Yes, but France had to get the sanction and approval of the Commission in order to do so. Of course it is open to any member to do so, but one cannot apply the sort of automatic autonomy in the Community which the hon. Gentleman is demanding.
I look forward with great satisfaction to voting against the Bill. My reason is a (most precisely the opposite of that advanced in favour of the Bill by the hon. Member for Stoke-on-Trent, Central (Mr. Cant). Here I am being careful to avoid any danger of hard and fast crystal gazing, but I have a strong suspicion about his forecast of dire inflationary dangers ahead. I think that, if there are dangers, they point in the opposite direction.
I was astonished to hear my hon. Friend the Member for Worthing (Mr. Higgins) complain that the Government should be introducing this Bill after what they had said last year about the temporary nature of the scheme. On the Government's record, cne would surely have been astonished if they had not introduced the Bill. It is quite normal with the Government that, when they say something is only temporary, it becomes permanent, and that, when they say something is permanent, it proves to be temporary. I am, therefore, not in the least surprised by the Bill. On the contrary, after all the Government said last year, I would have been surprised if they had not introduced it.
I am concerned about the reasons for retention of the scheme and its consequences. The hon. and learned Member claimed to advance three reasons but I detected a fourth, which I shall ber claimed to advance three reasons which he did advance, as has been pointed out, has been demoted from last year—the need for control of imports. I am glad that has been demoted because I regard it as the most heinous aspect of Government policy.
I always hope that the Government will resist the sort of pressures put on them by the hon. Member for Ashton-under-Lyne and some of his less numerate companions on the benches below the Gangway. The hon. Gentleman has now lost the assistance of the former President of the Board of Trade and of the Paymaster-General, who were both on the side of the angels. I am glad, therefore, that the hon. and learned Gentleman the Financial Secretary did not give the need to control imports as the first of his reasons in importance.
The first of the hon. and learned Gentleman's reasons in importance was control of credit expansion. We have not heard from the Government any explanation of the change of mind which undoubtedly occurred in the Government on this matter. In the Letter of Intent of last July, the Chancellor said that he planned to limit domestic credit expansion to £400 million in the current year. In October, he told the hon. Member for Heywood and Royton (Mr. Barnett) that he had made this forecast on the assumption that the import deposits scheme would be rescinded. What happened between July and October, when it was announced that the scheme was to be continued, to make the Chancellor, despite the substantial contraction in domestic credit expansion in the first quarter, change his mind and decide that, in order to reach his target of £400 million, the scheme should be renewed? We are entitled to an explanation because there clearly has been a change in the Government's thinking on this. The Chancellor has admitted it and no reason for it has been given today.
The hon. Member for Stoke on Trent, Central advanced several arguments for fearing inflation in the months ahead. One of his main reasons was the degree of inflation caused by recent wage settlements in the public sector. That is an argument which one should view with a certain amount of scepticism. There have, of course, been recent highly inflationary wage settlements in the public sector. Every time that the right hon. Lady sticks her sticky finger into the negotiating procedure, we know that the results will be all that much more inflationary at the end of the day.
I wonder, however, whether we will see settlements of that sort reflected in the general run of wage settlements in the private•sector of industry during the next six months, for this simple reason. After allowing for the effect of the Bill, which the Government are asking us to approve today, I do not believe that private sector companies will have the sort of cash flow that will enable them to do anything other than resist wage claims, perhaps, more severely than they have done in the past. In other words, I think that the general control of money supply in the domestic economy is now such that we may well expect that the effect of recent inflationary wage increases in the public sector is not followed in the private sector. If that is so, that argument for renewing the scheme falls down.
The fourth argument advanced by the Minister of State in support of the Bill was, to my mind, the most ominous of all. He said that if the import deposit scheme was not renewed, there might be an expansion of domestic private manufacturing investment to such an extent that the balance of payments would be damaged. That is a highly dangerous assessment because it amounts to saying openly that the purpose of renewing the scheme is to reduce the volume of private manufacturing investment.
