HC Deb 27 June 1966 vol 730 cc1250-548

4.14 p.m.

Mr. Laurence Pavitt (Willesden, West)

On a point of order. Sir Eric, on this Clause, you have selected nine Amendments for Division, and 35 Amendments which are to be discussed with them. Do we take it that we may not vote on any of these 35 Amendments?

Secondly, as Amendment No. 34 deals with part-time employees, will it be possible to discuss with it Amendment No. 21, in page 48, line 23, leave out "twelve shillings and sixpence", and insert "eight shillings and fourpence"?

The Chairman

The position is that in addition to the nine Amendments provisionally selected for debate, I have selected two further Amendments for debate, Nos. 231 and 325. When we come to the Amendments which are not selected, but which are to be discussed with the Amendments which have been selected, I am prepared to listen to any representations which may be made from either side of the Committee for separate and specific debates.

In reply to the final point raised by the hon. Gentleman, Amendment No. 21 is not selected.

Mr. Iain Macleod (Enfield, West)

Further to that point of order. In view of the large number of Amendments which are to be taken with Amendment No. 34, which, I appreciate, goes very wide, perhaps the Chair will consider sympathetically requests from this side of the Committee for separate divisions on some of the Amendments which are to be considered with it?

The Chairman

As I said, I am prepared sympathetically to consider requests from either side of the Committee for separate Divisions on some of the Amendments which are to be discussed with Amendment No. 34.

Mr. Iain Macleod

I beg to move Amendment No. 11, in page 48, line 13, to leave out "5th September 1966" and to insert "6th February 1967".

I propose to speak fairly briefly on this important Amendment, although I hope to catch your eye later in the discussion. The Amendment would move from the first Monday in September to the first Monday in February next year the date set down at the beginning of the Clause.

The first achievement of accepting the Amendment would be to buy time. This Clause is really the heart of the Chancellors Budget, and it seems a long time ago that the Chancellor was discussing hairdressing and the like in his television performance on the evening of Budget day. Since then, these proposals have been riddled. They were shot through on the Budget debate, and on the Second Reading of the Finance Bill, and what was left of them was shot out of the sky by my right hon. Friend the Leader of the Opposition in the debate last Thursday to which, in a very different context, I was just referring.

We know perfectly well that fierce opposition comes from the Chancellor's own side of the House in this matter. There has scarcely been a speech supporting him and even the Minister of Labour found loathing struggling with loyalty as he tried to move the Second Reading of that Bill.

The proposal which we now put will, in a sense, bring the two Bills together—that is, Clause 42 of the Finance Bill and the Bill which is not before the House, but which is in all our minds and in due course will be discussed. A number of concessions of one sort or another are beginning to be made, largely as a result of pressure from this side of the House—on agriculture, on clay mining, on charities, on sand. If we could push back the date it would be possible to argue some of these matters at rather more satisfactory length.

I put forward two main reasons, The first is that unless we do something like this Amendment, then it is quite clear that we are heading for complete confusion. Ministers from the Treasury Bench, including the Minister of Labour, believe that comparatively few companies will be affected by these different provisions. I should like to illustrate the position simply from one letter which I have received from the chairman of the British Oxygen Co. Ltd. The difficulty—and unless we can bring these two dates together and, therefore, the two Bills together we shall not solve it—is that we still do not know what the machinery for assessments or refunds will be. For example, the original White Paper referred to an "establishment." In the Budget debate the Financial Secretary said that it meant "premises" and he went on to quote the statistical reference to premises on which I made some comment. The Blue Book, which gives the different classifications, referred to a "unit" and on Second Reading, last Thursday, the Minister of Labour talked about the "address." We have four different conceptions—the establishment, the premises, the unit and the address. The simple fact is that nobody in industry knows which of these or which interpretation of these is the correct one.

That is the first reason why we should seek, as far as we can, to bring these two Bills together. Let me refer to this letter from the chairman of the British Oxygen Company Ltd. to show the sort of thing that will happen unless we take further time, as we are suggesting, to hammer out some of these points. British Oxygen is a firm, like many others, which is widely scattered and widely diversified, sometimes with its sales and accounting departments concentrated and sometimes, where it is more efficient, with them linked with the manufacturing industry.

The chairman gives four examples which will interest the Chancellor. If the Chancellor has not seen the letter, I should like him to study it afterwards. First of all, under the original White Paper British Oxygen reckoned that it would be in credit £250,000. Under the Bill it reckons that it will be in deficit £150,000. That is a difference of £400,000. The first example concerns one manufacturing site—and we do not know whether "site" is a fifth term of art to add to the four which I have given. On this site the company is planning automation. That will reduce the number of workers and will switch the plant. It would cost £40,000 per annum under the Chancellor's proposals, which can make no sense at all.

Secondly, the company has special need of transport because of the vast number of its customers. Now, the only way in which it can meet the bill is to set up its own transport company and "to make it less efficient"—I am using its own words. If the company makes it less efficient it will gain £54,000. Thirdly, it centralises the accounting work by computer with one of the factories. There is a resultant saving of staff, but, as a result, the company reckons that it will have to pay out £51,000 a year instead of recovering £49,000—a turnover of £100,000 a year.

Lastly, at one works where there is a large percentage of staff the company has precisely 64 staff and 64 workers, and if it adds one worker or discharges one clerk it will gain £10,000 a year. The chairman asks, "Does this make sense?" The answer is that of course it does not; it is absolutely daft. This is just one of the illustrations which have been flooding in to everyone of my hon. Friends and, I have no doubt, to hon. Members opposite.

The first reason I give, then, why we should take time is that we should at least make some more sense of the absurdities of the Bill. At this point I will consider only the industrial absurdities of the Bill which are so manifest that unless the Chancellor is ready to take a little longer and to bring these two key dates together—the collection and the beginning of the refund—only chaos lies ahead for British industry.

On previous Amendments I have been most conscious, in one or two instances almost morbidly conscious, of the cost of the Amendment. On this occasion I am bound to say that I am not. We have put forward from our side of the Committee ideas about a payroll tax linked to the development of the social services and with one eye on Europe. The Liberal Party has put forward, as expounded by the hon. Member for Cheadle (Dr. Winstanley), an extremely detailed plan. I would rather the Chancellor used either of those. I would far rather that he used the regulator than the naked folly of the S.E.T. as it stands before Parliament has had a chance properly to amend it.

I turn briefly to the second main reason. It is the question of the interest-free loan which is implicit in the Chancellor's scheme and which would be eliminated if this proposal were adopted. I am glad to see the Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance present, because we want to know why it is impossible for administrative reasons—if that be the answer given—to collect these sums at a date nearer to the date on which refunds can become payable.

May I quote briefly from a letter in The Times on 25th June which begins: I find it quite incredible that 'for administrative reasons' the Government think it necessary to take interest-free loans from charities in the form of returnable selective employment tax. The charity has first to find the money out of gifts intended for badly needed relief—already usually inadequate—or else it must borrow, if it can, at interest. What is true of charities is true for every employer in this country. The charities will get a refund—after considerable pressure has been brought to bear on the Chancellor—but even the charities will have to make this five months' interest-free loan to the Government, and at least for those five months a good deal of work will be held back. We want the most detailed reasons why, administratively, these dates cannot be nearer.

I turn from the situation of charities and allied problems to the much wider problem of industry. The question which we all want answered—and I must press for an answer again this afternoon—is, what will the Chancellor tell the banks about the level of bank advances and overdrafts in order to meet the interest-free loan which he is demanding from employers?

We asked this question in detail when we were debating Clause 15, on the regulator. We asked it again a day or so later, when discussing a Clause in connection with Corporation Tax. My right hon. Friend the Leader of the Opposition stressed the point, as did a number of others, last Thursday on Second Reading of the Ministry of Labour Bill. The Chancellor avoided answering until, at 9.56 p.m., with less than five minutes to go, the Leader of the Opposition interrupted him, and then the Chancellor said that he had nothing to say on the subject. Thus, on three occasions at least—more if one counts the debates on the Budget—the right hon. Gentleman has been invited to answer this question and to make the matter clear.

The Chancellor will recall that I said he had been "charmingly evasive ", but that was two debates ago. We have come to the point now when it is not funny for him just to go on saying nothing about these matters, while industry and the banks have to wait. The point is fundamental to the Chancellor's Budget judgment. It is not possible to understand whether the Budget is inflationary, deflationary or neutral until we know exactly how much of this will be taken up by bank advances in overdrafts or how much will be found out of profits or in some other way.

I appreciate that there are some questions which the Chancellor cannot answer, but he can say when he expects to make known the instructions which he must be intending to give—I am sure that he has already discussed this matter with the Governor and the banks—about the level of advances that will be allowed.

I remind the Committee that, from the Chancellor's point of view, from 5th September the right hon. Gentleman will be taking nearly £100 million a month—perhaps a little under that, but not very much less—out of the economy. As winter rolls on—and, with luck, as we are getting towards the end of it; certainly some time either at the beginning of February or as soon after as practicable—the right hon. Gentleman will have to pay out about £300 million.

I do not know whether it will be paid all at once, in a week or in one day, but the effect of that—of that tremendous punch being dealt in September and the enormous reflation that is planned for some time in February or towards the end of the winter—on the economy is very hard indeed to judge. I am sure that the right hon. Gentleman will agree with me about that.

I therefore press the right hon. Gentleman on this issue. It is intolerable that industry should be treated so casually, because, for a variety of reasons, the Government were not ready with what we may call their Ministry of Labour proposals and, because of that, could not put them in the same Bill, so that the House of Commons has been denied the opportunity of discussing the collection and the refund of S.E.T. in the same set of debates. It would have been a great deal more convenient had that been possible.

I acknowledge that the Chancellor has done what he could in an unsatisfactory position to bring these closer together. But they are in different Bills and although the Chair may oast a blind eye from time to time it would not be in order to go into any detail about what is in the Ministry of Labour Bill or to say what we would wish to do to it today, apart from strangling it. So we must resort to these methods of putting down large-scale Amendments of this sort.

To sum up, we believe that this is a thoroughly bad Clause. We believe that it has begotten a very bad Bill indeed. However, we have given a Second Reading to the Finance Bill and to the other Measure. It is, therefore, the task of the Committee to make this Bill a little less bad. I suggest that the right way to start is to move the two matters together and, by accepting the Amendment, we will have time to iron out some of the absurdities inherent in the scheme and it will also enable the interest free loan part of the Chancellor's scheme to be obliterated.

I hope that the Committee will accept the Amendment.

The Chancellor of the Exchequer (Mr. James Callaghan)

It might be convenient to the Committee if I were to indicate my reaction to the Amendment now, and then the debate can go on in the knowledge of that.

As the right hon. Member for Enfield, West (Mr. Iain Macleod) said, the effect of the Amendment would be to defer the starting date for collection of the tax from 5th September next to 6th February, 1967. The date 5th September was chosen as the earliest practicable date for the start of the scheme, given the need to pass the necessary legislation and to prepare and adapt the administrative machinery. I understand from the right hon. Gentleman that the Amendment is designed to delay collection of the tax until it is closer to the time when payments of refund or premium can be made.

As the right hon. Member for Enfield, West recognises, the net yield of revenue from the tax would be very much affected by the Amendment. Whereas I anticipate in 1966–67 a net revenue of about £315 million, according to the best calculations that can be made, if the Amendment were accepted the product of the tax would be only about £110 million. That is a very substantial difference. The effect of the Amendment would be to reduce the estimated revenue by about £200 million.

I do not think that I could recommend the Committee to delay the collection of the tax for five months because, as I have indicated, from my Budget speech onwards, it is intended to have a disinflationary effect. I said that in response to the enthusiasms, as I called them, of the hon. Member for Worthing (Mr. Higgins) the other night, and I said it in my Budget speech. It is my understanding of the economic situation that, uncorrected, there would be an upsurge of demand in the autumn, so far as one can judge. And, therefore, I would certainly not want to see the Revenue deprived of about £200 million in the way proposed in the Amendment.

The right hon. Member for Enfield, West said that he would, in those circumstances, use the regulator or, I imagine, would use any other combination to secure his ends. I do not believe that it would be appropriate—and this is a measure of the difference between us—to make a deep incision into particular sections of industry on a narrow front through imposing increased Purchase Tax in this way. It is much better to have a smaller tax over a wider front. The disinflationary effect of this will be spread over a wider sector, but will be very much less deep than would be the operation of the other measures which I might have chosen. I believe that to be right because of the particular nature of the industries upon which a very heavy additional load of tax would bear this year. I would, therefore, prefer not to use the measures put forward by the right hon. Gentleman.

I recognise that there is a difference of view about this. If we were to use the regulator I think that the decline in the yield—not an absolute decline, but a decline in the rate of increase in the yield—from beer, spirits and tobacco might be accentuated. The yield is going up, but it is not nearly as steep as it has been. That is another reason for not, at the moment, hitting that particular group hard.

The right hon. Gentleman said that we could argue at greater length if the time of collection were delayed. I think not, with respect. The Bills are going through now. We are at Clause 42 of this Bill. A number of points which the right hon. Gentleman raised, particularly about British Oxygen, are not concerned so directly with payment of the tax. I agree that it affects its attitude from the point of view of whether or not it will pay. However, it is more concerned with repayment.

I hope that the right hon. Gentleman will not stick to the idea of strangling the Ministry of Labour Bill, because that will look after the refunds. [HON. MEMBERS: "Strangle this one."] I detected that the right hon. Member for Enfield, West was in a murderous mood earlier. Whichever one he wants to strangle, whether it is one or both, discussions are going on. Frankly, it would not give us any longer to argue about them. I have not seen the British Oxygen case; I do not think that I have seen the letter. I saw the article in the Financial Times, and inquired into it, but I cannot say what the results of that inquiry were.

As to interest-free loans——

4.30 p.m.

Mr. Iain Macleod

Before he leaves that point, I wonder whether the Chancellor would consider at a later stage inviting the Parliamentary Secretary to the Ministry of Pensions and National Insurance to intervene, because he will realise that if, for example, either the collecting date could be altered for administrative reasons, or the refunds could be made more quickly, that would be an alternative way of going some distance to meeting the case which I have put to the Committee.

Mr. Callaghan

I am sure that if my hon. Friend wishes to intervene he will do so. He is an entirely free agent in this matter. The House is in Committee. But I think that I can tell the right hon. Gentleman that my hon. Friend and I speak as one on this issue. We have been into it very carefully. The 5th September was the earliest date at which we could introduce the machinery. My hon. Friend is not in a position to comment on the repayments. That is for the Ministry of Labour. We have been very carefully into it; I ask the right hon. Gentleman to accept what I said on it.

On interest-free loans collection must precede repayment and there is bound to be an interval. It is rather longer in the first instance than in the succeeding periods of three months. The right hon. Gentleman pressed me, as he said for the fourth time, to say what I am to tell the banks. I have no additional answer to give him than I have given up to the moment. This is a matter of discussion. As the right hon. Gentleman correctly foresaw, discussions are going on about it.

I have taken the temperature of a number of industrial firms concerned. I find that a number of them, in the weeks to come, will be wanting to know what overdrafts they can expect when they are financing themselves some way ahead. It is beginning to be a problem, but it is not yet a problem. That is the best advice I can get——

Mr. F. A. Burden (Gillingham) rose——

Mr. Callaghan

The hon. Member will have an opportunity of speaking in the debate.

I think that it is far better to take the necessary time and to get as close as possible to the incidence of the tax before we give the guidance which industrial firms, naturally, feel they want to have. Now if the hon. Member for Gillingham (Mr. Burden) wants to intervene, I will give way.

Mr. Burden

Surely the right hon. Gentleman realises that many firms have to make heavy overdraft arrangements and that any interference with this, although they may plan now, will create difficulty. Will the Chancellor, therefore, give an undertaking that he will certainly not instruct the banks to tighten up on overdrafts during the very difficult first few months of this operation?

Mr. Callaghan

I thought that was the point I was dealing with. I am not ready at the moment to give any undertaking on this particular matter. [HON. MEMBERS: "Why?"] Because I want the tax to have a disinflationary effect. I have now said so about six times. I understand that a great many hon. Members opposite think that it should have a disinflationary effect. [HON. MEMBERS: "Not everyone."] I did not say "everyone "; I said "a great many".

As to the future, regular records are kept of bank deposits and advances. We have just had the latest figures. The banks are not pressing quite so hard on the ceiling of advances as they were. Deposits are up, but seasonally corrected there is little difference. It would not be right in the general interests of the economy at this particular moment to say what should be the appropriate level of bank advances given in the month of September or October. It would be defeating part of the object of economic management if I were to do so.

Mr. John Biffen (Oswestry)

Could the Chancellor say whether, in making this assessment, does he or does he not take account of the fact that an increase in the strain on company liquidity as a result of having to pay the initial stages of the Selective Employment Tax is likely to have some considerable effect on the ability and willingness of companies to continue manfacturing investment? Is not one of the consequences likely to flow from this decision that the restraint will come not on consumption, but on investment?

Mr. Callaghan

This, of course, is one of the factors I have very much in mind. The banks have been given instructions—which have been publicised, and the Committee knows about them—for a long period now of the order of priorities in which advances are to be made, because it is, naturally, my strong desire that investment should be kept up. I have consistently taken the line in the matter of advances that consumption comes much lower in the scale of priorities than does investment, and exports come right at the top.

I ask the Committee to accept that as soon as I formulate the advice which I think is reasonable and rational, and based on a proper assessment of the future, that advice will be passed on to the banks. They will be given it. We are not at arm's length. The Committee can take it that there is a movement of opinion between various organs of government and the banking world and that as soon as it is possible to make an assessment of the situation it will be made and the information will be given. But I repeat that there is no intention here to turn on the tap so full that it would offset all the effects of the measures I am trying to take.

I am sure that that is clearly understood. This is part of the object of the exercise and the reason I chose this method rather than to make that deep incision into part of the industrial body which otherwise one would have to make. I hope that the Committee will be willing to accept that as a sensible and proper approach to this problem, knowing that as soon as it is possible to give this guidance it will be given, and recognising that although some individual firms, I have no doubt, already want to know, I am advised on very good authority that this has not so far become an immediately pressing problem for the banks.

Mr. John Boyd-Carpenter (Kingston-upon-Thames)

I find the right hon. Gentleman's justification of the five months' delay between the imposition of this tax and the first repayments very disquieting indeed. The right hon. Gentleman said bluntly, adopting the argument which Chancellors of the Exchequer have adopted since Goschen, "I must have my money." In this case, he must have £200 million. What he said which alarmed me a great deal more was in reference to the disinflationary effect of this tax and of his wish that bank advances should not be sufficient to improve the liquidity of industry for the purpose of bearing this tax in full. It seems that what the right hon. Gentleman is trying to do is to have a disinflationary effect by a tax aimed not at consumption—it hardly touches consumption—but at the working capital of industry.

This is where the Chancellor has now told the Committee he desires his squeeze to operate. This is the explanation for this timing. I cannot believe that the Chancellor seriously thinks that this, in this country's present economic position, is the right way to proceed. When production is as near stagnant as makes no difference, to apply the squeeze quite deliberately to the working capital of industry is an appalling mismanagement of our affairs. The Chancellor says that it is unfortunate that it is not possible to make these repayments until February, but that it is necessary for the purposes of his economic policy to impose the tax in September.

Mr. Callaghan

There is one point which I would be glad if the right hon. Gentleman would correct. It is not true that production is stagnant. The output of engineering and allied industries rose by 4 per cent. between the first quarter of 1965 and the first quarter of 1966.

Mr. Boyd-Carpenter

I am glad to hear any words of comfort from the Chancellor. I do not think that he will dispute that the general index of production has moved about one point. I do not think that he would pretend for one moment that he is satisfied with a state of affairs which compares so adversely with the position which he inherited, when industrial production was rising steadily.

Mr. Callaghan

Industrial production went up by 1 per cent. between the fourth quarter of 1965 and the first quarter of 1966 which, if it continues—who knows?—is 4 per cent. per annum. That is the rate at which it is going at the moment.

Mr. Boyd-Carpenter

I am sure that the Committee will have noted the fairly considerable qualification—"if it continues".

It is not my purpose to make out the position as any worse than it is. The facts are bad enough, as the Chancellor knows and as the First Secretary of State is frank enough to admit again and again. In a situation in which the failure of the economy and of production to expand must and does concern every responsible person in this Committee and outside, it is the economics of lunacy to apply the squeeze to the working capital of industry and to do it because the Chancellor has selected for his own choice a particular method of obtaining the yield which does not allow the compensating repayments to be made for five months.

This is what the Chancellor has now told the Committee he is doing. I challenge it, first, on his own basis for it, namely, the way it will help our economy. I suggest to the Committee that it is disastrous for industry to proceed in this way.

The right hon. Gentleman says that he will not say what instructions will be given to the banks. Does he realise the anxiety he is causing those in charge of industry? We are talking about a date only two and a half months away now. Does the Chancellor think that great companies do not worry about their liquidity two and a half months ahead? Does the Chancellor appreciate that, with this additional uncertainty piled on top of all the others which have to be faced by those in charge of industry, there will be a tendency for great enterprises to slow down, a tendency to wait and to hold up development? There must be this tendency if liquidity is to be in an uncertain state at a date which, from the point of view of the management of a great industry, is very close ahead indeed.

This is an unnecessary anxiety. It will not be diminished by what the Chancellor said a few moments ago, in reply to my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), namely, that, whatever happens, he did not intend the advances to be sufficient to offset the payment of the tax during these five months. Therefore, the need for the Chancellor urgently to let industrialists know how they stand must be increased by what he himself told the Committee this afternoon.

These dates and the five-months' gap involve the grant of an interest-free loan to the Chancellor by almost everybody. It includes those in industry about whom I have been talking and whom this tax is supposed to be designed to help. It includes everybody else. It includes those categories to whom the Chancellor, with a little persuasion from both sides of the Committee, has agreed to grant repayment.

Does the Chancellor realise the difficulty in which he is putting small charities by asking them to make an advance of this kind for five months? I know that from the angle of the Treasury the figures affecting small charities are very small. However, if the Chancellor had had experience of running a small charity which exists from hand to mouth he would realise that asking a small charity to make an interest-free loan of this description is a very serious matter.

4.45 p.m.

The Chancellor has accepted the principle that charities should not suffer. He should apply that principle to this five-month period as well. I do not suppose that this imposition will cause many charities to close, though it will cause some to close, but it will put all of them, big and small alike, in a difficulty. If the Chancellor accepts the principle that charities should not be harmed by this tax, he should apply the principle in this respect, also.

Finally, may I take up the point made by my right hon. Friend and which the Chancellor did not deal with very well, to the effect that the acceptance of the Amendment would give us all more time in which to consider the manifold anomalies of this Bill and of the Ministry of Labour Bill. The Chancellor said—it is true, for obvious and constitutional reasons—that the Finance Bill has to go ahead on the ordinary timetable. The Ministry of Labour Bill has not. If we had a little more time to iron out the anomalies—the right hon. Gentleman does not dispute for a moment that they still exist—as to who should be entitled to repayment, I am sure that we could make this at any rate less of a hash job than it is at present.

The Chancellor prides himself on having invented a new tax—one with which his name will no doubt be associated in the future. Surely he of all people should want to get it—not right; that is impossible—but less blatantly wrong than it is at the moment. If the Chancellor wants this to be a tax which will last, as he claimed during his Budget speech, a few more months spent on trying to get the categories right in the Ministry of Labour Bill would be time well spent from his point of view.

If it is really urgent to get this £200 million this autumn, the regulator lies to the right hon. Gentleman's hand. If the economy is not in so precarious a position that a few months will not make a decisive difference, why not postpone the levying of this tax until February when it can be repaid, save industry from a tax on working capital, save charities from a forced loan, save the industries he is trying to help from a forced loan, and let the House of Commons get on with the business of trying to clear up this mess?

Mr. J. Grimond (Orkney and Shetland)

The Chancellor has told us that, in spite of the efforts he has made to take money out of the economy, in spite of a very high rate of taxation, and in spite of historically a very high interest rate, he expects a situation in the autumn when it will be necessary to take even more money out of the economy and that, therefore, he must resist the Amendment.

What the Chancellor is, in fact, doing is taking money out of the economy from the pockets of people who, in the general interest, should not pay it. Therefore, I do not quite follow the right hon. Gentleman's argument that it would be wholly unfair to make what he called a deep incision into certain parts of the economy while leaving others free from it, because he is to make an incision into certain parts of the economy. He is to make an incision into parts of the economy which, in the long run, he admits should not and could not pay the tax.

It is not the fault of the Committee if the Chancellor has had to come to the House of Commons without the full implications of this tax having been fully thought out. He could well have delayed the tax until more work had been done upon it; or he could have considered the many variations of payroll tax which have been constantly discussed by economists and businessmen over the years; or he could have taken up one or two of the concrete suggestions made from this side of the Chamber.

For instance, my party has put forward a variety of payroll tax which would get the Chancellor all his money, but which would avoid many of the most serious defects of this tax and which, in particular, would leave Scotland, Wales and the North and West of England free from the tax altogether.

Further, it must be reiterated that this is a tax which will fall with particular severity on areas like the north of Scotland and Wales, because there is no chance in those areas that there will be a change from service to manufacturing industry. The only change which can take place in that direction is by further depopulation. In general, throughout the discussions on this tax I have been in some doubt as to how the Chancellor expects it to work in the autumn—whether he expects it to work in a deflationary way by putting up prices or by achieving a redistribution of industry, which seems unlikely so soon, although I admit that in the long run it may have that effect. Therefore, we cannot be debarred from disputing these dates merely by the asseveration of the Chancellor that he must have more money in the autumn and not wait till the winter.

I should like to take up two points which have been made. I do not want to go again over the ground which has been covered by the right hon. Member for Enfield, West (Mr. Iain Macleod), about the uncertainty which exists in large industrial companies, as to whether they will be liable for this tax or alternatively to a refund. Doubt does exist, and I believe that most of us have received representations from large companies, and it is a serious matter for the economy.

I want to say a word about the similar uncertainty in many small businesses. There is the position of the local bakehouse. There is the position of the small knitwear or weaving business which also has a shop. None of these know how they will stand under this tax. These are not rich people and they cannot afford to be made guinea-pigs by the Chancellor, because the end of the experiment may well result in their death. Therefore, in supporting the Amendment, I believe that we should be given more time for discussion as to how the tax will work out.

I turn to the forced loan aspect, and here again I do not want to cover the general ground, but I want to say a word or two about farmers and crofters. The Chancellor is well aware that not all farmers have a £60,000 annual turnover. Many farmers are already in debt and credit is tight. They are bound to be in some difficulty in finding even small amounts which they may have to find by way of loan to the Exchequer.

I believe that in his discussions with the banks and in his further consideration of the credit position he should bear seriously in mind that in certain parts of the country there is a large volume of agricultural debt. Further, the right hon. Gentleman has said that this is a simple tax to collect, and from the Revenue point of view this may be true, but simplicity has been partly achieved by throwing a great deal of the burden of collection on to the people who pay the tax. This is a tendency which is growing all the time, and we should not delude ourselves that this way of collecting tax and then paying it back is, whether we take the position of the taxpayer or the Revenue, a simple or desirable matter.

There are certain difficulties which will affect those areas of the country which are particularly hit by the present strike. In my constituency and in other islands off the coast of Scotland people have been forced to run up very large overdrafts because they had not been able to trade. We have been virtually blockaded for some six weeks. The Chancellor is sympathetic to us, I know, but I ask him to consider the case of a motor salesman in my islands who is carrying, on an overdraft, machinery for farmers. He is not able to move this machinery. Take any business which has goods held up in the ports in the South. All this sort of thing means that these traders' overdrafts are mounting.

The farmer is in the same position. Farmers have not been able to sell their beasts. There are 1,000 sheep waiting to leave Orkney. I hope that the right hon. Gentleman will look at this problem sympathetically. I know that he would not like to add to the difficulties of these people who are not rich and who have no great amount of capital behind them. I am certain that in the working out of this tax he does not want to put people in an intolerable position which would endanger small farmers unless some amelioration were given in the form of levy.

Mr. Charles Fletcher-Cooke (Darwen)

We know from the Chancellor's speech that he reckons to get £100 million a month, roughly speaking, from this tax. That means that he is to get between £500 million and £600 million before any repayments begin. The first thing to notice about that figure, which I think is right, is that this is not needed for the Chancellor's housekeeping budget at all. He has a surplus on his Budget as it stands without the Selective Employment Tax. Therefore, the only purpose of this tax is deflation.

The second thing I want to say about this figure is that it is in its immediate impact a very different and much larger measure of deflation than the Chancellor indicated in his Budget speech when he gave a net figure for a full year of something like £200 million to £300 million as the additional taxation that he was taking out of the economy for the year for which he was budgeting. In other words, he is giving the most tremendous sock in the jaw for five to six months between September and March.

It amazes me that the Chancellor is so confident of his assessment of the accuracy of his prophecy that he is prepared to deliver what is really a most damaging blow if he turns out to be wrong. I could understand, though I do not agree with it, the taking out of an additional £200 million to £300 million over the course of 12 months—a gradual and even process of that sort. I say that I do not agree, because when I spoke in the Budget debates I disagreed—I think I was perhaps alone in this—with the overall assessment of what was needed to be taken out of the economy. I have for many years disagreed with what is sometimes referred to as Boyle's law, which previous Governments of all complexions have adopted, because I have always thought that taking taxation for this purpose as opposed to purely budgetary purposes is in the end more inflationary than not.

Mr. Biffen

Hear, hear.

Mr. Fletcher-Cooke

However, that is something which I do not wish to pursue now; nor would it be in order to do so, though I am glad to have the support of my hon. Friend the Member for Oswestry (Mr. Biffen).

Whether that is right or wrong, what surely must be wrong is if the Chancellor decides for the purposes of Boyle's law that it is necessary to take £200 million or so over 12 months by taxation out of the economy for the purposes of deflation. It must be wrong to put in a withdrawal of purchasing power to the level of £500 million to £600 million in the course of five months. That is a process which cannot be squared with the final objective because during those five months, if the reasoning of the final objective is valid, it must inevitably lead to enormous damage.

Mr. Raymond Gower (Barry)

My hon. Friend refers to Boyle's law. Would not he agree that there is also a little of MacDermot's law in this, too? If one tax is high, the other must be high as well.

Mr. Fletcher-Cooke

Certainly, one can get all sorts of variations of the philosophy of taxation and all sorts of false egalitarianism of the type to which my hon. Friend refers. But that was not the point that I was dealing with. My point was that it seemed to me that the Chancellor's principle and objective of withdrawing £200 million or £250 million by additional taxation from purchasing power is contradicted by the method by which he is doing it, because he is doing far more.

I do not understand why the right hon. Gentleman cannot synchronise the dates between collection and repayment, because that would achieve his objective. Admittedly, it might delay slightly the start of payment. But, if he were to synchronise the dates, or make them not five months but one month apart, he would achieve, a smooth withdrawal at the rate of £200 million to £250 million a year.

5.0 p.m.

I beg the Chancellor to consider the economic aspects as opposed to the administrative aspects of what he is doing. Not only is it economically damaging, but it is quite inequitable to take this loan without paying interest. Nothing I have heard from the Chancellor so far has explained why, if he must do this for administrative reasons, if there must be this enormous gap, he cannot pay some reasonable rate of interest to those whose money he is taking only to pay it back later. Then the whole problem of bank loans, and so on, would be less oppressive than it is now. If people know that they will be paid interest on what they have to pay by way of forced loan, then, when they get their accommodation from the bank, it is not quite so inequitable.

My right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) referred in impassioned terms to the large firms which have to make their decisions way ahead. But, of course, it is the small firms which are much more likely to be hit. In my experience a large firm can always get by; it can always sell an asset of some sort, at a pinch. It does not go out of business as a result. But many small firms may do so as a result of this.

