Commons Sitting of 15 June 1966

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  LEEDS CORPORATION BILL
  As amended, considered; to be read the Third time.
LIVERPOOL CORPORATION BILL (By Order)
Consideration, as amended, deferred till Wednesday next.
MINISTRY OF HOUSING AND LOCAL GOVERNMENT PROVISIONAL ORDERS (CAMBRIDGE, READING AND WALSALL) BILL
  MINISTRY OF HOUSING AND LOCAL GOVERNMENT PROVISIONAL ORDER (WEST KENT MAIN SEWERAGE DISTRICT) BILL
  Read a Second time and committed.
ORAL ANSWERS TO QUESTIONS
  SCOTLAND

    Police Forces
    Mr. Edward M. Taylorasked the Secretary of State for Scotland what proposals he has for the reorganisation of police forces in Scotland.
    Mr. Hannanasked the Secretary of State for Scotland what proposals he has for the amalgamation of the police forces in Scotland; and if he will make a statement.
    The Secretary of State for Scotland (Mr. William Ross): I hope to make a statement shortly.
    Mr. Taylor: Would the Secretary of State agree that the loss of Scottish policemen to the Metropolitan Force, where there appear to be better promotion
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    opportunities, is reaching alarming proportions? Will he press for a reorganisation which can offer better promotion prospects to Scottish policemen?
    Mr. Ross: I think that the hon. Gentleman heard my Answer. I hope to make a statement shortly.
    Mr. Hannan: For the information of the House and the discomfiture of the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor), can my right hon. Friend confirm that any such amalgamations could have been carried out in the 15 years since the passing of the 1950 legislation? Can he say how soon is "soon"?
    Mr. Ross: I hope to make the statement before the end of this month. My hon. Friend is quite right. We thought that we had powers from 1950. If we had powers, we did not use them and, if the powers were not adequate, the then Government took no opportunity to put right the deficiencies.
    Mr. Monro: When he is considering this matter, will the right hon. Gentleman bear in mind that the criterion of establishment should not be the only one under consideration but that geographical area should be considered?
    Mr. Ross: Yes, indeed.
    Mr. Clark Hutchisonasked the Secretary of State for Scotland to what extent police forces in Scotland are under strength; and what proposals he has to remedy this.
    Mr. Ross: On 30th April the actual strength of the police in Scotland was 751 below authorised establishment. The problem is one of wastage rather than recruitment, and a working party of the Police Advisory Board for Scotland is considering measures to check it.
    Mr. Hutchison: As these figures are rather serious, is the right hon. Gentleman satisfied that the pay and promotion prospects are sufficient?
    Mr. Ross: The question of pay and promotion prospects is considered by another Department, as the hon. Gentleman knows. We are more concerned with wastage than with recruitment, because the wastage rate is quite high in the first years of entry into the force, and this is being examined now.
    Mr. Steele: Does my right hon. Friend recall that in an Answer to a Question from me some time ago he indicated that a number of policemen were transferring from Scottish forces to forces south of the Border? In this inquiry will he try to ascertain the cause of this so that some solution to the problem may be found?
    Mr. Ross: Yes, Sir.

    North-East Consultative Group
    Mr. Buchanan-Smithasked the Secretary of State for Scotland when he expects the North-East Consultative Group to complete preparation of specific proposals for industrial development; and if he will make a statement.
    Mr. Ross: The North-East Consultative Group held its first meeting on 1st June, and I am sure its assistance will be invaluable in the further economic planning of its area, but this is a continuous process in which specific proposals will emerge as we proceed.
    Mr. Buchanan-Smith: Is not the right hon. Gentleman ashamed that the Scottish Economic Plan White Paper did not contain any specific proposals for the North-East? Is he not aware that in the North-East unemployment is higher than in any other area of Scotland and that there is a very great need for urgent action in this part of Scotland?
    Mr. Ross: The urgency of the need for action relates to the fact that so little was done by the hon. Gentleman's right hon. Friends. The Scottish Economic Plan was never meant to be a detailed blueprint, and if the hon. Gentleman had read it he would know that.
    Mr. Hector Hughes: I thank my right hon. Friend for the last sentence of his last reply. Will he say what steps are being taken to counter the drift from the South-East of England to the Continent of Europe in favour of the North-East of Scotland to the Continent of Europe?
    Mr. Ross: It is because we have become aware of the need to take action in this part of the world and because of the facts which were elicited in the preparatory work of drawing up the Economic Plan that we have taken this step, which is only the first step.
    Mr. Noble: Has the Secretary of State no information yet from the Group on the effects of the Industrial Development Bill and the Selective Employment Tax on its efforts?
    Mr. Ross: I have not.

    A94 (Stonehaven-Perth)
    Mr. Buchanan-Smithasked the Secretary of State for Scotland what plans he has to assist major improvements on the A94, Stonehaven to Perth road.
    Mr. Ross: I have provisionally approved proposals by the county councils of Kincardine, Angus and Perth and Kinross, estimated to cost £370,000 and requiring £278,000 in grant, for improvements on the A94 between Stonehaven and Perth during the next three years.
    Mr. Buchanan-Smith: Would not the right hon. Gentleman agree that this road is the major link between the North-East and other parts of Scotland? Will he please promise to do all he can to assist the improvements to be made as early as possible?
    Mr. Ross: We are doing that.
    Mr. Bruce-Gardyne: Can the right hon. Gentleman give any indication of when it can be hoped that this road will be trunked?
    Mr. Ross: If the hon. Gentleman will put down that question, I shall be glad to answer it.

    Agriculture (Selective Employment Tax)
    Mr. MacArthurasked the Secretary of State for Scotland what representations he has received about the effect of the proposed Selective Employment Tax on agriculture in Scotland; and what replies he has sent.
    Mr. Ross: I have received various representations that the tax would impose an undue burden on agriculture. In reply it has been explained that the tax will be repaid direct to farmers and growers.
    Mr. MacArthur: Does not the right hon. Gentleman recognise that farmers in Scotland are trying to cope with rising costs and falling returns? Does he not realise that many of them are

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    heavily in debt? Does he seriously intend to add to their burdens this load of ever-increasing interest-free loan?
    Mr. Ross: No. The hon. Gentleman is quite wrong in all his assumptions. He knows quite well that most of these factors are taken into account at the Price Review.
    Mr. Stodart: Is not the right hon. Gentleman aware that it is not only the direct effect of farm workers paying tax which will be felt? Does he not realise that the vet's bill, the transport bill and the price of repairs to lorries will add an enormous amount to the costs of agriculture?
    Mr. Ross: No one knows better than the hon. Gentleman that all those factors are assessed and taken into account when we decide at the Price Review what support will be given to agriculture.
    Mr. Rankin: Is not my right hon. Friend aware that the hon. Gentleman referred to the tax on agriculture? Is it not the case that the tax is on the employers and not on the industry?
    Mr. Ross: I think that we are all aware of the incidence of the tax. It applies to the individual who does the employing of people employed in agriculture.
    Mr. Noble: Can the right hon. Gentleman explain to the House how if it was impossible to return the value of the tax to agriculture through the Price Review he is to return the value of the interest to the industry through the Review? These two things are not possible?
    Mr. Ross: The right hon. Gentleman knows quite well that they are two different matters. When I met representatives of the industry I found that they were satisfied with the fact that we were making the repayment direct to the individuals who made the payment.

    Arts and Music (Government Expenditure)
    Mr. Monroasked the Secretary of State for Scotland what sum of money is available this year from Government sources to further the arts and music in Scotland.
    Mr. Ross: Government expenditure on the arts in Scotland in 1966–67 is esti-
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    mated at about £1,030,000, including £554,000 for the national museums, library and galleries and £450,000 for the Scottish Committee of the Arts Council. In addition, the Arts Council will be making capital grants to certain projects for housing the arts.
    Mr. Monro: Surely the right hon. Gentleman is aware that the bagpipes are the national music of Scotland? Out of this vast sum, can he not give any grant to pipe bands?
    Mr. Ross: The hon. Gentleman knows, and I hope that he will appreciate, that I share his love of that form of music, but it is much more satisfactory to deal with pipe bands in this way so that the local pipe bands are supported locally. Indeed, in a Bill now before the House we are making provision for local authorities to have freer access to local finance for that purpose.
    Mr. Buchan: Will my right hon. Friend keep in mind that the amount allocated to the entire Arts Council for Scotland is no more than is given to one opera house in London? Will he make representations to the Treasury to ensure a fairer allocation to areas outside London, including Scotland?
    Mr. Ross: I assure my hon. Friend that we are watching this, but there has been a greater increase in the Scottish than in the United Kingdom allocation. The actual increase to Scotland this year over last is 30 per cent.
    Mr. G. Campbell: Does not the right hon. Gentleman agree with my hon. Friend that pipe music, in particular, is deserving of his full support and that it makes a distinctive contribution to our nation's music as well as its culture?
    Mr. Ross: I assure the hon. Gentleman that it gets my personal support.

    Equalisation Grant
    Mr. Munroasked the Secretary of of State for Scotland whether he will make an Order under Section 3(5) of the Local Government (Financial Provisions) (Scotland) Act, 1963, to reduce the percentages in Section 3(3), for the revaluation year 1966–67, thus preventing loss of equalisation grant to local authorities.
    Mr. Ross: On present in formation I do not think that an Order is justifiable, but a deputation from the local authority associations will be discussing the matter on 24th June with my hon. Friend the Joint Parliamentary Under-Secretary of State.
    Mr. Munro: If the right hon. Gentleman refuses to give this dispensation, local authorities will have to put up council tents at short notice or lose part of their equalisation grant.
    Mr. Ross: The hon. Gentleman is under a false impression of how this works. If they put up rents, they lose their equalisation grant anyway. What the hon. Gentleman is asking me to do is to manipulate the formula which would assist only particular authorities who are at present getting help in this way.

    Technical Training College (East Aberdeenshire)
    Mr. Wolridge-Gordonasked the Secretary of State for Scotland what assistance he will give towards the establishment of a technical training college in East Aberdeenshire.
    Mr. Ross: The normal grant arrangements for day-time further education would apply to any such college.
    Mr. Wolridge-Gordon: Is the right hon. Gentleman aware that this project is under active consideration and that it is the kind of practical help for the development of a local economy which is of the greatest importance? Will he assure us that he will give his full support when the Project comes to fruition?
    Mr. Ross: I can give the hon. Gentleman the assurance that in our considerations and discussions we are only too glad to give help.
    Mr. MacArthur: Will the right hon. Gentleman say when he will restore the sharp cuts made in the technical training college programme last year?
    Mr. Ross: Not in answer to the supplementary question.

    Farm Business Recording Scheme
    Mr. Wolrige-Gordonasked the Secretary of State for Scotland why he is not yet in a position to announce the
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    extension of the farm business recording scheme to the whole country.
    Mr. Ross: As announced earlier this week, this scheme is being extended to the whole of Scotland from 1st October this year. Applications will be accepted in respect of accounting years starting on or after that date.

    Murder Cases
    Mr. Stodartasked the Secretary of State for Scotland how many persons stood trial for murder in Scotland in the last full year before, and in the first full year after, the introduction of the Homicide Act, 1957; and what the figures were for 1964 and 1965.
    Mr. Ross: The number of persons proceeded against for murder in 1956, 1958, 1964 and 1965 were 13, 14, 24 and 21, respectively.
    Mr. Stodart: Although there is no evidence from these figures to show the effect of the abolition of the capital sentence, can the right hon. Gentleman say that he is watching any trend with great care and with an open mind?
    Mr. Ross: Yes, indeed. As the hon. Gentleman knows, the Act came into operation only on 9th November and has a five-year period. He is quite right to say that there is no evidence from these figures, because if he had selected some other years he would have found that in 1962, for example, the figure was 24. There is a fluctuation which does not give us any evidence of a trend.

    Local Authority Houses (Allocation)
    Mr. Youngerasked the Secretary of State for Scotland what progress is being made by the Scottish Housing Advisory Committee in their consideration of the methods whereby local authorities allocate their houses.
    Mr. Ross: I hope to have the Committee's report by the end of the year.
    Mr. Younger: Will the right hon. Gentleman pursue the results of this report with the greatest speed? Does he not agree that many people are put in a position of great hardship by having to move, sometimes only a short distance of two or three miles, crossing the boundary of a local authority and then losing

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    their priority on the housing list? Will he look at this very sympathetically?
    Mr. Ross: I entirely agree with the hon. Gentleman.
    Mr. Edward M. Taylor: Is the Secretary of State aware of the special problem in Glasgow, where more than 90 per cent. of flats for single persons and aged couples are allocated to existing council tenants, as a result of which people in privately rented property, single people or aged couples, do not have very much hope of getting such accommodation? Will that be covered by the report?
    Mr. Ross: The report will be covering all forms of allocation. The Committee has asked for information from local authorities throughout Scotland and most of them have already provided it. The Committee will be able to assess it and so be helped in reaching its findings.

    Home Loan Schemes
    Mr. Youngerasked the Secretary of State for Scotland what steps he has taken in the last six months to encourage local authorities to introduce home loan schemes.
    Mr. Ross: Almost all major local authorities already have such schemes. In March I issued a circular on their operation.
    Mr. Younger: Would the right hon. Gentleman explain why it took him more than three months to reply to a request from Ayr Town Council for a home loan scheme and why, when he did finally reply, he allowed only half the money asked for?
    Mr. Ross: The answer is simply because this was the first time that Ayr had applied for a home loan scheme. At the time we were dealing with many other such allocations. Half the amount was given because we had no previous data to go on to see what would be suitable for a full year. When we have seen how this works out—what demand there is in Ayr after six months—we will issue another figure.

    Edinburgh (Traffic Problems)
    Mr. Clark Hutchisonasked the Secretary of State for Scotland what advice his department have given to
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    Edinburgh Corporation about traffic problems.
    Mr. Ross: I have nothing to add to the Answer which my hon. Friend, the Joint Parliamentary Under-Secretary of State gave to the hon. Gentleman on 17th November last.
    Mr. Hutchison: Why is the right hon. Gentleman being rather slow about this? What is happening to the ring road around Edinburgh, and what discussions is he having with his right hon. Friend the Minister of Transport about railway closures?
    Mr. Ross: The hon. Gentleman should appreciate that Edinburgh itself regards this problem as an urgent one. There is a working party, to which we have given considerable help, and a comprehensive assessment of the problem and solutions to it can be made in changes to the Edinburgh Development Plan, which I hope to receive fairly soon.
    Mr. Stodart: Is the right hon. Gentleman aware that a new factor was introduced into this recently with the proposal to close the Edinburgh to Corstorphine line and that this will add to congestion in the city's streets?
    Mr. Ross: Yes, indeed.

    Rating System
    Mr. Edward M. Taylorasked the Secretary of State for Scotland whether he will introduce legislation to remove anomalies in the rating system.
    Mr. Ross: I have done so.
    Mr. Taylor: What is the point of complaining about lack of progress following smoke control orders and at the same time allowing the ridiculous anomaly of the rating of night storage heaters and central heating installations to continue? As an order was introduced recently, why was the opportunity not taken to do something about this ridiculous anomaly?
    Mr. Ross: I introduced the Measure, and if the hon. Gentleman has any constructive amendments to make to it he may place them on the Notice Paper. I assure him that I will then give them due consideration.
    Mr. William Hamilton: Would my right hon. Friend say for how long this

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    and allied anomalies have existed and what has been done to remedy them in the last 50 years?
    Mr. Ross: My hon. Friend will appreciate that they have been in existence for a long time, certainly since the introduction of smokeless zones, which is the point the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) has in mind. I am sure that my hon. Friend knows the answer to his question, because the information is to be found not only in legislation but as a result of the findings of the Scottish courts in relation to valuation proceedings.

    Fire Losses and Prevention
    Mr. Hannanasked the Secretary of State for Scotland if he is aware of the annual increasing loss to the nation's potential exports by fire; and if he will take the opportunity in forthcoming legislation to ensure that fire prevention personnel and methods are used more extensively to avoid economic loss.
    Mr. Ross: I share my hon. Friend's concern at the high cost of fire losses, although no separate figures for export industries are available. Firms in industry and commerce are encouraged and advised by Government Departments, fire brigades and insurance companies on how to improve their fire prevention arrangements. I do not think that there is need for new legislation on fire prevention in industrial premises.
    Mr. Hannan: Is my right hon. Friend aware of the lack of uniformity of responsibility applying to officers of local authorities in this matter? Will he examine the position to see what proportion of these officers is engaged in preventive services of this sort, remembering that such work is more valuable than waiting until disasters happen?
    Mr. Ross: I assure my hon. Friend that considerable attention has been paid to this matter over a number of years. There are fire prevention officers in every area brigade in Scotland. Whether or rot more powers are required is something which we will look into.
    Mr. Woodburn: Is my right hon. Friend aware that a great deal of education needs to be done about carelessness and the causes of fires? Is he aware that
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    I have seen quite responsible people throwing lighted cigarette ends into waste paper baskets and doing other stupid things which might cause fires leading to millions of £'s worth of damage? Should not responsible people give an example by not doing such foolish things, and might it not be a good idea to begin by educating children in schools in this matter?
    Mr. Ross: If we did what my right hon. Friend suggests in schools, might we not be in danger of causing the smoking habit to spread? Seriously, I agree that there is a considerable amount of carelessness involved in this matter and that people should act more responsibly. I hope that the discussion on this Question will get sufficient publicity to help solve the problem.
    Mr. Russell Johnston: Why if one installs central heating to improve the safety of one's house are one's rates increased as a consequence?
    Mr. Ross: I can only congratulate the hon. Gentleman on having got that supplementary question in two Questions after a similar question was raised.

    Teachers' Salaries
    Mr. Bruce-Gardyneasked the Secretary of State for Scotland when he now expects to receive the Report of the National Board for Prices and Incomes on teachers' salaries in Scotland.
    Sir J. Gilmourasked the Secretary of State for Scotland what action he proposes to take as a result of the National Board for Prices and Incomes Report on Scottish teachers' salaries; and if he will make a statement.
    Mr. Ross: I would refer the hon. Gentlemen to the Answer which I gave on 26th May to my hon. Friend the Member for Paisley (Mr. John Robertson). I met representatives of the Scottish Joint Council for Teachers' Salaries on 7th June and I shall make salaries regulations in final form as soon as possible.
    Mr. Bruce-Gardyne: Can the right hon. Gentleman explain why he chose to shelter behind a Written Answer to a Question before the Recess instead of making a statement to the House? Could it be because the Prices and Incomes

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    Board delivered a stinging rebuke to him for the terms of reference of this exercise?
    Mr. Ross: If the hon. Gentleman knew me and my reputation in the House a little better he would know that I do not require to shelter behind any form of procedure or anything else. On that occasion we were within a day or so of rising for the Recess. Parliamentary time was already fully occupied. Indeed, on the day in question, when I might have made a statement, it was nearly four o'clock before we got to the Orders of the Day. There was considerable urgency upon me to make known the Government's point of view, and I thought it essential that this should be done. I gave my Answer in the way described for that reason.
    Sir J. Gilmour: Since the Prices and Incomes Board said that it was not necessary or right to fix salaries on a comparable basis between England and Scotland, would the right hon. Gentleman agree that, knowing the circumstances and the Scottish teachers, he has done a great disservice to education by referring this matter to the Prices and Incomes Board?
    Mr. Ross: I do not think so. There was an element of doubt, and we must remember the injustice of the historic business concerning the Scottish teachers three years ago and the English teachers two years ago, in addition to the assessment of 13 per cent. for English teachers some time ago as against 13 per cent. this year for Scottish teachers. I think that it was right to get an independent assessment on this whole matter. I do not agree that it was a waste and the Report helps us to clarify some of the issues which are involved.
    Mr. MacArthur: Is the right hon. Gentleman aware that he could have given all the information much more frankly on the day in question had he made an oral statement to the House, as we asked him to do? Is he further aware that people in Scotland, particularly the teachers, and many hon. Members are sick to death at the way in which the right hon. Gentleman hides behind the Prices and Incomes Board? Will he not now at least arrange for a debate to take place in Government time so that we may question him and discuss the
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    many problems which arise out of his mishandling of the whole situation?
    Mr. Ross: The hon. Gentleman's memory is sadly amiss. We have already had a debate since the matter went to the Prices and Incomes Board. He may not yet be fully acquainted with the procedures of the House in his new duties on the benches opposite, but he may like to know that he will have an opportunity of debating this issue when the regulations come before the House.
    Mr. Noble: Does the right hon. Gentleman perhaps not realise that when he was in opposition his degree of irresponsibility was totally unsheltered and that since he has become Secretary of State he has become very much more coy about making statements to the House? Is he aware that this is not the first ocassion on which he has tried to dodge the issue?
    Mr. Ross: That is not true, and the right hon. Gentleman should know that because the last time he asked me to make a statement I appeared and made one. That was in connection with the Highlands and Islands and the seamen's strike.
    Mr. Buchan: Would my right hon. Friend keep in mind the fact that the teachers of Scotland are concerned not so much with how and when the Report was issued but with what is says? Will he keep in mind the possibility, which seems to be emerging from the Report, that negotiations should take place from the point of view of a revision in 1967?
    Mr. Ross: I am conscious of exactly how the teachers feel about this because I met some of their representatives on the Scottish Joint Council for Teachers' Salaries. I am well aware of their feelings about how we should proceed in future in relation to negotiating teachers' salaries.
    Mr. Bruce-Gardyne: In view of the unsatisfactory nature of the Minister's reply, I beg to give notice that I will raise this matter on the Adjournment at the earliest possible opportunity.

    Tay Road Bridge (Toll Charges)
    Mr. Bruce-Gardyneasked the Secretary of State for Scotland when he expects to approve the scale of charges

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    for freight and passenger vehicles on the Tay Road Bridge.
    Mr. Ross: When I have received and considered the report of the recent inquiry into the Joint Board's proposals.
    Mr. Bruce-Gardyne: Is the right hon. Gentleman aware that the suggestion by the Lord Provost of Dundee of a 10s. toll on commercial vehicles, to be reconsidered after a year, is quite inadequate to satisfy the anxieties that exist in the area about this toll? Does not he agree that a 10s. toll will mean that heavy vehicles will not use the bridge at all?
    Mr. Ross: Since I have to adjudicate following the receipt of this report it would he quite inappropriate for me to comment on this matter.
    Mr. Doig: Will my right hon. Friend keep in mind the two points about which I wrote to him a considerable time ago, namely, the fact that a 10s. charge will probably produce less rather than more revenue and, secondly, the fact that there is a vast difference between this bridge and the Forth Bridge in terms of corn-router traffic?
    Mr. Ross: I will bear in mind all these matters in the consideration of the report when I receive it.

    House Building Costs (Selective Employment Tax)
    Mr. Galbraithasked the Secretary of State for Scotland how much extra he estimates the Selective Employment Tax will add to the cost of building the average council house and to the cost of an average private house.
    Mr. Ross: The tax is likely to add on average about 2 per cent. in each case, but the lifting of the import surcharge and the new investment grants should enable the builders to absorb part of this.
    Mr. Galbraith: Two per cent. on the cost of a house is quite a substantial sum of money. How does the right hon. Gentleman expect to encourage people to build houses when this increase is imposed upon them? Will not he ask his right hon. Friend the Chancellor of the Exchequer to remove the burden of the Selective Employment Tax from people building houses?
    Mr. Ross: The hon. Member should appreciate that in our economic circumstances an additional burden of taxation was required. If another form had been used it might have had an even more depressing effect upon the economy, and particularly upon Scottsh house building.
    Mr. G. Campbell: Can the right hon. Gentleman yet tell us whether direct labour forces belonging to local authorities will have the tax refunded to them?
    Mr. Ross: That is an entirely different question. If he will put it down I shall be glad to give him an answer.
    Mr. Rankin: Did my right hon Friend observe that, just the other day, Glasgow Corporation refused to grant a contract to a prospective builder because he tried the dodge referred to by the hon. Member and instead gave the contract to direct labour?
    Mr. Noble: Does not the right hon. Gentleman agree that although 2 per cent. by itself may not sound a great deal, it is 2 per cent. on top of an already steeply rising house-building cost?
    Mr. Ross: The right hon. Gentleman should know all about steeply rising house-building costs, because they occurred while he was Secretary of State. [Interruption.] Oh, yes—in 1964 the increase was 10 per cent., and he did nothing about it. I hope that it will stimulate increased efficiency in the use of labour in the building industry.

    Ayr Road (Dual Carriageway)
    Mr. Galbraithasked the Secretary of State for Scotland what was the cost of dualling the Ayr Road from Eastwood Toll to the end of the 30 m.p.h. limit.
    Mr. Ross: The total estimated cost of this work to the end of the dual carriageway is about £1,273,000.
    Mr. Galbraith: That is a very substantial sum of money. In view of the amount of money spent in dualling that road, does not he think that it is time that the speed limit was increased from 30 m.p.h. to 40 m.p.h.?
    Mr. Ross: On the question of the cost of the road, the hon. Member had better re-examine the files in the Scottish Office. It may be that he was not unconnected with the Department at the time. In

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    answer to the second part of his supplementary question, I have already given notice of my intention to raise the limit to 40 m.p.h.

    Scottish Economy
    Mr. MacArthurasked the Secretary of State for Scotland whether he will publish a revised version of Command Paper No. 2864, the Scottish Economy, 1965–70, in view of the failure to fulfil the housing and schoolbuilding programmes, and the effect of the Selective Employment Tax on the service industries.
    Mr. Ross: No, Sir. I do not accept the implications in the Question.
    Mr. MacArthur: Will not the right hon. Gentleman even now speak up for Scotland and help the service industries, which figure so largely in the White Paper? Will not he help the vital tourist industry, which he now proposes to tax? Does not he recall that the tourist industry depends largely on part-time workers, who will be taxed at full-time rates?
    Mr. Ross: I can appreciate the hon. Member's prepared and ready gloom about prospects in Scotland, but I do not share it.

    Tourist Industry
    Mr. Russell Johnstonasked the Secretary of State for Scotland what proposals he has to assist the tourist industry in Scotland to make a larger contribution towards a favourable balance of payments.
    Mr. Ross: I have nothing to add at present to the Answers which I gave on 9th March to the hon. Member for Fife, West (Mr. William Hamilton) and the then right hon. Member for Berwick and East Lothian, Sir William Anstruther-Gray.
    Mr. Johnston: Will not the Secretary of State admit that both his Government and the last have treated the tourist industry most unfavourably compared with the treatment that this industry receives in other countries? If he will not consider the question of investment allowances, will he at least consider relieving the industry of some of the penalty of the Selective Employment Tax?
    Mr. Ross: I shall be considering, in connection with the Tourist Board Report and probably with the Tourist Board itself, what need there is to help the Scottish tourist industry. But hon. Members fail to appreciate the resilience of the Scottish tourist industry and what it has been able to do. I do not agree with the depressing pronouncements that we have had from hon. Members opposite about the future of tourism in Scotland.
    Mr. Noble: Has the right hon. Gentleman had any representations from any side of the tourist industry of any sort whatever that have not totally condemned this double imposition upon it?
    Mr. Ross: The right hon. Gentleman knows quite well that when we introduce taxation measures we expect condemnations, but those condemnations are not always justified in terms of their extreme gloom.
    Mr. Woodburn: Has my right hon. Friend received any representations from the tourist industry to the effect that it would sooner pay this extra tax in the form of Income Tax and Surtax?
    Mr. Ross: The point is that the tourist industry in Scotland, as elsewhere in Britain, depends for its prosperity upon the prosperity of Britain. The achievement and maintenance of economic strength is part of the benefit that it will derive from the measures taken by my right hon. Friend the Chancellor.

    Highlands and Islands (Selective Employment Tax)
    Mr. Russell Johnstonasked the Secretary of State for Scotland whether, in view of the dependence of the Highlands area on service industries, he is yet in a position to announce proposals to offset the effects of the Selective Employment Tax on the work of the Highlands and Islands Development Board.
    Mr. Grimondasked the Secretary of State for Scotland what steps are being taken to offset the damaging effect of the Selective Employment Tax in the Highlands and Islands.
    Mr. Ross: I do not accept that the Selective Employment Tax will have a damaging effect on development in the Highlands and Islands or that it will

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    pejudice the work of the Highlands and Islands Development Board.
    Mr. Johnston: Surely the Secretary of State will admit that it is quite contradictory on the one hand to offer a £500,000 grant in aid for 1966–67 and, on the other, to take out £2 million from the area. This will obviously militate against development, as a member of the Board has clearly and forcibly said.
    Mr. Ross: The increase in taxation may take money out of the area, but that does not mean to say that we are wrong in emphasising the need to maintain expansion within the manufacturing industry. If there is any part of the country that needs such an expansion and will benefit from it, it is the Highlands. We must not always consider these matters in isolation.
    Mr. Grimond: Is the right hon. Gentleman aware that he must be living in cloud-cuckoo-land? There is no question of people being squeezed out of the service industries in the Highlands and going into manufacturing industry, unless they go to Birmingham. We have the extraordinary situation in which we are encouraging manufacturing industry to absorb more people in the South. Will he look at this matter again and make representations to the Chancellor? This tax will do a great deal of damage to many parts of the Highlands, and in the Islands, coming on top of the seamen's strike, it will be disastrous.
    Mr. Ross: I do not think that there will be this squeezing, as the right hon. Gentleman suggests. He knows that the tourist industry in Scotland will prosper according to the demand made upon it, and I am satisfied that the demand will continue to rise and thus lead to further employment.
    Mr. Noble: If the right hon. Gentleman simply refuses to believe what he is told by every source in the Highlands, not only by those in tourism but by those in transport and all the service industries, will be undertake a tour of the area to try to find out what the position is?
    Mr. Ross: I do not need to make a tour of the area to find out what the people there feel. I shall be having discussions with the Highlands and Islands Development Board very soon on
    1446
    this matter. I hope that the right hon. Gentleman will not misrepresent any statements that it may make, as he has done in the past.
    Mr. Maclennan: Will my right hon. Friend consider what additional steps he can take to reduce the dependence of the Highland area on the service industries?
    Mr. Ross: Yes. That is why I established the Highlands and Islands Development Board.

    House Building
    Mr. William Hamiltonasked the Secretary of State for Scotland if he will make a statement on the progress being made with the house building programme.
    Mr. G. Campbellasked the Secretary of State for Scotland whether he has yet received the result of his special inquiry into the reasons for recent setbacks in the Scottish housing programme.
    Mr. Rankinasked the Secretary of State for Scotland if his recent meeting with the conveners of local authority housing committees has enabled him to identify the difficulties which are impeding progress in house building and what steps he is taking to speed up the output of houses.
    Mr. Ross: The meetings my hon. Friend the Under-Secretary of State has had with housing authority conveners have revealed that the recent low level of approvals and starts was no more than a temporary phase. The progress they expect to achieve in the coming months should ensure that the numbers of houses approved and started in the full year will be satisfactory.
    Mr. Hamilton: Can my right hon. Friend give to the House now the May figures and say whether those figures justify the girlish hysteria that came from the other side of the House in the recent debate on housing, based on one quarter's figures?
    Mr. Ross: Yes. Tenders approved in the most recent month show 2,671 houses approved compared with 1,544 in April. The number started was 3,014. So already we see that the trend has been reversed.
    Mr. G. Campbell: Is the right hon. Gentleman taking any urgent action in view of the extremely bad figures for April?
    Mr. Ross: If the hon. Gentleman had been listening he would be aware that we have already taken urgent action.
    Mr. Rankin: Referring to Question No. 56, could my right hon. Friend say whether any attempt was made to identify the causes which were impeding progress, and can he assure us that these have been completely removed?
    Mr. Ross: As to the causes, one was the weather, and, although I cannot make any promise about it, I hope that cause has been removed. There certainly has been some improvement. There arises the question of availability of land which in some areas is scarce. We have taken steps to ensure that we shall know well in advance what the demands in Scotland will be, and that is why we have undertaken these five year programmes. There are some indications of pressure on the planning staffs of local authorities. It may be that they have been held up because we are concentrating on five year plans. There is some indication that in some of the finishing trades there may be difficulty, and we are taking this matter up with the building industry and with the National Building Agency.
    Mr. Noble: Can the right hon. Gentleman say what he would regard as a satisfactory figure of houses completed this year?
    Mr. Ross: We hope to get somewhere between 35,000 and 40,000 completed this year.

    Forth and Tay Bridges (Fife Link Road)
    Mr. William Hamiltonasked the Secretary of State for Scotland if he will now give the date for the start of the Fife regional road linking the Forth and Tay road bridges.
    Mr. Ross: I cannot at this juncture fix a starting date. We are at present trying to settle the line of the road, which it is proposed should run from Pitreavie to Leven, and thereafter I should have to obtain powers to construct it.
    Mr. Hamilton: Can my right hon. Friend give any idea of the time schedule in this matter? Does he not recognise
    1448
    that it is very important that this road should be given a start, in view of the very much increased congestion on all Fife roads as a direct consequence of the opening of the Forth Bridge?
    Mr. Ross: No, it would not he possible at the moment to indicate when it could be started. There are certain complexities in relation to the siting of the road, the objections of the National Coal Board, the working reserves, the question of subsidence and many other complex matters.
    Mr. MacArthur: Does the right hon. Gentleman agree that there is a very important interdependence between this road and the Forth Bridge-to-Perth Road? Is it still his intention or hope to complete the new motorway to Perth by 1970?
    Mr. Ross: If the hon. Gentleman will put down a Question I shall be glad to answer it.

    Scottish Opera and National Orchestra Societies
    Mr. Stodartasked the Secretary of State for Scotland if he will make an estimate of the amount of Selective Employment Tax to be paid in a year by the Scottish Opera Society and the Scottish National Orchestra Society, respectively.
    Mr. Ross: Approximately £1,600 by the Scottish Opera Society and £6,000 by the Scottish National Orchestra.
    Mr. Stodart: Can the right hon. Gentleman give an assurance that he will do his best to see that this money is restored to those two bodies which have been responsible, as I am sure he will agree, for a most wonderful musical renaissance in Scotland?
    Mr. Ross: I know the value to Scotland of these two bodies, and it may be that they will benefit from consideration being given to the possibility of relief from the tax for charities, as announced by my right hon. Friend the Chancellor of the Exchequer.

    Gaming Clubs
    Earl of Dalkeithasked the Secretary of State for Scotland how many licensed gaming clubs there were in Scotland on 1st January, 1964, 1965 and 1966, respectively.
    Mr. Ross: It is thought that there are about 50 clubs in Scotland with the sole or main purpose of gaming; I am not aware of any substantial change in the number in the last year or two.
    Earl of Dalkeith: Is the right hon. Gentleman wholly satisfied that the police and fire services have adequate powers of entry into and supervision of these clubs to ensure the protection of the public?
    Mr. Ross: Yes, indeed. These matters are very much concerning my Department at present. There is a misconception in the Question which refers to licensed gaming clubs. The trouble is that they do not require a licence and have not needed a licence since right hon. and hon. Gentlemen opposite passed the 1960 Act.

    Scottish Office (Civil Servants)
    Earl of Dalkeithasked the Secretary of State for Scotland what increase there has been in the number of non-industrial civil servants for whom the Scottish Office has direct responsibility since 1st January, 1965.
    Mr. Ross: 598, Sir.
    Earl of Dalkeith: Would the right hon. Gentleman consider setting up a special working party to carry out a time and motion study in respect of the Civil Service Departments within his responsibility in order to see if he can set an example of better manpower usage?
    Mr. Ross: This is not necessary because we have ample ways and means of keeping a check. When I hear murmurs from the opposite side of the House, I feel I should point out that the increase in staff in the agricultural services, for instance, arose out of an Act of Parliament which they passed in 1964 and, in the education service, out of an Act of Parliament which they sponsored relating to teachers and dependants. Every time these Measures are passed, whether by hon. Members opposite or by us on these benches, it means possible increases in staff, and we cannot run away from the fact.

    Erskine Housing Development (Joint Meeting)
    Mr. John Robertsonasked the Secretary of State for Scotland, what was the nature of the official meeting
    1450
    held on Thursday, 19th May, 1966 between representatives of local authorities and the Joint Under-Secretary of State for Scotland, the honourable Member for Greenock; who were there; and what subject or subjects were discussed.
    Mr. Buchanasked the Secretary of State for Scotland, what agreements were reached at the meeting on 19th May between the Under-Secretary of State for Scotland and representatives of Renfreshire County Council regarding the future development of the county.
    Mr. Ross: This meeting, attended by representatives of Glasgow Corporation and Renfrew County Council under the chairmanship of my hon. Friend the Under-Secretary of State, discussed the possibility of joint action by these two local authorities and the Scottish Special Housing Association to secure the provision of houses at Erskine, if I decide to approve the amendment of the county council's development plan which is at present before me. No agreements affecting the development of this county were reached at the meeting.
    Mr. Robertson: As my right hon. Friend has to adjudicate in this matter, which is at present the subject of a public inquiry, was it not inappropriate that such a meeting should have been held at this time, and commitments undertaken or given? Is my right hon. Friend aware that at the public inquiry a statement to that effect has been made by one of the representatives attending the meeting?
    Mr. Ross: First of all, I cannot cornavent on any statements which were made at the public inquiry. The matter eventually comes to me. What the public inquiry does is to go into the question of objections and elicit facts, which will come before me. But that does not mean that Government policy is not pursued, and, indeed, this meeting about Glasgow's problem is one of a series of meetings concerning other local authorities. This is not inconsistent with my task of arbitrating on the question of objections to the development plan.
    Mr. Buchan: Will my right hon. Friend bear in mind that there exists in the area the kind of disquiet expressed by my hon. Friend at the very idea that such a meeting should take place, discussing matters

    1451
    covered by the hearing, with agreements apparently reached before the hearing itself? Is my right hon. Friend aware that I am glad of his assurance that no such agreement was reached, but will he bear in mind the possibility of solving Glasgow's problem in a more imaginative way than by satellite towns over-close to Glasgow?
    Mr. Ross: That is an entirely different question. I can assure my hon. Friend that none of the points raised by the objectors was raised at this meeting.

    Cockenzie-Port Seton (Housing Allocation System)
    Mr. Mackintoshasked the Secretary of State for Scotland whether he will refer the housing allocation system of the Burgh of Cockenzie-Port Seton to the Scottish Housing Advisory Committee under Section 143 of the Housing (Scotland) Act, 1950, in view of the obligation of local authorities under that Act to give reasonable preference to persons who are occupying insanitary or overcrowded houses and the fact that these considerations are not included in the burgh's points system for housing allocation.
    Mr. Ross: The Scottish Housing Advisory Committee is already studying the methods by which local authorities allocate the tenancies of their houses and has obtained information about present practice from a large number of authorities, including Cockenzie and Port Seton.
    Mr. Mackintosh: Would the Secretary of State not agree that in particular cases not only should housing allocation schemes be fair but that it should be possible to examine them and explain to the public that they are fair or unfair as the case may be?
    Mr. Ross: Ratepayers in a particular area should know what the allocation scheme is and should see for themselves. Explanations as to the justice of a scheme should come from their local representatives.

    Rent Panel Cases (Legal Representation)
    Mr. Buchananasked the Secretary of State for Scotland if, in view of the fact that tenants appearing before the rent panels on appeal are confronted with
    1452
    Queen's Counsel briefed on behalf of the landlords, he will extend the Legal Aid Scheme to cover the needs of such tenants.
    Mr. Ross: I do not consider that there is justification at present for extending legal aid to proceedings before rent assessment committees. I will, however, keep this matter under review.

    Alcoholism (Treatment)
    Mr. Dempseyasked the Secretary of State for Scotland if he will consult with the appropriate authorities with a view to providing adequate centres for the treatment and rehabilitation of alcoholics; and if he will make a statement.
    Mr. Ross: Regional hospital boards have been asked to designate hospitals in their regions as centres for the treatment of alcoholism as recommended in the Report of the Scottish Health Services Council on the Treatment and Rehabilitation of Alcoholics which was published last December. The Report has also been brought to the notice of local health authorities in view of the recommendations in it about hostels for rehabilitation purposes.
    Mr. Dempsey: Will my right hon. Friend bear in mind the need for complete co-operation between all sections of the National Health Service in this respect, including the executive councils, in order to ensure that something effective and practical is done as a result of this excellent approach?
    Mr. Ross: Yes, Sir. I can tell my hon. Friend that we have already received proposals from the eastern, southeastern and northern regions. We have not so far received them from the western and north-eastern regions, but they will be coming. I accept my hon. Friend's stressing of the need for co-operation.

    Householders (Road Charges)
    Mr. Dempseyasked the Secretary of State for Scotland if he will introduce amending legislation to enable local authorities to provide roads and pavements without direct charge for persons providing their own homes under owner-occupier schemes; and if he will make a statement.
    Mr. Ross: Local authorities already have power to meet the whole or part

    1453
    of the cost where they consider it appropriate.
    Mr. Dempsey: Will this be made perfectly clear to local authorities? Recently, a conference of the Labour movement decided in favour of such an amendment of the existing law. In view of this development, will my right hon. Friend ensure that what he has now indicated is made clear beyond ambiguity to all local authorities so that they know they have such powers and financial permission?
    Mr. Ross: Yes, Sir; I am surprised that it has not already been made clear. It may well be that these questions and answers will help to that end.

