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Volume 933: debated on Monday 13 June 1977

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asked the Secretary of State for Industry if he is satisfied with the current level of investment in British industry.

Investment has generally been on a rising trend, and all the recent investment intentions surveys point to substantial increases this year and even larger increases in 1978.

Does the right hon. Gentleman agree that investment will not be satisfactory as long as our interest rates are 10 per cent. more than those in countries such as Germany and when individual incentive is completely lacking? What are the Government doing to rectify this situation?

We are bringing down interest rates—a matter for which we get little credit from the Opposition—and beginning to attain the increases in investment that both sides of the House wish to see. Last year there was a 5 per cent. increase in investment in the fourth quarter of the year compared with the first quarter. This year the Department anticipates an increase of between 6 per cent. and 10 per cent., with an increase of as much as 20 per cent. next year. According to the CBI, we shall see an increase of 10 per cent. to 15 per cent. between mid-1977 and mid-1978. All these examples show the right trend. If our estimates are accurate, we shall attain a level of investment as high as that of 1970, which was a peak year that was never equalled by the Opposition when they were last in power.

Is my right hon. Friend aware that investment levels in Germany, France, Japan and Italy are far higher than in this country and that the main banks and insurance companies, which have been the principal sources of investment in those countries, are publicly owned?

I doubt whether public ownership is necessarily a major factor. We must look at the history of the development of financial institutions in all countries. My right hon. Friend the Member for Huyton (Sir H. Wilson) is heading a survey into the rôle of the financial institutions in this country. It is worth stressing that in our private sector about two-thirds of all investment is self-generated, and that is why we regard profitability as important.

Are not price controls and a tendency to overmanning as well as inflation and a low level of real profits relevant to levels of investment?

Price control may be relevant when it, rather than the market, is the major inhibition, but the major constraint on industry in recent years has been the market situation. Price con- straint is a necessary requirement if we are to achieve the victory over inflation, and it is equally important for industry and future investment programmes. Of course we want to avoid overmanning, and that is why we have sector working parties involved in about 40 considerations of ways to improve productivity in important parts of our industry.

Is not the truth of the matter that in the past 12 months company profits, at least for the last quarter, have increased by about 40 per cent., that the banks have money to burn and the profits of the four major clearing banks are up by 67 per cent., and that most major private companies are paying little or no corporation tax and pay tax only to overseas Governments? In this period of Labour Government has not as much as £10,000 million been provided by the taxpayer through means such as relief on stock and deferred taxation, and is it not clear that private enterprise is failing and that it is costing us too much money to keep continually propping it up?

I understand the vehemence of my hon. Friend's interjection. However, despite what he has said, it is worth bearing in mind that the private sector still needs profits in order to invest. It is a fact, whether my hon. Friend likes it or not, that on a historic basis profitability is at a very low level in British industry at present. Therefore, we must generate more profitability if the Government are not to find all the finance that is necessary.