I feel particularly bitter at the moment because I have had an intimation from the laundry which has served me well for five years that it is going out of business next week, partly as a result of this tax. I think that it will be extremely difficult to find another, so the smell in the "No." Lobby as the summer wears on may become rather great. But it is firms of that kind, whether or not they are likely to get the tax back, which will be hit. If the Chancellor insists on the width of the division between payment and repayment—not that the laundry will ever get repayment, though other small firms might be helped—he ought, in justice, to consider some form of interest payment on the money of which he will have the use. He would also help to smooth out the enormous escarpment which the five months' division creates, this enormous gap between the withdrawing of purchasing power of £500 million to £600 million and then starting to pump it back again in February.

I marvel at the Chancellor's confidence that he is estimating the rise and fall of the economic tide in the months ahead with such accuracy.

Mr. Leslie Hale (Oldham, West)

It was said in 1915 that there was rejoicing on the Rive Gauche when the French forces were issued with dungarees because it brought the world war within the limited range of Vuillard's colour. I had thought that Clause 42 had finally brought this year's Finance Bill within my limited economic range, until I heard two or three of the speeches to which we have just listened. Of the speech of the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) one could say, as was said of one company report, of the broadcaster, John Tilley, that it was correct in every detail except the figures. It seemed to me that all his figures were wrong, though I do not think that his speech was any the worse for that, and with some of the points he made I have some sympathy.

No one wishes to be discourteous to the Chancellor. He is the most courteous of men. Today, he has even apologised to the House for something which I have done once every three months since I have been here, that is, modifying a little overstatement which I thought, on the whole, would be better so modified. I never knew that there was any objection.

If the hon. and learned Member for Darwen is worried about his laundry, he must have observed that the washing of dirty linen now seems practicable within the precincts of this Chamber.

As I say, I hope that the Chancellor will not think that I am being discourteous. He is the last person I should wish to be thought discourteous to. He is one of the three triumvirs who wears his laurels with conspicuous modesty, one might almost say pudently, like a fig leaf. When I saw him leaving the House in the early hours of the morning a few days ago, bare-headed, taking the long trek to Downing Street on foot, I recalled Gray's "Elegy" with genuine emotion.

I understand the real difficulty of any Chancellor. As "Nye" Bevan used to say, we must first establish the principle. The principle here, of course, is that all taxation is wrong. The principle is that taxation is undesirable, that its end should not be pursued if it can be avoided, and that it can be justified only by the necessity to raise money for some good and useful purpose. Whether the prevention of inflation by the reduction of expenditure at one end and the increase of it at another is really a useful purpose is too wide an economic question for us to develop at this moment.

In introducing a new tax, even if the idea was not new, the Chancellor is under the obvious limitation that, if he makes the full inquiries which are necessary into its incidence the facts will leak out and action may be taken which would be subject to criticism. If he does not make full inquiries, he must produce it, perhaps, without all the detailed information as to its effects which are now becoming apparent and are giving us a certain amount of anxiety.

The Chairman

Order. I hope that the hon. Gentleman will keep in mind that we are discussing an Amendment to change the date in line 13.

Mr. Hale

Yes, Sir Eric. I was anticipating the moment when we would have to face that problem.

May I point out that the Amendment, if carried, would provide that the Oldham Co-operative Society would benefit by £10,000, because the society would be exempted from the rather punitive payment of a tax six months in advance. While I share your desire that we should inhibit ourselves as much as possible, and not go too wide—I had just acknowledged that—there are matters raised by the Amendment which, perhaps, one might just as usefully deal with now instead of by dividing one's speech into half a dozen parts, dealing with the matter on various Amendments and on the Question "That the Clause stand part of the Bill". Indeed, my rising to my feet was almost an unpremeditated act at this stage, prompted by the knowledge that there are other engagements in the course of the day.

I recall very well what my right hon. Friend said in his Budget speech, a speech which was universally applauded. No Budget speech has ever had so astonishing a reception. Some of my hon. Friends came out of the Chamber saying that they had literally seen the serpent emerging from the Dispatch Box and swaying to the cadence of the Chancellor's voice. 1 heard of one Parliamentary Private Secretary who threw up the endless rope and disappeared through the roof in ecstatic admiration. Perhaps I was one of the few at that moment who expressed modest reserve.

But, after all, if the Chancellor, in his friendly converse, had suggested to his auditors that, instead of letting I.C.I. pay for the arts, he would let the arts pay for I.C.I., the whole occasion might have caused a little tepid surprise. One could imagine that, when it became apparent that this was intended as a serious suggestion, the Queen's Messenger might have dropped the dispatch box and dashed down to the harbour to see whether the boat was tied up.

If he had gone one stage further and said, "Let us cream off the" divvy "from the Oldham Industrial Co-operative Society to make a contribution to help Sebastien out of his difficulties", then, I feel, the message would immediately have gone out for "Corkscrew Charlie". It might have been as well. We all know that such a call would receive a response, and might have led to the gentle suggestion that the Chancellor should do some quiet boating downstream on some quiet river, not the Danube or the Potomac, which are evocative, but somewhere limpid like the Limpopo or the Black-water near Macgillicuddy's Reeks. But there it is, the Chancellor has made his proposal, and we face this difficulty.

The Chancellor has won a very great deal of confidence in the country, and I do not suggest that any hon. Gentleman opposite should crack little jokes about the situation left by the Tory Government when my right hon. Friend became Chancellor of the Exchequer. The situation was all the more difficult because it had been left until the time of a General Election. My right hon. Friend had to take traditional measures, and he took strong and forceful traditional measures, because that is the only thing open to any Government immediately after a General Election. That was the first problem that faced my right hon. Friend, and I think that he has earned the confidence of the country.

I should be the last person to try to say anything that would denigrate my right hon. Friend, but I am worried about one thing. It has been said that there is another Amendment to be selected later which deals with a whole variety of exceptions. The main problem, it seems to me, is as follows. One says that there are too many people in service industries and that this is a useful measure in that one important object of it—though this is not its primary object—is to facilitate a redistribution of labour. But this forgets some promises by the Government about equal pay. What happens to the cause of equal pay when we have introduced a tax which, in essence, subsidises the employer of female labour at the expense of the employer of male labour? What happens to the cause of equal pay? How long will that be postponed?

It is said that the levy is one for the period of five months and it will ultimately be repaid. Immediately after the Budget I was discussing it privately with someone intimately connected with nationalised industries who pointed out that the National Coal Board would be levied about £20 million in the five months. I understand that that is a problem which is receiving the Chancellor's attention. Otherwise, we shall have a nationalised industry which has to borrow, and borrow with Government guarantees in order to pay the money to the Government. One can get that in these days of restricted credit in other industries. It is a problem.

The Oldham Industrial Co-operative Society—if I might for a moment talk for the attention of the Chancellor and not for the attention of the Opposition—pledged its full support for me as recently as six or seven weeks ago and gave it during the election campaign. It is a hard reward for it to be told that it is to be faced with having to pay £40,000 a year under this new tax. It is one of the great co-operative societies, with a great record of public service. It provides the public meeting place in Oldham. It provides an excellent cafe at which meals are available at about one-third of the price of other establishments. It has never asked for any special attention, and it is only fair to it to say that I approached it over this matter—it did not approach me—because I was concerned about the way in which the tax would affect it.

There are many other institutions which the Chancellor has tried to meet. I accept that when he introduces a Budget he will have in mind that some exceptions will have to be made and that he does not announce them in the Budget speech. The right hon. Member for Enfield, West (Mr. Iain Macleod) was taking some credit for action about charities, which I have no doubt the Chancellor had in mind. I hope that we shall have an opportunity to consider in some detail in the Committee stage of the Ministry of Labour Bill some of the very specialised cases which will arise. I am thinking of institutions such as the London Library, which do not qualify as charities but do not make any profit and never have made any profit and have rendered massive public service but have been peculiarly the victims of successive legislation by the House of Commons over the last 10 years. They have already been deprived of income, and now are to be deprived of more——

The Deputy Chairman (Mr. Sydney Irving)

Order. I am very reluctant to interrupt the hon. Gentleman, but I must bring him back to the question before the Committee, which is the date.

Mr. Hale

It is kind of you, Mr. Irving, to say that you are reluctant to interrupt me. I was just calling myself to order and saying that these were matters that we could raise later, so I will not raise them now.

We have had the experience of the post-war credits. It was an ingenious idea at the time to say that we would levy money from people and pay it back later. It was a sort of Kathleen Mavour-neen principle—it might be for years and it might be for ever. I cannot complain. I have qualified for mine and have had them. There was not much in it, because I was in the Army at the time, but I got them back, and so I cannot charge the Government with malfeasance. But it has been a hard and long row to hoe, and this may be a hard and long row.

While I congratulate the Chancellor and pledge my support, with some reservations, to the Budget, I thought it appropriate to raise one or two doubts that are in my mind.

5.15 p.m.

Mr. John Peyton (Yeovil)

I am particularly glad to be able to speak now, because I want to refer to the way in which the Committee was rent with the sobs extracted by the hon. Member for Oldham, West (Mr. Hale) when he told us of the way in which the Oldham Cooperative Society had been severely punished for its very minor offence of having supported him at the recent General Election. There are some hon. Members opposite the support of whom one would regard as a very major offence, but in the case of the hon. Member it is the clearest peccadillo that the Oldham Co-operative Society has been guilty of I am sure that the Chancellor should be deeply ashamed of himself for having imposed such a terrible penalty for so small a crime.

I want to be very bold and go back to a matter as near to the subject under discussions as the Chancellor's speech. The right hon. Gentleman said "We want to get as close as possible to the incidence of the tax before we give advice." There are two points that I want to make. First, this is no way to treat the House of Commons. The Committee is concerned with the business of passing very heavy taxation measures. Here, particularly, we have a new measure, and we are asked to pass it without knowing at all what is in the Government's mind.

For the Government to say that they do not know at this moment what advice they will give to the banks in the operation of the new tax only a few weeks ahead is rather like someone saying "I am going to produce a new motor car, and it will be on the stand at the Motor Show, but I am not yet quite clear in my mind what fuel it will use." In other words, we are being asked to approve a method of tax the real guts of which have not yet been revealed or explained. This is a very important point for industry. Until this great uncertainty is cleared up industry will be in very great difficulty. So the first point that I make is that the Chancellor is treating the House of Commons very badly.

The second point is much more serious, in my view. The Chancellor is treating industry in an experimental fashion. There have been various statements from Treasury spokesmen since the tax was first adumbrated to the effect that over the years the tax will be refined in the light of experience. In other words, industry, charities and a whole lot of small businesses will be used as guinea pigs and will suffer so that the Chancellor and the Government may learn.

I believe that the mere fact that a tax is relatively easy to collect administratively is not necessarily the best yardstick of merit. I support what was said by my right hon. Friend about the merits of postponing the incidence of this taxation until we have had more opportunity for discussion and the Government have had more opportunity for revealing what is in their mind on this subject. I object to the attitude, "We have this crude idea. Let us impose it on industry and see how it works. It will all come out in the wash."

Mr. Callaghan

Why does the hon. Gentleman think that the tax has anything to do with the level of bank advances? This is an entirely separate matter that must be judged against the wider economic canvas. It has nothing to do with the tax as a tax. It will depend entirely upon how the economic situation is looking at the time.

Mr. Peyton

The tax is to be levied on the working capital of industry, as my right hon. Friend the Member for King-ston-upon-Thames (Mr. Boyd-Carpenter) has said. I am astonished by the Chancellor's intervention. It is not a point in his favour. However, he has saved me the trouble of extending my speech beyond a certain point and thus saved the Committee the pain of listening to it. The misunderstanding, if there is one, is that of the Government, and the Chancellor has underlined it by his intervention.

This compulsory levy is to be taken out of the working capital of industry. It might be deflationary from one point of view, but what use is to be made of the money? Let there be no mistake; the Government will use the money at full tilt. It will not be put on ice. Private industry will be put during this period at a major disadvantage in providing the resources with which to fulfil its needs and expansion because the Government will be preventing it from doing so.

During my time in the House of Commons I have never received such a volume of protests so widespread over the population. I have received them from industrialists, businessmen, farmers, smallholders, horticulturists, old people and those concerned with charities. All of them are wondering what the Government are at. Do the Government understand what they are doing to them? My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) was abundantly justified in moving the Amendment, costly as he admitted it to be, in order to give the Government a badly needed opportunity for second thoughts—how much needed has been shown by the Chancellor's intervention just now.

Sir Gerald Nabarro (Worcestershire, South)

We were delighted to hear the speech of the hon. Member for Oldham, West (Mr. Hale) on behalf of the Oldham Industrial Co-operative Society. At the last election, 18 Labour and Co-operative Members were returned to the House. One of them is the hon. Member for Glasgow, Govan (Mr. Rankin). Another is the hon. Member for Willesden, West (Mr. Pavitt). Then there are the hon. and learned Member for Warrington (Mr. W. T. Williams) and the hon. Member for Bilston (Mr. Robert Edwards).

The hon. Member for Oldham, West has a covey of five of them seated in the decimated ranks of the party opposite—decimated because of the failure of the remaining 12 Co-operative Members to be present for this debate. Where are they? [An HON. MEMBER: "In the Government."] Whether they are in the Government or on the back benches, I hope that they will be voting in our Lobby tonight. If they are not, they are traitors to the Co-operative movement.

Of course, the Chancellor of the Exchequer has dealt the industrial cooperative societies a dastardly blow. All the Co-operative Members ought: to register their disapproval in speeches on this Amendment to defer the beginning of the operation of this immoral, iniquitous and inflationary impost on a large section of British industry, trade and commerce.

In the van of the movement and agitation to defer the date of this tax until next February, I expected to find the Co-operative Members. All I perceive, however, is a sepulchral silence broken only by the words of the hon. Member for Oldham, West. It is the duty of my right hon. and hon. Friends and myself to propagate widely in the country the desertion of the Co-operative Party from its true tenets and principles. Six Cooperative Members are present here today; 12 are missing.

Mr. W. T. Williams (Warrington)

I am sure that the hon. Gentleman would not like to make a bad point. He has omitted to mention my hon. Friend the Member for Bethnal Green (Mr. Hilton), who is also present beside me.

Sir G. Nabarro

Delighted. We have seven out of 18, so 11 are missing.

Mr. W. T. Williams

The hon. Gentleman's arithmetic is wrong. The hon. Gentleman sitting in the Chair is also a Co-operative Member.

Sir G. Nabarro

I cannot allow that, Mr. Irving. I must protect the Chair. This is one of those unique occasions when I spring to the defence of the Chair.

There are eight Co-operative Members present out of 18, and those eight include yourself, Mr. Irving. Thus, 10 Cooperative Members—the majority—are missing. That represents approximately 56 per cent. of them missing and 44 per cent. of them present. It is disgraceful, Mr. Irving, having regard to their election promises.

Now I must pass to the Amendment. It fascinates me to know how the Treasury has computed its figure of a revenue of £315 million during the current financial year. I quoted this figure in an earlier speech in Committee and was roundly condemned by hon. Members opposite. Later, they went to look it up in the Financial Statement 1966–67, but no one came forward to admit that my figure is correct.

The Chancellor admitted today that it is correct that he expects a net revenue of £315 million from this tax if it is collected from 5th September next. We seek to defer it until the beginning of February, for the reasons so cogently expressed by my right hon. and hon. Friends and myself. I could not go along with the Chancellor when he said that, were the deferment agreed to by the Committee, it would mean a loss of revenue to him of more than £200 million on the budgeted sum. Indeed, no.

The Chancellor seems to have forgotten what the Financial Secretary told us the other day, when he said that a hypothetical loss of revenue would be unavoidable if he accepted an Amendment in connection with fuel oil duty, moved by my hon. Friend the Member for Yeovil (Mr. Peyton) and myself. The right hon. Gentleman had forgotten that this form of taxation, S.E.T., is admitted as chargeable against profits for purposes of computing a company's liabilities to Corporation Tax.

5.30 p.m.

The Treasury itself is, therefore, paying half or more of the net cost to companies of this form of taxation because it is an admitted charge against Corporation Tax. I am glad to see that the Chancellor of the Exchequer assents. I have him on my side at last. What I want him to do at an early date is to justify how he arrives at this figure of £315 million, because we do not know.

The Treasury makes such wildly inaccurate estimates a year ahead, of the yield of taxation, as I pointed out a few days ago on an Amendment to reduce the standard rate of Income Tax. The Treasury was wrong last year by more than £80 million in the yield of Income Tax, and I think that it will be equally wrong with the £315 million which it postulates as being the net yield of the Selective Employment Tax in 1966–67. Therefore, were I to be convinced of the Chancellor's argument that he cannot afford the loss of revenue which deferring the onset of this form of taxation would incur, I would want him to publish a detailed computation of how he arrived at the figure of £315 million, taking into account what I have said.

The estimated interest-free loan to the Government inherent in this form of tax is £100 million a month. We do not know and I do not suppose that the Chancellor knows, or that the Minister of Labour, or Dr. Kaldor, or Dr. Balogh, or the remainder of the bunch knows, how long it will take the Government Departments to repay this tax, with or without the premium. The machinery is complex. I worked out my calculations on the basis that the average time for repayment would be five to six months.

At this point, I fall out with my hon. Friend the Member for Oswestry (Mr. Biffen). In an intervention in the Chancellor's speech, my hon. Friend said that the effect of the tax would be to reduce the liquidity of companies. To put it in the simpler and homelier terms which company directors understand, what he was saying was that its impact would reduce the liquid resources of companies. My hon. Friend went on to say that that would result in a diminution of investment. I doubt it. It might, but that is a guess.

What it is much more likely to result in is prices being put up. There are whole sectors of industry in a position to raise prices and recoup the cost of a tax of this sort, for example, baking, milling, brewing and spirits, and a whole range of consumer industries. The impact of the tax is much less likely to result in a diminution of capital investment, although it might in some measure, and that will depend on the type of company, its business, location, financial circumstances, age and a hundred other factors——

The Deputy Chairman

The hon. Gentleman must relate his remarks to the question of the date.

Sir G. Nabarro

Thank you, Mr. Irving. You or your predecessor may have heard the hon. Member for Oldham, West refer to the fact that there were half-a-dozen ensuing Amendments on the Notice Paper and that he proposed to deal with them all in his speech and make it a "Clause stand part" speech. Before you occupied the Chair, we had this problem of liquidity——

The Deputy Chairman

The hon. Gentleman must accept that I have been very tolerant with him, too.

Sir G. Nabarro

All right, Mr. Irving. I will finish my sentence on liquidity and pass to the next subject.

I do not accept the argument of my hon. Friend the Member for Oswestry that the tax will result in a diminution of capital investment. It might, but it is much more likely to do the opposite of what the Chancellor wants it to do. The Chancellor has said several times that he readily admitted the impact of the tax to be deflationary. I do not think that it will be deflationary. In conditions of over-full employment, when the aggregation of registered unemployed and transfers on the day of registration from job to job are at the ridiculously low level of 261,000, out of a working population of almost 25 million, gross over-employment which is the cause of the severe labour shortage in so many industrial areas, all that will happen when the tax becomes effective is that prices will be marked up to pay for it.

That is why I believe my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) to be right to plead that all the aspects and features of this form of taxation ought to be examined in much greater detail. The balls should be allowed to run along the table for a period of a few months so that we may examine all these complex factors and determine whether my hon. Friend the Member for Oswestry and my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) are correct in their supposition, or whether I am correct in mine.

In any event, I say to the Chancellor—and I have not been unkind to him this afternoon, but merely begged to differ about his assessment; he thinks that this form of taxation, of £315 million extracted from the economy this year, is deflationary—that in the event it will be extremely inflationary, having regard to the conditions of gross over-full employment which we suffer in this country and the acute shortage of labour in most of the industrial areas of Britain.

As I am about to resume my seat in the next few minutes I hope that we shall witness the sensational spectacle of eight Co-operative Members leaping to their feet to oppose their own Chancellor of the Exchequer and to vote with my right hon. Friend the Member for Enfield, West, my hon. Friends and myself, thus demonstrating not only the solidarity of the Co-operative Party, but their faith in their own movement and the fact that they are courageous men prepared to walk through my Lobby with me this evening and not run away from the Chancellor of the Exchequer.

Mr. John Rankin (Glasgow, Govan)

Can the hon. Gentleman tell me why none of the Co-operative Members on his side of the Committee has so far said a word in support of him or any of his colleagues?

Sir G. Nabarro

As far as I am aware, no Tory Member is officially sponsored by an industrial co-operative society. [Interruption.] I am not sure whether the Committee is addressing me, or I am addressing the Committee, but I repeat——

Mr. Rankin

No co-operation.

Sir G. Nabarro

—no Tory Member is sponsored by an industrial co-operative society.

Mr. Rankin

Shocking.

Sir G. Nabarro

It is not shocking. On the appropriate Amendments later, when I shall be strictly in order and not following the hon. Member for Oldham, West, who was grossly out of order, I shall allude——

The Deputy Chairman

Order. The hon. Gentleman must leave questions of order for the Chair.

Sir G. Nabarro

I defer at once to your rebuke, Mr. Irving, and I thank you for it.

At a later stage of the Bill I shall allude to private co-operative associations which support my hon. Friends, not the co-operative societies, such as the Oldham Industrial Co-operative Society, which are officially affiliated to the party opposite. I am speaking of private societies which are not officially associated with my colleagues and myself, but who generally support us. We wait to see the interesting spectacle of eight Co-operative hon. Members opposite rising and seeking to catch your eye, Mr. Irving, when I resume my seat.

Mr. Norman St. John-Stevas (Chelmsford)

This is a most important Amendment. The provisions for the collection and the anticipated refund of this tax suffer from two grave defects. First of all, they are ridiculously cumbersome, as my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has pointed out, and, secondly, and perhaps even more important, they are unjust in their operation. This Opposition Amendment has to be seen in the context of the whole means of collection of this tax.

To collect the tax, which would have a yield of about £240 million, the Revenue has first to gather in more than £1,100 million. It was this feature of the Bill which was derided recently by the Economist as "custard pie economics". The gap between payment and refund will continue throughout the whole period of the levy of the tax and we still do not know, when the tax gets under way, what arrangements will be made for the refund of the levy. We do not know whether there will be a quarterly, a monthly or a weekly gap.

This is typical of the whole, ill-thought-out nature of this tax. It is apparently the Government's strategy——

Mr. Joel Barnett (Heywood and Royton)

On a point of order. It might be helpful for the Committee to have a Ruling as to what precisely is "tedious repetition". Does it mean repetition in the same speech or in different speeches?

The Deputy Chairman

The hon. Gentleman must allow the Chair to decide, on the issues arising, what is tedious repetition and what is not. I can assure the hon. Gentleman that I will take good care.

Mr. St. John-Stevas

After that rather tedious intervention I resume my remarks, and will use a simile which has not, as far as I know, been used earlier in this debate. This whole operation is rather like a game of "Blind Man's Buff", with all the players, including the Chancellor, blindfolded.

What is inexcusable about this approach is that we have seen it all before. This is exactly the same approach which characterised the Finance Bill of last year. The Treasury team, like the Bourbons, have learned nothing from that experience. The initial five-month period, between the imposition of the tax and the return of several parts of it is a forced loan, interest-free to the Government.

It is typical of the Government that they should introduce what is a penal taxation Measure in this indirect and dishonourable way. The Chancellor's defence, which we heard this afternoon, was that this tax is deflationary. He argued that the yield would be effectively reduced, if the Opposition Amendment were accepted, by about £200 million. He should have thought of that before drafting the tax so inadequately that it can only be made effective by perpetrating an injustice upon many companies, large and small, and by unjustly imposing a penalty, not only upon companies but upon charities.

When one considers this combination of imposing penalties on charities, on manufacturing industries and on service industries, one is entitled to ask what has become of the selective nature of this tax, which, we were told, was the essence of it. There is no precedent in modern financial history for such a forced loan.

5.45 p.m.

I have mentioned the Bourbons. May I now refer to another unhappy dynasty, the Stuarts. One has to go back to the Stuarts before one can find a similar tax. Whatever may be said about that unhappy dynasty, financial responsibility was not the most prominent of its virtues. The closest parallel to the operation of this forced loan is the Benevolence which was imposed by Charles I.

Mr. Patrick Gordon Walker (Leyton)

Is it not a fact that the wickedness of that was that it was imposed by the King as a way of getting out of Parliamentary control of finance, so the analogy is altogether false?

Mr. St. John-Stevas

I would have thought that that intervention confirmed the analogy rather than undermined it.

Mr. Emrys Hughes (South Ayrshire)

On a point of order. Are you aware, Mr. Irving, that on Thursday last, Mr. Speaker gave a Ruling that analogies should not be made with a period earlier than 1935? Is it in order to go back to the Stuarts?

The Deputy Chairman

That is not a point of order.

Mr. St. John-Stevas

May I remind the Chancellor, through the Chief Secretary, of the fate of Charles I. He lost his head. Fortunately, or unfortunately, we are more restrained today. By operating the tax in this unfair and inequitable manner the Chancellor is in danger of losing something which is perhaps more important than his head, and that is his reputation.

Companies will clearly have to borrow from the banks to meet their commitments, and they will be borrowing at a time when banks are near to the ceiling of the advances which they can make, because of the other financial policies of the present Government, both in relation to Income Tax, and to the conditions created by Corporation Tax.

My right hon. Friend the Member for Enfield, West pressed the Chancellor to give details of the means which he intended to use to facilitate bank advances. One could bear with a little tedious repetition on that point, because we have had no information of any kind about what steps the Treasury proposes to take to facilitate bank advances and so help companies at a time when they will be very seriously embarrassed by this five-month period of the enforced loan.

The tax will have an effect upon liquidity, and I would support my hon. Friend the Member for Oswestry (Mr. Biffen) in saying that it is also likely to have an effect upon capital investment. This Amendment will improve the tax by eliminating the five-month period of the forced loan. In itself, the existence of the forced loan is a major injustice and, since the Government, through the Chancellor, have declined to modify their stand on this issue, I trust that it will be pressed to a Division later this afternoon, supported by all the members of the Co-operative Party opposite.

Mr. Pavitt

I hope that the hon. Member for Chelmsford (Mr. St. John-Stevas) will forgive me if I do not follow him back to the time of Charles I. I wish to set at rest the mind of the hon. Member for Worcestershire, South (Sir G. Nabarro), because I can see that he has a good deal of anxiety about our position. We shall make our own contribution to this debate in our own way, in our own time and as constructively as possible. We have a number of points which we should like to discuss with my right hon. Friend the Chancellor of the Exchequer. We are concerned about the date, but that is not the most important point and for that reason we have tabled a number of Amendments.

In the meantime, in case the hon. Member for Worcester should be concerned——

Sir G. Nabarro

Worcestershire, South.

Mr. Pavitt

I always think of the hon. Gentleman as being the Member for Kidderminster. Perhaps it is the "Kidder" part which sticks in my mind.

I assure the hon. Gentleman and other hon. Gentlemen opposite that, however much they seek to incite or discourage us, we shall deal with the matter in our own way, in our time, and to the best of our ability.

Sir John Eden (Bournemouth, West)

It became clear almost immediately after the Budget statement that the Selective Employment Tax had not been thought through. One of the advantages of this Amendment is that it will give the Chancellor of the Exchequer considerably more time to reflect on the many anomalies which he has created and to ensure that people whom he does not mean to tax or penalise are not called upon to pay it even for the limited period of six months. I agree with the speeches made by my hon. Friends that it is wholly wrong for the Chancellor of the Exchequer to call for an interest-free loan in this way and particularly to expect those whom he does not intend to tax to subsidise him.

I wish to emphasise the point raised by the right hon. Member for Orkney and Shetland (Mr. Grimond) and my hon. Friend the Member for Yeovil (Mr. Peyton) about the extent of the impact of this tax on smaller people. I thought that the Chancellor of the Exchequer rather pooh-poohed what they were saying and discounted it completely. It seems to me that he is far removed from the realities of the position of many people engaged in business and industry.

I should like the imposition of this tax to be postponed by at least six months so that the Chancellor has a little longer to carry out some research to enable him to come nearer to the true facts of industrial and commercial life and to find out what is agitating and concerning people. He seems to be wholly unaware of the damage, frustration and concern which his proposals are causing to a great many people.

Smaller people are likely to find themselves in particular difficulty in trying to extend their bank borrowing facilities. It is not particularly well, but reasonably well for the larger undertakings which may have more substantial assets and better opportunities for financing operations. But for smaller people who, apart from any new impost placed on their shoulders, are finding their relationship with their bank managers not particularly enjoyable, this further imposition will make life extremely difficult. I ask the Treasury Bench to bear that point in mind. These people will be harder hit as a result of having to finance this tax in advance of the time when it is necessary for them to pay it.

Another reason why I support the Amendment is the enormous cost which the administration of this tax will involve. It seems to me totally ridiculous, as it does to every hon. Member, that the net yield of the tax—my hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) said, I believe, that it would be £240 million—would involve the collection of £1,100 million or so. It is to be collected, to a great extent, from people whom the Chancellor of the Exchequer does not intend to tax at all. In addition, it will be collected from people to whom it is the Government's intention to pay a premium. If it is their intention that employers in manufacturing industry shall benefit from some special payment contrived by the Government, then let them make that payment. Why should they first require employers to borrow money in order to pay an interest-free loan to the Government for six months? This is not right in equity, and the cost of this operation must be very great indeed.

A very important point which has been touched on but on which I should like further elucidation concerns the position of those engaged in completing a contract for which a fixed price has been negotiated. I realise that the Chancellor has referred to this point, but I should like further clarification of it because I have had many protests and anxious letters about it. In many instances, those engaged in manufacturing industry who will have to pay this levy for six months before receiving any premium will be concerned with the conclusion of a contract for which they have agreed a fixed price during that period.

It may well be argued that in due course they will get some form of benefit and, therefore, they should not take into account the payment they are required to make in the interim. But the fact remains that these employers will have to pay in the interim. Surely some consideration should be given to the position in which they find themselves which distorts the whole basis of the figures on which they have agreed a fixed price for the contract.

Like, I believe, all hon. Members, I thoroughly dislike this proposed tax. I support the Amendment for the important reason that it would give the Chancellor of the Exchequer a further opportunity to consider the many anomalies and problems he has created by introducing the tax. When a tax is imposed, it should be just, simple and fair. This tax is manifestly unjust and, clearly, very complicated. Worse still, the Chancellor has indicated that in many respects he would like advance payment to begin so that he might get experience from the operation of the tax in order that further modifications might be made as they were required. It is wholly wrong to impose a tax in these circumstances.

I beg right hon. and hon. Members opposite who are concerned with this new tax to delay its introduction to give them an opportunity to think it through properly, to remove all its worst aspects before it is introduced and to make certain that when it comes in it is as fair as it can possibly be made to be, and so that due consideration can be given by them to the position of all those who are called upon for six months to pay an interest-free loan to the Government.

6.0 p.m.

Mr. W. R. Rees-Davies (Isle of Thanet)

I am glad to follow my hon. Friend the Member for Bournemouth, West (Sir J. Eden) at this stage, because I want to pick up one or two new epithets which have been cast around about this tax. Those that I give to it are somewhat different and they develop a different argument.

My first epithet is that, curiously enough, it is a very unclean tax. It is a tax upon our cleanliness. I shall deal with two aspects, the cleaning and the laundry industries, which are most hard hit of all by it. Secondly, it is a very unkind tax, because it is heavily loaded against the old, the disabled and those who work part time. Thirdly, it is uncertain. In so far as it will have any disinflationary effect, that will be because it causes unemployment.

The reason why I want to postpone the tax from 5th September for a while—certainly, February would be ideal, but I would be content with a period of two months—is quite different from the arguments so far addressed to the Committee. I am moving from the general arguments which have been so ably put by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) and by many other hon. Members, by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) and all of them.

The reason why I believe that 5th September is a quite inhuman date is that during that month the fixed-price contracts which were fixed last year will be in operation. For every holiday contract and for every late holiday, the whole of the hotel and catering industry has made all the arrangements for the autumn. They are all fixed. Take, for example, Butlin's. In September, nearly 9,000 people will be at the camp at Bognor. They have all arranged their prices for their contracts and their holiday, and yet that company will have to pay for over 2,000 staff from 5th September onwards. What will the Government do about that?

