I was particularly interested in the criticisms which the hon. Member for Shoreditch and Finsbury (Mr. R. W. Brown) made of my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor). The crux of the argument between them was: what was the original intention of the Bill?
As my hon. Friend says, the clear intention which was put forward was that this was a temporary Measure which was to last for one year. That clearly emerged from what was said by the Financial Secretary last year. It is true that not all of us last year believed that the Bill would end in December, 1969. Without making too much of a point of it, I said:
A time-bomb is built into this Measure… just when we should be getting on our feet, a further drain on sterling is likely to take place ".—[OFFICIAL REPORT, 28th November, 1968; Vol. 774, c. 850.]
In other words, I was saying that there would be a further drain on sterling in December, 1969. That is curious timing for those interested in General Elections.
It was clear to me at that time that it would have been inconvenient, to say no more, to have suddenly had a drain on our reserves by people paying their debts to foreigners who had lent us money to pay the import deposits, and, by an increase in imports, it would have been strange if the Government had been willing to allow that sudden drain on resources through to the first quarter of next year. I am therefore not surprised that we have this Bill, in spite of the clear statement that the scheme was to last for a year.
The debate last year and indeed this year had two main themes. The first was the direct effect of the Bill on importers. It has been spelt out in speeches that it has a direct effect. The only question was just how great would the effect be. I accept that anyone who has a good market for goods which he can import can get the credit to pay the deposit. There is no doubt about that. But that is not the end of the story, because he can get it only at a price, and it is a substantial price, because of the interest which has to be paid. Therefore, the increase in the cost of the goods to the public is bound to be substantial. The likely increase has varied from 2 to 4 per cent.
I was talking to a substantial importer from a big firm today who told me that he firmly believed that the import deposits would end in December. He told his foreign suppliers that they could be sure that this would happen. It is an interesting commentary that his foreign suppliers told him not to be a fool. They were equally sure that it would remain on the simple ground that once a tax is on it stays on. Therefore, whatever the importer felt, clearly his supplier was under no illusion about what would happen this December.
I wish to concentrate not on the direct effect of the scheme but on the general effect on the economy as a whole. The Bill, together with its predecessor, is part of one of the severest squeeze policies that we have known. We must consider whether this means that the policy of very severe squeeze is to continue exactly as it has done over the past months. Of course this is not necessarily so. Admittedly, it was almost the last turn of the screw in the squeeze conditions as they were created. Indeed—and this is what caused me so much concern when last year's Bill was before the House—once that Bill began to operate, so went the last chance of the banks getting down to their limits. I believe that it was the last straw.
Conditions were such that banks had the alternative either to obey the Chancellor's request and get down to the credit limit, at the same time putting many people out of business, or to see the condition in which they were placing their customers, resist applying the final pressure and thus fail to reach the Chancellor's target. As things turned out, the target was fixed at too difficult a level for the banks, with the greatest good will in the world, to reach. I think it is now tacitly agreed, although it has not been publicly stated, that the banks stand no chance of ever reaching that target.
As we said last year, the squeeze, of which the Bill and its predecessor form part, has a particularly harsh effect on small companies. I spell, out last year the various ways in which the squeeze worked and I will not repeat them. We have heard a lot recently about the fact that there has not been a noticeable increase in bankruptcies and liquidations, but I believe that the figures will now begin to increase.
I should like to take up the point which I made in an intervention. It is not only in liquidations that one finds companies in difficulty. Very often, particularly if they are basically viable concerns, but simply because much more credit is taken by customers, if they cannot keep within the limits set by the banks there is the danger of receivers being put in. That is happening. In certai cases—I accept that this is of limited application—it is possible to escape one's creditors by putting in a receiver for a while and taking off the pressure. I believe that if figures could be produced for the number of receiverships which have arisen during the last few months—certainly, most practising accountants would be able to give a fair indication—the numbers would be seen to be increasing considerably.
An argument was put forward that we need not worry too much about the continuing severity of squeeze next January because, it was said, people survived last January when the original Act was in force. That, however, is a completely false argument. In January of this year credit was nothing like as tight as it is today. There can be no question of that. Secondly, because this has been going on so long, because people have been taking longer to pay their bills, there has been mounting pressure throughout the year. I believe that there must be an easing of the credit restictions if a great deal of unnecessary harm is not to be caused.
This is especially important for the small companies in the development areas. In a speech the other day I expressed the view that in considering the development areas insufficient attention had been given to the question of credit in those areas, in which we accept that trading is more difficult. In the development areas people are in greater danger of going out of business, taking more credit and the like, and, therefore, there are additional difficulties. There are also people who have moved into development areas seeking to expand and lacking the backing to withstand periods of severe credit restrictions, and, of course, going into those areas on purpose to expand, and yet, at the vital time, finding they cannot get help.