§ 4.17 p.m.
§ THE MINISTER OF STATE, BOARD OF TRADE (LORD BROWN)
My Lords, with permission, I should like to repeat a Statement made in another place by my right honourable friend the President of the Board of Trade. The Statement is as follows:
"Since the National Productivity Conference in September the Government have been considering whether it is necessary to give some additional stimulus to industrial investment during the period immediately ahead. We have discussed this question with representatives of industry in the light of recent surveys of investment intentions, which suggested that there was likely to be a fall in private industrial investment next year.
"We have now decided to effect a temporary increase in the rates of investment grant payable by the Board of Trade under Part I of the Industrial Development Act 1966. The standard rate in respect of eligible capital expenditure incurred between January 1, 1967, and December 31, 1968, will be increased from 20 per cent. to 25 per cent. and the rate for development areas from 40 per cent. to 45 per cent. These higher rates will apply to eligible plant and machinery used by manufacturing, extractive and construction industries; and also to mining works, scientific research equipment and certain computers. The rate for ships, hovercraft and most computers which is at present 20 per cent. throughout the country, will be correspondingly increased to 25 per cent. Under the Act expenditure is regarded as having been incurred when the sums of which it consists became payable. This is explained in more detail in the booklet I have recently issued for industry. I should emphasise, however, that the mere placing of a contract within the two year period will not in itself attract the higher rates of grant on expenditure under the contract. Such expenditure will qualify for the higher rate only in so far as it is incurred before the end of 1968.
"There will be no change in the coverage or other features of the invest- 824 ment grants scheme. Claims made during 1967 in respect of expenditure incurred during 1966 will qualify only for the existing rates of grant of 20 per cent. or 40 per cent. The booklet on investment grants which I published earlier this week describes the details of the scheme and makes clear that the standard long-term rates will be 40 per cent. in the Development Areas and 20 per cent. in the rest of the country.
"The necessary Order under Section 7 of the Industrial Development Act will be brought before Parliament as soon as possible.
"We also intend to speed up the payment of claims as soon as we have had sufficient experience next year to judge what is practicable. My right honourable friends the Minister of Agriculture, Fisheries and Food and the Secretary of State for Scotland will be making corresponding arrangements for increased grants for agriculture and fishing vessels."
That concludes my right honourable friend's Statement.
§ 4.22 p.m.
§ LORD DRUMALBYN
My Lords, I should like to thank the noble Lord for having repeated in this House the Statement of his right honourable friend. I wish to ask one or two questions. The first is, does he not think it is most unfortunate that, almost before the scheme has come into operation at all, it is necessary to change it? Does this not reflect very seriously on the Government's economic policy? Secondly, I would ask whether he considers that the difference which is being made in this scheme is adequate to balance the anticipated decline in investment expenditure in the coming year.
The noble Lord spoke about speeding up the payments. What we must ask him from this side of the House is from what speed he is going to speed them up. What is the expected speed at present? I understood that it was a matter of eighteen months, and this in itself is surely a considerable deterrent to investment expenditure. Would it not have been better if at the same time as making this improvement he had arranged for interest to be paid on the amounts outstanding at the time the expenditure is incurred?
§ LORD SHAWCROSS
My Lords, before the noble Lord replies to that 825 question, I wonder whether I might say a few words on this matter, as this is a subject in which I am deeply interested and concerned and in which I do not want to inject any note of Party political recrimination. I am grateful for this relief, small as it is. I think it is too small. I think that, before long, the Government will have to consider whether either an increase in the actual amount of grant should be made, or whether they should give far more serious consideration than has hitherto been done to the possibility of allowing, on a selective basis free depreciation in connection with new capital investment. But does the noble Lord not appreciate that financial assistance alone at this time is not going to be enough to secure any massive fresh investment in the private sector? What industrialists now need to be assured of is that they are going to have markets in which they can sell the goods they produce with their new equipment, and that if indeed they succeed in selling them in those markets they will be allowed to retain a reasonable proportion of the profits they may hope to make from them.
