I have great respect and affection for the hon. Member for Westhoughton (Mr. J. T. Price), but is he suggesting that there must be a preliminary import boom if one is trying to generate an export boom? If an export boom necessitates as a corollary a preliminary import boom, what on earth is the point of having the import deposits scheme? It is the hon. Gentleman who lacks logic. [HON. MEMBERS: "Oh."] It is evident from the reaction on the benches opposite that it is the truth that wounds.
Now, another quotation from the Board of Trade Journal of 6th August:
The Import Deposit scheme, which came into operation on November 22 last year, may have affected the level of certain imports among industrial materials. There is no clear evidence of any marked effect, however, since imports of semi-manufactures, which were largely subject to the scheme, increased a little by volume between the second half of 1968 and the first half of this year.
Again, the out-turn entirely falsifies the Chancellor's prophecy of a specific cutback in imports as a result of the scheme. In my view, it is perverse, as I have sought to show.
The House will note the rather delicate way in which the Board of Trade Journal attempted to make the transition to a positive increase in imports against the background of the expected result which, clearly, was a positive decrease. One might say that it succeeded in striking the slightly hysterical note of reassurance which one would expect from a doctor who had prescribed for a young lady a fertility drug potion instead of the pill, and it could be said to have succeeded, because of the perverse results, in giving British imports a dose of the fertility drug.
Perversity of result is one of the hallmarks of the economic fruits of the present Administration. Let me remind the House how this happened. They imposed a selective employment tax squeeze to get men out of the service industry, and then found that above all the men were squeezed out of manufacturing. They concentrated investment incentives on manufacturing industries, by contrast, and then found that the solitary growth sector, the real loner in investment growth in the British economy, is the retail distribution sector, that industry sector most detested by the Prime Minister and on the whole bitterly resented by most Socialists—a totally perverse result. They clobbered the service sector and investment overseas, and lo and behold the whole salvation of the British balance of payments comes from the invisibles, including dividends on capital earlier exported. Now we see exactly the same perverse effect of import deposits: the Government slap them on, and up go the imports of semi-manufactures, almost in isolation.
It is a situation worthy of Alice in Wonderland. It was Alice who taught us that if one wanted to grow small one took a drink out of a bottle marked "Take me" and instantly grew larger. The Government's whole economic philosophy is to hunt around for any old bottle marked "Take me". They take it in the expectation that something will happen, and the reverse occurs.
A direct reduction of imports, and especially stocks, was not the only benefit which it was alleged import deposits would yield. There was also the little matter of liquidity, touched on by the then Financial Secretary to the Treasury, now the Paymaster-General, when he said on 28th November last year that the effect of import deposits
… will be that of mopping up liquidity which would otherwise be available to finance other consumption or other expenditures."—[OFFICIAL REPORT, 28th November, 1968; Vol. 774, c. 751.]
But this pious hope shows how extraordinarily little the present Administration understand about the complexity and sophistication of the economic system they are trying to manhandle. They should learn their Friedman a little better, and take a few lessons from the hon. Member for Stoke-on-Trent, Central (Mr. Cant).
The fallacy of the argument that liquidity is mopped up on a large scale is exposed by the fact that many suppliers of goods to this country are now introducing substantially deferred credit payment terms. As one example, whereas the Government of India previously asked for extremely rapid settlement of debts they now ask only for a down payment of 50 per cent. until the import deposits are released and they can be paid in full. The effect on liquidity of such an arrangement is totally neutral. The British importer who hitherto promptly paid 100 per cent. of the cost now pays 50 per cent. to the seller and 50 per cent. to the Chancellor, and does not have to pay the seller the full price until the import deposit is released. This practice is growing, and I believe that it is disadvantageous to Britain. It teaches a large number of foreign suppliers the art which we and other countries have developed to a nicety of extended deferred credit payments. At the end of the day we may well find that we have taught foreign suppliers to British importers some of the tricks of the trade, and that it has made Britain more vulnerable to foreign salesmen. I do not think that that is a good idea.
This will not have the same effect on all importers. The selectively discriminating effect of the squeeze on some importers will hit, above all, the small firms. Many of my hon. Friends have spoken eloquently on behalf of small firms. It should not be overlooked by the House that about half the country's industrial output is in the hands of firms with fewer than 500 employees, and the sort of discrimination which the scheme brings about—because, on the whole, the big operators get easier credit terms from those from whom they borrow—bites wholly irrationally and in a predatory manner usually on the small and the weak firms. No rational regard is had to the needs of small importing business firms or, indeed, of some of the small imports which particular firms find crucially necessary to their operations.
The right hon. Member for Sheffield, Hillsborough (Mr. Darling) referred to silicon carbide, and my hon. Friend the Member for Macclesfield (Sir A. V. Harvey) drew our attention to the need of some firms for calcium carbide. These crucial ingredients, of vital and sometimes overwhelming importance to small firms, are simply lost in the small print of the list of exemptions and non-exemptions in the Bill, although they are a matter of life and death to many firms.
But this is typical of Socialism. At one time we were told that the religion of Socialism was the language of priorities. It is now expressed above all by priorities for big business. It is big business which gets the benefits under Socialism while the small firms are squeezed all the time.