    Salmon and Trout Fisheries (Report)
    Mr. Bakerasked the Secretary of State for Scotland what representations he has received, and from what sources, following his invitation to the public for observations after the publication of the Hunter Report.
    Mr. Ross: More than 100 representations have been received from a wide range of sources. The opinions expressed are so varied that it would not be possible for me to summarise them here.
    Mr. Baker: As the Report has been in the right hon. Gentlemen's hands for ten months now, can he say when he is likely to implement it or otherwise, and can he confirm or deny that a survey for a trap has been carried out at the mouth of the River Deveron?
    Mr. Ross: We received the Report on 5th August last year, but thereafter I invited representations from any intrested organisation or individual. It was some time before we received all these, and it was only fair to wait till we received them before we started our assessment. It may well be that I shall ask to see some of these organisations, and they may want to make personal representations to me. Therefore, it will be some time yet before we can come to the point of making decisions about future legislation in this matter. If the hon. Gentleman will put down a Question on his last point, I shall be glad to answer it.

    Secretary of State (Official Residence)
    Mr. James Davidsonasked the Secretary of State for Scotland what administrative arrangements he has made for maintaining and running his official residence in Scotland.
    Mr. Ross: I refer to the reply given by my honourable and learned Friend the Financial Secretary to the Treasury on 18th May. No. 6 Charlotte Square will be administered by the Trust that is being set up for the purpose.
    Mr. Davidson: Does not the right hon. Gentleman agree that, as this is to be his official residence, the building should be taken over by the Ministry of Public Building and Works and it should not he left to the National Trust to run part of the building and to the Scottish Council for Development and Industry to find the necessary money?
    Mr. Ross: I do not consider that the hon. Gentleman is right here. The initiative came not from the Government but from outside, from people who are concerned about Edinburgh and the need there for an official residence for the Secretary of State. I think that the arrangement can work quite well in this way. There are precedents for it, for instance, in relation to Chequers and Dorneywood.
    Mr. Woodburn: Is not great credit due to the Bute family for their efforts in preserving this house and the whole Adam structure of Charlotte Square for the nation, and is not this an excellent way of making public use of it?
    Mr. Ross: One of the side effects, of course, is that this very desirable property of outstanding architectural merit is thus preserved.
    Mr. Galbraith: I entirely agree that the right hon. Gentleman in his office should have an official residence in Scotland, but can he explain why official residences in England are furnished and provided by the taxpayer whereas in Scotland a different arrangement is made?
    Mr. Ross: I am prepared to answer the question as it affects this office in Scotland and the way in which the matter arose.

    1455
    Questions on the other matters should be addressed to somebody else and not to me.
    Mr. Hugh D. Brown: I recognise the need for a modest flat for a modest man in Edinburgh, but surely it is wrong to continue a precedent which was wrong in the first place in accepting private money to subsidise an official residence.
    Mr. Ross: I assure my hon. Friend that this is more than just a private residence in which the Secretary of State will live. It will also be possible for the Secretary of State to fulfil his functions in relation to the growing demand in Edinburgh for official recognition of international conferences to give hospitality without having to hire rooms in a hotel.
    Earl of Dalkeith: May I welcome the right hon. Gentleman to my constituency and ask him whether he is planning to open his new stately home to the public at any time?
    Mr. Ross: I assure the hon. Gentleman—I am surprised that he does not know this—that since the building is owned or has been handed over to the National Trust it must be open to the public. Although I am in the hon. Gentleman's constituency, he has an awful lot of changes to make in his personal political thinking before he gets my vote.
    Mr. Emrys Hughes: Is my right hon. Friend aware that the Marquess of Bute was able to be so generous to the nation only because the miners of Ayrshire and the tenant farmers in Ayrshire were so generous to him?

  LORD PRESIDENT OF THE COUNCIL

    Royal Charters (Infringements)
    Sir Knox Cunninghamasked the Lord President of the Council if he will introduce legislation to enable him to take action in respect of governors of corporations having Royal Charters in instances in which the corporation concerned has acted in breach of its charter.
    The Lord President of the Council and Leader of the House of Commons (Mr. Herbert W. Bowden): No, Sir.
    Sir Knox Cunningham: Will the right hon. Gentleman examine the charter of
    1456
    the Royal Shakespeare Company since a number of people believe that this company is in breach of its charter when it continues to spend public money in producing non-Shakespeare plays in London?
    Mr. Bowden: The hon. and learned Gentleman asked whether I would introduce legislation. Legislation is not necessary. The Crown may at this moment, if it wishes, take proceedings through the High Court for the forfeiture of any charter. On the specific point he mentions, my hon. Friend at the Department of Education and Science has already told him that, on the best legal advice obtainable, there is no infringement of the charter.

    House of Commons (Accommodation)
    Mr. William Priceasked the Lord President of the Council whether the working conditions of journalists and members of the staff in the Commons part of the Palace of Westminster meet the requirements of the Offices, Shops and Railway Premises Act.
    Sir Gerald Wills: I have been asked to reply.
    Although the Act is not enforceable within the House of Commons, recommendations by H.M. Factory Inspectorate on the accommodation of the staff of the House and for Members' private secretaries are being implemented. Extra accommodation in the Star Chamber Court building will be allotted to the Press.
    Mr. Price: I thank the hon. Gentleman for his reply and apologise for making him the victim of a piece of "buck" passing. Will he not agree that we are merely tinkering with this matter, and is it not time that we stopped making excuses and got down to the problem of being rid of the disgusting conditions under which staff in this place work?
    Sir G. Wills: I understand that the accommodation to be allotted to the Press in the new Star Chamber building is to their satisfaction and will be satisfactory to all concerned. As regards the report of the inspectors, in many cases it dealt with minor matters, and other major matters have been implemented and are already satisfactory.
    Mr. Moonmanasked the Lord President of the Council if he will consider taking steps to convert at least 25 per cent. of the 87 toilets in the House of Commons so that the space can be used by Members as offices.
    Sir G. Wills: I have been asked to reply.
    This will be considered, but I hope that less drastic means of providing office accommodation for Members can be found.
    Mr. Moonman: The hon. Gentleman's reply will cause some dismay among hewer Members because they have no adequate accommodation, although they may have satisfactory conveniences. Would he be prepared to consider the possibility of an inquiry into the usefulness of all the rooms in the Commons Part of the Palace, including the toilets, and also will he negotiate with the Lord Great Chamberlain to ascertain whether some of the 67 toilets in the other place can be more effectively used as well?
    Sir G. Wills: I am always prepared, and we are always prepared, to consider the greater provision of accommodation, but many of these toilets to which the hon. Gentleman refers are little more than cubicles, and the larger ones which he has in mind are in places where they are most greatly needed.
    Mr. Dickensasked the Lord President of the Council how many persons were in residence in that part of the Palace of Westminster occupied by the House of Commons in 1956; how many are in residence at present; and how many rooms they occupied then and occupy now.
    Sir G. Wills: I have been asked to reply.
    Six persons were in residence in the House of Commons part of the Palace in 1956 and six persons are in residence at present. In 1956 they occupied 108 rooms. 90 rooms are now occupied.
    Mr. Dickens: With due deference to you, Mr. Speaker, as a resident in this part of the Palace of Westminster, may I thank the hon. Gentleman for his reply and invite him and his Committee to consider asking the residents whether any
    1458
    surplus accommodation they may happen to have can be made available to Members of the House of Commons?
    Sir G. Wills: This matter has been considered on numerous occasions, and I have myself inspected the so-called surplus accommodation. Believe me, it is not surplus, and it would be most difficult to make use of it.
    Mr. Noble: May I take it from my hon. Friend's reply that he is not including the Whips' Office on either side of the House as a residence in it?
    Mr. Dickensasked the Lord President of the Council if he will state the number of rooms in the Palace of Westminster, indicating separately those occupied by Members of the House of Commons, excluding public rooms.
    Sir G. Wills: I have been asked to reply.
    The number of rooms in the Palace of Westminster is 1,189, of which 736 are in the House of Commons part, but in view of the difficulty in defining rooms occupied by Members of the House of Commons and "Public Rooms", a schedule listing rooms in the House of Commons and the occupiers will be sent to the hon. Member and placed in the Library.
    Mr. Dickens: I am obliged to the hon. Gentleman for his reply, but will he consider whether the Members of another place and the facilities available to them could be moved out of the Palace of Westminster to make more accommodation more readily available to Members of this House?
    Sir R. Cary: Is it not necessary for the principal officers of the House of Commons to live within the Palace of Westminster in order to discharge their duties?
    Sir G. Wills: I think that that is understood, or should be understood, by most hon. Members.

BILLS PRESENTED

  SELECTIVE EMPLOYMENT PAYMENTS
  Bill to provide for payments in certain circumstances in respect of persons in respect of whom selective employment tax

  1459
  has been paid; and for connected purposes, presented by Mr. Gunter; supported by Mr. George Brown, the Chancellor of the Exchequer, Mr. William Ross, Mr. Douglas Jay, Mr. Richard Crossman, Mr. Fred Peart, Miss Margaret Herbison, Mr. John Diamond, and Mrs. Shirley Williams; read the First time; to be read a Second time Tomorrow and to be printed. [Bill 26.]

  CIVIC AMENITIES
  Bill to make further provision for the protection and improvement of buildings of architectural or historic interest and of the character of areas of such interest; for the preservation and planting of trees; and for the orderly disposal of disused vehicles and equipment and other rubbish, presented by Mr. Sandys; supported by Mr. G. R. Strauss, Mr. Grimond, Mr. Deedes, and Mr. Arthur Blenkinsop; read the First time; to be read a Second time upon Friday, 8th July, and to be printed. [Bill 27.]
  NATIONAL INSURANCE ACTS 1946 AND 1948 (AMENDMENT)
  Bill to amend the National Insurance Acts 1946 and 1948 in respect of industrial diseases; and for connected purposes, presented by Mr. S. O. Davies; supported by Mr. G. Elfed Davies, Mr. Harold Finch Mr. Leo Abse, Mr. Thomas Swain, Mr. Edwin Wainwright, Mr. Robert Woof, Mr. Adam Hunter, Mr. Eric G. Varley, and Mr. Michael McGuire; read the First time; to be read a Second time upon Friday, 2nd December, and to be printed. [Bill 28.]
  MEDICAL TERMINATION OF PREGNANCY
  Bill to amend and clarify the law relating to termination of pregnancy by registered medical practitioners, presented by Mr. David Steel; supported by Dr. Winstanley, Dr. David Kerr, Dame Joan Vickers, Mrs. Renée Short, Mr. Simon Wingfield Digby, and Viscount Lambton; read the First time; to be read a Second time upon Friday, 22nd July, and to be printed. [Bill 29.]

  NATIONAL INSURANCE (FURTHER PROVISIONS)
  Bill to make provision for the payment of pensions out of the National Insurance Fund for certain classes of person not
  1460
  eligible for pensions under the National Insurance Act 1946, presented by Dame Irene Ward; supported by Mr. Airey Neave, Mr. Terence L. Higgins, Mr. W. H. Loveys, Miss Harvie Anderson, Mrs. Jill Knight, Mr. Martin Maddan, Mr. Paul Dean, Sir John Vaughan-Morgan, Mr. Turton, Mr. Robert Mathew, and Mr. Maurice Macmillan; read the First time; to be read a Second time upon Friday, 1st July, and to be printed. [Bill 30.]

  INDUSTRIAL AND PROVIDENT SOCIETIES
  Bill to facilitate the borrowing of money by registered societies within the meaning of the Industrial and Provident Societies Act 1965, and for connected purposes, presented by Mr. Derek Page; supported by Mr. Bert Hazell, Mr. Christopher Norwood, Mr. Paul Hawkins, Mr. Malcolm MacMillan, and Mr. Jeremy Thorpe; read the First time; to be read a Second time upon Friday, 16th December, and to be printed. [Bill 31.]
  PUBLIC SERVICE AND ARMED FORCES PENSIONS COMMISSION
  Bill to establish a Commission to review public service and armed forces pensions, and for purposes connected therewith, presented by Mr. Robert Carr; supported by Mr. Cranley Onslow, Sir Arthur Vere Harvey, Colonel Sir Tufton Beamish, Miss Harvie Anderson, Sir John Eden, Mr. Maurice Macmillan, Mr. Gilbert Longden, Sir George Sinclair, Mr. Anthony Royle, Mr. Anthony Kershaw, and Mr. Paul Dean; read the First time; to be read a Second time upon Friday, 3rd February, and to be printed. [Bill 32.]
  NATIONAL HEALTH SERVICE (FAMILY PLANNING)
  Bill to secure the provision, as part of the National Health Service, by local health authorities of services in connection with family planning, presented by Mr. Edwin Brooks; supported by Mr. Leo Abse, Sir Clive Bossom, Mrs. Gwyneth Dunwoody, Mr. Nigel Fisher, Dame Joan Vickers, and Dr. Winstanley; read the First time; to be read a Second time upon Friday, 17th February, and to be printed. [Bill 33.]
  ROAD TRAFFIC (DRIVING INSTRUCTION)
  Bill to provide for the registration of persons engaged in giving instruction in tie driving of motor vehicles and for connected purposes, presented by Mr. Will Owen; supported by Colonel Sir Harwood Harrison, Mr. William Molloy, Mr. Arnold Gregory, Mr. Bernard Floud, Mr. R. Gresham Cooke, Mr. Eric Ogden, Dame Joan Vickers, and Mr George Rogers; read the First time; to be read a Second time upon Friday, 3rd February, and to be printed. [Bill 34.]
  TOKYO CONVENTION
  Bill to make provision with a view to the ratification on behalf of the United Kingdom of the Convention on Offences and certain other Acts Committed on board Aircraft, signed in Tokyo on 14th September, 1963, and to give effect to certain provisions relating to piracy of the Convention on the High Seas, signed in Geneva on 29th April, 1958; and for purposes connected with the matters aforesaid, presented by Mr. Robert Maclennan; read the First time; to be read a Second time upon Friday, 16th December, and to be printed. [Bill 35.]
  TEACHERS OF NURSING
  Bill to amend section 17 of the Nurses Act 1957 and section 6(1)(f) of the Nurses (Scotland) Act, 1951, presented by Mr. Tom McMillan; supported by Mr. Archie Manuel, Mr. Sydney Bidwell, Mr. G. R. Strauss, Mr. James Bennett, Mr. Paul B. Rose, and Dr. John Dunwoody; read the First time; to be read a Second time upon Friday, 8th July, and to be printed. [Bill 36.]

  POSTAL AND PROXY VOTING
  Bill to amend section 12 of the Representation of the People Act 1949 so as to enable persons unable or likely to be unable to go in person to the polling station by reason of their absence from their qualifying address to vote by post or by proxy at parliamentary elections, presented by Sir Ronald Russell; supported by Mr. Bernard Weatherill, Sir Gerald Nabarro, Sir John Langford-Holt, Sir Harry Legge-Bourke, Sir John Rodgers, Mr. John Hall, and Mr. Airey Neave; read the First time; to be read
  1462
  a Second time upon Friday, 24th June, and to be printed. [Bill 37.]

  ROAD TRAFFIC (AMENDMENT)
  Bill to make provision for securing compliance with the requirements imposed by law as to the use of motor vehicles and trailers on roads and their construction, equipment, weight and condition, presented by Mr. Harry Randall; supported by Mr. Arthur Palmer, Mr. Symonds, Mr. Ron Lewis, Mr. Ray Dobson, Mr. John Cordle, Mr. Edwin Wainwright, Mr. Leslie Spriggs, Mr. David Weitzman, and Mr. Nigel Fisher; read the First time; to be read a Second time upon Friday, 2nd December, and to be printed. [Bill 38.]
  RACE RELATIONS ACT 1965 (AMENDMENT)
  Bill to amend the law relating to discrimination on racial grounds so as to prohibit housing, employment and other economic discrimination; to strengthen and give statutory authority to the Race Relations Board and its Conciliation Committees; and to extend section 6 of the Race Relations Act 1965 to any person who persuades any other person to commit a crime or misdemeanour, presented by Mr. Maurice Orbach; supported by Mr. Reginald Freeson, Mr. Paul B. Rose, Mr. Jeremy Thorpe, Mr. Arthur Lewis, Mr. Arthur Blenkinsop, Mr. John Hunt, Mr. James A. Dunn, and Mr. Simon Mahon; read the First time; to be read a Second time upon Friday, 16th December, and to be printed. [Bill 39.]
  REGISTRATION AND CONTROL OF UNLICENSED CLUBS
  Bill to empower local authorities in England and Wales to require the registration of buildings used by clubs and kindred bodies for purposes of entertainment, dancing and the playing of games and to confer certain powers of control in respect thereof, and for connected purposes, presented by Mr. Norman Miscampbell; supported by Mr. Deedes, Sir David Renton, Mr. R. Gresham Cooke, Mr. Peter Blaker, and Mr. Mark Carlisle; read the First time; to be read a Second time upon Friday, 17th February, and to be printed. [Bill 40.]
  EMPLOYEES PROTECTION
  Bill to ensure the representation of employees in the establishment and maintenance of standards and conditions of safety and health in employment; to provide for the co-operation and coordination nationally of interested parties in matters of safety and health; and to make certain other provisions connected with the purposes aforesaid, presented by Mr. Peter Archer; supported by Mr. John Horner, Mr. Harry Howarth, Mr. Andrew Faulds, Mr. Body, Mrs. Gwyneth Dun-woody, Mr. Eric S. Heller, Mr. Roland Moyle, Mr. William Hamilton, Mr. Trevor Park, Mr. Gardner, and Dr. David Kerr; read the First time; to be read a Second time upon Friday, 1st July, and to be printed. [Bill 41.]
  NATIONAL INSURANCE
  Bill to provide a pension out of the National Insurance Fund to certain widows unable to qualify under the National Insurance Acts, presented by Mr. R. Bonner Pink; supported by Dame Irene Ward, Mrs. Jill Knight, Mr. Paul Dean, Mr. Philip Holland, Mr. John Nott, Mr. Oscar Murton, Mr. David Crouch, Mr. Walter Clegg, and Mr. Hugh Rossi; read the First time; to be read a Second time upon Friday, 22nd July, and to be printed. [Bill 42.]
  EMPLOYMENT AGENCIES (REGULATION)
  Bill to regulate fee-charging employment agencies, presented by Mr. Hugh Jenkins; supported by Mr. Arthur Blenkinsop, Dame Joan Vickers, Mr. Eric Lubbock, Mr. Raphael Tuck, Sir Tatton Brinton, Mr. Bernard Floud, Mrs. Anne Kerr, Mr. David Ensor, Mr. Andrew Faulds, and Mr. Brian O'Malley; read the First time; to be read a Second time upon Friday, 24th June, and to be printed. [Bill 43.]
  REPRESENTATION OF THE PEOPLE ACT 1949 (AMENDMENT)
  Bill to amend the Representation of the People Act 1949 by extending the franchise to all persons of eighteen years or over, presented by Mr. Ioan L. Evans; supported by Mr. Paul B. Rose, and Mr. Alan Williams; read the First time; to be read a Second time upon Friday, 17th February, and to be printed. [Bill 44.]
  ANTARCTIC TREATY
  Bill to enable effect to be given to measures for the conservation of Antarctic fauna and flora which, in pursuance of the Antarctic Treaty signed at Washington on 1st December 1959, have been or may hereafter be recommended for approval by contracting parties to that treaty; and for other purposes connected with the Antarctic Treaty, presented by Sir Clive Bossom; supported by Sir David Renton, Mr. Marcus Kimball, Mr. Brian Harrison, Mr. Robert Maclennan, Dr. David Owen, Mr. Eldon Griffiths, Mr. James Davidson, Miss Quennell, Mr. Patrick Wall, and Mr. Maxwell-Hyslop; read the First time; to be read a Second time upon Friday, 2nd December, and to be printed. [Bill 45.]
  FREEDOM OF PUBLICATION PROTECTION
  Bill to give greater freedom of publication of matters of public interest by clarifying and amending the law relating to contempt of court, official secrets and libel, presented by Mr. Jasper More; supported by Mr. Mark Carlisle, Mr. Arthur Davidson, Mr. Deedes, Mr. Charles Fletcher-Cooke, Mr. Leslie Hale, Mr. Iremonger, Mr. Harold Lever, and Mr. William Roots; read the First time; to be read a Second time upon Friday, 8th July, and to be printed. [Bill 46.]
  PONIES
  Bill to make provision with respect to the export and sale of ponies and for connected purposes, presented by Mr. Anthony Stodart; supported by Mr. Body, Mr. Burden, Mr. Robert Carr, Mr. John Cordle, Mr. Marcus Kimball, Mr. Marcus Lipton, Dr. Shirley Summerskill, and Mr. Bernard Weatherill; read the First time; to be read a Second time upon Friday, 24th June, and to be printed. [Bill 47.]

  DEPARTMENT OF WORLD SECURITY
  Bill to set up a department of world security in the United Kingdom to coordinate and inform Her Majesty's Government's efforts to strengthen the United Nations and its agencies and to supplant the rule of force by the rule of law in world affairs and to provide impetus thereto, presented by Mr. Frank Judd; supported by Mr. E. L. Mallalieu,

  1465
  Mr. Ivor Richard, Mr. Evan Luard, Mr. Alan Lee Williams, Mrs. Gwynneth Dun-woody, Mr. Roland Moyle, Mr. Edwin Wainwright, Mr. David Howell, Mr. John Tilney, Mr. Richard Wainwright, and Mr. Hooson; read the First time; to be read a Second time upon Friday, 16th December, and to be printed. [Bill 50.]

  LICENSING (CERTIFICATES IN SUSPENSE) (SCOTLAND)
  Bill to provide for the abolition of the suspension of certificates for the sale by retail of exciseable liquor, and for the amendment of the procedure for the removal of existing certificates which are in suspense to premises other than those specified in the certificate and for purposes connected with the matters aforesaid, presented by Sir Myer Galpern; supported by Mr. William Hannan, Mr. Hugh D. Brown, Mr. James Hamilton, Mr. David Steel, Mr. Neil Carmichael, Mr. William Baxter, Mr. Edward M. Taylor, and Mr. James Dempsey; read the First time; to be read a Second time upon Friday, 1st July, and to be printed. [Bill 5l.]
  ANIMALS (CONTROL OF INTENSIFIED METHODS OF FOOD PRODUCTION)
  Bill to authorise the Minister of Agriculture, Fisheries and Food and the Secretary of State for Scotland to make regulations for securing humane conditions and practices in connection with the rearing and keeping in buildings of animals for the production of food, and the slaughter of such animals; and for purposes connected therewith, presented by Mr. Body; supported by Mr. Burden, Mr. Peter Archer, Mrs. Juyce Butler, and Sir Ronald Russell; read the First time; to be read a Second time upon Friday, 3rd February, and to be printed. [Bill 52.]
  CLIENTS' MONEY (ACCOUNTS)
  Bill to make special provision for safeguarding clients' money or deposits; and for purposes connected therewith, presented by Mr. Anthony Grant; supported by Mr. John Hall, Mr. John Hunt, Mr. Reginald Eyre, Mr. R. Graham Page, and Mr. Hugh Rossi; read the First time; to be read a Second time upon Friday, 22nd July, and to be printed. [Bill 53.]
ORDERS OF THE DAY

  FINANCE BILL
  Considered in Committee.
  [Sir ERIC FLETCHER in the Chair]
  3.39 p.m.
  The Chancellor of the Exchequer (Mr. James Callaghan): I beg to move,
  That the order in which proceedings in Committee on the Finance Bill are taken shall be Clauses 1 to 9, Schedule 1, Clauses 10 to 14, Schedule 2, Clauses 15 to 23, Schedule 3, Clauses 24 and 25, Schedules 4 and 5, Clause 26, Schedule 6, Clause 27, Schedule 7, Clauses 28 and 29, Schedule 8, Clauses 30 to 41. Schedule 9. Clause 42, Schedule 10, Clause 43, Schedule 11, remaining Clauses, new Clauses, Schedule 12, new Schedules.
  The Motion is in standard form and will enable the Committee to consider the Schedules to particular Clauses immediately after the consideration of the Clauses. I think that this is for the convenience of the Committee. Both sides have normally accepted that this is the better way to proceed.
  Question put and agreed to.
  Mr. Iain Macleod: On a point of order. I wonder whether I could raise a point which may be for the convenience of the Committee about the posting of the selected list of Amendments, which is a great convenience to the Committee, especially so to members of the Opposition.
  When this subject was raised last year your predecessor said that whenever possible mid-day would be a convenient time for posting. I appreciate the difficulties, and I do not raise this in any carping spirit, but it was after 1 o'clock today when the list was posted in the Lobby. I wonder whether this is something that you could take into account, Sir Eric, and see whether something can be done to move the list to around midday for future sittings of the Committee?
  The Chairman: I am much obliged to the right hon. Gentleman. He will remember that it was about 1960 that the practice began of posting in the Lobby a provisional selection of Amendments. It is my intention to follow that practice and to endeavour to post in the Lobby on every day upon which the Committee sits a list of my provisional selections.

  1467
  It is obviously impossible to give any guarantee about the hour at which that list can be posted. I have ascertained that in the past it has generally been between 1 o'clock and 2 o'clock, but I know how convenient it is for hon. Members and I will endeavour to see that a list is posted as early as can conveniently be arranged.
  I should perhaps take this opportunity of emphasising that the list is purely provisional and that the Chair must reserve the right to alter the provisonal selection if circumstances so require.
  Mr. Macleod: That is understood. I am grateful to you, on behalf of the Opposition, for what you have said, Sir Eric.
  Mr. A. Woodburn: May I raise a point of order? Just now the Chair had to read out quite a number of things that were on the Notice Paper. During the course of the Bill there will be a great many Amendments on the Paper which are rather complicated, and which Members do not understand even if they are read out. Would it not be possible for the Chair to say that the Amendment as per the words on the Paper should be put and thus reduce a great deal of the effort required from both the Chair and hon. Members?
  The Chairman: I am much obliged to the right hon. Gentleman. I certainly welcome that suggestion and hope that it will be acceptable to the Committee.

  FINANCE BILL

    Clause 1.—(RELIEF FROM DUTY ON IMPORTED GOODS.)
    Question proposed, That Clause I stand part of the Bill.
    Mr. Patrick Jenkin: I would like to begin by warning the Committee that the omission of a number of names from the list in The Times this morning does not mean that the Committee will be without the services of others of us during this debate. We shall be here and we shall endeavour to press our points on this Bill, and there are many, with all the force that we can command.
    I should like to comment, first, by way of introduction, upon the first 10 Clauses of the Bill.
    These Clauses may appear to be in many ways uncontroversial and capable
    1468
    of arousing very little argument across the Floor of the Committee, but the Chancellor will be aware that in the course of opening the Budget debate, and during the Second Reading of the Finance Bill, right hon. and hon. Members were given no exposition of the purpose and intention underlying these Clauses. Therefore, we feel that it is right that we should, quite briefly, probe the Government's intentions in introducing what might be regarded as minor administrative Clauses, to find out the reasons why they have been introduced. We shall endeavour to do this briefly, but we must make it clear that if the explanations supplied give rise to a view in the Committee that the Clauses should be amended we would want to table Amendments, to be taken at Report stage, because that will be the first opportunity that we shall have, following an explanation of the Clauses.
    Clause 1 of the Bill is a curious Clause. It is long and complicated and, as the right hon. Gentleman the Member for East Stirlingshire (Mr. Woodburn) has pointed out, even if it were read out I doubt whether many hon. Members would appreciate its full significance upon first reading. I found that I had to read it several times before I really understood what it was aimed at. I believe that I now see what it is getting at, and subject to anything that the Minister of State to the Board of Trade, who I believe is to reply today, has to say I believe that we can offer it a cautious welcome. I believe that the Clause should not pass without some explanation as to how it is to work and I have a number of questions.
    3.45 p.m.
    Before I come to these it would be helpful if I were to try to say what I understand to be the intention of the Clause, and I hope that the Committee will forgive what may appear to be a very elementary introduction. However, I find it helpful, if only to myself, to start from the beginning and then to work through.
    The usual position, where goods are imported into the country and later exported, is that either the duty on the goods is remitted and they are subsequently exported free of duty, or, if the duty is paid, it is subsequently repaid.
    Similarly, if goods are imported and are subsequently incorporated or used in the manufacture of other goods then, if duty has been paid, the Commissioners allow drawback on the exported goods in respect of the duty which was paid on the imported goods. The drawback on a great many orders stems from Section 9(1) of the Import Duties Act, 1958. This is familiar and for the most part gives rise to no difficulty in theory, though as I am sure the Minister of State recognises, there are often considerable difficulties in practice, and in some cases the difficulties are so intense that firms simply do not find it worth while going through the necessary stages in order to claim the drawback. This is particularly so where goods go through several stages of manufacture and where there are several different imported components which may well have borne duty at different rates.
    Until this Clause there has always been a golden thread running through this legislation, namely, that one had to be able to trace back, from the exported goods, right through the various stages of manufacture, to the goods which have been imported and upon which duty had been paid before one could claim the drawback. One had to show that duty-paid goods had been used in the manufacture of exported goods and if one could not show that, one was not entitled to the drawback. One had to be able to trace the position through from the beginning to the end.
    Clause 1 introduces what appears to be a novel extension, whereby in certain circumstances this golden thread is departed from, and for the first time, imports can be relieved from duty, or drawback can be claimed where the exports on which the claim for drawback s based are derived from different goods, that is not the same goods which were imported. The Clause adopts the concept of what is called "equivalent aricles", that is to say, exports that have been made from goods which are equivaent to the imported goods. In the long definition in the Clause, in subsection (14,b), the concept introduced is one of interchangeability—that if the goods from which the exports are made are interchangeable, as defined in the subsection, with the imports, and if the imports have borne duty, the exports may
    1470
    qualify for drawback even though they are not made from the imports.
    That is what the Clause is about and I hope that the Committee will find it helpful if I give an example drawn from the industry in which I have worked. Suppose a company imports a plastic raw material, let us say polyethylene in bead form, or something of that sort, and pays a 10 per cent. duty, and suppose that it exports a familiar household object, a plastic washing-up bowl, which has been made from that polyethylene, under the law at present the company can claim the drawback on the duty paid on the imported raw material.
    This Clause alters that position. It extends it. It does not, of course, in any way withdraw the relief which has existed hitherto, but it does empower the commissioners to give the relief to a manufacturer of a washing-up bowl even if that bowl itself is made from domestically produced polyethylene on which he has not paid any duty, provided that the domestic material and the imported material are interchangeable.
    Of course, it is not anything like as simple as that; anyone who reads the Clause will realise that it is hedged about with all sorts of qualifications. The Board of Trade must be satisfied that the granting of the relief or drawback would conduce to the export of other goods and only if exports are encouraged does the Clause operate. Concurrently, the commissioners who are charged with the administration of this legislation must be satisfied that the exports—presumably the goods do conduce to exports—will incorporate equivalent articles; that is to say, that they will be made from material which is interchangeable with the imported material. So that the firm which wants to claim the benefit has from the outset to surmount two hurdles, first, that this will, in fact, encourage exports, and secondly, that the commissioners are properly satisfied that the exports in question were made from equivalent material.
    Again going back to my example, suppose that the Board of Trade felt it right to grant relief on the imports of the polyethylene and granted the duty remission because this would increase the exports of washing-up bowls, the commissioners have to be satisfied that the material which goes into the washing-up

    1471
    bowls which are, in fact, exported is interchangeable with the equivalent of the material which was imported.
    So far, put in this form, the Clause looks like a fairly simple piece of corner-cutting; it looks as though it avoids this complicated and often almost impossible to prove process of tracing through all these various stages of the imports by the manufacturer to the final exports, and if this were the only purpose this would be obviously a minor administrative convenience and one which could fairly easily and warmly be welcomed. It would avoid a great deal of time of the administrative staffs of firms claiming drawback if they were able to say, "We have mixed them in, we cannot trace them through, but the material which went into common storage was identical with the raw material and we will claim drawback."
    This seems to be reasonable, but I am bound to ask whether the Clause goes further. Is there some other purpose which the Clause could well serve? As I understand it, the question depends on how the Clause will be operated, and, in particular, how the definition of "equivalent articles" will be interpreted. It is contained in subsection (4,b), where the Committee will see:
    "… the Commissioners (having regard to … the description, quantity, quality, value and function of those goods and the imported articles …"
    Or—and this is, perhaps, the critical point—they must have regard to such of those characteristics as appear to them to be relevant. They are given discretion to ignore one or some of those five characteristics.
    Therefore, one can pose the question from my example by extending the case which I put before the Committee a moment or two ago. Suppose the imported plastic raw material or polyethylene was more expensive than the domestically-produced stuff. That is unlikely, but it might happen in present circumstances that it was imported simply because domestic capacity was below total demand. In those circumstances, can the washing-up bowl manufacturer buy his expensive foreign plastic, and then make bowls with the cheaper home-produced material and claim the drawback on the imported material? The material may be chemically identical with
    1472
    the home-produced material, completely interchangeable.
    Can he claim the drawback based on the duty paid on the imports of the more expensive imported material? Because if so does this not give rise to an export subsidy? Would not this, therefore, be contrary to our Treaty obligations under the G.A.T.T. and E.F.T.A., because we would, in fact, be returning to the manufacturer a higher rate of duty, a duty which was higher than that paid for material incorporated in the washing-up bowl being of equivalent value to the imported material? Or is this a case where the value as stated in the Clause would be regarded by the commissioners as a relevant matter so that the materials would not be regarded as interchangeable?
    Mr. Robert Sheldon: I am following the hon. Member very carefully in his valuable argument, which is one which one comes up against very frequently in marketing exports, but I do not quite follow his point. What would happen to the imported chemicals he has mentioned that firm has purchased? What would the firm do with the chemicals?
    Mr. Jenkin: The answer is that the firm would use them to supply the home market, putting their costings of exports on the footing of the cheaper domestically produced material.
    It would avoid any question of dumping, because the firm would not be producing below cost under the G.A.T.T. and anti-dumping legislation in other countries, and would be supplying the home market which for finished products might be a protected market.
    But the question is, in those circumstances; is the difference between the cost of the imported and domestic materials a relevant factor so as to preclude the commissioners from giving the relief by way of remission or drawback on the exports of the washing-up bowls?
    Indeed, I could put the question in the reverse way. I am bound to say this is the much more likely situation, namely, that the imported raw material is somewhat cheaper than the domestic material. Clearly, it could be used directly; that is to say, out of imported material, washing-up bowls could be made for export.

    1473
    This is something wholly admirable. It means we have gained, as it were, some progress from the process of the materials. 3ut suppose that the cheaper imported material is somehow used to depress the general price level of the material in the domestic market. This could be looked at in two ways. In one way it could be a very welcome intensification of competition, a way to get round the extent to which tariffs are used to restrict competition in the country. Or, on the other land—it depends, perhaps, on which particular hat one is wearing—this could mean a loss of very valuable protection, a protection without which we could not hope our industry would survive.
    Therefore, my first question to the Minister of State is: is the purpose of the Clause purely administrative corner-cutting, a piece of administrative simplification, so as to save the problem of tracing these raw materials through? Or is it intended to be either a means of reducing the effective level of tariff and encouraging competition in the home market; or is it intended, conversely, to be an indirect subsidy? I have no doubt that the Minister will be able to answer that question.
    On the latter point, the export subsidy, we shall come to Clause 8 later, but we must remember how sensitive our partners overseas are to even innocuous arrangements to help our exports. If this is to he a subsidy, then this should be made clear at this stage.
    4.0 p.m.
    My second question is: how far will interchangeability have to go? Can relief be claimed if the domestically-produced material used in the exports is the preferred material from the point of view of consumer satisfaction, where the imported material, though perfectly serviceable, gives products of not quite the same quality? Will any difference in the material be countenanced by the commissioners when they come to administer the Clause or will minute differences be ignored, so that it is simply a question of degree? The words in the definition Clause are pretty general, and one would welcome some indication from the Minister of State as to how the commissioners will interpret the question of interchangeability.
    My third question is: what about the time scale? How long must elapse between the import and the export? The Committee will appreciate that if one is dealing with the same goods, goods which are imported, use is made of them, and they are exported, it does not matter how long elapses between the import and export. Duty is paid on import and, provided one satisfies the necessary burden of proof, one can claim drawback when products are manufactured from those imports and exported.
    When dealing with the Clause, however, the time scale must be important, because the whole concept of the Clause is that there should be some nexus between import and export in respect of which relief is claimed on the exports which are conduced to, and which are made from interchangeable goods. So that if there is to be some form of time limit imposed, some idea that one cannot just import goods "on spec" and then at a later stage find that one can export other goods made from interchangeable products and then claim back the import duty on the goods which one has imported, that ought to be known. In other words, must the imports in question have been made with a view to promoting the exports in respect of which drawback is claimed?
    Another question which arises on this is that the Board, under subsection 1(a), must be satisfied that relief will "conduce to" the export of other goods. That is a rather vague phrase. I paraphrased it in my opening remarks as "leading to the encouragement of exports". It must "conduce to". How heavy will the burden of proof be on the manufacturer to satisfy the Board of Trade that exports will be very much affected as a result? Will it be that he will have to satisfy the Board that, unless relief is given, the additional exports will not happen at all? Will he have to prove that extra exports will be made, or is it sufficient to say that they will be less likely? Will it satisfy the Board if the firm is able to say that without the drawback exports would be a good deal less remunerative and, in the long term, might result in its having to give up the market? How far is the burden of proof to be interpreted?
    Sir Gerald Nabarro: Is not the proper thing to do to

    1475
    eliminate the word "conduce" and substitute "contribute", which is a word that everyone understands as being practical and explicit, and it explains precisely what is wanted?
    Mr. Jenkin: If my hon. Friend thinks that that would be an appropriate improvement to the Bill, I have no doubt that he will put down an Amendment on Report. "Contribute" might be held to require a physical connection between the two, which it is the whole purpose of the Clause to avoid. However, I see that my hon. Friend is not wholly with me on that, so I shall not pursue it.
    Sir G. Nabarro: No, I am not.
    Mr. Jenkin: Subsection (1,a) of the Clause requires that in addition to the Board of Trade being satisfied as to the conducing of exports, it is expedient in the national interest, and in this legislation it follows the pattern of Section 9 of the Import Duties Act. How will that be interpreted in this case? I would have thought that virtually all exports were in the national interest, though in reply to a Question from my hon. Friend the Member for Yeovil (Mr. Peyton) yesterday, the Prime Minister seemed to imply that some exports were better than others. On the spur of the moment, that was quite clever, but it does not mean very much. How will "the national interest" be interpreted, and what considerations will the Board of Trade have in weighing up those words?
    Under subsection (1,b) the Board of Trade has to have regard to the interests of domestic producers of comparable articles. If relief were given without such consideration, the domestic producers of goods equivalent to imported goods might find themselves cut out by tariff-free imports. Will they be consulted in every case? In the case of import duty exemptions there is an opportunity for domestic producers to object. They are consulted. They are given an opportunity to make representations and their views are taken into account formally. Will that happen under the Clause, or will there be some informal consultation?
    There appears to be no Statutory Instrument involved here. It is a wholly administrative discretion, and it could be used to depress prices and intensify competition. It would seem right that
    1476
    there should be an opportunity for domestic producers to express their views.
    Discretions abound throughout the Clause. It is as full of discretions as the usual discretion statement is full of indiscretions. The Board must be satisfied that it conduces to exports. It must be satisfied that it is in the national interest. The commissioners must be satisfied that equivalent articles will be used. The definition of "equivalent articles" is as follows:
    "The expression 'equivalent articles' means goods of any description which, in the opinion of the Commissioners (having regard to such matters … as appear to the Commissioners to be relevant in the particular circumstances) are sufficiently similar …"
    They have power to impose conditions. They can make conditions as to the method of relief, as to how relief is to be given and as to the amount of relief.
    All sorts of administrative discretions are inevitably involved in the Bill. The Bill is a formidable battery of administrative safeguards. What the Committee and industry will want to know is what means is to be used to publicise the method whereby the Board of Trade and the commissioners will exercise those discretions. We shall want to know that there is no misuse of the Clause and, having regard to the purpose underlying the Clause which I am sure the Minister of State will explain to the Committee, that it is not to be used for some other purpose.
    Industry will want to know in what circumstances imports have qualified and where applications have been refused, why they have been refused. People will want to know especially that where the Board has given notification under subsection (1) to the commissioners that it is in the national interest and that exports will be encouraged, the commissioners have, nevertheless, refused relief.
    This is a substantial armoury of questions, but I do not apologise for asking them. We were offered no explanation in the Budget debate or on Second Reading as to what the Clauses are aimed at. They are certainly novel provisions, and they make a new departure in the administration of our protective tariffs. They could be relatively minor. On the other hand, they could have wider implications and represent a quite radical departure from the pattern which has

