The hon. Gentleman is diverting me—[Laughter.) I am quite happy to be diverted, but I thought many other hon. Gentlemen wanted to get into the debate. All these fiscal measures will be, at one and the same time, both inflationary and deflationary; in one sense inflationary through increase of prices, and in the other sense deflationary in the way the hon. Gentleman the Member for South Angus was referring to it, in the effect on money supply. So there is a double effect. However, I hope I have dealt with this main point.
There is so much confusion about the effect on small companies. I am very concerned about the effect of the general credit squeeze on small companies, but the crazy thing about this situation is that this general squeeze is having an effect on small companies and not on small importing companies, because small importing companies can obtain funds. My criticism, therefore, is that this is not a selective pressure on liquidity but a general added pressure on liquidity.
My hon. and learned Friend the Financial Secretary gave some figures which seemed to show that the scheme was having some effect, and that where previously the non-exempt imports have been increasing at an annual rate of 13 per cent., they increased last year at the rate of 3 per cent. I am not sure whether those figures are correct, but the burden of his point was that the only evidence available showed a reduction in the increase in. imports. If this is so, and I accept that it is possibly so, although I believe that it is because of the general credit squeeze and not the selective nature of the pressure, and if it is perfectly legal. under G.A.T.T. and E.F.T.A., why say that it will be only temporary? If it is having only some effect, why not leave it? I have no objection to leaving it for some time if this is a legal weapon which is open to us.
The argument of the hon. Member for Worthing was that, having signed an agreement which we believed enabled us to put on an import deposit, we need to go to the other parties to the agreement and ask them to examine it in minute detail to find if it is wrong, although we have already said that what we have done is right. I cannot accept that argument.
If the Government's main concern and their top priority is to achieve an extra £50 million surplus on the balance of payments, then this and any other measure is of value. But that is not my main concern. My main concern is to give the highest possible priority to increased manufacturing investment. That 1 regard as a higher priority than an extra £50 million surplus on the balance of payments.
All the squeezes of recent years—and not going back merely to 1964—presumably have some effect somewhere on investment and on stocks. In the debate on the Queen's Speech I referred to research on stocks held by companies in this country which had been done by Norman Cunningham of the Liverpool University School of Business Studies, to which nobody seems to have paid much attention. The research showed that stocks as a percentage of national income over an eight-year period were 24 per cent. for the United States, 25 per cent. for Sweden, 28·5 per cent. for France and Germany and 45 per cent. for the United Kingdom. These are significant figures. All the credit squeezes seem to have had no effect in forcing management to look more closely at the level of stocks carried in relation to turnover. I put that down to inefficient management; it obviously cannot be put down to inefficient workers.
The hon. Member for Worthing is, I understand, opposed to credit squeezes and says that they are not the answer to our economic problems. But one would have expected that credit squeezes would have had some effect. We know that they have some effect on manufacturing investment and one would expect them to have an effect on the ratio of stock to sales and production. I would be interested to know from my hon. Friend whether the Government are looking at this aspect. The report of last year from the Washington Brookings Institute showed that our management was less efficient than that of some of our competitors. If this is so, it warrants close examination, because of the great damage that is done to our economic and balance of payments position.
The Government are not the first Government to find that the answer to economic problems lies in credit squeezes. We have had credit squeezes for a long time. Hon. Members on both sides of the House say how terrible credit squeezes are, but I wonder what sort of world they are living in if they think that for years and years there have been credit squeezes which have had no effect.