The real question, as is well known, is whether as a matter of the common law the companies are entitled—they will not want to do it—to say, "This was not reasonably within the contemplation of the contract and, therefore, we are entitled to make an extra charge for this entirely new issue which has arisen." I do not know whether the Financial Secretary to the Treasury has taken legal advice about this—I have no doubt that he has—but will the answer be that the companies may make an additional charge from the time when this tax comes into force?

From a commercial point of view, it is quite impracticable for all the hoteliers in Margate and Ramsgate and throughout the country to say to those who arrive under arrangements which were made last year and in the winter and spring, "I am terribly sorry. You have come to stay with us from 5th to 12th September, or from the 12th to the 19th. Bad luck on you. You now have to pay another 7 per cent. more because we have to pay this miserable tax, which neither you nor I knew anything about." Therefore, it is quite impractical to hold to the date of 5th September, which must be put off to the back end of the season.

That, however, is the least of my worries. The reason why I say that this tax is extremely unkind is because an effect of it will be creative of unemployment in the one sector where it is least desired. It may well be that in conditions of over-full employment there is a case to try to get flexibility in the Midlands, but this certainly does not apply in the case of Thanet, the seaside resorts or even those other parts of the country where a large number of people who are old-age pensioners and disabled are employed.

It so happens that in my constituency we have a larger number of people on National Assistance than in any other constituency in the United Kingdom, not because they are unemployed or unemployable, but because we have so many elderly people, women over 60 and men over 65. In the summer months and continuing into September and October, they earn a small sum of money, mainly on part-time work, usually working either morning or afternoon. It is a matter altogether of not more than 20 hours a week and for most of them probably not more than about 15 hours a week. They are paid about 5s. an hour for that work.

Normally, September carries on as a good month for the tourist resorts, but October, as hon. Members throughout the Committee know, is a bad month and very often the whole of the premises gradually start to close. What particularly occurs is that the smaller establishments, which do not have the staff and which are not able to get the same class of bookings as the first-class hotel gets, are the ones that close first. They work to a very tight margin.

In the month of October throughout the country, old-age pensioners flow to constituencies such as Bournemouth, Brighton, Blackpool, Thanet and elsewhere, and we take in those old people on the cheap. Those who take them in on the cheap are the smaller and cheaper hotels and guest houses. I see my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) in his place. His constituency makes considerable arrangements, as does mine, for precisely that class of person.

The picture is undoubtedly that the part-time people, who are themselves old-age pensioners and elderly people who provide the part-time labour in these constituencies, working perhaps 12 or 15 hours a week, will get the sack; and instead of continuing for the month of October, these hotels and boarding houses will close that much earlier. Therefore, the old people who come to Folkestone, Thanet, Bournemouth and elsewhere will be deprived of the opportunity, the boarding houses will not be able to pay the costs and unemployment will also be caused to these old people. That is why I call this an unkind tax. It is unkind because it makes and draws no difference.

The Amendment gives an opportunity for the tax to be brought into effect at a later date at the end of the season. Speaking to the argument which I am addressing to the Committee, the earliest date would be two months later, 5th November. For the purposes of the argument I am using—although I entirely accept and adopt everything that has been said to the Amendment generally—I merely ask that there should be a two-months' delay.

The same argument, unfortunately, applies in the case of part-timers. Just as we have the elderly people, so the hotel and catering industry has made extensive arrangements throughout the Metropolis, in the cities and elsewhere to employ very large numbers of part-timers. These people again, in the general nature of their employment, are in many oases the whole of the contract cleaning industry, the army of Mrs. Mopps. The Mrs. Mopps are people we must not upset. They are very difficult to get. Speaking for myself, I think that this is one of the worst features of the tax. Seriously it is. They work for about 5s. an hour for 15 hours a week and the average Mrs. Mopp earns £3 15s. a week.

The horrifying feature of this is that 75 per cent. of the Mrs. Mopps, being married women, of course work part time because they have to look after the kids, they have to do the shopping they have to look after hubby in the evening; but if we want clean hotels and clean catering institutions they must have this domestic staff. Also other women of the country need to have this domestic staff, too, because the domestic staff, the Mrs. Mopps, are today looking after the homes of the women whom the Government want to go out to work in the factories. If we discourage married women from working part time we deprive ourselves of the cleaners who will look after the homes for the women working full time in the factories.

This is where this tax is ill-conceived, and unkempt, and not thought out, because unless we give ourselves time for these arrangements to be made by putting this tax back a month or two—give it, perhaps, to February—people will not be able to work out arrangements which will have to be made by the contract cleaning industry as a whole.

Mr. James Tinn (Cleveland)

If these Mrs. Mopps are working for married women working in factories or the professions, does the hon. Member not think they could afford to carry the 12s. 6d.?

Mr. Rees-Davies

No. I am quite convinced they cannot. I will answer that straightaway. First of all, the women we are talking about, I am sure the hon. Member recognises, are not people who can work in a factory. Many of them are middle-aged people, who work a number of days in the week and, say, two or three hours a day——

Mr. Tinn

I obviously did not put my question clearly enough. I was suggesting that the wife, the lady of the house, who is thus released for employment, and who will be paying the tax, will be able to pay it.

Mr. Rees-Davies

No. I do not think that is true either. The fact of the matter is that the stamp as it stands at the moment—I must not go into the amounts of this at this stage, because that is a question which arises on later Amendments, but the hon. Gentleman will recognise this—means that if we add 12s. 6d. to a matter of £3 a week which one is paying—and it is an extra 12s. 6d.—it represents altogether an impost of something like—what is 12s. 6d. of £3 percentagewise——

Sir G. Nabarro

Just under 20 per cent.

Mr. Rees-Davies

—some 22½per cent., a very considerable sum. It is an enormous impost, whereas on the ordinary wage packet of £20 a week it is only 5 per cent. Therefore the impost—the hon. Member follows my point?—upon the employer of a domestic cleaner is four times larger than what one is paying in industry for the normal working man. This, of course, must be quite wrong. It cannot be right to charge four times as much for the woman for her cleaner by way of taxation than what is charged the ordinary employer in industry. I can see, Sir Eric, that you are looking at me as though——

The Chairman

The hon. Member is getting a bit far from the Amendment.

6.15 p.m.

Mr. Rees-Davies

I was drawn away by the intervention which the hon. Member made, but I entirely agree with you and I will pass to the next point. As I say, there will be an opportunity to return to it later.

Having pursued the matter for this aspect of the tourist industry, I respect- fully submit that the Government have not—I repeat, not——

Sir G. Nabarro

On a point of order. Is it in order, Sir Eric, for the Deputy Chief Whip to hover at your elbow ready to pounce? Is it a fact that you are about to accept a Motion for the Closure from him? If so, would it not be in order for my hon. Friends and myself to protest?

The Chairman

The hon. Member really ought not to make an interruption of that kind. I have not seen anyone hovering at my elbow.

Sir G. Nabarro

Further to that point of order. I saw him hovering, Sir Eric.

Mr. St. John-Stevas

I hope he will not hover over me.

Mr. Rees-Davies

Well, Sir Eric, as I am one of the few Members here who has hovercraft in his constituency, I perhaps have a little knowledge of hovering and perhaps I may be permitted to carry-on.

The point I am making, following, as I say, a somewhat different line, on this idea of the postponement—if the Minister would be with me for a moment on it—and the arguments which have been ably developed as to the difficulties of companies being able to obtain overdrafts, is, as the Chancellor admitted with a nod, that of course industry can charge this tax to Corporation Tax. I would point out that the small boarding-houses and the Mrs. Mopps and the old-age pensioners—all these people who will carry the reality of this tax—have no Corporation Tax against which they can pass it on.

This tax in its essence, when we consider one is paying something like £3 to £6 a week to employ the part-time person, the old-age pensioners, is this, that the consideration in the employer's mind will be entirely, "Is it worth paying out at the full rate, to employ a part-timer, an old person or a disabled person, if one is unable to charge against it any Corporation Tax because one is not paying Corporation Tax? "Clearly, one comes back to the extraordinary injustice here of the difference of the rate of the impost for the full industrial earner and that borne in the case of the higgledy-piggledy people, as I say, the old-age pensioner. the Mrs. Mopps, all those who feed this industry with its labour.

I conclude by saying that I really feel that we must put this date back at the earliest towards the end of the tourist season so that arrangements can be made in the hotel and catering industry, which employs so many of these people, because of the contracts with those with late holidays, and so that those in constituencies which are so deeply affected, such as my own, will be able to ensure that we do not have unemployment of the part time and elderly. If we do have that unemployment it means that the Government will sooner be paying more National Assistance, and the impost which they will have to pay soon enough anyway, and which at present they do not have to pay till September whilst these people are in employment. For these reasons, somewhat different, but in support of the others, I, too, hope that we shall have the assistance of a co-operative move to be able to bulldoze the Government on this Amendment.

Mr. Burden

I have no intention of detaining the Committee for very long, but I should like to make one or two points. We are engaged in this debate today because the Chancellor and the party opposite have taken the view, as the Chancellor explained during the debate on the Budget, that if we look around and find an area in which tax is not being paid, that appears to be unfair to the firms and industries and areas by which tax is being paid; the Government therefore impose this tax.

But this is going beyond that. This is in fact saying to the manufacturers and industry of this country, "We, the Government, want you also to give a tax-free loan". Indeed, it amounts, as has already been said, to a sum of about £100 million a month, and the Government have indicated that there will be no effort to repay that amount till at least five months, and it may be six or seven months, after this monthly sum of £100 million has been levied on the working capital of companies.

Whilst the Chancellor was making his speech, I asked him if he would ensure that, during the five or six months of the operation of the tax before the repayments were made, no measure was taken by the banks to make it more difficult for firms to increase their borrowings or to increase the Bank Rate. It is quite evident that, as a result of having to make this forced loan to the Government, a considerable number of firms both large and small will of necessity have to go to the banks to increase their loans and obtain new loan facilities. That cannot in any way be justified.

The other day, in my presence, the Chancellor said that there was no great opposition to the tax throughout the country. If he believes that, ha is truly living in cloud-cuckoo-land. I am quite sure that he has had far more representations than any other individual hon. Member has. I have had them from the butcher, the baker, the candlestick maker, Uncle Tom Cobley and all, as I think most of us have. The tax is thoroughly disliked, and the method of collecting it and the delay in repaying those firms which are entitled to have it repaid are matters that are causing considerable concern.

I want to turn for a moment to the question of charities. During the earlier stages, the Chancellor was obdurate in saying that there was no intention of repaying the charities, and obviously there could not have been. If it was always the Chancellor's intention to make repayments to the charities, why did he not make that perfectly clear at a very early stage? It caused them considerable concern and apprehension. I am quite sure that most of the people connected with charities and hon. Members of the House believe, as I do, that the relaxation in favour of charities was very largely brought about by criticism in the House, not only from these benches but also the strong criticism from the benches opposite and no doubt representations made behind closed doors by members of the party opposite.

However, despite the fact that the sums are going to be repaid, the charities are being asked to make a forced loan to the Government. Dr. Barnardo's Homes will have to pay £50,000 to the Government before getting one penny back. The same is true of the Church Army. In the case of the R.S.P.C.A., the sum involved is about £20,000. The Chancellor says that he has no desire to hurt the charities, but is he not still hurting them by demanding that they give to the Government a tax-free loan of considerable sums of money? Is that not likely to make it difficult for them to meet their commitments?

I can assure the right hon. Gentleman that most charities run from hand to mouth if they have not got reserves.

Mr. A. P. Costain (Folkestone and Hythe)

Will my hon. Friend give way?

Mr. Burden

I will give way in a moment. I hope that the right hon. Gentleman will show his realisation of that fact by finding some means of taking this penalty away from the charities, if not by accepting the Amendment as it stands, which embraces everything.

Mr. Costain

I am grateful to my hon. Friend. Would he allow me to point out that the Amendment will be a great advantage to the charities because their funds are low at this time of the year, between September and Christmas? Most of their funds come by way of responses to their Christmas appeals, and the tax will hit them at the worst time.

Mr. Burden

I agree with my hon. Friend that not only is this the period during which they find it most difficult to raise money, but, correspondingly, it is the period during which most of them have large sums of money to find and when their expenditures are at their highest.

If I can have the ear of the Chief Secretary for a moment, I hope that he will take this matter seriously. It is still a matter of concern for the charities that they will have to provide this tax-free money. What a ridiculous situation will arise if, as a result of having this money taken from them, the charities are forced in turn to go to the banks and borrow and pay bank charges in order to provide money for the Government which ultimately they will have returned to them. That is absolute nonsense and cannot be justified in any circumstances. I hope that the right hon. Gentleman will look at it again.

Mr. Gower

The two clear points which have emerged during the debates on the Bill and today are the concern about the need for further consideration and more time for reflection, and the issue about the nature of the interest-free forced loan which the Treasury will enjoy.

There has been many reasons adduced by speakers in the Committee why it would be advantageous to the Government for there to be some further time for consideration. The Chancellor himself did not attempt to argue against the case made for further consideration and more time. What he said, in effect, was that he could not consider it because he needed the money to deflate the economy in the autumn; he even named the month of September.

What frightened me about it was the manner in which the Chancellor said it. It was as though he was quite sure that, in this new form of tax, he had an instrument of the most perfect precision the consequences and effects of which were well known to him. The fact is that he has an instrument which is quite untried and unproved, the consequences of which he cannot foretell. It is an instrument which is far reaching in its effects, as has been pointed out today. It will affect all kinds of industry, both large and small companies. It will affect the new and the old, the efficient and the not so efficient. It will affect those which have great resources and those which have not, those whose liquidity permits them to meet immediate calls on their resources and those whose liquidity does not. To say the least, this instrument may have very unpleasant consequences for many firms, particularly those in the smaller categories.

My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) suggested that while the Government took a little more time under the terms of the Amendment to work out the consequences and make provision to minimise the less desirable ones, they could meet the objection of the Chancellor by using the regulator. It seems to me that that was something which should appeal to the Government. With all its limitations, the regulator is a known instrument. It is dealing with a known tax which has been in existence for many years, the approximate consequences of which are known to us. It would not have all the unfortunate and unknown consequences of the new tax for so many of our industries and services. In those respects there is a strong case for taking more time for reflection and consideration.

The second objection was put very well by my hon. Friend the Member for Chelmsford (Mr. St. John-Stevas). The Government are fortunate that today the Executive can get away with things which absolute monarchs could not do. We know what happened when absolute monarchs attempted to get forced loans, but the modern Executive can get away with this sort of thing. What the Government are doing is outrageous. They are to have the use of this money for a considerable period. It is not only an interest-free loan, but a forced one. Had one of the Stuart kings gone as far as this, our modern historians would have been even more surprised.

6.30 p.m.

I submit that the Amendment, which has been put forward very clearly and very impressively, is one which the Government should accept because it is designed to help them. If they do not accept it, they will plunge into economic unknowns, the consequences of which may well be extremely serious.

Mr. St. John-Stevas

On a point of order. Mr. Steele, may we have the blinds down, as at the moment it is impossible to see the expression on the Chief Secretary's face?

The Temporary Chairman (Mr. Thomas Steele)

Note will be taken of the hon. Member's request.

Mr. David Gibson-Watt (Hereford)

I start by saying that I have never found any difficulty in reading what the Chief Secretary's face tells us, and that I should like him to consider very carefully the arguments which have been put forward from this side of the Committee for postponing the incidence of this tax.

It is true, as my hon. Friends have said, that when the Chancellor started off on this perilous journey in his Budget speech he little knew what the tax would lead to in regard to the insults and vilification which it has received in the country. I think that my hon. Friends have used very gentle language about it. My hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) described it as unkind and unclean. I could go very much further, but I shall limit myself to drawing attention to the fact, as was so well done by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) that the Chancellor has already benefited to a great extent by the period of time between the Budget and today.

If more time were taken, a more reasonable attitude might be taken by the Chancellor and his advisers about this tax, if it has to be imposed. I should like in particular to draw attention to some of the people who will be hit by this forced loan to the Government. It is difficult to pick out any particular category. Indeed, all small employers will be hit by it. If someone is not in the category to which the Chancellor referred, the farmers who employ six agricultural workers to help them get a turnover of £60,000 a year, and who go to Ascot races, he will be hit by this tax.

I am thinking now of the small employer, and the hill-farmer of West Wales. The Chancellor of the Exchequer is a Welsh Member of Parliament. Does he consider it right that somebody living on the upper slopes of Cardiganshire, or Breconshire, or Radnorshire, or even Carmarthenshire, should be asked to lend money to the Government, free of tax, in this way? Has the Chancellor considered the fact that whereas, 10 years ago, farmers as a whole were well off on the credit side of their bank accounts, many millions of pounds on the right side, today they are many millions in debt? This tax will add to their debts. Does not the right hon. Gentleman agree that this will be an additional burden, particularly on small farmers in these isolated parts of the country?

Sir Douglas Glover (Ormskirk)

Is my hon. Friend aware that one hon. Gentleman opposite said, "Send the bailiffs in"? This is what hon. Gentlemen opposite think of the farmers.

Mr. Gibson-Watt

I do not know what they think of farmers, but anyone who understands the other meaning of the word "bailiff" knows that on the farms about which I am talking farmers cannot afford to employ a bailiff. The sort of farm to which the Chancellor was referring can employ a bailiff, and possibly he is left there when the so-called people to whom the right hon. Gentleman referred go to Ascot Races. There is a case for taking time to think again, and to realise that this enforced loan is very much resented by small employers in these outlandish parts of the country, important as they are.

I conclude by repeating to some extent the sensible words of my hon. Friend the Member for the Isle of Thanet who talked about the tourist industry. It is not only the resorts in the southern half of the country which are affected. The Highlands of Scotland, Western Wales, and other parts of England are also affected, and they will again be hit by this tax.

I shall not indulge in endless repetition of the reasons why I believe that the tourist industry should be helped. I merely ask the Chancellor whether he thinks it is right that these small employers should have to pay this enforced loan, when, as a result of opposition, both outside the House and inside it, he has decided now to take a slightly different view from that which he took in his Budget speech with regard to the agricultural industry?

Mr. John Pardoe (Cornwall, North)

I do not wish to delay the Committee for long. No doubt we shall be here until the bacon and egg hours of tomorrow morning. I believe that the Amendment should be accepted, because there is a lot of room for further consideration of this tax. I know that many people say that Governments never change their minds, no matter how long the discussions last, or how many words we use.

The Chancellor said earlier today that he thought there would be ample discussion of this tax. I do not think that the accusation that Governments never change their minds can be levelled against this Government. On the contrary, I think that they are in need of the admonition which Adlai Stevenson once gave to President Eisenhower, "Don't just do something, stand there".

This tax was announced about eight weeks ago, since when we have had several major changes. Agriculture has been taken out, mining, quarrying and the extractive industries have been removed, and charities have been exempted. We have also had a considerable new impost with regard to companies with an administrative block on one side of the road, and a manufacturing block on the other.

Those are four major changes which we have had in about eight weeks.

Mr. St. John-Stevas

Thanks to the Tory Party.

Mr. Pardoe

That intervention is not very helpful. This has happened as a result of pressure in the country, and I think it is accepted that Liberals have played a considerable part in this. If we have had these major changes in eight weeks, then, with a little extension of the period for digestion, we could hope for even better changes.

As a new Member, I had hoped that a Government with all the brains they have at their disposal would be able to bring in a tax without having to make all these major changes. One wonders why they employ economists at the Treasury. Is there no advice which they can take before a tax is announced? It is an extraordinary position and gives one no great confidence in the Government's ability either to take or to listen to professional advice.

The hon. Member for Oldham, West (Mr. Hale) quoted a saying by "Nye" Bevan, "Establish your principles". I had always supposed that one principle of Socialism in taxation was, "From each according to his ability to pay". It was certainly a principle of the Socialist Party when I was a member of it, but I am aware that the Socialists have lost many of their principles since I left.

I should like further consideration given to the effect of the tax on the regions. Has the Chancellor considered the effect on the regions?

The Temporary Chairman

We are not discussing the principles of the tax at this point. We are discussing an Amendment and I hope that the hon. Member will relate what he is saying to the Amendment.

Mr. Pardoe

I stand corrected and I thank you for pulling me back into order, Mr. Steele. Many hon. Members have strayed further from the point than I have strayed, but I will try to relate my remarks to the Amendment.

We need a period of time for consideration, because we wish the Government to look at the effects which this tax will have, and I do not believe that sufficient consideration has yet been given to those effects or will be given to them before 5th September. I related these remarks to the particular effects on the regions. Has the Chancellor been advised of these effects? Did he take advice from the regional councils before announcing the tax? Did they give him advice on what the effects would be in the regions? Much greater consideration must also be given to the so-called selective nature of the tax.

The Temporary Chairman

Order. We are not considering the selective nature of the tax. We are considering the date of operation.

Mr. Pardoe

I again stand corrected. I am trying to make the point that this is one of many matters which must be considered during this period and it is one reason why at the outset of my remarks I said that we needed further time to consider the tax.

We have not had very careful consideration of the effects of the tax on particular industries. In my constituency the hotel industry is of major importance. September is an important month in the financial year of the hotel industry and bang in the middle of this period, after having entered into agreements, they will suddenly be forced to pay this additional tax. Hotels make their arrangements 12 months ahead. Christmas is the time for hotel bookings and many agreements which were entered into last Christmas will have to be honoured after the imposition of this tax.

We need further time for consideration, because the tax shows that the Government will continue to introduce new legislation of this sort without sufficient consideration of the demands of industry. It has been accepted, for some unknown reason, ever since Dr. Dalton's time, that a Government must not talk about taxes until they have brought them before the House. In this case, that is a very bad principle of taxation. The Government should have discussed this tax much more fully with industry to see what effect it would have.

6.45 p.m.

Another problem concerns the interest-free loan. The hon. Member for Hereford (Mr. Gibson-Watt) spoke about the problems of hill farmers in Wales and Herefordshire. While he was speaking an hon. Member opposite commented, "Send the bailiffs in." I believe that this is typical of the urban-minded Government that we have and their attitude to rural problems and the farming community. It is well known that legislation already announced is aimed at sending in the bailiffs to many more small farms. Small farmers in my constituency in Cornwall can get nowhere by going to the banks for better credit. They are up to the hilt in overdrafts and it is nonsense to suppose that they should make an interest-free loan to the Chancellor.

It is part of the purpose of the tax to get industries to reinvest in labour-saving equipment, but at the same time, we have a situation in which capital is being taken from industry which could be used for investment in labour-saving equipment. This is a curious way of encouraging labour-saving practices in British industry.

This delay is needed. It is a bad tax now and probably will be a bad tax five months later. Nevertheless, in this case it is better late than now. It is not good enough for the Chancellor to say, in answer to the point made by the right hon. Member for Enfield, West (Mr. Iain Macleod), that he had not heard of the case of the British Oxygen Company, Limited. It is important that cases of this sort should be discussed fully between industry and the Government before such a tax is introduced. That is why I believe that we need this additional period to make the tax a lot better than it is now.

Mr. Costain

I do not think that any Amendment could do more good to my constituency than this and that is why, in order to attend the debate, I have neglected a call of duty by the Estimates Committee to go to Scotland. If any tax in itself were designed to hit a constituency like that which I have the honour to represent, this is the tax, for the Chancellor has hit the bull's eye.

The hon. Member for Cornwall, North (Mr. Pardoe) said that there had been eight amendments in eight weeks. This Amendment will delay the introduction of the tax by nine months, but it still will not make it a legitimate tax. The delay may give the Chancellor an opportunity to make more sense of it because I believe that the tax was introduced not only without thought, but also for a political purpose.

I expect that when we come to the next General Election, and we are pointing to the increases in taxation which the Socialists have brought in, this tax will be forgotten because it does not fit into other forms of taxation. We should not have had the argument about allowing a contractor to contract out of his contract if it had not been a different form of tax. It is well known that when Purchase Tax has been increased, it has been quite legitimate for the buyer to pay the additional Purchase Tax. By delaying the tax for nine months the Government will have an opportunity to widen the gap, and not so many people will suffer from the tax, arising from claims from one contracting party against another.

The tax has hit the hotel industry very hard—an industry which figures very largely in my constituency and other coastal resorts. There are many hotels, particularly small hotels, where they are at their wits' end to make their business pay, and it is the end of the season which makes the difference between whether their business is profitable or not. They have booked up for a number of functions at the end of the autumn months, for example, for dinners on Fridays and Saturdays—and many hon. Members know that these take place in their constituencies.

For these dinners they employ extra staff for a short time, generally for more than eight hours. Relating the cost of this tax to the extra staff makes the difference between making a reasonable profit and incurring a serious loss. The Amendment, by delaying the operation of the tax, would avoid that injustice to hoteliers.

Exactly the same thing is happening to small shopkeepers in my constituency. It is useless to say that, by introducing this tax, their staff will be transferred to other industries when, in many instances, other industries do not exist. When the Chancellor suggests that he wants to impose this tax to increase the revenue, he should remember that workers who are discharged will go on National Assistance and that many of them are elderly. I had tabled an Amendment to rectify this position but, it not having been selected, I would be out of order if I discussed it. Unless we can get some amelioration, the tax will cause chaos and confusion to small businesses.

When the Chancellor said that he could not make up his mind on the question of bank loans, I was convinced that he had never been faced with the difficulties of trying to convince a bank manager that one needs a loan. The right hon. Gentleman should find out exactly what happens. To begin with, the manager wants to know one's prospects. The Chancellor said that he could not tell the prospects until a later date. Is he not aware that bank managers generally go on holiday in July and August and that future loans are fixed just before or at that time? It is important that the change proposed in the Amendment is made because, by delaying the operation until February, some help will be given to small shopkeepers, hoteliers and others who so obviously deserve it.

Mr. J. Bruce-Gardyne (South Angus)

Throughout our discussions in the past few weeks we have heard from both sides of the Committee ample reason for delaying the operation of S.E.T. The Government need a great deal more time to think this out and to rectify a few of the appalling anomalies which have been exposed. That should be sufficient reason for the Government to accept the Amendment.

The Chancellor suggested that he could not afford to make the concession called for in the Amendment for reasons of the revenue management of the economy. I suspect that the right hon. Gentleman has had to adjust his judgment on this matter already, on several occasions. He originally indicated that the net yield from this tax would be about £240 million in a full year, but I suspect that that calculation was made before it was decided to draw the different categories for premium and rebate as tightly as they are drawn in the Ministry of Labour Bill, which we will discuss again on another occasion.

I suggest, therefore, that the net yield would have been likely to be appreciably more than £240 million but that there may be a reason why the Chancellor could not take this into account when considering his attitude towards the Amendment. It may be—indeed, I suspect that it is—that the right hon. Gentleman had to tighten the categories and increase the net yield to give himself a margin for error in view of his experience in drafting various pieces of legislation which he has brought forward in the last two years and which have made him realise that he must accept a great many amendments which inevitably reduce the yield from his proposals.

Nevertheless, the calculation which he has made of what he would require to withdraw from the economy this autumn and winter has, I suggest, changed a good many times. When he originally presented us with this tax in his Budget statement there was no indication of his intention to exact this £500 million forced loan between the autumn and next spring. There was an indication that the demand pressures on the economy might be expected to rise during the autumn and winter, but this was because of Government spending. Yet it is not Government spending which the right hon. Gentleman is proposing to cut back but, presumably—as my hon. Friend the Member for Oswestry (Mr. Biffen) and my hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) pointed out—private manufacturing investment.

The Chancellor intervened during the remarks of my hon. Friend the Member for Yeovil (Mr. Peyton) and said that the tax had nothing to do with the level of bank advances. [Interruption.] That was my understanding of the right hon. Gentleman's intervention. He said that the two were separate matters. The inference behind his remark presumably is that the £500 million of forced loan to be extracted this autumn and winter will not need to be financed out of bank advances and will, therefore, be financed by industry in one of three ways; first through prices being increased, but not to the extent that would be required to cover the cost of the net yield from this tax, but to the extent that it would be required to cover the gross cost during the five months before the repayments are made, secondly,—alternatively, or at the same time—that industry should pay off its employees to the extent that might be required to enable it to meet this £500 million forced loan, or, thirdly that industry should reduce manufacturing investment to that extent. But in each case, it would happen to a far greater extent than would be justified by the £240 million which the Chancellor has estimated would be taken out of the economy in a full year.

That is the inference to be gained from what he said. However, I do not believe that that was what he intended. I believe that he was originally calculating that it would be possible for at any rate a substantial part of this forced loan to be financed by increases in bank borrowing. The right hon. Gentleman said that the banks were not quite up against the ceiling. However, two weeks ago he said that they were. When we were debating Clause 15, the right hon. Gentleman said that the banks were right up against the ceiling imposed by the 5 per cent. increase. He said: At present, there is a limit on advances of 5 per cent. over 1965. … The banks are right up against the ceiling at the moment."—[OFFICIAL REPORT, 16th June, 1966; Vol. 729, c. 1855.] What has been happening? I suggest that the Bank for International Settlements—the central bankers—have made it clear that the 5 per cent. ceiling must not be breached and that this is the reason why the right hon. Gentleman feels that he must extract this £500 million forced loan from industry and why he can give no undertaking, although he has been pressed time and again to do so, to ease the banks' ability to lend when this forced loan comes into operation.

The Chancellor was rather indignant when my right hon. Friend the Leader of the Opposition accused him the other night of putting the economy into three-monthly convulsions. Taking £500 million out of industry between this autumn and next spring and then paying back £300 million of it is putting the economy into convulsions, and I cannot see, because of that, any good reason why the Committee should not accept the Amendment which was so admirably moved by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod).

7.0 p.m.

Sir D. Glover

I am indeed grateful to the Chair for calling me so early in this very important debate. Plenty of other hon. Members wish to speak and there will be more, because this is a very important matter and it is right that the Committee should probe it right to the roots.

I support this Amendment very strongly. I support it because I have not been able to find in this Committee any hon. Member of the party opposite, any hon. Member of the Liberal Party or of the Conservative Party, who has a good word to say for this tax. The Chancellor had better realise that he has very little support for it his own side of the Committee——[HON. MEMBERS: "NO."]——not for the principle of a tax of this sort, but for the way in which the present tax is expected to operate. That is why it is absolutely vital that in this Committee we should give the Chancellor additional time to think about the tax before it begins to operate.

A great many of my hon. Friends have talked about a forced loan. The way in which the Chancellor is running the tax makes it not only a forced loan but a capital levy, because even on 6th February next year only part of the impost will be repaid to industry, to commerce and to everyone concerned. My best calculations are that the tax will probably be paid back at three-monthly intervals for ease of administration. That means that the Exchequer will have taken from the people the best part of £300 million which will have been taken permanently and which will never come back into their coffers until the tax is repealed. We have to realise that there is a very definite element of capital levy in this tax.

Another reason for accepting the Amendment is that the Chancellor said this afternoon that he was not concerned about bank arrangements. He said that he would try to arrange that the banks would give accommodation for this levy. It is all very well talking about the great tycoons of industry. The hon. Member for Oldham, West (Mr. Hale) said this afternoon that when the Chancellor realised that the tax would cost the National Coal Board £20 million he made arrangements to see that it would not cost the Board £20 million. That was what I understood from the interchange which went on. Probably the National Coal Board can get finance from the Banks, but what about horticulturists in my constituency? What about small traders? These people probably already have overdrafts up to the hilt and have all that the banks are prepared to give them.

The banks certainly will not increase overdrafts simply because it would be nice for the Chancellor to receive his tax, but if these people do not have an overdraft, what is their legal position? If they do not pay this tax they are criminals. If they do not pay this tax they have to go to gaol, but where can they get the money to pay the tax? Do not my horticulturist constituents have to buy seed for next year? September to February is not a period when most people are selling produce but when they are planting their seedcorn, seeds for their tomato crops and their lettuces. It is the time of the year when money is going out, not when money is coming in.