    1477
    been operated hitherto. I am sure that t le whole Committee will welcome an explanation from the Minister of State as to what the Clause means and as to how it is to work.
    Mr. F. J. Bellenger: The purpose of the Government in placing this legislation before the Committee is clear and helpful. As I understand, these very complicated Clauses have been designed to assist our export trade and, in that respect, they will have the approval of the whole Committee.
    In some respects, it might be said that while exporters understand their own trade, they do not always understand the ramifications of the Commissioners of Customs and Excise. I endorse the remark made by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkim that someone—if it is not the Treasury, then certainly the Board of Trade or the Customs authorities—should issue for the information of exporters some explanation of precisely how they can claim either drawback or exemption from this duty.
    I rise only to put one or two questions, some of them bearing on the remarks of the hon. Member for Wanstead and Woodford. Through my experience of being connected with a chemical importing firm I am aware of some of the difficulties which exporters in this country have in competing with firms or organisations overseas. I should, therefore, like to ask the Minister to elaborate on a question put to him by the hon. Member for Wanstead and Woodford as to the time limit between the import of commodities, and the export of manufactured goods of which those imported commodities are a part.
    Considerable business is done in the importation of chemical substances from certain countries because of the quality of these chemicals. It is perhaps surprising to relate that even big firms like I.C.I. import large quantities of chemicals. To keep up supplies for those importers who want them for their exports of manufactured articles, or even for the home trade, large quantities of imported commodities have to be warehoused in this country. The purpose may be quite clear, that the importer wants to be sure of his supplies in advance of his manufacture.
    1478
    It is, therefore, important that the importer should know whether certain commodities or chemicals which may be warehoused in this country for some time will be eligible for drawback by the time he comes to manufacture and export them. I think that that was the purpose which the hon. Gentleman had in mind when he asked for an explanation of the time limit which would be allowed for drawback to be claimed.
    It is easy to understand that when duty has been paid on imports, drawback is claimed on that duty after a certain period, but is it possible to remit the duty altogether on the importation of that commodity, subject to certain assurances and certain guarantees? It is possible that a considerable sum of money will be locked up, as will be the case with the Selective Employment Tax, which may be recoverable after a certain period. A certain portion of the duty will go to the Government's coffers, perhaps a substantial portion of it, and the Government will get the use of that money for some time, subject always to the time limit not being fixed for claiming drawback. I think that this could happen. Indeed, I believe that the Clause uses the word "remission" as opposed to "drawback".
    I hope that my right hon. Friend has grasped the point that I am making, but I am more concerned to ensure that exporters in this country are placed on just as favourable terms as exporters abroad who, because of the absence of this duty, 10 per cent. or otherwise, can export to markets which perhaps we have been supplying.
    If I may say so to the hon. Member for Wanstead and Woodford, I do not think that that would be unfair according to the G.A.T.T. provisions, because already, apparently, Continental and other overseas exporters are at some advantage compared with people in this country, in that they pay no duty, whereas, for some reason or other, we impose a duty on the same commodities as they use for the manufacture of similar articles.
    Sir Arthur Vere Harvey: Has the right hon. Gentleman thought of leaving these materials in bond until they are required for manufacture?
    4.15 p.m.
    Mr. Bellenger: I am not technically conversant with those provisions, but I should have thought that it was up to the Government to say whether it was possible to do that, and that is the purpose of my question.
    If the Government are genuine in their intention to help British exporters who may be able to find the same commodity produced in this country, but if it is used in the manufacture of the article to be exported may mean us losing markets because our competitors can produce more cheaply because of the absence of the duty, they should consider the suggestion that I have made about helping our exporters. This is all that I am concerned with, and I hope that my right hon. Friend has followed my argument.
    When dealing with such a complicated mater as this, it is not sufficient to tell the House of Commons in a comparatively short speech, which is probably all that my right hon. Friend will make to the Committee this afternoon, what the Government propose to do. This should be set out in printed form, and it will have to be extensive if manufacturers are to understand not only what the Government are after, but how people can obtain the benefits which flow from this Clause.
    Sir G. Nabarro: I should like to begin by congratulating my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) on his dissertation on this extremely complicated and difficult Clause. It was largely academic in character, and, like many academics, he called the substance of industry washing-up bowls.
    I wish to talk of something rather more important than washing-up bowls. I speak with due humility when I say that I have a long history of association with the matter referred to in Clause 1 of this Bill. I sat in the office of the then Chancellor of the Exchequer in 1961 as part of a deputation of manufacturers drawn from British industry, and I was being asked, as were my colleagues, how the Government, and notably the Treasury, could help British exporters.
    The major point that I made to the then Chancellor of the Exchequer, my right hon. and learned Friend the Member
    1480
    for Wirral (Mr. Selwyn Lloyd), was that it was important to facilitate and to make easier and more simple the recovery of import duty paid on raw materials, part manufactured and manufactured goods which subsequently were ingredients in British exports.
    There was a good deal of controversy, and subsequently a letter arrived from my right hon. and learned Friend inviting me to go to Kings Beam House, the headquarters of Customs and Excise, to tell the commissioners what I had in mind. I said to them, "I shall give you the most difficult case of plywood, a raw material which is extensively used for packaging British exports". About 60 per cent. of British exports are packaged, and there is this curious anomaly, going back to 1932 and the Import Duties Act of that year, that softwood and hardwood brought into Britain are not dutiable, whereas plywood, which, in the last 35 years, has largely supplanted softwood and hardwood for the packaging of exports from Britain, is subject to an import duty of 10 per cent.
    A large part of this plywood coming into Britain today, notably the cheaper grades, is brought in from Russia. I declare my interest at once. I am a director of the largest importer in Britain of Russian plywood, and I am also a director of the largest manufacturing company in Britain of plywood export containers.
    Therefore, I lay claim to have played a part in the transposition of Russian raw materials, dutiable upon import, into packaging material and protection for British exports and how a scheme could be devised for drawback for the 10 per cent. plywoods import duty, on proof that the plywood concerned had subsequently been employed for plywood packing of British exports. I know that my hon. Friend the Member for Wanstead and Woodford will now feel that I am justified in saying to him that the commodity which I have selected—plywood—is vastly more important than his plastic washing-up bowls.
    What then happened was that the Customs and Excise said to me—and this is all on the records in Kings Beam House, so the Chancellor of the Exchequer and the Minister of State, Board of Trade may check for themselves—" This is

    1481
    exceptionally difficult. How is it possible to trace millions of pieces of plywood coming into Britain which are subsequently converted into 10 to 15 to 20 times as many million pieces of plywood in order to form components of packing cases subsequently sewn up with steel and manufactured by a container manufacturing firm which is not itself the importer and then supplied to a multiplicity of British firms which are exporters, when the 1932 Act, as re-enacted by the 1958 Act, requires that it is the exporter, the firm which is actually sending the goods abroad, which is liable for claiming the drawback or relief on the import duty paid earlier?"
    It took two and a half years, between 1962 and nearly the end of 1964, before I, with Customs and Excise, had evolved a formula—[HON. MEMBERS: "Hear, hear."] This is all on the record and I will give the references in a moment—a formula with the Board of Trade. [Interruption.] I am referring to the former President of the Board op Trade. I shall make a reference to the right hon. Gentleman in a moment.
    An Hon. Member: What a Government.
    Sir G. Nabarro: It is not a question of "What a Government", because it was immensely difficult as it then existed.
    The Customs and Excise said to me, as did the Board of Trade and the Inland Revenue, "We cannot deal with this matter simply until the Import Duties Act, 1932, and the 1958 Act are amended to allow Customs and Excise to remit an import duty outright, subject to it being substantiated at a later date that the dutiable goods brought in have subsequently been exported." In my interpretation of the Clause, that power will now be vested in Customs and Excise, but I am not sure. It is one of the questions which I want to ask the Minister of State, Board of Trade.
    The right hon. Member for Bassetlaw (Mr. Bellenger) seemed to me to be a little critical of services at the Board of Trade. I have used those services for 20 years as an exporter and I have found them admirable, notably the information services. There is no need for the Board of Trade to publish a list of the raw materials and commodities and
    1482
    manufactured good to which the Clause, if enacted, would apply.
    All that any manufacturer has to do is to lift the telephone and get through to the Board of Trade information services and ask, in the case of plywood, to which I have been referring, "Is the import duty recoverable for plywood, and if so, how do I do it?" The Board of Trade will tell him in five minutes. That applies to hundreds and hundreds of commodities and manufactured goods. What is needed is simplification pf the procedure.
    I hope that the Minister of State, Board of Trade, will reply to the debate, because I want to put a point to him. I took this identical manufacturing process into the European Economic Community and made it my business to find out how the Six deal with this matter. In the Grand Duchy of Luxembourg, one of the members of the European Economic Community, I saw the head of Customs and Excise and the Minister of Economic Affairs three years ago about this identical problem. I said that the external tariff of the Common Market was 13 per cent. for plywood coming from Leningrad into the Grand Duchy, but it was all used for the manufacture of export containers, carrying E.E.C. goods outward as exports. I asked if they needed a system comparable with the extremely compendious and complex system now being operated in Britain or would they give me carte blanche and remit the whole import duty on the plywood, subject to an auditor's certificate at the end of the year that all the plywood had been used for the manufacture of articles contributing to the export trade of the European Economic Community? It took me one month to get agreement. It has taken me five years in Britain to see this Clause proposed, though it has been on the stocks for a very long time.
    I want to ask the Minister of State, Board of Trade, whether the Clause means that the Customs and Excise can, by agreement with British manufacturers seeking to increase their exports, remit the import duty subject to auditorial and accountancy proof at the end of the year that these raw materials, or part-manufactured or wholly manufactured goods, have found their way into British exports?

    1483
    I turn now to the Financial Secretary to the Treasury. During my short absence from the House of Commons, I sent him details of this case. I called in aid the Financial Times of 6th January, 1964. The feature "Men and Matters", displaying my own picture. There were three columns defining as bureaucracy run mad that millions and millions of book entries had to be made to recover the import duty on plywood for export packing cases. So colossal is it that the hon. Gentleman's own Department—I invite the Minister of State to turn up the Financial Times of that date—is now allowing 25 per cent. of all the import duty recovered as administrative charges for the process of recovery. With 25 per cent. administrative charges, the exporter is getting back only 75 per cent. of the import duty paid. That is the extent of the tens of millions of book entries that are required to substantiate the amount of import duty paid.
    The Financial Secretary broke off his correspondence with me. He had no idea that I was returning to the House. [Laughter.] I make him look foolish today. He broke off his correspondence and said that the matter was not worthy of further consideration.
    The Financial Secretary to the Treasury (Mr. Niall MacDermot): My recollection is—the hon. Gentleman did not tell me that he intended to refer to this matter, or I should have looked up the correspondence—that I broke off the correspondence because of the discourteous manner in which the hon. Gentleman was conducting it.
    Sir G. Nabarro: I apologise if the hon. and learned Gentleman thought me discourteous. My original correspondence—I tell him this so that he may go and check it—was with his right hon. Friend the President of the Board of Trade, who is primarily responsible for the promotion of British exports. I am intimately concerned with the promotion of British exports, and have been for 20 years. It was in pursuit of that ideal that I was trying to knock some sense into the Board of Trade and into the Treasury, but the Financial Secretary broke off the correspondence. He did not think that I was returning
    1484
    to the House. The fruits of my labours will be manifest this afternoon.
    The Minister of State, Board of Trade, will happily confirm what I have said about the efforts I have made. I did not wish to delay the progress of the Finance Bill by tabling such a simple Amendment as to substitute "contribute" for "conduce", but I commend to the Government that "contribute" would be a more definitive term, having regard to all the surrounding circumstances. I hope that on Report the Minister of State will table an Amendment to substitute "contribute" for "conduce". If he does not do so, I shall do it for him and advise my right hon. and hon. Friends to divide if he does not accept the Amendment.
    The Minister of State will be able readily to establish from his permanent officials the truth of every practical example I have put to him this afternoon. I have done all this in his Department and with the Customs and Excise. I want him to confirm that, for example, in relation to the extremely important contribution made to British exports by plywood packaging, which forms the bulk of the packaging for the heavy consignments going out of Britain today, the Customs and Excise will be able to say, when the Bill is enacted, "We will no longer charge import duty to manufacturers of plywood containers on the plywood which they are employing for manufacturing, subject only, in retrospection, to the exporters being able to prove that the full quantity of dutiable plywood imported and appropriately delineated, has indeed found its way as a contribution into British exports".
    If the hon. Gentleman can give me that undertaking, I shall happily support the Clause, otherwise I must reserve judgment on this compendious and complex Clause and seek to amend it at a later stage.
    4.30 p.m.
    Mr. Sheldon: The hon. Member for Worcestershire, South (Sir G. Nabarro) attaches great importance to obtaining drawback in respect of the plywood used in the manufacture of certain items of packaging for goods for export. However, I am sure that there are other items which may be more important than the one with which he is concerned. I know of no exports which have been frustrated because of the inability of an exporter to

    1485
    claim the drawback on the plywood content of the packaging.
    Sir G. Nabarro Sir G. Nabarro rose——
    Mr. Sheldon: When one rises one does not sit down immediately.
    In the main, the 10 per cent. import duty and the drawback that is obtainable in respect of this does not weigh very heavily in the minds of the manufacturers of the export goods concerned. The hon. Gentleman is presumably considering his own position. I am considering the position of the exporter of a wide range of products. When he adds up all the factors, I doubt very much whether such an exporter spends many sleepless nights considering whether he will be able to get the drawback on plywood for packaging.
    Sir G. Nabarro: The hon. Gentleman has imputed to me the use of the word "frustrated". I did not say that any British exports had been frustrated. I said, though, that the cost of British exports was inflated by the difficulty of securing the recovery of the import duty. The rule should be never to charge import duty on raw materials or on part-manufactured or manufactured goods which are subsequently exported. This should be the Chancellor's axiom.
    Mr. Sheldon: The emphasis now seems to have shifted from his questioning the importance of the points raised by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin), covering a wide range of imported plastics, to a question of principle.
    I am on a much wider point. I am considering the pattern of international trade and the changes which have taken place, especially over the last few years. What I am concerned about is the greater specialisation in products and services, particularly in sophisticated Western European countries, which has gone on for some time now. Nowadays, completed products are very frequently made from a number of components and services coming from a number of countries. This is increasingly becoming the case. This country sells such components and provides services to people abroad who may be making them up into one completed product and selling it.
    We must take part in this trade, in which we ourselves buy products from
    1486
    one country and services possibly from another country and retain here in our own country the right to complete the finished and final product, in order to be able to export competitively. It is important that we have control over the final product, largely because very many types of further business flow from this. Control over the final product means that such component orders as there are for the final product are the more likely to be placed in this country because of proximity, ease of communication, and so on. This in itself can be of very great value.
    In the past, it was not necessary to be quite so flexible. Then we had a full range of industry able to supply both the products and the services used in creating the final product. In the new type of international competition which exists today, if we wish to retain our share of trade we must be competitive, not only on one final product but on each of the component parts within that final product.
    This is becoming more difficult as countries in Western Europe, in particular, are able to send goods from one to another and so establish their own particular specialisations. If we wish to compete effectively, we shall have to take greater advantage of this specialisation in Europe and, consequently, ease the task of claiming drawback.
    I am sometimes disturbed at the concern that Customs and Excise show about the avoidance of Customs duty. We see this, for example, in Customs-free zones at airports, a question which we shall be dealing with later in the Bill. Customs-free zones have come to Britain rather later and less fully than they came to other countries. This excessive concern with avoidance is somewhat reminiscent of the Inland Revenue's obsession with avoidance. However, there is one crucial difference. When the Inland Revenue is concerned about avoidance, there is greater cause for concern, because taxation has, among many other attributes, the qualities of increase of equality, elements of fairness in some of the taxes raised, and raising of revenue.
    These elements of social justice and raising of revenue are not found in the import duty to anything like the same extent. The import duty is almost solely

    1487
    concerned with assisting industry, with assisting exports, and with diminishing imports. Judged by these standards, there is less of a case for such excessive concern about avoidance. Because of this, I am very happy to see the new definition of "equivalent articles".
    The example given by the hon. Member for Wanstead and Woodford was of considerable value in showing that when imported goods are placed against other goods in the home trade and exported there could be some avoidance of import duty. However, this is covered by the safeguard in subsection (2,b). I admit that this gives a greater administrative discretion, but I do not find this so distasteful as perhaps do some hon. Members. We have to take some risks if we are to find all the export opportunities available to us. The problem which my right hon. Friend the Member for Basset-law (Mr. Bellenger) mentioned—about chemicals coming in and duties being paid, with the consequent loss of interest on those payments—could be covered by an increasing leniency in the way in which articles are admitted under bond.
    I should like to see an easing in this respect. This is something which could be quickly done and would be administratively simple. An easing in the way in which articles were allowed in under bond could put this matter right.
    One of the great advantages of the new definition of "equivalent articles" concerns the large number of goods which are imported and whose product finds an outlet both in the home trade and in the export market. This is a problem for many manufacturers. They may produce a particular article from home trade sources entirely which is too dear for the export market. If they import the article, on the other hand, the duty makes it too dear for the home market.
    They are, therefore, in a dilemma. They either have to have one line of home-produced goods and another of goods which have ben imported or they have to deny themselves the advantage of having long-production runs in which both can go concurrently. In some production runs, this is impossible and, so, in many industries, as a result, exports have been sacrificed. The notion of equivalent quantities, by which one can
    1488
    be set off against another, will lead to an increase in exports of many types of goods and as a result, I am happy to welcome the Clause.
    Mr. John Peyton: I think that the Committee will be indebted to the hon. Member for Ashton-under-Lyne (Mr. Sheldon) for one of those flashes of insight which occasionally illuminate our discussions on Finance Bills. When he told my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) that when one rises one does not sit down, he said something which needs to be extolled and noted in our records.
    During this interesting and stimulating debate, I have taken the opportunity to reread the Clause. In my view—I do not intend to expand it at great length, because I realise that Treasury Ministers have other things to do than listen to this—the Clause is shot through with many phrases which I dislike.
    On page 2, line 10, are the words, "Commissioners are satisfied". Later, in line 20, are the words "as appears to the Commissioners to be appropriate". In line 30, again, "as appear to the Commissioners to be appropriate". In line 33 are the words:
    "shall be subject to such conditions as the Commissioners see fit to impose".
    In line 46 we see, "the Commissioners are satisfied that". There are further examples on the following page.
    Over the years, Governments may come and go, but the Customs and Excise goes on for ever and it is exceedingly skilful in extracting from successive Governments this kind of legislation, which vests in it very wide powers and very large discretions. I sometimes wonder which side the Customs and Excise is on. Is it on our side? Is it really in favour of British trade, or is it there simply as an obstacle?
    I know that this is to a certain extent a difficult and unfair question, but I have long been moving towards the belief that it is time that somebody had a look even at such an unchanging institution as the Customs and Excise. One of its objects in life seems to me to rewrite the Book of Genesis so that it would start with the announcement:
    "In the beginning, God created the Customs and Excise",

    1489
    and the rest of the seven days, we should be told, he spent making the remainder of the world to fit the contours of Customs and Excise.
    I am not making a flippant interjection in the debate. I am concerned that this remarkably powerful and rigid body, which is vested so often in our legislation with such wide discretions and powers, should modernise itself and be made to realise that it should be on the side of British traders and that at all costs tedious and tiresome delays in the sacred name of evasion must be avoided. Before the hon. Member for Ashton-under-Lyne leaves the Chamber, I want to say that I agreed with his views on this point.
    4.45 p.m.
    I hope that Ministers will realise that this is not particularly a party point. As I conceded at the beginning, Customs and Excise legislation is something for which successive Governments have been responsible and very often the same rather tiresome phraseology is repeated in it.
    The Minister of State, Board of Trade (Mr. Roy Mason): Perhaps I ought to intervene at this stage to explain what this long and complicated Clause is designed to do. It seems unusually long—nearly three pages—and seems to be very complicated. This is, however, because we have to embody in the Clause much of the wording embodied in earlier legislation and we are referring specifically to Sections 7 and 9 of the Import Duties Act of 1958.
    The Clause makes two additions to drawback. We are, in the Clause, making an effort to help exporters a little more. The two additions are what is loosely described as "equivalence" and an amendment to the arrangements for the payment of drawback on containers. The hon. Member for Worcestershire, South (Sir G. Nabarro) will be particularly interested in this.
    Drawback is a simple matter. There is no difference between the two sides of the Committee on this. It has been agreed upon—this has been in operation for many years—that, if an ingredient or part is imported into this country which goes into a finished export product, the exporter may receive the drawback of the import duty. That is a clear and simple process of getting his drawback of the import duty
    1490
    where he has to import a part which has gone into an export product.
    We discovered during the operation of drawback that there are one or two cases, not very many, in which, on occasion, a person has been importing a part or an ingredient, and, for one of many reasons—it may be lost at sea or delayed—he has been obliged to get a domestic part or ingredient which has then gone into the export product. We have decided in this Clause to call them "equivalence" and to allow the exporter the import duty drawback, provided that he still imports the ingredients similar to those which he has put into the export product from the domestic market.
    This is an easement to the exporter. There are not many cases, but that is what the word "equivalence" means——
    Mr. Bellenger: Although drawback will be allowed on the equivalent because, for one reason or another, the manufacturer has not been able to import, must he use the import which he eventually brings into the country in the same way to produce goods for export, or could he use it for the home market?
    Mr. Mason: The person concerned can use it for home market production or for export provided that he imports a similar part to that which he is obliged to get from the domestic market to put into the export product.
    The other addition is the Amendment about drawback on containers. In the past, this has been so tightly drawn that when there has been a wrapping around an export product, that wrapping alone has been entitled to the drawback. For example, if we were exporting herrings and they were wrapped in a Cellophane wrapping, only the Cellophane wrapping would be entitled to be recognised—[Interruption.]—if it were eligible, and not the wooden crate which surrounds the Cellophane wrapper.
    Sir G. Nabarro: The hon. Gentleman misunderstands me. He said "if it were eligible". I intervened to say something. I apologise for doing so sedentarily. But I notice that the Chancellor of the Exchequer is much more sedentary. He is fast asleep, and I must wake him up. What I said was "dutiable", not "eligible". That is a very different matter.

    1491
    I am on the nub of the issue on the matter of export containers, and the hon. Gentleman must be very careful to tread warily in this matter. I carefully explained that softwood and hardwood coming into Britain for use in export containers are not dutiable on import, but plywood is dutiable. Therefore, in the realm of heavy containers it is the import duty on plywood only, at 10 per cent., which should be remitted in order to prevent a compendious and complex process of recovering it under drawback.
    Mr. Mason: The hon. Gentleman misconstrues what I am saying. I am referring to our amendment about the packaging of an export product. The provision has been so tightly drawn that only the initial cover—it might have been a Cellophane bag—and not the crate was eligible. I cited the export of herrings, where there is a Cellophane wrapping and then a crate. Because of the tightness of the law, only the Cellophane wrapping was recognised and not the wooden crate—the timber which the hon. Gentleman might have imported going on to an export product. Those are the two additions.
    The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) raised a number of points. He complained about a number of firms who had to make an effort to prove drawback, and said that the effort was so much that they did not think it worth while. The Committee will agree that it must be seen that ingredients have been imported and then exported in a finished product. The revenue must be protected, and no exploitation must be allowed. If firms think it worth while they will make the effort to apply for drawback.
    The hon. Gentleman asked whether this Clause and its complications, referring to equivalence, means that the Government want some administrative corner cutting. That is not really it. It is an easement for exporters.
    The hon. Member spoke about imports of an expensive ingredient and the possibility of there being a cheaper ingredient at home and wondered whether there would be a hidden export subsidy if one or the other went in. I can assure hull that the Commissioners will take into
    1492
    consideration the difference in values between an imported ingredient and a domestic one. I also assure him that there is no attempt here at export subsidy. If there were an export subsidy, it would contravene G.A.T.T. and E.F.T.A. The practice that we are introducing is used in other countries, particularly France, Sweden, Italy and America.
    The hon. Gentleman also talked about interchangeability. There must be similarity when one is using a domestic ingredient in an export product because an article from abroad may be delayed and the export order may be delayed. The items must be similar, but we must give Customs some flexibility. It might be wire, and the colour of the outer covering might be different—blue or red. If it is a non-essential item it can be ignored, but there must be similarity. I emphasise that we must give Customs some flexibility in that regard. The hon. Member also mentioned the burden of proof. It rests upon the Board of Trade in the sense that the Board must be satisfied that it is an export order, and the Customs must be obliged to check it afterwards.
    Mr. Raymond Gower: Surely the burden of proof lies with the person who is exporting. He has to establish it with the Board of Trade. It does not lie with the Board of Trade, as the hon. Gentleman said.
    Mr. Mason: The Board of Trade has to be satisfied that it is an export order. The person exporting, logically, would be making an application and would have to fill in a form and explain it. The burden rests with the Board of Trade to determine that it is an export order. When exporters are claiming drawback they have to fill in a long, detailed form, and there has to be physical examination by Customs afterwards.
    Mr. Patrick Jenkin: My point was not exactly where the burden of proof lies. That is clear in the Clause. It states that the Commissioners must be "of the opinion". That presumably means that the applicant must satisfy them. My question was how heavy was the burden of proof that exports must be conduced to or encouraged that they would not take effect without the relief being granted, or that it would merely be an assistance to them, or that the exports would be more

    1493
    remunerative? These are three very different degrees of the extent to which "conducing to" can be interpreted.
    Mr. Mason: I will not get involved in the argument between the hon. Gentleman and his hon. Friend.
    Mr. Patrick Jenkin: This is not an argument between my hon. Friend and myself. It is a question of how far one must go to satisfy the Board of Trade that exports will be "encouraged", to use a neutral word.
    Mr. Mason: How far one must go to satisfy the Board of Trade that exports will be encouraged? We have introduced a whole range of exports assistance and encouragement. This is just another one. If a person importing ingredients for export products makes application for drawback there must be Board of Trade examination followed by a physical examination by Customs. This is the general procedure. The hon. Gentleman is talking about explaining to firms how best we can do this. I should have thought that the mere fact that it is in the Finance Bill advertises it. Also, the Board of Trade will obviously explain in detail how it is to come into operation. If any hon. Members can think of ways and means of helping us to publicise it, we will consider them.
    My right hon. Friend the Member for Bassetlaw was right. This is another help to our exporters among the battery of aids that we have already introduced. There is no set time scale when one imports a part and it is going into an export product, but a connection must be seen between the imported ingredient and the exported product. In most productive processes this can be seen.
    The hon. Member for Worcester talked about his packaging——
    Sir G. Nabarro: I am not the hon. Member for Worcester. I am the hon. Member for Worcestershire, South. I do not want to be mixed up with my hon. Friend the Member for Worcester (Mr. Peter Walker) on the Opposition Front Bench.
    Mr. Mason: The hon. Member for Worcestershire, South referred to the problem that he had been having with regard to his plywood packaging. I have been led to believe, even before
    1494
    the debate began, that he has been helped considerably by the Customs on this and that the Customs are doing their utmost to make sure that his problem is eased a great deal. However, I am sure that he will be interested in subsection (7) where a further step is being taken to help him by loosening the definition of packaging so that it is not the immediate cover which counts but a wooden crate as well.
    Sir G. Nabarro: I am not helped, neither are exporters helped, unless the hon. Gentleman will be unequivocal in reply to this question. The Clause says in subsection (2,a,ii) "either by remission". The gravamen of my case to cut out the vast amount of paperwork between Customs and Excise and thousands of exporters is that we want to get the import duty on plywood removed so that it is not paid at all, subject to confirmation later that the plywood has been used for the purposes of contributing or conducing to exports.
    Mr. Mason: I am advised that what the hon. Gentleman is asking for would not be possible. It would undermine our basic concept of drawback.
    I agreed with my hon. Friend the Member of Ashton-under-Lyne (Mr. Sheldon) that discretion must be given to Customs on the question of equivalences, especially in respect of production runs. In a production run there may be domestic ingredients going through with a small percentage of imported ingredients, and if there were a sudden demand arising from an export order one could not separate the whole process and have a complete, detailed check on the imported ingredients throughout the run just to make sure that the man was validly getting drawback. This is where Customs must have leeway to determine how best the matter can be dealt with.
    There will not be many such cases. Our estimate is that about £500,000 of revenue will be involved in the cases which may be recognised in respect of equivalence assistance. These are helpful additions for exporters, and I hope that the Clause will commend itself to the Committee.
    Mr. Gower: We can agree that the addition to the drawback principle which

    1495
    has obtained for some time increases the benefit to the exporter, but it covers only a limited territory.
    There is one main point which the hon. Gentleman has not answered. It is vitally important that this power, as far as it goes, should be exercised to the very maximum. There may be some concern in the minds of hon. Members on both sides whether the wording referred to by my hon. Friend the Member for Yeovil (Mr. Peyton) may lead to a mystique being applied in the administration of these powers, and whether it may mean in some cases that they will not be used to the maximum. We should have liked an assurance from the hon. Gentleman that terms such as "in the opinion of the Board" and "as the Board see fit to indicate" do not mean that these powers are designed as an absolutely basic and essential protection for the revenue and no more.
    As a simple example of contrast, I cite the powers in respect of grants under B.O.T.A.C. Such powers are different. Those grants cannot be allocated to every person who applies. But in the case in question surely it should be the objective of the Government and the Board of Trade that these powers should be applied in every instance where the circumstances are appropriate for them to be used. Can the hon. Gentleman or his right hon. Friend give an assurance that the wording is not designed to narrow the application of the powers? He has not done so yet, but it is important that he should.
    5.0 p.m.
    I agree with the hon. Gentleman. I was not quite sure when I heard the speech of my hon. Friend the Member for Kidderminster——
    Sir G. Nabarro Sir G. Nabarro rose——
    Mr. Gower: I am sorry. I mean my hon. Friend the Member for Worcesteshire, South (Sir G. Nabarro).
    Sir G. Nabarro: I accept my hon. Friend's apology.
    Mr. Gower: I was not quite sure when we heard the speech of my hon. Friend the Member for Worcestershire, South whether he had drawn this Clause himself, or had received some modest drafting assistance from the Government, but when
    1496
    I heard the Minister replying I realised that it was a Government-drafted Clause.
    I want also to emphasise—and I hope that the Minister will take note of this—that I believe that this equivalence doctrine may become of greater importance as industry, our economy and the economies of other countries tend to become more sophisticated, because although we are now discussing what is perhaps a minor part of the whole range of exports, circumstances could make this a part of increasing importance. I hope that it will not be minimised because it is now of relatively smaller importance.
    Mr. Michael Alison: There is a drafting point in the Clause which I believe to be of some importance and significance, a view which is borne out by the Minister's use of the word "ingredients". Lines 11 and 12, on page 2, use the phrase:
    "manufactured or produced from, equivalent articles."
    I am sure that the Minister will agree that as the drafting stands that could be held to apply not to ingredients, but to what could be called producer goods. I would wager that if the importer of a machine tool, for example, went to the High Court on the basis of interpretation, he would win his case for saying that "manufactured or produced from" referred not to an ingredient, but to a producer good.
    Perhaps we can follow this through. If machine tools are included in the ambit of the Clause, a very substantial and interesting departure from Government policy as hitherto announced has been made. To look at the golden thread, to use the phrase of my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), if the goods in question are a machine tool and the exportation of other goods is the motor vehicle and the equivalent articles defined in paragraph (b) are likewise machine tools, it is perfectly thinkable to interpret this provision as applying to producer goods and machine tools.
    I agree that the Government would probably say that they were saved from that interpretation by the phrase in subsection (1,b):
    "the Commissioners are satisfied as to those other goods"

    1497
    and by the phrase, "as the Board sees fit", which is the optional permissive discretion which is given to the Board of Trade.
    But let us remind ourselves that there is a strong case to be made out for more flexibility in the importation of machine tools. I know that it is Government policy to try to discourage the importation of machine tools—the surcharge is a case in point—by discrimination against manufactured articles. But there are many people who feel that the role of this country is not to try to produce every commodity, but to make some sort of attempt at specialisation, and there are many who, in spite of the surcharge, are continuing to import machine tools because they are essential to exports and cannot be produced in this country.
    I hope that the Government will admit that this provision has been deliberately drawn in such a way as to make it possible for machine tool producer goods to come in with relief against import duties, particularly the surcharge. It is of some interest to note that the Government are taking permissive powers—if this is the correct interpretation—to amend legislation which has already been most carefully spelled out in terms of the articles which may be imported and which is not due to expire until November of this year.
    I hope that the Minister can assure us that he has drawn this provision deliberately widely to enable manufacturers who export manufactured goods and who need imported producer goods, machine tools, so to get those machine tools without having to pay the surcharge or the import duties. Perhaps in confirming that he will indicate how the Government would propose in respect of the export element of the products of such imported machine tools to determine what quantity or part of the goods produced by machine tools are to be exported and what part will remain an imported good.
    5.15 p.m.
    Mr. Terence L. Higgins: Moving the Second Reading of the Finance Bill, the Chief Secretary said:
    "I hope that I may be allowed to depart on this occasion from normal tradition in introducing a Finance Bill, which has been to go through the Clauses one after other, explaining the effect and purpose of each."—[OFFICIAL REPORT, 25th May, 1966; Vol. 729, c. 476.]
    1498
    I am sure that those of us who have listened with interest to the debate will feel that some earlier explanation on Second Reading might have saved hon. Members a great deal of thought and confusion. I also think that in view of the complexity of the Clause the Government might well have considered an Explanatory Memorandum to the Bill, which would have been helpful.
    Following the Minister's reply, we find ourselves in an extraordinary situation. He started by dealing with what he said the Clause loosely described as equivalents. We cannot have a Clause of this kind in which the definition of such a vital word is only loosely described.
    It has also been stressed by my hon. Friend the Member for Yeovil (Mr. Peyton), among others, that the Board of Trade will be given a great deal of discretion. It seems to have a discretion on the one hand between the very narrow points which the Minister of State has covered and, on the other hand, in the far broader possible interpretations of the Clause which my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) spelled out. Surely we need to clarify whether the Clause is drafted as widely as it appears to be drafted and whether interpretation within these two very wide limits is to depend entirely on the Board of Trade and the Commissioners themselves.
    In this connection, it is relevant to stress the points which my hon. Friend made about the need for publicity, because it is not sufficient simply to put the Clause in the Bill and mention it in passing in the Board of Trade Journal without spelling out in some detail in the House of Commons what it means and giving it as much publicity as possible. Are the materials covered by the Clause simply to be notified by the Commissioners as the Board of Trade feels fit, or are people to be allowed to apply to the Board of Trade to have allowance made for them, with a notification resulting from their application?
    The Minister's explanation of the Clause dealt with two quite simple matters. He stressed the case in which a raw material could not be obtained from abroad and a domestic raw material equivalent was used instead. What he did not make clear in his explanation in

    1499
    response to an interjection from this side of the Committee was whether, if an additional piece of home material was used, it would be possible for people to claim drawback twice.
    From what he said, I am not clear whether that is so. If this is the sole purpose of the Clause, surely it could have been covered much more tightly. It would seem that it is open to the much wider interpretation spelled out by my hon. Friend the Member for Wanstead and Woodford who asked a series of relevant questions. I hope that the Minister will feel able to answer my hon Friend's specific questions.
    First, my hon. Friend asked about the time scale, over what period would it be considered whether it had not been possible to obtain the raw material on the basis originally intended, some substitute or equivalent being provided instead. Secondly, my hon. Friend referred to the question of whether it was conducive to exports. It would now appear from what the Minister has said that "conducive" in this sense relates merely to the very narrow point which he made.
    In addition, would it also cover the kind of problem in which, for example, there is the import of vegetable oils, some from one source and some from another, and some perhaps from a home source, all going into the same tank and then some being re-exported? Is it his intention to cover cases of that kind as well as the very narrow case which he mentioned?
    Thirdly, my hon. Friend asked what was the definition of "equivalents". Surely we ought to have a much tighter definition than we have been offered so far, not merely whether the stuff is of a different colour or something like that, but what allowance is to be made for any difference in price of the goods which could have been imported and the price of those which could be obtained from the domestic market. Fourthly, my hon. Friend asked what criteria of the national interest were to be used in determining whether relief should be given.
    Finally, and perhaps most important, he asked about the protection of domestic producers. It appears that domestic producers could be substantially influenced by the possibility of a manufac-
    1500
    turer in this country being able to import goods in substitute for domestic goods, then to be re-exported, obtaining essentially duty-free raw materials. The degree of protection for the domestic producer would seem to be substantially and significantly reduced in the provision of components for export.
    I hope that we shall have a clearer definition from the Minister. It appears that the Clause can be very broadly interpreted in the way in which my hon. Friend the Member for Wanstead and Woodford interpreted it. It could be used as a means of encouraging our exports by promoting them rather than removing administrative inconvenience. If the Clause is drafted as widely as that, is it not open to objection from our fellow members of G.A.T.T. and E.F.T.A., because it appears to leave discretion to the Commissioners? Surely it is most undesirable to have a Clause as broadly defined as this relying to so large an extent on the interpretation by the Commissioners.
    I hope that the Minister will feel able to answer the very relevant questions which have been put, and we shall listen with interest to what he has to say.
    Mr. Norman St. John-Stevas: I should like, first, to congratulate my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) on the manner in which he opened this very important debate. He was taken to task by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) for being academic. If it was academic, his speech was academic in the best sense of the word in that it was objective, impersonal, and well-informed. He was accused by my hon. Friend the Member for Worcestershire, South of confusing washing-up bowls with the substance of British industry, but that was an error which seemed to be compounded by my hon. Friend the Member for Worcestershire, South in confusing the substance of British industry with what I thought to be an amalgam of plywood and himself, with the latter commodity playing the dominant rôle.
    My hon. Friend the Member for Wan-stead and Woodford put a number of extremely important and probing questions of detail to the Minister. I hope that before the debate on the Clause is

    1501
    over we will receive answers to these questions, some of which were also posed by my hon. Friend the Member for Worthing (Mr. Higgins). I hope, also, that we will have some comment from the Minister on the important point made by my hon. Friend the Member for Barkston Ash (Mr. Alison).
    I am concerned not so much with the detail as with the general principle that lies behind the Clause. My hon. Friends and I welcome any relief from taxation and duty, however mild, which may be conceded by the Government. It is, after all, in accordance with our general policy of reducing the incidence of taxation and removing clogs from the export trade.
    However, there is an important matter of principle involved amid the verbiage of the Clause because it illustrates the extremely dangerous tendency of the Government to confer wide discretionary powers on civil servants and officials of the Customs service to the exclusion of the rule of law. This was graphically illustrated by my hon. Friend the Member for Yeovil (Mr. Peyton) in his reference to the Old Testament.
    There is not a single discretion in the Clause. There is a double one. First, there must be a recommendation from the Board of Trade that the granting of relief is conducive to the exportation of other goods. Bound up with that is a further discretion, even at this stage, when the Board of Trade's officials and the Minister may impose such conditions on the granting of relief as
    "… would be expedient in the national interest …"
    What an extraordinarily vague phrase that is. After having got through that ambiguity, one finds another exercise of discretionary power by the Commissioners of Customs and Excise, who may give or withhold relief, apparently at will. In these circumstances, with discretion so broad and a Clause so vaguely worded, it is vital that some guidance is given—I hope it will be given today—about the principles on which this discretion will be exercised, because we have had no indication of that so far.
    Another consideration of vital importance is that provision should be made for decisions about relief in particular cases to be widely publicised so that businessmen and industrialists may judge whether
    1502
    or not the goods in which they are dealing qualify for relief. In a slightly different form this point was made by the right hon. Member for Bassetlaw (Mr. Bellenger).
    I had hoped that the Minister would say what plans he has for letting all the interested parties, including hon. Members, know what is going on. But there was no sign of any such plan—of any grasping of the importance of spreading this information to the interested parties as widely and as quickly as possible. Only if this is done can there be an assurance in practice that these powers are not being misused.
    It should be remembered that there may be a conflict between the two discretions. The Board of Trade may recommend relief while the Customs authorities may withhold it. What is the unfortunate importer or manufacturer to do in those circumstances? Surely there should be some provision for him to escape from being ground between these two millstones.
    We accept that there must be a degree of discretion in this matter, but the Committee is entitled to assurances about the manner in which this discretion will be exercised. We therefore ask, as a minimum, for an indication of the predictable lines of principle on which the Minister intends that the Customs authorities will act, for the widest publicity to be given to the decisions which are taken and for an assurance that any decisions which are taken will be speedily made public.
    Mr. David Howell: The Minister's remarks helped to clarify some facets of this incredibly obscure and complex Clause, but he said, rather revealingly, that this was part of a battery of aids which the Government were bringing to exporters. If this is part of the campaign to raise exports at this critical juncture, what an incredible place to hide it.
    It would be helpful if the Minister would say what part the Clause, and this extension, is in the overall export strategy, if there is such a strategy, of the Government. At present, many businessmen and exporters are bewildered at the variety of export aids; export rebates, cheap credit for exporters, the S.E.T. rebate, overseas trade missions, and now