Furthermore, the Minister of State—and this was why I interrupted him—referred to forecasts of private manufacturing investment during the next year and quoted a figure of 10 per cent. above this year. That clearly relates the Board of Trade's survey of manufacturers' intentions which was published on 21st October. The point about that survey was that it resulted from a questionnaire of firms' intentions taken in September, before there was any news of the Government's intention to renew the import deposit scheme and at a time when it was widely expected that the scheme would be taken off. I believe that, as several of my hon. Friends have pointed out, the effect of renewing the scheme must have a severe effect, particularly next spring, on companies' cash flow. The immediate effect of that must be to curb their investment intentions.
In the Minister of State's introductory remarks, the background against which this should be considered seemed to me to be very out of date. The hon. Gentleman was back on the track which his right hon. Friend the Chancellor gave the overseas bankers in October, when investment was "on course" and going ahead magnificently. Since then, the Chancellor has very much changed his tone. When he spoke the other day to "Neddy"—it is, I suppose, a question of horses for courses he sounded distinctly unhappy about the level of manufacturing investment at the present time. He said that the problems could not all be solved in one year and that while the investment level was not satisfactory, the Government could not get everything right at once. Therefore, the Minister of State's highly optimistic expectations about manufacturing industry are not only very out of date, but are even more out of date than those of the Chancellor. Hence, I find it difficult to accept the rosy picture painted by the Minister of State.
There have, of course, been suggestions, to which the hon. Member for Stoke-on-Trent, Central referred, that the automatic effect of a substantial balance of payment surplus would be to increase the amount of liquidity available in the domestic economy. That surely overlooks the operation of the Exchange Equalisation Account. The beauty—or the horror—of this is that just as the Government were free to continue to expand the money supply at a time of acute deficit in 1967–68, so they are free today, if they so choose—and they are showing every indication of so choosing—to contract the money supply at a period of growing surplus. Therefore, there is none of the automatic interrelation between the two.
Like my hon. Friend the Member for Macclesfield (Sir A. V. Harvey), I am also particularly concerned about the effect that the sort of acute liquidity squeeze, which, I believe, we will see in the early months of next year will have on smaller companies. For the larger companies, I believe that it will mean a drastic cutback in manufacturing investment, thus preparing all the most suitable grounds for the next balance of payment crisis in a few years' time. For the small company, however, which in many cases is probably up against its overdraft limits, it could well mean, as my hon. Friend suggested, a rash of bankruptcies. The consequences of this will be particularly acute in Scotland, where the private company—the so-called close company, so hated by the Chief Secretary to the Treasury—forms the backbone of our manufacturing capacity.
I believe that the consequences of a credit squeeze with the kind of intensity that the renewal of the scheme implies in the course of the spring of next year could have a serious effect on private companies in Scotland—a much more acute effect overall both on the structure of companies in Scotland and on the level of unemployment and employment than probably in other parts of the United Kingdom, where, on the whole, the privately-owned company is less significant in the contribution which it makes to the local economy than it is in Scotland.
When one considers that pressures of this sort seem to have been applied by the Chancellor very largely because of his personal tiff with the London clearing banks, who failed to come down to their lending ceiling and he therefore de- cided, apparently, almost in a moment of pique, to extend the import deposit scheme to teach them a lesson, it is irresponsible that such widespread effects should be caused in areas like Scotland in the pursuit of one of the Chancellor's personal quarrels.
What worries me most is not so much the direct impact of the Bill. I admit that the effect of not returning to companies the forced loans which they have made to the Government, as they expected them to be returned, in the spring, may be only limited in quantitative terms. What worries me is that this is an indication of the Chancellor's whole attitude, which seems to me to be one of "Hold on tight. Disregard all the danger signals on the internal credit system, keep all the goodies together for a good old consumer boom Budget next year—and then go on to the next balance of payment crisis thereafter".