I do not think that the banks will give more facilities, but these people are expected to find extra money to pay to the Treasury, with no loans. When February comes they will not get all the money back. They will always be about three months in arrear. Therefore, these people in a small way will have a smaller amount of capital on which to work their businesses than they had in the past, they will find it more difficult to be efficient. They will find it more difficult to put in labour-saving machinery even if they weather the storm of not being able to get extra bank facilities for this five-months' gap.

Another reason why we should accept the Amendment is that it seems that the Chancellor needs additional time to look at his own tax. The Chancellor says that manufacturing industry is in such a parlous state that it should receive 7s. 6d. a week for every male employee and 3s. 9d. for every female employee to serve as a blood transfusion to get industry on the road to expansion and increased productivity. This is a very funny way of going about it.

Two years ago I was on the other side of the river in St. Thomas's Hospital. At that time the doctors thought that I needed a blood transfusion. For three weeks I hovered between here and there. I shall not say where "there" is because I did not know at the time when they were putting blood into my system to keep me going. That is exactly what the Chancellor says he wants to do to manufacturing industry. What would have been said if a surgeon had come into the ward and said, "Take a couple of pints from him"?

That is exactly what the Chancellor is saying, that every manufacturing employer should get 7s. 6d. for a male employee as a blood transfusion, but for the next five months they will not get the transfusion and instead they will be blood doners. The blood will be taken away and they will not get it back, so they will become corpses.

If the Chancellor believes that anyone can think that this is the sort of proposal which can come from a man supposed to be sane, this is a perfect example of why we need more mental hospitals in the country. It reminds me of the story of the chap who had a puncture and there was another chap sitting on the wall around a lunatic asylum——

Mr. Pavitt

Mental hospital.

Sir D. Glover

I beg pardon, a mental hospital.

The man with the car took off the spare wheel, kicked the hub cap, and all the nuts went down a grid. He scratched his head for a moment, then shrugged his shoulders and set off to walk down the road to the nearest garage. The chap on the wall called, "Hey. What are you doing?" The motorist said, "Didn't you see what happened? All the nuts from this wheel went down the grid." The man on the wall said "I'm supposed to be mad, but I'm not stupid. Why not take one nut from each of the other three wheels and take the car to the garage?" That is what we want from the Chancellor, not this high-falutin' nonsense.

Here is a proposal which, if he thinks about it, he will find has basically something to recommend it. The selective part of the tax is wrong. The way in which the Chancellor is doing this by a forced loan and by a forced capital levy is wrong. He is giving to the banks an increased profit of about £20 million a year for the interest which they will get on increased borrowing which will take place throughout industry and commerce. The proposals made by the Chancellor are so full of anomalies that they are laughable. Case after case will be quoted making absolute nonsense of these proposals. Therefore, I hope—I am serious about this—that the Chancellor will contemplate this matter even now and see that the way in which it is being done is wrong.

We have given him an opportunity by this Amendment to bring sanity back into the proposal. By February he could evolve a system whereby he could still get his money, but not this system of collecting £1,100 million in order to have £200 million left at the end of the day. The Amendment would remove all the anomalies of forced loans, capital levies and bonuses to the banks by increased interest on increased loans. It would give the Chancellor time to remove many of the anomalies in the Bill. In the long run, he would realise that he was a very wise Chancellor to do so.

Mr. Peter Bessell (Bodmin)

I promised the Chancellor by signal that I would speak for only two minutes. I intend to keep that promise. The whole burden of this debate has been that there should be a delay, for the simple reason that there are a number of anomalies in connection with this tax which must be sorted out and which in any case will be corrected in time. I am certain that the comment by a Government spokesman to the effect that, as time passes, many of the rough injustices of this part of the Bill will be sorted out was true. However, this is no reason why people should suffer in the meanwhile simply because time was not taken for proper preparation of this part of the Bill.

I call in aid just one example of an injustice which will be created by the Clause. I ask the Chancellor to give this special consideration, because it under-scores the points which have been made by right hon. and hon. Members on this side throughout the afternoon. It is the case of the small baker. A baker who has a bakery removed from his retail premises is treated as a manufacturing unit in regard to his employees in that bakery. However, many small bakers who operate throughout the length and breadth of the land with a bakery at the rear of their shop premises or attached to their retail outlet are treated differently for the purposes of the tax.

The Temporary Chairman

I do not see the relevance of this argument to the Amendment, which deals with time.

Mr. Bessell

If you will allow me, Mr. Steele, I will relate it, as I am in fact doing, to the whole point of the Amendment. My point is that this is a real injustice which will be inflicted on this section of the retail trade and that, if the Chancellor had the time at his disposal, he would correct such injustices. This has been the burden of almost every speech made today. Many examples have been quoted to underline this point.

I do not believe for one moment that the Chancellor wishes this tax to act unfairly or unjustly. I have far too much respect for him, both for his integrity and for his desire to design an equitable tax system, to believe that. If he had the time, many of these anomalies would be corrected. Indeed, he has already corrected anomalies in the case of agriculture, horticulture, and other industries. I ask the Chancellor to look very carefully at this Amendment and see whether, in the interests of our economy as a whole, there would not be great wisdom in allowing this postponement so that the necessary alterations, which cannot and will not be made during our debates on the Bill, can be made.

Sir John Foster (Northwich)

The arguments in this debate have fallen into two categories. One argument has been that this is a bad tax and that by postponing the date when it comes into operation the Chancellor may improve it. Those who have advanced this argument have verged on being out of order. The other argument, which I conceive to have been well within our rules of order, has been to urge the Chancellor that, if he postpones the introduction of the tax, certain injustices will be made less onerous.

I urge the Chancellor to consider the case of fixed-price contracts, where this extra increase in cost cannot be absorbed. At one end of the scale there are the big engineering contracts, where the profits may be squeezed or even abolished. If it is a labour intensive contract and this tax applies, the whole profit would disappear. There is no method by which the parties can rectify this, unless it is provided for in the contract.

At the other end of the scale there is the case of the landladies. These ladies do not work for any great profit. They may not be paying any Income Tax. They may merely be making a bare living. They make arrangements a long time ahead for people to stay in their boarding houses. This extra tax will wipe out the small amount on which they hoped to live or the small amount which they hoped to save at the end of the season so as to exist through the winter.

This injustice would be made less severe if the date of this tax coming into operation were postponed. On the whole, fixed contracts do not run for a very long period, because people are afraid of rising costs. A rising cost brought about by a tax which nobody could foresee is unlikely to be taken care of in a fixed price contract. It is not the same as an increase in Income Tax, Profits Tax, or Corporation Tax. That type of tax takes away something which somebody has made; it reduces the profits. The Selective Employment Tax increases the costs.

I ask the Chancellor to bear this very much in mind. He could deal with it by tabling an Amendment later. However, there seems to be no hope of his doing so. He should consider helping the considerable number of people who depend on the profits they make at least to remain profits and not to be wiped out by the imposition of the Selective Employment Tax.

7.15 p.m.

Mr. Callaghan

I rise to ask the Committee if it thinks that it would be reasonable to proceed to a Division now? We have had a debate lasting more than three hours on the Amendment. I readily accept that this is an important Amendment. I hope that we have now reached the time when we can vote on what is the proper date. It has been a little difficult for hon. Members to separate the question of repayment from the question of payment. I admire the ingenuity with which it has been done on some occasions. I will try to steer clear of the difficulty and keep in order, but I recognise that the questions of repayment and payment are clearly related and that a person's attitude to the question of payment will depend upon whether he is to be repaid.

The right hon. Member for Orkney and Shetland (Mr. Grimond) referred to many of his constituents who have been beleagured by a strike for the last six weeks. He asked what their position would be in the matter of bank advances. Perhaps I should say now that it is the general rule, as the right hon. Member for Enfield, West (Mr. Iain Macleod) will know, that the Government give general guidance through the Bank of England to the joint stock banks, and it is for the banks to interpret the detail of that guidance.

Therefore, it would not be proper for me to express a complete view on this, but 1 am sure, from my close contacts with the banks, that there would be every expectation that they would clearly give special consideration to the people of the Orkneys and Shetlands in this matter, in view of their experiences over the last few weeks. The right hon. Gentleman will understand that I cannot take unto myself the responsibility for saying that, except to say that from my general experience I am sure this will be true. I think that it would be the desire of the Committee that it should be so in the case of the approach of the banks.

The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) said that people are being asked to make an interest-free loan to the Government and that it is reasonable that, if they are to get their money back, they should receive interest on it. Manufacturers will receive a premium of varying descriptions. One of the reasons for the premium was to avoid loading manufacturers with any additional costs. It has been one of my strong desires in the course of the Budget to avoid loading manufacturing industry as far as possible. On any normal analysis of a company's liquidity, it will be found if its borrowing requirements are set against the manufacturing premium it will receive that the company will be very much on the right side in this matter.

Therefore, although I would not acknowledge the principle that people should get interest in respect of their loan, nevertheless I think that in the case of those who will get the premium there is no doubt that they will be able to put one calculation against the other and find that they are still in on the result. I hope that this premium will, therefore, cover any element of interest payments.

My hon. Friend the Member for Oldham, West (Mr. Hale) raised the matter of the position of co-operatives, as did other hon. Members. I am sorry that I was not in the Committee when my hon. Friend spoke, but I had to leave for a few minutes. I agree that delay would help them put off the evil day. That would be true for any taxation at any time—the longer we can put it off, the less we have to pay. But I cannot regard that as an overwhelming reason for deferring the introduction of the date.

The hon. Member for Worcestershire, South (Sir G. Nabarro) expressed the view that this was an inflationary and not a disinflationary tax. I thought that his views about the attitude of manufacturers was very interesting. I would not like to say whether he is right or wrong—time will show—but I have always reckoned that there would be an element of higher prices in this and, indeed, I have said so right from the beginning. It would not be completely so because a number of people intend to absorb the price increases as far as they can, and in so far as that yields an extra degree of efficiency, we should all be grateful for it.

As to the basis of calculations which the hon. Member asked me about—he is not here, but I can put it on record now—I am estimating roughly on a gross yield for 1966–67 of about £600 million and repayments of about £300 million or so, which gives the £315 million. I am not giving it precisely here because it is not possible to do so.

The hon. Member for South Angus (Mr. Bruce-Gardyne), I thought, made my case for me on this question of giving guidance to the banks. He said, "The Chancellor told us a fortnight or so ago that the banks were right up against their ceiling. Now the Chancellor has said that they are not up against the ceiling. What is happening?" I can tell him that that is the way bank advances tend to go and that is one reason why it would not be very sensible at this stage to say what release of pressure would be needed on the banks in September.

I suppose it could be said in one way that I have not made up my mind. It would be rather foolish to make up one's mind in advance of the event when the pressure of bank advances and of deposits—I watch the situation very carefully—varies so rapidly. This is the reason why I am saying that we must wait and see how the situation develops, while remembering that it is important for a number of companies to know as soon as they can what the position is.

I have made specific inquiries about this, and I give this assurance to the Committee. I am told that there are some companies which will soon begin to want to know. The pressure is not yet on the banks to know. Therefore, I would think it sensible to defer a final decision on this until the pressure is there and until people really do want to know what the position will be.

The hon. Member went into a great many fantasies about the Bank for International Settlements. I will not pursue his line of thought. I know that frequently he has to produce 1,000 words, which I read carefully and with great profit from week to week, and no doubt it will be pursued there. When one has to do that, one has to spin one's fine-spun webs, but it does not particularly relate to the truth.

The hon. Members for Bodmin (Mr. Bessell) and for Cornwall, North (Mr. Pardoe) both made the same point from the Liberal benches. But deferring the date of introduction, with respect, does not defer the time for consideration. We are considering the matter now and deciding at this moment when these dates of introduction should be.

Without getting out of order, Mr. Steele, I should like to trench on the ground for half a second as to the making of changes. As the hon. Gentleman knows, a Bill which we are shortly about to consider makes provision for changes to be made by order, and that is the moment at which we can consider that matter. I have no doubt that the Minister of Labour and the Treasury will want to consider what changes should be made. But that is the moment when we do that, and not here and now, in relation to the coming into force of the tax, for the reasons which I gave when I followed the right hon. Gentleman at the beginning of the debate.

Mr. Rees-Davies

Does the right hon. Gentleman then take the view that it is open to him with his colleagues to con- sider whether, under the other Bill, one would be able by order to delay the introduction or operation of the tax in part, if not in whole, in relation to the whole of the hotel and catering industry that is profoundly affected by introducing this tax on 5th September rather than at the end of the season?

Mr. Callaghan

I would not have thought so for a moment. I would have thought that, once the Clause has been passed, that is the date of the operation of the tax for all industries and all services, and that whatever happens under the other Bill is a matter for providing for repayment and not for delaying the introduction of the tax. That would be my understanding of the situation.

The hon. and learned Member for Northwich (Sir J. Foster) referred to some points about fixed contracts. He may remember that I made a statement about that in winding up another debate last Thursday in relation to the attitude of the Government towards their contractors, and I hoped that local authorities would follow the same line. As to contracts between private individuals, it would not be within my power to intervene in a matter of that sort. But at least we have given the lead.

Sir J. Foster

Does the right hon. Gentleman realise that this is a great injustice where there is a contract between two individuals? One cannot absorb the tax by greater efficiency. One cannot absorb it because it wipes out the profits. Therefore, the person will suffer loss through no fault of his own. Will the right hon. Gentleman say that he recognises it is an injustice?

Mr. Callaghan

Yes, because of the special elements of the Selective Employment Tax. It is for that reason that the Government have given the lead they have given in this direction. Normally, one does not expect to make allowances for increased taxation, but in this case we have exceptionally done so in the matter of renegotiating contracts.

I do not think that I can go further on private contracts. I will not speculate further on the matter. I know the right hon. Member for Enfield, West wishes to make some comments now, and I will, therefore, resume my seat, expressing the hope, if I may, that we should now reach a decision on this Amendment.

Mr. Rees-Davies

Before the Chancellor resumes his seat, may I point out that he has not said a word about one immensely important question. Here comes this tax on 5th September which affects the whole of the tourist industry. Why cannot this be put back a month or two? All of these contracts have been fixed price contracts throughout. We have this picture today in which nothing is done and in which everybody who has paid for his holidays this summer will expect to get them at the same rate. We have this picture in which they do not know where they are and industry itself does not know where it is. The Chancellor has not dealt with this problem at all.

Mr. Callaghan

I fear that I have not. I did not hear the hon. Gentleman's speech. I really would not find it possible, with regret, to defer the operation of the tax for the hotel industry. It is based upon the National Insurance stamp. This is the basis of the administration. Because it is based like that, nobody in the Ministry of National Insurance can say who is putting the stamp on. So it would mean deferring the date of the introduction of the tax for all sectors of industry—[Interruption.] I know that that is the view of the Opposition; they say, "Why not defer it?" For the reasons that I gave when I made my initial speech, I cannot entertain that argument.

7.30 p.m.

Mr. Iain Macleod

In two or three minutes, I shall advise my right hon. and hon. Friends to divide on this Amendment. The Chancellor's soothing manner hides the fact that he has been utterly inflexible in his attitude to the case which we have put. It has been powerfully supported by my hon. Friends and from the Liberal benches. The Liberal and Conservative Parties have any amount of things to differ about, but we can say that, although there may be certain differences on some Amendments, in our attitude towards the Selective Employment Tax the Liberal and Conservative Parties have been taking, and, I presume, will continue to take, much the same mind.

The Chancellor knows, also—I do not want to comment, because we are more interested to see what they do rather than what they say—what the Co-operative Members of the Committee feel about this Amendment. I think that no single body in this country would gain more from the Amendment than would the various co-operative societies in all our constituencies. The time for brave words is over. The time for action has come. If we are to believe what they have said—it is up to them—the time for action from Co-operative Members has come.

I moved the Amendment on two grounds. First, I said—everyone agrees that this is so—that we need more time. This is why I suggested that the two Bills should come more closely together in time so that many of the absurdities which have been highlighted in previous debates and today by my hon. Friends and by Liberal Members could at least to some extent be put right. The Chancellor yielded nothing in this. Nor did he attempt to explain why either it could not be started later than 5th September, or why refunds could not begin earlier than an unknown date in February.

On the second point, the question of liquidity generally and bank advances, we have over and over again impressed on the Chancellor the necessity of knowing at the earliest possible date where one is. I think that he agrees with this in his heart of hearts. I cannot understand why he is taking so long to make up his mind. It is essential to let industry know where it stands in relation to this tax. Every company and countless individual employers have calculations to make which depend on how their banks will treat the approaches which they will have to make to them. It is almost frivolous of the Chancellor to let us approach July in this matter without having given any indication whatever.

On these two grounds, which have been reinforced by a considerable number of speeches to which we have had no response whatever, we must divide the Committee on this most important Amendment.

Mr. W. T. Williams

It was not my intention to speak in this debate. [HON. MEMBERS: "Oh."] What I have to say I shall say in a few sentences. The Co-operative Party and the Co-operative Union are not playing politics in this matter. It is a matter concerning our own consciences as to how we respond to the challenge made and the difficulties with which the Co-operative movement is faced by this tax.

The Chancellor knows, and the Government know, that the Co-operative movement and the Co-operative Members in the House regard aspects of this tax unfavourably. He knows, and the Government know, that the situation in which the Co-operative movement has been placed by the tax is exceedingly difficult. They know also that we have no intention of being used by the Opposition in order to play politics. [HON. MEMBERS: "Oh."] I have to face this mindless barracking, but I shall say what I have to say.

We have no intention of being used by the Opposition, who, during all the years when they were in Government, were the implacable enemy of the "co-ops" and who did nothing but disservice to the movement until it suited their political purposes.

On the other hand, it is right that not only the Committee but the country should know exactly what it is the "co-ops" intend in this matter. We have made representations to the Government, and we have impressed upon the Government our opposition to aspects of this tax in its incidence not only upon the Co-operative movement but, for we had not asked for specific or special consideration, upon the distributive movement generally. We shall continue to press the Government for consideration of the matters which seem to us to be proper. In these circumstances, it is our intention not to assist the Opposition in their politics.

Question put, That "5th September 1966" stand part of the Clause: —

The Committee divided: Ayes 182, Noes 127.

Division No. 59.] AYES [7.36 p.m.
Archer, Peter Eadie, Alex Lyon, Alexander W. (York)
Armstrong, Ernest Faulds, Andrew Lyons, Edward (Bradford, E.)
Atkinson, Norman (Tottenham) Fernyhough, E. McBride, Neil
Bacon, Rt Hn. Alice Fitt, Gerard (Belfast, W.) McCann, John
Bagier, Gordon A. T. Foley, Maurice MacDermot, Niall
Barnes, Michael Ford, Ben Macdonald, A. H.
Barnett, Joel Fraser, John (Norwood) McGuire, Michael
Benn, Rt. Hn. Anthony Wedgwood Gardner, A. J. Mackenzie, Gregor (Rutherglen)
Bennett, James (G'gow, Bridgeton) Garrett, W. E. Mackie, John
Binns, John Gordon Walker, Rt. Hn. P. C. Mackintosh, John P.
Bishop, E. S. Gourlay, Harry Maclennan, Robert
Blackburn, F. Gregory, Arnold McNamara, J. Kevin
Boardman, H. Grey, Charles (Durham) Manuel, Archie
Booth, Albert Griffiths, David (Rother Valley) Mapp, Charles
Bowden, Rt. Hn. Herbert Griffiths, Will (Exchange) Mason, Roy
Braddock, Mrs. E. M. Hale, Leslie (Oldham, W.) Mendelson, J. J.
Braine, Bernard Hamilton, James (Bothwell) Mikardo, Ian
Bray, Dr. Jeremy Hamilton, William (Fife, W.) Miller, Dr. M. S.
Brooks, Edwin Hannan, William Molloy, William
Broughton, Dr. A. D. D. Hattersley, Roy Moonman, Erie
Brown, Rt Hn. George (Belper) Hazell, Bert Morgan, Elystan (Cardiganshire)
Brown, Hugh D. (G'gow, Provan) Henig, Stanley Morris, Charles R. (Openshaw)
Buchan, Norman Harbison, Rt. Hn. Margaret Moyle, Roland
Buchanan, Richard (G'gow, Sp'burn) Hooley, Frank Mulley, Rt. Hn. Frederick
Butler, Herbert (Hackney, C.) Horner, John Noel-Baker,Rt.Hn.Philip(Derby,S.)
Callaghan Rt. Hn. James Houghton, Rt. Hn. Douglas Oakes, Gordon
Castle, Rt. Hn. Barbara Howarth, Harry (Wellingborough) Ogden, Eric
Coe, Denis Hoy, James O'Malley, Brian
Coleman, Donald Hughes, Rt. Hn. Cledwyn (Anglesey) Orme, Stanley
Conian, Bernard Hughes, Emrys (Ayrshire, S.) Owen, Dr. David (Plymouth, S'tn)
Corbet, Mrs. Freda Hunter, Adam Paget, R. T.
Craddock, George (Bradford, S.) Hynd, John Pannell, Rt. Hn. Charles
Cronin, John Jackson, Colin (B'h'se & Spenb'gh) Parker, John (Dagenham)
Cullen, Mrs. Alice Jay, Rt. Hn. Douglas Pearson, Arthur (Pontypridd)
Dalyell, Tarn Jenkins, Hugh (Putney) Pentland, Norman
Davidson, Arthur (Accrington) Jones, Dan (Burnley) Perry, Ernest G. (Battersea, S.)
Davies, Dr Ernest (Stretford) Jones,Rt.Hn.SirElwyn(W.Ham,S.) Perry, George H. (Nottingham, S.)
Davies, G. Elfed (Rhondda, E.) Jones, J. Idwal (Wrexham) Prentise, Rt. Hn. R. E.
Davies, Harold (Leek) Judd, Frank Price, Christopher (Perry Barr)
Davies, Ifor (Gower) Kelley, Richard Price, Thomas (Westhoughton)
Dell, Edmund Kerr, Dr. David (W'worth, Central) Randall, Harry
Dempsey, James Lawson, George Redhead, Edward
Dewar, Donald Lee, Rt. Hn. Frederick (Newton) Roberts, Albert (Normanton)
Diamond, Rt. Hn. John Lever, L. M. (Ardwick) Roberts, Gwilym (Bedfordshire, S.)
Dickens, James Lewis, Arthur (West Ham, N.) Robertson, John (Paisley)
Doig, Peter Lewis, Ron (Carlisle) Robinson, Rt.Hn.Kenneth (St.P'c'as)
Dunnett, Jack Lomas, Kenneth Robinson, W. O. J. (Walth'stow, E.)
Dunwoody, Mrs. Gwyneth (Exeter) Loughtin, Charles Roebuck, Roy
Dunwoody, Dr. John (F'th & C'b'e) Luard, Evan Rogers, George
Rose, Paul Summerskill, Hn. Dr. Shirley Whitlock, William
Rowland, Christopher (Meriden) Swain, Thomas Williams, Alan Lee (Hornchurch)
Ryan, John Symonds, J. B. Williams, Clifford (Abertillery)
Shaw, Arnold (Ilford, S.) Thomas, lorwerth (Rhondda, W.) Wilson, Rt. Hn. Harold (Huyton)
Sheldon, Robert Tinn, James Wilson, William (Coventry, S.)
Shore, Peter (Stepney) Urwin, T. W. Winnick, David
Short,Rt.Hn.Edward(N'c'tle-u-Tyne) Walden, Brian (All Saints) Winterbottom, R. E.
Short, Mrs. Renée (W'hampton,N.E.) Walker, Harold (Doncaster) Woof, Robert
Silkin, John (Deptford) Watkins, David (Consett) Zilliacus, K.
Silkin, S. C. (Dulwich) Wellbeloved, James
Silverman, Julius (Aston) Wells, William (Walsall, N.) TELLERS FOR THE AYES:
Small, William Whitaker, Ben Mr. Joseph Harper and
Spriggs, Leslie White, Mrs. Eirene Mr. Walter Harrison.
NOES
Allason, James (Hemel Hempstead) Gurden, Harold Murton, Oscar
Astor, John Hamilton, Marquess of (Fermanagh) Nabarro, Sir Gerald
Baker, W. H. K. Harris, Frederic (Croydon, N.W.) Neave, Airey
Balniel, Lord Harrison, Brian (Maldon) Nott, John
Batsford, Brian Harvey, Sir Arthur Vere Onslow, Cranley
Bell, Ronald Hastings, Stephen Osborne, Sir Cyril (Louth)
Bessell, Peter Higgins, Terence L. Page, Graham (Crosby)
Biggs-Davison, John Hirst, Geoffrey Page, John (Harrow, W.)
Birch, Rt. Hn. Nigel Hogg, Rt. Hn. Quintin Pardoe, John
Boyd-Carpenter, Rt. Hn. John Holland, Philip Peel, John
Boyle, Rt. Hn. Sir Edward Hooson, Emlyn Peyton, John
Braine, Bernard Hordern, Peter Pink, R. Bonner
Brown, Sir Edward (Bath) Howell, David (Guildford) Pounder, Rafton
Bruce-Gardyne, J. Hunt, John Powell, Rt. Hn. J. Enoch
Burden, F. A. Iremonger, T. L. Price, David (Eastleigh)
Campbell, Gordon Jenkin, Patrick (Woodford) Pym, Francis
Carlisle, Mark Jennings, J. C. (Burton) Ramsden, Rt. Hn. James
Channon, H. P. G. Kimball, Marcus Rees-Davies, W. R.
Chichester-Clark, R. King, Evelyn (Dorset, S.) Ridley, Hn. Nicholas
Clark, Henry Kirk, Peter Ridsdale, Julian
Clegg, Walter Knight, Mrs. Jill Roots, William
Cooke, Robert Lambton, Viscount St. John-Stevas, Norman
Costain, A. P. Lancaster, Col. C. G. Sharples, Richard
Craddock, Sir Beresford (Spelthorne) Langford-Holt, Sir John Smith, John
Cunningham, Sir Knox Longden, Gilbert Steel, David (Roxburgh)
Dance, James Loveys, W. H. Tapsell, Peter
Davidson,James(Aberdeenshire, W.) Lubbock, Eric Taylor, Sir Charles (Eastbourne)
Deedes, Rt. Hn. W. F. (Ashford) McAdden, Sir Stephen Temple, John M.
Dodds-Parker, Douglas MacArthur, Ian Thatcher, Mrs. Margaret
Eden, Sir John Mackenzie, Alasdair(Ross&Cromarty) Turton, Rt. Hn. R. H.
Elliot, Capt. Walter (Carshalton) Maclean, Sir Fitzroy Wainwright, Richard (Colne Valley)
Elliott, R.W.(N'c'tle-upon-Tyne,N.) Macleod, Rt, Hn. Iain Walker, Peter (Worcester)
Fisher, Nigel McMaster, Stanley Walker-Smith, Rt. Hn. Sir Derek
Fortescue, Tim Maddan, Martin Ward, Dame Irene
Gibson-Watt, David Mathew, Robert Weatherill, Bernard
Glover, Sir Douglas Maude, Angus Webster, David
Goodhart, Philip Mawby, Ray Whitelaw, William
Goodhew, Victor Maxwell-Hyslop, R. J. Wills, Sir Gerald (Bridgwater)
Cower, Raymond Mills, Peter (Torrington) Winstanley, Dr. M. P.
Grant, Anthony Mills, Stratton (Belfast, N.) Younger, Hn. George
Grieve, Percy Miscampbell, Norman TELLERS FOR THE NOES:
Griffiths, Eldon (Bury St. Edmunds) Mitchell, David (Basingstoke) Mr. Peter Blaker and
Grimond, Rt. Hn. J. More, Jasper Mr. Reginald Eyre.
Munro-Lucas-Tooth, Sir Hugh

7.45 p.m.

Mr. Hugh Jenkins (Putney)

I beg to move Amendment No. 17, in page 48, line 19, after "amount", to insert: in respect of each hour of employment".

The Temporary Chairman

I think that it will be convenient for the Committee if we take at the same time Amendment No. 19, in line 20, leave out "twenty-five shillings" and insert "seven-pence", Amendment No. 22, in line 23, leave out "twelve shillings and sixpence" and insert "fourpence", Amendment No. 25, in line 24, leave out "twelve shillings and sixpence" and insert "fourpence", and Amendment No. 28, in line 26, leave out "eight shillings" and insert "three-pence".

Mr. Jenkins

It is fortunate indeed, Mr. Steele, that you have decided in your wisdom that these Amendments should be taken together, because they are all part of a whole. Amendment No. 17 seeks to convert the tax from one levied in respect of each week of employment to one levied in respect of each hour of employment. The other Amendments are consequential. If Amendment No. 17 is carried and the tax is converted as I have described, one would hope that the other Amendments would be carried, because they are an essential part of it, but if Amendment No. 17 were not carried, it would be wrong for the others to follow.

I hope that this is clear. I notice that one or two hon. Gentlemen and an hon. Lady opposite have added their names to one or two of the later Amendments but not to Amendment No. 17. The consequence of accepting those Amendments but not No. 17 would be strange, because it would reduce the tax to 7d. a week instead of 7d. an hour, and it is far from my purpose to reduce it to such an absurdity. If the first Amendment ware not carried, the later Amendments would be purely of a wrecking character, and it is conceivable that this is not entirely unknown to the hon. Lady and hon. Gentlemen opposite who have put their names to the later Amendments. I assure the Committee and my right hon. Friends that that is far from my purpose. Indeed, I supported the Government on the Amendment which has just been carried because I am not opposed to the tax in principle. What I am opposed to is the manner in which the tax is being levied. My Amendment is tabled to improve the tax and make it more sensitive.

In what I shall say briefly in support of the Amendment, I want to say precisely why I believe that my proposal would result in a substantial improvement in the tax, and why I believe that my hon. Friends, after they have listened to my arguments and the debate, will decide to accept the Amendment and change the nature of the tax.

The object of the Amendments is not in any way to reduce the revenue that my right hon. Friend hopes to raise. Indeed, in certain circumstances, a firm employing a number of people for more than 40 hours a week each would pay a larger and not a smaller amount of tax. This would, incidentally, discourage overtime, because the rough division I have made, to the nearest penny, would provide that the tax would become payable on an hourly payment relating to a 40-hour week. Thus, in respect of any employee working more than 40 hours, the employer would pay a larger sum whereas in respect of an employee working less than 40 hours he would pay a smaller sum.

Let us consider the advantages of this degree of flexibility. The problem of the part-time worker would be solved because his employer would pay in respect of the number of hours in which he was engaged. I have not attempted to change the fundamental nature of the tax. I have preserved the same relationship through the hourly sums that the Government have created in their weekly sums. In Amendment No. 19 the sum of 7d., which is the hourly pro rata rate, is introduced. In Amendment No. 22 the pro rata sum of 4d. is proposed in place of the 12s. 6d. in the Clause and the same applies to Amendment No. 25. In Amendment No. 28, the sum of 3d.—the nearest we could get—is substituted for the sum of 8s. These substitutions are as near pro rata as one can get in substituting hourly for weekly payments. They would not change the amount paid in respect of each week of employment. The employer engaging a man or a woman for a 40-hour week would still pay precisely the same under the hourly rate as under the weekly rate of 25s. or 12s. 6d.

Although we are not attempting to alter the amount of revenue, the Amendments would do so incidentally because the amount paid by an employer would be on the basis of hours instead of the week. The advantage as far as part-time employees are concerned is surely immediately apparent. The great objection to the tax in respect of part-time employees has been the amount to be paid. However, it has been claimed that most of them are women and that in their case only half the tax will be payable. That does not deal with the many male part-time workers. A part-time worker is very often the man who badly needs employment. He is often a man who is not in full health or who is getting on in years and who, for one reason or another, cannot do full-time work.

Under our proposals he would continue to be employed on an hourly basis whereas his services might well be dispensed with if the tax is levied on a weekly basis. The same applies, of course, to women as part-time employees. This would make the tax more flexible and reduce many objections to it.