    1503
    the one we are discussing. Against the background of the extremely gloomy trade figures of the last few days and the critical situation which exists, it is time to think about consolidating and clarifying all these ideas on export aids so that something may be done and that businessmen and exporters can understand exactly where they stand.
    Sir Harmar Nicholls: From the way in which my hon. Friend listed those export aids it might appear that a great deal is being done. In fact, none of them amounts to a row of beans for helping exports, and that should be on the record.
    Mr. Howell: I thank my hon. Friend for reinforcing what has been said about the depressing position of exporters.
    Before we part with the Clause it would be interesting to know from the Government how they see this provision as part of their strategy and whether it is intended to supplement the rebate through the S.E.T., which will have a small effect in offsetting the damage which the S.E.T. will do to exporters by taxing services. Will this extension help to offset the effect of the S.E.T. on the services used by exporters?
    In short, is the Clause an additional ingenious device to offset the effects of the unhappy and misconceived S.E.T. because, if it is, it would be helpful if the Government came clean and said exactly for what it is intended and what damage it is designed to repair? At present, we do not know whether it is a serious weapon and part of a genuine export strategy, which I hope it is. If it is, my only comment is that it seems peculiar that it should be buried in this obscure and complex Clause. Even more peculiar is this ill-defined arrangement between the Board of Trade and the Customs for deciding who is entitled to what.
    We want to know whether this is part of a serious strategy to increase the competitiveness of British exporters or whether it is a bright idea thrown into the Bill and one which, therefore, will add to the mass of muddle for which this Administration is becoming justly famous.
    5.30 p.m.
    Sir G. Nabarro: I rise for only two minutes to press the Minister of State,
    1504
    Board of Trade, about the case with which I illustrated my arguments. I must point out to my hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) that I do not accept his sneers about my advocating the case of plywood. Evidently he did not listen carefully to my speech. Plywood is the most important single commodity employed in packaging British exports. It is brought into this country with a duty of 10 per cent. I declared my interest, very properly, as a director of the largest plywood importers and distributors in Britain. I have, therefore, a healthy stake in the export trade. I am sorry that my hon. Friend descended to sneers.
    Mr. St. John-Stevas: I was not sneering at my hon. Friend; I was protesting at the sneering of my hon. Friend, directed to a colleague earlier in the debate.
    Sir G. Nabarro: I am sorry. I did not hear that.
    I declared an interest and I related my personal experiences from the Chancellor of the Exchequer's room in 1961, right up to date, in this context, which has possibly produced this Clause in a Finance Bill. It is, therefore, with much regret that I heard the Minister of State gabble—I was not quite sure what he said, because he spoke so quickly—an implication that the Clause would not make any difference to the position in relation to these large quantities of dutiable plywood imports, on which, I readily concede, the import duty can be reclaimed by the exporters—but only after a huge amount of work.
    I refer to the point made by the right hon. Member for Bassetlaw (Mr. Bellenger), who pointed out that it often takes nearly 12 months for the Customs and Excise authorities to repay import duty, all of which industry has to finance. If the Minister of State has conceded that the position in respect of plywood is not ameliorated or improved as an aid to exporters by means of the provisions of the Clause, I want him to tell the Committee why.
    I should also like to know why the words to which I drew his attention, "either by remission", are not applicable to the most formidable case that I have put forward to aid the British exporter—

    1505
    the case at which my hon. Friend the Member for Chelmsford glibly sneered. I hope that the Minister will now apply himself to the point and tell me why the phrase "either by remission" does not apply to the complex plywood drawback situation.
    Mr. Mason: I do not intend to reply to the point made by the hon. Member for Worcestershire, South (Sir G. Nabario)——
    Sir C. Nabarro: Why not?
    Mr. Mason: —because he has run this personal campaign for a long time. He is trying to extract from the Government wholesale remission on all plywood imports and not merely those which go into material which is re-exported. The export has to be proved, and particulars of the trade have to be produced. Until it is proved he will not get full remission. I shall not go into that question further.
    I thought I had already answered some of the points which have been raised, especially by the hon. Member for Worthing (Mr. Higgins). One point concerned the time scale. No time scale is laid down. It cannot be laid down. Nevertheless, it is essential that there should be a connection between the import and export of goods. In many production processes this can be related, and a time scale can be roughly worked out.
    Another point concerned domestic producers. One or two may be concerned about the situation, but there is no real cause for anxiety. The interests of these producers will be constantly watched. Some cases have come forward during recent operations which have illustrated that there is some worry about the matter, and we have now introduced the principle of equivalence to help them, to the extent of £500,000 a year. The question of imported oils going into a production process alongside domestic oils was raised. There may be a temporary shortage or a slow-down in the supply of foreign oils and the whole production process could be done with domestic oils. In that case equivalence could be claimed, provided that at a later stage foreign oils came in again.
    Subsection (3) covers the question of claiming drawback twice. It is put in to make sure that this cannot be done. There was also the question of the wording
    1506
    of the Clause in connection with machine tools. The whole of this wording has been taken from the 1958 Act, and I can give an assurance that machine tools are not involved in the way suggested. Finally, it was suggested that the Clause was too loosely worded. The point is that the Customs and Excise authorities and the Board of Trade will not be rigid in their application of this provision. The spirit of the Clause is to provide help.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 2.—(DRAWBACK ON TOBACCO.)
    Question proposed, That the Clause stand part of the Bill.
    Mr. Higgins: The Committee will not wish to deal with the Clause in great detail, but in view of the confusion which arose on Clause 1, and the great difference between the Minister's interpretation and what seemed to us to be a reasonable interpretation of it, it would be as well to hear from the Government precisely what the Clause is intended to do.
    As we understand it, it will enable firms who operate duty-free shops in airports to obtain drawback on tobacco more easily. Where the tobacco is warehoused in preparation for such a shop it will be easier for the shop to claim drawback. It is well known that during the General Election the Chancellor made reference to an increase in the amount of duty-free spirits which travellers would be allowed to bring in. He did not cover the question of cigarettes, but we understand that it is a purely administrative provision designed to facilitate the mechanics of the matter. We welcome the provision as a simplification of Customs procedures.
    It is also relevant to ask a question concerning the word "leaving" in paragraph (a). The paragraph refers to
    "persons leaving the United Kingdom by air".
    We may presumably ask whether consideration has been given to the possibility of similar facilities being granted in respect of people returning to this country by air. We find ourselves in an extraordinary situation, in which a certain brand of British cigarettes can be exported to Calais and bought there by a British tourist returning to this country, who can

    1507
    bring them in duty-free. This means that the profits presumably accrue to the people retailing those cigarettes in Calais.
    The magazine Which? carried out a survey relating to the purchase of British duty-free products at Continental airports by people coming back to this country. Can the Minister tell us whether this provision can be extended so that it covers people both leaving and arriving? We should be grateful if he would tell us if this is the correct interpretation of the Clause.
    Mr. MacDermot: The hon. Member for Worthing (Mr. Higgins) has correctly stated the effect of the Clause. It falls into two parts. The first deals with the extension of airport shop concessions. The Clause regularises an extra-statutory concession which has been in operation for some time, because it was obviously reasonable to do this. Duty-free shops have been set up at the principal airports in order to enable duty-free sales to be made to persons leaving the United Kingdom by air for destinations abroad. The object is to increase our export earnings by encouraging tourists to spend their currency in this country instead of abroad. That practice is adopted in many other countries.
    It is not the intention to extend the provision to returning passengers, because such passengers are in the same position when they land here as is someone who has never left the country at all, and people would think it very unfair that such travellers should be able to buy in this country duty-free goods which people who remained here could not. The returning passenger has his concessionary allowances, which were recently increased, for goods which he buys abroad, and this has greatly simplified the Customs procedures for both visitors and British tourists on returning to this country. But I have never heard it suggested before that the duty-free shop facilities should be extended to returning passengers.
    The second part of the Clause deals with a small point to facilitate the export of tobacco from this country. As the Section in the Customs and Excise Act is drawn at the moment, it limits the payment of drawback of tobacco duty on tobacco exports to tobacco which is
    1508
    exported by a tobacco manufacturer unless he has a licence. The result is that a person who is not a tobacco manufacturer but who wants to export on drawback has to take out a tobacco manufacturer's licence, on which there is minimum duty of five guineas a year. This, we feel, is an unnecessary irritant and hindrance, and we thought this was a convenient opportunity to remove it.
    Mr. F. A. Burden: I do not think that the hon. and learned Gentleman the Financial Secretary has got the point which my hon. Friend the Member for Worthing (Mr. Higgins) was making. He stated that the object of part of the Clause was to facilitate exports from this country. While accepting that there are difficulties in this, surely it is just as good and will result in a saving in foreign exchange if people who bring in British merchandise which they buy abroad are enabled to purchase it in the concessionary shops before they enter the country and thus pay sterling for it rather than buy it abroad where, although it is British merchandise, they still have to pay sterling and spend foreign exchange. It would seem to me, therefore, that although this idea has not been proposed before, it might be helpful.
    The Financial Secretary said that this suggestion, if put into effect, would enable people coming into this country to buy duty-free articles which they could not buy other than in an export shop on an airport, and which the ordinary public could not buy. But they already do that by means of the concession that travellers are allowed on re-entering the country. Therefore, the point is not really valid.
    Mr. Peyton: I wish to congratulate the Financial Secretary on having made perfectly clear the reason why one is permitted to go to a duty-free shop on the way out from the country, and divorced his remarks from any suggestion that this was a privilege conferred on the travelling public. My only concern is to ensure that this sensible measure should be sensibly administered.
    My mind is fogged by the formalities. Passengers are asked to produce their tickets. Surely they would not be in the place where they are without tickets. They then have to fill up a form. I do not know who reads those forms. One

    1509
    has to get an application form in order to buy a bottle of whisky or 200 cigarettes. Who reads these forms afterwards, and of what possible value are they?
    I am not trying to hold up the proceedings. I do not want to delay the Financial Secretary's reply, but I am making the same point as I made on a previous Clause, namely, that the whole of our Customs administration is too fogged with regulations, the purpose of which has been forgotten.
    Mr. MacDermot Mr. MacDermot To the hon. Memoer for Yeovil (Mr. Peyton) I would say that there have been extensive attempts at evasions of duty by abusing these duty-free shops. This is one of the reasons why there have to be the strict controls which he apparently finds irritating but which I think most people have come to accept. I have found similar procedures in foreign countries. There are similar forms to be filled up there.
    I would only remind the hon. Gentleman that if, when he is abroad, he buys s packet of English cigarettes, the loss of sterling to this country is balanced by the foreign currency which will have been paid to get the cigarettes abroad.
    5.45 p.m.
    Sir Douglas Glover: I agree with the Financial Secretary about the forms. I certainly do not agree with my hon. Friend the Member for Yeovil (Mr. Peyton), for I feel that there would be a great deal of abuse if the situation were eased much more than it is at the moment.
    I should, however, like to mention a somewhat different point. I find that when I go to Jersey, which is within the orbit of this country—in other words, I am not really going to a foreign country—I am entitled to concessionary liquor and cigarettes, but that when I go to Dublin, which is in a foreign country, I am told that I am flying on an internal air route and that there are no concessions. I should like to know the reason for this discrimination against the Southern Irish.
    Mr. St. John-Stevas: In welcoming this small concession from the Financial Secretary, may I express the hope that it will form part of a general improvement and speeding-up of Customs arrange-
    1510
    ments at London Airport to coincide with the coming into operation of the new cargo terminal in December, 1968.
    Mr. Antony Buck: Will the Financial Secretary clarify one small point? This Clause deals solely with tobacco. What other concessions will be dealt with? Are they still on an entirely ad hoc concessionary basis or are they provided for elsewhere? I apologise for my ignorance about this.
    Mr. MacDermot: We need the special concession for tobacco for this reason. Section 183 of the Customs and Excise Act only provides for the payment of tobacco duty drawback on United Kingdom manufactured tobacco which is warehoused for use as stores or for exportation by post. It was to overcome those narrow words that we introduced this amendment in this Clause.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 3.—(EXEMPTION OF E.F.T.A. GOODS FROM DUTIES ON HOP OIL AND HOP EXTRACTS.)
    Question proposed, That the Clause stand part of the Bill.
    Mr. Higgins: Again, I rise simply to ask if we may have some explanation of this Clause. It seems on the face of it to be fairly straightforward, inasmuch as it appears to extend E.F.T.A. exemption of Customs duties to hop oil and hop extracts. The question arises, first, what will be the effect on our own hop growers? Last year we exported about 1,000 tons of hops and, I understand, earned over £500,000 in the process, and we imported virtually none.
    May I ask the Financial Secretary what he expects will be the effect on our balance of payments as a result of this change? Does he think that there will be any significant increase in the import of hop oil which last year, I understand, was only 151 ounces? Could we have some idea whether he thinks this is a purely nominal change which is unlikely to affect the pattern of trade, or whether it will effect an increase in imports and presumably a reduction in our exports?
    The Minister of State, Board of Trade (Mr. George Darling): The effect on the balance of payments will be practically nil. There will be no real effect on hops because they are excluded, being agricultural products. The purpose of the Clause is to fulfil, as I am sure the hon. Member understands, an obligation under the E.F.T.A. Convention. The effect is to remove the duties on imported hop oil and hop extracts which originate in and are consigned from the European Free Trade Area.
    These duties were imposed in 1925 to help the hop industry get going after the First World War. They are entirely protective in character and under the Convention there is an obligation on us to remove protective elements in revenue duties on imported goods other than agricultural products. As hops are an agricultural product, they are not involved. The removal of duty will apply only to hop oil and extracts.
    As I have said, the effect on the balance of payments is negligible. In trade terms, as the hon. Gentleman himself hinted, I think, the whole thing is quite insignificant.
    Mr. John Biffen: One cannot suppose that this is one of the monumentally significant Clauses in the Bill, but there is one question I should like answered. The British hop industry is one of the most highly controlled, through the Hop Marketing Board. Although the Clause does not itself refer to hops, I assume that both hop oil and hop extract must come from hops, so that any change in duty on these imported products must to some extent have an effect upon the balance of home production.
    My question is this: was there any consultation with the Hop Marketing Board? Is there any likely implication for United Kingdom hop growers?
    Mr. Darling: There were no consultations, and we have had no representations from the Board. The trade in these two products is so small that I do not expect that we shall have any representations.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 4.—(REMOVAL OF RESTRICTION ON DELIVERY OF IMPORTED VODKA FOR HOME USE.)
    Question proposed, That the Clause stand part of the Bill.
    Mr. Patrick Jenkin: We come now to vodka. I admire the sense of propriety of right hon. Gentlemen opposite who put vodka into Clause 4. It seems entirely appropriate.
    The Clause is quite simple, but it raises one or two questions. Section 109 of the Customs and Excise Act, 1962, which is the one which provides for the three-year maturation of spirits, has many exceptions, some of them being well known. It is well known, for example, that gin may be sold the moment it has been rectified. It is treated as a compound because of the flavouring in it. In fact, it is a very highly rectified spirit, very pure, and can be used at once. Vodka, as the Committee will know, is in exactly the same case. True vodka, I am informed, is really a pure spirit, and the home producers of vodka are able to avoid the three-year maturation period only by putting some minor flavouring into it sufficient to qualify it as a compound so as to bring it within the exemption.
    The extension of the exemption to imported vodka seems perfectly reasonable and sensible. The words in the Clause,
    "which have had a flavour communicated thereto"
    are put in with a purpose, because it might well be that something which could give a flavour did not come within the description of a compound.
    I have one or two questions about the effect of the Clause. It is in no way clear from the statistics how much vodka was imported during the last year for which figures are available. It is my belief that there was very little indeed, a negligible quantity, but it would be useful to know how much was imported, and what the effect of the Clause will be in increasing the imports of vodka.
    Is it the intention to increase imports of vodka from overseas, presumably from Russia and Poland, where it is made? If that is the intention, is it part of a negotiation whereby we have something in exchange? Will it help British exports, whether of spirits or of other products?

    1513
    What do the Government envisage as the effect of the Clause? As I say, the modification made seems sensible in the circumstances, but we should like to know how the Government expect it to work, and with what result.
    Mr. MacDermot: The Clause is introduced to remove a discrimination which would offend against the E.F.T.A. Convention, a discrimination against imported vodka which arises almost accidentally from the wording of our existing legislation. The general rule is that immature spirits, that is, spirits less than three years old, may not be delivered for home use. But there are certain exceptions, and these are in favour of spirit beverages which are traditionally consumed immature. As regards those manufactured in the United Kingdom, the exception is expressed in quite general terms, but where the exception relates to imported goods, it is specifically limited to two spirits, Geneva, more commonly known as gin, and liqueurs.
    Vodka has grown in popularity in recent years. The type which is made here comes within the general terms of the exemption as it applies to United Kingdom-manufactured spirits, but the imported vodka does not get by as Geneva or liqueurs, and it is this which produces the discrimination which offends against the Convention. Under the terms of the Convention, we are bound to remove it.
    That is the sole intention. It is not that we want to affect or influence in any way the current of trade. The effect on the revenue is expected to be extremely small. In so far as there is any, there may be a small gain, but it will be of no significance, the reason being that the duty on immature spirits is slightly higher than that on mature spirits.
    The Clause has been agreed not only with the importing interests concerned but also with the United Kingdom manufacturing interests.
    Mr. Biffen: It may be the Financial Secretary's purpose that this change should have no effect, or no noticeable effect, upon the importation of vodka, but it does not follow that there will be no effect. We do not import substantial quantities of vodka from the Scandinavian countries, but, as my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) pointed out, the
    1514
    main sources of importation, so we are led to understand—only the hon. and learned Gentleman can confirm this—are the Soviet Union and Poland. Is it not likely, therefore, that as one of the consequences of Clause 4 there will be an increase in imports of vodka?
    As I understand it, notwithstanding the E.F.T.A. Convention, we export a great deal of immature whisky to Sweden, and always have done. I understand—I am sure that my hon. Friend can confirm this—that that trade continues. If we waive the rule on that account, for perfectly legitimate reasons, permitting the Swedish importation of raw whisky, we are entitled to be sure that we do not put ourselves at a disadvantage by accepting the possibility of freer imports of Russian and Polish vodka into this country unless we know, on the other hand, that our own spirit manufacturers have improved access to the markets of Eastern Europe.
    Mr. MacDermot: I did not say that it was our intention that this should have no effect on the trade. I said that we had no intention of producing any effect, which is not the same thing. The intention is not directed to its effect on trade but to adhering to our E.F.T.A. Convention, which we are bound to do.
    The hon. Gentleman has raised fears in his own mind about the effect of the Clause. All I can tell him is that these fears are not shared by the manufacturers in this country, or they appear not to be, because the manufacturers have agreed to the Clause.
    6.0 p.m.
    Mr. Buck: I am sorry to ask the Financial Secretary in terms whether he thinks that the Clause is watertight, but I should be grateful if he could indicate what vodka is and whether it is sufficient to refer in the Clause to
    "vodka consisting of spirits which have had a flavour communicated thereto or an ingredient or material mixed therewith".
    Is he satisfied that other items which we would not normally think of as vodka would not be exempted under the Clause?
    Mr. MacDermot: If the hon. Gentleman wants a legal definition, I should want notice of that question. All I can tell him is that I come from the West of Ireland where the equivalent drink is poteen, which, as anyone with experience

    1515
    would know, is distilled from a remarkable variety of raw materials. Whether the same applies to vodka I do not know.
    Earl of Dalkeith: Has the Financial Secretary received any representations from the Scottish whisky industry against these proposals?
    Mr. MacDermot: None at all.
    Mr. Biffen: As we now have vodka defined, and, as my hon. Friend the Member for Colchester (Mr. Buck) has indicated, somewhat dubiously defined, in a Finance Bill, may we now expect the Customs and Excise statistics to itemise vodka as a separate category?
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 5.—(REBATE OF DUTY ON HEAVY OILS.)
    Mr. Peyton: I beg to move Amendment No. 132, in page 5, line 18, to leave out "twopence" and insert: "one penny".
    The taxation of hydrocarbon oils is both onerous and complicated. I have found it extremely difficult to ascertain exactly the yield from this tax. My researches here, despite considerable assistance, did not yield any positive result. Having consulted the annual report of the Commissioners of Customs and Excise and still not knowing what the yield was, I was driven to consulting on the telephone one of the chief victims—in other words, a major distributor of the product.
    I understand—and I should be obliged if I could be corrected if I am wrong—that the yield from the fuel tax of 2d. a gallon is £81 million. That is made up of £57 million on fuel oil and £24 million on gas oil and kerosene. I hope that whoever replies to the debate has the figures and will be able either to confirm or deny that that is the right figure for yield.
    We are discussing a very important tax which is highly germane to the fuel policy of this country. Although the Minister of Power is not in his place—I do not want to make too much of this point—I hope that before the end of the debate he will be present. I raise this matter not flippantly but as a matter of cardinal importance to the fuel policy of the coun-
    1516
    try, and I am slightly surprised and disappointed that no representative of the Department principally concerned is here to listen to the argument.
    Perhaps I can be forgiven if I say how glad I am personally to renew a partnership with my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) which I think he and I have reason to think was fruitful in the past. Today we celebrate a reunion. I hope very much that the Government will show that they have an open mind on these matters and that they are aware that this is not merely a party case but one of the highest importance from the point of view of this country's fuel policy.
    The sponsor of this tax was my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd). As Chancellor of the Exchequer, he said that he was introducing it as a means of raising revenue. But subsequently the purpose of the tax has changed. It has now been made clear that its real purpose is to protect the coal industry. The difficulty which the Committee is in is that we do not have with us the Minister of Power, who is responsible for this admirable document, the White Paper on Fuel Policy, from which I want to quote. I will excuse the Minister of State, Board of Trade, if he is not familiar with every line of it.
    Mr. Darling: There is some confusion which probably arises from the way in which the Clause had to be drafted in relation to all the other oil taxation to which the hon. Gentleman has referred. This Clause deals only with lubricating oil. It has nothing to do with fuel oil.
    Mr. Peyton: Is the hon. Gentleman saying that this Clause does not touch on gas oil, kerosene or fuel oil?
    Mr. Darling: There will be an explanation of the Clause, but, because of the way in which we conduct our business, we must take the Amendments first. The Clause does not deal with fuel oil, gas oil and kerosene. It is directed mainly at lubricating oil. Because of the way in which our legislation on this is drafted, we have to make references to the other matters, although we are making no change there.
    Mr. Peyton: I have no wish to prolong my remarks on this point. I am sorry

    1517
    if I have misunderstood the matter. I should be happy, if it were the correct thing to do, to raise the points which I have in mind on the Question, That the Clause stand part of the Bill, rather than on this Amendment.
    Mr. Darling: Yes.
    Mr. Peyton: In those circumstances, subject to anything which my hon. Friends on the Front Bench may wish to say, I would beg to ask leave to withdraw the Amendment.
    Mr. Darling: Perhaps I have misled the hon. Gentleman. I was merely answering the point as to why the Minister of Power was not here. This i3 a Board of Trade matter dealing very largely with lubricating oils.
    Mr. Peyton: If the Minister of State can assure me that this Amendment would affect only lubricating oils——
    Mr. Darling: No, it would not. It is the Clause which deals with lubricating oils.
    Mr. Peyton: I am obliged. The point with which I am concerned is this. The original purpose of this tax was to raise revenue. Latterly it has been made quite clear by the Government that its main purpose is to help the coal industry.
    May I refer the Minister of State to paragraph 17 on page 6 of the White Paper on Fuel Policy, Cmd. 2798, which starts:
    "Following this sudden reduction in demand for coal, a number of measures were taken tc help the industry."
    It ends with the words:
    "In the 1961 Budget, a duty of 2d. a gallon (about £2 a ton, equivalent to protection in the region of 23s. 0d. per ton of coal used for steam-raising) was placed on oil used for burning."
    The point was further developed, so that there is no accident about this, in paragraph 44, which specifically states:
    "The most important of the existing measures of protection, which are described in paragraph 17, are the duty on heavy oil (and other oil used for burning) …"
    Then it goes on about the ban on coal imports. The point here is that the Government relied on this tax as a means of protecting the coal industry.
    Since the publication of that White Paper the House of Commons has passed
    1518
    an Act conferring upon the coal industry the benefit, at the expense of the taxpayer, of an immense measure of financial reconstruction. The coal industry's debt was reduced by £415 million. This was a very expensive operation from the taxpayers' point of view. One of the suggestions that I make to the Government and to the Committee is that the Act of Parliament which conferred that benefit upon the coal industry radically altered the position and the justification for retaining this tax. I noted with interest the words at the end of paragraph 44 of the White Paper.
    Naturally, no Government will go on record condemning a tax, but considering the coyness with which all Governments approach the subject of tax concessions these words in paragraph 44 are to say the least striking. The paragraph says:
    "… it can be argued that, on fuel policy grounds alone, a reduction of the oil duty, and hence of the cost of fuel to industry, is in principle desirable."
    These were not my words; they are words which I would have been very happy to use had we been on the other side of the House and had I been in the Ministry of Power. This present Administration have used them and we must welcome them for what they are worth.
    What I am hoping to hear from the Government is a clear statement that this to my mind bad tax is not to be permanently enshrined in our economy. With anything less than that I am bound to say that I would be very far from content. One of the points made by the Government in the White Paper was that fuel policy should be flexible. It seems very important at this stage that the stress on the need for flexibility should be recognised.
    Naturally, I do not want, even if I were permitted to do so, to go at length into the present problems of the coal industry. It is sufficient to say that in the present state of the industry, with a thousand men a week leaving it, one cannot be certain that over five or ten years the industry will be able to meet its main demands. This would naturally put the electricity industry in some jeopardy. I am not talking of astronomical figures like 200 million tons. It seems that those who advocate such high targets are more to

    1519
    be praised for their enthusiasm than for their realism.
    The Government should watch this changing position most carefully and, in the interests of flexibility alone, should be considering whether the time has come to abolish or halve the task, particularly on fuel oil. My second reason for putting this proposition forward is that the electricity industry, with the immense burdens imposed upon it by a modern industrial economy, needs to have the advantage of the widest and freest choice among rival fuels. That choice should not be inhibited or influenced in any wrong way by permanent taxation measures.
    6.15 p.m.
    I agree that in the short-term there may be some argument which can be made for taxation measures upon fuel. Such taxes should always be in the short term. If they are imposed in the longer term, they will result in unnecessary and dangerous distortions, which have the worst possible effect on our economy. I hope that the Minister of State or the Chief Secretary, whoever is to reply, will consider the advantageous position in which the gas industry is placed. I am not for one moment advocating that the Government should go for a policy of equal misery, and tax the raw materials of the gas industry.
    It would be a disastrous and retrogressive move if they were to do so. Having said that, I feel that the Government are obliged to bear in mind that there is no tax upon naptha. Equally there is no tax imposed upon Sahara methane. If the Government were to impose a tax it would upset the calculations of a very important sector which has a very useful contribution to make to the fuel economy of the country. I hope that I am right in saying that there can be no question of imposing a tax upon North Sea gas as and when that becomes available. To do so would again be a very reactionary and foolish thing.
    That being the case, it seems that it must be wrong to impose a savage tax upon the raw material which is used so much and is so important to the electricity supply industry. I am sure that the Treasury Ministers are conscious that there is a good case for saying that the gas industry should make an increased contribution to the country's fuel
    1520
    economy. This is in order to relieve the burden which would otherwise be placed upon electricity, with the demands which it makes upon other limited capital resources.
    I am forced to the conclusion, from whichever angle I look at this, that the retention of the fuel oil tax is an evil and bad thing. I am not speaking from any party point of view. I am talking from the point of view of one who is concerned to see that our fuel costs should be as low as possible. One has at the moment no grounds for making promises, but if the North Sea really fulfils the promise which is now apparent, then we will have benefited enormously from an uncovenanted and unhoped for contribution to our national economy. It would be folly in the extreme to vitiate the fuel policy by imposing this tax on one of the raw materials. I say, in all modesty, that I do not believe that any fuel expert, or any prophecy which has ever been made in this highly complicated subject, has ever been right and therefore one does not want to get oneself too closely wedded to a policy of rigidity and distortion.
    As I have said, I am convinced that the permanent enshrining of this bad tax in our national economy will not help our fuel interests. I therefore repeat what are the main arguments to my mind. First, the importance of flexibility which is not helped by the sort of distortion introduced by such a tax; secondly, there is the need to relieve electricity of any unnecessary and artificial burden; thirdly, there is the plain fact that discriminatory factors introduced artificially like this are bad, and that whatever their short-term justifications may be or may have been, there remains for them none in the long term.
    I do not wish to take up the time of the Committee any more, but I hope that I have said enough to convince the Committee that this is a matter which should not be allowed lightly to go by. I am for myself convinced that the time has come when we should be at least ready to remove this tax. I admit that, of course, the Government would be confronted with a serious loss of revenue, but, nevertheless, I say to them that the evil which this tax is doing is such that it would be right in the very near future to remove it, or at least to reduce it by

    1521
    half, arid I hope that when the Minister winds up the debate he will be able to assure the Committee that the Government have an open mind and would be ready, perhaps within months, to abolish a tax which, whatever its justification at the moment of its birth may have been, has long outlived its welcome.
    Sir G. Nabarro: I rise to support my hon. Friend the Member for Yeovil (Mr. Peyton), and at once reciprocate the pleasure he expressed in our being associated the one with the other. It is an association which was sadly severed in 1962 when he joined the Ministerial bench opposite and I lingered and languished on the back benches for a further couple of years. We talked together about this important matter of fuel oil duty in 1961 and in 1962, and the impact it would make on our economy, and notably upon industrial costs.
    I readily recognise that there may be some dubiety about this Clause 5 and what exactly it applies to, and if our Amendment has the effect of clarifying the position this afternoon it will indeed have performed part of the service to which we have directed the Amendment, and also it will give my hon. Friends and myself a vehicle for expressing our grave dissatisfaction at this continuing impost upon industrial productive costs.
    I may claim in this connection some slight individuality—in the proper context: on 16th May, 1961, following a Conservative Chancellor of the Exchequer having imposed the fuel oil duty on industry, I moved from the benches opposite against it, and I divided the Committee against it. Only nine Members voted against it, one other Conservative and myself, five Liberals, and, I believe, two Labour Members, the predecessor of the hon. Member for Ashton-under-Lyne (Mr. Sheldon) and the then Member for Stoke-on-Trent, South (Mr. Ellis Smith). We were rather a mixed bag.
    Though a powerful case was made against the Conservative Chancellor placing a tax on productive industry—it raised an amount of £80 million in a full year, equal then to about 8s. a ton on the cost of steel, very considerably increasing the costs of electricity generation and a number of other factors—the overwhelming majority of the Labour Party, then the Opposition, sat quiescent
    1522
    and abstained. They were frightened of their coal mining lobby——[An HON. MEMBER: "No."] I am glad to receive the acknowledgment of the hon. Member for Bolsover (Mr. Neal). He had so suborned his colleagues as to convince them that the way to sustain the coal industry was to put a tax on the competitive, basic and natural fuel, namely, fuel oil for industry.
    But the Chancellor of the Exchequer in that year, 1961, did not admit that this 2d. a gallon on heavy fuel oil was for coal protective purposes. He said it was a revenue raiser. Two years later a succeeding Chancellor of the Exchequer, also a Conservative, my right hon. Friend the Member for Barnet (Mr. Maudling) turned turtle and said it was not for revenue purposes, it was to protect the coal industry.
    I say this afternoon, in supporting this Amendment, that the circumstances of 1966 are entirely different in the context of the coal industry from the circumstances of 1963. I ask hon. Members to recall what the circumstances were in 1963. There was too much coal. It could not be sold, at home or abroad. Stocks at one time had reached the phenomenal figure of nearly 40 million tons. Coal production was over 200 million tons. There could have been a case at that stage for protecting the coal industry—I recognise that there might have been a case, though a case that I could not myself support—but since then the position has changed very fundamentally.
    Coal production year by year has fallen and reached, as I reminded the Minister of Power at Question Time yesterday, the lowest point in our history in peace time. In the last full coal year, the coal year which ended on 31st March, 1966, coal production had actually fallen to 186 million tons. My hon. Friend the Member for Yeovil drew attention to the departure of 1,000 miners a week from the coal industry. He might have added that the coal industry's manpower is now down to 450,000, again, the lowest point in our history, and it has fallen from 713,000, as it was 15 years ago, in 1951.
    But it is not only a question of electricity's demand for coal. It is a question that coal demand will remain, in my judgment, above 180 million tons for

    1523
    many years ahead, and coal is productively falling steeply year by year and at the present time based on the first eight or nine weeks of the current year, coal production is running at not much more than 175 million tons in a full year or a further 11 million tons down on last year.
    I conceive that there may be a coal shortage within the next two or three years due to the vast exodus of miners from the industry. In these circumstances, is it wise to handicap the only alternative natural fuel, namely, fuel oil? I would not expect the Chancellor of the Exchequer readily to concede all my arguments in this matter or to make any concession in the fiscal sense this year. What I want is a statement—a sympathetic response, perhaps—from the Treasury Bench along the lines suggested by my hon. Friend the Member for Yeovil.
    I want a statement to the effect that this iniquitous fuel oil duty—and I call it that advisedly, because two commodities which should never be taxed in this country are food and fuel—is not a permanency and will be closely and carefuly considered before the next Finance Bill with a view to its elimination, having regard to a possible shortage of coal during the next two or three years.
    My hon. Friend the Member for Yeovil quoted a pertinent passage from Command Paper No. 2798 on Fuel Policy, and perhaps I may quote a complementary passage from paragraph 17.
    6.30 p.m.
    Mr. Peyton: I have already done so.
    Sir G. Nabarro: My hon. Friend tells me that he quoted it. I am afraid that I left the Chamber for about 30 seconds, and I was not quite sure what he had quoted. However, I will read it again to support the arguments which I put forward. It says:
    "In the 1961 Budget"
    when I voted against the fuel oil duty on industry—
    "a duty of 2d. a gallon (about £2 a ton, equivalent to protection in the region of 23s. 0d. per ton of coal used for steam-raising) was placed on oil used for burning. This duty was initially imposed for revenue reasons"—
    1524
    that was my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) doing it in 1961 for revenue reasons—
    "but its protective effect on the coal industry was one of the factors taken into account in deciding to retain it."
    That thesis was the view of my right hon. Friend the Member for Barnet (Mr. Maudling) when Chancellor of the Exchequer, and he explained it in these terms to my hon. Friend and myself when we were seated on the Government benches:
    "I say to my hon. Friends who are concerned about this"—
    that is, the fuel oil duty—
    "that I share their great regret that I could not make a reduction. Looking at the whole prospects of fuel costs to British industry, I thought that the decision which I reached"—
    that is, to retain the fuel oil duty—
    "was the right one, that this was not yet the time, in present circumstances, to make a reduction in this particular duty."—[OFFICIAL REPORT, 9th April 1963; Vol. 675, c. 1224.]
    That was three years ago. In those three years, the coal industry has passed from a position of substantial surplus to a position of prospective substantial shortage. In view of that dramatic change, I hope that the Treasury Ministers will consider sympathetically the removal of the 2d. a gallon fuel oil duty so that encouragement should be given to fuel oil burning as the only alternative natural fuel resource for years to come.
    Mr. Edward M. Taylor: I wish to say a few words in support of the very able arguments which have been put forward by my hon. Friend the Member for Yeovil (Mr. Peyton), and I want briefly to comment on some of the Scottish aspects of the Amendment.
    In the Bill the Government are introducing a Selective Employment Tax which will discriminate against Scotland. That appears to be a breach of the Act of Union which said that the incidence of taxation should be the same throughout the country. For that reason, I am anxious to support the Amendment, because, if it is carried, it will help Scotland more than any other part of the country.
    My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) has referred to the possibility of a shortage of coal, and he has questioned the wisdom

    1525
    of retaining a tax which gives protection to the coal industry, as mentioned in the White Paper on Fuel Policy.
    Scotland is in a special position in that we have only 74 coal pits left, and the Government's plans are such that only 26 of those 74 have a guaranteed future. All the rest are under the threat of closure. If there is to be a shortage, the physical shortage in Scotland will be more serious than in the rest of the country.
    When the tax was introduced, the whole purpose of it was to provide protection for the coal industry and to encourage industry generally to turn from fuel oil to coal. That is all very well, and it would have had an equal effect throughout the country if the price of coal throughout the country had been the same. However, under the coal industry's pricing arrangements, much higher prices obtain in Scotland. If we encourage a change-over from fuel oil to coal or if we encourage people to stay with coal, as the Act clearly does, the effect in Scotland will be far more serious.
    This is not a niggling point. There is a major Scottish steel works which uses a great deal of coal, and an extra 10s. a ton means an extra £1 million every year on its costs. The price differential for industrial coal between that firm and a comparable firm in the North of England is something like 30s. a ton, which means an extra £3 million per year on its costs.
    If we retain a tax which gives protection to the coal industry and penalises the use of fuel oil, it will have a far more serious effect in Scotland where the price of coal is extremely high. It has effects in other ways. It has effects on the gas industry, where, if the use of coal is encouraged as against fuel oil, the price of gas is affected. The price of gas in Scotland is above the average for the whole of the United Kingdom; yet we have recently had a 13 per cent. rise in the price which has not been experienced in other areas.
    For those reasons, while I support the Amendment on the grounds put forward by my hon. Friend the Member for Yeovil, I want to impress upon the Government that the effect of the problems mentioned by my hon. Friend is far more serious in Scotland. If the Amendment were carried and the fuel tax were
    1526
    reduced or abolished, the advantage to Scotland would be much greater proportionately than in the rest of the country.
    The Budget will have a serious effect on Scotland, and I hope that the Government will do something to help us in our problems.
    Dr. Reginald Bennett: May I add my voice to those of my hon. Friends who have moved and supported the Amendment, even if I am not able to take part in the mutual congratulations indulged in by my hon. Friends the Member for Yeovil (Mr. Peyton) and the Member for Worcestershire, South (Sir G. Nabarro).
    When I heard the Minister of State. Board of Trade, say that it was intended that the Clause should only apply to lubricants, I was a little anxious. Am I to suppose that lubricating oils are to be subject to a 2d. tax which they have not experienced hitherto, or is that a gloss on what he was saying in his remarks on the Amendment?
    Mr. Darling: It refers only to lubricating oils. I will deal with the matter when we come to discuss the Clause.
    Dr. Bennett: I am very concerned about this discriminatory tax against fuel oils. It seems to be most unfair to tax liquid fuels when solid and gaseous fuels are not taxed. It distorts the pattern of industry and the pattern of the derivation of power for industry. It handicaps the electricity industry, which has been compelled to hang on to coal and to put up generating plant suitable for coal long after it should have been adapting itself more completely for oil. It has resulted in an unwarranted increase in the cost of power generation over the last 10 years and will for a long time ahead if we cannot get it reduced.
    The tax is an admirable windfall for the Exchequer, and there will be very little chance of getting rid of it completely. That is why I supported with more enthusiasm an Amendment which sought to reduce it by half rather than abolish it completely. I still believe that it should be abolished, and I have pleasure in supporting my hon. Friends.
    Sir D. Glover: I rise with pleasure to support the Amendment, and I should

    1527
    like to congratulate my hon. Friend the Member for Yeovil (Mr. Peyton) and my other hon. Friends for putting it on the Notice Paper, and also for the able speeches in which they have put forward the case for reducing the tax on fuel. Any tax on fuel must be towards the inefficiency of industry. Whether it is a tax on fuel oil, or natural gas, or coal, any tax on the basic costs of the fuel that is used in industry must, in the long-term, be to the disadvantage of the nation.
    As my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) said, there may have been reasons in 1961 and 1963—and particularly in 1963—for providing some form of protection for the coal industry. I do not know whether my right hon. Friend the Member for Barnet (Mr. Maudling), who used the argument, would maintain that it was a very valid argument even at that time, but it certainly is not valid today.
    The coal industry, under the very able chairmanship of Lord Robens, is closing inefficient pits. The result is that it is doubtful whether the total production of coal will meet the requirements that the nation puts on the coal industry, and we shall look a little foolish if in a year or two, because we are not producing enough coal and because of the tax on fuel oil, we have to import coal as it will be cheaper than using fuel oil.
    That sort of situation could easily arise. I do not think that anybody from these benches is suggesting that the Government should say that they will scrap the duty on fuel oil. I was very impressed with what my hon. Friend the Member for Yeovil, who is something of an expert in these matters, said about the long-term view of this tax, and I think that everybody in the Committee would be quite happy with the Government if they said that they share the views which we have put forward, that they realise that any tax on fuel must be a tax on efficiency, and that they will therefore view sympathetically the arguments put forward by my hon. Friends for the removal of this tax at the earliest possible date.
    Mr. MacDermot: We have had a very interesting debate on this Amendment, with, I think, moderately and persuasively advanced arguments. As my right hon.
    1528
    Friend the Minister of State will make clear when we debate the Question, That the Clause stand part, the purpose of the Clause is to remove a discrimination which exists between imported lubricating oils and some home-produced lubricating oils. This again, is a matter which offends against our international conventions.
    The hon. Member for Yeovil (Mr. Peyton) who moved the Amendment, and the hon. Member for Worcestershire, South (Sir G. Nabarro) who supported it, have taken the opportunity, as they are entitled to, to put down an Amendment of a somewhat wider scope aimed at reducing the duty on all heavy oils other than road fuel from 2d. to 1d. a gallon. If this were accepted, the effect would be to cost the Revenue £33 million in a full year and £22 million in the present year.
    The same hon. Gentlemen, reversing their roles of mover and supporter, have also put down a new Clause, new Clause 3, which would have the effect of abolishing this duty completely. If this were adopted, the effect would be about £77 million in a full year as the cost to the Exchequer, and this is the answer to the first question which the hon. Member for Yeovil asked me, namely, what is the revenue from this duty at the moment?
    In a proposal of this kind one has to look both at its effect from the point of view of revenue collection, and at its effect from the point of view of fuel policy, and the hon. Gentlemen made it clear—particularly the hon. Member for Worcestershire, South—that they appreciated that in present circumstances they could not expect the Chancellor to be able to accept the Amendment as it stands.
    6.45 p.m.
    As was made clear and, I think widely accepted during our Budget and Second Reading debates, of necessity this year we are faced with a Budget and a Finance Bill whose strategy is to help to remove a substantial amount of demand from the economy. As the Chancellor made clear in his Budget speech, much as he would like to do it, this is not the year in which he is able to reduce taxes. I think that this was fully granted and recognised by the hon. Members who moved and seconded the Amendment, and I shall seek to answer the debate in the spirit in which they have done so.
    Before I turn to the question of fuel policy itself, may I just point out that this is one of those duties which qualify for the export rebate. We all know the difficulties which hon. Members on both sides of the Committee—and both Governments—have found in trying to find ways in which, consistent with our international obligations, we can, by fiscal measures, assist exporters. This is one of the rebated taxes, and it is a matter which has to be taken into account when considering proposals either substantially to reduce or to abolish this duty.
    Sir Harmer Nicholls: The hon. and learned Gentleman is suggesting that because they do not have to pay any extra tax this is helping people with their exports. I do not think that the Committee ought ever to accept that. The fact that they are not to pay increased taxes put on in this Budget will not put them in a better position this year for dealing with exports compared with what they had to face last year.
    Mr. MacDermot: I have heard the hon. Gentleman advance more forceful arguments than that before now.
    If we are seeking to find fiscal measures to assist exporters, it can be done only by relieving exporters of taxes which otherwise they would suffer, unless it is to be done by means of a direct subsidy, and we know that that is out. We have, by fiscal measures, to find ways to produce incentives and inducements to businessmen to turn to the export trade rather than the home trade. This is what we are discussing. This is the only way in which that can be achieved.
    On the question of fuel policy, we have twice had quoted to us passages from the White Paper on Fuel Policy. The first quotation was from paragraph 17, which deals with the historical aspect of this, namely, that the duty was imposed initially for revenue reasons by the previous Administration but was kept on, among other reasons, because of its protective effect on the coal industry.
    The next quotation was from paragraph 44, which states succinctly the arguments which hon. Gentlemen opposite have been putting forward in this debate. It says:
    "Indeed, it can be argued that, on fuel policy grounds alone, a reduction of the oil duty, and hence of the cost of fuel to industry, is in principle desirable. Although in the
    1530
    present circumstances of the coal industry there is no early prospect of such a reduction, the Government will keep this question under review."
    That shows that by October of last year the Government had recognised that there was force in the argument. They were not in a position to contemplate any alteration in the duty at the time, but they acknowledged the force of the argument and expressed their readiness to keep it under review.
    Since the publication of that White Paper there have been important developments in the fuel sector, and the Minister of Power told the House on 24th May last that he had put in hand a review to take account of the changing situation, in particular, of course, the North Sea gas discoveries which have been referred to during the debate. This review will cover the prospects of the coal industry, and the place of the duty on heavy oils in fuel policy.
    Quite clearly, it would be inappropriate for my right hon. Friend the Chancellor of the Exchequer to make any changes in the duty before that review is completed. As I understood the tenor of the questions put to me by the hon. Members for Yeovil and Worcestershire, South, they seek from me an assurance that the Treasury will be willing to look again at the place of this duty in our whole fuel policy, as well as its relevance for purely revenue purposes.
    I hope that what I have said will be sufficient to assure hon. Members that the whole question is open, and will be considered in the review and also by the Government in deciding what action to take after the completion of the review. It is because the review is in hand that I cannot say anything more specific and it would have wasted everyone's time to expect the Minister of Power to be able to contribute to our discussions.
    Mr. Peyton: When the Committee is discussing fuel policy, I cannot accept that there is any reason why the Minister of Power or his Parliamentary Secretary should not be present to hear the arguments. These are matters of great importance to the nation as a whole, transcending temporary party differences.
    The White Paper to which we have all referred contains those classic words,
    "… the Government will keep this question under review".

