Finance Bill

Part of Orders of the Day — Finance Bill – in the House of Commons am 12:00 am ar 17 Gorffennaf 1974.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Mr Edmund Dell Mr Edmund Dell , Birkenhead 12:00, 17 Gorffennaf 1974

This has been an interesting debate. It would appear from the way that the argument went that the Opposition were gradually convincing themselves that they should not vote on the amendment, regardless of my reply. The right hon. Member for Carshalton (Mr. Carr) said how important my reply would be, but I noticed the way in which the argument changed after his speech. Nevertheless, I must treat the debate seriously.

Neither I nor my right hon. Friend have ever tried to under-estimate the problems involved in our present situation. Many companies face serious problems, there are problems for the Government and problems with the public sector borrowing requirement.

It is interesting that in a debate which is closely related to the public sector borrowing requirement and in which we are discussing an amendment which if passed would increase the public sector borrowing requirement by £300 million the one fact which has not been mentioned by any right hon. or hon. Gentleman on the Opposition benches is the borrowing requirement in the last year of the previous Government, before we came into office. I was interested to hear the hon. Member for St. Ives (Mr. Nott) express the wish that we should get back to a balanced Budget. I do not think he can claim that his right hon. Friend the former Chancellor of the Exchequer advanced the cause of getting back to a balanced Budget. This is the problem which we faced when we came into office. We wished to do something about the public sector borrowing requirement as we found it when we came in.

I accept the fact, since it is obvious, that the mini-budget casts its shadow forward. The hon. and learned Member for Dover and Deal (Mr. Rees) said that we were debating the matter in a vacuum. I fear that I cannot fill the vacuum this evening. I cannot imagine any mini-budget which, introduced by my right hon. Friend next week, would affect the need to reduce the borrowing requirement this year by the £300 million which the ACT surcharge enables us to do. Whatever else happens, it will still be essential if we are to keep the borrowing requirement in any sort of control.

The right hon. Member for Carshalton was concerned with the effect on investment of taking money away from the company sector. He argued about the need to encourage high quality investment, and went on frankly to admit that no Government had been particularly successful in encouraging high quality investment and said that our investment record was poor by international standards among developed countries. But he said that by the time we wanted a fertiliser, we sucked money out of the economy. I do not believe that the ACT surcharge will have the effect on investment that the right hon. Gentleman expects. I wish to emphasise that the continuing and determining fact about the level of investment is the availability of profitable demand. That is the reason why we can have some hope, in the current export demand, that we might attract a level of export-oriented investment which would move in the direction of changing the balance of activity.

When we came in we did not tinker with the investment incentives. We left the 100 per cent. depreciation, which is a valuable incentive since it has an influence on investment, but the main factor in determining the level of investment is the availability of demand—and in the present highly competitive situation the availability of rising export demand should be a favourable factor.

The qualification which the right hon. Gentleman would make relates to the present state of company liquidity. There may be demand, but is there the money to finance the investment? The hon. Member for Cornwall, North (Mr. Pardoe) discussed the question of the current level of company liquidity and we had an intervention from the hon. Member for Kingston-upon-Thames (Mr. Lamont) on this point. At the end of the first quarter of 1974, after the three-day week, the level of company liquidity gross was still high. It was still at that time around £9,900 million.

I know the Conservatives tend to qualify the figure by referring to the net position. They say that if one takes away bank advances there was a net deficit and that the figure of £9,900 million is not to be taken at face value. I do not believe that is the correct interpretation of this situation. These bank advances in theory may be on call, but they are not so in practice. This company liquidity is available to finance investment. The CBI, for example, is not claiming any immediate problems. It says that there may be problems next year, but in its representation to the Government the CBI has not claimed any immediate liquidity problem.

We have helped liquidity by keeping regional employment premium in existence and giving assurances about its future. That should help, but we shall keep company liquidity under review—an assurance which we have repeatedly given since the time of the Budget.

8.15 p.m.

The hon. Member for Cornwall, North discussed the financial deficit in the company sector and speculated on the ill effects which the present deficit might have. Unfortunately, in the present situation, with a large balance of payments deficit, that was inevitable. What does the hon. Gentleman expect to be done at this moment? There are the public sector, the corporate sector and the personal sector, and it is inevitable that in total they should be in deficit.

In the personal sector, is the hon. Gentleman suggesting that we should have further increases in taxation to reduce the surplus in that sector? If not, the question is simply a matter of striking the right balance between the deficit in the public sector and that in the corporate sector. That has to be determined by the Government. We believe that, given the conditions which we were facing at the time of the Budget, my right hon. Friend made the right decision by imposing a £300 million ACT surcharge as a way of producing the right balance between the deficit in the public sector and that in the company sector. The question is whether this will so affect the company sector that it will have an ill effect on investment. I have given reasons why I do not believe it should have that effect.