One might ask why the Government introduced this tax in its present form in the first place and I will anticipate one or two points my right hon. Friend the Chief Secretary may make in reply. It is conceivable—and hon. Members opposite probably think this—that the Government did not think of doing it in the way I suggest. But that is probably not the case. They may have thought of it but dismissed it, and, as I say, I want to anticipate their reasons so that I can spike my right hon. Friend's guns before he turns them on us.

Our proposal would be flexible and have certain advantages, but I think that my right hon. Friend will say that the problem of collection could be extremely difficult. I wonder whether this is really so. Indeed, I can see some advantages. The method of collection is to be through the National Insurance stamp. Perhaps this is because the Ministry of Labour felt able to shoulder the burden whereas the Treasury was a little fussy. But if it is no more than an administrative convenience of that kind it is a pity that the decision was made on that basis.

Another point which might have been made is that the collection on the stamp basis is rather complex. Certainly, collection on the basis of a weekly payment to the Government by each employer would be much simpler. Under my system, all that the employer would have to do at the end of the week would be to write out a cheque covering the.total number of hours worked in his establishment and send it to the Chancellor. If the Chancellor prefers it done through the Ministry of Labour, the employer could send the cheque to the Minister of Labour who could then send on a cheque to the Chancellor or make a book transaction, as we know will be done on the basis proposed by the Government. All we are doing here is to remove a certain amount of purchasing power indirectly, and exactly how we set about the process does not really matter very much.

One of the concerns which moved me to look into this matter—others were drawn to my attention by constituents—is the problem created by theatrical employment in which there is a great deal of part-time work. People work in the evenings in order to keep theatres open and the amount of work and the size of their pay are really quite small.

I am not talking so much of actors as of people who work backstage or in the box office or at the front of the theatre. Putting them on an hourly basis for the purpose of this tax would make it possible to continue their employment and, indeed, for some theatres to remain open which would find it difficult to do so if the tax were levied in full on the basis of a weekly payment of 25s. for a man and 12s. 6d. for a woman. It was this aspect which first drew my attention to the benefit of an hourly payment, but there are other reasons.

Now I want to return to the question of collection. I see no reason why the employer should not pay in the way I have suggested. It would save a great deal of work in each establishment. Imagine the saving in a factory. Instead of having to stick on a stamp for every employee at the same time as he puts on the National Insurance stamp, which would be a great deal of extra work, under my method the employer would be able to write a cheque at the end of the week, making one simple operation in the accounting department.

8.0 p.m.

My right hon. Friend might ask how we could make sure that the tax was paid. I am not sure that that objection is valid. With the National Insurance stamp, the individual needs to be identified so that he can know what his own personal record is, but the individual need not be identified for the purposes of the collection of this tax. If I am right in saying that there is no necessity to preserve the individual contribution basis for the tax, that argument is destroyed. There is not the same case as there is with the National Insurance stamp. If the tax is to be collected by stamp, that is merely because that happens to be a convenient way of collecting it. It may be convenient for the Government, but I doubt whether it will be convenient for employers.

The other possibility is the danger of people not paying the tax, of employers fiddling the amount by returning smaller numbers of employees. It might be said that the Revenue might lose a certain amount if we were to rely on my suggested method, and if it was not to do so, that might require the establishment of some sort of inspectorate. I am not sure how much there is in that argument. If it is made and if the Government say that they are wedded to the stamp system, there is no reason why they should not use the stamp system even on the basis of an hourly tax. There is no need to have only stamps representing a 40-hour week. There could be a 40-hour stamp and an eight-hour stamp and some one-hour stamps. The card could then be made out quite simply for the number of hours worked by the employee concerned. If the Government are wedded to the stamp system, they could introduce this hourly basis, with all its advantages, and still stick to the stamp method of collection.

For all those reasons, I feel it desirable to urge this Amendment on my right hon. Friends. It would have the effect of making what is basically a sound tax more acceptable. That is the object of the Amendment, not, as with some other Amendments, to bring the tax into disrepute. That is no part of my feeling in the matter. I believe that the tax deserves to have a fair start. If it were to be imposed on the hourly basis which I suggest, it would become much more popular, which would give the tax a much fairer start than it would if my right hon. Friends decided to stick to the weekly method of calculation with all the anomalies which that of necessity would involve.

Mr. Nigel Birch (Flint, West)

Though I cannot agree with everything said by the hon. Member for Putney (Mr. Hugh Jenkins), I cannot deny myself the honour of following him into the Lobby against the Government on this Amendment. The reason is that he has touched on one of the most dangerous points of the tax economically and from the point of view of humanity. It is the question of what will happen to part-time workers.

The hon. Gentleman was perfectly right to say that not all part-time workers are women. No doubt a great body of them are married women who can spare a few odd hours on some days of the week and who are very largely responsible for keeping the hotel industry and the retail trade going. But there are also those who are handicapped, ill, disabled or old, as the hon. Gentleman said, and not capable of working full hours. So far, the Chancellor has said that he cannot do anything about them, but unless he can, not only will costs go up very much, but a great part of the retail and hotel in- dustries will be badly damaged, because either their costs will go up astronomically, or they will not be able to employ these people and their business will go downhill.

I cannot say precisely whether the hon. Gentleman's scheme will work. When the Chief Secretary replies, he will probably think of some more ingenious reasons than the hon. Gentleman himself put against the Amendment. Of course it is not the Treasury which collects the tax but the Inland Revenue, and the Inland Revenue is absolutely delighted to shuffle it off to the Ministry of Labour. It knows that the Ministry of Labour is capable of doing it, while the Inland Revenue is not and that is why it has come about in this extraordinary way.

I support the hon. Gentleman because it must be wrong economically to bring in a measure which discriminates against part-time workers when, as has so often been said, one of the main efforts of the Ministry of Labour over the years has been to get more part-time workers, more old and disabled workers, into employment. The problem could have been solved, but one needs to spend the best part of the year working on a tax like this and no work has been done on this. That is why we have these endless anomalies. If it is any consolation to the hon. Gentleman, I shall vote for the Amendment.

Mr. Pavitt

Like the right hon. Member for Flint, West (Mr. Birch), I support the Amendment and on very similar grounds, although I do not want to deploy most of the arguments about part-timers. This is a consideration which runs right through the Clause, but we shall have an opportunity to discuss it on a later occasion and I do not wish to develop the complete case until the time comes.

There is no doubt that my hon. Friend the Member for Putney (Mr. Hugh Jenkins) has found an ingenious way of revising the tax which both those who support and those who oppose it would like to be more selective. One of the difficulties in any form of taxation is that there are borderline cases and that just over the boundary there is always a difficult case. That must result from the rough and ready way in which our taxation measures are often drawn.

My hon. Friend's ingenious way of using stamps of various lands might result in something similar to the trading stamps which one gets when one purchases petrol, so that, instead of having stamp cards, people will have to have stamp books. I understand that even for the present range of part-time workers there are about 30 different varieties of stamps.

This tax is to collected by an attachment to the insurance stamp. If the Chief Secretary can find a practical way of working what my hon. Friend proposes, the person working nine or 10 hours a week—the person working eight hours a week is now excepted—would be more equitably treated. For a person working nine hours a week, usually a female worker, the incidence of the tax at 12s. 6d. a week will represent an increase of 1s. 6d. an hour. This is a heavy impost if one is employing many people doing nine, 10 or 11 hours a week. The whole point of the Amendment is that it just brings in this very small number of those just on the borderline, doing nine, 10, 11, or 12 hours a week. For that reason, 1 would support the Amendment.

Sir J. Foster

Let us assume for the purposes of this debate that it would be a good thing if we could allow the employment of part-time people, the disabled and elderly. Let us assume that the Financial Secretary agrees with that. I foresee that the debate will turn upon whether it is administratively possible to do this. As a result, suggestions should be made, from all sides of the Chamber, in order to enable the Chancellor to bring this about. I cannot believe that the Government Front Bench will say, "No, our object is to prevent the employment of part-time, disabled or elderly people", or, "We do not care if they are not employed".

Starting on this basis I would suggest a slight amendment to the way in which the hon. Gentleman the Member for Putney (Mr. Hugh Jenkins) envisages his scheme would work. I would tie it in with the calculations made on P.A.Y.E. Take the case of a factory employee. One knows what his hourly wage is because the hours of work are 42 or 44 hours a week or something of that sort. One knows his basic wage and it is quite easy to divide that by the number of hours worked and reach his hourly wage. In the pay slips made at the end of the week one has to add his entitlement to overtime and one has to set down the number of overtime hours worked.

I suggest that instead of relating it to a fixed 40-hour week, the accounts department of the factory, which would have to do the same sum in any event for overtime purposes, could perform the task. There could be some stamps of the main values and where there is a stamp of unusual value, for a person employed for two hours a week or four hours or seven, the stamp should have a tick put upon it by the factory showing that a separate cheque has been sent at the same time.

There could be said to be the possibility of cheating, but the payee's slip must agree with the amount sent in and one has only to look at the payee's slip to see the hourly rate which would be paid. This would help the Ministry of Labour in checking. One would find that the 40 hours a week multiplied by 7d. was a little more expensive in certain cases. But the right hon. Gentleman's calculation is not quite right, as 40 times seven is a little less than 25s.—actually 23s. 4d. I do not believe that the Government Front Bench will say that they are glad that part-time, disabled and elderly people cannot be employed or that they do not care whether they are employed. They will have to say, "If only we could do it, we wish someone would show us how." The hon. Gentleman for Putney has shown us.

Mr. Hugh Jenkins

Will the hon. Gentleman permit me to say that it is worked out to the nearest penny?

8.15 p.m.

Mr. John Fraser (Norwood)

I support the Amendment in principle because it will help to iron out some of the anomalies affecting the part-time worker. I am aware that in the sort of business which I practised before I came here it was possible to employ someone who comes to work for eight or nine hours a week, to make the tea in place of the secretary. By doing that one pays a fairly small but remunerative wage and is able to save the time of skilled staff. There are chemists in my constituency who employ people part-time in the evenings to dispense prescriptions and by doing this they are able to save the time of full-time staff.

It is a pity—and this is why I support my hon. Friend's Amendment in principle—that no provision has been made for part-time workers. One would have thought that the deployment of labour would have required the encouragement of part-time workers, rather than having everyone pay the stamp at the same rate. I suspect that the reason for not being able to exempt these people is because of the limitation of the type of insurance card. I am convinced that if men and women had the same colour insurance card they would both be paying the same amount of Selective Employment Tax.

It is only because there is a convenient distinction between one kind of card and another that one can draw the distinction between the various amounts to be paid. I know that the arguments against having some special provision for the part-time worker is that in some large industries the thing tends to iron itself out. This applies when there are full and part-time workers, but it is not true of some firms employing almost exclusively part-time workers. Thus one has the anomalous situation, if one takes the cleaning industry employing the Mrs. Mopps, about whom we have heard, in which, if the industry is a service industry, employing mainly part-time people, when the tax is very much a poll tax on labour costs, the industry will be paying a fairly high rate of tax in proportion to the amount of wages which the cleaning women receive.

On the other hand if a large factory in a manufacturing group employs its own cleaning labour, it will receive a premium and, by extending some concession to the part-time worker, it is not going to cost anything—because some money will be lost by manufacturing industry in that it will lose some premium for its part-time workers and something may go to the service industries because it will not have to pay quite so much.

I said that I was in favour of the Amendment in principle, but I am against it in practice because it would be unworkable. Let us assume that hon. Members were classed as employed persons liable to pay the tax. It would be an extremely difficult thing for the Paymaster-General to be running round this House in the early hours of the morning working out how many hours each Member had worked. I mention hon. Members as an illustration of the difficulty in working out the number of hours everyone has worked in order to calculate the rates. I know that my hon. Friend the Member for Putney (Mr. Hugh Jenkins) is interested in the theatre. It might provide some incentive to various playwrights to write plays of an hour in length so as to save the amount of tax payable upon those working in theatres.

There is a very real practical objection to working to an hourly basis. I would like to suggest a method capable of being able to deal with a part-time worker, which, at the same time, does not create the enormous administrative difficulties which would arise in the case of the Amendment proposed by the hon. Member for Putney. It is proposed by the Treasury that the tax should be collected by an extra payment of the National Insurance stamp. I cannot see why it has not been possible to use the graduated pension system. When sending graduated pension contributions one would add on the employer's side 25s. per week for a male and 12s. 6d. for a female.

It would be just as easy to calculate the tax in this way, but one could make exemptions and say that where someone earned less than £4 or £5 a week the amount to be paid on the employer's side of the graduated contribution section of the P.A.Y.E. card would only be one shilling a week. Operated in that fashion one would be able to cope with the part-time workers, with people working 16 or 20 hours a week without creating administrative difficulties suggested by my hon. Friend's Amendment. It would get round the problem in a perfectly simple fashion and I hope that this suggestion might commend itself to my right hon. Friend and lead to a middle way between the points of view expressed.

Sir D. Glover

I support what the hon. Member for Putney (Mr. Hugh Jenkins) has said. I do not believe that his proposals are such that the Treasury could accept them in their entirety, but they are another argument why the Government should have accepted the previous Amendment which proposed that this tax should be postponed until February. I am sure that the Government have not given nearly enough thought to the problem of part-time workers. I was impressed by what the hon. Member for Norwood (Mr. John Fraser) said. I realise that there are many difficulties about the proposals of the hon. Member for Putney, but the Government should do something, not in the distant future, but now, about the problem of part-time workers.

The hon. Member for Norwood mentioned the question of firms which employed Mrs. Mopps. Under the Government's proposal, a firm in Liverpool employing a lot of Mrs. Mopps on contract in cleaning the Ford factory at Halewood will form them up on parade outside the factory and have to pay 12s. 6d. for each one, although the ladies who work in that factory probably do not work more than 15 or 20 hours a week. The employer then says, "Ladies, I am very sorry, but owing to the Government's stupidity I am now going to give you the sack."

The ladies will then walk through the doors of the Ford factory where they will be signed on by the Ford company, which will get a premium of 3s. 9d. for each of them. They use the same mops, the same buckets, the same taps; they clean the same floors and the same windows. They do exactly the same job they have been doing for years. The difference to the State is this. If they are employed by an outside contractor, the State gets 12s. 6d. a week for each. If they are employed by Ford's, the State pays 16s. 3d. to Ford's for each, a difference of 28s. 9d.

The Government must realise that any system which produces that sort of anomaly is crazy. It is not the economics of Socialism; it is the economics of Bedlam.

Take the retail distribution trade. An enormous number of shops employ women part-time on Friday afternoons, which is the busy time of the week, and Saturday. They may do 12 hours a week, for which the firm has to pay an on-cost of 12s. 6d. on their pay. If the woman is getting a little old, or has become less efficient, she gets the sack. Yet the Ministry of Labour has been working for years to try to get exactly that sort of person into employment. It cannot be right that the State should ask the firm to pay the same amount in tax in respect of a girl or woman working 12 hours a week as it pays in respect of full-time staff working 40 hours or more a week.

The hon. Member for Putney probably accepts that the Government would not accept his Amendment in its entirety. What he is disturbed about is the anomalies. He wants to bring more common sense and a more practical approach to the Bill. The hon. Member for Norwood wants to do exactly the same thing. We must ask the Government to consider this problem again. Although the tax will operate from September, it is not too late for the Government to say, "We have been impressed by the arguments about part-time workers. We have heard what our hon. Friends the Members for Putney and Norwood have said. We realise that there is a problem and we will introduce an Amendment on Report which, even if it does not go the whole way, will go a long way in removing anxiety."

This Amendment, oddly enough, is an all-party Amendment. It will not bring down the Government if it is accepted. Since the Government's proposals on part-time workers are complete and utter nonsense, I hope that the hon. Member will press his Amendment to a Division. I will support him, not in trying to bring down the Government, but in trying to introduce a little common sense into this tax in dealing with the segment of the population with which the hon. Member is concerned.

Mr. Norman Buchan (Renfrew, West)

Timeo Danaos et dona ferentes. When hon. Members opposite say that they will follow us into the Lobby on the principle of a Clause and not because of their objection to the principle of this tax, then I for one am very wary. I support my hon. Friend the Member for Putney (Mr. Hugh Jenkins), first, because I always support him; secondly, because I think his arguments are irrefutable; and, thirdly, because I notice that my name is on the Amendment Paper along with his.

There are those of us who approve of this tax because it is a correct measure, a Socialist measure. Perhaps the hon. Member for Ormskirk (Sir D. Glover) does not agree, but basically it is a Socialist measure. However, it suffers from the gross defect of a lack of selectivity because it is far too blunt. My hon. Friend's Amendment is an attempt to refine the instrument, to make it more selective. In this year and age, we cannot leave merely a division between service and manufacturing industries. We must look at things a little more closely. The trouble with the tax, and indeed with all taxation, is that it is considered in the light of the efficiency of the country and of raising revenue and not also in terms of the graces of life.

The arts, theatre and music, will be affected by the tax. It is true, as my hon. Friend the Member for Putney said, that with the full-time actor working 40 hours a week, or whatever he does, there will not be much variation. But we think of all the services which are necessary not only to make the theatre function, but to make it function in a comfortable and graceful fashion. Many of the services are given on a part-time basis. The same is true in the field of music. This tax will have the tendency of reducing the number of part-time musicians who help to add grace—and fulfil a necessity—to our lives.

An hon. Member opposite referred to the mentally handicapped. But there is another serious issue with me because, as hon. Members will know, the Erskine Hospital for War Disabled is in my constituency. One of the tasks which frequently faces me at my "surgeries" is to see how one can bring some aim and purpose into the lives of people disabled in various ways, and one of them is to try to get them part-time jobs. Anything that we can do in this direction through taxation or any other method will be useful. For this reason, too, I support the Amendment.

Along with this is the question of the retired. Again, we should be giving more and more attention to the "graces" of life. This has nothing to do with efficiency, but concerns, perhaps, the nature and quality of the life we lead. One of our jobs with so many people is to fit them into part-time work, where they can be useful and where they feel that they are useful, so that they can spend their days with some kind of dignity partly because they feel that they are being useful. My hon. Friend's proposal would help in this way.

I am too long in the tooth to think that a discussion based upon the graces and the quality of life brings much conviction to bear upon the Treasury. The argument of efficiency is the rock on which we always falter. My hon. Friend the Member for Putney pointed out, however, that far from losing revenue the Treasury would, by his proposal, gain productive revenue in the sense not only that overtime payment would make a bigger contribution to the revenue but because efficiency would also begin to be sharpened.

For far too long, many of our workers have been looking at their wages based upon their assessment of their basic wage plus overtime. It is conceivable that the low standard of wages in this country, together with the question of overtime, has been the crux in the seamen's struggle. I certainly want overtime—we are trying to boost exports—but I want it to be efficient and not inefficient overtime. I believe that the workers want the same. Therefore, my hon. Friend's proposal would tend to cut down the unproductive and inefficient overtime by making employers look at it twice.

I did not imagine when I began to speak that I have so many arguments in favour of this Amendment to put forward. We seem now, in this Amendment to be moving towards the much fairer method of a payroll tax plus an added selectivity by bringing in the basic division between services and manufacturing industry. I ask my right hon. and hon. Friends at the Treasury to go down in history by adding yet another grace and bringing in the extra refinement proposed by my hon. Friend.

I agree that the form of the tax is deliberately simple. We are using an existing classification which bears the stamp of the Ministry of Labour. It should not, however, be beyond the ingenuity of my right hon. Friend the First Secretary and the Chancellor to devise a scheme on the lines put forward by my hon. Friend the Member for Putney. The Government Front Bench will not be so modest as to imagine that they cannot bring forward such a scheme. The solution could follow the totalling of hours each week and the payment of money in relation to that number of hours. This would solve the problem. I urge the Government Front Bench not to put my hon. Friend the Member for Putney in the embarrassing position of having to accompany the hon. Member for Ormskirk through one of the exits of this Chamber, but to accept the Amendment.

8.30 p.m.

Mr. Gower

There must surely be something wrong with a Bill which treats a full-time employee for the purpose of this tax in virtually the same way as a part-time employee or a partially disabled person—one, for example, who is blind. The Chief Secretary and the Government generally must be disturbed at the obvious deep misgivings, which are shared on both sides of the Committee and outside Parliament, about the consequences of the Bill in its present form on the future employment of persons in part-time employment, and the disabled in particular.

I listened with care and sympathy to the hon. Member for Putney (Mr. Hugh Jenkins), because he was suggesting a possible partial solution. I agree with the hon. Member for Norwood (Mr. John Fraser) that it obviously would not cover all persons in employment, some of whom are paid by other methods. Obviously, however, it would cover the classification of people who are employed on an hourly basis, who represent a quite large proportion of those who are employed. In that way the Amendment would go a considerable way to meet that difficulty.

The Chief Secretary will have some fairly powerful technical objections to the Amendment in its present form, but unless he can deal with the arguments of principle I, like a lot of other hon. Members, will have to follow the hon. Member for Putney into the Lobby. I am sure that he will divide the Committee unless the Chief Secretary can give us an assurance on the matter of principle.

There is anxiety. It could not be otherwise. Reference has been made to the employment of Mrs. Mopps, the people in the cleaning industry. The only consequence of the Government's proposal can be that either these people will not be employed in such numbers or that the cost of the work they do will be considerably greater. If I were getting work done by cleaners and they were affected by this tax, as they must be, I should not expect to have the cleaning done at the same price. It would not be feasible.

In the long run, the person having to pay such a high—almost a poll—tax for each person in that category would be obliged to employ people who were able to do full-time work. I hope, therefore, that the Chief Secretary will be able to give a satisfactory answer on the argument of principle. I certainly would not expect him to accept the Amendment in detail. An interesting variation to it was suggested by my hon. and learned Friend the Member for Northwich (Sir J. Foster). Obviously there is ample scope for further variation and the Chief Secretary must surely respond to us on the argument of principle. Otherwise we must divide against the Government.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

I, too, shall have pleasure in following the hon. Member for Putney (Mr. Hugh Jenkins) into the Lobby, though whether he will lead us from in front or behind, like the Duke of Plaza Toro, remains to be seen, but I will be in his army if he goes there.

The Amendment he has proposed certainly deals to some extent with the problem of the part-timer, one of the most glaring examples of injustice in this Bill, and I, indeed, have many constituents who would greatly benefit. I am thinking particularly of home helps and the part-time agricultural workers, whose employers would pay a small amount of tax if the Amendment were carried as it now is, rather than the full 25s., and this, I think, is the very great advantage of the Amendment.

But in some senses it does not go as far as it should. I do not believe that it is a simple way of basing the tax. I think pence per £ is a rather complicated way to work it out and a difficult way to levy it. With respect to my hon. and learned Friend the Member for Northwich (Sir John Foster), when he tried to explain the method of collection I found myself at times not entirely following him, I must say. I do not think it could be called simple or easy to collect.

The hon. Member for Renfrew, West (Mr. Buchan) called this a Socialist tax. What an extraordinary idea. It seems to me that this is a flat-rate tax. It is not Socialist at all. It is not progressive at all. One pays the same 25s. if one employs a labourer for eight hours and if one employs the top financial brain in this country for a whole week; it makes no difference; it is not progressive. Surely, the whole point of this tax ought to be that for the use of scarce and skilled people one should pay more tax; but if one uses unskilled people for a few hours a week one should pay very little tax. It should be an incentive to economy in the use of labour and skill of all sorts, not just a flat-rate, blanket tax as proposed by the hon. Member.

Lastly, the other objection to this tax, I think, is that it is not inflation proof. Seven pence an hour may be a derisory sum of money after this Government have been office a few more years—hardly worth paying: if one has to go to get one's wages in sacks as a result of prolonged and uncontrolled inflation 7d. an hour will be so insignificant it will not be worth paying. Of course, it should be a percentage of wages or earnings paid, and this, in my opinion, is the only conceivable and sensible way of collecting a tax of this sort.

I should like to see the tax developed and added to along the lines of the hon. Member's Amendment and along the lines I have suggested. I should like to see it replace Income Tax in the lower ranges of income altogether—below, shall we say, £1,500 a year or something of that sort? I am shocked, if I may say so, at the enormously small percentage of our tax revenue collected by means of employment taxes, through the stamp and now through this tax which is proposed. We in this country collected by this means only 13.8 per cent. of total revenue, whereas in Germany it is 28 per cent. and in France it is 35.5 per cent. These figures show how much greater reliance we place on direct taxation, and how far too little reliance is placed on the other forms of taxation.

It is interesting that in France, tax is 50 per cent. on labour and in Holland it is 23 per cent. on labour, whereas at the present time, on an average wage of over £18, one only pays 7½ per cent. in this country. If the Clause goes through as it is proposed, that will rise to 14 per cent. when the Selective Employment Tax has been paid; but, for those who receive the premium, it will fall back again to 5.3 per cent. on labour. I suggest that the figure of 5.3 per cent. on labour shows that the Government are attempting to collect their tax on an entirely wrong basis.

I would like to try to solve the difficulties of collection which hon. Members have referred to and to which the Chief Secretary will doubtless refer when he catches your eye, Mr. Irving. Of course, it is difficult to collect either the 7d. per hour tax, a percentage tax or any other form of tax than the flat-rate tax which the Government have put forward. But that is an argument for not putting forward the tax until the system of collection has been arranged.

It is ridiculous to bring in the wrong tax just because one has not thought far enough ahead to arrange a system of collection which is viable, fair and sensible. In my opinion, the insurance stamp itself should not be on a flat rate. We should go to a percentage basis of collection for all taxes on labour, whether they be to cover unemployment, health, pensions or straightforward tax as we are discussing in this case.

The Government have made a fatal mistake in trying to bring in a tax, which is in some ways not ill-conceived, before bringing into being the machinery which would be required to collect it on a fair, sensible and equitable basis. The anomalies which have been mentioned by my right hon. and hon. Friends will become more and more of a nightmare to the Chief Secretary during the coming months.

This Bill and the Ministry of Labour one which we are to discuss will take many weeks to get through the House, and he will rue the day when he supported the Chancellor in bringing forward a tax which had not been thought out, for which the machinery for collection was not in existence and for which the machinery for paying back the premiums was not in existence, either.

The anomalies are so frightful that the only way we can salvage the principle, for which the whole Committee has some sympathy, is for the Chancellor to withdraw the tax now, get his machinery right and bring it in again next year on the basis of what the Opposition have been suggesting.

Mr. R. J. Maxwell-Hyslop (Tiverton)

It will be noticed that I have joined with the hon. and bearded Member for Putney (Mr. Hugh Jenkins) in sponsoring the Amendment——

Mr. Hugh Jenkins

Mr. Irving, is it in order for hon. Members to refer to each other's facial characteristics? If so, I shall refer to the hon. Member for Tiverton (Mr. Maxwell-Hyslop) as "the hon. and unbearded Gentleman".

Mr. Maxwell-Hyslop

We can settle for that difference, though I hope that we shall have in common support for the Amendment.

In part, it removes from the tax its regressive element. It is not a flat-rate tax, as has been suggested by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). It is a regressive tax, because the rate of tax charged per hour increases with the small number of hours worked per week by each employee. It is an example of regressive taxation brought in by a Labour Government, and I hope that the Chief Secretary will not endeavour to persuade us to accept it as being, in some way, a progressive measure.

It is not incumbent upon the sponsors of the Amendment to detail to the Government the mechanics under which they can collect their own tax. That is the proper function of Treasury Ministers and their professional advisers. When an Amendment is put before the Committee to get rid of anomalies, injustices, and follies in a tax introduced by the Government, it is not on the plate of the sponsors of the Amendment to determine the mechanism by which that can be done, and I imagine that this is what the Chief Secretary would say if he were sponsoring an Amendment to get rid of anomalies and injustices in a Finance Bill.

8.45 p.m.

What are the characteristics of the people who are engaged in part-time work? Why are they working part-time instead of full-time? Broadly speaking, there are two reasons for this, either because the employment potentialities in the area are inadequate to provide them with full-time work, in other words their employment is marginal, or because there is something in their personal circum- stances—they are not fully physically or mentally fit, or they have family commitments, or elderly relatives or friends to look after—which prevents them from enjoying the higher standard of living which they would enjoy if they were able to work full time. Yet these are the people who are singled out—unless of course the Amendment is accepted—for an effective rate of taxation which may well prove punitive, which may well result in them losing that part-time employment.

As well as resulting in considerable hardship to the individual, in many cases it will not result in any significant saving to the Treasury, because the persons concerned, instead of earning income on which, in many cases, an element of tax is paid, as here, will go on to National Assistance or whatever it is called when the Bill dealing with this has been considered by both Houses.

The loss to the Treasury as a result of accepting the Amendment would be considerably less than its face value, and the reason for this must be borne in mind. One hon. Gentleman talked about a mental hospital in his constituency. There are three in mine, and one of the major problems is that of rehabilitating people who are temporarily mentally sick, and of rendering sufficiently self-confident to stand, at least partially, on their own feet people who are born mentally subnormal and are incorrigibly mentally subnormal. Very often this starts with a form of contract labour where they go out to work under supervision. For instance, in the south end of my constituency they go out in teams to pull swedes on farms at certain times of the year. By working under supervision it is hoped that with the passage of time they will gain sufficient skill and sufficient self-confidence to be released to look after themselves without permanent supervision. This is the most marginal type of labour of all. These are the people who are most vulnerable to an unamended Selective Employment Tax of this kind.

The Amendment would apply also to people who have no mental or physical disabilities, but who live in areas of the country where there are not sufficient opportunities for full employment. Unashamedly I admit that the West Country is one of these. Surely it is not seriously imagined by the Treasury Bench that people will work part time in the West Country in the morning, and in Macclesfield or Birmingham in the afternoon? Nor, I take it, is it imagined that as a result of the tax they will move to Coventry or to Birmingham where houses are not available.

The effect of the tax will be to render it unprofitable in many cases to employ part-time labour, or, alternatively, to employ it for a certain period of the year as is done at the moment. A considerable amount of part-time labour is employed in the holiday industry, in the licensed distributive trades, and the catering trades in general. In so far as the results of the tax is to restrict activities to which the Chancellor has paid tribute as a massive earner of foreign currency—and, incidentally, a saver of currency which would otherwise be spent by British people on holiday abroad—this is contrary to another aspect of the Chancellor's policy.

Moreover, even if the individual businesses continue to offer facilities which involve employing part-time labour, the decreasing margin of profitability will effectively reduce the proportion of the year in which it is possible to employ those people, which is neither to the benefit of the economy nor to the benefit of the individual. The benefit to the Treasury is both speculative and small. It was said by the hon. Member for Putney, with excessive charity, that he was quite sure that his right hon. Friends on the Treasury Front Bench had thought of all this before they introduced the Selective Employment Tax in the first place. Charity obviously begins at home. I do not believe that they had. This was a crudely drafted proposal.

Mr. Hugh Jenkins

I said that I was sure that they had not the charity on the other side of the Committee. I did not say that I had it.

Mr. Maxwell-Hyslop

The hon. Member was referring to his own Front Bench. He thought that they had in mind—but were deterred by difficulties—the problems envisaged in the Amendment. I do not believe that they had them in mind at all. The entire Finance Bill, like that of last year, is riddled with incompetence. It was not clearly thought out before it was introduced. Neither the mechanics of carrying it out nor the purpose were properly defined when the Bill was drafted in the first place. Nor was it competently drafted. As we progress further through the Bill, further through the night, further through the week and further through the month, the hon. Member will find that out with a superior degree of conviction to that which he has at the moment.

We do not yet know what will be the response of the Treasury Bench to the Amendment or what will be the response of those who have given lip-service to its aims. We observed them supporting a previous Amendment with their voices and then scuttling into the Lobby to support the Government. I have something less than confidence that those who have advanced on the benches opposite good concrete reasons in favour of the Amendment, supported by adequate evidence, will have the courage of their convictions and will vote for it if it comes to a Division.

Let us still permit the flame of hope to burn within us. Let us hope that the Treasury Bench will reply that the Amendment is reasonable, because it turns a regressive tax into an effective flat-rate tax, because it does not go to the heart of the objectives of the Selective Employment Tax, ill-warranted as those objections are, and because it does not ruin the financial forecast on which the Budget was based. The results are nothing like as heavy as that.