    1531
    We all know how little those words can mean. Not all of us are entirely convinced of the value of the survey which the Minister of Power is now making of our whole fuel economy. Had he been here this afternoon to comment upon it, he might have been able to convince us.
    I do not know what my right hon. and hon. Friends on the Front Bench will say, but I very much hope that they will agree to divide the Committee, unless the Financial Secretary can now say that the Government have moved rather further than he has indicated, because at the moment he has not added anything to the fact that the duty is under review.
    If we could have at least some admission that the duty is to be removed as soon as possible, this would be some move in the direction for which I am looking. At present I do not see that the Financial Secretary has moved, and unless he can go further than he has I hope that my right hon. and hon. Friends will decide to divide the Committee.
    Mr. St. John-Stevas: I am glad to spring to the support of my hon. Friend the Member for Yeovil (Mr. Peyton) and the hon. Member for Worcestershire, South (Sir G. Nabarro).
    Sir G. Nabarro: We are both my hon. Friend's friends.
    Mr. St. John-Stevas: I assure my hon. Friend that I am smiling on him benevolently. I hope that any sneers that may have come between us have now been exorcised.
    My hon. Friend the Member for Yeovil put his finger on the nub of the objection to the tax, when he said that it was a revenue-raising tax which is now being used as a protective device. If we are to survive economically and restore our competitive position in the world, it is precisely this sort of protective device that must go.
    If the Government today agreed to reduce it even by one-half, this would do more to stimulate the competitiveness of our economy than all the exhortation from the Prime Minister, even if backed up by the Treasury team. The Financial Secretary said that it would cost £33 million in a full year to reduce the tax by one-half. It would be worth every
    1532
    penny of it for the stimulating effect which it would produce on the economy.
    Apart from the practical effect, it would be a symbol of our determination to face up to economic facts instead of indulging ourselves in economic and protective fantasies. Action is all the more urgent on the duty in view of the North Sea gas discoveries, which are about to revolutionise our whole fuel position, and when these gas discoveries have a practical effect we shall want to have the way prepared for a fuel policy which will not be distorted by artificial taxation barriers.
    I welcome the Amendment as a move also towards a policy of freer trade. I have grave doubts about whether we should ever have departed from our policy of free trade. So many of our present problems spring from that disastrous decision. I am sure that our best hope for the future lies in following a policy of freer trade. I therefore congratulate my colleagues on producing what is in some ways the most important of all the Amendments tabled to the Bill. I hope that they will match their pertinacity in raising the issue by their courage and determination in pressing it to a Division.
    Sir Harmar Nicholls: I think that the Financial Secretary gave a grain of hope to my hon. Friend the Member for Yeovil (Mr. Peyton), although it was only a grain, and I can understand my hon. Friend thinking it was not a big enough grain and urging the Financial Secretary to go further. From the way in which the hon. and learned Gentleman accepted the argument, he ought to go further today, although the tone of his reply and his words offered some hope that the constant review may well result in something worth while, perhaps in the next Budget. We hope so.
    I want to pursue the point on which I intervened while the Financial Secretary was speaking. Whatever abilities those who spoke from the Treasury Bench today may have—no doubt they have many, although I have not found them for myself, but no doubt the book of record will show them—they certainly are not businessmen. They cannot get away with a theoretical argument of the type employed by the Financial Secretary.
    It is not true that to give a rebate on a new tax is helping export industries.

    1533
    If a rebate is given of a new tax, the industry to which it is given is in a better position vis-à-vis its home competitors, but it is in precisely the same position vis-à-vis its foreign competitors. If a new tax of 6d. in the £ is imposed, but one industry is excluded from it, that does not put that industry in a better position as compared with its foreign competitors than it was in before.
    For all the arguments the Financial Secretary used in telling us why the Govment cannot reduce the duty this year, there was a grain of hope. However, he ought not to tie up in the argument on this Amendment his suggestion in connection with the exporting industries. They should have an absolute first priority all down the line, because the balance of trade figures are what matter and they will decide whether the country will be able to maintain its standard of life and all those things of which we are so proud today. All that depends on the exporters.
    It is no good "kidding" ourselves that we are giving the exporters some sort of aid when we are not. During the last five Finance Bills, I have moved Amendments asking that exporters be given an incentive by a tax reduction. That cuts across G.A.T.T. but I should work hard to ensure that G.A.T.T. accepted this. A committee is examining the matter and the Treasury Bench hopes, I gather, that something may come out of that discussion. Do not let us "kid" ourselves by sentences such as the Financial Secretary used that the Government are giving help to exporting industries by merely providing that they will not have to pay increased taxes which are put on year by year.
    7.0 p.m.
    Mr. James Griffiths: The Financial Secretary stated that the Minister of Power is now conducting a new survey of the fuel situation, bearing in mind the recent discoveries of gas under the North Sea. I wish to utter a word of warning. I listened to the hon. Member for Chelmsford (Mr. St. John-Stevas) talking about the new discoveries, which we welcome. I welcome them as an old colliery man. When the last man comes out of the last pit, I hope that I shall be alive. If I am, I shall take a holiday,
    1534
    for we do not want anyone to go down a pit if we can avoid it.
    The discoveries of gas under the North Sea and any discoveries which may be found elsewhere round this island will, at the best estimate, provide only a very small proportion of our fuel needs for many years to come. The euphoria which is growing up that, because of the discoveries under the North Sea, we shall be able to dispense with the coal mining industry in a few years or, according to some, in a few months, is having a serious effect on the mining industry. It is resulting in a loss of manpower.
    One day soon we may well be short of coal, because we are short of men. We may well be in that position because the country has been led to believe that everything is now all right and that we need not bother about coal mines or miners because of the discoveries of gas under the North Sea. We shall need coal and miners for a long time.
    Therefore, I hope that there will be a sober assessment of the position. Although we should welcome these discoveries of gas under the North Sea, or wherever it may be, I hope that we shall not present the picture to the nation that we can now dispense with coal mining. Let us wait until the survey has been made. We should then plan our whole fuel policy, including the place which coal will have to play for many years in our economy. In the meantime, I hope that this protective duty, so far as it is protective of coal, will be retained.
    Mr. Patrick Jenkin: We have had an interesting debate. Valuable points have been made from both sides, not the least of which was that just made by the right hon. Member for Llanelly (Mr. James Griffiths). I detected an echo in the right hon. Gentleman's remark about his wanting to take a day's holiday when the last man comes up from the pits of that famous remark by the late Aneurin Bevan, "We all want work, but if we can do it in white coats on top rather than in black coats underneath that will be the day". This is a sentiment with which many will agree.
    When the debate started, my right hon. and hon. Friends who were considering what attitude we should adopt to the Amendment had not necessarily intended to divide the Committee. However, I

    1535
    consider that the Government have treated the Committee in a very cavalier way. I take the point made by the Minister of State, Board of Trade, that, whereas the Clause is directed to a very narrow sector of hydrocarbon oils, the Amendment ingeniously opens up a very much wider debate. I am certain that the Government realised this. The Minister of Power must have recognised, or the Treasury should have ensured that the Ministry of Power recognised, that the Amendment would open up a full debate on the fuel duty.
    So it has. Yet throughout the debate there has not been one Minister here from the Ministry of Power to deal with a matter which falls absolutely fairly and squarely within the purview of the Minister of Power. It is ridiculous that the Financial Secretary should have had to stand at the Dispatch Box and justify the Government's fuel policy. We know that the hon. and learned Gentleman is a man of parts. We know that he can turn his hands to many things. Indeed, it is the job of a Financial Secretary to do so. It is monstrous that the Minister whose function this plainly is has not been here to answer for the Government.
    Sir D. Glover: Perhaps my hon. Friend would tell the Minister of State that, if he wants to send for the Minister of Power, we are quite capable of keeping the debate going until that Minister arrives.
    Hon. Members: Ascot.
    Mr. Patrick Jenkin: If the Minister had gone to Ascot, one might have said that there was some excuse for his not being here. The fact is that he is just outside the Chamber, although he should be here.
    The real point which my hon. Friends have pressed on the Government with eloquence, although they have received a dusty answer, is that the duty is now intended mainly as a protective duty for coal, that this is the primary reason why it is to be kept on, that the duty is damaging to the nation's industrial potential, and that therefore we must have as clear an assurance as the Government can give that the duty will be taken off or reduced at the earliest possible opportunity.
    1536
    One of the arguments which the Financial Secretary adduced to show why it would not be possible to reduce the duty was that this would result in loss of revenue. The loss of revenue—£22 million this year and £32 million in a full year—as a pure money-raising exercise is a mere bagatelle. What needs to be considered is the economic impact it would have. This is the question to which the Financial Secretary should address his mind. Would it be inflationary? Would it add to the Government's inflationary difficulties if the duty were remitted?
    In so far as the duty is charged on the domestic consumer of fuel oil for central and space heating and the ordinary paraffin burners, I suppose it can be said that a remission of the duty would increase purchasing power and, therefore, be inflationary. However, this can be only a relatively small part of the total fuel which is charged, because the great majority goes directly into industry.
    I am intrigued by the thought of what the Minister of State, representing that great Department the Board of Trade, must have been thinking as he heard this argument going backwards and forwards across the Committee about industrial costs. His Department must have received countless representations from industry to the effect that this is a direct addition to industry's manufacturing costs and is making the task of industry that much more difficult. The Treasury has an interest in the revenue. The Minister of Power has an interest in the protective aspect. The Board of Trade ought to be using its influence to protect industry from this unjustifiable impost.
    The Financial Secretary's argument that this is a tax which is rebatable was answered most effectively by my hon. Friend the Member for Peterborough (Sir Harmar Nicholls). The Financial Secretary's argument was poor because the tax was introduced five years before the rebate. It was the height of folly for him to suggest that the duty should be kept on because a rebate has subsequently been introduced.
    The real point is the crucial one of timing. We are told that a review is taking place. My hon. Friend the Member for Yeovil (Mr. Peyton), in his

    1537
    second speech, dealt effectively with this point. We all know about reviews. This one could drag on. The pressures on right hon. and hon. Members on the Treasury Bench from their back benches and from their supporters outside Parliament are intense. Those applying these pressures want coal to go on being protected.
    Much has been said about an impending shortage of coal. I understand that there is no real shortage of coal. There is a shortage of economically produced coal. Lord Robens is effectively grappling with this problem. He is conducting a steady campaign of closing uneconomic pits and transferring miners who wish to continue in the industry to more economic areas. Lord Robens is managing to do this without causing any major upheavals amongst miners.
    Then, for some reason which it is difficult to follow, the Government intervened and introduced a panic measure of closures, much to the dismay of the National Coal Board. The result was that, in a few weeks, there was a loss of morale, a crisis of confidence on the part of workers in the mining industry which has resulted in the loss, now, of approximately 1,000 miners a week. Not only will the Coal Board be unable to produce economic coal because it is still working uneconomic pits——
    The Chairman: I do not think that the hon. Gentleman should pursue that line of argument.
    Mr. Jenkin: I will draw my remarks to a close, Sir Eric.
    The Coal Board is even now having difficulty working its economic coalfields. It is in these circumstances, in this crisis of confidence, that the impact and relevance of the fuel oil duty becomes even more important. From the Financial Secretary we had no indication that the Government were prepared to treat this matter with the sense of urgency and importance which it clearly deserves. Therefore, although the Amendment is drawn considerably wider than the original Clause, it would be right that I should ask my hon. and right hon. Friends to join my hon. Friend the Member for Yeovil in dividing the Committee.
    Mr. MacDermot: If the Committee accepts the advice just given by the hon. Member for Wanstead and Woodford (Mr. Jenkin) we shall have a truly remarkable demonstration. We shall see the Opposition voting in favour of an Amendment to reduce taxes by £33 million in a year when the Leader of their own party informed the House yesterday that the most urgent thing which is needed is for the Government to adopt policies to reduce the inflationary pressures in the economy.
    The hon. Member asked me whether to reduce taxation by £33 million a year would be inflationary. He himself described that sum of money as being a bagatelle. The hon. Gentleman who supported the Amendment which the committee is invited to vote for himself recognised that, because of this very economic situation, because of these inflationary pressures, this is not a year in which he would expect the Amendment to be accepted, yet the Front Bench spokesman recommends the Committee to vote for it.
    Mr. Iain Macleod: I have rarely heard a sillier intervention than the one with which the Financial Secretary has just honoured the Committee. I can only think that for a moment his temper got the better of his usual equable self. He knows perfectly well, for example, that we have said that, at the appropriate stage, we shall move to strike out the premiums which would be paid to manufacturing industry to encourage them to hoard labour. Those premiums come to precisely £133 million, or £100 million more than this proposal would cost in a full year.
    We should be grateful if the Financial Secretary would calm himself. We have a long way to go on the Bill and he must not start talking like that at this stage. He should not be tired of the Bill already, badly though it is drawn and incompetent though his performance was a year ago on the last Finance Bill, which still rankles with him and remains in our memory on this side of the Committee. Perhaps he would deal with our Amendments, which have been moved in a calm and civilised way, in a rather more cultured fashion in future.
    I have no hesitation, particularly after that last contribution, in endorsing the

    1539
    advice given to my right hon. and hon. Friends to divide.
    Sir G. Nabarro: I supported this Amendment, so I will not allow the hon. and learned Gentleman to get away with his figure of £33 million. Of course, he is wrong. He misled the Committee. He has not done his homework with his customary assiduity. Had he studied the earlier debates on this topic, all the background since 1961, he would have learned that the alleged loss of revenue is quoted gross, and that he should offset against that the effects of Corporation Tax and other forms of tax on industry.
    I have on two earlier occasions extracted from Treasury Ministers a confession that all statements in relation to the cost of abatement of fuel oil duties are quoted gross, and that there is an offset against it in respect of what was until last year the aggregation of Income Tax and Profits Tax, but is now Corporation Tax plus an element in respect of Income Tax on distributions.
    7.15 p.m.
    Therefore, the £33 million which he claims would be the gross cost of the Amendment in a full year ought to be adjusted for Corporation Tax and other forms of direct tax on industry. Subject to correction from the Treasury Bench and the Financial Secretary's advisers, my calculation is that the net cost would be about £16 million and not £33 million. I invite the Financial Secretary to read again the debates of 16th May 1961, when I moved an Amendment identical to that moved this afternoon by my hon. Friend the Member for Yeovil (Mr. Peyton). The answer from the Treasury Minister, on that occasion the Economic Secretary to the Treasury—my right hon. Friend the Member for Altrincham and sale (Mr. Barber)——
    Mr. Anthony Barber Mr. Anthony Barber (Altrincham and Sale) indicated assent.
    Sir G. Nabarro: —whom I am glad to see present nodding acknowledgment of the sorrow which he then expressed for having to refuse my admirable Amendment—was that it was a gross figure. That was confirmed on 9th April, 1963, by the then Chancellor of the Exchequer, my right hon. Friend the Member for Barnet (Mr. Maudling).
    1540
    I accuse the Financial Secretary of misleading the Committee. The cost of the Amendment is not £33 million in a full year: it is nearer £15 million in a full year.
    Mr. Peyton: Having moved the Amendment, I do not accept either the figures given by the Financial Secretary or those of my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro). As there seems to be some doubt about what the Amendment would cost, I hope that the Financial Secretary will, in the morning, ask his Department to look into the matter. I shall be interested to know the facts.
    The hon. and learned Gentleman was very fair in that he did not allow the misapprehension which was dawning in my mind—that the Amendment did not do what I expected and intended it to do—to develop too far.
    I am very glad indeed that we have had the debate. I repeat my very real regret that no one from the Ministry of Power was present to deal with this important aspect of our fuel economy. I understand the difficulties of going through a long Committee stage, but I thought that the hon. and learned Gentleman's answer was disappointing. I do not wish to be personal, but I can attribute his inability to go any further than he did only to the absence of his right hon. Friend. In those circumstances, I am delighted that my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) was able to say that he would advise the Committee to divide.
    Sir Harmar Nicholls: I think that the last point which my hon. Friend the Member for Yeovil (Mr. Peyton) made ought to be pursued further. Notice was given at least three quarters of an hour ago in all the speeches that this was a matter which ought to be drawn to the attention of the Minister of Power. There has been every opportunity for all the facilities of the House to be used, for Parliamentary Private Secretaries to let the Minister know that his Department was under investigation.
    It is treating the Committee with disrespect that neither the right hon. Gentleman the Minister nor his hon. Friend the Parliamentary Secretary is on the Treasury Bench so that we can see that the Department directly involved knows

    1541
    first hand what is happening. They have had ample notice as the debate developed that their place was here in the Committee. It ought to be on the record that they are neglecting their duty to the Committee and not using the facilities of the House to come here.
    Dr. Bennett: Is it not the case that the lack of courtesy which the Minister
    of Power is showing to the Committee would be less if he were elsewhere? As it has been repeatedly reported that he is in the precincts, does not that make it far worse?
    Question put, That "twopence" stand part of the Clause:—
    The Committee divided: Ayes 221, Noes 139.

    Division No. 20.]

    AYES

    [7.20 p.m.

    Abse, Leo

    Fletcher, Ted (Darlington)

    Mason, Roy

    Alldritt, Walter

    Floud, Bernard

    Mayhew, Christopher

    Anderson, Donald

    Foot, Michael (Ebbw Vale)

    Mitchell, R. C. (S'th'pton, Test)

    Archer, Peter

    Ford, Ben

    Moonman, Eric

    Armstrong, Ernest

    Forrester, John

    Morgan, Elystan (Cardiganshire)

    Ashley, Jack

    Fowler, Gerry

    Morris Alfred(Wythenshawe)

    Atkins, Ronald (Preston, N.)

    Fraser, John (Norwood)

    Morris, Charles R. (Openshaw)

    Atkinson, Norman (Tottenham)

    Freeson, Reginald

    Morris, John (Aberavon)

    Bacon, Rt. Hn. Alice

    Galpern, Sir Myer

    Mulley, Rt. Hon. Frederick

    Barnett, Joel

    Garrow, Alex

    Neal, Harold

    Baxter, William

    Ginsburg, David

    Newens, Stan

    Bellenger, Rt. Hn. F. J.

    Gourley, Harry

    Noel-Baker,Rt.Hn.Philip(Derby,S.)

    Bence, Cyril

    Gray, Dr. Hugh

    Norwood, Christopher

    Benn, Rt. Hn. Anthony Wedgwood

    Grey, Charles

    Oakes, Gordon

    Bennett, James (G'gow, Bridgeton)

    Griffiths, David (Rother Valley)

    Ogden, Eric

    Bessell, Peter

    Griffiths, Rt. Hn. James (Llanelly)

    O'Malley, Brian

    Bidwell, Sydney

    Hale, Leslie (Oldham, W.)

    Orbach, Maurice

    Binns, John

    Hamilton, James (Bothwell)

    Orme, Stanley

    Bishop, E. S.

    Hamilton, William (Fife, W.)

    Oswald, Thomas

    Blackburn, F.

    Hannan, William

    Owen, Dr. David (Plymouth, S'tn)

    Boardman, H.

    Harper, Joseph

    Page, Derek (King's Lynn)

    Booth, Albert

    Hazell, Bert

    Paget, R. T.

    Bowden, Rt. Hn. Herbert

    Henig, Stanley

    Palmer, Arthur

    Braddock, Mrs. E. M.

    Herbison, Rt. Hn. Margaret

    Pannell, Rt. Hn. Charles

    Brooks, Edwin

    Hobden, Dennis (Brighton, K'town)

    Pardoe, J.

    Broughton, Dr. A. D. D.

    Hooley, Frank

    Parker, John (Dagenham)

    Brown, Hugh D. (G'gow, Provan)

    Horner, John

    Parkyn, Brian (Bedford)

    Brown,Bob(N'c'tle-upon-Tyne,W.)

    Howarth, Harry (Wellingborough)

    Pavitt, Laurence

    Buchan, Norman

    Howarth, Robert (Bolton, E.)

    Pearson, Arthur (Pontypridd)

    Buchanan, Richard (G'gow, Sp'burn)

    Howie, W.

    Pentland, Norman

    Butler, Herbert (Hackney, C.)

    Hughes, Emrys (Ayrshire, S.)

    Perry, George H. (Nottingham, S.)

    Callaghan, Rt. Hn. James

    Hughes, Hector (Aberdeen, N.)

    Price, Christopher (Perry Barr)

    Cant, R. B.

    Hughes, Roy (Newport)

    Price, William (Rugby)

    Carmichael, Neil

    Irvine, A. J. (Edge Hilt)

    Probert, Arthur

    Coe, Deris

    Jackson, Peter M. (High Peak)

    Pursey, Cmdr. Harry

    Coleman, Donald

    Jeger, Mrs.Lena(H'b'n&St.P'cras,S.)

    Randall, Harry

    Concannon, J. D.

    Jenkins, Hugh (Putney)

    Rankin, John

    Corbet, Mrs. Freda

    Johnson, Carol (Lewisham, S.)

    Rees, Merlyn

    Craddock, George (Bradford, S.)

    Johnson, James (K'ston-on-Hull, W.)

    Reynolds, G. W.

    Crawshaw, Richard

    Jones, Dan (Burnley)

    Rhodes, Geoffrey

    Cullen, Mrs. Alice

    Judd, Frank

    Robertson, John (Paisley)

    Dalyell, Tam

    Kenyon, Clifford

    Robinson, W. O. J. (Walth'stow, E.)

    Darling, Rt. Hn. George

    Kerr, Dr. David (W'worth, Central)

    Roebuck, Roy

    Davidson, Arthur (Accrington)

    Kerr, Russell (Feltham)

    Rose, Paul

    Davies, Dr. Ernest (Stretford)

    Lawson, George

    Ross, Rt. Hn. William

    Davies, G. Elfed (Rhondda, E.)

    Leadbitter, Ted

    Rowlands, E. (Cardiff, N.)

    Davies, Harold (Leek)

    Lestor, Miss Joan

    Ryan, John

    Davies, Nor (Gower)

    Lomas, Kenneth

    Shaw, Arnold (Ilford, S.)

    Davies, Robert (Cambridge)

    Lubbock, Eric

    Sheldon, Robert

    Dempsey, James

    Lyon, Alexander W. (York)

    Silkin, John (Deptford)

    Dewar, Donald

    Lyons, Edward (Bradford, E.)

    Silverman, Sydney (Nelson)

    Diamond, Rt. Hn. John

    McCann, John

    Slater, Joseph

    Dickens, James

    MacColl, James

    Small, William

    Dobson, Ray

    MacDermot, Niall

    Snow, Julian

    Doig, Peter

    Macdonald, A. H.

    Spriggs, Leslie

    Donnelly, Desmond

    McGuire, Michael

    Steel, David (Roxburgh)

    Dunn, James A.

    McKay, Mrs. Margaret

    Steele, Thomas (Dunbartonshire, W.)

    Dunnett, Jack

    Mackenzie, Alasdair(Ross&Crom'ty)

    Strauss, Rt. Hn. G. R.

    Dunwoody, Mrs. Gwyneth (Exeter)

    Mackenzie, Gregor (Rutherglen)

    Symonds, J. B.

    Dunwoody, Dr. John (F'th & C'b'e)

    Mackintosh, John P.

    Thomas, Iorwerth (Rhondda, W.)

    Edwards, William (Merioneth)

    Maclennan, Robert

    Thornton, Ernest

    Ellis, John

    MacMillan, Malcolm (Western Isles)

    Thorpe, Jeremy

    English, Michael

    McMillan, Tom (Glasgow, C.)

    Tinn, James

    Evans, Albert (Islington, S.W.)

    McNamara, J. Kevin

    Tomney, Frank

    Faulds, Andrew

    Mahon, Peter (Preston, S.)

    Urwin, T. W.

    Finch, Harold

    Mahon, Simon (Bootle)

    Varley, Eric G.

    Fitch, Alan (Wigan)

    Manuel, Archie

    Wainwright, Edwin (Dearne Valley)

    Fletcher, Raymond (Ilkeston)

    Mapp, Charles

    Wainwright, Richard (Colne Valley)

    Walden, Brian (All Saints)

    Williams, Clifford (Abertillery)

    Woof, Robert

    Walker, Harold (Doncaster)

    Willis, George (Edinburgh, E.)

    Wyatt, Woodrow

    Wallace, George

    Wilson, William (Coventry, S.)

    Zilliacus, K.

    Watkins, David (Consett)

    Winnick, David

    Wellbeloved, James

    Winstanley, Dr. M. P.

    TELLERS FOR THE AYES:

    Whitaker, Ben

    Winterbottom, R. E.

    Mr. William Whitlock and

    Williams, Alan Lee (Hornchurch)

    Woodburn, Rt. Hn. A.

    Mr. Neil McBride.

    NOES

    Alison, Michael (Barkston Ash)

    Gower, Raymond

    Murton, Oscar

    Allason, James (Hemel Hempstead)

    Grieve, Percy

    Nabarro, Sir Gerald

    Astor, John

    Griffiths, Eldon (Bury St. Edmunds)

    Neave, Airey

    Atkins, Humphrey (M't'n & M'd'n)

    Gurden, Harold

    Osborn, John (Hallam)

    Awdry, Daniel

    Hall, John (Wycombe)

    Osborne, Sir Cyril (Louth)

    Baker, W. H. K.

    Hall-Davis, A. G. F.

    Page, Graham (Crosby)

    Batsford, Brian

    Hamilton, Michael (Salisbury)

    Percival, Ian

    Beamish, Col. Sir Tufton

    Harris, Reader (Heston)

    Peyton, John

    Bennett, Dr. Reginald (Gos. & Fhm)

    Harrison, Brian (Maldon)

    Pink, R. Bonner

    Berry, Hn. Anthony

    Harvey, Sir Arthur Vere

    Price, David (Eastleigh)

    Biffen, John

    Harvie Anderson, Miss

    Prior, J. M. L.

    Biggs-Davison, John

    Hawkins, Paul

    Pym, Francis

    Birch, Rt. Hn. Nigel

    Heseltine, Michael

    Quennell, Miss J. M.

    Blaker, Peter

    Higgins, Terence L.

    Ramsden, Rt. Hn. James

    Boyd-Carpenter, Rt. Hn. J.

    Hill, J. E. B.

    Rees-Davies, W. R.

    Brain, Bernard

    Hirst, Geoffrey

    Ridley, Hn. Nicholas

    Bromley-Davenport,Lt.Col.Sir Walter

    Hobson, Rt. Hn. Sir John

    Rippon, Rt. Hn. Geoffrey

    Brown, Sir Edward (Bath)

    Hogg, Rt. Hn. Quintin

    Rossi, Hugh (Hornsey)

    Bruce-Gardyne, J.

    Holland, Philip

    Scott, Nicholas

    Bryan, Paul

    Hordern, Peter

    Sharples, Richard

    Bullus, Sir Eric

    Hornby, Richard

    Shaw, Michael (Sc'b'gh & Whitby)

    Burden, F. A.

    Hunt, John

    Sinclair, Sir George

    Campbell, Gordon

    Hutchison, Michael Clark

    Smith, John

    Carlisle, Mark

    Iremonger, T. L.

    Stainton, Keith

    Carr, Rt. Hn. Robert

    Irvine, Bryant Cadman (Rye)

    Stoddart-Scott, Col. Sir M. (Ripon)

    Cary, Sir Robert

    Jenkin, Patrick (Woodford)

    Summers, Sir Spencer

    Chichester-Clark, R.

    Jopling, Michael

    Talbot, John E.

    Clark, Henry

    Kerby, Capt. Henry

    Taylor,Edward M.(G'gow,Cathcart)

    Clegg, Walter

    Kimball, Marcus

    Temple, John M.

    Cooke, Robert

    King, Evelyn (Dorset, S.)

    Thatcher, Mrs. Margaret

    Craddock, Sir Beresford (Spelthorne)

    Lancaster, Col. C. G.

    Turton, Rt. Hn. R. H.

    Crawley, Aidan

    Lloyd, Ian (P'tsm'th, Langstone)

    van Straubenzee, W. R.

    Crouch, David

    McAdden, Sir Stephen

    Walker, Peter (Worcester)

    Currie, G. B. H.

    MacArthur, Ian

    Walker-Smith, Rt. Hn. Sir Derek

    Dean, Paul (Somerset, N.)

    Maclean, Sir Fitzroy

    Wall, Patrick

    Deedes, Rt. Hn. W. F. (Ashford)

    Macleod, Rt. Hn. Iain

    Ward, Dame Irene

    Doughty, Charles

    McMaster, Stanley

    Weatherill, Bernard

    Eden, Sir John

    Macmillan, Maurice (Farnham)

    Whitelaw, William

    Elliot, Capt. Walter (Carshalton)

    Maginnis, John E.

    Wills, Sir Gerald (Bridgwater)

    Elliott, R. W.(N'c'tle-upon-Tyne,N.)

    Maude, Angus

    Wilson, Geoffrey (Truro)

    Errington, Sir

    Maxwell-Hyslop, R. J.

    Wolrige-Gordon, Patrick

    Eric Eyre, Reginald

    Maydon, Lt.-Cmdr. S. L. C.

    Worsley, Marcus

    Forrest, George

    Mills, Stratton (Belfast, N.)

    Younger, Hn. George

    Fortescue, Tim

    Miscampbell, Norman

    Gilmour, Sir John (Fife, E.)

    Mitchell, David (Basingstoke)

    TELLERS FOR THE NOES:

    Glover, Sir Douglas

    Monro, Hector

    Mr. Jasper More and

    Glyn, Sir Richard

    Morrison, Charles (Devizes)

    Mr. Anthony Grant.

    Goodhew, Victor

    Munro-Lucas-Tooth, Sir Hugh

    Question proposed, That the Clause stand part of the Bill.
    7.30 p.m.
    Mr. Patrick Jenkin: As it became apparent during our last debate, this Clause is very much narrower than the rather wide subject that we were discussing. As I understand, most imported heavy oils have the Customs duty rebated all but 2d. This includes gas oil, fuel oil, kerosene, and so on. But there are certain heavy oils which, more or less as an historical survival, have the duty rebated all but 3d. These are what might be described as heavy lubricating oils. There may also be various other small categories.
    1544
    In other words, the really crucial words in the Clause are "in all cases", for the significant thing is that in most cases the figure is already 2d. What it means, in effect, is that certain limited protection which home producers of heavy lubricating oils have hitherto had is now being taken away. We should like to know from the Government what the attitude of the home producers to this is.
    Is this part of a new competition policy? Is it purely an E.F.T.A. arrangement made to comply with the Stockholm Convention, and, if so, why is it not limited to E.F.T.A.? One might have asked the same question about the hop

    1545
    oil point. If the reduction in the protection is required under the Stockholm Treaty, why does it apply universally? Why is it not limited merely to imports from the other member countries under the Convention?
    I would ask, as I asked in relation to vodka, whether we are getting any corresponding advantage from this small loss of protection. This is a small Clause, and it is not necessary to labour it for long, but I should be grateful to have my question answered.
    Mr. Darling: The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) has clearly and simply explained the purpose of the provision. It is inserted in the Bill to enable us to fulfil an E.F.T.A. obligation. Although I do not think that there could be contrary advantages from this, I am sure that the hon. Member would wish us to carry out our obligation. We are bringing the Customs duty and the Excise duty to the same level so that there is no protective duty on the oils which remain. They are very largely lubricating oils. As far as I know, the other oils involved under the definition of heavy oils would amount to very little indeed.
    We did not include this in the last Finance Bill, and by not doing so we committed a breach of our obligations in theory; but the breach was theoretical because there was so little, if any, production in this country. There is very little production going on now, but it has started up during the last year. I do not know how it will grow; it will probably be small for some time. However, the only way in which we can carry out our commitments to the E.F.T.A. Convention is to do it this way.
    I am told that there are practical difficulties in applying the duty only to imports from E.F.T.A. countries. In fact, imports from E.F.T.A. countries are very small. There is a little from Sweden, and that is about all. However, it would be very difficult to carry out the suggestion made by the hon. Member.
    The cost, I am told, will be about £500,000 in the current year and about £1 million in a full year. As I say, the purpose is to carry out our obligations. Whether we shall get any corresponding advantages I do not know. It is probably unlikely. The reason we are doing this
    1546
    is that production of this kind of oil is starting up in this country, and the only way in which we can carry out our obligations is to do it this way.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 6.—(ELIGIBILITY OF IMPORTED GOODS FOR RATES OF REVENUE DUTIES APPLICABLE TO GOODS OF REPUBLIC OF IRELAND.)
    Question proposed, That the Clause stand part of the Bill.
    Mr. Stratton Mills: I wish to probe a couple of matters which arise out of the Clause, which I have read on several occasions but by no means properly understood, as I admit at once. I hope that the right hon. Gentleman can give us some information about the reason for the Clause.
    Section 12 of the Import Duties Act, 1958, deals with entitlement to Commonwealth preference and, in particular, the determining of the origin of such goods. The purpose of the Clause appears to be to extend those provisions to import duties on goods from the Republic of Ireland. Presumably, the reason for that is to apply the future Orders to be made under the Anglo-Irish Free Trade Agreement of December, 1965.
    The provision seems to envisage an increase of import duties, to give the Government power to deal with Commonwealth preference and increase duties on goods from the Republic of Ireland at some time in the future. I understood that the whole purpose of the Agreement was in the other direction. I hope that the right hon. Gentleman will be able to give us a little more explanation.
    Mr. Higgins: As I understand it, the Clause is necessary to carry into effect the Free Trade Area Agreement signed between the United Kingdom and the Republic of Ireland in December, 1965. We have had relatively little occasion to debate this Agreement and perhaps the Minister of State will tell us whether this is the only matter which will come before the House before the agreement is implemented on 1st July, this year.
    The United Kingdom has agreed to abolish import duties and quantitative

    1547
    restrictions on the import of Irish goods, and in return the Irish Government has agreed to reduce import duties and quantitative restrictions on our exports to the Irish Republic, but there is a considerable asymmetry between the timing of the measures which we are introducing and those which the Irish are introducing to facilitate their side of the bargain. As I understand it, most of the exports of industrial goods from Ireland now enter this country free of duty, so that there will be no change in that respect, although we shall be making considerable concessions on agricultural products.
    What we are doing is to trade those concessions for a gradual reduction in the Irish duty on our exports to the Republic of Ireland, a reduction over a period of years, but this will not come fully into effect until about 1967–68 for the quantitative restrictions and January, 1975, for some of the tariff reductions. Perhaps the Minister of State can confirm that.
    If so, we need to consider whether some consideration should not be given to whether the Clause facilitates an arrangement by which the balance between the two parties is somewhat lopsided. The conditions under which Irish industry operates incentives to investment are significantly different from those under which this country gives investment incentives. At the moment, one can get considerable incentives to investment in the Irish Republic if one is to export to other countries, for example, to the United Kingdom.
    Some time ago, I myself was engaged in examining such an investment project and I think that I am right in saying that one can be given complete relief from Profits Tax and certain other taxes if one exports more than a certain percentage and can obtain other concessions for the training of people, and so on. It is easy for the Irish Republic to do this, because the Irish are in the position of either attracting some industry, or not attracting any. We could not make some concession in Newcastle or Merseyside, for instance, because that would mean a general reduction of the revenue raised.
    But, given this difference in the two arrangements and given that we are making an arrangement with a country whose incentives are contrary to the
    1548
    General Agreement on Tariffs and Trade, to which the Irish Government does not subscribe, is it right and proper to approve the Clause which implements the Treaty?
    I should be grateful if the Minister would say what consideration has been given to these matters. We should not approve of a Clause without some explanation and without understanding that the points which I have mentioned are important for the development districts in this country and probably Northern Ireland as well, and I should like to hear that the position of Scotland, for example, has also been considered. I would be glad if the right hon. Gentleman would favour the Committee with an explanation of precisely what the Clause does, but also placing it within the general context, because it is so rarely that we have an opportunity to debate treaties of the kind which have to be implemented by Clauses such as this.
    7.45 p.m.
    Mr. Darling: I hope the hon. Gentleman will forgive me if I do not respond to his invitation to go into detail. The reason is that this Clause is purely a machinery provision and at this stage has nothing to do with all the issues which, I agree, ought to be discussed before anything is done under the Treaty. The hon. Member for Belfast, North (Mr. Stratton Mills) put his finger on the purpose of the Clause. It is to give the Board of Trade power to make the regulations under the Treaty which would deal with many of the matters which the hon. Member for Worthing (Mr. Higgins) has been discussing. The hon. Member for Belfast, North has, however, put it the wrong way round. This machinery will, in effect, reduce the import duties rather than increase them.
    It is needed because the Board of Trade powers, which would be exercised under Section 12 of the Import Duties Act, 1948, to make provision of determining the country of origin of imported goods relate to protective import duties under that Act and to revenue duties only in so far as Commonwealth preference is concerned. The agreement with the Republic of Ireland requires us to remove by 1st July, 1968, as the hon. Gentleman said, any effective protective element in the revenue duties on goods which originate in the Irish Republic. We need these

    1549
    powers to enable such goods to be identilied as to origin, in accordance with the origin rules contained in the Agreement. We have similar powers as a result of the E.F.T.A. Convention and this part of the Bill is taken from Section 1 of the E.F.T.A. Act, 1960.
    The Clause extends the powers of Section 12 of the Import Duties Act to cover goods of the Republic of Ireland which are liable to revenue duties on importation into this country. The obvious examples are cigarettes, matches and mechanical lighters. All the Clause does is to give the Board of Trade power to deal with the origin of goods and to carry out the regulations which must come before the House for approval and which ire themselves part of the Anglo-Irish Trade Agreement.
    When we have the regulations—and the hon. Gentleman was generally right in what he said about the timing of of the proposals in the Agreement—the Board of Trade will come forward with the appropriate measures under the Agreement and will ask the House for approval. At that stage there will he full opportunities to debate the issues on the Agreement which the hon. Gentleman has raised.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 7.—(UNLADEN WEIGHT OF VEHICLES: SPECIAL BODIES.)
    Question proposed, That the Clause stand part of the Bill.
    Mr. Peter Walker: May I express by personal appreciation to the Chancellor of the Exchequer for including one or two Clauses concerned with transport and so enabling me once again to savour the joys of this Committee on the Finance Bill.
    This is a Clause which we welcome, but I should be grateful if the Parliamentary Secretary would give us a little information about it. First, what will be its cost in a full year? Secondly, has he any estimate of the number of vehicles currently affected? Thirdly, why has it been decided to have the date of 1st September, 1966? If this is a concession which it is correct to provide for these vehicles, I would have thought that it would have been more appropriate to use
    1550
    a more immediate date, particularly as the Clause provides for a refund for the period after 1st September. Presumably if that is the correct thing to do the refund could have been given for a longer period, even though there were administrative difficulties. Perhaps we can be enlightened.
    Finally, how exactly did this problem come to the attention of the Treasury and what sort of delay was there between when representations on the problem were first made and the decision to make the concession? One would have thought that there would exist some permanent machinery, able to deal with this type of problem without having to come to the House with a Clause in the Finance Bill to make special provision, so that a more immediate decision could be made for this type of vehicle and the taxation problems connected with it.
    Dr. Bennett: I welcome the Clause. It is a decent and proper provision which will be attractive to industry and will provide some measure of relief where it is well deserved.
    I am not sure whether the Government are fully aware of the fact that the Clause may prove to be the last hope for certain types of commercial vehicles, which at present I do not suppose are contemplated as coming under it. These failed to get relief in a different direction a couple of years ago, and when my party was in power, by way of rebate on heavy fuel oil.
    I am referring to mobile construction vehicles, in particular such things as the mobile concrete mixer, of which there are many on our roads. Relief or rebate has been sought for these vehicles, on the fuel used not for driving them but for mixing the concrete. This was turned down and the Treasury refused to give relief, having found reasons which satisfied the Ministers of the day. I have on the Notice Paper new Clause No. 4—"Rebate on fuel for mobile construction machinery". I hope that that will find favour with the Government. However, should the attempt fail to obtain rebate on the fuel not used for the transportation of these vehicles but, as I explained, used for the machinery which mixes the concrete, there will no doubt be a move to disarticulate the concrete element—to get the mixer away from the vehicle—so

