I wish to speak about shipping, but first I must declare an interest as a director of the Furness Withy Group.
After the Budget, the Inland Revenue press handout on the changes in investment allowances stated:
The Chancellor pointed out that the long term underlying effect of this reform would be to encourage the movement of resources into investment projects with a genuine worthwhile return, to discourage uneconomic investment and to permit industry as a whole to improve its profitability and expand.
I agree with this reform. All hon. Members can think of plenty of industries where the pattern of investment has been distorted to a ridiculous degree by the incidence of investment allowances. Therefore, I concede that to qualify for exemption from the new regime, an industry should have not merely to make a strong case but to prove itself unique.
As I said in the debate on the defence Estimates, shipping has done that in the past. It was taken for granted that shipping was the lifeline of the country, and our history has shown that to be so. The time has now come when the Government cannot delay for much longer an answer to the thorny question: is shipping still the lifeline of the country?
The Financial Secretary has shown that he knows that to be true. As other hon. Members have said, the size of the merchant fleet during the past 10 years has not merely dwindled but plummeted, and will soon be a third of its size in 1975. As if the figures were not warning enough, the Falklands crisis came along to bring home in the starkest form the lesson that we have only enough shipping to support even a limited action of that sort.
In shipbuilding, where the industry has declined drastically, one can get some comfort from the fact that we still have the naval shipyards to maintain our defence capability. However, no such safety net exists for the merchant fleet. What could be described as the financial safety net is being removed by the abolition of the 100 per cent. free depreciations. The Financial Secretary can claim that he has recognised this industry to be unique—the hon. Member for Stoke-on-Trent, Central (Mr. Fisher) complained of that. He has granted concessions, which are welcome. They will soften the blow and give some flexibility, which is what the shipping industry has constantly asked for. I welcome them and am grateful for them. If I say that the concessions will not totally satisfy the shipping industry, my hon. Friend will not be surprised. The reason is that exceptional methods must be used in the industry to maintain some calm in an impossibly turbulent financial sea.
Few people realise the size of the investment involved or what the General Council of British Shipping calls the "lumpiness" of the investment. In a lean year, one cannot decide to limit one's capital expenditure to a moderate sum. Either one buys a ship or one does not. If one owns container ships, one spends £30 million or nothing. A cruise ship costs £100 million. By the time the ship is built, the volatile nature of the world market can have increased or decreased the ship's value by up to 30 per cent. To increase further the peaks and troughs, the market operates in a number of currencies so that the profits are subject to all the changes and chances of exchange rates. I know of no industry where a calming factor is more badly needed to maintain continuity of planning and investment.
Other countries have this problem and have dealt with it either by high protection or by subsidy. Among the major maritime flags, competitors enjoy a wide array of benefits, ranging from a no-tax regime for the flags of convenience to investment grants, tax-free reserves and exceptionally favourable credit for investors in ships.
The British 100 per cent. initial investment allowance has been a particularly flexible and efficient way to elevate the industry from a complete gamble to a reasonable business enterprise. The erratic movements of profits tax, payments and cash flows are at least mitigated. Shipping does not qualify for the aids available to other United Kingdom industries. It has no protection and faces severe international competition, all of which is benefited, aided or subsidised in one way or another. Shipping's big advantage, its capital allowance— which is unique to this country — is being scaled down in spite of its contribution to defence, the balance of payments, employment and trade.
Once again, I express my gratitude to the Minister. He has undoubtedly shown that he understands the depressed state of the industry, that it is still decreasing in size and that he appreciates that some immediate action has to be taken. But I hope that he will allow the debate to continue with the industry during the coming year.