6
Raw Material Supplies
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30. In accordance with existing policy, steel for engineering exports and build- ing steel for productive industry has been cut back below even the low level of last period's allocation. This decision was inevitable so long as Defence, Housing and the Social Services are given their present priority. It is not necessary for me to emphasise that this allocation is inconsistent with the main economic objectives which we have in view.
Incentives to Exporters
31. There remains the question of incentives to exporters. This has aroused much discussion during the past two or three years and the fact that many con- tinental Governments have introduced financial incentives for exporters rankles with United Kingdom industry. Proposals have been put forward by trade associations and individual firms: practically all have concerned taxation reliefs in favour of exporters. This is not surprising. The burden of taxation on industry has been an extreme dis-incentive to productive and selling efforts. As my colleagues know, it is not simply a question of levels of tax on distributed profits but goes right to the heart of the whole structure of taxation of industrial enterprises including the method of assessment for tax.
32. A great deal of thought has, of course, been given in recent years to possible fianancial incentive schemes limited to exporters but it is clear that all those which have been suggested are open to objection on some count or other. Any scheme which would be reasonably straightforward from the administrative stand- point is bound to be rough and ready. As soon as one tries to cover every possible inequity between firm and firm or industry and industry, the administrative com- plications become intolerable.
33. I am sure that we can only look for an answer to this question of incentives to industry and exporters along the lines of a new approach to the prob- lems of industrial taxation. Such a reduction is bound to help greatly in securing the right sort of economic climate for production and export trade. By the time that industry has paid Income Tax, Profits Tax and E.P.L. there is little left that could be called incentive. Industrialists increasingly take the view that the risks are all one way. This is the worst possible climate in which to obtain an expansion of exports, let alone an expansion upon the scale envisaged in the Chancellor's paper.
SECTION III
Longer-Term Trade Problems
34. Even if we take all the steps open to us to increase our export earnings by such measures as I have outlined above, and others, such, for instance, as those discussed in the paper by the Chancellor of the Exchequer on the output of. the metal using industries (C. (52) 173) and with which I am in full agreement, I do not see any prospect that action on these lines alone will solve our balance of payments problems. Nor do I think it right to assume that the required increase in our exports can be sold in markets outside the sterling area, as is assumed in the Chancellor's paper on the Balance of Payments problem circulated as C. (52) 172.
35. It seems to me that we are closing our eyes to facts if we try on our own to cure the lack of balance between the productive strength of the United States and ourselves. The United Kingdom is only a part of the whole sterling area and in our intense preoccupation with the need to increase our direct export earnings we are in danger of losing sight of this. There has been and there still is a chronic lack of balance between the sterling area and the dollar world. Between 1946 and 1951, the United Kingdom received some $8,000 million from the United States and Canada, either as loans or grants. This means that during these six years no less than three-quarters of the United Kingdom's imports from the dollar area was either given to us or bought on credit. This vast amount of external assistance has con- cealed the true character of the relationship between the United Kingdom and the overseas sterling area on the one hand and the United States and dollar area on 'the other.
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THIS DOCUMENT IS
Page 28THE PROPERTY OF HER BRITANNIC MAJESTY'S
YENF
CONFIDENTIAL
C. (52) 176
GOVERNMENT)
CABINET OFFICE
RECORD COPY
26TH MAY, 1952
COPY NO.
so. 62
CABINET
CIVIL AIR TRANSPORT
Note by the Secretary of the Cabinet
I attach the draft of a statement on Civil Air Transport
to be made in both Houses on Tuesday, 27th May. The
Prime Minister has directed that it should be considered by
the Cabinet to-morrow,
Cabinet Office, S. W.1.,
26TH MAY, 1952.