    1551
    that the vehicle itself will pay the tax and will use non-rebatable fuel while the concrete mixing element will qualify for rebate and be untaxed under the Clause.
    It will be appreciated that this is an inefficient method and will still encumber an industry which is trying to reduce its costs. This Clause provides one way at least by which these costs may be reduced and I know that the industry welcomes the provisions.
    The Joint Parliamentary Secretary to the Ministry of Transport (Mr. John Morris): I am glad of the welcome which the two hon. Gentlemen opposite have given to the Clause. The hon. Member for Worcester (Mr. Peter Walker) posed four questions and I will deal with them in the reverse order in which he put them. He asked when the matter came to the attention of the Treasury and how much delay there had been. I regret that I cannot go into detail on this issue, except to say that as soon as the matter came to my attention I saw that it was dealt with as quickly as possible.
    The hon. Member for Worcester asked what this would cost in a full year. The type of vehicle which will benefit from the provisions of the Clause now pays between £19 and £306 per year in vehicle excise duty. The reduction in duty will depend on the weight of the containers carried, now to be discounted, but it will probably range between £36 and £63 a year. The number of vehicles which will be affected is not known exactly. It is probably comparatively small, not greatly exceeding 1,000, and on that basis, although I cannot quantify it further, a simple arithmetical calculation should produce a rough figure of the total cost.
    The hon. Gentleman then asked about the relevance of the date 1st September. This will be the first convenient date for this provision—since vehicle excise licences are issued on a monthly basis—after the Bill becomes law. A forward operative date for changes of this sort affecting rates of duty is common practice. There is a precedent. It is Section 11 of the Finance Act, 1964, which exempted certain vehicles used by invalids.
    Mr. A. H. Macdonald: While I welcome the Clause, I must ask my hon. Friend some questions about the operation of subsection (3), which states:
    1552
    "If any question arises whether a body is from time to time actually used for the purpose mentioned in subsection (1) … the body shall be deemed not to be so used until the contrary is shown".
    In the event of it being a new vehicle, how will the person applying for a licence be able to show "the contrary" since the vehicle has never been used? Does this mean that such a person will get a licence, but at a greater rate until the vehicle has been used, whereupon he will get a licence at a different rate? The subsection uses the words:
    "If any question arises whether a body …".
    In what circumstances would such a question arise? Does this imply that there will be some sort of inquiry about whether a vehicle is used in this way?
    Mr. John Morris: I am grateful for my hon. Friend's intervention. Subsection (3) merely states, in other words, that the onus is on the user to show the kind of body on the vehicle from the point of view of the container. I understand that there is no difficulty of the type canvassed by my hon. Friend, but if there were such a difficulty there is the usual appellant machinery in the Ministry and cases of this kind are dealt with when a person is aggrieved. We deal with matters of this kind from day to day.
    Mr. Peter Walker: I am grateful for the Minister's reply. I still do not completely understand the position about the date 1st September. I appreciate that it is not administratively convenient to issue new licences at the new rates until 1st September. The hon. Gentleman quoted the example of the 1964 Act. However, was there in that Act the same refunding provision concerning a proportion of the licences already paid as exists in this provision? If not, why, having included these refunding provisions, is it not possible to refund it on, say, 1st April or 1st May?
    Mr. John Morris: I could not answer the last part of the hon. Gentleman's remarks, about whether or not there is a refunding provision in Section 11 of the 1964 Act, without notice. As I said, the date in the Clause is the first convenient date on which we can bring this provison into effect after the Bill comes into force.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 8.—(RESTRICTION ON EXPORT REBATES FOR GOODS CONSIGNED TO CONVENTION AREA.)
    Mr. Ronald Bell: I beg to move Amendment No. 155, in page 6, line 37, to leave out "and will not be".
    The Temporary Chairman (Mr. George Rogers): I suggest that it would be for the convenience of the Committee to take, with this Amendment, the following Amendments:
    Amendment No. 156, in page 6, leave out line 38.
    Amendment No. 157, in line 39, leave out "or becomes".
    Amendment No. 158, in line 43, at end insert "of which he has knowledge".
    Amendment No. 159, in page 7, line 10, leave cut "and will not be".
    Amendment No. 160, in line 11, leave out from "goods" to "and".
    Mr. Bell: I wonder whether it would be more convenient, Mr. Rogers, since Amendment No. 153, in line 14, leave out from "above" to end of line 17, is also selected, if we took together Amendment No. 155 to Amendment No. 160, but not No. 158, so that we would then take No. 158 with No. 153, since those are rather more cognate points. I think that that, while substantially the grouping you propose, may be more convenient for the Committee.
    Mr. MacDermot: Amendment No. 153 could be the subject of a separate debate, or it could be taken with the group of Amendments you suggested, Mr. Rogers. It is really up to the hon. and learned Member for Buckinghamshire, South (Mr. Ronald Bell) to decide, subject, of course, to the view of the Chair. I also understood the hon. and learned Member to say that he wished to discuss Amendment No. 158 separately.
    Mr. Bell: No. I suggested that Amendments No. 158 and 153 be taken together.
    The Temporary Chairman: I have no objection to that course if the Committee has none.
    8.0 p.m.
    Mr. Bell: The effect of this series of Amendments would be to limit
    1554
    the liability or disentitlement of an exporter to export rebate due to the operation of the export rebate. The Clause is described in its side head in these terms:
    "Restriction on export rebates for goods consigned to Convention area."
    That refers to the European Free Trade Area. The export rebates are those provided for under Section 7 of the Finance (Number 2) Act, 1964. They are reliefs in respect of duties on hydrocarbon oils, vehicle excise duty and Purchase Tax incurred in connection with the production or movement of the products concerned.
    Article 7 of the Stockholm Treaty makes it clear that drawback of Customs duties is not consistent with the enjoyment of the advantages which flow from that Treaty. Section 2 of the European Free Trade Area Act, 1960, makes the Convention rate of duty—which is the reduced duty enjoyable under the convention—inapplicable if, first, drawback was allowable in the country of origin, and, secondly, the Commissioners of Customs and Excise are not satisfied that drawback has not been and will not be allowed.
    The words "and will not be", which are identical with the words that the Amendment seeks to strike out, are in that Section of the 1960 Act. I imagine that the parallel will be used in justification of the words appearing in the Clause; indeed, those words may have taken their origin from that Act.
    But that Section of the 1960 Act goes on to provide that if the commissioners find later that drawback on Customs duties has been allowed in the country of origin they may recover from the importer in this country the additional amount of duty. That provision is for the protection of British interests in Britain. It relates to drawback of foreign custom duties in the country of origin, and the penalty or burden is imposed upon the importer.
    This Clause deals not with drawback of Customs duty, but rebates of internal duties. It is put forward not for the protection of British interests, but for the placating of foreign complaints, and the penalty or burden falls upon the exporter in this country. This unusual proposal

    1555
    derives from a dispute inside the European Free Trade Association which I find it difficult to understand, since Article 7 of the Treaty seems plainly to apply to rebates of internal duties. The Clause represents a compromise or bargain struck at a recent meeting of the E.F.T.A. Ministerial Committee.
    The general effect of the Clause, which my Amendments do not frontally challenge, is that British exporters are to be disadvantaged and pushed around when they sell to E.F.T.A. countries so that the export rebate system shall not be formally challenged in E.F.T.A. or G.A.T.T., and that there shall be no further grumblings about the surcharge between now and 1st December next. I hope that I have correctly described the terms of the bargain, explicit or implicit.
    There remains the question raised by the Amendments—how far should British merchants be pushed around in this doubtful cause? I can appreciate that certain difficulties will arise if the Amendments are accepted. There will be a risk that in some cases—although I would expect them to be very few—the export rebate would be paid in respect of goods on which, ultimately, the Convention rate of import duty was paid.
    I emphasise that there would be no disadvantage to Britain, and in my view there would be nothing contrary to the Treaty and nothing that is not common practice in almost every European country. The issue arises simply whether our E.F.T.A. partners—and one in particular—would feel satisfied with a Clause 8 that left out these wide and comprehensive precautions about future transactions with the goods. If, on the other hand, the Clause is not so amended, there would be disadvantages for the British exporter. I do not want to overstate them. In a straightforward direct sale, made from a usual supplier to a regular customer, they would hardly exist, but in more complicated transactions there would be a risk of hardship, and a fruitful source of misunderstanding.
    The rubric rightly refers to the restriction of rebates, and the effect of the provisions has been explained by the Board of Trade and the Chancellor as giving the exporter the choice of taking
    1556
    either the export rebate or the Convention rate of duty.
    It is at this point that the difference between Section 2 of the European Free Trade Area Act, 1960, and this Clause is clearest. If not always, at least usually, the import duty is paid by the importer. Without claiming any expertise in foreign laws, which I certainly do not possess, I would expect that the liability for import duty would always lie upon the importer. In addition to that difficulty, I understand that, in practice, the British exporter is expected to choose the rebate in preference to the Convention rate of duty for one class of case, where the purchasing country has no multilateral tariff, and might have a marginal preference for the rebate where the multilateral tariff is less than the rebate, and will choose the Convention rates in other cases.
    The foreign importer's interest will in nearly every case be to pay the lower rate of import duty. So, in many cases, we start the bargain with a conflict of interests, and whether or not there is a conflict depends on the import duty category into which the goods fall. Where there are supplies from one seller to one buyer of a variety of goods—perhaps in one consignment—there is a most fruitful source of genuine misunderstanding between the seller and buyer about which goods are to go, through which of these optional channels.
    All this is difficult enough in the past tense but when assurances for the future are sought the position is surely most unfair to the United Kingdom supplier. In the words of the Bill he is required to satisfy the commissioners
    "that a Convention rate of duty has not been, and will not be, applied to the goods at any time after the exportation."
    How does he satisfy the commissioners of that? How does he satisfy himself of that?
    Suppose a variegated supply of goods goes in bulk to one E.F.T.A. destination, consigned to one of a variety of mercantile agents. Incidentally, I must confess that I have never been quite sure what constitutes a mercantile agent; but anyway, let us suppose that a mixed consignment is sent to one of these various kinds of agents, some of whom are not agents at all, and then the bulk is broken and

    1557
    the goods are resold in parcels, still in bond, at an E.F.T.A. destination and are sent to different destinations and different buyers.
    How does this affect the British merchant who is party to the goods and has been paid to keep track of all that goes on between foreign merchants thereafter in which varying rates of import duty are paid on the goods? That is the burden that is put upon the British merchant in Clause 8 as it stands.
    I expect to he told in familiar language that this scope of responsibility upon the British exporter is necessary, that without it there would be evasions and that if there is the risk of evasion, our E.F.T.A. colleagues, bruised already by the surcharge, will object. I expect to be told that they will say that the Chancellor has not carried out the undertaking which I know he gave them at, I believe, the April meeting of the Ministerial Committee. On practical grounds, I doubt that. I also doubt whether the matter is not workable with the Amendments to which I am speaking.
    If, starting from the doubtful point of Article 7 of the E.F.T.A. Treaty, the other E.F.T.A. countries are pressing for so exact a proscription of the export rebate in convention dealings, then the question should be solved by telling them that this country will not object if they c loose to pass domestic legislation like Section 2 of the European Free Trade Association Act, 1960, applying the rebate on internal duties as well as the drawback on customs duties, but, so far as we are concerned, doing the thing backwards as Clause 8 is doing it, and the wrong way round—that is to say, not addressing oneself to the country of arrival and to the importer who is liable for the import duty, but addressing oneself as Clause 8 does to the exporter in the country of origin who is ultimately to pay the export duty.
    As I say, let it be done the wrong way round, as Clause 8 does. We are not prepared to go further than Clause 8, amended as I am proposing it should be—t nat is to say, without the requirement that the British exporting merchant shall give a guarantee about the future transactions with goods and the duty which ultimately comes to be paid upon them.
    1558
    I hope that the Financial Secretary will agree that this is a reasonable point of view and that we should not be shut out from doing that by the fact, which I appreciate, that the British representative in the April meeting gave certain assurances to his colleagues in the European Free Trade Area.
    8.15 p.m.
    Mr. Geoffrey Hirst: My hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) has explained these Amendments extraordinarily well and very lucidly so that there is not much that I need say. However, I readily appended my name to his Amendments because I would go further than my hon. and learned Friend and say that I do not like the Clause at all. On the other hand, I concede that one might have to compromise a little with the obligations—to me, undesirable—which Her Majesty's Government have undertaken.
    I am surprised that this point was not mentioned during the Second Reading debate, because a point of principle is involved. Some reference to this matter would have been more helpful than the extraordinary waffle that we got from the Chief Secretary on that occasion, to which I drew somewhat elaborate attention. This is a matter of principle. It is not only a question of not helping British industry and placating foreign interests, but it attaches considerable penalties which are most unreasonable. I cannot understand the Government, with their obviously sincere desire to increase this country's exports, putting such a difficulty and disadvantage upon many British interests.
    As I know from personal experience, one deals with one's business affairs—for example, in the textile industry with which I was not concerned, and in the chemical industry with which I was concerned—through export houses, as principals and not as agents, involving a considerable number of people engaged in considerable joint selling. They are the people who would claim the rebate if there was one. With agents it would be a different story, but they are acting as principals and are handling a large number of articles.
    I have in mind an instance in my pharmaceutical career, in which I am not engaged now, where such a principal

    1559
    brilliantly handled something like 4,200 items. That is a rather large number, but hospital items soon add up. How such a person can give an assurance about the possibility of convention rates I do not know. I have perhaps taken an exaggerated case because it happened in the Middle East, but the firm in which I was interested exports the same things to the E.F.T.A. countries. I have no idea what goes on these days, but how such a firm can give an assurance about the future I do not know.
    Some very good explanations should be given for this Clause. I trust that in the explanation that we get we shall not be told that the purpose of the Clause is to placate or make easier the feelings of our E.F.T.A. partners irrespective of what difficulties are presented to British merchants. If that is the explanation, the Clause should not be in the Bill at all for it would be quite irresponsible.
    Mr. Peter Bessell: The Committee is indebted to my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) for introducing these Amendments, if only to enable us to have some clarification of the Clause. I hope that the Financial Secretary will be able to answer the valid points which my hon. and learned Friend and my hon. Friend the Member for Shipley (Mr. Hirst) have raised.
    I do not want to go into the detailed question concerning the quid pro quo which may have been entered into by Her Majesty's Government in order to appease the E.F.T.A. countries in relation to the 15 per cent. import duty, although I think it is a question which ought to be answered and I hope that we may have some clarification upon this when the Financial Secretary replies.
    One feature of the Clause which bothers me is that, while it may not have any very serious disadvantages to exporters, it complicates the machinery of exporting. At a time when every possible incentive is needed to encourage manufacturers to export, it is a pity that any Clause or regulation should be introduced which could be even a minor discouragement. The disadvantages are chiefly administrative, but it is my experience, at least, that the difficulties in persuading manufacturers to embark
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    on an export programme can frequently be summarised as being administrative.
    For this reason, again, we need a very clear explanation of the reasons behind the Clause.
    Mr. MacDermot: I join in agreeing with hon. Members opposite that the hon. and learned Member for Buckinghamshire, South (Mr. Ronald Bell) put this Amendment to the Committee with great clarity. It is a helpful Amendment, which raises the whole underlying point of the Clause. It is not in order for us on an Amendment to discuss widely the whole purpose of the Clause, but the hon. and learned Gentleman stated sufficiently for the present purpose the general effect of the Clause and the circumstances in which it came into being. I would not adopt his language in describing it, but it is well known that the Clause implements an agreement which was reached at the Ministerial Conference of E.F.T.A. last October and further discussions held with the Norwegian Government, in order to resolve certain reservations which they had made at the time of that agreement.
    We take the view, and have always taken the view, that our export rebate scheme is something which we are entitled to introduce both under the E.F.T.A. agreement and under the wider G.A.T.T., but we recognise that there are people who do not share our confidence in that matter. At one time it was being strenuously attacked.
    The agreement which was reached within E.F.T.A. was reached following the very helpful consideration of this problem by a working party under the Secretary-General of E.F.T.A. Put shortly, the conclusion reached in the end was that, within E.F.T.A., the scheme was acceptable provided that the British exporter was, in effect, put upon his option either to claim the rebate or to allow the goods to benefit from the E.F.T.A. tariff treatment when they were received into the receiving country; but that the goods could not qualify for both.
    The hon. and learned Gentleman put the matter rather as though these two things were more divorced than I suggest they really are, as though the application for export rebate was, as it were, solely a matter for the exporter, that it was the importer who was concerned with the tariff treatment, and that there was, as it

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    were, a conflict of interest. But, of course, exporting is the result of a bargain struck between exporter and importer. The terms of that bargain will be influenced depending on whether it is the exporter who will have the benefit of the export rebate or the importer who will have the benefit of the tariff treatment.
    The hon. and learned Gentleman implied that we had not sufficiently defended the interests of the British exporter in this matter. I put it to him that, once it is accepted that we had to reach a compromise decision on this matter, we have reached a compromise which is e artinently satisfactory to the British exporter inasmuch as he is the one who has the option. It may, of course, enter into the bargain. It may be part of his bargain with his purchaser. As part of that bargain, he may agree himself not to claim the export rebate and that the importer will claim the E.F.T.A. tariff treatment. But, so far as our law and this provision is concerned, the choice rests fairly and squarely with him, and this is accepted by our E.F.T.A. partners as being the right way in which we should legislate.
    These Amendments would restrict that which we have agreed with our E.F.T.A. partners in this way. It is suggested that the entitlement to export rebate should be withheld only if the person receiving the rebate—who is, of course, the exporter in the technical sense for the purpose of the export rebate, the person who enters into the contract to export goods out of the country—knows at the time he applies for it that the goods in question have already been given privileged tariff treatment on importation into another E.F.T.A. country; that the goods would not be disentitled to export rebate if their privileged tariff treatment in the other E.F.T.A. country were accorded after the export rebate had been applied for or paid in this country; and that the person receiving the export rebate could disclaim ail knowledge or interest in whether the goods subsequently entered another E.F.T.A. country with the benefit of the E.F.T.A. tariff treatment.
    Such a provision would not be in accordance with the agreement, and, moreover, it would not be in accordance with the fairness or justice of the matter. The point which is overlooked is that, before E.F.T.A. tariff treatment can be
    1562
    successfully obtained by the importer in the other country, he will have to secure the co-operation of the British exporter to establish his entitlement to that privilege by obtaining a certificate of origin in accordance with the E.F.T.A. rules. The British exporter will have to give a certificate for the purpose of that claim. This, I think, answers the question put by the hon. and learned Gentleman—how will he know that a claim is being made or that a subsequent claim is made?
    One can examine this by examples. One must take it in stages. First, one can envisage the case of goods exported from this country on, say, 30th September. A claim for export rebate can be made the following day. This is an extreme case because they are normally dealt with quarterly and it would in the ordinary course of events be a longer interval; but the claim could be made within a very few days of the actual export. The goods may not reach their destination within E.F.T.A., for example, Austria, until a few days later, after that claim has been made, and the question of E.F.T.A. tariff treatment in Austria may not be settled until a subsequent date.
    The next stage would be a similar example except that the goods, on importation into Austria, are stored in a Customs warehouse and not delivered to the Austrian home market until, perhaps. two or three months after the time of their physical importation into Austria.
    A third case which might arise is the case which the hon. and learned Gentleman instanced. Goods might be exported from this country to a mercantile agent in a non-E.F.T.A. country—say, Germany—and stored in a bonded warehouse and exported for eventual sale. They might be exported to a buyer within an E.F.T.A. country some months later, and qualify for E.F.T.A. tariff treatment. The question of their E.F.T.A. tariff treatment would arise after the exporter has already claimed and been paid the export rebate.
    I imagine that in those circumstances the normal procedure would be for the exporter at the time to make it clear to his agent with whom he was dealing that this was a case in which he had decided to claim the rebate, that it was in his interest to do so and that, in those circumstances, the claim would not be made for the E.F.T.A. tariff treatment

    1563
    at the other end. But if it were subsequently made, again the eventual buyer seeking to establish E.F.T.A. tariff treatment would have to obtain his certificate of origin and to get in touch with the original exporter to establish the origin of the goods.
    Mr. Hirst: Normally, the certificate of origin is part of the export parcel. When one exports, the certificate of origin is part of one's documents.
    8.30 p.m.
    Mr. MacDermot: If that has happened, he knows at the time of his export that he has issued a certificate of origin with a view to a claim being made by the importer. Therefore, he will not claim the rebate. He will not do the two things at the same time. He will not both issue a certificate of origin for the purpose of claiming the rebate and make a claim in this country for the export rebate.
    Mr. Hirst: The certificate of origin is normally required by most countries to ensure entry. Whichever method the exporter adopts will have nothing to do with that. It may be necessary from the Treasury point of view that the export should be proved. The certificate is a normal shipping document. That is the case in the Bradford trade and in the cotton trade in Manchester. Certificates of origin are part and parcel of the proof that it is a British export. That does not pre-decide how the transaction should be handled from the point of view of rebate or Convention.
    Mr. MacDermot: I take the hon. Gentleman's point. But he will know at that stage, when he is exporting, whether the certificate is being provided with a view to a claim being made by the importer for the tariff treatment. This will be the normal case. If he does, then he will not claim the rebate in this country. I agree that there may arise circumstances in which he does not have this knowledge at the time but acquires it subsequently. If he has already claimed the rebate, his duty—it is provided for in the Clause—is to acquaint the authorities of the fact which has come to his knowledge and he will become liable to refund the rebate if a claim has subsequently been made in the receiving country.
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    As I say, this will be quite an exceptional case. Normally, it will be covered by contract at the time of exporting the goods. In other words, the goods will be marked at that time as goods in respect of which the exporter has decided to claim the rebate or it will be left free for the importer to claim the tariff treatment.
    Mr. Sheldon: There is a class of business in which documents are passed on to whichever customer might require their use. Until the documents have reached the final buyer, the goods are stored in a bonded warehouse or possibly a free port. What will the certificate of origin show in this case, because it is not sufficient for a report to be made back to the original exporter? Something in the original documents should show that the export rebate has been claimed. Can something be done to satisfy this?
    Mr. MacDermot: I will look into the point which my hon. Friend has raised. I am not aware at the moment of the answer to it. but I can well see that there would be a clear practical advantage if some procedure were devised to deal with the matter, whether it is something for us to do as the Government or something which will arise as a trading practice. I can see clearly that if an exporter has decided to claim rebate but is automatically supplying, in the way mentioned by the hon. Member for Shipley (Mr. Hirst), a certificate of origin, it should be made plain either on that certificate or on some accompanying document that the rebate has been claimed so that it will not produce this sort of confusion of a claim being made made in both countries, and acrimony resulting later with the nuisance, bother and awkwardness of rebate having to be made subsequently. These are matters of procedure and I will gladly look into the point which my hon. Friend has raised, as to whether we can do anything by way of documentary procedure to avoid that sort of difficulty arising.
    The hon. Member for Shipley also raised the added complication, which I agree arises, that in the case where the exporting is done through the British exporting house, the claim for the rebate will be made not by what one generally regards as the exporter, the manufacturer, but by the exporting house. Naturally in such a case there is very

    1565
    close liaison between the exporting house and the exporter. Often the treatment of the rebate is a matter for negotiation between the two parties, and clearly, here again, this is a matter which will call for co-ordination between the exporter in the loose sense and the technical exporter, for purposes of obtaining the rebate, in order to achieve the object I have mentioned, namely, to see that confusion does not subsequently arise as a result of the importer not being aware of the decision made by the exporter at the time of the export.
    Mr. Patrick Jenkin: This has been a useful debate, airing a point which could clearly in certain circumstances give rise to difficulty and embarrassment. The point made by my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) and also the points raised by the hon. Member for Shipley (Mr. Hirst) have made it clear that there is something here which requires to be watched fairly carefully.
    One does not like the idea of firms exporting goods which then pass outside their control and then something happening to those goods which may result in a liability falling upon that firm. I was much attracted by the suggestion made by the hon. Gentleman the Member for Ashton-under-Lyne (Mr. Sheldon), that somehow the documents should be marked to show that the export rebate has been claimed or that it is intended to be claimed as part of a claim involving other goods. Thereafter, everyone would be put on notice that the goods would not qualify for E.F.T.A. treatment. I am sure that the whole Committee is grateful to the Financial Secretary for having said that he might look at this.
    In the circumstances, it appears to me that the Financial Secretary has gone a long way to alleviate the anxieties which might reasonably be felt and which have been reasonably expressed in the Committee. I hope that in the circumstances my hon. and learned Friend will think fit to withdraw the Amendment.
    Mr. Ronald Bell: I have been conscious from the first of the difficulty of taking this series of Amendments to a Division, because I am aware of the difficulties which would arise from their acceptance. I also remain conscious of
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    the difficulties which will remain because the Financial Secretary does not feel able to accept them. It is clear from his speech that he is also aware that cases may arise where acrimony will be caused because the goods will still qualify for the Convention rate of duty, and if someone chooses to insist upon it, hardship and difficulty may be caused.
    However, I recognise that my solution has difficulties, just as the existing wording has. Because the Financial Secretary is not able to accept these Amendments it must have some effect upon my attitude and perhaps the attitude of other hon. Members to Clause 8 as a whole and may predispose us to think that the right way to do this, in view of the admitted difficulties, is by the procedure which we followed in Section 2 of the E.F.T.A. Act, 1960, that is to say by domestic legislation in the other E.F.T.A. countries, and not by trying to do it back to front and landing ourselves in these very appreciable complications. Therefore, I ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Mr. Ronald Bell: I beg to move Amendment No. 153, in page 7, line 14, to leave out from "above" to end of line 17.
    The Deputy Chairman (Mr. Sydney Irving): I think that it will be convenient if we discuss with this Amendment Amendment No. 158, in page 6, line 43, at end insert "of which he has knowledge".
    Mr. Bell: Amendment No. 153 would leave out words which put the burden of establishing his innocence—if I may borrow a term from the criminal law—upon the British merchant.
    As to Amendment No. 158, subsection (2) as it stands at present provides that if the exporter who has in fact chosen to receive the export rebate rather than the Convention rate duty and something happens subsequently which dissentitles him to the export rebate—that is to say, in one of those cases we were discussing on the previous series of Amendments—and somebody somewhere takes the Convention rate of duty so that the British exporter loses his rebate, he must repay the rebate.
    I suppose that that follows logically enough from the provisions of subsection (1), though we may not like it, but it

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    also goes on to impose on the British merchant a duty
    "to inform the Commissioners of any event giving rise to such a liability"
    that is, a liability to repay the export rebate. That is an absolute obligation on him, to inform the Commissioners of any event giving rise to such liability. It does not require that he should be aware of the offence.
    I may be told that the Attorney-General, or the Financial Secretary in his own wisdom, if he is allowed to use his legal judgment in his present office—which is, perhaps, forbidden by Government procedure—takes the view that the words which I propose are not necessary, and that that obligation can only arise if the exporter has actual knowledge of the event. If I am positively assured that the Law Officers of the Crown have given that advice and that the Financial Secretary has accepted it, I shall not persist with my Amendment, whatever I may think of the advice which has been given or of the acceptance of it.
    The point I want to raise is simple enough, and I do not think I could make it simpler if I talked any longer, and it is that the exporter must not be under a duty to disclose something he does not know about.
    Amendment No. 153 is to leave out the words at the end of subsection (3). They say that
    "in proceedings by the Commissioners to enforce that liability against any person for the recovery of the amount of the rebate it shall be for that person to prove that he is entitled to retain the sum sought to be recovered."
    This is becoming a habit, and I suppose that I must say that it is becoming a habit with me to resist this form of words whenever I come across it. I seem to have been doing it for a good many years now.
    I confess that I have not had great success in resisting such provisions, whichever party has staffed the Front Bench opposite, but I continue in my belief that this is a bad thing to do, that it is a habit which naturally commends itself to Governments and Departments of State. It is always excused by the convenient form of words, that the burden of proof is put upon the person who is accused "because the facts are
    1568
    peculiarly within the knowledge of the accused". That is the phrase used when it is a criminal matter, but this is a civil liability.
    8.45 p.m.
    Is it true that the facts are peculiarly within the knowledge of the merchant who is said to be liable to make the repayment? I do not think that it is. Considerable difficulty may arise in some cases either for the Commissioners to prove that an event has occurred which disentitles the exporter to keep the rebate, or for the exporter to prove that it has not. I can see great difficulty in both directions. My complaint about these words is that no one is bothering about the difficulty on the merchants. Everyone is obsessed by the difficulty which the Commissioners may encounter.
    Let us look at the nature of the case. The sort of occasion when it would arise is the one which we were discussing on the last Amendment when goods are sold in bulk, go to a bonded warehouse, the bulk is broken and the goods go to different destinations. It is difficult for the exporter in Britain to follow them, and if one of the E.F.T.A. countries finds that goods have arrived in it, the Convention rate of duty has been paid and then a trade competitor draws attention to the fact that the goods may possibly come from a supplier in this country who elected to take the export rebate, how is the unfortunate exporter to trace all the goods and establish his right to keep the money, the burden of proof being on him?
    The Clause says, in effect: "We claim the money back. If you think that you are entitled to keep it, you must prove your case up to the hilt". I say that that is not fair.
    In the 1960 Act where, for our own protection, we have that provision in Section 2 in respect of drawback which has been claimed in a foreign country, in Section 3 we give to the Commissioners the most far-ranging powers, requiring any person who appears to have been concerned with the goods in any way to provide any information called for by them. If he fails to do so, he is subject to penalties. Those are the sorts of powers which we have given to the Commissioners of Customs and Excise for our own protection in chasing a case where

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    there has been drawback in the country of origin.
    Armed with powers like that in our own country, the Commissioners would be in a strong position to arrive at the truth, but the merchant is not able to compel anyone to inform him. He is helpless. Why is it true that these matters are peculiarly within his knowledge or within his ability to find out? The reverse is true. The Commissioners are in a specially privileged position to find out. We have diplomatic representation in these countries. Through our embassies and trade missions, we can ferret out the truth, but the merchant cannot.
    In my view, the ordinary, everday rule of law should apply. Proof should lie on the claimant as it does in every other case, and the Commissioners should prove their case. If it is said that this is very difficult for them, my answer is that it is much more difficult for the merchant, and it is extremely harsh to put this burden on him. It is only because it is the Government in effect that this is being done, and it is the Government who promote legislation.
    I hope that the Financial Secretary will look at this very carefully. I think that there is a risk of oppression and hardship, ant I am sure that neither the hon. and learned Gentleman nor his colleagues would want that to happen. This is not the protection of the Revenue, it is the placation of our E.F.T.A. partners. With all due regard to that, I ask the hon. and learned Gentleman to look at this carefully, and if he cannot accept the Amendment, as I hope he can, will he at least give an undertaking to pursue his best endeavours to see that the difficulties which I have brought to his notice are overcome?
    Mr. MacDermot: The hon. and learned Member for Buckinghamshire, South (Mr. Ronald Bell) has spoken to two Amendments, and perhaps I might deal with them in the same order as he has done.
    Amendment No. 158 proposes to add some words to subsection (2). My view, for what it is worth, is that the Amendment is not necessary, but I will say at once to the hon. and learned Gentleman that I have not taken specific advice on the point that he has raised, because I regarded it as part of the series of points
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    which he raised on the last Amendment we were discussing.
    My view is that the subsection as worded could not give any liability to inform the Commissioners of a matter of which a person had no knowledge, but I shall gladly look at that and undertake that if I have any reason to go back on that view I shall put down an appropriate Amendment. It clearly would not be right to seek to impose a duty on someone to do the impossible.
    On his second point, the same point occurred to me on reading the draft of the Clause. I think that any lawyer looks carefully at anything which proposes to put the onus of proof on the defendant in any proceedings. As the hon. and learned Gentleman said, the general principle on which at times it is thought right—and it has been approved by the courts as being right—to put the onus of proof on the defendant is when the facts are peculiarly within the knowledge of the defendant.
    I confess that before the hon. and learned Gentleman moved his Amendment I was inclined to feel that this was a case which fell within those principles, in the sense that if the Commissioners had reason to think that an event had occurred which gave rise to a liability to make the repayment, in other words, that E.F.T.A. tariff treatment had been granted in the other country, both parties in this country would be in a difficulty of proving what had happened in another country, but it seemed to me that, generally speaking, if not always, it would be the exporter who would have the means of knowledge in relation to the certificate of origin.
    I am impressed with the points raised during the debate that we have just had on the other Amendment. I think it is clear from our discussions—or if it is not clear it is certainly possible—that there might be cases where the exporter would not have any means of proof, whatever his state of knowledge, and I think one can assume that the Commissioners would not think of taking proceedings of this kind unless they had very firm information that E.F.T.A. tariff treatment had been granted in the other country, they had demanded the repayment, and the exporter had refused to repay.
    In some cases the exporter's refusal might be genuine. He might say, "I am

    1571
    not satisfied that you are right. My information is otherwise". In such a case it might seem harsh to put the onus of proof on the exporter. Being impressed with the arguments and instances that have been adduced, I should like to look further at this. The inclusion of the provision was based on precedent. There is a very similar provision relating to the export rebate in the 1964 Act, and I am told that there are precedents in earlier Customs legislation.
    What we are doing in the Clause is perhaps rather more unusual. It depends on the proof of facts concerning something which may not have occurred within our jurisdiction, but which may have occurred in another country. I should like to look more carefully at this, if the Committee will allow me, and, if necessary, bring forward an appropriate Amendment on Report.
    Mr. Ronald Bell: I am grateful to the right hon. and learned Gentleman for that reply. In the light of what he has said, I gladly beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Question proposed, That the Clause stand part of the Bill.
    Mr. Patrick Jenkin: We have had two useful, short debates. I congratulate my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) on the response which he evoked from the Financial Secretary. I only hope that in now speaking to the Question I do not evoke from him a similar reponse to that which there was from him the last time that I spoke on such a Question.
    I believe that it is right that we should look at the situation underlying the Clause, examine its origins and parentage to some extent, and obtain more explanation than we have had so far from the Financial Secretary as to why it is in the Bill. There is no doubt, and I think that the Financial Secretary would not contest this, that it represents a major concession to our E.F.T.A. trading partners, and could have far-reaching consequences.
    It is because of these possible consequences, and the implications which it
    1572
    might have for the future, that we are justified in spending a minute or two in looking at it. The first hint to reach the outside world that something of this kind was to be exacted from this country by our E.F.T.A. partners came in the communiqué issued after the Ministerial Meeting of E.F.T.A. in Copenhagen, on 28th and 29th October, 1965.
    It will be remembered that that meeting was heavily overshadowed by the controversy, and indeed the bitterness, which the import surcharge had created among our partners, who regarded it as a grave affront to the whole scheme of the E.F.T.A. agreement and the Stockholm Convention. They had been told that it was temporary and when they asked, "How long is temporary?", they read in the British Press that the Question had been put to the First Secretary and that his only answer was, "How long is a piece of string?".
    The Ministers went to the meeting last October determined to announce their decision that it was to last for at least another 12 months, and they knew that this would be a thoroughly unpalatable announcement to their partners. In those circumstances, it was not surprising that the First Secretary did not attend the meeting, but sent the President of the Board of Trade. On 30th November, the Chancellor of the Exchequer told the House that the surcharge was to be kept on.
    There were two brief paragraphs in the E.F.T.A. communiqué which are relevant to this Clause, and I should like to read them. The first stated:
    "Ministers decided by a majority that, as from 31st December 1966. when the tariffs on E.F.T.A. industrial goods traded within the Area are reduced to zero, such goods may not benefit both from E.F.T.A. tariff treatment and from drawback".
    My hon. and learned Friend the Member for Buckinghamshire, South referred to Article 7 of the E.F.T.A. Convention, which made it quite clear that drawback is inconsistent with Convention treatment. Then came the paragraph with which this Clause is concerned:
    "Ministers discussed the positon of rebates of internal taxes on exported goods in a completed free trade area. They reached agreement in principle on a solution, with a temporary reservation by the Norwegian Delegation."
    The question of drawback passed easily. No fuss was made. It was envisaged in

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    the Convention. There can be no conceivable objection to the disallowance of drawback in these circumstances. After all, it stems from the very nature of a free trade area that a drawback cannot be allowed. A free trade area is like a Customs union in that there is a freedom of internal trade. It is unlike a Customs union in that there are different external tariffs. A country like ours, with a high external tariff, represents a valuable market to other Convention countries. Therefore, the extent to which that high tariff is eroded or eliminated by drawback represents a deprivation of the rights of E.F.T.A. members. Therefore, from this point of view this step is quite right.
    9.0 p.m.
    Coming to the question of the rebate of internal taxes, which is what the second paragraph referred to, the position is wholly different. This is dealt with in the. E.F.T.A. Convention, as subsequently amended. Article 13 makes it clear:
    "Member States shall not maintain or introduce (a) the forms of aid to exports of goods to other Member States which are described in Annex C".
    The original Annex C dealt with this. Perhaps I need not read that but can turn to the amended Annex C dated 15th March, 1961. The paragraph dealing with internal tariffs listed as one of the export aids which were to be banned
    "The exemption, in respect of exported goads, from charges or taxes, other than charges in connection with importation or indirect taxes levied at one or several stages on the same goods if sold for internal consumption, or the payment, in respect of exported gods. of amounts exceeding those effectively levied at one or several stages on these goods in the form of indirect taxes or of charges in connection with importation or in both forms."
    That paragraph of Annex C makes it perfectly clear that the repayment in respect of exports of indirect taxes is perm tted, provided that it does not exceed this amount that has been paid. The words are:
    "of amounts exceeding those effectively levied".
    If it exceeds those amounts, it is illegal. If it does not exceed the amount levied, it is perfectly legal.
    It is, therefore, necessary to examine the export rebate scheme. I want to quote the Chancellor of the Exchequer's own description of this scheme, which he gave on Second Reading of the Finance
    1574
    No.2 Bill, 1964. It is important that one should recognise just how carefully drawn up this export rebate scheme was. Clearly, Ministers must have had this in mind when they considered it. The Chancellor said this:
    "Some elements of tax paid at earlier stages of the process of production enter into export costs, but cannot be precisely identified in the cost of the exported goods. These include vehicle licence duties, the hydrocarbon oil duty, and some elements of Purchase Tax, for example, on business stationery. We estimate that the unrelieved element of tax in export costs due to these may approach £75 million a year, and the purpose of the new scheme is as far as possible to relieve the export trade of these elements of taxation."—[OFFICIAL REPORT, 24th November, 1964; Vol. 702, c. 1100.]
    As the Bill went through subsequently, it was linked with these excise taxes and it was carefully calculated so that the rebate was in no circumstances greater than the amount of the tax which was levied. This was the intention and I believe that it was carried out with great skill by the Government statisticians. The intention was that the amount returned in rebate should accurately reflect the amount of tax which had been levied during manufacture.
    It is curious that during the debates on that Bill there was no suggestion, either from the Treasury Bench or from the Opposition benches, that there was any fear of this export rebate offending any of our treaty obligations. On the Third Reading, my right hon. Friend the Member for Barnet (Mr. Maudling), just after midnight, suggested in relation to the export rebate:
    "Clearly, many difficult problems Hill arise in the operation of the scheme and there will be arguments as to who should benefit—the export merchant, the manufacturer and so on."
    He went on:
    "I think that its legality internationally is at the least doubtful."
    The Chancellor jumped to his feet and said:
    "Why?"
    He may have been siting down, but he was obviously immediately provoked. My right hon. Friend went on:
    "I think that it will be acceptable in the circumstances of the greater illegality of the surcharge."
    It is sad that he was proved in the event to be wrong.
    The Chancellor said a little later, on the same occasion:
    "The right hon. Gentleman misunderstood me. When the legality of this is being challenged by those who are not friends of this country overseas, I wondered why he felt that he had to give comfort to them by lending his authority by casting doubts on its legality."
    My right hon. Friend replied:
    "The question of legality is a question of fact."—[OFFICIAL REPORT, 7th December, 1964; Vol. 703, c. 1240–41.]
    That is, of course, obviously right.
    The indignant repudiation by the Chancellor that there was any suggestion of this export rebate being contrary to our Treaty obligations has been reinforced on a number of occasions. In response to a supplementary question from me, the Minister of State to the Board of Trade said categorically on 10th February, 1965:
    "This export rebate scheme is not incompatible with the existing rules of E.F.T.A."—[OFFICIAL REPORT, 10th February, 1966; Vol. 724, c. 607.]
    That is what the Minister of State said in February, even after the E.F.T.A. meeting to which I have referred.
    Yet, just before that, on 21st January, there was a Treasury announcement which, as reported in the Board of Trade Journal for 28th January, said:
    "… certain indirect taxes, i.e. those on auxiliary materials, equipment and services …"
    were no longer to be allowed as rebates within the E.F.T.A. An agreement had been reached by the countries. I emphasise the words in the announcement, "certain indirect taxes". This means that certain specific indirect taxes, which clearly came within the Treaty, had been picked out and isolated from other indirect taxes—those or auxiliary materials, equipment and services. It looked as if that provision had been expressly and specifically aimed at the United Kingdom.
    In another Answer to my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne), the Minister of State specifically said that there were no other E.F.T.A. countries which had anything similar. The Board of Trade Journal, to which I referred, also said that there had been—this was the first we had heard of it—a report from the Secretary-General
    1576
    to the E.F.T.A. Council of Ministers. I do not think that the Report on which that decision had been taken has been published. It is not available in this country; although I have made efforts to see a copy, I have been unsuccessful.
    On the basis of that Report, a specific exception was made to Annex C, which allows the repayment of indirect taxes paid during the course of manufacture aimed directly at our own export rebate. The export rebate, we now know, has been declared illegal or contrary to the Stockholm Convention, and is to be banned. Manifestly, there is no corresponding advantage from the other members to this country.
    Therefore, in these circumstances, I am bound to ask, "Why?" Why have Ministers in these negotiations gone to these apparently great lengths to single us out for this unfavourable treatment? I know, of course, what the answer is. The whole country knows what the answer is. It is because they were going to have to say that the surcharge would be kept on for another 12 months and as a sop to our outraged partners, who knew that they would have to face this highly unpopular and, from their point of view, damaging surcharge, the Government knew that they had to give way on something. But the real sting was that the surcharge was only temporary. We now know that it is to come off this autumn. We have been told that it will not be replaced by quotas. We shall wait and see. But the sop, the compensation, which the Government found it necessary to give, is permanent.
    That is not all. We are now not going to be able to have the export rebate—something perfectly legitimate and clearly within the terms of the Stockholm Convention as amended by Annex C—for goods that qualify for Convention treatment. The question arises of how much else would be covered by this. Will someone else come along and say, "What about turnover taxes"? The Prime Minister told us the other day in a speech in another part of this building that the Government were looking again at the T.V.A. I welcome this. I believe that some of the arguments which the Richardson Committee used in recommending that no T.V.A. should be introduced in this country did not tell the

