My hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) made a thoughtful speech and rightly drew attention to the effect of the import deposits scheme on credit availability, a subject to which I will refer later.
I have listened to the greater part of the debate—I was not able to be here for one part of the afternoon—and the theme running through it, certainly from the point of view of my hon. Friends, has been two fold; first, surprise and condemnation of the Government for renewing a scheme which they repeatedly said was temporary and likely to come to an end after 12 months, and, secondly, surprise and condemnation of the Government for continuing an Act which was contrary to the spirit and letter of E.F.T.A. agreements.
I am surprised that anybody should have been surprised over these things. I cannot understand how anybody could believe that any imposition or restriction imposed on the British people by the present Government should be temporary. I am also surprised that anybody should comment on the feelings of the E.F.T.A. members about this because not only my hon. Friends but people abroad realise that it is useless to take matters up with Her Majesty's Government.
When we debated this matter on 3rd December last year I intervened in the speech of the Attorney-General to ask whether our action was legal under E.F.T.A. agreements. I got the impression—perhaps I did not hear his words correctly, but I gather that the House generally got the same impression —that what we were doing was legal. We gather now, however, that we have not been acting legally and that what we have been doing has been contrary to agreements into which we entered.
The speeches of hon. Gentlemen opposite today have taken the view that it does not matter very much if we have acted legally or illegally because other countries have done the same sort of thing. Hon. Gentlemen opposite have said, in effect, that when it has suited their purpose, they have breached either the letter or the spirit of agreements previously freely entered into. Thus, they argue, it does not matter if we do the same. This is excusing one sin with another and I am sure that the Devil excusing sin would find support and comfort from the arguments of hon. Gentlemen opposite.
I should have thought that Her Majesty's Government would have attempted to have held to their bond, word and agreements and would not have knowingly taken steps which were contrary not only to the spirit but to the letter of freely entered into agreements, bat apparently this has not been the case.
I was not surprised when I first learned that the Government intended to extend the scheme. Indeed, about six weeks after the passing of the original Act—that is, in the early part of this year—when having discussions with colleagues in companies on which I serve I suggested that it would not be a temporary measure, and I gave reasons why I took that view. I pointed out, for example, that the Act provided for the Government to receive large sums of money—we were told earlier that it could be £550 million—free of interest. It was a great windfall for the Government which they would not lightly give up. I suggested, secondly, that it would not be temporary because it took a considerable time for measures of this kind to become effective.
Governments of both parties have erroneously supposed for a long time that their measures take effect virtually the following day. It frequently takes a considerable time for legislation to work its way through the economy. I suggested to the people I was advising that the real effect of the legislation would not be felt in the first 12 months but after that time, so certain was I that the scheme would be extended. This is the time when the real effect would be felt.
The reason the effect would not be felt at the beginning was that, first, a lot of imports were in the pipeline, and, secondly, in many cases the overseas suppliers would attempt to keep their buyers going by extending their credit, which is what they did. I was also fairly certain that it would be difficult for the overseas suppliers to continue indefinitely, this long credit, and I will mention one or two examples from personal experience which show this to be true. After all, we have been talking about the general effect all over the country, but it is sometimes necessary and salutary to come down to particular examples to see how certain sections in the community are affected. In the debate on this subject last year I opposed the Measure, because I thought that it was likely to impose considerable hardship on a small section of the community. One section of the community, the importers, has already been mentioned. The importers are seriously affected because of the way in which the import materials are selected, and certain limited sections of the industrial world are much more severely affected than others. Because of the way in which the imported goods have been selected for this impost, certain manufacturers who are unable to find any substitutes in this country are forced to pay import deposits, whether or not they wish to, if they are to continue in business. This imposes special hardships on a comparatively limited number of people. At that time I thought this was wrong.
Above all, I was concerned about the long-term effect on industrial development and capital investment in this country. I was certain that in the first 12 months people would try to find ways of maintaining liquidity and of overcoming the problems imposed by the import deposits, but that as we came into the latter part of the first 12 months, and as the Measure was extended for a further period, as I was certain it would be, industry would find itself faced more and more with the difficulty of being sufficiently liquid to finance capital investment, and there was the problem of the effect of this Measure on cash flow in general.
The Financial Secretary said that most of the forecasts made by the Opposition had been falsified. I quoted the experience of companies in which I am personally concerned, which represent the experience of many other companies similarly situated. The forecasts which I made at that time certainly have not been falsified. The amount which I forecast that the company would probably have to pay was just about right; it was rather less than it might have been, because imports from America were restricted by strikes in that country in the early part of the year. My forecast of its effect on capital development has come right.
This company, in common with many others similarly placed, being unable to raise money from the bank to pay the import deposit, had to restrict its capital investment for its originally planned development and thus slow down expansion. One consequence of this was that, instead of expanding at the planned rate, it will now, especially as this Measure is to be extended for a further period, find itself two to three years, if not more, late with its development plans. As a result instead of being able to make itself independent of imported materials, which it could do if it developed a large market sufficient to enable it to put up additional factories in this country, it will have to postpone the day when it does that, so that several years later it will have to go on importing semi-finished materials, which are the factory's raw materials, whereas, if it were not for this Measure, it would be within measurable sight of being able to make itself independent of imports and therefore saving foreign exchange. This Measure has postponed its capital expansion. Although this is the experience of only one company it must be typical of many others—