Orders of the Day — Customs (Import Deposits) Bill

Part of the debate – in the House of Commons at 12:00 am on 17th November 1969.

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Photo of Sir Arthur Harvey Sir Arthur Harvey , Macclesfield 12:00 am, 17th November 1969

I am not doing anything of the kind. I also have the privilege to represent textile manufacturers, but they are in some ways a different category from those who import to reexport.

The Financial Secretary was very cagey in presenting the Bill, in comparison with what happened last year. He said that we must now be more careful. Why must we be more careful today? He also said the same amount of money was taken out last year and that no more damage would be done than was done then. But if one continues a tax for two years instead of one and small firms have not the liquid funds to reinvest, they are hurt twice as much. The hon. and learned Gentleman has hold of the wrong and of the stick if he contends that.

The hon. Member for Stoke-on-Trent, Central was right to talk about inflationary pressures. They are alarming. We have seen increases in pay for dustmen, firemen and so on, many of them justified to some extent. But there is a shoal of them, and such increases will become the pattern throughout industry in the months ahead, with terrifying implications for the economy.

But I want to return to the problem of import deposits. It is my firm impression that during the past 12 months most companies believed that this tax was to last for only a year. The Minister can say that the Government never gave a categorical assurance that it would not continue beyond the year, but the inference was there. Speaking as Minister of State, Treasury, the hon. and learned Gentleman himself said last 28th November: It is a stop-gap Measure, a temporary measure, to accelerate the improvement in our balance of payments, …"—[OFFICIAL REPORT, 28th November, 1968; Vol. 774, c. 868.] Nobody reading that would have thought that it would be continued for another period after a year.

In answer to a Question about the scheme not being revived after 5th December this year, the then Financial Secretary told my hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) on 1st April:

… It is not one which could or should be kept in being for more than a limited period and I have nothing to add to that statement." —[OFFICIAL REPORT, 1st April, 1969; Vol. 781, c. 220–1.] The decision to continue the scheme has thrown a great many firms out of gear, and I shall show why. It is not the Government that have achieved even the three months favourable balance of payments; it is industry. It has been said that firms dealing in commissions and so on do not contribute anything. But £40 million a month is earned through insurance, brokerage, shipping and so on. I do not think that many hon. Gentlemen opposite realise what the City of London contributes to our favourable trade balance. It should be given due credit for a great achievement; it has saved the day so far.

My information is that about 70 per cent. of the firms affected have been unable to meet their demands from United Kingdom suppliers, so they have still had to import the products they need. Some found the price differential was adverse. The cost of home-produced alternatives was a competitive handicap, and this in turn affected exports.

There are many extraordinary anomalies. We heard of many of them last year. For example, all calcium carbide has to be imported. It is essential in the production of many goods for export. But it is still necessary to pay the 40 per cent. import deposit, whereas Ferro alloys, which are allied to carbide, and manufactured along with it, are exempt. This does not begin to add up. Caviar can be imported free of the duty. We know that it is a food. Dirty rags, clothes, carpets and mats made with rope can all be imported without paying the 40 per cent. tax.

Therefore, I find it difficult to understand the workings of the Government's mind. I have had that experience for five years with the present Government. I found the workings of the Government's mind in the post-war years under the Attlee Government vastly better, because there was much more logic in what they did. One understood the Ministers better.

The reduction of the rate from 50 per cent. last year to 40 per cent. for the next period will do little to alleviate what promises to be the most severe squeeze of company liquidity since the war. Firms and individuals will have to pay their tax next spring, and that will be the testing time for industry. The scheme is bound to have an adverse effect on British industry's ability to invest. We want British firms to invest more, and the tax is holding the money back in Government hands when it should be going into new machinery and equipment.

Sir Steuart Mitchell emphasised in his paper to "Neddy" how grave the country's record on this score is. He referred to the age of our machine tools and the fact that in real terms British industrial investment is no higher than it was in the peak year of 1961. That is a terrifying thought when we talk about our industrial recovery.

The import savings are comparatively small; they are not enormous. That has been admitted. The National Institute puts forward the figure of £60 million for 1969. The Association of British Chambers of Commerce thinks that a relaxation would have eased the liquidity problems of industry but would not have seriously affected the volume of imports. The small companies are being increasingly affected. Let any hon. Member go to his constituency to get the truth from the people trying to run companies—and not the large companies. The I.C.Is of this world can find the money. It is the small firms which are affected. Seventy per cent. of British industry is made up of firms with from 70 to 100 or 200 people.

I do not think that the pressure which we shall get next year is fully appreciated by the Government. In the autumn, in early September, most firms prepare their industrial budgets, not just for one year but for five years ahead. They try to work out what their capital investment will be and what increases there will be in wages, bonuses, and so on, in order to make a cash plan for their business. Having done most of this work, they now have to add 40 per cent. for the import deposits scheme. I know that the Government budget, rather indifferently, for only a year ahead, but most firms try to look ahead for at least five years, which is the right thing to do. It would not be a bad thing if the Government did more of it themselves. We should then know where we stood.

On 22nd October this year, The Guardian predicted a noticeable jump in imports in the next two or three months. It is a well known fact that from about August most firms thought that this imposition would come off in the next few days. Quite rightly, they held back on imports because it was in their interest so to do. I have heard it said—I do not know whether it is true—that even the Government are holding back on the import of Virginian tobacco, not for import tax reasons but because it will help the balance of payments in the runup to the general election. I should like to know whether this is true. I am prepared to wager that in the next two or three months the import figures will increase considerably. I hope that they will not, but I think that there will be quite a large increase. Firms do not know when the tax will come off, whether it will he in the lifetime of this Government or the next Government, and they are uncertain about the future.

Reference has been raade to E.F.T.A. We have only to cast our minds back to the time when the Government slapped on the import surcharge overnight without reference to our friends and colleagues in Europe to know what an uproar it caused. This imports tax, which is not in the same category as the import surcharge, is nevertheless against the spirit of the E.F.T.A. agreement; I am not qualified to talk about G.A.T.T. I know from my friends in Europe that they resent this imposition very much. Even the Irish Government are very concerned and are seeking discussions with the Government about it at an early date. We should liberalise trade as much as possible.

I ask the Government to think about this matter very carefully. While we have had two or three months good trade figures, what will happen next year if the Americans continue with their deflationary policy and world trade goes against us? Surely we want to get the momentum going in this country. Recently home sales in the motor car industry have been right down, and this must in the long term affect export business. That applies to every other industry in this country which is trying to export. We live by exports. I hope that we shall have a better explanation when the Minister winds up than we had at the beginning of the debate.