    1577
    whole story, and it is right that it should be looked at again.
    But suppose we introduce a T.V.A. and shift part of the burden of Corporation Tax from profits to turnover, which would in many ways be a good thing to do. The advantage to exports would be considerable in that under the G.A.T.T. and Stockholm Conventions it would be possible to remit the T.V.A. on goods exported to other Convention countries. The clear distinction between direct and indirect taxes shows that the greater the weight of indirect taxation the greater the assistance to exporters.
    It looks to us as if the Government have struck a very poor bargain for Britain. They have made a long-term concession to placate a short-term, but no doubt embarrassing, hostility. There may be another explanation. If so, the Committee and the House have yet to hear it, and there have been plenty of opportunities for Ministers in reply to Questions and debates to give the other reason.
    I would ask the Financial Secretary to deal specifically with this point. Why was it necessary to take this action? We were doing something which was perfectly legal under the Convention and which had clearly been envisaged when the Convention was drawn up. Why was this done in terms which appear to pick out the United Kingdom export rebate in circumstances where we get nothing in return? Clause 8 is the opportunity for the Government to come clean on this and give the Committee a full explanation of why they thought it necessary to do this. If the explanation is not satisfactory, we shall find that this is another instance of where the Government have engaged in international negotiations and come away with a very poor bargain.
    I need not list all the examples that we have had—the American aircraft and the other matters which have been debated almost ad nauseam. This is a little instance not involving enormous sums of money, but it is a niggling little point, and the Government have given in, ar d we want to know why.
    9.15 p.m.
    Mr. J. Bruce-Gardyne: I do not want to add greatly to what my hon. Friend the Member for Wan-
    1578
    stead and Woodford (Mr. Patrick Jenkin) has said about the Clause, because he has covered the ground most thoroughly and admirably. But I want first to clear up one point about it.
    The Financial Secretary has several times said that it would be open to the exporter to claim either the rebate or the preferential tariff. This has always been the understanding. But are we quite clear that under the terms of the Clause where, for instance, one of the other E.F.T.A. countries operates a nil tariff vis-à-vis third countries it will be open to the exporter to claim the rebate? I take it that there cannot be any doubt about that.
    Equally, suppose one of the other E.F.T.A. countries operates a tariff against third countries which is lower in value than the export rebate. I take it that in that case also the British exporter will be able to claim the rebate instead of the preferential tariff. I do not think there can be any doubt about those points, but they do not seem to be clearly laid down in the Clause, and I should like the Financial Secretary's confirmation.
    I turn to the principle of the Clause. My hon. Friend said that this was a relatively small matter, but it is not as small as all that. I notice that the motor car industry reckons that the loss of the rebate may cost it about £24½ million. That is not exactly chicken feed. As my hon. Friend said—I do not think it can be said too often—this is essentially a permanent concession which has been torn from the Government to return for a temporary toleration of the import surcharge.
    I have every sympathy with our E.F.T.A. partners about the import surcharge. They have been subjected to the shabbiest possible treatment by Her Majesty's Government, and have every right to complain of the way in which Britannia has waived the rules for the past two years, as it will be before the surcharge comes off.
    I have no greater liking for export rebates than I have for import surcharges. I hold that a currency which cannot survive without this artificial corseting is probably in need of attention to its parity, very much as a middle-aged woman who tries to disguise her spread

    1579
    with artificial corseting might be better advised to admit to her real age and real figure.
    Nevertheless, the point is that this was a permanent concession in return for a temporary forgiveness, and, therefore, it was a concession that the President of the Board of Trade should never have made. What is more, I cannot help feeling that the President has indulged in discussing this matter before the House with what at my most generous I can only describe as a certain amount of obfuscation. In col. 1111 of the OFFICIAL REPORT of 29th November last, the President told me that the withdrawal of the export rebates was part of a general settlement which applied equally to all other members of E.F.T.A. as well as to ourselves. But on 10th February the Minister of State explained that no other country had applied a specific export rebate scheme. Therefore, this was an exclusive British concession and was not part of a general settlement at all. On various occasions the President of the Board of Trade has tried to confuse the export rebate with drawback, but, as my hon. Friend the Member for Wanstead and Woodford has pointed out, they are quite different animals. I find it hard to believe that the right hon. Gentleman was not perfectly well aware of that.
    The definition of drawback in Article 7(5,a) of the E.F.T.A. Convention is:
    "'Drawback' means any arrangement for the refund or remission, wholly or in part, of duties applicable to imported materials, provided that the arrangement, expressly or in effect, allows refund or remission if certain goods or materials are exported, but not if they are retained for home use."
    The items included in the export rebate are essentially hydrocarbon oils, Vehicle Excise Duty and Purchase Tax. The last two cannot possibly come within the terms of drawback, although the first might conceivably do so. However, again as my hon. Friend pointed out, the Minister of State has said quite flatly that the export rebate is not incompatible with E.F.T.A.
    This is where we come to the very serious crux of the matter. If the rebate is not incompatible with the Stockholm Treaty, why was it withdrawn; and, if it was withdrawn, does not this in itself
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    imply an admission of incompatibility? If this implies an admission of incompatibility, are not the Government in reality saying that the rebate amounts to an export subsidy? And if it is an export subsidy, it offends against not only the Stockholm Treaty, but the G.A.T.T., as well.
    Last year the President of the Board of Trade told us:
    "… this is an arrangement that applies by definition within a free trade area and, therefore, could not be applied outside."—[OFFICIAL REPORT, 29th November, 1965; Vol. 721, c. 1112.]
    If the export rebate is not in conformity with the Treaty of Stockholm, I cannot see how it could be part of an arrangement which applies exclusively to that Treaty. I cannot help feeling—I have said this before and I must say it again—that if the Government maintain this withdrawal, as they are proposing to do in the Clause, when the E.F.T.A. Treaty comes into full operation next year, they will be laying themselves open to the demand from the members of G.A.T.T. that the export rebate should be withdrawn altogether.
    I sometimes feel that the President of the Board of Trade might have been better advised to devote more of his energies to discouraging his right hon. Friends from driving a coach and horses through treaties and international obligations into which this country has already entered and perhaps rather less of his time into brow-beating one of our E.F.T.A. partners for maintaining an excise duty which was plainly in accordance with the Treaty of Stockholm at a time when we were plainly in breach of that Treaty.
    There is another and murkier explanation of the Government's intention to make the suspension of the export rebate a permanent feature of our relations with the E.F.T.A. countries. My hon. Friend the Member for Wanstead and Woodford hinted at it and I hope that tonight we shall at least get a firm denial from the Parliamentary Secretary. The murkier explanation is that the Government nave it in mind to replace the import surcharge with import quotas. Surely the Government should realise that the waiver of the export rebate will not be enough to deter our E.F.T.A. partners from retaliating against British exports if, after two years of an illegal import

    1581
    surcharge, the Government then revert to import control. They will have to do a good deal more than that to satisfy them.
    I cannot see that the Clause will serve any long-term purpose except to damage the interests of British exports to E.F.T.A. This is a concession which should not have been made and which the country has every cause to regret and we want a very good explanation of it from the Financial Secretary tonight.
    Mr. Nicholas Ridley: I agree with my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) and my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne). This is a most humiliating Clause. I shall not go over all the arguments which have been adduced with much more knowledge and much more skill than I could produce, but I for one have never liked the export rebate, just as I have not liked the import surcharge. I have always been against the imposition of both, because they lull people into a sense of false security. As the country drifted into an uncompetitive position, as our exports would not sell and our imports would grow, instead of trying to cure the root trouble the Government tried to shape the effects by taxing imports and subsidising exports.
    The real problem of competitiveness still remains, and we have by these measures somehow lulled manufacturers into feeling that if only the Government would subsidise them all would be well—the attitude expressed quite recently in a wage claim when people said, "If they cannot afford to pay, let the Government subsidise the employers". This is one of the weak kneed demoralising attitudes tnat is about.
    However, we have the export rebate, and it is appalling that we should have t-aded it in in this way when the Government have claimed all along that it was legal in regard to the Stockholm Convention. If we now admit, as the Clause admits, that it is not legal—that, in the words of the Secretary General of. E.F.T.A.,
    "… it is incompatible with the E.F.T.A. Convention"
    —we must surely admit that it is incompatible with all our other trading agree-
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    ments. One cannot excuse E.F.T.A. for this and say that it is legal for any other part of our trade. It is an important breach indeed.
    I gather that our E.F.T.A. exports are running at about 15 per cent. of our total exports—and 15 per cent. of the effect of the Government's policy goes down the chute in this Clause. I do not like the Clause or the policy, but if we are to have this policy it can hardly be called watertight and homogeneous if, in the first year, the Government must exempt 15 per cent. of our exports from being liable to claim the rebate.
    What will this exercise save? What is the value of the Clause to the Treasury, remembering that less than would otherwise have been paid out will be paid out? It will surely have sprung to the mind of hon. Members that if E.F.T.A. complains of the export rebate now, what is it likely to say about the S.E.T. rebates? We will come to that later. If the remission of tax on materials and goods is being queried, surely the remission of tax on labour will be queried all the more. Are we then going to have to remit the S.E.T. rebates on 15 per cent. of our exports, particularly those which go to E.F.T.A.?
    The complexities of this situation make the mind boggle. It is as if the lady described by one of my hon. Friends as having difficulty getting strapped into her corset was bulging out all over again so that wherever she managed to get strapped into it she merely bulged out somewhere else. The Government's administration of these matters is a quagmire simply because they have been trying to manipulate the figures of exports and imports instead of going to the root of the problems and dealing with the question of the competitiveness of British manufacturers. I think it highly unlikely that the S.E.T. rebates will be legal under E.F.T.A. When a policy gets eroded to the extent of 15 per cent., as this one has, it is difficult to have any confidence in such a policy.
    When discussing an earlier Amendment my hon. Friends drew attention to the complexities of this issue, and I will not dwell on them. Suffice to recall that when this provision was announced the Board of Trade Journal claimed it as

    1583
    a sort of victory for the Government. It stated:
    "Exporters now have the privilege of being able to choose whether to get the rebate or the nil E.F.T.A. tariff'.
    It is not a choice at all. They used to be allowed to have both, but now they will be forced to have one or the other. I wish that when the Government get a major rebuff of this sort they would not try to dress it up as a success.
    We must be told whether this rebate is illegal in regard to the Stockholm Convention. If it is not illegal, why did we trade it in, and for what? If, on the other hand, it is illegal, why have we not abolished it over the whole range of our exports, because one cannot pretend that it is illegal for Stockholm and legal for G.A.T.T. These are serious questions, and while I will not go over the whole ground again, I hope that the Financial Secretary is aware that all of this has created an impression of muddle, inefficiency and ill will in our intentions towards Europe. I hope that he will give us an explanation which will answer the questions my hon. Friends and I have asked.
    9.30 p.m.
    Mr. MacDermot: I hope that my reply on this occasion will not provoke hon. Members opposite to repeat their act of folly of a short while ago on a previous Amendment. I shall do my best to moderate my language and to revert to the more amicable terminology which I had been using before the intervention which caused such offence.
    The main question that I have been asked was summarised very succinctly by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). I am asked whether this export rebate scheme is legal or not, in accordance with our international agreements. If it is legal, why did we need to make an agreement like this, to which we are giving effect in the Clause, and if it is not legal, how can we defend having it at all?
    The simple answer is that different views have been held on its legality, and different views will continue to be held, to some extent. We have taken the view that the scheme is legal. The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) outlined very clearly and
    1584
    forcibly the reasons and arguments why we say that this is a legal scheme and why we are entitled to rebate these taxes within the terms of the E.F.T.A. Convention. We take the view that it is rebating taxes which have been levied at various stages on goods which are being sold and exported.
    But there is another argument; it has been put forward against us that these are taxes levied not on goods, but on the process of manufacture. People who take this view seek to distinguish our export rebate scheme from an added value tax scheme which, it is argued, is levied more directly upon goods. This is the issue, and it is a matter about which some of our friends within E.F.T.A. take a different view, and hold it very strongly.
    As those who are lawyers know, in these matters among friends one does not want to go to law. All lawyers advise their friends not to go to law, and we have not sought to resolve this matter by going to law; we have sought to reach an agreement between those concerned which was acceptable to all parties.
    The hon. Member for Wanstead and Woodford said that we had been forced into doing this, and that we ought never to have done it at all, because of the feeling among the E.F.T.A. countries against the import surcharge. I feel confident that exactly the same argument would have been put forward about the rebate scheme if there had been no import surcharge at all. This is a different view, fairly held. I am myself certain that we would have had that argument irrespective of the import surcharge. I respect the argument that we have reached this agreement—which is a lasting agreement, which we are now embodying in our legislation—purely in order to overcome a temporary difficulty. That is not the case. The agreement secures real advantage for our exporters.
    We were chided for claiming this as a victory. I do not know whether it is to be described as a victory—I do not think that it is—but I suggest that we have secured the real interests of our exporters, especially to the extent that the choice lies with them.
    May I now proceed shortly to say what the effect of it is? It is that the British exporters will not be entitled to E.F.T.A. tariff benefits as well as the

    1585
    export rebate, and it is the exporter who must choose. In many cases the exporters will probably choose to give up the export rebate because the E.F.T.A. tariff treatment will be more valuable. But it is estimated that there will be a substantial minority of cases where the exporter will opt to claim the export rebate.
    This will apply particularly to the two cases which the hon. Member for South Angus (Mr. Bruce-Gardyne) instanced, namely, where there is a nil tariff within E.F.T.A. or where there is a lower differential in the E.F.T.A. tariff treatment than the value of the rebate. I confirm explicitly with a clear and unambiguous "Yes" the two questions which the hon. Member asked me about that.
    The hon. Member for Cirencester and Tewkesbury asked me how much the effect would be on the Revenue, what would be the amount of rebate that would have been forgone. Any estimates in this field can only be of a general nature, but the estimate is that the maximum amount of rebate that might be forgone by British exporters, with a consequential gain to the Exchequer, would be about £9 million in a full year. That is reckoned to be the ceiling. What the actual figure would be I would not like to predict, and it is not possible to reach a useful estimate.
    The hon. Member for South Angus made the point that the rebate scheme really an entirely different animal from the drawback scheme. With that I would entirely agree. I would accept what he says on that point, but I would also suggest to the hon. Member for Cirencester and Tewkesbury that the e Kport rebate scheme is also an entirely different animal from the import surcharge scheme, both of which he condemned, as it were, in the same breath.
    A number of wider questions were raised, into which I do not think the Committee will want me to go now, comparing the added value scheme with this export rebate scheme, and as to whether it was our intention to try to replace the letter by the former. All I would say is that this agreement which we have reached with our E.F.T.A. partners, which is embodied in the Clause, is something which we think produces a
    1586
    workable and fair compromise between two quite genuinely differently held views within E.F.T.A. about the validity of this scheme. I hope with that explanation that the Committee will agree to the Clause.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 9.—(CUSTOMS PROCEDURES: HOVER VEHICLES AND RELATED MATTERS.)
    Question proposed, That the Clause stand part of the Bill.
    Mr. Higgins: There is one main point which needs to be clarified on this Clause. In the earlier debate on Clause 1 we found ourselves in a position where the actual interpretation of the Clause, as to whether it was contrary to G.A.T.T. or not, seemed to be given largely to the Commissioners of Inland Revenue. We now find ourselves in a position where once again the commissioners are given very broad powers to control the movement of hovercraft. It is particularly on this point that I want the Chief Secretary to spell out the explanation in rather more detail.
    Subsection (3) provides that
    "The Commissioners may by regulations impose conditions and restrictions as respects the movement of hover vehicles and the carriage of goods by hover vehicles, and in particular—

    (a) may prescribe the procedure to be followed by hover vehicles proceeding to or from a port or any customs airport or customs station, and authorise the proper officer to give directions as to their routes."

    It seems that the commissioners are being given great powers to regulate the actual way in which hovercraft move and the routes they follow. Is not this power drawn rather more widely than it need be simply for the purpose of protecting the Customs?
    It is true that the hovercraft is a rather unusual craft inasmuch as it can travel freely over both land and sea, not needing an airport at which to land. Certain regulations are necessary, but would it not be possible to draft the Clause in such a way that the Customs did not appear to be given permission to regulate the movement of hovercraft within

    1587
    the country as well as, apparently, outside it? As far as I can see, there is no limit providing that these powers shall be restricted to hovercraft moving over the coast or across the border of Northern Ireland.
    The later parts of subsection (4) deal with the movement of hovercraft from places which are not actually ports but at which hovercraft may be stopping during their journey. Is it the Government's intention to restrict the movement of hovercraft to certain areas? As the Clause now stands, would it be possible for them, for instance, to import or export goods from a bonded warehouse situated anywhere in the country rather than from such a wharf or warehouse at a port or airport at present used for the operation of ships or aircraft?
    We should like answers on those two points, and we are concerned, also, about one or two other matters which arise on the Schedule relating to the Clause.
    Mr. Peyton: This is a Clause of some importance, and I am glad that the Chief Secretary is here to answer the debate. I recall that on several occasions last year he was so impressed by the weight of my arguments that he gave way, and I am confident that he will tonight follow the same path.
    If I may say so without intending any offence—this does not apply only to the present Government—the Clause shows the utter absurdity of our procedures. A provision of this kind is incorporated into a Finance Bill, with all the associated secrecy and mystique, and the result is that any discussion with the only people who have experience of running and managing hovercraft is inhibited. It is quite ludicrous, and the more so as there can be no possible urgency in the making of this provision. One prophecy I make is that there is most unlikely to be an ugly rush of hovercraft round our shores during the next 12 months putting upon the Customs and Excise an intolerable burden of administration. There will not be this problem. In my view, before such an ugly Clause had been introduced, it would have been much better if there had been reasonable discussion with those people who had some experience in the management and running of these new vehicles.
    9.45 p.m.
    The development of hovercraft is of immense importance to this country. We have a lead in the development. It is a matter of pride to us. I make no apology for referring to the fact that it is a matter of great importance to my constituents and to all connected with the British Hovercraft Corporation, particularly Westland Aircraft. It is so nice to be able to say to the Government that they have a record of which they can afford to be proud in this development. They have not been unhelpful, and I am prepared to say this. It would be a great pity if they were to sully their record.
    This Clause awakens in me some suspicions. I have the impression that the Customs and Excise are concerned, not so much with the possibility of the efficient operation of a new service of this kind, but with the tidiness of their own administration to an almost exclusive extent. I do not want to go through the Clause line by line. That would be a form of torture for the Committee, and I should not wish to subject it to that. However, I draw attention, particularly that of the Chief Secretary, to subsection (7), which provides that:
    "Goods to which section 47 of the said Act applies (drawback goods, etc., and goods subject to restrictions or controls on export) shall only be exported in a hover vehicle if it is of a class or description for the time being approved by the Commissioners and subject to such conditions and restrictions as they may impose …".
    It depends entirely on the intentions of the Commissioners. But it seems to me that under the Clause the Commissioners are empowered to impose the most onerous and intolerable restrictions on a new and infant but very important development.
    I am being very reasonable in my request to the Chief Secretary. I am asking him, not to withdraw his Clause, but for an explicit assurance before Parliament and written into the record that the very wide powers conferred on the Commissioners to make regulations will be used with the utmost restraint and that it is not the Commissioners' intention to discriminate against this new form of transport as against ships or aircraft.
    I ask the Chief Secretary to tell us, in particular, whether a bona fide commercial operator would be given the benefit of Sections 47, 50, 107, and 173 of the

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    Customs and Excise Act, 1952. I should not like to weary the Committee by going through those Sections in detail. I am sure that the Chief Secretary is familiar with them. It would be wholly wrong if a bona fide operator of this immensely important new development were inhibited in his undertaking. I hope that the right hon. Gentleman will experience no difficulty whatever in giving me the very modest assurance for which I have asked, namely, that these powers, so lightly conferred on the Commissioners, will not be used in any exceptional way so as to place any unusual or hindering burden upon operators of these vehicles.
    The Chief Secretary to the Treasury (Mr. John Diamond): May I, first, reply to the point raised by the hon. Gentleman the Member for Worthing (Mr. Higgins) about subsection (3). These are largely parallel conditions to those already existing relating to ships and aircraft. In addition to that, one has to bear in mind that one is dealing with a new kind of animal. If it were not for this we should not be talking about this Clause at all. One has to meet the needs—and I particularly address this remark to the hon. Gentleman the Member for Yeovil (Mr. Peyton)—of the operators of this new kind of transportation.
    Whereas at present one can only be required, for Customs purposes, to have regard to airports and ports, with this new kind of vehicle one has to deal with inland yards, warehouses, and other areas where it might suit their commercial convenience and the convenience of their customers to provide a place at which goods could be subjected to Customs clearance. It is to meet that need that subsection (3) provides something additional to what would be expected if we were providing for ships and aircraft only.
    Turning to the three points raised by the hon. Member for Yeovil (Mr. Peyton) he said, first, that there was no urgency. There is an urgency inasmuch as passenger services are already operating. There are as yet no goods services, but passenger services are in operation and one has to take account of that. He suggests that the Clause is drawn in such a way that one could say that it is to suit the administrative convenience of the Customs and Excise.
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    I can assure the hon. Gentleman that he and I—and I speak for the Government on this—are at one in our desire to help. He was good enough to say that we had helped, and we propose to continue to help in the full development of this new method of transport. There is no question of subjecting the operators of hover vehicles to difficulties caused by administrative convenience. Quite the contrary. It is the Customs which is going to considerable lengths, as provided in this Clause, to suit the needs of the operators, after full discussion with them. I can assure the hon. Gentleman that there was very full discussion.
    I am delighted that he has asked me to give an assurance on behalf of the Government on the future treatment of hover vehicles. He wanted an assurance that hovercraft operators will not be put to any disadvantage in relation to competing forms of transport of goods and persons. I can give him a precise assurance that there is no intention of putting commercial hover vehicle operators at a disadvantage compared with ships or aircraft. I give the assurance with pleasure.
    The hon. Gentleman referred to bona fide operators, and, of course, we are talking about such operators. In short, I think that both sides of the Committee are at one on this. It was right that I should explain the words and what is behind them. The proposed arrangements are sensible and that they have been arrived at at the full discussion. They will develop more fully as this form of transport develops. It is for that reason that the Customs is retaining its discretionary rights so that, as we see this new form of transport developing, the discretion can be used in an appropriate way. I am quite sure that this will be a suitable method, and I hope that the Committee will be good enough to approve this Clause.
    Sir D. Glover: I think that my hon. Friend the Member for Yeovil (Mr. Peyton) has done a very useful service in putting down his Amendment and in raising this debate. He speaks as an expert on this matter; I do not; but it seems to me, listening to the debate, that there are questions I should like the right hon. Gentleman to try to answer.
    I accept that even the right hon. Gentleman could find them somewhat difficult

    1591
    to answer, because we are dealing with a new form of transportation. However, he said that it would not be put in an inferior position compared with ships and aircraft. I would have thought that at this stage of its development it should be put in a much more favourable position than ships and aircraft. Ships have a long-established system of working—of going into ports where there are Customs sheds and where there is speedy clearance of passengers and freight and so on, and there is an established flow.
    What worries me is that the hovercraft is an entirely new vehicle. It does not go into a quay. It does not operate as a ship. It does not operate as a car. It does not operate as an aircraft. It can, in fact, land on open beaches. Therefore, it may mean that Customs and Excise will have to have very flexible arrangements for clearing in places where there are no facilities such as they have for ships and aircraft.
    It is all very well for the right hon. Gentleman to say that there will be discussions about this. The difficulty about discussions is that it all depends on how long they take. As my hon. Friend the Member for Yeovil said, there would not seem to be any great urgency about them because the number of hovercraft which will operate in the next 12 months will not be enormous, and if the passengers in them were to bring in goods duty free in the next 12 months that would not kill Customs and Excise because the amount involved would be small.
    What does the right hon. Gentleman mean by discussions? The people who are now trying to develop this new form of transportation want to be able to work out schedules and to provide adequate services, and they do not want to be delayed while having long discussions with Customs and Excise before agreed procedures can be evolved before their services can operate. What they want to do at the present moment is to get their services into operation, even though there may be very great inconvenience in Customs and Excise in supervising a hovercraft when it comes to our shores.
    Although I am not an expert on this matter I am disturbed to read in the newspapers of the progress being made in other countries with this new form of transportation, and if our people are
    1592
    trying to develop it with the head start they have got they ought not to be handicapped in making their plans for their scheduled services and bring them into operation, or inhibited in providing these services for the public, because of discussions which are to take place with Customs and Excise. Such discussions can so often take many months before a mode of operation is worked out, and they could he a great disadvantage to hovercraft services.
    Therefore, I hope that the right hon. Gentleman, in his assurance to my hon. Friend, did mean that that help was to be given, and that there will be speedy solutions, even if, in fact, the solutions are not administratively easy for Customs and Excise. I think that the first priority in this case should be to get this new machine working, and so allow us to get valuable commercial experience, even if it means that Customs and Excise work under disadvantage during the next year or two while getting the system into operation.
    10.0 p.m.
    Mr. Victor Goodhew (St. Albans): The Chief Secretary was good enough to give an assurance that there was no intention on the Government's part to put this type of vehicle at a disadvantage compared with ships or aircraft, but he did not endeavour to explain why these provisions were wanted by Customs and Excise. While I can understand that it may be necessary for these vehicles to operate subject to certain conditions and restrictions which Customs and Excise may wish to impose where the vehicles make a landfall and where Customs are readily available, I cannot see why it is necessary for the Commissioners to approve the class or description of any hovercraft.
    I do not know whether the Customs and Excise already have the right to approve any particular type or description of aircraft, or any type or description of ship which may bring goods into and take goods out of the country.
    If that is not so and the Commissioners do not have that right of approval in the case of ships and aircraft, it occurs to me that there is a distinct disadvantage being put at the hands of those who are hoping to do good trade for the country with hovercraft, and it makes one wonder whether this is not a case of people

    1593
    being frightened of something new and wanting a man with a red flag in front of it, as happened with the motor car.
    I am not happy, and I hope that the Chief Secretary will be able to assure me that this is a requirement to be made on those who are operating ships and aircraft and that in the Clause we are not going to deal further than we should with those operators.
    Mr. Higgins: In replying to the points raised by my hon. Friends, I wonder whether the Chief Secretary could also confirm or deny that the Clause does riot give the Commissioners powers about hovercraft moving purely within the United Kingdom. Could he tell us if it gives the Commissioners that power, or whether their powers are restricted to hovercraft moving from the United Kingdom outside territorial waters and coming back in the opposite direction?
    Mr. Diamond: I must try once more to resolve the anxieties which I am sorry to see still exist. They should not exist. I repeat that it is the Government's intention and the intention of the Commissioners of Customs and Excise to assist in the development of this new form of travel, to give it every flexibility so that it shall not be incommoded, and to have due regard to both the needs of the Revenue and the needs of the developraent of the traffic as well.
    With a new form of transportation, one has to have a flexible approach, and the way one has done it has been as I have shown. One has gone on the basis of ships and aircraft, but one has said "after consultation"—not prior to consultation. I am not talking about discussions that will take place, but about discussions that have taken place with tie trade interests and with the operators.
    One then goes to the further point in saying that as a hovercraft may want to land its goods at a place other than a seaport or an airport, one must not merely be satisfied with the convenience of the Customs, who would say, "Let us have a seaport or an airport with the usual warehouses and arrangements to which we are used". One must provide for new arrangements and new places at which goods can be inspected, so as to give the greatest possible encouragement to
    1594
    the development of this kind of traffic. That is all that is happening here. I assure hon. Gentlemen opposite that that is what the Government's desire is.
    In response to the point raised by the hon. Member for Worthing (Mr. Higgins), it is true that the Customs and Excise has the same powers over a hovercraft which is moving within the country as a hovercraft which is moving outside the country, for the simple reason that one cannot contain a hovercraft. It can start off on dry land, go over muddy flats and then proceed over the water. It cannot be contained and, therefore, one has to have reasonable protection for the Revenue in the way indicated in the Clause.
    There is nothing here more than is appropriate at this stage in the development of a new form of transport. Certainly, Customs and Excise has its normal powers, but I have repeated that it has the discretion to which the hon. Member for Yeovil (Mr. Peyton) referred. It has these powers of discretion in exercising its responsibility and it is in relation to that that I gave the assurance, and I repeat it word for word, that there is no intention to put commercial hover vehicle operators at a disadvantage compared with ships or aircraft. It is almost impossible to go further than that in demonstrating our desire to be as helpful as we possibly can.
    Dr. Bennett: I appreciate the courtesy and the co-operativesness with which the Chief Secretary has treated this problem. I think that the difficulties and misgivings on this side of the Committee might be met if, in subsection (3), there were some suggestion that it is hover vehicles entering from abroad or leaving the country which are really intended to be regulated by the commissioners in orders about the direction and places to and from which they can move.
    I know that the point is that Customs should be able to control internal movement because, as the Chief Secretary said, the hovercraft cannot be contained. But it can be contained by one strand of barbed wire, because it cannot jump, so it is not an uncontrollable vehicle. I think that the objections from this side of the Committee would be met if the Chief Secretary could see some way of implying that it is hovercraft entering or leaving the country with which he is concerned in subsection (3).

    1595
    There is no suggestion in the Clause that it is hovercraft going abroad, or coming from abroad, with which the Chief Secretary is concerned, and I do not think that the right hon. Gentleman has told us whether, under subsection (7), ships and aeroplanes have to be similarly controlled in so far as ships or aeroplanes of a certain class or description can carry dutiable goods. That is what is implied for hovercraft under subsection (7), but I do not believe that it is intended to apply to hovercraft alone.
    Mr. Goodhew: I do not doubt the Government's good intentions, any more than I doubt their good intentions with regard to the Selective Employment Tax, but the result of that may be terrifying compared with their intentions. The same thing applies here.
    The Chief Secretary made no attempt to answer the two points I put to him. I asked why the Commissioners required to have any right of approval of the class or description of hovercraft that is to be used for export vehicles. Nor did he answer my question about whether this applies to ships or aeroplanes. I cannot believe that it does, and I cannot believe that at a time when we are anxious—and the Chancellor of the Exchequer must be most anxious—to export as many goods as possible, we should put any obstacle in the way of people trying to do that vital thing. I hope that with the comings and goings of P.P.S.s we shall get a reply to these two points about which I am most unhappy at the moment.
    Mr. Hector Monro: I support my hon. Friends, because Scotland is the home of the hovercraft, and for the last year or two we have had an excellent hovercraft service on the Clyde. I cannot for the life of me see why the commissioners should have any rights over hovercraft plying in the Clyde estuary. I think that it is a valid point to make under subsection (3) that hovercraft within the territorial waters of the British Isles should be exempt from examination by the Commissioners.
    The Chief Secretary has been most helpful so far, and I think that he should go further and remove any of the problems for hovercraft, because this craft is
    1596
    a dramatic invention and we should give it its head in every possible way. Designers and firms operating hovercraft will regard these provisions as restrictions on their operations. These people should be helped in every possible way, rather than restricted.
    Mr. Goodhew: I hope that the Chief Secretary will answer these important points. We may have the greatest trust in the intentions of the Government, but we cannot be expected to accept another Finance Bill with mistakes which have to go on being rectified for more than a year afterwards. If there is something wrong and greater powers are being sought in the Bill than those which apply to ships and aircraft, he ought to be honest with the Committee and say so. I feel most unhappy at the idea of allowing the Clause to pass, because we have had no answer to this important question.
    Mr. Higgins: I support what my hon. Friend the Member for St. Albans (Mr. Goodhew) has said. The point which worries us is not whether hovercraft are in the same category as ships and aircraft, but whether they are in the same category as railway trains and lorries. It appears that the powers given in the Clause will enable the Commissioners to determine the routes which hovercraft follow when they are in the United Kingdom. I should be grateful if the Chief Secretary could clarify that point. He speaks of hovercraft not being able to be contained. Am I wrong in thinking that this would also be the situation of a light aircraft which was said to be going on a domestic flight and did not do so?
    Mr. Diamond: The reason I did not rise immediately was because I thought that the hon. Gentleman wanted to address the Committee further and I was anxious to hear his further comments and did not want to seem to edge him out.
    I repeat that what we are doing is to assist and not to restrict. In answer to the hon. Member for Worthing (Mr. Higgins), ships are required to satisfy the Revenue, and small ships are required to do so in exactly the same way.
    Mr. Goodhew: Aircraft?
    Mr. Diamond: Not aircraft, but small ships. The reason why we are doing this is that a hovercraft can do any of these

    1597
    things. It can perform as a ship or it can perform as an aircraft, and up to a point it can perform over dry land. If cne is not to restrict its movement, one has to take steps to control the transporting vehicle itself. Otherwise, one would he compelled to restrict its movements so that the Customs could exercise the full responsibility which the House puts on it with regard to dutiable goods.
    In order not to restrict the movement cf the hovercraft, and having regard to the fact that it is a developing form of transportation and is the ideal smugglers' vehicle—it can do everything that a smuggling vehicle can do and more—[Interruption.] I wanted to put it fairly and I am not making special points. I am giving the Committee everything that it wants to know. Having regard to the fact that it can do what a small ship can do, we have to put the same restrictions on it. That is reasonable.
    That being the basis of the matter, and the Government's desire being not to Emit its development or its routes, and not to put a barbed wire round the whole country to prevent it coming in or out, for we would regard that as some restriction of our liberties—[Interruption.] I am trying to explain to the Committee the Government's attitude and I am finding it a little difficult. If people do not accept what one says, there is not much point in repeating it.
    I repeat for the last time that we are doing everything we can to help in the development of the hovercraft. There has to be a certain flexibility, because it is in the development stage. I have given the precise assurance for which I was a3ked, and I have repeated it twice. I hope that the Committee will now feel satisfied that we are doing everything that we reasonably can to encourage the development of this vehicle.
    10.15 p.m.
    Mr. Peyton: What the right hon. Gentleman said earlier went a long way to satisfying me. Unlike some of my hon. Friends, I was disposed to feel that the assurances—subject to what they might look like in print—which he was good enough to give, and with great courtesy were a great help. But the last remarks which he has made caused me some dismay. What he has since said on
    1598
    behalf of the Government is that the hovercraft is an ideal smugglers' vehicle. He has obviously caught from the Customs and Excise the contagious malady of seeing a smuggler under every jetty and concealed behind every buoy.
    I am disappointed that the right hon. Gentleman should have taken this attitude. I hope that he will not go too far along this road. I do not know what my hon. Friends think about this, but I would be disposed to accept the assurances the right hon. Gentleman gave, as far as they go. I hope that he will do his best to move this immense colossus—this great edifice—of the Customs and Excise away from the suspicion that everybody is evading some small items of Customs duty. The really important thing is to encourage new enterprise. If suspicions are to be heightened to the extent that we start by viewing this vehicle as the ideal equipment for a smuggler, the whole position will be very menacing. I am sure that this is not the right hon. Gentleman's attitude.
    I am sorry that late at night he should have caught a whiff from some very bad quarter and given voice to such monstrous sentiments.
    Mr. Goodhew: I am sorry to delay the Committee still further. I do not understand the Chief Secretary's remarks about smuggling goods and about this vehicle being an ideal smugglers' vehicle. Subsection (7) mentions goods which shall be exported, not imported. Why is there so much anxiety about smuggling goods inwards, when the Clause is concerned with goods to be exported? Subsection (7) says that goods
    "shall only be exported in a hover vehicle if it is of a class or description for the time being approved by the Commissioners".
    What has this to do with imports and smuggling?
    I return to my comment that it is unbelievable that the Government are so full of suspicion of this vehicle that they do not know what to do next, apart from putting a man in front of it with a red flag. The Chief Secretary has said, "This is a new vehicle. Therefore, we must be careful. We must ensure that nothing terrible happens with it". It is an absurd state of affairs if people

    1599
    who are trying to export goods have to go to the Commissioners of Customs and Excise to get their vehicles authorised. A Government who have talked about technological revolution, the scientific age, and one thing and another, take cover—or, rather, run to the Commissioners of Customs and Excise—at the site of a hovercraft. It is absurd.
    I hope that, even at this late stage, the Chief Secretary will tell us that this provision was not meant to be there. I can understand the necessity for the provision that the vehicle shall be:
    "subject to such conditions and restrictions as"
    the Commissioners
    "may impose".
    However, I hope that the Chief Secretary will undertake that the Government will reconsider the matter complained of before Report.
    Sir D. Glover: Like my hon. Friend the Member for Yeovil (Mr. Peyton), I was very much convinced by the Chief Secretary's original speech. His second intervention frightened me to death about the future of the hovercraft. It is obvious that deep down the Government view this development with the gravest suspicion: because it is something new, therefore it must be viewed with great disfavour, because it might put the railways out of operation or might do damage to our old-established industries.
    The right hon. Gentleman mentioned barbed wire. This is exactly the mentality of the Germans, who spent about £200 million fortifying the Channel Islands, from which we withdrew voluntarily before the Germans arrived. Why they should have thought that that money was necessary, I have never understood. The right hon. Gentleman and his colleagues are approaching this project, a new development, in exactly the same frame of mind.
    The right hon. Gentleman said that the hovercraft was the ideal smuggler's vehicle. Was not the right hon. Gentleman in the House when we were given a demonstration of a hovercraft in the Thames? We had to stop it, because every Committee in the House had to stop work. Yet this is the stealthy
    1600
    vehicle coming in the silent night and of whose presence no one is aware. Even a man who is stone deaf could hear a hovercraft from 10 miles away, yet it is supposed to be the ideal smuggler's vehicle.
    A smuggler's vehicle is something which comes in by sail—it is silent. The right hon. Gentleman will now measure every hovercraft before it can get into the cave. He is viewing the whole problem from exactly the wrong point. As my hon. Friend said, the problem of hovercraft from the point of view of the Customs and Excise is a minor one, certainly during the next 12 months.
    Mr. Peter Mills: I should have thought that if anybody knows anything about smuggling it is we in the West Country. We would certainly never use a hovercraft. We would use a small boat, very silently.
    Sir D. Glover: I ask the right hon. Gentleman to look at this again. He has convinced most of us. There was no hostility about this on this side of the Committee, half an hour ago. It is only since his last intervention that this hostility grew up. We thought that the Government were sincerely going out of their way to provide every help to the new developing hovercraft. What the right hon. Gentleman said in his last intervention created on this side of the Committee a facade of co-operation, but deep down there is a great deal of suspicion in the Government's mind about what use these vehicles would be put to.
    I am certain that many of the regulations which will be brought in under the Clause are not necessary. They must have created an entirely wrong impression among those pioneers producing hovercraft, when they are told at this moment that it is the ideal smuggler's vehicle. If this is the ideal smuggler's vehicle, the Chancellor needs to be worried very much less about carrying contraband. I would not start to bring in contraband in a hovercraft. The Customs and Excise and law enforcement officers would have me in clink before I had finished my first trip, let alone any others.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

