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New Clause—(Amendment To Finance Act, 1932, Section 10)

Volume 466: debated on Tuesday 28 June 1949

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Reference to machinery in section ten of the Finance Act, 1932 (which enables the Treasury by licence to authorise the duty-free importation of machinery), shall be deemed to include references to plant and parts of and accessories for machinery or plant.—[ Lieut.-Commander Braithwaite.]

Brought up, and read the First time.

I beg to move "That the Clause be read a Second time."

The object of the new Clause is to aid the operation of section 10 of the Finance Act, 1932, by extending the authority of the Treasury to issue duty-free import licences to cover spare parts of machinery. Under this section of the Finance Act, 1932, free import licences could be issued by the Treasury provided that two conditions were fulfilled, the first being that
"having regard to all the circumstances it is expedient that the consignment should be allowed to be imported without payment of duties under the Import Duties Act, 1932,"
and the second condition being that
"similar machinery is not for the time being procurable in the United Kingdom."
Since then, several Amendments have been made to that Act, notably by Section 8 of the Finance Act of 1934 and Section 1 of the Import Duties (Emergency Provisions) Act, 1939. But those Amendments have not altered the original provisions which I have just quoted to the Committee. Subsection (2) of Section 10 lays down that the Section shall apply to "any class or description of machinery." I think that makes it clear that it was the intention of this House at that time to give the widest possible application, where circumstances warranted, to such exemption from import duties.

No difficulty is experienced in obtaining a duty-free import licence from the Treasury where the necessary conditions apply and where a complete machine is being imported. The position with regard to spare parts is very different. In many cases the spare parts are only obtainable abroad. The trouble which has developed is that despite the intention which is clearly laid down in the 1932 Finance Act, that wide application of exemption should be afforded in suitable cases to cover all types and classes of machinery, the present policy of Government departments is to interpret that variety of exemption as applying only to complete machines and not to the machine parts.

No, I cannot give way. This is an important technical matter, and if the hon. Member takes exception to anything I may say, I have no doubt that he will have the opportunity of catching your eye, Major Milner—

It is not an objection. I want something made clear about the machinery imported—

If the hon. Member is incapable of listening to a case being put, he has one of two remedies. One is to conduct himself as an hon. Member of the House of Commons, and the other is to leave the Chamber. Perhaps I may continue with my speech.

The hon. Gentleman must resume his seat. No point of Order can possibly arise. The hon. Gentleman is not entitled to speak unless the hon. Member addressing the Committee gives way, and the hon. and gallant Gentleman the Member for Holderness (Lieut.-Commander Braithwaite) has not given way.

I appreciate that Ruling, but I was going to ask on a point of Order whether the hon. and gallant Gentleman was in order in suggesting that my conduct would make it necessary for me to leave the Chamber. In my view that is a matter which only you can decide. In the circumstances, ought not the hon. and gallant Gentleman to be called upon to withdraw.

I was not clear that the hon. and gallant Gentleman put that interpretation upon his words. In any case the hon. Member rather brought the remark upon himself. Lieut.-Commander Braithwaite.

I was endeavouring to point out that under the procedure which is at present being applied by Government Departments it appears to us, though not apparently to the hon. Member for Bolton (Mr. J. Lewis), that a distinction is made between the importation of complete machines and that of machine parts. The result of this anomalous restriction is that while comparatively minor items such as typewriters and bicycles, which fall within the definition of a machine as such, qualify for exemption, major items such as a body for a large press, complete with moving parts, would receive no exemption and nor do the vital spare parts without which, in a great many cases, the plant and machinery must stand idle and unproductive.

In addition to that distinction, another is being made as between plant and machinery, and there appears to be no clear-cut definition of plant under which the departments are operating. It seems that in practice they classify static equipment such as a chemical bath as constituting plant, and do not consider such equipment for exemption. This arbitrary distinction between a machine with moving parts and one without, seems to be unreal because both these types are equally necessary to industry and in some cases they are dependent in their action. [HON. MEMBERS: "Dependent."] I should have said "interdependent."

As I explained earlier in the evening it is very easy for hon. Members to sneer when one is endeavouring to put across a rather difficult case. No complaint is made when the right hon. and learned Gentleman the Solicitor-General or the Financial Secretary makes use of what are known as "copious notes" to deal with complica- ted matters, and if it is the intention of the hon. Member for Harborough to sit there and sneer he is not treating me in particular, or the Committee in general, in the proper way. It is quite true, I have here very heavy annotations in order to support this case, and I do not think, if the hon. Gentleman was endeavouring to deal with this matter, he could do it out of his head and without notes. As regards this question of machine parts—[Interruption]—This is not a laughing matter for industry.