The best reason of all is the positive reason for accepting the Amendment: it will not turn a foolish tax into a good tax, but it will reduce the sum total of anomalies and injustices introduced by the Clause. Unless the Government can see their way to accept the Amendment and its consequential Amendments or be persuaded to do so by the voting of the Committee, this will be a worse Finance Bill than it need otherwise have been.

The Chief Secretary to the Treasury (Mr. John Diamond)

As was expected, this debate has dealt with the principle of part-time workers and with the mechanical details of the collection of the tax. It was inevitable that the principle should be debated, because it is to meet the fears and anxieties which my hon. Friend the Member for Putney (Mr. Hugh Jenkins) has about part-time workers, or certain categories of them that he was seeking to propose a method by which there would no longer be a disproportionately heavy tax on those who worked a disproportionately short time a week, by having a flat-rate tax. It was, therefore, right and proper—and, indeed, inevitable—that the principle should have been brought in.

The Chair has been good enough to let the Committee debate several Amendments dealing with the principle of the part-time worker, and I am sure that it is right that the arguments for and against part-time workers in this connection should be fully deployed when we come to the Amendments which have been selected. Suffice it to say, meantime, that the debate we will have will, I am sure, satisfy the Committee that the anxieties expressed about part-time workers are somewhat exaggerated.

My hon. Friend the Member for Putney moved an Amendment which is attractive. It is not aimed at destroying the tax, it is not aimed at postponing it for an unconscionable time and it is not aimed at withdrawing revenue. It is aimed, in a practical way, at overcoming a difficulty which we all recognise. It therefore has many attractions.

My hon. Friend was right in saying that this is a difficulty, and we recognise that it is. There is no point in having a disproportionate tax if one does not have to have one, and we would have been only too glad to have provided a method of avoiding a disproportion which was consistent with the need to introduce a tax of this kind at this time with the machinery that is available and which would be capable of being collected in an economic fashion.

My right hon. Friend is right in saying that we would have introduced something to meet his point had it been possible to do so. But the Committee will have noticed that, whereas the debate on the principle showed a great deal of unanimity about the anxieties concerning the effect of S.E.T. on part-time workers—be they disabled or other part-time workers; we all wish to pay particular attention to them—it showed anything but unanimity on the method by which the tax could be collected.

My hon. Friend the Member for Putney put forward his very interesting method, with which I will deal shortly. He was supported by the hon. and learned Member for Northwich (Sir J. Foster) who said he recognised that the proposal of my hon Friend would not work but who also said that he had a proposal based on P.A.Y.E. which would work.

Sir J. Foster

I did not say that it would not work. I said that I had an improvement on it.

Mr. Diamond

I do not want to put words into the hon. and Learned Gentleman's mouth. He speaks with great care, and I withdraw any words which I inadvertently attributed to him. He said that he had an improvement on my hon. Friend's method. His improvement was to make the payment of the tax depend on the machinery of P.A.Y.E., but he was overlooking the fact that there are many people—I do not have the exact number—to whom P.A.Y.E. does not apply but where this tax would apply.

The hon. Member for Norwood (Mr. John Fraser) said he recognised that the proposal of my hon. Friend the Member for Putney was not a practicable one, but that he had a better suggestion, which was to relate it to the graduated pensions scheme, although he omitted for the moment—and I am sure that it was only for the moment—to recollect that there are vast numbers who are contracted out of that scheme, vast numbers in respect of whom the tax should be paid. When we look at it from the point of view of either of the two methods suggested we find immediate and very evident difficulties which my hon. Friend the Member for Putney would hope are not associated with his scheme.

I come back to my hon. Friend's scheme, which is the only one before us at the moment. I have dealt with the others because it was obviously courteous to do so and because, in the Committee, there is recognition that there are great difficulties about the scheme of my hon. Friend the Member for Putney which hon. Members would like to meet if they can. The Government very much sympathise with this and would like to have a scheme which would not result in a disproportionate tax if this were possible.

9.0 p.m.

The tax has been described as a flat-rate tax by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), and as a regressive tax by the hon. Member for Tiverton (Mr. Maxwell-Hyslop), but I say that this tax is, in fact, a progressive tax. The tax is a tax on services. If both hon. Members will be good enough to direct their minds to services and the relation which services bear to standards of income, they will recognise immediately—it is not denied in any quarter—that this is a progressive tax. I am not talking about a particular Amendment, but about the fact that the tax as a whole is a progressive tax.

Mr. Maxwell-Hyslop

Is not the comment by the right hon. Gentleman true only on the assumption that every bit of tax is passed on to the consumer?

Mr. Diamond

It is not true on that basis alone. I do not want to divert the debate on this issue, but I do both hon. Members the courtesy of responding to their comments. And I wish to make quite clear that the Government do not accept that this is not a progressive tax.

I come next to the proposal of my hon. Friend the Member for Putney, having made clear that there are difficulties associated with the many alternative proposals. I must also ask the Committee to recognise that there are difficulties associated with his. First, I deal with the question: should there be stamps or can we manage without stamps? If one is reduced to stamps one is faced immediately with difficulties. There have been many similar occasions where an additional tax has been put forward, not by this Government but by previous Governments, where methods of collection have been considered and it has been decided that by far the most simple and reliable method is to have a stamp, or to add it to the existing National Insurance stamp.

I need only remind the Committee about the Industrial Injuries Scheme payments which are collected in the same way, and, more recently, payments under the redundancy scheme. I can assure my hon. Friend, from vast experience, that this is the only economic, reliable, and fair way of collecting taxes of this nature. Other methods have been fully considered on every occasion. It simply would not be practicable to adopt a different kind of system. It would not be fair to other taxpayers. It would not be administratively possible to adopt a system other than that of relying on stamps. If we rely on stamps we are brought up against a very major difficulty of having all the different categories of stamps which one would require to satisfy the detailed proposals of my hon. Friend. We would need a book as big as a blackboard to provide space for every different kind of stamp and it would be administratively far too difficult to cope with.

My hon. Friend has assumed that in all cases the hours of work are known, but that is very far from being the case—very far indeed. There are all the salaried employees who work a variety of hours. Their hours are not known. There are vast numbers of factory workers and others who are paid not by reference to hours who work different hours. There is a whole host of employees in services of one kind or another whose hours of work are not known. It would be an enormous burden to put on the employer to find the hours of work and to pay stamps accordingly. The difficulties associated with this are of such an order that it is just not a practicable scheme, as my hon. Friend the Member for Norwood pointed out. The other schemes proposed also have their glaring difficulties.

We have thought about this very carefully. We do not think that the difficulties associated with part-time workers are anything like as great as some hon. Members on both sides fear, although we recognise that these are difficulties to be taken very seriously into account. The debate which we shall have when you, Sir Eric, are good enough to call that series of Amendments, will give an opportunity for expounding these arguments in full. I am bound to tell my hon. Friend that, attractive as his proposal is, constructive as it is, and constructive as was the method by which he put it forward to the Committee, I cannot recommend the Amendment to the Committee.

Mr. Hugh Jenkins

Can I read into what my right hon. Friend has just said that, when the matter of part-time work comes up for discussion at a later date, the Government's approach to the problem will be sympathetic and possibly constructive?

Mr. Diamond

I must not in any way mislead my hon. Friend. The Government will, as ever, be sympathetic and constructive, but I do not want by that to mislead my hon. Friend into thinking that we have any particular proposals for machinery which would meet the difficulties relating to part-time workers.

The debate will, I think, satisfy my hon. Friend that many of his anxieties about part-time workers are without foundation. I think that the debate will satisfy my hon. Friend that we are most anxious to ensure that in no circumstances are part-timers lost to the total labour force. It is along those lines that the arguments will develop.

My right hon. Friend the Chancellor is not proposing, in connection with part-timers, to alter the method of payment of the tax at this stage. My right hon. Friend has made it clear throughout that there is nothing in the tax to prevent us from considering, after we have seen it working for an appropriate time, whether it is necessary to introduce further refinements at a later date.

Mrs. Margaret Thatcher (Finchley)

I do not rise with the intention of curbing the debate in any way, because I recognise that there are a number of my hon. Friends and hon. Members opposite who may still wish to speak. I want to register a protest now at the Chief Secretary's reply to the debate. If the hon. Member for Putney (Mr. Hugh Jenkins) is satisfied with that reply, he will be satisfied with anything.

The Chief Secretary always has a lot of sympathy, but it never extends to his pocket. What we are asking for is some fiscal change with regard to part-time workers. All the argument has shown the unwisdom of using the National Insurance system as a means of raising general revenue. The whole National Insurance system was designed to give specific insurance cover to individuals, and the amount they receive is related to their own contributions.

I agree that certain things have been drafted on to the system. However, Industrial Injury benefits, which the Chief Secretary mentioned, are also designed to give specific insurance cover. Redundancy payments are designed to give specific cover in certain events. The National Health Service contribution is a revenue earmarked for a specific purpose. There has been no example yet of using this system designed for individual insurance cover as a means of raising large sums for general revenue purposes. I think a lot of the trouble would not have arisen had this been a very small impost. It is the general level of 25s. for a man and 12s. 6d. for a woman which has led to a great deal of the argument. It was a staggering amount to impose. It is this which has given rise to this debate.

I say to the hon. Member for Putney that if we could have knocked this tax out completely, we would have done. But all Oppositions recognise that if they cannot do that, they must concentrate their case on mitigating the effect of the tax upon deserving cases, and that is the spirit in which we approach this Amendment. I accept that, once the Chief Secretary had decided to use the flat-rate National Insurance system, he was bound to be in difficulties. But in deciding to use that system, what he was saying was that he preferred simplicity of collection to all reasons of an equitable distribution of the burden and to all reasons of social justice.

What he should have done was to have said, "This is the amount of tax we want to raise. Now we must consider how best that burden should be distributed and what are the economic side-effects of the decisions we take." What he has done has been to say, "We want so much tax. We must use the National Insurance poll tax system of collection. Therefore, we must ignore equity. Therefore, we must disregard the economic side-effects. Therefore, we must turn our back on social cases."

I cannot accept any of that at all. My hon. Friends and hon. Members opposite have given very cogent detailed accounts of the effects of this particular poll tax on various part-time workers and on various social cases. They have made out their case excellently. It is quite wrong that a woman who works for nine hours a week should attract the same amount of tax liability on her employer as a woman who works 42 hours a week. It is quite wrong that a woman aged 22 who works for 48 hours a week should attract the same tax liability as an old-age pensioner who works perhaps for two days a week. Clearly the old-age pensioner should attract very much less, and the woman who works for a much shorter time also should attract a lesser tax liability.

One of the difficulties of the Chief Secretary is because of the eight-hour rule in the National Insurance scheme. When we tried to deal with this, the Chancellor said the other day, "That would mean that a number of people who had insurance cover would not get it if we raised that limit to 20 hours." That shows the unwisdom of using this system of collection, because it was never designed for this purpose.

9.15 p.m.

On the method of collection, a number of alternative suggestions have been proposed. The hon. Member for Norwood (Mr. John Fraser) suggested not, I thought, P.A.Y.E. but an extension of the graduated pension contribution. The Chief Secretary said that a large number of persons contracted out. Of course they did, but in September when wage-related earnings contributions come in, everyone will be paying graduated contributions for graduated sickness or unemployment benefit, provided they earn above £9 a week. Everyone will be in it.

It would be a very good thing if people who earned less than £9 a week did not attract any tax liability. It would be a different equitable way of achieving what the hon. Gentleman wants to achieve. All those above £9 a week will be paying graduated contributions of one sort or another. Therefore, the Chief Secretary does not have to be bound by the flat-rate system. He could have chosen the other way.

He could have achieved the purpose of the Amendment even under the flat-rate National Insurance system. He has chosen to make the tax follow the employer's contribution. Had he made it follow cases in which both employer's and employee's contributions are paid, a lot of the people we want to help would have been out of the purview of the tax. For example, retirement pensioners who work do not pay the employee's contribution. Those drawing widow's pension do not pay the employee's contribution. Married women who opt out of National Insurance, the vast majority of part-timers, do not pay the employee's contribution. Had the right hon. Gentleman made it dependent upon employer's plus employee's contribution, many of the anomalies which he has now brought in would automatically have been out.

I do not accept his reasoning or that he has exhausted the possibilities under either the flat-rate National Insurance system or under the graduated system. Perhaps he has not lived with the system as long as I have, or perhaps he has not been tough enough with the Department. There are some very good people with some very good ideas on this subject, and it is an insult to say that they have not some method to offer for overcoming the difficulties.

The case on merit is very strong. I understand that it was said in the debate on the Selective Employment Tax that one of the reasons why the tax in respect of women was 12s. 6d. per head was that so many women were part-time workers. This was never part of the White Paper or of the Chancellor's original speech. The original reason given for the tax in respect of a woman being 12s. 6d. as against 25s. for a man was that average earnings for a woman working full time were less than half the average earnings of a man working full time. For example, in the Monthly Digest of Statistics for May the average earnings of a man in manufacturing industry were given as £20 3s. 3d. and the average for a woman working full time were given as £8 11s. 11d. a week.

That was the reason for the difference in the tax, and it has no part-time element in it at all. The average women working part time works 21.9 hours for £5 2s. 11d. a week. If one is to say that the reduction of the tax for women should take into account that a large number work part time, it should be only a quarter of the tax for men, not a half. I cannot accept that, therefore. It would be a great help for women working part time if the tax were only 6s. 3d., but the Chief Secretary would then have gone half way to meet us.

The case in respect of retirement pensioners who put in a couple of days and for the handicapped is even stronger. There are many who employ such people for social reasons. It is often better for a retirement pensioner to go out to work even though, perhaps, he cannot put as much into the hours, one pays him for doing certain odd jobs. To add 25s. a week to the cost of employing a retirement pensioner for a couple of days in the garden may mean that he has to be stood off altogether and has to go to National Assistance. Most of us who employ such people for what I call social reasons will, naturally, do our level best not to stand them off, but there will be a number who have to be.

There will also be a number of employers in the retail trade who stand off part-timers and see whether they can find one skilled full-timer because of the imposition of the Selective Employment Tax. The effect of this will be quite the reverse of what the Chief Secretary wants. Instead of employing labour which could not be used elsewhere, they will draw off skilled labour which could be used elsewhere.

The right hon. Gentleman has given one of the weakest replies on the whole Budget. This is a strong case on merit for mitigating the effects of the tax on part-timers and on the mentally and physically handicapped. We agree with the purpose behind the Amendment. We hope that the hon. Gentleman will press it to a Division, and we shall support him in order to give as much help as we can to these people.

Mr. Norman Miscampbell (Blackpool, North)

I shall not delay for long the opportunity of the hon. Member for Putney (Mr. Hugh Jenkins), who moved Amendment No. 17, to vote with us. We have had a thoroughly disappointing reply from the Chief Secretary. There is no reason why we should cease to urge upon him better ways. After all, he will have plenty of opportunities, if he does not accept them here and now, to think better of the decision that he has made this evening.

The right hon. Gentleman says that he thinks that the difficulties of part-timers are greatly exaggerated. I wonder whether it would be possible to exaggerate them in the case of certain industries which depend almost entirely on part-timers. The right hon. Gentleman says, as every Minister does, that there are technical difficulties why these people cannot be excepted, why Amendment No. 17 cannot be accepted, and why he does not even wish to accept the spirit of the Amendment. The answer is that all these difficulties are wished upon a Government who have imposed such a high rate of taxation—25s. or 12s. 6d.—on a selected pattern of the employed population. I can see that, once that decision was taken, exceptions would be difficult.

Let us consider whether we have been exaggerating in any way. Let us look at the difficulties of certain industries in which part-time workers are a common feature. I will take two examples of different social importance, or, at any rate, ones which we may view differently.

First, it is perhaps not often realised that those who provide holiday accommodation for, often, the lower-paid workers all round our coasts—I am not thinking just of Blackpool, but my constituency cannot be far from one's mind in this—rely almost exclusively on part-time workers. A typical hotel or boarding house has the proprietor and his family and a squad of part-time workers to help. It is difficult to get people who will work the whole time because of the long hours which have to be worked in the season, so one has to rely on part-time workers.

Some come in to do the breakfasts and the washing-up, some come in for lunch, and others come in later. The burden upon an industry which has to rely almost exclusively on part-time workers is in many cases even greater than if it had full-time workers able to work all through the day.

Mr. Eric Lubbock (Orpington)

Does not the hon. Gentleman think that the Government are encouraging tax evasion, that people in this position will be encouraged to say that their employees are doing less than eight hours?

Mr. Miscampbell

I have not the slightest doubt that that will be the circumstance in many places, though I hesitate to suggest that it is likely to happen in Blackpool. But I suppose one can envisage a situation where it may happen there. Certainly, common sense indicates that this will be the type of thing that will happen. In any establishment where people are just coming in and going out all day, it is all too easy for that type of thing to happen.

As the Committee may feel that that is a particular constituency point, I turn from it to something else of which I am well aware because of the constituency that I represent. There must be scores of other hon. Members who have exactly the same problem. Anyone who represents a constituency which contains a high proportion of old-age pensioners will find that a common feature of their constituencies is a number of nursing homes which provide care and help for the old and for those in post-operative conditions who must be looked after.

These are people for whom the National Health Service and the hospitals have no place—people who are too old and too ill to stay at home, but there is no place for them in the hospitals. They are not being looked after by full-time nurses, who are in too short supply, but by part-timers who come in to help the old, the sick and the geriatric and post-operative cases.

Only two months ago, during the election campaign, all of us went round such establishments to see the old folk. The problem was put before us and one could not turn away. I am thinking particularly of one place where there are usually about 18 or 19 patients and 12 part-time workers who come in every day to look after them. This is not an expensive establishment. It is as modest in its fees as such a place can be—a scale of 12, 13, or 14 guineas a week. That is the minimum possible for people to be looked after in these conditions.

Yet the Government have decided that it is impossible to leave such establishments out of an impost which will amount to about £350 to £400 a year. Such a selection has no social merit. If such places are not exempted it will be quite shameful. I have instanced these examples, but I remind the Committee that part-time workers are the basis of many industries and social services.

Mr. Hugh Jenkins

May I, Sir Eric, have leave of the Committee to speak again for a few moments?

The Chairman

The hon. Gentleman does not need leave to speak again.

Mr. Jenkins

I think that it is necessary for me to speak again. Hon. Members who have just come into the Chamber are not aware that what is being debated is an Amendment in my name. Most of the debate has been directed to two main questions: first, whether the position of part-time workers in principle is one which the Government need to ameliorate; and, secondly, whether my proposal is the right and practicable way of dealing with it.

On the question of principle, most of the Committee seems to agree that it is desirable to do something special for part-time workers. That is a wide range of agreement. I have not been convinced by my right hon. Friend on the question of practicability. He holds out to us the prospect that he will say something later about the position of part-time workers which will make us feel that the position is not as grave as we think. Unfortunately, he has not told us now.

In effect, he says, "Do not press the Amendment, because, later, I shall tell you something which will make it unnecessary for you to do so." If I had to rely on that alone, I would not be able to agree with my right hon. Friend, but what has convinced me is the arguments put forward by hon. Members opposite. One after another they said that this was a good proposal in principal, but that for one reason or another it would not work, and then they suggested this, that or the other alternative. With one or two exceptions, practically every hon. Member opposite who has spoken has said that the principle of the Amendment is right, but that it would not work. The hon. Member for Blackpool, North (Mr. Miscampbell), however, agreed that it was right and was practicable, but there is still a great deal of difference between us, because I am in favour of the tax in principle whereas he is not.

9.30 p.m.

In these circumstances, the question arises what action the Committee ought to take and, in particular, what action I should take. For me to pursue an Amendment which, I am convinced by hon. Members opposite, would be impracticable of working would be entirely wrong. Therefore, because hon. Members opposite are apparently only too keen to go through the Lobby in support of my Amendment, which they believe to be hopelessly wrong in order to assist me to defeat my own Government, which is a proposition I could not be expected to accept, I beg to ask leave to withdraw the Amendment. [HON. MEMBERS: "No."] In doing so, I must tell my right hon. Friend that we shall want to hear some stronger arguments from him about the

position of part-time workers before the debates on this Clause are over.

Question put, That those words be there inserted:—

The Committee divided: Ayes 134, Noes 175.

Division No. 60.] AYES [9.32 p.m.
Allason, James (Hemel Hempstead) Griffiths, Eldon (Bury St. Edmunds) More, Jasper
Astor, John Grimond, Rt. Hn. J. Munro-Lucas-Tooth, Sir Hugh
Baker, W. H. K. Gurden, Harold Murton, Oscar
Balniel, Lord Hamilton, Marquess of (Fermanagh) Nabarro, Sir Gerald
Batsford, Brian Harris, Frederic (Croydon, N.W.) Neave, Airey
Bell, Ronald Harrison, Brian (Maldon) Nott, John
Bessell, Peter Harvey, Sir Arthur Vere Onslow, Cranley
Biffen, John Hastings, Stephen Orr-Ewing, Sir Ian
Biggs-Davison, John Heald, Rt. Hn. Sir Lionel Osborne, Sir Cyril (Louth)
Birch, Rt. Hn. Nigel Higgins, Terence L. Page, Graham (Crosby)
Black, Sir Cyril Hiley, Joseph Page, John (Harrow, W.)
Blaker, Peter Hirst, Geoffrey Pardoe, John
Boyd-Carpenter, Rt. Hn. John Hogg, Rt. Hn. Quintin Peel, John
Boyle, Rt. Hn. Sir Edward Holland, Philip Percival, Ian
Brinton, Sir Tatton Hooson, Emlyn Peyton, John
Brown, Sir Edward (Bath) Hordern, Peter Pink, R. Bonner
Bruce-Gardyne, J. Howell, David (Guildford) Pounder, Rafton
Burden, F. A. Hunt, John Powell, Rt. Hn. J. Enoch
Campbell, Gordon Iremonger, T. L. Price, David (Eastleigh)
Carlisle, Mark Jenkin, Patrick (Woodford) Pym, Francis
Channon, H. P. G. Jennings, J. C. (Burton) Ramsden, Rt. Hn. James
Chichester-Clark, R. Kimball, Marcus Rees-Davies, W. R.
Clark, Henry King, Evelyn (Dorset, S.) Ridley, Hn. Nicholas
Clegg, Walter Kirk, Peter Ridsdate, Julian
Cooke, Robert Knight, Mrs. Jill Roots, William
Costain, A. P. Lambton, Viscount Sharples, Richard
Craddock, Sir Beresford (Spelthorne) Lancaster, Col. C. G. Smith, John
Cunningham, Sir Knox Langford-Holt, Sir John Steel, David (Roxburgh)
Dance, James Longden, Gilbert Taylor, Sir Charles (Eastbourne)
Davidson, James (Aberdeenshire, W.) Loveys, W. H. Temple, John M.
Deedes, Rt. Hn. W. F. (Ashford) Lubbock, Eric Thatcher, Mrs. Margaret
Dodds-Parker, Douglas McAdden, Sir Stephen Thorpe, Jeremy
Doughty, Charles Mac Arthur, Ian Turton, Rt. Hn. R. H.
Elliot, Capt. Waller (Carshalton) Mackenzie, Alasdair (Ross&Crom'ty) Wainwright, Richard (Colne Valley)
Elliott, R.W.(N'c'tle-upon-Tyne,N.) Maclean, Sir Fitzroy Walker, Peter (Worcester)
Eyre, Reginald Macleod, Rt. Hn. Iain Walker-Smith, Rt. Hn. Sir Derek
Fisher, Nigel McMaster, Stanley Ward, Dame Irene
Fortescue, Tim Maddan, Martin Weatherill, Bernard
Foster, Sir John Mathew, Robert Webster, David
Gibson-Watt, David Maude, Angus Whitelaw, William
Glover, Sir Douglas Mawby, Ray Wills, Sir Gerald (Bridgwater)
Goodhart, Philip Maxwell-Hyslop, R. J. Winstanley, Dr. M. P.
Goodhew, victor Mills, Peter (Torrington)
Gower, Raymond Mills, Stratton (Belfast, N.) TELLERS FOR THE AYES
Grant-Ferris, R. Miscampbell, Norman Mr. Anthony Grant and
Grieve, Percy Mitchell, David (Basingstoke) Mr. George Younger.
NOES
Allen, Scholefield Callaghan, Rt. Hn. James Doig, Peter
Archer, Peter Carmichael, Neil Dunnett, Jack
Armstrong, Ernest Castle, Rt. Hn. Barbara Dunwoody, Mrs. Gwyneth (Exeter)
Atkinson, Norman (Tottenham) Coe, Denis Dunwoody, Dr. John (F'th & C'We)
Barnes, Michael Coleman, Donald Eadie, Alex
Barnett, Joel Conlan, Bernard Faulds, Andrew
Benn, Rt. Hn. Anthony Wedgwood Corbet, Mrs. Freda Fernyhough, E.
Binns, John Craddock, George (Bradford, S.) Finch, Harold
Bishop, E. S. Crawshaw, Richard Foley, Maurice
Blackburn, F. Cronin, John Ford, Ben
Boardman, H. Dalyell, Tam Fraser, John (Norwood)
Booth, Albert Davidson, Arthur (Accrington) Garrett, W. E.
Bowden, Rt. Hn. Herbert Davies, Dr. Ernest (Stratford) Gordon Walker, Rt. Hn. P. C.
Braddock, Mrs. E. M. Davies, G. Elfed (Rhondda, E.) Gourlay, Harry
Bray, Dr. Jeremy Davies, Ifor (Gower) Gregory, Arnold
Brooks, Edwin Davies, Robert (Cambridge) Griffiths, David (Rother Valley)
Broughton, Dr. A. D. D. Dell, Edmund Griffiths, Will (Exchange)
Brown, Rt. Hn. George (Belper) Dempsey, James Hale, Leslie (Oldham, W.)
Brown, Hugh D. (G'gow, Provan) Dewar, Donald Hamilton, James (Bothwell)
Brown, R. W. (Shoreditch & F'bury) Diamond, Rt. Hn. John Hamilton, William (Fife, W.)
Buchanan, Richard (G'gow, 8p'bum) Hannan, William Dickens, James
Harper, Joseph Mackintosh, John P. Rose, Paul
Harrison, Walter (Wakefield) McNamara, J. Kevin Ryan, John
Hattersley, Roy Manuel, Archie Shaw, Arnold (Ilford, S.)
Hazell, Bert Mapp, Charles Sheldon, Robert
Heffer, Eric S. Mason, Roy Shore, Peter (Stepney)
Henig, Stanley Mendelson, J. J. Short,Rt.Hn.Edward(N'c'tle-u-Tyne)
Herbison, Rt. Hn. Margaret Mikardo, Ian Short, Mrs. Rente (W'hampton,N.E.)
Hooley, Frank Miller, Dr. M. S. Silkin, John (Deptford)
Houghton, Rt. Hn. Douglas Molloy, William Silkin, S. C. (Dulwich)
Howarth, Harry (Wellingborough) Moonman, Eric Small, William
Hoy, James Morgan, Elystan (Cardiganshire) Spriggs, Leslie
Hughes, Rt. Hn. Cledwyn (Anglesey) Morris, Charles R. (Openshaw) Summerskill, Hn. Dr. Shirley
Hunter, Adam Moyle, Roland Swain, Thomas
Hynd, John Mulley, Rt. Hn. Frederick Symonds, J. B.
Jackson, Colin (B'h'se & Spenb'gh) Noel-Baker,Rt.Hn.Philip(Derby,S.) Taverne, Dick
Jay, Rt. Hn. Douglas Oakes, Gordon Thomas, Iorwerth (Rhondda, W.)
Jones, Dan (Burnley) Ogden, Eric Tinn, James
Jones, Rt.Hn.SirElwyn(W.Ham,S.) O'Malley, Brian Urwin, T. W.
Jones, J. Idwal (Wrexham) Orme, Stanley Walden, Brian (All Saints)
Judd, Frank Owen, Dr. David (Plymouth, S'tn) Walker, Harold (Doncaster)
Kelley, Richard Paget, R. T. Watkins, David (Consett)
Kerr, Dr. David (W'worth, Central) Panned, Rt. Hn. Charles Weltzman, David
Lever, Harold (Cheetham) Parker, John (Dagenham) Wells, William (Walsall, N.)
Lever, L. M. (Ardwick) Pearson, Arthur (Pontypridd) Whitaker, Ben
Lewis, Arthur (W. Ham, N.) Pentland, Norman White, Mrs. Eirene
Lewis, Ron (Carlisle) Perry, George H. (Nottingham, S.) Whitlock, William
Lomas, Kenneth Prentice, Rt. Hn. R. E. Williams, Alan Lee (Hornchurch)
Loughlin, Charles Price, Christopher (Perry Barr) Williams, Clifford (Abertillery)
Luard, Evan Price, Thomas (Westhoughton) Wilson, Rt. Hn. Harold (Huyton)
Lyon, Alexander W. (York) Randall, Harry Wilson, William (Coventry, S.)
Lyons, Edward (Bradford, E.) Redhead, Edward Winnick, David
McBride, Neill Reynolds, G. W. Winterbottom, R. E.
McCann, John Roberts, Albert (Normanton) Woof, Robert
MacDermot, Niall Roberts, Gwilym (Bedfordshire, S.) Zilllacus, K.
Macdonald, A. H. Robertson, John (Paisley)
McGuire, Michael Robinson, Rt.Hn. Kenneth(St.P'c'as) TELLERS FOR THE NOES:
McKay, Mrs. Margaret Robinson, W. O. J. (Walth'stow E.) Mr. Charles Grey
Mackenzie, Cregor (Rutherglen) Roebuck, Roy Mr. George Lawson.
Mackie, John Rogers, George
Mr. Ronald Bell (Buckinghamshire, South)

I beg to move Amendment No. 268, in page 48, line 19, at the end to insert: (a) for the first or only person in respect of whom the employer is so liable, one penny; and.

The Chairman

We can take, at the same time, Amendment No. 269, in line 20, at beginning insert: for every other such person".

Amendment No. 270, in line 22, at beginning insert: for every other such person".

Amendment No. 271, in line 24 at beginning insert: for every other such person".

and Amendment No. 272, in line 26, at beginning insert: for every other such person".

Mr. Bell

The effect of the Amendment is to leave out from the incidence of the tax the first person employed by each employer. The other Amendments are consequential on the first.

The Selective Employment Tax lays a considerable burden on people liable to it. For a man it is £65 a year, and for a women £32 10s. a year. These are considerable sums for those in a small way of business or life, and the purpose of the Amendments is to mitigate the burden suffered by such people.

There are two ways in which the burden of the tax can, in some cases, be mitigated. One is by passing the tax to the community at large by making an appropriate increase in the price of the goods or services sold. The other is by charging the tax as a trading expense. It may be contended that there are two other ways, which are by increasing productivity so that the tax is offset by a higher gross profit, or by making fewer employees do the same work, which is another way of expressing the same thing. These last two are not really ways of mitigating the burden of the tax, but in relation to this Amendment I shall be broad minded and will consider all four.

The Amendment would give complete relief to someone who employs only one person. It would give half relief to someone who employs only two people. Then there is a rapidly diminishing degree of relief becoming negligible quite soon as the scale of employment rises. It is, therefore, designed to soften the blow for the smallest employer.

My reason for proposing the Amendment is that the smallest employers are the hardest hit by this tax, in the following ways. First, the smallest employer of all is often not in trade or business at all and, therefore, cannot pass on the tax to an ultimate consumer and must carry it all himself or herself. In the same way, the tax does not rank as an expense against Income Tax or Corporation Tax where there is no business. In this category come domestic helps for the old, which the Financial Secretary to the Treasury will no doubt tell me—if he can make his voice heard through the conversation which comes from the Front Bench below the Gangway; although I do not hear it so much now—is covered by Clause 6 of the Selective Employment Payments Bill, which we shall be considering more particularly next week.

