§ 23. Mr. Fletcher-Cooke
asked the President of the Board of Trade whether he will now publish the results of the departmental study on the effectiveness of the investment grants system.
§ 36. Mr. Kenneth Baker
asked the President of the Board of Trade whether the study being made by his Department of the effectiveness of investment grants is completed; and whether he will make a statement.
§ 38. Mr. David Howell
asked the President of the Board of Trade whether he will now publish the conclusions of the 1711 studies being undertaken by his Department on present investment incentives.
§ Mr. Fletcher-Cooke
Is that not a very long time to have to wait? May not the delay be due to the fact that this policy is quite clearly embarrassing the Government because we are spending enormous amounts of public money with very little result? Would the Minister consider reverting to a system of investment allowances which has the blessing of the fact that it is consistent with our entry into the E.E.C., whereas the investment grant system is clearly in flagrant contradiction of its rules?
§ Mr. Dell
On the contrary, I believe that the investment grant system has raised the level of investment in manufacturing industry. Indeed, some evidence of this is shown in the figures for the fourth quarter of 1968.
As for reverting to investment allowances, the previous Government made no investigation at all of the effectiveness of investment allowances. Such investigations as were made showed that most investors were ignorant of their existence and were not influenced by them. It would therefore appear to me to be absurd to revert to such a system.
§ Mr. Baker
Did the Minister note what the President of the Board of Trade said yesterday about the cotton textile industry, in which he declined to extend extra investment grants in relation to cotton textile machinery, but allowed it a higher rate of depreciation? Why does he not extend this excellent example to the rest of British industry?
§ Mr. Dell
My right hon. Friend yesterday did not extend depreciation to the textile industry. He said that there would be consultation on that point. [HON. MEMBERS: "Oh."] I recommend hon. Gentlemen to read my right hon. Friend's statement, which referred to consultations between the industry and the Inland Revenue. As for the other point, the reason why additional investment grants could not be extended to the textile industry was that this claim could equally have been made by other industries. We reserve the premium rate 1712 of investment grant to the development areas where it appears to have the effect of raising the amount of investment in the development areas by a substantial degree.
§ Mr. Howell
Whatever the President of the Board of Trade said yesterday, will the Minister and his right hon. Friend take good care not to be seduced by any clamour for additions to or modifications of the investment grant system? Will he recognise that the best thing he could do would be to scrap the lot and cut taxation accordingly?
§ Mr. Dell
I do not agree with that proposition. I also note that the previous Government had a system of investment allowances which was ineffective and which, presumably, had some effect on the level of taxation. Hon. Gentlemen opposite must make up their minds whether or not they want investment incentives. The difference between this system of investment incentives and its predecessor is that this one is effective.
§ Mr. Sheldon
Is my hon. Friend aware that a very large proportion of investment grants is paid out to oil and chemical companies on the equipment they use which they would probably put in in any event, companies which employ very few people for each £ of investment grant spent? Could not investment grants discriminate more in favour of those who provide more jobs, and particularly those who set up manufacturing plant and machinery?
§ Mr. Dell
I am aware that the investment grant system is highly capital-intensive, possibly less so than its predecessor. Where I do not agree with my hon. Friend is on his suggestion that we should not give substantial encouragement to investment in highly capital-intensive industries, many of which provide a significant proportion of our exports.