  Schedule 1.—(APPLICATION OF CUSTOMS AND EXCISE ACT 1952 TO HOVER VEHICLES.)
  Mr. Peyton: I beg to move Amendment No. 163, in page 57, line 27, to leave out sub-paragraph (2).
  Unlike some of my hon. Friends, I was disposed to accept the right hon. Gentleman's arguments and undertakings as being a valuable contribution to the hovercraft industry. I am grateful to him. There is no doubt that what he has said will be looked at both by the hovercraft industry itself and by operators and potential operators with a great deal of interest. I hope that he viill keep his own words and intentions fresh in the minds of Customs and Excise as it comes to address itself to the problems which will no doubt arise.
  I draw the attention of the Government to the first Schedule, paragraph 4 (2), in which appear the words:
  "This Act shall not be taken as applying section 204 of the said Act (relief from duty of oils used as fuel for ships in home waters) to hover vehicles."
  In other words, this very valuable relief accorded to ships is to be denied to hovercraft operating in home waters. I cannot see what justification there can be in distinguishing in any way between a hovercraft and a ship.
  I do not want to quarry too deeply into precedent or opinion, but I wonder whether the right hon. Gentleman is aware of the opinion expressed by his right hon. Friend who was then Minister of State at the Board of Trade when taking part in the Standing Committee proceedings on the Anchors and Chain Cables Bill in the last Parliament. A most interesting and somewhat academic discussion took place. The right hon. Gentleman said:
  "In quite another connection, I recently had occasion to raise the same question, whether for purposes of drawback and relief of duty a hovercraft was a ship. I am advised"?—
  he left himself a loophole.
  "that it is not free of legal doubt, as the hon. Member for Weston-super-Mare (Mr. Webster) said. It has not been tested in the courts at any time, but the view taken by the Customs for the purpose about which I was concerned, is that it 1S a ship."—[OFFICIAL REPORT, Standing Committee C, 26th May, 1965; c. 69.]
  1602
  I should like the right hon. Gentleman to tell me what the justification is for discriminating in this matter against a hovercraft, knowing, as the Government must do, that a hovercraft will be competing for its business against ships and aircraft. How can there be any justification? Hovercraft carriage of goods over land is a remote prospect at the moment. Basically, we are concerned with carriage of goods over the sea by hovercraft. Why should there be any discrimination against a hovercraft, against a modern form of transport in which this country at present leads the world?
  I am sure that the right hon. Gentleman will be quick to leap to his feet to assure me that the insertion of this wretched provision in the Schedule was a mistake which has never been adequately brought to his attention until now and that he is very grateful to me for doing so and will immediately remove the horrid thing from its present position of honour and reduce it to the oblivion which it deserves.
  10.30 p.m.
  Dr. Bennett: As one who made some efforts when we were considering the Anchors and Chain Cables Bill to reach the truth, we can, I believe, say with justifiable pride that one thing which we unearthed, if that is the right word, was that great statement of fact and principle quoted by my hon. Friend the Member for Yeovil (Mr. Peyton)—a statement which had never hitherto been delivered by the Board of Trade.
  On that occasion the then Minister of State ruled that the hovercraft is, from the point of view of the Customs and Excise, almost certainly, without much fear of legal challenge, a ship. I therefore support the remarks of my hon. Friend the Member for Yeovil, whose constituency is a long way inland, who moved the Amendment on behalf of hovercraft, which are indeed in competition with ships.
  Mr. Grant-Ferris: Is my hon. Friend aware that a notice to mariners recently issued by the Board of Trade laid it down that a hovercraft is a ship and must exhibit the same lights as a ship and observe in every way the rules applying to a ship when in open water?
  Dr. Bennett: As one who travels frequently by hovercraft I assure my hon. Friend that the hovercraft behaves in no way similar to a ship. For example, a ship does not travel sideways quite so fast. I assure him that those who try to share the use of the navigable waters of the Solent are absolutely confounded by the fact that a ship's stern light may be coming towards one very rapidly indeed.
  Therefore, without wishing to beat the air unduly, we can be grateful to those snort proceedings upstairs on the Anchors and Chain Cables Bill for establishing a big point of policy which is now not merely recorded in the OFFICIAL REPORT, but which has been published in a notice to mariners. Thus, this judgment is enshrined. I add my voice to the plea so eloquently expressed by my hon. Friend the Member for Yeovil that the hovercraft should not be deprived of this relief on the oil used as fuel by ships in home waters.
  Mr. Diamond: The Treasury is grateful to the hon. Member for Yeovil (Mr. Peyton) for raising this matter because it gives me an opportunity to remove a misconception which might otherwise be widespread. However, I assure the hon. Gentleman at once that what I am removing is the misconception and not part of the Bill.
  We have been discussing, on the Clause and the Schedule, the machinery of the Customs and Excise. We have not been dealing, either on the Clause or the Schedule, with the Government's policy towards the development of the hovercraft. Many issues must be considered in this matter and, from the point of of view of the Customs, in asmuch as it is now necessary to take some steps because the traffic already exists, we do not wish to do anything which would prejudice the full development of hovercraft. I repeat that we are at one on this.
  We therefore do not want to prejudice the future position in any way. Were it not for an accident, which I will explain, there would be no reference to the point which concerns the hon. Gentleman in the provision. One must take the necessary powers to cope with this new form of transport and, in doing so, one must make reference to the Clause in which similar powers are granted for
  1604
  ships. That previous Clause unfortunately does, as a matter of unhappy drafting, include within it a reference to the exemption for coastwise traffic of heavy oil use.
  It is only because that earlier Clause contains that reference that this Clause and Schedule have to make reference to it. All that we are saying is that we are not going to prejudge the issue at all until everything has been fully considered and thought out, and a further development has taken place—that is to say, the hovercraft has been given an opportunity to develop further, so that we can see more readily its full potentiality. In order to leave the position completely open we do not want to incorporate any special advantage or disadvantage.
  The relief to which the hon. Member refers is a relief granted to coastwise shipping at a very depressed time in the shipping industry, in 1933. It was granted in very special circumstances. Whether, when the Government are ready and further development of the hovercraft has taken place, there will be a removal of this tax, or other taxes will be imposed, or further encouragement will be given, I cannot say at this moment. I am dealing not with hovercraft but with the Customs machinery. We are attempting to leave the ground completely open. I reassure the hon. Member that nothing that we are doing here prejudges the ultimate situation. This is only a method of getting the Customs machinery established.
  It would not have been right to take the very special exemption given to shipping as a principle which we could follow in respect of other forms of transport. When we are ready we shall be only too happy to say what the final proposals are in regard to hovercraft. But the Bill does not deal with that question. I hope that I have satisfied the hon. Member that there is no reason for any anxiety about the further development of the hovercraft.
  Dr. Bennett: Will the right hon. Gentleman make it clear whether the exemption which applied in 1933 still applies to such shipping as still moves round our coasts?
  Mr. Diamond: Yes, but the answer to what is implicit in the hon. Member's

  1605
  question is that it is a very different thing to remove an exemption than to give an exemption.
  Sir A. V. Harvey: I had not intended to intervene in the debate, but I was very disappointed with the reply of the Chief Secretary. He is a very eminent accountant, who looks at these matters professionally. The Government have exhorted the country to get ahead with exports. We lead the world on the production of the hovercraft, and an exemption in this direction would surely help those who are exploiting, manufacturing and selling it. It does not add up for the Minister to say that coastwise shipping was given this exemption 30 years ago in a depressed period, when that shipping is still being given the advantage of that exemption.
  I do not want to be involved in the shipping question, but I am concerned with the hovercraft, in respect of which British industry has a tremendous potential. This would be the right opportunity for the Government to do everything in their power to encourage those manufacturing the hovercraft, especially in exports. Not only over water, but over frozen estuaries and the lakes in Northern Canada the hovercraft has a great potentiality, and I ask the right hon. Gentleman not to push this matter aside as inconvenient but to grasp the nettle and do something about it, and show our people that we want to encourage exports.
  Sir D. Glover: This is most unsatisfactcry. The right hon. Gentleman took 10 minutes to tell my hon. Friend the Member for Yeovil (Mr. Peyton) that he was discriminating against the hovercraft. It is all very well to say that this concession for shipping was brought in 33 years ago; the fact remains that coastwise shipping still gets this concession, but the hovercraft does not. The hovercraft is working at a disadvantage compared with shipping.
  We started the debate with the right hon. Gentleman saying that the Government were leaning over backwards to do everything they could to encourage this vital new industry. Yet when we come to cases and cut out the verbiage, it comes down to the fact that the Government are discriminating against the
  1606
  hovercraft in favour of coastal shipping. This is a terrible position. It is like the argument that we had this afternoon, that if there is a tax on fuel and the exporter is relieved of that tax, it is of benefit to the importer. This is an argument for doubling the tax—not reducing it. It does not cheapen the price of exports.
  This concession was given to coastal shipping in 1933 in different circumstances, and it does not alter the fact that if a hovercraft has to operate without concessions it is being discriminated against to the benefit of coastal shipping. I should not have thought that this was carrying out what the right hon. Gentleman said at the beginning of the debate, that the Government were genuine in their wish to encourage what should be one of the greatest, most vital and growing industries, particularly in the export field, in this country.
  Mr. Peyton: As I moved the Amendment, perhaps I may say a few more words. The Chief Secretary has confronted the Committee with a difficulty. It is clear from his remarks that the hovercraft operator will be at a disadvantage as compared with the operator of a coastwise ship. The right hon. Gentleman, on the other hand, has dealt with the problem at some length with his usual courtesy, and in those circumstances I would feel disposed to ask leave to withdraw the Amendment—[HON. MEMBERS: "No."] I am only asking leave. I am fully entitled to do that.
  I should like to ask leave to withdraw the Amendment on the clear understanding that this or a similar Amendment is put down on Report, by which time the Government will have had a fair chance to think out what is admittedly a new problem, and will by that time——
  Mr. Callaghan Mr. Callaghan indicated dissent.
  Mr. Peyton: I observe with great alarm that the Chancellor shakes his head. I may tell the Chancellor, since he is here, that only last autumn I was in Kuwait. The then Prime Minister of Kuwait, now the Ruler, informed me that in 1957 he had given to the right hon. Gentleman a set of praying beads. I commented at the time what a very wise and discriminating present it was to give

  1607
  to a politician, and particularly one from the party opposite. I added what a great pity it was that he had never instructed the Chancellor on how to use them.
  I very much hope that the right hon. Gentleman will go home, find those beads—I have got some myself—gather some inspiration from them and then go to his right hon. Friend the Chief Secretary, who has had all the embarrassment of this wretched case tonight, and instruct him to come back on Report and say that he has had second thoughts, that he will produce a far more satisfactory solution than this, and that there will be no discrimination against what is a really new, hopeful and promising industry.
  I am sure that is the real intention of the right hon. Gentleman, and that is why, in saluting that intention, I beg to ask leave to withdraw the Amendment.
  The Chairman: Is it the Committee's pleasure that the Amendment be withdrawn?
  Hon. Members: No.
  Amendment negatived.
  Schedule agreed to.

  Clause 10.—(PIPE-LINES.)
  Question proposed, That the Clause stand part of the Bill.
  10.45 p.m.
  Mr. Eric Lubbock: I apologise for delaying the Committee at this hour, but there are some questions on this Clause which should be answered. I am delighted to see the Financial Secretary sitting beside the Chief Secretary on the Front Bench because the Financial Secretary took a leading part in the debates on the Pipe-lines Bill four years ago, when we used to argue about the meaning of the term "pipe-line" until 3 or 4 o'clock in the morning every Tuesday. The hon. and learned Gentleman is a great expert on this subject, and I know that, if the Chief Secretary cannot answer my questions, he will be able to get the information from his colleague.
  I assume that the Clause is designed to cope with the recent discoveries of natural gas in the North Sea. It was something of a surprise to me when I went to visit one of the natural gas drilling rigs in the North Sea, during the Whitsun Recess, to
  1608
  find that one is obliged to take one's passport. It is a similar exercise to going into a foreign country, the Customs officer appearing at the helicopter terminal on one's return from the rig.
  In passing, I must say that this seems an unnecessary procedure when the rigs do not have any bonded goods on board. I can see the point of it if cigarettes or drink are sold duty-free on them, but in most cases, I understand, the rigs have no bonded goods on board, cigarettes or liquor being sold at full prices. It is a waste of time and effort for Customs officers to have to be present when the personnel return from the rigs. However, that is by the way.
  What we are concerned with here is the natural gas which may be imported into the United Kingdom by means of pipe-lines constructed from the drilling rigs to terminals on the East Coast of this country. The first question I would like to ask the Chief Secretary concerns the interpretation of subsection 3(a), which reads:
  "for the purposes of the customs and excise Acts … goods imported by means of a pipeline shall be treated as imported at the time when they are brought within the limit of a port …"
  That phrase comes from the Customs and Excise Act 1952 and the limits of a port are the limits which are defined by the Commissioners under the powers conferred upon them by that Act.
  The Chairman: I am finding difficulty in hearing the hon. Member.
  Mr. Lubbock: I am sorry. I will speak up.
  My question to the Chief Secretary is whether it is the Government's intention that the Commissioners will designate as a port any terminal area to which a pipeline may be brought from a natural gas rig operating in the North Sea, or, and this is the only alternative which I can see, are the oil companies, the rig operators going to be compelled to construct pipe-lines so that they terminate within the limits of existing ports?
  If the latter is the case then this might be a very expensive procedure, because the discoveries of gas so far have not been located in close relationship to any existing port. In certain cases, it may be much more economical to bring the

  1609
  pipe-line ashore in a remote area outside of any existing port.
  The second point is slightly more complicated, but the gallant Gentleman will remember that under the Pipe-lines Act a construction authorisation is necessary for any pipe-line longer than 10 miles. Anything less than that is a local pipeline. We have to start by asking whether pipe-line construction authorisation will be necessary in the case of a pipe-line which is constructed from a rig to a point an the shore when the length of pipeline which is on the land is less than 10 miles. Is it the total length of the pipeline which is the criterion or is it the length which is on the land? I have re-ead Section I and other sections of the Pipe-lines Act, 1962, with great care to;ee whether I could find the meaning of this phrase, but it is a matter of some doubt, which, the hon. Gentleman will see, is of importance.
  If we have more than one rig which is feeding natural gas or petroleum products into a single pipe-line, then under Section 9 of the Pipe-lines Act the Minister has power to require the constructors of the pipe-line to build it of a size large enough to take the products of more than one user. One can see a certain situation arising if one looks at a map of strikes which have already been made in the North Sea.
  There is, for example, the Phillips strike, which is immediately in line beyond B.P., on a perpendicular from the coast. We have the Gas Council strike, which is in a direct line, but further out than the Shell-Esso strike. There may be many cases where more than one oil company or groups of oil companies will use the same pipe-line coming on to the shore.
  Under the provisions of Section 9 of the Pipe-lines Act, assuming that Section 1 applies so as to avoid wasteful duplication of the construction of pipe-lines, my question to the Chief Secretary is how is one to identify the separate products from each of the rigs as they cross the boundary mentioned in subsection 3 (a) of this Clause. That is when they come to be treated as imported, when they cross the limits of the port.
  Through this one pipe-line we shall have, for example, the products of the Gas Council and the Phillips' rigs flowing simultaneously and for the purposes
  1610
  of this Clause it will be necessary for someone to distinguish them, and I do not quite see how that can be done, because, of course, the gas which is found under the North Sea will be practically pure methane, as far as one can judge, from whichever rig it comes. It seems to me that there may be some difficulty in discovering to which company the flow coming through the pipe-line belongs.
  My third point is a quite trivial one, but I thought I had better mention it at this stage. In the definition of "owner" in subsection (10) we have the word "pipe-line" at the beginning, but later it refers to "line" without the prefix "pipe". I remember that in the Pipelines Act we were very careful not to use any other word but "pipe-line" and if the right hon. Gentleman will look at Sections 65 and 66 of the Act of 1962 he will find that the word "line" was not used; it was always "pipe-line". I do not suppose that there is any danger of ambiguity here, but, just in case, perhaps this point ought to be cleared up.
  One other point on this definition. I should like the right hon. Gentleman to explain to me why this definition has to be made between the owner in the case of a pipe-line which is vested in the Crown and the owner in any other case, because if the right hon. Gentleman looks at the definition of "owner" in the Pipe-lines Act he will find that it means the person in whom the pipe-line is vested. Unless there is a factor which I have not been able to discover I cannot see why the same definition should not be used here.
  Mr. Hirst: Before the Minister replies, I should like to say a word because I am a little worried about subsection (6). I appreciate that it is not unreasonable that approval should be required for the use of pipe-lines, but it seems to me that the subsection goes a long way. When any Government Department or, for that matter, any inspired organisation, is given power to do something—in this case, vary the terms of their approval—"for reasonable cause", naturally I have a certain amount of "wind up".
  The subsection says the Commissioners may
  "for reasonable cause vary the terms of their approval, and (provided that they have given to the owner of the pipe-line not less than three months' notice of their intention so to do) revoke their approval."

  1611
  I should like the Government to give us reason for these very sweeping powers and particularly for the period of notice. I think that three months' notice in relation to this sort of undertaking is unreasonable.
  I want to approach the matter reasonably. I have said it is obvious that some sort of approval in this sort of venture should be required. I do not dispute that, but if one is to ask for these very wide powers for approval they should be reasonable in the same sense as, no doubt, the Government would argue that the commissioners would not look at anything without reasonable cause. The word must have the same meaning in both contexts. I do not myself think it reasonable that approval should be required in so short a period as three months when possibly nothing has been done and only some rearrangement is required.
  This provision does not appear to be necessary. The Government can possibly make out a case to show why it is necessary, but at the moment it is a little difficult to see, and I think we need some explanation of the point.
  11.0 p.m.
  Mr. Diamond: If I might, first, answer the point just raised by the hon. Member for Orpington (Mr. Lubbock), as I am sure he understands, this is replacing an earlier Section in the 1963 Act in order to give additional powers to meet the new circumstances to which the hon. Member for Shipley (Mr. Hirst) referred.
  In the original Section, we had the same three months. We have had several years' experience of it, and we have received no complaints. We have no reason to believe that the three months is not adequate. The only circumstances that one can envisage would be a correspondence going on, the Customs saying, "We do not like the way you are running this, and we would like you to do so and so", a reply saying, "We are not prepared to do so and so", and a difficult correspondence becoming more difficult; so that, by the time the correspondence was terminated, everyone would know that a certain stage was being reached, and three months would
  1612
  be something unnecessarily long rather than unnecessarily short.
  We have had no complaints at all. It is in the original Act, and we have no reason to believe it is inconvenient to anyone.
  To answer the rather minor point cases confirmed and I agree there are ton about definition, we are taking over the precise words in the Finance Act, 1963. The Clause is based on a section in that Act, but it meets the new situation of the Continental Shelf and, as the hon. Gentleman said, it enables one to import from that point instead of merely from within the country.
  If he will be good enough to look at Section 9(7), he will see "owner" defined in exactly the same way:
  "… 'owner', in relation to a pipe-line, means … the person in whom the line is vested and, in the said excepted case, means the person operating the line."
  Then he asked me how one is to differentiate between the various owners from whom the gas is coming, using the common pipe-line. As the hon. Gentleman realises, under the Clause, the Customs has power to authorise the owner of the pipe-line. In the case which he envisages, the owner of the pipe-line would be a consortium representing the two or three parties who are importing the gas. That would be a convenient way of doing it. If they are to use the same pipe-line, they will have to make some arrangement between them. That arrangement can be called "the arrangement incorporated in a consortium". The consortium would be the owner. It would be responsible for the duty. It would divide the duty between its members, and it would work perfectly simply in that way.
  Mr. Lubbock: The Pipe-lines Act envisaged a situation in which one person is the owner of the line and has to convey the products of some other person. Under Section 9(2) of that Act, the Minister has power to impose such requirements as he thinks necessary for the purpose of securing to persons other than the owner of the line the right to have conveyed by the line the kinds of things specified in the authorisation. For example, B.P. might own the line, and it might convey products belonging to Phillips.
  Mr. Diamond: I am sorry. I thought that the hon. Gentleman was asking me about a more difficult point than he is. If there is one owner, there is no problem at all. The one owner has to account for the duty on what is passing through the line, and he collects from anyone else whom he is allowing to send goods in that way.
  Question put and agreed to.
  Clause ordered to stand part of the Bill.
  Mr. Iain Macleod: I beg to move,
  That the Chairman do report Progress and ask leave to sit again.
  It looked at one time today as though we might possibly take a bite out of Clause 11 and have a discussion on betting and gaming, but the first day of a Finance Bill is always unpredictable.
  We have had a number of excellent debates, and a number which left us quite insatislied, and to which we shall have to return on Report, but I suggest to the Chancellor that this is a natural break, and that as the betting and gaming Clause introduces a new tax, and a principle of treat importance, it might be an idea to call it a day at this stage and take up tomorrow Clause 11 and the subsequent Clauses relating to betting and gaming.
  Mr. Callaghan: The right hon. Member for Enfield, West (Mr. Iain Macleod) has moved a Motion which has now been put to the Committee. I was about to do it myself, but I am delighted to be relieved of the task.
  I thought that we would get to Clause 11, because when I opened my newspaper this morning I read that we would get that far. I found it very interesting.
  I am a little disappointed that we have not started on Clause 11. I had hoped that we might start on it, but I think that there is a good deal to be said for starting on a new subject tomorrow instead of at five minutes past eleven tonight. I hope that we can make reason-
  1614
  able progress tomorrow, and in those circumstances I shall not resist the Motion.
  Question put and agreed to.
  Committee report Progress; to sit again Tomorrow.

LOCAL GOVERNMENT [MONEY]
Resolution reported,
That, for the purposes of any Act of the present Session to make further provision, in relation to England and Wales, with respect to the payment of grants to local authorities, rating and valuation and the classification and lighting of highways, and for other purposes, it is expedient to authorise the payment out of moneys provided by Parliament of—
(1) grants to local authorities, for the year 1967–68 and each subsequent year, of an amount equal to the aggregate amount which the Minister of Housing and Local Government determines is to be available for that year for the payment of grants (other than housing subsidies) to local authorities out of such moneys, reduced by such part of that aggregate amount as the said Minister estimates will be allocated to grants for specific services provided by local authorities;
(2) the expenses of any Minister incurred under the said Act in paying—

(a) grants to local authorities in connection with the development or redevelopment of land, the use of land as a public open space or the reclamation or improvement of derelict, neglected or unsightly land;

(b) grants to port health authorities and to county district councils in connection with the functions relating to aircraft conferred on those councils by or under section 143 of the Public Health Act 1936;

(c) grants to local authorities in respect of expenditure on staff which is attributable to the presence in their areas of immigrants from the Commonwealth,

not exceeding, in the case of the grants mentioned in paragraphs (a) and (b) above, one-half of the amount which, under the provisions of the said Act, is or is treated as, or as costs incurred on account of, expenditure in respect of which the grants may be paid or such larger proportion of that amount as may be payable in accordance wth section 185 of the Town and Country Planning Act 1962;
(3) any administrative expenses incurred under the said Act by any Minister; and
(4) any increase attributable to the provisions of the said Act in the sums payable out of such moneys under any other Act.
Resolution agreed to.

AGRICULTURE (BRUCELLOSIS)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fitch.]
11.7 p.m.
Sir Arthur Vere Harvey: During recent months I have put several questions to the Minister of Agriculture, Fisheries and Food about brucellosis. For those who are not aware of the disease, let me tell them that it is the abortion of cattle, and that the disease can be passed on to human beings through milk or by handling.
This matter was debated on 19th June, 1964, on the initiative of my hon. Friend the Member for Richmond, Yorks (Mr. Kitson). Looking back on it, it was a very good and interesting debate. There are several aspects of this subject to which I should like to refer in the short time available to me. I estimate that the cost of this disease to the dairy industry is a minimum of £2 million a year, or approximately £25 per infected animal, due to the loss of yield of milk of about 20 per cent., and, of course, loss of calves. There is also a loss to beef herds. Britain is short of beef, and we need every animal that we can get, without losing them through brucellosis. There is also the loss of exports of cattle, plus the cost of human brucellosis.
During the election campaign in my constituency I found that one well-known doctor was treating 28 patients for brucellosis. It is a ghastly complaint. A doctor in my constituency has suffered from it for about eight years. At the beginning of this year my youngest son, if I may bring him into this debate, who is aged 18, was complaining of headaches, but he went back to school in January. He ran a temperature of nearly 105 degrees, but he was being treated for influenza. After 14 days I asked that a specialist be brought in. A blood test was taken, and brucellosis was diagnosed. He is only just recovering, so I have had some first-hand information of how this disease can affect human beings.
There is nobody here from the Ministry of Health. I had thought that there might be. What is that Ministry doing about this disease? I am told that between 1,000 and 4,000 people in the country are affected annually, maybe more.
1616
One does not always know when people are affected. Human brucellosis is not notifiable in England, Scotland or Wales. People lose time at work. The duration of the illness can be up to many months or years, and there is a long convalescence.
The disease could be totally eliminated in Britain. The Minister is not facing up to the problem. Brucellosis is not unlike tuberculosis in cattle; it can be passed on to human beings. We have often been told by right hon. and hon. Gentlemen opposite that during 13 years of Tory Government something should have been done about this matter. Let me remind the House that tuberculosis was eradicated completely in that time. It was the opinion of the Ministry of Agriculture, Fisheries and Food that the two problems could not be tackled simultaneously. Tuberculosis was eradicated without crippling the country; it was costly, but it was done.
I wish to quote from a long letter which I received from the medical officer of health in my constituency. He said:
"… I would say for certain that there is more sense in making brucellosis notifiable than there is in having measles notified which is being done at present … Nor will pasteurisation solve the problem as we know that at least 25 per cent. of cases occur in people who handle diseased animals or their products … Only this day (1st June, 1966) I have had occasion to remove a Section 20 Order, which, as you know, is the Heat Treatment Order I place on a farm as a result of positive milk being found. This Order was placed on the farm at the end of last week, but the farmer has got rid of the two offending animals and I am obliged to remove the Order. We do not know where the two cows went, and they may well be producing milk in a diseased state on another farm which is going to the public in a dangerous manner.… If Mr. Peart wants to make this political, you can remind him that during the period from 1951 to 1962 the country was engaged in the eradication of tuberculosis from our cattle and that during this period it was impossible to tackle anything else."
That letter was from a civil servant, a very well-known doctor in my constituency.
The right hon. Member for Rossendale (Mr. Greenwood), now the Minister for Overseas Development, speaking from the Opposition benches on 19th June, 1964, said:
"… as a nation we seem to have dragged our feet somewhat on the issue in a way which, to say the least, is surprising."

1617
Later, he said:
"It is a lamentable state of affairs that we seem to be almost the only country in Europe where brucellosis is not a compulsorily notifiable disease."
and:
"… I support very strongly the suggestion that there should be compulsory slaughter of the infected beasts and that the Government fiould be prepared to accept the financial tesponsibility for this."—[OFFICIAL REPORT, 19th June, 1964; Vol. 696, c. 1714–17.]
The veterinary service in Britain is probably one of the best in the world. We certainly have the best veterinary surgeons, many of whom have been infected with Malta fever, who are hardworking, dedicated to their jobs, and working all hours of the day and night to improve the efficiency and well-being of our cattle. They have made strenuous efforts to combat this disease, but without a Government plan they have an absolutely hopeless task.
The present Minister of Agriculture, Fisheries and Food, also speaking on 9th June, 1964, said:
"I should like to know from the Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food why there has been this long delay in taking action."
He went on to say:
"I want no lethargy."
and, later, he said:
"In view of the menace to health and the cflect of the disease on our agriculture, the Ministry must do something about it. We cannot afford a delay of this kind".
He also said:
"I shall not fight the election on brucellosis, but I have no doubt that, when there is a change of Government, the hon. Gentleman vvill remind me of my speech this morning."—[OFFICIAL REPORT, 19th June, 1964; Vol. (696, c. 1722–7.]
That is what I am doing tonight—I am reminding the right hon. Gentleman of his speech on 19th June, 1964. How tnany cases of human infection must there be before something is done about it, before there is an outcry among the public, among the thousands of people who are suffering on the lines which I have indicated?
I know, as a farmer in a small way, that S.19 has been an effective vaccine, but there is apathy among quite a considerable number of farmers, who do not always take the matter seriously. An animal that has been vaccinated with
1618
S.19 has this fact stamped under the tail, and it is not always discernible. There seems to be no policy at all. It is estimated that only 30 per cent. of calves are vaccinated before they are eight months old. Many herds carry animals which are free from brucellosis, but would react positively to the test. All such animals should be liable for slaughter if a test and slaughter policy were introduced.
Farmers are heavily penalised financially if the milk which they send to the Milk Marketing Board is infected by antibiotics, but nothing is done about brucellosis. It has been a notifiable disease in Northern Ireland since 1949. About 80 per cent. of the States of the United States are free from brucellosis, and the whole country is expected to be free in the next five years. France is running an eradication scheme. Practically all the Scandinavian countries have tackled the problem successfully. I do not know whether it is generally known that a patient who contracts brucellosis can sue a farmer who knowingly sells infected milk. The black spots are Cheshire and Somerset and areas of heavy dairy industry where people draw their milk from farms direct without pasteurisation.
The British Veterinary Association has drawn up an eradication scheme and is anxious to get on with it. Surveys that I have read show that about 66,000 cows in this country are infected. If all these animals were slaughtered and the farmers compensated at the rate of £100 per animal, the cost would be between £6 million and £7 million. I know that is a lot of money, but the health of the nation must come first. The increased cost of drugs as a result of free prescriptions is between £40 million and £50 million a year. If we can save several thousand people suffering from this illness, it is worth spending £6 million to get rid of the disease or a large part of it in the first year.
I ask the hon. Member to bear in mind that his right hon. Friend has given me rather dusty answers to my questions in recent months. In fact, his last reply was almost discourteous. This is not a party matter. It is a national matter in which the health of the people and the prosperity of our dairy herds and our

1619
export of cattle are concerned. It should be treated on a national basis and not delayed. I hope that the hon. Gentleman will give some encouragement that the Minister will tackle the problem without undue delay, as he and his right hon. Friend have said they will.
11.17 p.m.
Mr. Timothy Kitson: I am grateful to my hon. Friend the Member for Macclesfield (Sir A. V. Harvey) for allowing me a moment or two in which to say a few words. The Minister must get on and tackle this problem. He agitated for action when he was in opposition, and the situation is deteriorating. It is strange that we should be about the only country in Western Europe which has no eradication scheme. Since we had our last debate on the subject, Northern Ireland has practically completed its eradication scheme.
The Ministry has produced figures suggesting that the cost of eradication would be about £40 million. The Veterinary Association and the dairying industry cannot understand how the figure has been produced. Many of us believe that it is because the Treasury is dodging its responsibility and has produced a figure greatly in excess of the actual figure that a scheme would cost. Unless we soon start an eradication scheme we shall be very isolated as one of the few countries still with brucellosis, and the cattle export industry will be extremely difficult. There are already signs that Europe is loath to take cattle on the hoof from us, and one of the reasons is because we are doing nothing to eradicate brucellosis.
The hon. Gentleman should suggest to the Minister that in areas where it is proved that there is a low incidence of the disease, as in some countries where research has been going on and it is known that there is a low incidence, we could start pilot schemes. The dairying industry is attempting to introduce its own pilot scheme through the Royal Dairy Farmers' Association, and I think that many people will jump on this band wagon, and this will make the Minister's task more difficult when he introduces a national scheme in a year or so's time. The Minister must get on with this and not delay any longer.
11.20 p.m.
The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. John Mackie): I am pleased that the hon. Member for Macclesfield (Sir A. V. Harvey) has raised this subject, because it gives me an opportunity of explaining, on behalf of my right hon. Friend the Minister, the very great difficulties in the way of a solution. This is a serious problem. I thank the hon. Member for Richmond, Yorks (Mr. Kitson) for his contribution, because we know that he has taken a genuine interest in this subject over many years in the House. As the hon. Member for Macclesfield said, this is not a party matter: there is nothing political about it.
I would say to the hon. Member for Richmond, Yorks, that Northern Ireland is only about halfway to doing the job. The problem there was not so difficult as ours, in that they used far less of Strain 19, which makes for an easier job. Therefore, using them as an example is not so accurate as the hon. Member probably thinks. I agree with him that such a scheme would help our exports.
This is a serious question and nobody would object in principle to eradication. I am sorry that the hon. Member for Macclesfield thinks that my right hon. Friend gave him a dusty answer. I am sure that he did not mean to, as he is as interested in getting the job done as is the hon. Gentleman. I accept the hon. Member's point that when his party were in power there were other things to do concerning animal health and that, to a great extent, these things were done by the previous Government.
Nevertheless, the previous Government did not start on the problem. The only thing they did was to put in hand a scheme of investigation, but did not start on an eradication scheme during the 13 years that they were in office. It is, therefore, a little unfair for Opposition Members to criticise us for taking only a few months to consider the practical aspects of this serious problem.
Brucellosis is a serious disease, both for animal and for human health, and I wish to express our sincere sympathy with the hon. Member in his personal experience of the way in which it can affect not only a man's herd, but his family.

1621
On the question of notification, this is not easy, because there is no other symptom than abortion, which can have many other causes than brucellosis. Also, only a proportion of the animals affected abort. Notification of a disease, unless it is obvious, is difficult. Brucellosis is not like foot and mouth, or other notifiable diseases in animals.
I think that the hon. Members would agree that this disease is not in the same category as bovine tuberculosis, either in its economic effects on the livestock industry or in its effects on human health. The economic effects can be and have been considerably mitigated through the Calfhood Vaccination Service, which is free, and, although the effect of the disease on a human being is most distressing, it is rarely fatal. Although it may be, as some medical authorities state, that there are more cases than the average of 125 confirmed each year, one still cannot compare the seriousness of this with tuberculosis as a major problem of public health.
Nobody questions the seriousness of brucellosis. The hon. Member mentioned the 28 cases in Macclesfield and said that the medical officer there suggested that the figure was more like 1,000 to 4,000, which shows the difficulty of estimating. But the number of cases confirmed is, on average, about 125.
It follows that it would be wrong to adopt direct measures of eradication without counting the cost. In other words, i F we have to send a lot of money, we must consider the best way of spending it, taking into account the interests of agriculture and public health. I do not want to rule out the possibility of a more gradual approach to the main problem and this is under consideration at the moment by the Government.
Estimates were given by the hon. Memher of the cost to the dairy industry of £2 million. The estimate from the report which I have here, and which no doubt he has seen, puts the figure at £1 million, or half his estimate, but if exaggeration makes a point I am prepared to take it. The brucellosis survey of 1960–61, which I have here, showed that about 2 per cent. of dairy cows were infected, and these were distributed among 25 to 30 per cent. of dairy herds.
Sir A. V. Harvey: When the hon. Gentleman talks about just over 100 human beings infected in a year, does he really believe that when 28 people were being treated six weeks ago in Macclesfield the whole of Britain has only 100 cases? Really, he must get the numbers right.
Mr. Mackie: These are the number of cases confirmed and I agree there are probably more. The figure of 4,000 has been mentioned, but the hon. Gentleman should realise when putting these figures to us that the problem is nothing compared with the tuberculosis problem.
I was saying that the survey showed that about 2 per cent. of dairy cows were infected and these were distributed over 25 to 30 per cent. of dairy herds. This is the hard core of the problem. Unfortunately, however, there is an added complication, which I mentioned earlier, that Northern Ireland did not have, owing to the widespread use of Strain 19 vaccine among adult cattle.
This is because this vaccine induces the same type of reaction to blood tests as infection does, and as a result we estimate that about 14 per cent. of female cattle of breeding age would react to the diagnostic tests which would have to be used in a scheme of eradication.
This means that if we attempted full-scale eradication of the disease now, as the hon. Gentleman has suggested, and we had to pay compensation on this 14 per cent., the compensation bill, allowing for salvage, would be nothing like £6 million to £7 million. It would be something like £35 million to £40 million.
This figure is based on the experience of the eradication of tuberculosis, and it does not take into account administrative costs, blood sampling, testing, etc. This estimate cannot be regarded as exact, but it is near enough to give a good impression of the amount of money which would be involved.
I do not think we should bandy about figures of £6 million or £7 million if we are talking of carrying out a full-scale eradication scheme.
Sir A. V. Harvey: What I was suggesting was that a pilot scheme should be carried out in one or two different counties, so that at least we make a

1623
start. I hope that the hon. Gentleman will encourage the House to that extent.
Mr. Mackie: I will come to the point about pilot schemes later. But I would just like to point out that if we were to carry out this full eradication scheme, because of the complication of Strain 19, these would be the figures that might be involved.
The only way to reduce this heavy bill for compensation would be to allow sufficient time for the ordinary processes of culling to remove these uninfected cattle from the national herd which, as I have explained, would at present react to diagnostic tests because of vaccination. This would take some years, and clearly some steps would have to be taken to reduce materially the numbers of cattle which are at present being vaccinated as adults.
If we were to allow time for this to happen, the cost of compensation would be confined to infected animals only, together with the cost of testing and administration. This might be as little as one-quarter of the figure I have just quoted. It would depend, of course, on the scale of compensation and on the number of cattle vaccinated as adults and still remaining in the national herd at the stage when it might be possible to begin full eradication.
The question then arises, taking into account the economic loss to the industry and the number of cases diagnosed each year in human beings, whether or not the money can be found, and when and on what conditions and at what rate it might be possible to find it. These are the questions of principle which remain to be solved. These however, are not the only ones. Even when they have been satisfactorily resolved, there remain technical problems to be disopsed of.
We are inundated with advice—as any Government is—and some people tell us that we should make the vaccination of calves compulsory. This would be difficult. It would virtually mean an enforcement officer on every farm. Besides, it would cut across the policy of those livestock owners who maintain closed herds and do not normally practise vaccination because the health situation in their herds does not make it absolutely necessary.
1624
We have also been advised to start a pilot scheme in a number of different places. This suggestion is not well conceived. The purpose of a pilot scheme generally is to find out whether a certain programme is practicable or not. No one doubts that eradication of brucellosis is practicable. What is in doubt is the method and the cost of doing it. A pilot scheme would throw little or no light on these two problems.
The first and essential step that would have to be taken before any progress can be made at all is to identify those herds that are already brucella-free, or nearly so. The 1960–61 survey showed that 70 per cent. or so of the dairy herds are in this category, but because of adult vaccination many of these herds contain animals which would react to the blood test; the percentage containing no reactors is estimated to be rather less than 20 per cent., but the task of identifying them is not easy. The milk ring test is available for preliminary screening and can readily be carried out in dairy herds. For obvious reasons it cannot be used as a test in beef herds. But even the milk ring test requires confirmation by the blood test and this, too, will cost a lot of money.
Further steps are also complicated. One possibility is a prohibition on the sale of non-brucella-free animals. I find it difficult to believe that the farming community would accept this readily, and it would be impracticable until a large proportion of the brucella-free herds were registered as such. Restriction or even prohibition on the use of S.19 vaccine in adults might be more acceptable, were the marketing of brucella-free animals to be developed. This, in turn, would involve the very difficult question of refusing the only protection available for farmers whose herds have been in contact with contagious abortion. Believe me, I can say as a farmer, and an erstwhile dairy farmer, that this is very important. It is a very expensive business to try to keep a herd free and then to get a contact, not having vaccinated. These are some of the technical problems. There are many other difficult questions to be answered. This is not a simple problem, as the hon. Member suggested it was.
Mr. Kitson: Many other countries have succeeded in finding a scheme and the

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money to introduce it. When Northern and Southern Ireland are quite capable of introducing an eradication scheme, why are we not capable of doing so?
Mr. Mackie: We are not incapable n any shape or form. I am simply pointng out all the technical difficulties in a country which is giving a free S.19 vaccination scheme, which makes it more difficult here than in Northern Ireland and perhaps in some other countries.
After all, we have had this survey in Our hands only since the beginning of last year or the year before, and we have lad many things to do. We have to look at costs and at the public health aspect. While in no way belittling the importance of getting rid of this problem, I am pointing out the cost which must be taken into account when introducing a fairly big scheme like this. To say that it is a simple matter and that other countries have solved the problem easily and at little cost is not right.
Sir A. V. Harvey: I did not say that.
Mr. Mackie: It is a very costly affair and as a Government we must take this into consideration.
Reference has been made in debate and in Questions to a new strain of vaccine referred to as S.23. I think that the strain is 45/20. This is a dead vaccine which is not so effective as a live one and in many cases does not give the protection given by a single dose of
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S.19. It requires two doses. There is evidence that two doses give a degree of protection not far short of that given by S.19. The duration of protection given by 45/20 is unknown. We all know that S.19 will protect for five pregnancies. It requires several years before the duration of this protection will be known. For some time experiments have been carried out by the Central Veterinary Laboratory at Weybridge and the Agricultural Research Council Field Station, at Compton, to test its suitability for general use and particularly to see what its effects are on blood reactions on cattle which have previously been vaccinated with S.19.
The hon. Gentleman seems to suggest that the Government are doing nothing about it, but we have carried out this survey and we have gone into discussion on this particular survey. We are investigating this, and I have tonight pointed out very carefully all the problems that there are. I assure the House that we have this matter very much in mind and can say that as soon as we have decided on the best action there will be no delay. I ask the hon. Gentleman to understand that we appreciate his personal problems, and the country's problems, and assure him that we shall not forget them by any manner of means.
Question put and agreed to.
Adjourned accordingly at twenty-five minutes to Twelve o'clock.