It would not even be a laughing matter for the constituents of hon. Gentlemen opposite. I am attempting to put across a matter which is causing a certain amount of anxiety to industry. I frankly admit I am now going to read from a typescript the details of a case in point which arose recently. The case arose in connection with the import from America of spinning jets used in the production of rayon yarn and staple. As a result of expansion in the industry it was found that British manufacturers of spinning jets could not, for the time being, meet all demands since the necessary drilling capacity was not available. The only way in which the production programme could be met was by having the jet cups fabricated and drilled in the U.S.A. by the parent company of the U.K. firm who normally carry out the work. The metal from which the jets are compounded is in large part platinum, but they also contain gold. In order to reduce dollar expenditure to the minimum, old jets were melted down, the precious metal extracted, and arrangements were made to transport the ingots to the U.S.A. for fabrication and drilling.

The necessity for that procedure was recognised by the Government Departments concerned, and the required import licence was readily given, but after very lengthy negotiations during which, in order to avoid a further production hold-up, the metal was exported and the work commenced, exemption from import duty was refused on the ground that the jets were merely part of a machine and did not qualify under Section 10 of the Finance Act of 1932. The effect on industrial costs and efficiency of discrimination of this kind against machine parts and plant is obvious, as is the point which the new Clause raises for the consideration of the Committee. At present the exemption is given only in cases where the Board of Trade and other Government Departments are of the opinion that the circumstances of the particular case warrant exemption. This new Clause does not propose any change in this provision. What it does propose however is that the exemption should not be restricted to complete machines, but should be widened to apply to the import of parts whenever, in the opinion of the Government Department concerned, they are urgently required, and are unobtainable from home sources. It further proposes that the narrow interpretation of machinery should be widened to include plant.

2.30 a.m.

In supporting the new Clause so ably moved by my hon. and gallant Friend, I would like to point out that the present position is that under the Section of the 1932 Act whole machines are allowed to be imported free of duty if, in the opinion of a Government Department, the circumstances of the case warrant it. The object of the new Clause is to alter that practice by allowing parts of machines to be imported, and for the definition of machinery to be extended to cover certain items which are at present excluded. For example, we know that we have only two mechanical brains in this country, one at Newcastle and one possessed by the Chancellor of the Exchequer. If the Government wish to improve their dealing with the Finance Bill they will need a few more mechanical brains. Some of the parts can be produced in this country but others cannot, and if these mechanical brains have to deal with Income Tax—and they are the only ones who can—it will be necessary that parts be imported free of duty.

It is necessary to expand certain export industries very quickly, and one finds that it will be of great advantage to this country if parts of machinery can be imported free of duty under Section 10, rather than making people import whole machines or go without the parts, and have to wait the longer time for delivery in this country. The reason for the new Clause is the rather restricted application of Section 10. It may be that the object would be met by a wider interpretation. That is a matter I should have thought largely for administrative decision. We should be interested to hear from the Solicitor-General the reasons for which Government Departments have cut down the meaning and intention of Section 10 of the 1932 Act, as amended by subsequent legislation. The instances given by my hon. Friend are instances in which full productivity was hampered by the way this Section was interpreted. Obviously in the case of the platinum ingots which were sent to America to be turned into jets, and which then came back to England, duty was charged on them contrary to the spirit of Section 10. Duty was also charged on the melted down ingots—

I do not think that makes it any better, it is still a case which should not have happened. Surely the hon. Member will give us credit for putting forward this new Clause because we think it will enable the general wish for increased productivity to be fulfilled to that extent. Another example was given by my hon. and gallant Friend—or perhaps he did not get as far as that. But if the hon. Member for Bolton (Mr. J. Lewis) says that is the only instance, I perhaps must detain the Committee for another few minutes giving the instance of sicromal steel coils from Germany to be used in the process of manufacturing acetic anhydride. These coils are inserted in brick-built furnaces and acetic acid vapour passes through them at 1,200 degrees Centigrade. At the time British manufacturers were not in a position to supply sicromal, nor were they able to produce a substitute alloy capable of withstanding the great temperatures and strains involved. The Board of Trade agreed to the importation of these coils but a duty-free licence was refused on the grounds that such equipment constituted a piece of static plant and was therefore inadmissible for duty remission. The argument is much too complicated and hon. Members are advised not to put it forward as the House of Commons will not understand it.

Is it in Order for an hon. Member, after quite clearly reading from a lengthy brief, which he has confessed is the same brief as that from which the previous speaker also read from at length—is it in Order, when there are clear rules about reading from documents, that this should be allowed?

I am afraid it is a practice which is much too common to be stopped tonight.

As a matter of fact, on looking at what the hon. Member calls a "brief," I find that the sentence I was about to read is not there. It did appear that the words were there, but they are not there. It was done in another place by a Socialist noble Lord and by a Minister, and it can be seen in the Report of the House of Lords Debates. But joking apart, perhaps the learned Solicitor-General will tell us whether there are any reasons why Section 10 should not be dealt with in this way?

