The Rt. Hon. Sir John Major KG CH

Tag: 1990

  • Mr Major’s Parliamentary Answer on the Bank of Credit and Commerce International – 18 January 1990

    Below is the text of Mr Major’s response on the Bank of Credit and Commerce International held on 18th January 1990 in the House of Commons.

    Mr. Rathbone To ask the Chancellor of the Exchequer what discussions he or his officials have had with United States counterparts about the banking operations of the Bank of Credit and Commerce International.

    Mr. Major There has been close liaison between United Kingdom and United States customs officials in connection with Operation C-Chase, a drugs money-laundering investigation directed at the Medellin cartel, involving bank accounts held with the BCC group.

    Mr. Rathbone The Chancellor will be aware of newspaper reports of the handling of huge amounts of drug-trafficking money by the bank, which transferred £15 million from this country to Luxembourg last year and has held the major part of $60 million in deposits for Mr. Rodriguez Gacha and the Medellin drug cartel this year. Is he satisfied that there is sufficient national and international supervision of the bank’s operations? In the light of his investigations, what initiatives will he present for inclusion in the report by the international financial action task force, which is due in April?

    Mr. Major I am aware of the reports to which my hon. Friend refers and I am satisfied with the supervision responsibilities and powers available to the Bank of England. As my hon. Friend will know, under the Banking Act 1987 the operations of BCCI in the United Kingdom are supervised by the Bank of England. Internationally, overall supervision of the group is carried out by a college of supervisors with representatives from a number of countries in which the bank has its operations. I have no doubt that those supervisors will give careful consideration to the outcome of the case, and it would be inappropriate of me to comment on that now.

    Mr. Skinner If the Chancellor of the Exchequer really wanted to get hold of the money that has been salted away by the drug barons, he need only use the system that was adopted by the previous Chancellor of the Exchequer during the miners’ strike. Is the right hon. Gentleman aware that when the miners’ money was in banks in Switzerland and elsewhere on the continent, the British Government found ways and means of sequestrating that money that belonged to the National Union of Mineworkers? Is the right hon. Gentleman aware that if he adopted a similar system, he could get at the drug barons’ money? If he wanted to adopt an even stronger method, he could tell all the banks that the Government intend to stop the tax relief that they give them every year.

    Mr. Major I am fascinated by those post hoc revelations. On money-laundering, the hon. Gentleman will be aware that the Drug Trafficking Offences Act 1986 strengthened considerably the powers of enforcement agencies and introduced a provision for financial institutions to report suspicious transactions to the police. The United Kingdom is participating fully in the financial action task force that has been established, with representatives from a number of countries, specifically to deal with this problem.

    Mr. Dykes Does my right hon. Friend agree that although the Florida allegations are serious and must be pursued rigorously, it would be unfair – particularly as he has confirmed that supervision of the BCCI is correct so far as he can tell – to criticise on a worldwide basis this successful international bank, which apparently has helped millions of people in the Third world?

    Mr. Major As my hon. Friend will know, senior representatives of that bank are facing trial in the United States. It would be unwise of me to comment.

    Dr. Marek The Chancellor will accept that this is a most serious affair in that it could besmirch the good name of the City and the whole financial industry in this country. Will he assess the amount of man and woman power that should be available to Customs and other officers in the Bank of England to assure the public that there is no cause for alarm, that this is an isolated incident and that it will not recur in the City or anywhere else in this country?

    Mr. Major I share the hon. Gentleman’s view that this is a serious matter, and I hope and believe that it is an isolated incident. The Bank of England has sufficient staff working on the proposition. The hon. Gentleman will be aware of the successful year that Customs and Excise has had in combating and grabbing hold of illegal drug imports.

  • Mr Major’s Parliamentary Answer on Industrial Investment – 18 January 1990

    Below is the text of Mr Major’s response on Industrial Investment held on 18th January 1990 in the House of Commons.

    Mr. John Greenway To ask the Chancellor of the Exchequer what assessment he has made of the prospects for industrial investment over the next 12 months.