9.45 p.m.

Clause 6 of the Selective Employment Payments Bill covers part-time employment, about which we have heard a good deal this evening, people who have large families—and again, I expect, I shall be told that Clause 6 of the Selective Employment Payments Bill looks after them; wives who have remained in employment or who have gone back to it—

Sir D. Glover

Perhaps my hon. and learned Friend can help me. Is it not quite wrong for the House of Commons at this stage to anticipate the debate on the Selective Employment Payments Bill, which is due next week? We are dealing today with the Finance Bill.

Mr. Bell

We have, of course, debated the Payments Bill on Second Reading, when Clause 6 was in it. I agree that we cannot foretell the course of the examination of the Bill which I forecast for next week, but we know that Clause 6 is in it. I realise that the Financial Secretary to the Treasury is in a position to tell me that some of the categories that I have mentioned are covered by Clause 6 as it starts its life; but I shall have some comment to make about that presently.

Into this category come widowers, who are not covered by Clause 6 of the Payments Bill; nurses for sick children, who, I suppose, in some degree are covered; and all the various kinds of direct help that one comes across. We had an interesting debate just now on the position of one kind of direct personal employee, because that is what pensioners most commonly are, and the Chief Secretary was in great difficulty because he wanted desperately to do something but could not do it, or so he told us. I am providing a mechanism which may tome to his aid in this terrible dilemma in which we from this side have such keen sympathy with the right hon. Gentleman.

We all know that some hard cases are not covered by Clause 6 of the Payments Bill. In Clause 6 of that Bill, to be old one has to be 70. Some people are old before they reach that age, and yet they might not fall into the second category in Clause 6 of those who are incapacitated by reason of illness or ill health. The Government have conceded the principle by Clause 6 of the Payments Bill that they ought not to have levied this tax on household employees and now they have set up a series of exemptions, which are somewhat closely defined and leave some of the most obvious cases unprovided for, in particular the very one which we have been debating for an hour and a half, the part-time employee.

When we were discussing the Redundancy Payments Bill in Committee I drew attention repeatedly to that category of small employers called the domestic employers whom it was convenient to summarise as the "vicar's wife". That sort of person is going to be struck at by the provisions of this Clause and of Clause 6 of the Payments Bill. As one hon. Member—the hon. Member for Norwood (Mr. John Fraser), I think it was—said on the last Amendment, it is quite wrong of the Government to be so interested in gathering taxes that they forget the graces of life—a rather surprising sentiment from that side of the Committee, but it was uttered, and I ask the Financial Secretary to remember it.

If he will work this out and consider the person—and there will be many—who in respect of domestic employment falls through the various subsections of Clause 6 of the Payments Bill, let us take the vicar's wife. She needs domestic help. She cannot very much afford it. She is now to be taxed at 12s. 6d. on it. She may decide that she cannot on that basis carry on with the single domestic help she has. After all, this may be someone who works for three or two days a week, but she has to pay 12s. 6d., an unnecessarily high overhead.

Therefore, she may decide that she will have to dispense with her employee. At once comes along the Redundancy Payments Act and she has to make a redundancy payment, because although that person may go—I greatly doubt it, but she may go—at once to make Morris motor cars—highly unlikely, but it could happen—and may go the following Monday, it makes no difference: redundancy payment is still to be payable. This sort of unthinking accumulation of taxes on small people can create great hardship.

My hon. Friends were referring to the same class of employment in connection with the problems of the tourist industry. There again is something which is very much covered by this Amendment. While there are big hotels—we all know the Metropole at Brighton, and so on—there are also many smaller establishments in the tourist industry, most of them small seaside hotels and boarding-houses and so on, which, as my hon. Friends were saying just now, depend to a large extent on part-time employees, and to which it would be a not inconsiderable relief—though it would not solve their problems, it would be a mitigation of their problems—if these employees were exempt from the application of this tax.

I should like to turn to the small trading and other services employers who are particularly covered by the Amendment which I am moving. Of course, they have the possibility of raising the prices which they charge, and so of passing on the tax. to the consumer, though it is a limited possibility; but though they can charge the amount of tax they, too, will find the tax especially onerous. They, too, are usually people of small resources. Sometimes they render their services to the community with a profit margin which would not be considered an income at all by someone in manufacturing employment. They do it because they like to be their own masters and they value the independence of running a shop or whatever it is. For them, this tax may be quite crippling. The smallest employers have also this characteristic that they enjoy no elbow room for manœuvre, to make the best out of the distinctions which are made in the Bill: they cannot separate the manufacturing and the selling into two curtilages so that at least half their employees earn the premium which can be recovered by skilful arrangement under the Bill.

The village baker who does the baking himself, possibly with one paid assistant, and who has two paid assistants in the shop will pay the tax on all his employees and thereby will help to pay for the premium which will be collected by the factory bakery which is his rival, with its standardised, lightly singed, crustless cotton wool which the Treasury proposes now to make the beneficiary of an express grant at the expense of the village baker.

I mentioned that there were two other possible methods which would be urged against me as ways in which the incidence of the tax might be mitigated—increased turnover or higher productivity and the economy of labour by better deployment. Those are the prizes which the Chancellor of the Exchequer has intermittently and with fluctuating enthusiasm dangled before our noses as the prizes of his policy. The Chief Secretary has been rather more consistent about that, possibly because of his better understanding of Hungarian.

This is certainly set out in the White Paper and was in the Chancellor's Budget speech as one of the objectives. As I indicated just now, neither is a valid escape, since both are just as desirable and advantageous, whether the tax is applied or not. If one gets increased productivity or deploys one's labour better, one has not offset the tax; one has suffered exactly the same, one has gained the same advantage and will lose just as much by paying the tax.

However, the Chancellor's point, excuse, hope or whatever it was, was that the tax might stimulate economy and efficiency in the use of labour. Let us pretend that it might. Let us assume that taxing newspapers which do not print their own papers in order that they may contribute to a premium per head for the London printing houses may do something to reduce the 30 per cent. over-staffing of the London printing houses which was referred to in the Report of the Royal Commission.

It seems a little unlikely, but, in moving this simple Amendment, I feel that I ought not to particularise my scepticism too far. Let us accept the assumption upon which the Chancellor bases the operation of his tax in general. Those savings in labour, which might be the objection to what I am proposing, must surely be achieved where there is large-scale employment of labour. Making 19 do the job that 20 did before is sometimes possible, but making one person do the job that two did before or dispensing with the services of one's sole employee is quite a different proposition. In my experience, at any rate, those who employ only one or two people calculate the cost and the need very closely. They do not hoard labour or waste it. Commonly, they have the greatest difficulty in getting it, because they cannot compete with manufacturing industry and often the rate of pay which in the end they are forced to offer to get anyone at all is a severe burden upon them.

I would ask the Financial Secretary what social and industrial policy the Chancellor thinks that he is furthering at this bottom end of the employment scale. I think that he is in danger of doing enduring damage and of causing real hardship.

10.0 p.m.

In the case of domestic and other direct personal employment, to which I shall refer later, there is no scope at all for the economy of labour. It is the physical presence and the assistance of one person which is the whole object of the employment.

I said earlier that I would deal with Clause 6 of the Selective Employment Payments Bill. It leaves out certain categories, but the point that I want to make is that even those whom it covers have to reclaim the benefit by going through this machinery of the Supplementary Benefits Commission. It is a very cumbersome process. It does not do the job. It is very tiresome for the applicant, and of course it increases the administrative burden of the tax. There is for these people no scope whatever for economy in the use of labour, nor for deployment or higher productivity.

The Financial Secretary may perhaps declare, as the Chief Secretary did on the previous Amendment, the keenest sympathy with some or all the classes of people whom I have mentioned in moving the Amendment. He may say that some of them can be looked at again during the Committee stage of the Selective Employment Payments Bill, and that some of the personal cases can be brought within the scope of National Assistance.

I would regard both of those as thoroughly unsatisfactory answers. I would not think it right that a Selective Employment Tax should be imposed on people to bring them within the scope of National Assistance, and I would not repose much confidence in any remedy for those troubles being sought by amendment of the Selective Employment Payments Bill, because when we come to that next week, if we do not now get what we want, Clause 42 will be just water under the bridge. It will not be much good saying that we ought to do this by not collecting the tax. We have to pursue our remedies here and now, by amendment of this Clause, rather than hope that there will be pie in the sky next week, more especially when we have a shrewd suspicion that there will not be any pie in the sky.

When we come to consider the mitigation of this hardship by repayment, I have no doubt that we shall hear a good deal about the difficulties of providing for hard cases in that way, beyond what is done in Clause 6, about the problems of definition and evasion, and about the complexity and expenses in administration. I shall add one more to the future objections for the benefit of the Financial Secretary, that the reduction of hardship by particular exemptions can easily increase hardship by anomaly.

I am offering a single, simple, remedy to the Financial Secretary which, while it leaves the main folly rampant, takes the sting out of the criticisms throughout one sector of the community, and that perhaps the most hard-pressed sector of all, and a sector which can contribute nothing to the Chancellor's labour objectives.

Lastly—I think that this one is probably beneath the Financial Secretary, but I had better anticipate it in case he does—the right hon. Gentleman may make the point about another denomination of the insurance stamp. If the Government were to accept the Amendment, no doubt they would delete the 1d. at some future stage, and then the payment made in respect of the first employee of each employer would be the same as that for an employed person. There would be no different stamp. In any case, if the Government are in difficulty about another denomination of stamp they can always turn to the Postmaster-General, who will probably produce 20 more if they wish—and a postage stamp in commemoration of the event, too.

There is no practical difficulty in distinguishing between the first and subsequent employees. If a person who is nominated as a first employee in respect of one employer changes his job for another employment in which he is not first employee but a subsequent employee, then from the relevant week his employer will put the appropriate stamp on for him. Since this extra payment on the stamp in respect of the Selective Employment Tax affects neither insurance benefit nor status, no complication arises from the movement of a person from one occupation to another.

There is remarkably little risk of evasion by sub-division of enterprises because the prize at stake for a large concern is negligible. It would be a most welcome alleviation of a problem which for many small people is as harsh as it is unexpected, and the relief would easily and naturally be confined to those for whom it was intended.

I have strong if superficial confidence that the Financial Secretary will not allow his better nature, which has been somewhat eclipsed during the Bill—he was quite kind on the last occasion I moved an Amendment—to be crabbed again by the advice which appears to have prevailed with the Chief Secretary so often during the course of the Bill. I hope that he will start a new era in the story of this Bill. It is not too late, for we have all the new Clauses and all the night ahead of us. I hope that he will start by accepting the Amendment. The Chancellor is by his side and he can seek the Chancellor's authority. I see that the Chancellor wishes him to do so. This Amendment will solve many of the minor difficulties. The folly of the principle is beyond cure here, and we will deal with it later, but the Financial Secre- tary can deal with these immediate problems now and earn the gratitude of the Committee and the country.

Mr. W. S. Hilton (Bethnal Green)

There is one word used by the hon. and learned Member for Buckinghamshire, South (Mr. Ronald Bell) with which I agree—the word "evasion". My fear about this proposal and the reason I appose it is that the scope for evasion in the proposal for S.E.T. is already far too wide. The opportunity for evasion could lead to a disastrous effect throughout industry, and I hope to be able to say something about that in my speech.

There is already an exclusion for self-employed people. I had an Amendment down on that subject which was ruled out of order, but I hope to be able to deal with some of the points in relation to this Amendment which I believe is designed not only to relieve the self-employed person of the tax, but also to give him another addition.

When it is said that large-scale enterprises will not find it advantageous to indulge in evasion, it should be made clear that the construction industry, the largest single employer of male labour in the country, will find it extremely advantageous to indulge in the kind of evasion the Amendment would allow. In that industry today there are about 45,000 gangs of labour-only sub-contractors, each containing perhaps four, five, or six men. If one excluded the originator of the labour only sub-contractor gang, and in addition one of his own men from the tax, one would encourage this example of what some people might loosely call enterprise.

Mr. Ronald Bell

Does the hon. Gentleman realise that to do that it would be necessary to constitute separate employers, that a company, to get tax relief on the burden of one male employee, which is £32 10s. a year, it would cost more than that to float a separate company? Is he aware that a company doing that would lose on the deal?

Mr. Hilton

That reveals the hon. and learned Gentleman's ignorance of what is taking place in the construction industry today. Will he accept from me that there are already a quarter of a million people in the construction industry doing this, that some of his hon. Friends, including the hon. Member for Folkestone and Hythe (Mr. Costain), is very apprehensive about this proposal, that there is no question of floating a company where labour-only sub-contractors are concerned and that, therefore, there is no cost?

Sir D. Glover rose—

Mr. Hilton

I am not raising the question of evasion simply to score a point. I am concerned that the industry should become highly industrialised. However, it cannot become so if it becomes more and more subject to fragmentation, which is what I believe the Amendment would achieve. My hon. Friend the Member for Sheffield, Brightside (Mr. Winterbottom) made a speech the other day in which——

Sir D. Glover rose—

Mr. Hilton

If you keep interrupting people outside will think that you have been making the speech and I have been interrupting.

The Temporary Chairman (Sir Harry Legge-Bourke)

Order. I assure the hon. Member that I have not been making a speech.

Mr. Hilton

My hon. Friend the Member for Brightside pointed out in that speech the dangers of the sort of suggestion we are considering. He expressed fear about what would happen in the retail distributive sphere and in services generally. He said that one would find this sort of thing happening in barbers' shops and that 80 per cent. of them would be exempt already because they would come in the self-employed category. He was under the impression that some barbers' shops, with two or three chairs, would be paying the tax. However, I have discovered that a new system, rent-a-chair, is now coming into being. By this system barbers rent individual chairs to people, who become self-employed thereby, and thus avoid the tax.

As a Labour-Co-operative Movement Member—[Interruption.] I do not know what hon. Gentlemen opposite are complaining about. Long after the proposal of my right hon. Friend the Chancellor in regard to S.E.T. has been forgotten, the Bill will be remembered as resulting in Conservative Members becoming the most fiery supporters of the Co-operative movement.

The Amendment, from the point of view of evasion, has not been thoroughly thought out by the hon. and learned Member for Buckinghamshire, South (Mr. Ronald Bell) and his hon. Friends. If, for instance, we find this leading to greater evasion in the retail industrial sphere, it is not only a question of a loss to my right hon. Friend from the revenue point of view, but, as a Labour-Co-operative Member, I must look at the effect it will have on my movement, which cannot resort to this type of evasion. If one finds the Co-operative movement is unable to evade the tax through a proposal of this kind, but that its competitors are able to evade it, then a certain section of the retail trade—a section which is a social service—is being put at a very great disadvantage because some other people have been able to avoid the consequences of a tax which it must pay in full.

10.15 p.m.

Mr. Burden

Would the hon. Member not agree that if his arguments apply they would apply to every retail store, everyone engaged in the retail business? Why apply the arguments only to the co-operative societies? Presumably the hon. Member does so because they have the support of some hon. Members opposite.

Mr. Hilton

That is not so. The retail co-operative societies are governed by a democracy of people who will not tolerate the kind of practices which private enterprise is likely to get up to.

Another point about evasion to which I direct the attention of my right hon. Friends is that it is not simply a question of evasion of this tax. If more and more fragmentation takes place in the construction industry, or other major industries, it will not be merely a question of losing extra revenue but evasion of the industrial training levy will take place. That is very important to the future training of people in industry and to the industrial training legislation as a whole.

The same applies in relation to redundancy payments. I point out to hon. Members opposite, who do not believe that this proposal would lead to evasion on a large scale, that when the Redundancy Payments Act came into operation there was evasion in some industries in order to avoid the provisions of the Act, which did not bite for two years. This tax will bite immediately. That is why I fear there will be greater evasion.

Sir D. Glover

I am grateful to the hon. Member for giving way. If I am fortunate enough to catch the eye of the Chair, I will be able to show why I agree with a great deal of what the hon. Member has said about evasion. I want the Committee to accept the Amendment, because people will be forced to evasion unless the proposed law is altered before we make it.

Mr. Ronald Bell

May I be allowed to point out that, although the hon. Member suggested that the Redundancy Payments Act was not taking effect for two years, it took effect at once. He is confusing that with the qualifying period of two years.

Mr. Hilton

I am not confusing anything. I am saying that in the construction industry certain builders knew that they would not be liable for payment unless men served in the industry for two years and they used evasion to get rid of their obligation. I already have very grave misgivings about the exclusion of one class of person from this tax because of the effect that will have on industry generally. I have even greater reservations on an Amendment which would allow evasion to take place on a larger scale and which might accelerate the evasion which is taking place already.

I do not believe that legislation which encourages evasion is good. That is why I am not particularly in agreement with this Amendment and why I hope that my right hon. Friends will take into consideration not only the points I have made, but the points I was unable to make on my own Amendment.

Mr. R. H. Turton (Thirsk and Malton)

The fallacy of the argument of the hon. Member for Bethnal Green (Mr. Hilton)—if he is right in saying that there will be a great deal of evasion of the Selective Employment Tax, as I am sure there will be—is that it is not worthwhile people using this method of evasion. All they have to do is to break up their establishment and make all their employees self-employed.

I like this Amendment, because I think one of the most grievous hardships which will be caused by the tax will be to small income groups. The household with elderly people, the household with a disabled person in it, those who are getting old and have just enough money to take one employee, will be hit extremely hard. The idea that we should allow them one employee as a nominal addition to their establishment has very much to be said for it.

Is it administratively possible? I would say that it is, because at the moment the Ministry of Pensions and National Insurance periodically circulates all employees asking for the number of cards they hold in their establishments. Those who are in the small income group and who have only one employee are returning regularly one card. Administratively, the Ministry of Pensions and. National Insurance could check this. I agree with my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) that it would mean one extra stamp, but this would not be a very great burden on the Ministry.

This would deal with the hardship which arises to those who are covered by Clause 6 of the Selective Employment Payments Bill. These are the cases which are causing worry to hon. Members on both sides—the over-70 households, the disabled households—who will have to make a free loan to the Chancellor out of their exiguous resources, although they will later get their money back. If my hon. and learned Friend's suggestion were adopted, these people would pay a nominal sum per week, which would not be a burden to them. The effect of the Bill as drafted will be to throw many of these households on the National Assistance Board. It would be regrettable if any Measure passed in the House of Commons had that effect on disabled and old people.

If the Amendment were accepted, it would cut down the cost of administering Clause 6 of the Selective Employment Payments Bill. On Thursday the Chancellor told me that 950 more civil servants would be employed in four Departments. He could not judge how many more civil servants would be employed in the other Departments to be designated under the Selective Payments Employment Bill but he did not think it would be very many.

This will be a difficult tax to administer. If my hon. and learned Friend's suggestion were adopted in respect of cases covered by Clause 6 of the Selective Employment Payments Bill, where there is only one employee in the household, the administrative task of the Ministry of Pensions and National Insurance and of the Supplementary Pensions Board would be cut down.

If the Government were to say that they accept the principle behind the Amendment and that they will make a concession in respect of the small income group household with one employee, I hope that my hon. and learned Friend will accept the substitution of "first and only" for "first or only". The purpose of the Amendment is to deal with the case where there is genuinely only one employee. I do not see any merit in applying this to a large establishment with thousands of employees; there would be no value in having a preferential rate for the first employee. A special rate should be available for the first and only employee.

I beg the Government to realise that this aspect of the tax is causing real worry. We may all hold violent views about the general principle of the tax, but all hon. Members will be very worried about the effect that the Bill as at present drafted will have on people on small incomes, the old people, and especially disabled households, who are having great difficulty at present in managing to live in this affluent society in Britain.

Mr. R. E. Winterbottom (Sheffield, Brightside)

I do not think that the right hon. Member for Thirsk and Malton (Mr. Turton) is as naive and simple as he sounds. He knows far more about this than to think that his speech touched the reality of the situation.

Mr. St. John-Stevas

That is exactly what it did.

Mr. Winterbottom

After hearing what I have to say, hon. Members can judge that question for themselves. Hon. Members know my point of view about this tax. I believe it is directed to the wrong people in distribution. I believe that the people who ought to be touched in distribution are amongst those who are called self-employed. They ought to be brought within the framework of a proper payroll tax, as much as those people who are in the larger distributive establishments.

When I consider this Amendment I think of the mover who is a lawyer. If any body of persons stands to be shot at, it is the lawyers of this country, with great respect to them. If any section of the country has taken people out of industry in order to seek a living that has no relationship to an incomes and prices policy, it is the lawyers—make no mistake about it. Here we have a prominent lawyer. If we want to compare the figures, in terms of relativity, of those people who have gone into the service industries, we find that a greater proportion have gone into the professional classes, and into the legal class in particular, than any other section of the service industries.

It is very nice to come here, apparently so innocent, and try to get away with a story like this, but bear in mind that the hon. and learned Member is defending his own profession. How many lawyers are there with just one solicitor's clerk and a girl who gets a wage of goodness knows how much, and goodness knows why sometimes? Indeed, there is no more obvious case for seeking the avoidance of the Selective Employment Tax than that of the legal profession. I do not like this tax at all. Hon. Members know that.

Mr. Ronald Bell

Does not the hon. Gentleman think that the classic example would be for any Member of Parliament to move the Amendment since most Members of Parliament have one secretary?

Mr. Winterbottom

I am not so sure. I believe that Members of Parliament themselves should be brought within the framework of this tax as self-employed people. If one is to argue, as I argue, that self-employed people should be brought within the framework of this tax, I see no reason why I should be excluded. From a logical point of view I am self-employed. If we call this a profession—I do not know whether it is or not—then, like the other professions, Members of Parliament should be brought within the framework of a payroll tax.

The Temporary Chairman (Sir H. Legge-Bourke)

I am very sorry to interrupt the hon. Member for Sheffield, Brightside (Mr. Winterbottom), but I would ask him to bear in mind that this Amendment deals particularly with the employer and the one or only employee that he may have. I hope the hon. Gentleman will make his remarks relevant to that matter.

Mr. Winterbottom

Yes, Sir Harry. All that I have said is the background. Now I will come on to the particular.

In the sphere of distribution there are between 500,000 and 600,000 distributive units. Over 500,000 are in the hands of self-employed people. Taking those with one employee only, there are over 520,000 establishments which, if the Amendment were accepted, would completely escape the tax.

10.30 p.m.

I regard this as a wrecking Amendment. [HON. MEMBERS: "No."] It is a wrecking Amendment because it increases the anomalous exclusions of those who are avoiding the tax already because they have not been brought within its framework, and it would put them in a better position in relation to others competing in the market against them. That is why I say that the Amendment goes the wrong way. It should be an Amendment to include the self-employed man, and it ought not to take the exceptions further.

I have been rather surprised by the Opposition today. They have failed to seize the chances that the Bill presents. If any case which they have presented is worth calling a case at all, they have taken it the wrong way by their argument. They have missed the strong part of their case. Resolutions of this kind show their weakness in terms of argument. I am no grocer, but I know the saying that a small receptacle full is better than a large one half empty, and it is always better to put the good things to the front. Yet the Opposition have been showing all the bad apples and the rotten stuff. This is another example of it. If they really want to criticise the tax, they should criticise it with reference to those who should be covered by it and who are excluded. They should not try to take the exceptions further still.

There is no case for excluding the first employee in any establishment. You only make the distinction between those who have to pay the tax in the world of distribution and those who do not more acute and more distressing. For that reason, I suggest that you withdraw the Resolution.

The Temporary Chairman

Order. First I must remind the hon. Gentleman that we are dealing with an Amendment, not a Resolution. Second, the Chair has nothing whatever to do with it.

Mr. Winterbottom

Very well, Sir Harry. There is reason in what I am saying even though I have made a mistake in saying it. I withdraw it willingly, but I have said it once, and you know what I mean. If I can get what I believe ought to come out of this tax, I shall not mind making a mistake in terms of order for which I have humbly to apologise. I shall probably continue to make mistakes right till the end of my days when I am given a wooden overcoat.

What I am pointing out is that hon. and right hon. Members opposite are making mistakes, and the mistake they make on this Amendment is in trying to take the exclusions from the tax too far. Hon. Members opposite are making it impossible for the Government to concede the things which we believe will make the tax operative. Amendments of this kind only waste the time of the Committee, however much we have the opportunity of discussing them, and are out of keeping with the purposes of the Bill.

I object to the Bill. I am not trying to defend the Government. I am only trying to put the Opposition on the straight and narrow path.

Mr. Gower

This is a commendable Amendment proposed by my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) to help the small man or small unit. The hon. Member for Sheffield, Brightside (Mr. Winterbottom) has a bias against the small unit or small man. We on this side have certainly in the past always taken the view that the smaller unit or smaller man should be preferred, though not always in purely economic terms, to the larger unit or larger man. For social reasons, for the good of the community, the small units and small men should be supported. As has been pointed out, it is not to these very small units about which we are speaking that we can look for any significant economies in the use of labour.

Dame Irene Ward (Tynemouth)

Do not call us units.

Mr. Gower

Perhaps I should refer to "smaller persons". It cannot be expected that economies in labour will enable the small decorator to dispense with the services of one of his employees. Reference has also been made to the tourist and holiday industry, which is pertinent in respect of the very small hotel or boarding house.

I am particularly concerned about this subject because it relates very closely to the problems of the development areas and the areas of depopulation in Scotland, Wales and elsewhere. The hon. Member for Bethnal Green (Mr. Hilton) was referring predominantly to the prosperous areas with a great upsurge in the demands for labour.

Mr. Hilton

I was speaking on behalf of 20 building unions, and the practice to which I referred is widespread throughout Great Britain.

Mr. Gower

I am referring to another aspect. In a small town in the north of Scotland or the north of Wales the employment given by a small builder, small decorator or small shopkeeper is vital to the community. The hon. Gentleman has no conception how vital it is. It is all very well to talk in terms of London, Birmingham or other great cities. What about small communities where the outlets for young people are so limited? It is astonishing that the Labour Party, which has always professed such great concern about these areas, should now be so indifferent to their plight.

Mr. Winterbottom

I am not indifferent to the plight of the small shopkeeper. I have probably dealt with more problems for small shopkeepers throughout this country than the hon. Gentleman has ever known about. I understand the small shopkeeper. I understand the self-employed man. I know precisely what the position is in every part of the country.

Mr. Gower

That may well be the case. I do not dispute the hon. Member's knowledge of the problems of the small shopkeeper. I am more concerned about the vital importance of the employment provided not only by the small shopkeeper but by the very small factory and other small units.

I know places in Wales where the units of employment even in industry may be very small. No doubt the position in parts of Scotland is similar. The Government have made a great song and dance about their development area policy and there is a case for considering this tax's relevance to that policy. Sometimes these areas are places which for a generation have suffered a decline in population. I am thinking particularly of Mid-Wales, but again the position is no doubt similar in parts of Scotland.

In such areas, the avenues of employment are few and we should sustain these smaller units. In a very small village the only place available to a young man may be the local garage, perhaps employing two fitters. How can the proprietor of such a place make such economies as to enable him to dispense with one of his fitters? The Amendment would give valuable assistance to these smaller units—or, since my hon. Friend the Member for Tynemouth (Dame Irene Ward) does not like that term, perhaps I should say, smaller employers.

Mr. Philip Goodhart (Beckenham)

The hon. Member for Bethnal Green (Mr. Hilton) tried to wring our hearts by saying that the Amendment, which was so ably moved by my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell), might lead to evasion in the building industry. That is not likely to produce many tears on this side of the Committee. Later, we shall seek to exempt the whole industry from the tax, thus making the evasion 100 per cent.

I think that most of us would agree that, in recent years, there has been a strong tide against the small manufacturer and trader in our economy. Increased mechanisation and automation, the increasing price of machinery and the system of wholesale rebates we hear so much about in the retail trade are all putting the small man under pressure.

Successive Governments, I must admit, have accelerated the process. The Resale Prices Act has done an enormous amount for the consumer, but there is no doubt that it has pressed more heavily on the small trader than on the large merchant concerns. Any small shopkeeper who turned away from the Conservative Party, however, because of the Act, thinking that he would get better protection from the Labour Party, had better think again. The extended credit squeeze has borne far more heavily on the small trader than on the large. Anyone who looks at the satisfies of bankruptcies can see this only too well. Even such an Act as the Offices, Shops and Railway Premises Act, 1965, bears more heavily upon the small shopkeeper and the small manufacturer than it does upon the large business. When it comes to increases in taxation, the burden on the small man is infinitely greater than it is on the large man.

10.45 p.m.

In his television speech, after the Budget, the Chancellor talked about a large grocer, or a grocer with a large turnover. He explained how this man's business was going to be remarkably little affected by this tax. The grocer certainly seemed to have a substantial turnover and no doubt was the sort of person who could afford to go to Ascot and lose a certain amount of money each day. I met a small grocer in my constituency who withdrew £700 out of his business last year in order to live. This tax is going to mean an extra £700 to him in the coming year.

While this tax may mean a check in the profits of Marks and Spencer and Sainsbury's, for the small trader it will mean, not a check in profits, but the complete destruction of his livelihood. My hon. and learned Friend the Member for Buckinghamshire, South referred to the small employer who cannot pass the tax on, the domestic employer, and to the arrangements that have been made in Clause 6 of the Selective Employment Payments Bill.

Mr. Winterbottom

In the case of the grocer who had to withdraw £700 from his business, can the hon. Gentleman tell us how many employees he had and his turnover per year?

Mr. Goodhart

I do not wish to do so, as I do not have his permission. The reason why the tax is so heavy on this man is that, like so many other people in the retail trade, he depends very heavily on part-time staff, and this Amendment would be a help to him. If we can get a concession, as we certainly ought, on part-time staff, then his position will be improved. I hope that the hon. Gentleman, with his knowledge of the retail trade, will support Amendments in favour of removing the tax on part-time workers.

Mr. Winterbottom

If the hon. Gentleman would do me the honour of reading my speech last Thursday he will find that I used a logical argument about part-time workers which he seems to be avoiding. I advocated a reduction in the tax as it applied to part-time workers.

The Temporary Chairman

Before the hon. Member for Beckenham (Mr. Goodhart) proceeds with his speech, may I say to him that much of the argument he is adducing seems to be more appropriate to the Question, "That the Clause stand part of the Bill" than to this Amendment, which is concerned with the first or only employee.

Mr. Goodhart

As I was saying, Sir Harry, before I was interrupted, one of the groups most affected by this Amendment is the group which cannot pass on the tax in increased prices or increased anything else—the domestic household which is employing one person in a part-time or full-time capacity to help with the household, perhaps to help to look after the children. Some concession on this point has been given in Clause 6 of the Selective Employment Payments Bill. No doubt we will get to Clause 6 of that Bill at some time in the fairly distant future. But even when we get there we shall find that the relief offered is complex, vague and unsatisfactory.

Let us consider the position of two women whom I met in my constituency over the week end. Both of them employ part-time domestic help. Under the Government's proposals they would not be entitled to any relief in respect of their domestic staff. One of them suffers from migraine and the other suffers from hay fever. Under the Government's proposals, if one is sick or infirm, one is entitled to relief. Presumably if a person has migraine one week he or she is entitled not to pay the Selective Employment Tax for the domestic help that week. If one suffers from hay fever and the pollen count rises and one begin to sneeze, one is entitled not to pay the Selective Employment Tax for the domestic help that week. A thousand sneezes in a week and one gets one's part-time help free.

There are a number of ludicrous lines of division which will have to be drawn because of the complicated machinery which the Government propose to introduce. But the simple effective way of dealing with all the anomalies which arise, not only for the small trader, but for those who employ domestic help, can be dealt with by accepting the Amendment so ably moved by my hon. and learned Friend the Member for Buckinghamshire, South.

Mr. Percy Grieve (Solihull)

I am very grateful for the opportunity of supporting the Amendment of my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell). I base my support for it on the narrow but important ground of the relief which it will give, if accepted, to domestic employers of labour and to those who are so employed.

