§ 27. Mr. Barnett
asked the Chancellor of the Exchequer if he will make a statement on the effects of present tax incentives to industry for investment in new plant and machinery.
§ The Chief Secretary to the Treasury (Mr. John Diamond)
The question of investment incentives has recently been under review by the N.E.D.C., and the Government are currently examining various aspects of investment policy. But I am not sure how far it is possible to isolate the effects of tax allowances from the effects of the other measures included in the present system of incentives.
§ Mr. Barnett
As there are clearly genuine doubts about the effectiveness of the direct incentive of investment grants, would not my right hon. Friend agree that there is clearly some incentive in that out of the cash flow that arises, and is it not important that he should consider doing something about reducing the period of delay between the date of purchase and the date of payment of the grant, which would affect the cash flow, and very likely improve the cash incentive effect?
§ Mr. Kenneth Baker
As the amount of investment in manufacturing industry, which attracts investment grants, fell last year to a level as low as it was in 1961, is not there at least a prima facie case for saying that investment grants are wasteful and not helpful to investment? Will the right hon. Gentleman consider replacing the present system by one of initial allowances, and depreciation allowances over a fixed period?
§ Mr. Higgins
Can the right hon. Gentleman say what the average period of delay is now for the payment of these grants, and how it compares with the period when receipts under the tax allowance system might have been expected?
§ Mr. Diamond
I cannot answer that off hand, but if the hon. Gentleman puts down a Question to my right hon. Friend the President of the Board of Trade he will no doubt get an accurate answer.