§ 4. Mr. Ridley
asked the Chancellor of the Exchequer if, in the light of the Reddaway Report, he will introduce legislation to remove the fiscal discouragement to direct investment overseas.
§ 33. Mr. Kenneth Baker
asked the Chancellor of the Exchequer, in view of the conclusions of the Reddaway Report on the medium-term beneficial effects of overseas investment on the United Kingdom balance of payments, whether he will review the restrictions placed upon such investment in 1965.
§ 46. Sir G. Nabarro
asked the Chancellor of the Exchequer what steps he is taking to implement the recommendations of the Reddaway Report, notably concerning overseas investments.
§ The Chief Secretary to the Treasury (Mr. John Diamond)
I would like to take this opportunity to thank Mr. Reddaway and his colleagues. Their Report is a valuable contribution to the analysis of the return on alternative uses of resources and deserves careful study.
But it does not call for any modification of the Government's policies in this field. The authors accept that direct controls of overseas investment may be necessary at times of balance of payments pressure, and their conclusions contain nothing to justify more favourable tax treatment of direct investment abroad.
§ Mr. Ridley
Is the Chief Secretary aware that he has come to the wrong conclusion? Is he aware that the Reddaway Report and the Economic Research Council document, just published, make it abundantly clear that this Government have been living on the "tick" earned by foreign investment overseas? Will he now take immediate steps, in view of this wrong diagnosis and fiscal discouragements on overseas investments, to remove these fiscal discouragements?
§ Mr. Diamond
There is nothing in what the hon. Gentleman has said which would cause me to alter my view, nor are there any fiscal discouragements. The fiscal system is neutral for overseas investment.
§ Mr. Baker
Would the right hon. Gentleman not agree that the Reddaway 1081 Committee found two things: first, that overseas investment pays off in 11 years, and then constitutes a net inflow into our invisible earnings, and secondly that home capital is not hit by investment overseas? In view of these two conclusions, will he not relax tax restrictions upon overseas investments?
§ Mr. Diamond
May I repeat, there are no tax restrictions. The tax system is designed to be completely neutral. There were certain tax incentives, advantages, which have been removed.
§ Sir G. Nabarro
Is it not a fact, leaving aside the fiscal disincentives to overseas investment, that the policy of the present Government, manifest now for four years, and evidently as it will be projected in future, will mean the total abandonment of British overseas investment, if continued?
§ Mr. Diamond
No. The hon. Gentleman is quite wrong on both points. The first point I have dealt with twice, and I will not insult the House by making it a third time. As to his second point, the present arrangements under exchange control and under the voluntary programme are designed to give preferential treatment to the most promising projects. That is the policy, that will continue to be the policy.
§ Mr. Patrick Jenkin
Is the Chief Secretary aware that having heard his answers, the House will come to the conclusion that it will now have to wait until a Tory Government does justice to this question of overseas investment? Does he recognise that part of that programme of reform would involve the reform of the whole structure of Corporation Tax?