Amendments of Customs (Import Deposits) Act 1968

Part of Clause 1 – in the House of Commons at 12:00 am on 26th November 1969.

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Photo of Mr Kenneth Baker Mr Kenneth Baker , Acton 12:00 am, 26th November 1969

What I find most objectionable in the Clause, which the Amendment does something to mitigate, is that the Government have not so far put forward a case for extending the imports deposits scheme for a day, week or month, let alone a year. That is why we seek in the Amendment to restrict the scheme to a further six months.

The argument put forward earlier was that the scheme, if it operates in the next year, is a fine economic tool. That was the argument of the hon. Member for Birmingham, Northfield (Mr. Chapman), who referred to it as a sophisticated tool of economic management. But if one does not know the precise effect of an economic tool one should not use it, and the Government do not know. If one asks any Minister, including the two in the Chamber, to what extent the scheme has inhibited imports, they will not give an answer. If one asks, "Why did you choose 40 per cent. instead of 30 or 20 per cent.?", they will not give an answer, because they do not know. They are legislating from ignorance, and that is what sticks in my gullet. To call the scheme a sophisticated economic tool is to stretch credulity to the point of complete naivety. It is not. It is a blunderbuss with very marginal effect on imports. But it has a greater effect on domestic liquidity.

On Second Reading, the Minister of State said, in effect, that he could not give facts as to why we should have the scheme and asked us to trust the Government's economic judgment. That, after five years, is a bit of a nerve. With this scheme, the Government are groping in a fog and know they are. They have no idea of the economic weather. They are trying to judge it with a sundial set the wrong way round. This means that, whenever the sun comes up, they think that it is going down, and whenever it is going down, they think that it is coming up. This is what we have had for the last five years and it is what we have in the Bill.

The major point of the Amendment is the way company liquidity is being affected by the scheme. It is the most serious point of the debate and is tied up with the time factor with which the Amendment is concerned. The Government are holding about £550 million of British industry's money under the scheme. That is a great deal of money. The November issue of Financial Statistics showed that the liquid assets of United Kingdom commercial and industrial companies over the 12 months between June, 1968, and June, 1969, fell by £80 million. Since June, 1969, they have probably fallen dramatically more. Thus the Government, with this scheme, the corporation tax increase, the S.E.T. increase and the increases in National Insurance contributions levied only this month, are taking out of industry's cash flow £550 million.

I believe that this is affecting companies in two ways. There is growing evidence that companies are reducing their investment programmes and also growing and disturbing evidence that they are cutting research and development programmes. Research and development is often one of the first casualties in a cash crisis in any company, and I believe that, if we could get the Government to repay to industry this £550 million at the end of six rather than 12 months, it would be a great boon.

I do not believe that this would have the super inflationary effect which the hon. Member for Ashton-under-Lyne (Mr. Sheldon) argued that it would on Second Reading. It certainly will have nothing like the inflationary effect that the 25 per cent. increase in wages of building workers and the 20 per cent. increase for airline workers will have.

To emphasise my argument, I give a specific example from the Press. Rolls-Royce, one of our great industrial companies has, I would estimate, a substantial amount of money paid in import deposits to the Government. Perhaps Ministers know how much and will be prepared to tell us. But it must be millions, if not tens of millions of pounds. Yet the company, in its own newspaper, explained to its workers that there is a considerable crisis and that basically it is a cash crisis.

What is extraordinary is that, to get out of this cash crisis, the company is having to go to the Industrial Reorganisation Corporation to borrow money. Thus, on the one hand, the Government, through this scheme, suck money from the company and, on the other, force it to go to the I.R.C. to borrow back its own money. That is something which even Shylock did not think of. It is almost a contravention of the Moneylenders Act, but it is what is happening.

More and more companies are being placed in this position. I believe that the Chairman of the I.R.C. has sent out a letter offering loans to British industry— the very companies which are having to pay import deposits. He is saying to them, "The Government have taken your money and have not paid a penny to you for it. They are keeping it for six months or a year. However, we will lend you some money." This is financial dishonesty and it is disgraceful that the Government should condone it.

I hope that the Government will say tonight that, whilst this scheme is going on, the I.R.C. will not offer any loans of any sort to British industry because this is trying to loan back to British industry British industry's own money.

I hope that I have made the case, which I believe to be very powerful, that the liquidity of companies is now being affected to such an extent that it is not a debating matter any longer. Management and executive meetings throughout the country are cutting research and development plans. One way the Government can help industry to expand in 1970 and 1971 is to withdraw this scheme immediately.