    Mr. Major The Industry Act 1971 forecast published with the Autumn Statement projected total business investment to grow by 9¼ per cent, in 1989 and 4½ per cent, in 1990. This follows growth of 30 per cent, in real terms between 1986 and 1988.

    Mr. Greenway Has my right hon. Friend noted the results of a survey of leading industrialists published this week which described the fear of a recession as a myth based on a misconception? It rejected the gloomier predictions of the effect of high interest rates on industry. In his forthcoming Budget, will my right hon. Friend the Chancellor give priority to measures that will keep up the momentum of increased investment seen under the Government? Will he target the small independent business sector as one deserving of particular help through investment-related taxation reform?

    Mr. Major I have noted the survey to which my hon. Friend refers and he characterises it accurately. He will know that I cannot anticipate the Budget. However, I can draw to his attention the fact that the small business sector is still growing substantially, with a rate of VAT registrations of more than 1,300 a week during the past year.

    Mr. Robert Sheldon But manufacturing industry will clearly be damaged by the high level of interest rates, even if they remain as they are and do not increase. Is the Chancellor of the Exchequer aware that something must be done for manufacturing industry? One problem that it faces is that the capital allowances militate against investment – a rate of 25 per cent, capital allowances in the first year is not realistic. Manufacturing industries cannot retrieve 75 per cent, of the cost of that investment at the end of the first year and, therefore, the allowances are an investment disincentive. Will the Chancellor replace them with a proper investment incentive, as existed pre-1979?

    Mr. Major The right hon. Gentleman will be aware of the reforms in corporate taxation introduced by my right hon. Friend the Member for Blaby (Mr. Lawson) in 1984. They made significant changes, not least a dramatic reduction in the prime rate of corporation tax. The vast majority of capital investment in manufacturing in recent years has come out of retained profits, at present taxed at a much lower rate. There will be a slowdown in capital investment in manufacturing, but there will be continued growth. There has been a considerable record growth in recent years.

    Mr. Ian Taylor Does my right hon. Friend agree that one factor in the continued good news about business investment is that Britain has managed to increase labour productivity and keep down unit costs of labour? If the position were to change – given the irresponsibility of certain unions backed by the Labour party – the climate for business investment might decline. In the internal market of the European Community businesses could switch their investment criteria elsewhere which would largely be the result of the unions’ failure to appreciate the position.

    Mr. Major My hon. Friend is entirely right. Productivity is vital, not only to maintain competitiveness and present profitability, but to open up the opportunity of future investment to create future jobs and prosperity.

    Mr. John Garrett What are the figures for manufacturing disinvestment? Bankruptcies rose – by 40 per cent, last year. In the city that I represent, 400 jobs were lost in a liquidation which the management attributed directly to the Government’s level of interest rates. How many more victims will there be of the Government’s use of interest rates as the sole means of controlling the economy?

    Mr. Major The hon. Gentleman picks a strange day to make that charge. He does so on the very day unemployment and employment figures show that more people in this country are in work than ever before.

    Mr. Sumberg Is my right hon. Friend aware that the north-west of England is present enjoying an economic boom, with increased investment and reduced unemployment? Does he agree that the Government have laid to rest for ever the idea of a north-south divide?

    Mr. Major I agree with my hon. Friend. Between 1980 and 1988, investment growth in the whole economy grew at the rate of 4½ per cent, per year. Between 1970 and 1980, the rate of growth was not 4½ per cent, annually but 0.4 per cent.

  • Mr Major’s Parliamentary Answer on Taxation – 18 January 1990

    Below is the text of Mr Major’s response on Taxation held on 18th January 1990 in the House of Commons.

    Mr. Barry Porter To ask the Chancellor of the Exchequer if it remains his policy to achieve lower rates of direct taxation.

    The Chancellor of the Exchequer (Mr. John Major) We have set an objective of 20 per cent, basic rate of income tax, without a time limit.

    Mr. Porter I am sure that all my hon. Friends are delighted with that response. In drawing up his Budget statement will my right hon. Friend also consider that it would be helpful to give some fiscal encouragement to savings and investment rather than to consumer spending?

