treat that cash as having been paid under the Act, although it was not. That is to say, repayment will take place 180 days after the cash has been paid.

The alternative would be to treat that cash has having been a security and to say when the Act comes into force, "Here is a cheque for £X, being your security. Now give me a cheque for the identical amount for the deposit." That would be an unnecessary and slightly ridiculous exercise, so we are prepared to accept that where cash was paid as a security the date on which it was paid is the first of the 180 days.

Photo of Sir John Foster Sir John Foster , Northwich

The right hon. Gentleman said, first, 100 per cent. cash and then he referred to "cash". I imagine that if a proposition was paid in cash that also would be counted in the importer's favour.

Photo of Mr Jack Diamond Mr Jack Diamond , Gloucester

I thought that I said, "I imagine 100 per cent." If I did not perhaps the hon. and learned Gentleman will allow me to insert "I imagine 100 per cent." because, as he rightly said, the principle is cash and so far as I am aware security in cash would have to be 100 per cent. to be adequate security.

Photo of Sir John Foster Sir John Foster , Northwich

It is not clear from what the right hon Gentleman said whether he means that it is 100 per cent. or part bond, part cash.

Photo of Mr Jack Diamond Mr Jack Diamond , Gloucester

I am grateful to the hon. and learned Gentleman who has great capacity in these matters. If it is part bond and part cash, it comes within the principle I have enunciated. Whatever cash is paid, the date on which it becomes repayable is 180 days and the amount is automatically repaid.

I hope that I have answered the various points which have been raised. I recognise that on this major Amendment there is due cause of anxiety. I have discussed with my hon. Friend the Financial Secretary the statement he made. Unfortunately, I was not here to hear it. My hon. Friend assures me that there is nothing in what he said which is inconsistent with what I am now saying. It would hardly be possible, as between two close Treasury colleagues, that such an inconsistency could ever arise. At all events, my hon. Friend tells me that, and as I was not here I am glad to hear it. That is the point which the Government are putting to the Committee and I hope that it will be found acceptable.

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

I should have liked to have been able to say that we welcome the Chief Secretary to our deliberations on the Bill. He has delivered himself of the characteristic speech in which he has said "No" in rapid succession to four successive Amendments. Therefore, I feel that our welcome must be tinged with a good deal of regret.

We have had a number of powerful speeches, notable those by my hon. Friends the Members for Cities of London and Westminster (Mr. John Smith), Glasgow, Cathcart (Mr. Peyton), arguing that the period of 180 days should be reduced to 90. The very valuable point was made that the Treasury should take power to cut the period by Order. My hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) raised doubts as to the effect of Clause 3. Perhaps we shall be able to deal with that point when we reach that Clause and have a brief debate on the Question, "That the Clause stand part of the Bill". I share the doubts expressed by my hon. Friend the Member for Crosby (Mr. Graham Page) as to whether the Chief Secretary has had proper advice as to what the effect will be if the scheme is terminated prematurely under Clause 3(4).

I believe that the whole House will agree that the point of principle which was alluded to by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) and which is raised by Amendment No. 9 is perhaps the most serious issue which the Committee faces on this group of Amendments. I regarded the Chief Secretary's rejection of the case made by my hon. and learned Friend as very disappointing. Our case is that the Government tried to operate the scheme from 27th November on the footing that cash would immediately be payable by way of deposit. Thanks to the vigilance of a number of my hon. Friends and hon. and learned Friends, that was found not to be possible. Indeed, the headlines in the evening papers on the day of the debate—I see that the Financial Secretary is recollecting the occasion with pleasure—pointed out that the scheme on that footing was not legal, that the Government had no power to demand cash, and that under the Provisional Collection of Taxes Act, 1968, until the Bill becomes law the only operation of the Money Resolution is that they could demand security.

Whether it had to be squeezed out of the Financial Secretary or whether he saw the point, it having been put to him, and acceded with good grace, I leave history to judge. I gained the impression that the Financial Secretary, once he was seized on the point, conceded it fairly rapidly.

Towards the end of his speech the Chief Secretary suggested that nothing that the Financial Secretary said in the debate on the morning of 26th November committed the Government. Omitting a very long parenthetical phrase thrown in by the Financial Secretary, I quote this from his speech: … the scheme will be operated so that from the passing of this Ways and Means Motion, this duty of Customs will be im- posed in a way that provided that security is given to the satisfaction of the Customs … that will suffice to cover the period between the passing of this Motion and the legislation."—[OFFICIAL REPORT, 26th November, 1968; Vol, 774, c. 262–63.] I understood that to mean, and on a proper interpretation of the words it could only mean, that the period of 180 days should run from 27th November or such later date as a bond was taken, and that the bond was all that could be demanded before the date on which the Bill became law.

12 p.m.

The Government cannot have it both ways, as they are trying to do. They are trying to operate this scheme, in a sense, retrospectively, back-dated to 27th November. They must accept the consequence that the period should run from the date when the bond is given, the date when the import is made and the goods are entered for warehousing.

I cannot accept that the Chief Secretary has made a valuable concession, saying that the Government are graciously pleased to regard cash paid as security as qualifying for the 180-day period. As one of my hon. Friends said sotto voce at the time, "I should jolly well hope so". But we are demanding more than that. The Government must face the consequence of their election that the scheme should operate from before the date when the Bill comes into effect. As a matter of honour, the period of 180 days should run from the date when the bond is first given, and they cannot demand that the security should, in effect, go over for 200, 210 or, perhaps. 220 days. That would be utterly unconscionable.

I ask my right hon. and hon. Friends to express their strongly held views on this matter by dividing on Amendment No. 9.

Amendment negatived.

Amendment No. 9 proposed: In page 1, line 20, after 'paid', insert— 'or a bond for the deposit given'.—[Sir K. Joseph.]

Question put, That the Amendment be made:—