Section 10 of the Act as amended enables the Treasury to authorise the duty-free importation of machinery. This does not include, and up to now never has included, plant and accessories. As I understand the new Clause, it proposes that for the first time, plant and accessories both for machinery and plant, should be included in these licences which are issued. The power is exercised, as I think the Committee knows, by the Board of Trade, which in turn seeks the advice of the Department concerned. Normally, now, that Department is the Ministry of Supply. The current practice, and I think this is borne out by the illustrations, in so far as we can follow them, which have just been given, is to licence productive machinery of a kind which cannot be procured in the United Kingdom.

I agree that the dividing line between what is plant and what is machinery is sometimes difficult to draw. Actually, for Customs purposes, I believe it never has been drawn in words, although normally when it comes to definition of a piece of machinery or plant actually in being, and under review, it is found not to be so difficult as one might imagine. If we accepted this Amendment it would mean the loss of a certain amount of revenue. But I do not put that forward as a reason why I cannot accept it.

Surely the effect of this Clause is only to give power to the Board of Trade, and it is for that Department to use it or not.

If the Board of Trade were given this power, it would be expected that it might exercise it, and we should lose some revenue; but I cannot say how much. One of the difficulties in accepting the suggestion is that this method is in existence to protect British industry; and I am rather surprised that right hon. and hon. Members opposite, who are always concerned with the future of British industry, should so glibly throw away that which, up to now, I have always understood they were anxious to preserve. Before a change of this sort is made, industry should be consulted and we should take some soundings to find if there is a general feeling that a change of this kind in these duty free licences should be undertaken.

The most that I can say tonight is that we will consider this, but, on reflection I must say that to include accessories, and parts of plant and machinery, is, I think the Committee will agree, a big obligation. On the advice given to me up to now the feeling is that it would be wrong to include accessories. They do not amount to a great deal in the aggregate; but so far as plant is concerned, we are very willing to look at this matter. We do not, however, think that the Committee should expect more at the moment, or that I should give a promise to move an Amendment on the Report stage. We cannot do anything until we have seen how industry would react to the change.

I must confess that the right hon. Gentleman did not encourage me very much at the beginning of his remarks, but he has gone some way to meet the point raised. Useful illustrations have been given, and hon. Members opposite may not appreciate the fact, but it is not always easy for one to master the technicalities of some particular industry in which one is not engaged. Two hon. Members, I think, made a very good attempt to do so tonight. There was the reference to the import from America of jets for spinning rayon, and from my hon. Friend the Member for Northwich (Mr. Foster) there was the careful explanation about the steel coils. I would like the right hon. Gentleman to consider these two specific illustrations when he comes to look into the whole matter and see if he cannot give even a little more than he promised when he addressed the Committee just now.

I should not have attempted to intervene at this advanced hour had it not been for the remarks of the Financial Secretary. This is a serious subject, and I want to give, if I may, an illustration from my own industry, of which particulars may be found within the Working Party report. If we are not careful, we shall find the spectacle of "tied" machines coming from other parts of the world and used in our industries to the exclusion of our own machinery. I would quote to the Committee the British United Machinery, which has the machinery of the boot and shoe industry in pawn.

2.45 a.m.

If we allow these spares to come in we may find that engineering firms in this country which are now able to make spares for this machinery will be unable to supply spares because the terms of contract or hire may be such that manufacturers will find it easier and cheaper to import them from overseas. Germany has been referred to. It is possible that industries may be financed in Germany so that spares can be used for machines in this country. I hope the Minister will take care to ascertain the views of the engineering industry especially those sections which supply spares. If we should find that industries are using not only machines but spares which come from abroad we shall be in a position where we may not be able to add improvements to them and we will then be at a disadvantage in competing with others.

Inventions and improvements to machines do not reach this country as quickly as they should because of this fact. If we build up industries so that we can supply spares we shall enable ourselves to expand and build the actual machines. We shall be able to get the patents if we pay the price. I hope the Minister will realise that although it may suit us at this moment when there is a strain on industry to import spares, in future years we may reach a different position.

Before the hon. Member sits down may I ask him if he is trying to tell the Committee that spares of machines are not being imported?

I did not say that spares were not coming in but said that they were coming in. I was asking the Committee to realise that if it is made easier to get them at a lower price than we can supply them in this country, our industries will suffer later.

The Financial Secretary, perhaps unwittingly, appeared to me to threaten a very important principle, that the purpose of import duties was to protect trade and not to raise revenue. He mentioned that the cost of allowing the Clause would be negligible. I think that was the effect of his remarks but I hope the cost will not weigh with the Government at all.

