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This is not the first time this year we have discussed stock relief. Many of us who are involved in these debates are beginning to feel that we have been over this ground almost too often, but we still lack the clarity and reassurance that the new clause seeks from the Chief Secretary. Each time we have debated stock relief over the last six months it has been against a background of the situation in industry getting progressively worse. Each time the situation slides a bit more while the Chief Secretary is reassuring us in an almost paternal way. It is rather like holding an umbrella over a man who is drowning and reassuring him that at least it is not raining on his head.
We have the forecast from the Treasury of unemployment reaching between 1½ and 2 million. This is the gloomiest official forecast we have had so far, but since our last debate on stock relief we have also had forecasts from the Department of Industry showing some of the most disastrous falls in industrial investment trends ever recorded. There is a 15 per cent. fall for manufacturing investment and a 10 per cent. fall for the distribution industry's investment. These figures are far worse than even the gloomiest pessimist had predicted.
All this time the Chief Secretary is telling us that everything is all right and that stock appreciation measures have produced massive relief and assured the cash position of firms. In one way that is true, but it is a falsely-based truth, if that is not too Irish an expression.
Has the Chief Secretary received the Sandilands Report? How long is he going to keep it? The whole House is getting a little worried about the tendency of the Government to sit on reports. It seems from earlier events this afternoon that they tend to sit on them for a rather long time. If the report is very big, the Chief Secretary will look a little taller by sitting on it, but this is a serious matter about which industry is deeply concerned and we want to know how long the Chief Secretary is going to keep the report.
Will this relief be clawed back or not? What will happen afterwards? We have had assurances from the Chief Secretary that it is unlikely that the situation will go back to what it was before, and the Minister of State, though in a way that slightly unnerved me, said earlier that it was merely temporary. We have had queries from people in industry who want to know whether it is temporary or permanent and how they can regard funds put aside that might be clawed back.
One example of the problems that are caused is given in a letter from a major company which says:
The November Budget first introduced tax relief on stock appreciation. At that time, we calculated our relief at approximately £686,000. We assumed on the basis of the Chancellor's statement that we could plan on utilising the tax relief for at least a few years, and make our investment plans accordingly. On 15th April, we received quite a shock. Tax relief on stock appreciation was to continue, but the relief will be based on the difference in stocks over a two-year period and the cumulative profits over that same period … our stocks rose during 1974 by £1,707,000. During 1975 we exerted a great deal of management time and energy in controlling the levels of our stocks and succeeded in reducing them by approximately £1 million. At the end of 1975, after two years, our stocks therefore were only £714,000 above the base, and it is on this figure that our tax relief for 1975 is computed. As 10 per cent. of our cumulative trading profits exceeds the increase in our stocks (£714,000), we get no tax relief in 1975. … Thus, when we pay our tax bill next January, we will have to give back all the relief we received last year, and get no additional relief this year.
That is an example of what happened over the two-year period. However, it is also an example of what many firms fear will happen in the future.
Perhaps these funds can be held in cash flow for the time being, but who will invest that kind of money until he is sure where the future lies? Can the money be tied up in real fixed investment now with such a doubt as to whether it will be clawed back in the future? That is the thinking behind the new clause. The wording may not be perfect but it is essential that we get this matter clear, because until it is made clear money will remain available in cash but it will not be available for investment. That is the missing element in the present situation.
It is all very well for the Chief Secretary to say that because of the stock appreciation relief the financial position of industry is improving, and that is literally so in money terms.