    Mr. Major My hon. Friend makes an important point about savings. I shall make a careful note of it. The real difficulty with the savings ratio is not so much a fall in the stock of savings, but an increase in the amount of borrowing. Our interest rate policy is intended to deal with that.

    Mr. Beith Will the Chancellor take a more positive and enthusiastic attitude to incentives for saving, particularly in a year when the necessary and welcome move towards independent taxation and the national insurance changes will make for a looser fiscal stance?

    Mr. Major The hon. Gentleman is an old parliamentary hand. When was any Chancellor enthusiastic before a Budget?

    Mr. Yeo Bearing in mind the obvious advantages for everyone of lower taxation, can my right hon. Friend advise my constituents in Suffolk whether he knows of any politician who is currently recommending higher taxation?

    Mr. Major Whether the person concerned is a politician is a matter for judgment, but I believe that it is the official policy of Her Majesty’s Opposition to raise taxation substantially both in terms of direct taxes and national insurance contributions.

    Mr. Nicholas Brown Just among ourselves, would not the Chancellor like to take this opportunity to admit that 2 per cent, off” the mortgage rate is worth substantially more to most home owners than 2p off the basic rate of income tax? Would not the Chancellor also like to take this opportunity to repudiate the top rate tax-cutting, interest rate-rising policies of the previous Chancellor, or would he prefer to wait until the Budget? In the meantime, will he confirm that, as the former Minister for Housing and Planning told us not so long ago, the Conservative party’s official response to those who are struggling to pay their mortgages is that they should take in lodgers?

    Mr. Major Even among ourselves, in the privacy of this exchange, I am reluctant to concede too much to the hon. Gentleman. I note his implicit acknowledgement that the Labour party would reverse the Government’s policy of cutting top taxes and would increase taxation quite substantially. Mortgage interest rates will fall when interest rates fall, which will be when we begin to see some progress in reducing the rate of inflation, and not before.

  • Mr Major’s Written Parliamentary Answer on Separate Taxation – 17 January 1990

    Below is the text of Mr Major’s written Parliamentary Answer on Separate Taxation on 17th January 1990.

    Sir John Stanley To ask the Chancellor of the Exchequer what steps he will take to ensure that charities do not suffer a loss of income from covenants from married couples where one of the spouses is not paying income tax as a result of the introduction of separate taxation as from 1 April 1990.

    Mr. Major [holding answer 21 December 1989]: A charity’s claim to refunds of tax on payments received under covenants does not depend on whether the covenantor is, or is not, liable to pay tax on his or her own income.

    A covenantor making a covenant payment to a charity deducts basic rate tax and pays over to the charity only the net amount. The charity is entitled to claim back that tax from the Inland Revenue.

    If the covenantor is liable to tax on an equivalent amount of his income, he gets basic rate relief for the covenant payment by retaining the tax he has deducted from it. If he is not liable to tax on an equivalent amount of his income, he has to pay over to the Inland Revenue the tax he has deducted.

    The introduction of independent taxation for married couples with effect from 6 April 1990 will mean that a husband and wife will become separate taxpayers. If one of them will not be liable to tax, the effect on his or her covenants will be no different from what happens now when a covenantor is a non-taxpayer- the payments will continue to be made net of tax to the charity, but the tax withheld will have to be paid over to the Revenue.

    For the past year, Inland Revenue publicity material has drawn attention to the fact that couples who find themselves in this situation may want to review their covenant arrangements. That is a matter between covenantors and the charities that they support.

  • Mr Major’s Written Parliamentary Answer on Construction Company Earnings – 15 January 1990

    Below is the text of Mr Major’s written Parliamentary Answer on Construction Company Earnings on 15th January 1990.

    Sir John Stanley To ask the Chancellor of the Exchequer what was the average annual increase in the net earnings of construction companies between 1974 and 1979; and what has been the average annual increase since 1979.

    Mr. Major Based on figures extracted from published accounts, the average annual increase in net income of large construction companies was 12.5 per cent. between accounting years 1974 and 1979 and 11.6 per cent. between accounting years 1979 and 1988. Net income is defined as gross trading profit plus other revenue income less depreciation. The underlying figures are published in the MA3 series of business monitors “Company Finance”.