I probably put it clumsily, I often do, I know, but what I tried to say was that there would be a certain loss of revenue. We did not put that forward as a serious argument here. There were other considerations some of which my hon. Friend (Mr. Attewell) has put lucidly. We must be careful in this matter and consult industry and see what their views are.

I am glad to have that assurance. I was surprised that the Financial Secretary replied on this Clause and not the Economic Secretary (Mr. Jay). I should have thought that the Clause concerned the Economic Secretary more than the Financial Secretary. As a Liberal converted to the idea of Protection, I welcome measures for the protection of British trade. But we have to be very careful indeed.

For example, with regard to agricultural machinery, we find that farmers are in possession of American combine harvesters imported during the war; that spare parts for those machines have been difficult to obtain, but that at the same time, British manufacturers have been doing their best to make those spare parts; and also that the Americans, fortunately both for us and for them, have started to make those spare parts in this country. Those are some of the complicated factors that we would have to bear in mind when seeing how this new Clause worked out in practice, but so long as the economic advantages and disadvantages are borne in mind all the time, and so long as no revenue producing considerations come into play, I think we can rest assured that this Clause would be a very beneficial one.

I quite frankly hope that this Clause will be defeated. I have looked at it extremely carefully and I have listened with great care and interest to the speech made by the hon. Gentleman opposite. There can be no doubt that it is very nice and easy to come here tonight and say that there is this difficulty about spare parts. We all know of that difficulty. I know it as a farmer, but fundamentally, the 1932 Act is absolutely sound. We rebuilt the whole of our engineering system on that before the war. It was one of the greatest accomplishments of the time. I claim that this is really—I think accidentally—an appalling type of new Free Trade Clause. It might have come from the second bench below the Gangway. It is vary rare that I disagree with my own party, but it is obvious there has been a mistake made; so obvious that even the right hon. Gentleman, the Financial Secretary saw that it was against the best measures of Protection, and I hope that the Clause will be withdrawn.

Having said so much against my party, may I be allowed to congratulate the right hon. Gentleman the Financial Secretary on having at last committed himself, and I hope the Government, to the fact that protection of this kind is really essential in preserving and building up our industry. It is up to manufacturers to find out where these things are wanted and to make them, and make them quickly. That is one of the ways in which we got initiative in business people of this country before the war, and why we were successful during the war in turning out machinery. I ask my hon. and gallant Friend the hon. Member for Holderness (Lieut.-Commander Braithwaite) to withdraw the new Clause because I am sure that he did not realise that it should not have been put forward by any member of the Tory Party.

The Financial Secretary said there would be some cost to the Exchequer. Surely he is wrong? The whole purpose of giving the new powers proposed in this new Clause is to enable accessories which cannot be obtained immediately in this country, to be imported in order that production will not be stopped, that employment can be maintained and that industry can be efficient. Surely that means increased revenue for the Exchequer? The purpose of the new Clause is to help industry in this country through any temporary phase when machinery cannot be made in this country by enabling the importation of urgently-needed parts of machinery. I should have thought that was a very good provision to make. It was never intended, surely, that there should be a complete reduction of import duties or that this, country should be flooded with machinery from abroad? I am surprised that the hon. Member for Torquay (Mr. C. Williams) should make such a suggestion.

It is the sort of insidious thing which, unless pointed out quickly, may lead to trouble.

This proposal is not to permit a flood of foreign machinery to come in but to enable special bits of machinery to come into the country in certain selected cases to speed up production, and make industry more efficient when machinery and spare parts cannot be obtained here. I think it a very reasonable new Clause and hope that in consultation with the industry concerned, the Government will give it sympathetic consideration.

May I say that the reason why we put down this new Clause was that we felt that the operation of Section 10 of the Finance Act, 1932, was not in accordance with the intention of Parliament when it was passed. The Financial Secretary said, I think, that he was shocked at the proposal. May I remind him that the Import Duties and Finance Acts of 1932 were passed when this country was being subjected to a severe foreign glut. It was made clear at the time that it was the intention of the then Government that the power should be flexible in cases where changes took place.

We are now in an entirely different situation and are endeavouring to cope with a grievous dollar shortage. An export drive is necessary and this new Clause merely sought to define the manner in which Section 10 of the Finance Act, 1932, should operate. Not for the reasons suggested by the hon. Member for Torquay (Mr. C. Williams)—who has not been as helpful in this discussion as he generally is—but because of the sensible manner in which the Financial Secretary has been good enough to meet the suggestion by saying that he is to have consultations with industry, which seems a commonsense method, I ask leave to withdraw the new Clause. This short debate has been valuable in many ways, and the matter has been well ventilated—even if somewhat incompetently introduced by me.

Motion and Clause, by leave, withdrawn.