§ LORD WADE
My Lords, in thanking the noble Lord for his Statement, may I say that I welcome it so far as it goes. Would the noble Lord not agree that additional stimulus to industrial investment will be of particular importance in 1967, in view of the anticipated fall in private industrial investment? What steps do the Government propose to take to try to ensure that this stimulus will be of some real effect in the coming year 1967 and that it will not be too late for that year?
§ LORD BROWN
My Lords, as it is freshest in my mind, perhaps I may take first the question which was asked by the noble Lord, Lord Wade. The whole purpose of the scheme is indeed to stimulate investment in 1967. Perhaps the point has been misunderstood. The scheme provides an addition of 5 per cent. to investment which is entered into in 1966 and where the expenditure is incurred before the end of 1968. If any body wants to get advantage from the scheme during the two years, they will have to move pretty quickly to a commitment during 1967.
826 May I turn to some of the other questions which were put to me? The noble Lord, Lord Drumalbyn, referred to the fact that before the original grant level was introduced the scheme had been changed. I think this is a welcome sign on the part of Her Majesty's Government of flexibility to circumstances as they arise. I do not accept it as a matter for criticism that they have been ready to act so rapidly on the stimulus of a possible decline in investment. The question was asked whether this is an adequate amount. The actual amount involved in extra expense to the Exchequer is roughly £60 million a year. That is £120 million over the two years, although these additional amounts will not arise in this financial year or in 1967–68. This will give some idea of the scale of the incentive which is proposed.
As to the comments made about speeding up payments, the original provision is that they should be paid eighteen months after claim, with the undertaking that this will be brought down, if possible, to six months. It is too early to say what can be done about speeding this up. The administration of the scheme is complex, but we hope to be able to say something about it later. Certainly it is our intention to reduce the lapse of time between claim and payment as rapidly as possible.
In regard to the remarks of the noble Lord, Lord Shawcross, I think the only point he made which was special and separate from those I have already answered related to the securing of markets which was needed to correct the situation. The Government intend to adhere to the policies which have been explored at such length in this House and elsewhere, so long as it seems necessary to ensure that inflation is grappled with. These measures are intended to stimulate investment, because it is the Government's view that whereas we must reduce consumer demand—and by those means we inevitably reduce temporary market possibilities—we must at the same time make certain that investment does not fall.
§ BARONESS ELLIOT OF HAR WOOD
My Lords, may I ask the noble Lord to what fields the investment grants apply? He mentioned agriculture and fisheries and said something about vessels. Does he mean agriculture and fisheries from the point of view of seagoing craft, 827 or does the word "agriculture" in this sense also mean agricultural investment grants?
§ LORD BROWN
My Lords, would the noble Lady excuse me from answering this question? It means going into a great deal of detail, all of which is dealt with in the booklet which is available to noble Lords in the Library. Does that answer the noble Lady?
THE EARL OF SELKIRK
My Lords, am I correct in thinking that no investment grants of any kind will be paid until after the end of next year? Is that the current position?
§ LORD BROWN
Under the 20 per cent. and the 40 per cent. levels, it is planned to start paying investment grants arising on capital expenditure in the first quarter of 1966 in mid-1967. Thereafter it is hoped to begin closing the gap of eighteen months as quickly as possible.
My Lords, do I take it that Her Majesty's Government still treat the service industries as pariahs, in spite of the fact that service industries can mop up at little expense the purchasing power of the consumer in imported goods?
§ LORD DRUMALBYN
I thank the noble Lord for answering all the questions so conscientiously. May I ask him about the possibility of allowing interest during the outstanding period between the time when the expenditure is actually incurred and payment is made, and the time when grant is received'? This would act as a considerable incentive to the Department, and I am sure the Treasury would watch it very carefully indeed to see that payments were made quickly.
§ LORD BROWN
My Lords, I will undertake to have a look at it. It has probably been looked at and discarded, because the complexities of the grant system are considerable. It would certainly add to the cost to the Exchequer and I think this would be frowned upon. But if the noble Lord wishes, I will have it looked at.