The vast majority of people who have any help at home these days are those who are able to have daily help for one, two, three or more days a week. Many such people are desperately in need of this help. Mothers and wives who go out to work need it so that they may make their contribution to the family budget. There are those who will not be catered for by the measure of relief which the Government propose in Clause 6 of the Selective Employment Payments Bill who, for one reason or another, must have help at home. Such people, often managing on a narrow budget, will be gravely hurt and harmed by having to pay this tax on the help which they have at home.

Perhaps even worse will be the lot of those whom they employ, because many of them, faced by the necessity of having to pay this tax, will have to tell those whom they employ that they can employ them no longer. Many elderly women employed in this capacity as important helps at home will be put out of employment and they will have no other employment to which to go.

It is ludicrous to pretend, as the Treasury Bench pretended on Second Reading of the Finance Bill, that the tax will drive this kind of person into industry. Such people are quite unfitted to give their labour in industry. The only place where they know how to give their labour and where they are able to give it is in the home. Such people should not be victimised, as these people will be victimised if the Clause goes through in its present form.

If we in this Committee stand for anything, surely we must stand for those who are weak and unable to look after themselves. Such are the daily women who give their assistance in the homes throughout the country. For this reason, and I put this in the forefront of my argument, the Committee should support my hon. and learned Friend and should pass the Amendment.

I add a word to my hon. Friends who have cited the case of the small employer of labour in village shops, garages and the like. It is ludicrous to pretend that the assistant to the grocer, to the tobacconist or to the confectioner, or the garage mechanic, will find employment elsewhere. Indeed, the garage mechanic's labour cannot be dispensed with. This is a blow aimed deliberately, as I see it, at the small employer of labour. For these reasons, I support my hon. and learned Friend in his Amendment.

Mr. Richard Wainwright (Colne Valley)

Implicit in most of our tax law is a respect for the irreducible minimum. We do not, for instance, levy Income Tax upon the minimum income required for subsistence. For Estate Duty, we exempt the modest competence which most people wish to leave to their families. In the Amendment, we are dealing with an irreducible minimum. I believe that at least the spirit of the Amendment is right in seeking to exempt the only, or the first, employee.

11.0 p.m.

I think also that consideration should be given to the fact that those employing only one person, or a small number of people, are likely to gain least advantage from the fact which was announced in the White Paper, that this tax is to be a charge for Income Tax and Corporation Tax purposes. Large employers will in effect bear only about half of the gross cost of this tax, because they will set it against their other—profit—taxes. It is most unlikely that the small employer—leaving aside Members of Parliament and other affluent subjects—will be able to get the benefit of the full set-off against Profits Tax.

Another advantage of the irreducible minimum, if it is respected, as I hope it will be, in this tax as in existing taxes, is to spare the poor bureaucrat. I hope that the Treasury Ministers have already consulted their collectors of taxes. It is not only the poor inspectors for whom our prayers should go up at the present time, but the collectors. I understand that the collectors of taxes' agonies of collecting Pay-As-You-Earn from small employers are already indescribable, and in witness of that fact they have had to introduce a complete, separate scheme for administering Pay-As-You-Earn in respect of the domestic employers. There is an entirely separate administration for trying to collect Pay-As-You-Earn in all those small cases. The difficulties of collecting S.E.T. from small employers will be no less, and on plain administrative grounds, as well as on grounds of respect for the irreducible minimum, I hope that this Amendment will have the support of the Committee.

Mr. Ian MacArthur (Perth and East Perthshire)

I should like to return to the point which was at least touched on by my hon. Friend the Member for Barry (Mr. Gower) when he called attention to the effect which this tax in its present form would have on the remoter parts of Britain. I have in mind particularly the Highlands of Scotland, and the more remote country districts generally. The impact on those districts will be particularly severe. I believe that it would be eased considerably if the Amendment moved by my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) were accepted, or at least if the spirit of it were accepted, in view of the easement which that would bring to the small concern with a single employee.

It is the small concern with a single employee that provides a large part of the employment in those far-flung places. It is the small concern with a single employee which provides a large part of the services without which life in those remoter parts simply could not continue. And these are the very districts where the Government wish to build up employment, and where, they have maintained, over and over again, that the maintenance of the service industries, and, indeed, their development, will help us attract the manufacturing industry which we wish to see grow there.

Indeed, this was illustrated not long ago when the Government set up the Highland Development Board with the object of bringing extra employment to the Highlands in service industries and in other industries, too, and it is curious to note now, after all the trumpet blaring there was at the time when the Highland Development Board, which has an annual budget of something like £1 million, was set up, that it will be struggling in the face of a Selective Employment Tax which will take something over £2 million a year out of the very region covered by the Board. This Amendment would remove many of the anomalies which will exist otherwise, by freeing this very important and deserving section of the service industries from the impact of the tax.

I have in mind the service rendered to those remoter parts of Britain by the small plumber, the small electrician, the small joiner and the like—many of them very small concerns, each with one employee only. The impact on their costs of this tax will be very large. They do not have the same large turnover of the larger concern. They will bear the full impact of the tax, and inevitably it will be reflected in the charges that they make to their customers in the country districts, where living costs already are higher than elsewhere, and in districts where we want to see the population increase.

It is not only that, because, very often, these small tradesmen are the only employers in the locality. If they are obliged by the tax to squeeze out their single employees, where then will the young lad go for a job? Where will he find his trade?—[Interruption.]—I hear an hon. Member opposite say "Birmingham", and that is just the tragedy of it. One effect of the tax in the Highlands and the remoter districts will be to force people out of the depopulating areas into the crowded Midlands and the South. If the hon. Gentleman believes that that is the right policy, he is flying in the face of his own party. Month after month in the House, members of the party opposite have proclaimed their determination to reverse that process and do everything in their power to increase employment in the Highlands and other remote areas.

Mr. Winterbottom

The hon. Gentleman questions whether it is the right policy. All I said was that it has been happening for a very long time, apart from the tax.

Mr. MacArthur

It has been happening for a long time, but that is no reason for making it happen faster now. We want to reverse the process as quickly as possible.

If a young man cannot find a job in a local tradesman's shop, he joins the march south, never to return. That is the prospect which the Government are building up by the way in which the tax will affect the small remote places.

I have in mind also the small shopkeeper in a village. In the Highlands, very often the small village shop is operated by a man and his wife, with one employee to drive the shop's van. I live in a remote part by the Highlands myself, and I see the importance of the van to the community in which I live. Since the fuel tax went up, many such vans have left the road. The tax added £9 million to costs in Scotland. The provision of a van is an expensive service; there is very little profit to a small village shop is running a van, sending a man up the glens to sell very small quantities of groceries to a few farmhouses.

That is the sort of man who would be the first to go if the tax affected the small shopkeeper in these remote places. That shopkeeper faces all the other burdens resulting from such things as increased rates. He depends on the wholesaler, and he will carry the full burden of the cumulative effects of the tax through the process of distribution. He will have to look for economies, and the first one will be in the part-time girl behind the counter or the lad who drives his van.

There is another category in these remote districts, and perhaps it is one of the most pressing. I have in mind the small farmer whose operation is just large enough to support one employee. There are many such farms in Scotland and, I have no doubt, in England and Wales, too. In order to continue, the farmer has to have one man on whom he can rely. It applies particularly to the small dairy farm, where the farmer must have someone to carry on the work with him.

The impact of the tax on that small operator will be very severe. The small farmer is already suffering, with increased costs, falling returns and restricted credit. Now he is to be called upon to make an interest-free loan for a period of months at a time when his returns are desperately low. It will come at the worst time of the year for him to find extra money. The pressure on him to cut his costs by taking the last step of getting rid of his sole employee will be, alas, economically tempting.

I believe that, by accepting the spirit of the Amendment, the Government have a real opportunity to assist themselves in carrying through policies for the remoter parts of Britain which they have proclaimed constantly and which, just as constantly, they have overturned by their actions.

Mr. Eldon Griffiths (Bury St. Edmunds)

As a Member for a country constituency, and concerned above all with the lives of elderly people in remote rural villages, I support the Amendment.

I should, however, like to comment on two of the speeches made from the benches opposite. First, that of the hon. Member for Sheffield, Brightside (Mr. Winterbottom), for whose experience I have great respect. His thesis was that those who have been left out of this tax ought in all honesty to be brought in. It seems to me that this is rather a new doctrine of taxation, namely, that he who is not eligible to pay tax under the law is a tax evader. I find this a most extraordinary doctrine, but that is what the hon. Gentleman said.

Mr. Winterbottom

The point is that the tax is for service industries. By far the largest section of the distributive section of service industry is not paying the tax. It is, therefore, avoiding the tax, and that is the position that we have to face. I am saying that the whole industry should pay the tax if equity is to be established.

Mr. Griffiths

I fear that the hon. Gentleman has failed to meet the point that I was on. He has said that those who are not caught up within the Government's tax legislation are evaders; but they are the fortunate people. Surely the right answer to tax evasion is not more tax, as the hon. Gentleman proposes, but less tax. That is the view taken by this side of the Committee.

The hon. Gentleman then had a go at the lawyers. I am glad that he did, because, being made aware of it, they will be able to meet his point in their law journals.

The hon. Member for Bethnal Green (Mr. Hilton) had previously had a go at the builders. As I understood the hon. Gentleman's case, he painted a picture of the people in the building industry as a race of tax evaders. I find this very odd at a time when the Minister of Housing and Local Government says that he is trying to restore to the building industry the confidence which he has just knocked out of it. The hon. Gentleman has not helped his right hon. Friend by suggesting this evening that the whole race of builders in this country is conspiring to evade taxes. I regard that as a slur, and I hope that the hon. Member for Bethnal Green will withdraw it.

Mr. Winterbottom rose—

Mr. Griffiths

I think that the hon. Member for Bethnal Green can withdraw it himself.

The case that I have to make on behalf of the Amendment is on compassionate grounds, and for the people in remote rural villages. I am concerned about the effect of this tax on the elderly person who earns a few pounds as a gardener and thereby keeps his pride and his health long after he has reached the age of retirement, but who will find himself put out of a job by the application of this tax.

I am concerned about the effect on a disabled person, and I am thinking here of one man who is a gardener. He is 68, and he has one leg. It has not been possible to provide him with an artificial limb. He hops about the garden, and he does a tremendous job looking after the flower beds and the vegetable garden. He can hardly be justified as an economic proposition. He is kept in his job because of a quality which I am sure the Chancellor would not wish to exclude from our society, namely, kindness, and there is no fiscal sum that one can place on the quality of kindness.

I suggest that the application of this tax at 25s. will make it impossible for this man, who lost a leg in the First World War, to be kept on in that garden which he loves, and where he has his pride. He will be sacked. He will be thrown on to the rubbish heap. I believe that as a human being the Chancellor does not intend this, but, nevertheless, this is what he will achieve.

I am concerned, too, about the effect of the tax on the working wife who employs an older woman to look after her children while she goes to work. Under the Amendment she will be able to continue to do this. If the Amendment is not accepted, it will not be possible for an able-bodied woman to go out to work, because it will no longer be possible for her to pay an older woman to look after her children while she is at work. The net result will be a loss to industry of one able-bodied woman.

11.15 p.m.

I would like to quote two specific examples from my own constituency. One is from the very remote Suffolk village of Ashington Green. There it is extremely difficult to get milk delivered to the remote Suffolk cottages, particularly in the winter time. The reason is very simple. The distances are long and the costs are high and with the petrol tax recently it has become uneconomic for the Co-operative Wholesale Society in particular to deliver that milk. Delivery now depends, or it did until recently, on one man with one employee. If this Amendment is accepted it will be possible to deliver milk to people of 80 and 90 in these villages. If this Amendment is refused it will be impossible to deliver that milk, and again I wonder if the Chancellor really intends this.

I turn to another specific example of a man of 80 in the village of Exning who wrote to me and said that he had had working for him as companion, close friend and nurse for 42 years an elderly woman. He is like so many others, a member of the group that I would call the "new poor", the people who live on small fixed incomes who have no trade unions to protect them and who have had inflation biting away at their incomes as well as having their rates go up, higher food prices, fuel costs and the rest. Here is a man who is suddenly asked to pay from his tiny income 25s. a week, which he cannot possibly afford, to keep in his home to look after him a woman who has been with him for 42 years. He will have to sack her. It is not just economics. He will have to sack her and something will go from that man when he throws that woman out of the home she has loved for 42 years. He does not want to do so and she does not want to go but he has not got the 25s. to pay the tax.

What will happen in this case? Almost certainly if he loses his companion of a lifetime, he will have to go into an old people's home and the State will have to find labour and money to look after him. The net result will be to add to the labour bill of the nation as a whole. He will be a charge upon the public whereas, at the moment, he is independent and happily so.

What is to happen to the elderly woman who has looked after him for 42 years and has been discharged? What will she do and where will she go? It is no use saying that in a remote Suffolk village a woman who has looked after an elderly man for 42 years will go into a factory. There is no factory for her to go into. She has no training. The one thing she can do is look after a man who was her employer and her friend. The Chancellor will cause this couple, who have lived together, one helping the other for years, to split up. Is that what he intends in the name of economics? I believe he has achieved the precise opposite of what he intends.

For these reasons, as a Member for a country constituency, I support the Amendment. I hope that the Chancellor will recognise that those who employ a single person working in their homes, in their gardens and in their businesses are doing something far more important than is represented by the miserable sum that the Chancellor may be able to extract in the name of these perverse economics.

Mr. Rees-Davies

In this Amendment we seek to exclude the sole employee. I want to take one or two, I hope, fairly new points. They have been trespassed upon in part in the country areas by the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths).

The hon. Member for Sheffield, Bright-side (Mr. Winterbottom), who has sat here through practically the whole of this debate, made, if I may say so, an able contribution on the Second Reading of the Selective Employment Payments Bill which I listened to with great interest. The hon. Member has not been entirely accurately represented. He shares my view that basically we ought to have had a poll tax—certainly a tax applying to everybody. Had there been a tax at a low level on everyone, self-employed included, we should not have had the troubles of this debate. It is the selectivity of this tax which has aroused the opposition, and a very good example is contained in the Amendment.

No one has dealt with the astonishing situation about home helps. In my constituency several thousand people are dependent on domestic home helps. Partly they are paid for by the individual concerned, who pays 5s. an hour, probably 50s. for 10 hours a week. Those who employ home helps are elderly people who simply must have these home helps in order to operate their household, otherwise their health would suffer severely. Under this tax, if the home help is male they must pay an extra 25s. a week, which is ridiculous. If the home help is female, they must pay an extra 12s. 6d. a week, which means that they will have to reduce the number of hours assistance by the equivalent of 12s. 6d., which is 2½ hours. If the number of hours is not reduced, the Kent County Council or the Greater London Council or the Government will have to make up the difference to the home helps through National Assistance or the agencies of the councils, because they are being subsidised in part by the Government and in part by the county.

This is another illustration of the Treasury's miserable incompetence, their lack of humanity, and the appalling incompetence of the agencies advising the Government in this case. The civil servants and those who have been advising the Chancellor have not applied their minds, until now, to the ordinary simple facts of human life. It is not good enough that Dr. Balogh and this other bunch of foreigners who have been advising the Chancellor should take over this country, too.

It has hit the tourist industry from top to bottom—from the top, where they are running major associations, down to those responsible for the agencies at county level; the Co-operative movement, on the one hand, and the small traders, on the other hand; and the local councillors who have to provide the home helps. They are all sick to death with the Government and with this tax.

I have had opportunities to meet those associated with every aspect of this industry. There is not one who is not highly critical of the way in which the tax has been dealt with. Widows and widowers, peers of the realm who guide the industry in its upper echelon—at all levels they would be content to pay a poll tax or a turnover tax, whether placed on the employer or on the individual. What infuriates one and all in this country—and it will be borne in upon civil servants and the Government sooner or later—is that the Government go on hitting the old and the poor with an unkind tax and go on hitting the tourist industry in every possible way, by taking away investment allowances, by imposing a Selective Employment Tax, by charging it on their part-time labour, and by refusing to make any concessions. The Government are acting in a shameful way and, sooner or later, the country will rise and tell them so. I am saying now what will soon be said by hundreds of thousands of people.

If right hon. Gentlemen opposite will listen to those who are concerned with the distribution industry and industry generally they might apply their minds to this matter. If one has a tax which is to be equitable, the first thing one must look at is the method by which the tax will be imposed on one citizen as compared with another. Leaving companies out of the argument for a moment, one must ensure that the tax is equitable as between citizens. How can the Government argue that a tax the impost of which is exactly the same on an elderly person—who must pay, out of a very small income, for a home help, domestic or nurse—as on industry generally is equitable? In the first case, a much higher percentage of the elderly person's income goes in the tax compared with industry, which pays on the basis of an average level of earnings of £20 a week. An old-age pensioner who must pay 50s. a week for a home help is obviously paying a higher percentage of his or her income than industry in respect of the average earnings of a labourer at £20 a week.

This is a simple matter of arithmetic. As has been pointed out from the Liberal bench, when considering Income Tax, Surtax or any other tax, one must bear in mind the relative burden on the individual. My hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) was absolutely right when he said that one way of dealing with this issue would be to exclude from the impost of this tax the employer who employs only one person.

Many hon. Members have spoken on this subject. I have dealt with another aspect of it. I beg the Government—remembering that they did not even bother to reply to my earlier remarks on the tourist industry; the Chancellor was not here and the Treasury Minister present apparently did not bother to report my remarks to him—to give serious attention to this matter now. I speak with anger and sincerity. I speak this way because I have taken the trouble in the last few weeks to learn the case being put by the tourist industry from one end of the industry to the other. I tell the Government here and now that if they do not wake up to these problems soon they will have the whole tourist industry howling around them like a pack of wolves. It is about time hon. and right hon. Gentlemen opposite woke up and listened.

The Financial Secretary to the Treasury (Mr. Niall MacDermot) rose—

Hon. Members

No.

Mr. MacDermot

I am not seeking to stop the debate and——

Several Hon. Members rose——

Mr. MacDermot

—I have no power to do so. I have been listening with great interest, for about one and three quarter hours, to the arguments which have been adduced in favour of the Amendment and I thought it might assist the Committee if I were now to state the Government's view. The Amendment is within a fairly narrow compass. There has been a certain amount of forceful repetition of the arguments—[Interruption]—and I am sorry if hon. Gentlemen opposite think that I am intruding in the debate unduly early. I am seeking to reply to them.

The hon. Member for the Isle of Thanet (Mr. Rees-Davies) expressed anger that we had not replied to his arguments on behalf of the tourist industry.

Dame Irene Ward

Hear, hear.

Mr. MacDermot

I remind the hon. Gentleman that an Amendment has been selected by the Chair specifically dealing with the problems of the tourist industry, and I should like to advise the Committee at this stage that I do not seek, in the few remarks I will make, to deal with some of the wider questions which will be the subject of special Amendments later.

One hon. Gentleman spoke particularly of the problems of the Highlands—the question of special areas, development districts and areas of high unemployment—but, in the fullness of the night, we will come to that subject on later Amendments. What I shall seek to address my remarks to are the particular issues raised by this Amendment.

11.30 p.m.

Mr. MacArthur

The hon. and learned Gentleman says that we shall come to the question of employment in the Highlands in later proceedings on the Finance Bill, but that will not necessarily be in connection with this one limited point of the single employer in the Highlands, which I hope that he will answer.

Mr. MacDermot

I shall deal with the problem of the single employer throughout the country, whether in the Highlands or elsewhere.

We have heard arguments adduced on the subject of part-timers, on a payroll tax and so forth. I shall seek to deal with what the hon. and learned Member who moved the Amendment called the single and simple point raised by this Amendment. I say at the outset, and I will explain this more fully later, that besides being single and simple, what is proposed would be unworkable. What is proposed is that we should reduce the tax to a nominal rate of one penny for an employer who has only one employee and the same nominal rate for what he calls the first employee in other cases. I appreciate that his reference to one penny is to keep within the rules of order. What we are really discussing is an exemption for such people.

There are two questions. One is whether we should make an exemption of this amount. The second is whether we can. First on whether we should, broadly speaking there are two classes whose case has been argued. One is the employer of domestic labour, domestic servants. The second is that of the small man in business who has only one or a few employees. There are, I understand, something of the order of 360,000 domestic servants in the country. We have heard particular cases argued of particular hardship, but many of those are employed by people to whom it would be no real hardship to pay this tax. We do not see a reason why the whole of that class should be exempted. What is argued is particular cases of hardship.

The hon. and learned Member who moved the Amendment not unnaturally anticipated that my reply to this would be that many of the cases of hardship we have heard argued in such moving terms in the Committee are already met by provisions which we shall discuss later, be it next week or whenever it is, on the Selective Employment Payments Bill. That provides for repayment of the tax in respect of nursing and domestic assistance in a household where there is an old person—anyone over 70, which would meet the case mentioned concerning a man in his 80s—a person who is infirm, or a person who is incapacitated or sick, which would include a woman who is pregnant. These provisions will cover most if not all the cases of home helps about which the hon. Member for the Isle of Thanet spoke, cases where there is a child or children of a single parent and where that parent himself or herself is working. It would cover the case of the working widower who has children to support. These cases we are seeking to meet by means of the repayment system.

Dame Irene Ward

It would not be in order to discuss Clause 6 of the Selective Employment Payments Bill, but I have obtained a copy from the Vote Office and I find that it is loosely drawn. Would the hon. and learned Gentleman be in order in laying such emphasis on this Clause because I would riddle it through one hundred times in so far as it concerns definition.

Mr. MacDermot

No doubt the hon. Lady will riddle it through or seek to when we discuss it at the appropriate time. I am seeking to remind the Committee of the provisions contained in that Bill which hon. Members opposite were very anxious should be before the House when we discussed this present Bill, because of its obvious relevance.

The other case is that of retail shopkeepers——

Mr. Eldon Griffiths

Would the hon. and learned Gentleman accept that to say to an old person of 80 that he must wait six months is a much more difficult thing than to say it to a much younger person?

Mr. MacDermot

I appreciate that difficulties may arise over the question of the interval period. Incidentally, it is not quite six months; it is five months. [Interruption.] Well, let us be accurate. All I am seeking to point out is that the claim for an exemption from this tax was argued on the basis of the great weight with which this tax was going to bear on these people. In fact, provision is made for repayment.

The second category of which we heard was that of the retail shops in particular and other small employers. As my hon. Friend the Member for Sheffield, Bright-side (Mr. Winterbottom) pointed out earlier in the debate, the self-employed person is exempt already, and, of course, very many of the small employers whose case has been argued here will be people who are themselves working in the business in a self-employed capacity, and who therefore will not be paying any tax in relation to their own labour.

What we are seeking to do, as has been made plain in the Second Reading debate, in the Budget debate itself and in all the debates that we have had in connection with this tax, is to broaden the tax base and to spread it wide, in the form of a low percentage tax. We do not see any justification for exempting from the scope of this tax people who employ one employee, or for exempting the first employee for all employers.

My hon. Friend the Member for Brightside gave some figures—I am unable to confirm them; I do not know their source—showing what a high percentage of retail units are, in fact, self-employed persons as he argues. He may well be right. But in any event, whatever the precise figures may be, clearly a very high percentage of people engaged in the retail trade are small shopkeepers.

If we are to choose a tax which is going to spread the tax burden beyond the areas which at the moment some feel are bearing a disproportionate burden, and to spread it widely over the whole field of services, there is no reason in logic for excluding the small employer and the small business. The hon. and learned Member for Buckinghamshire, South (Mr. Ronald Bell) asked what is the social and industrial policy which my right hon. Friend the Chancellor is seeking to pursue. It is precisely that of enlarging the tax base.

A number of hon. Members argued in favour of the Amendment, as they believed that it would save a lot of administrative work and that it would be administratively workable. I assure those hon. Members that such is not the case. In fact, the position is that the Ministry of Pensions and National Insurance, when examining the contribution card of a particular employee, which is what they will have to do when it is returned to them, would be quite unable to tell from the card whether the employee was the first or only employee of a particular employer. They would not know from the card who the employer was. Many of these employees will not remain with one employer throughout the whole of the year. They will change employers. So the only way they could check would be, first of all, by getting in touch with the employee and finding out who were his employers during particular periods of the year and then checking with the employers as to how many employees they had during that period. It will be obvious to hon. Members that quite patently this would not be a workable scheme.

Mr. Turton

Does not the Financial Secretary agree that every time an employer sends in his quarterly return of cards, he has to send in a form showing how many employees he has? Therefore, the National Insurance office must know from that return the number of employers who have got only one employee.

Mr. MacDermot

That may be done for purely statistical purposes, but it does not help for this purpose. There are no records kept of the identity of particular employers or of particular employees in relation to them. An employer may have only one employee when making a return, but when he produces the card later that year, it may not relate to a particular employee who has been in his service throughout this period of employment.

We are concerned with whether an effective check can be made by the Ministry of Pensions and National Insurance when it receives the card at the end of one year's period, when an employee may have been working for many different employers. This is why the only distinction that can be made is in relation to particular types of employee, not in relation to particular types of employment or employers, or the number of employees there are, or the particular category of business the employer is conducting.

Nor would it be true that all that would be required is one additional type of stamp. There would be required an extra rate for each different insurance category affected by the tax, and some 10 or more rates would be required in addition to the present range of over 30 different types of stamp.

Mr. Goodhew

The hon. and learned Gentleman has just said it is possible to differentiate between the type of employee, but not between the employers, and therefore it would not be possible to make exemptions for these employers of individual workers. If this is so, how is he going to find out to whom he should make his rebate in the categories of the old or infirm, or the others he has mentioned?

Mr. MacDermot

We are discussing exemptions from the tax, not the categories for rebate. I referred to the other Bill only in order to point out that some of the particular hardship cases which have been quoted in support of the principle of this Amendment are being met either in whole or in part in the other Bill, and whereas some reliefs can be made and are practicable on administrative grounds in the other Bill, what I am seeking to do is to refute the argument of hon. Members who suggest that this Amendment would be (a) workable, and (b) would lead to simplicity in administration of the tax. Neither is correct.

Mr. St. John-Stevas

I should first like to congratulate the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths) on having made such a humane, well-informed and relevant contribution to the debate just before the Financial Secretary replied. The contrast between that speech by my hon. Friend, which was based on the facts of life, and the academic dissertation inflicted on us by the Financial Secretary was extraordinary.

I pass from him to the hon. Member for Sheffield, Brightside (Mr. Winter-bottom) who, without any shadow of justification, attacked my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) for his speech on the grounds that it had nothing to do with reality. In fact my right hon. Friend was dealing with the hardship and suffering that will be caused to old people if this Amendment is rejected and his speech, far from being remote from reality, was directed right at the very heart of this matter and right at the heart of the motivation of the Opposition in moving this Amendment.

The attitude shown by Government Members towards the problems, hardship and suffering which the tax will create is most significant, as significant as the deserted benches opposite showing government supporters' lack of concern for these vital matters.

11.45 p.m.

One sees also the re-emergence of the tax avoidance syndrome in the speeches of the hon. Member for Brightside and his companion the hon. Member for Bethnal Green (Mr. Hilton). The hon. Member for Bethnal Green seemed to resist the Amendment on the rather novel ground that everyone could avoid taxation through it except the "co-ops". The conclusion must be that, if the "co-ops" could avoid taxation, his objection would melt away. This is a curious moral standpoint, even coming from one of the Co-operative Members whom we have seen going through such extraordinary moral contortions tonight in order to reconcile their conscience and duty to the Co-operative movement with their party loyalty to the Labour Government.

Mr. Hilton

I made the point that I believed that this tax, in the way it was being imposed, would lead to greater evasion, and this was not something which I wished to see in legislation. I said, further, that the Co-operative movement would not be able to have recourse to the same evasion and this would make it more difficult for the movement in the problems which it faces now.

Mr. St. John-Stevas

The hon. Gentleman has got himself into a moral muddle, and it is completely beyond my capacity to help him emerge from it.

The point of the Amendment which interests me is not that which concerns the Co-operative movement but that which concerns the sick, the old and the handicapped of every kind. I think of those in the constituency of every hon. Member of the Committee who need a nurse, a companion or a housekeeper to look after them. This is not a luxury. For these people, our constituents, it is a necessity. One test of the real value of a civilisation lies in its attitude to the old and the handicapped. The callous attitude of the Government to these people as revealed in their rigid application of the Selective Employment Tax is an interesting gloss on the important speech made over the weekend by my right hon. and learned Friend the Member for St. Marylebone (Mr. Hogg) in Flintshire.

Mr. Winterbottom

This matter concerns the sick, the disabled and others like that. I readily accept that. But it also covers self-employed people who will not pay the tax, and it covers hundreds of thousands who will be first employees of self-employed people who also would not be subject to the tax. This is one of the contradictions emerging from the agreement in terms of argument between the hon. Member for the Isle of Thanet (Mr. Rees-Davies) and myself.

Mr. St. John-Stevas

That does not affect my argument in the slightest. If that is the case, it is an additional argument for the Amendment, not one against it.

I return to what my right hon. and learned Friend the Member for St. Marylebone said in graphic terms about the moral decay of the nation brought about by the financial and economic policies of the present Government. This is not the place to continue that analysis, but the way the Government have applied this tax well illustrates their attitude of moral irresponsibility which is crystallised in every action and utterance of the Prime Minister, whose behaviour now seems to have infected the Treasury Bench.

We know that in the next Bill, which is to have its Committee stage soon, provision will be included for a refund. But the point of the Amendment is that there is still very real hardship because there is an interval between payment and refund which people on very low incomes cannot afford to bear. It is typical of the academic approach of the Government and the Financial Secretary in particular that the hon. and learned Gentleman has failed to appreciate this point. The people that I am talking about are people with very small incomes, with a tiny amount of savings already eroded by inflation, and with no facilities for borrowing money.

We have all had letters on this subject, and I have had a number, and I make no apology for reading one from a constituent in Chelmsford because I hope that it will bring to the Financial Secretary a breath of reality. It reads: I am a retired head postmaster in my 88th year, a widower, and in frail health necessitating skilled nursing. Since the death of my wife eight years ago I have employed a state enrolled auxiliary nurse who also kindly acts as my housekeeper. This has involved, on my part, strict economy, much self-sacrifice, and annual withdrawings from my, rapidly diminishing, savings. I am now harassed and dismayed at the prospect of having to find 12s. 6d. a week to meet the proposed payroll tax. These are the authentic words of a person who is typical of many thousands throughout the country who have been plunged into deepest anxiety by the tax. These are the people who, if the Bill is not amended, will have to make a five-months' interest-free loan to the Treasury and thereafter at three-monthly intervals loans of a similar character. Even Scrooge, I think, might have shrunk from such an outcome.

The Chancellor has expressed his ambition to be remembered as a great reforming Chancellor, a sort of 20th century Gladstone. He may well be remembered, but it will not be for that reason, because the Gladstone Budgets are remembered as Budgets which swept away anomalies, restrictions and injustices of every kind, whereas this Budget will be remembered, and the present Chancellor in particular, for imposing more injustices and anomalies than any of his predecessors within living memory.

The Amendment drafted by my hon. Friend is an ingenious one, and I congratulate him on his ingenuity, but I congratulate him much more because his ingenuity is exercised in a good cause—to relieve from extra burdens those in our society who are least fitted to bear them because they are already handicapped by age or infirmity. It is not an official Amendment, but because it seeks to do that I know that it will have the united support of the entire Opposition.

The Treasurer of Her Majesty's Household (Mr. John Silkin) rose in his place and claimed to move, That the Question be now put.

Hon. Members

No.

The Chairman

Order.

Several Hon. Members rose——

The Chairman

Order. The Question is——

Several Hon. Members rose——

The Chairman

Order.

Question put, That the Question be now put:—

The Committee proceeded to a Division—

Hon. Members

No.

Sir J. Eden

It is disgraceful. On a point of order. Sir Eric——

Mr. Eldon Griffiths

On a point of order——

Mr. Geoffrey Hirst (Shipley)

On a point of order——

Mr. William Hamilton (Fife, West)

On a point of order——

The Chairman

Order. [Interruption.] Order. After a Division has been called I cannot listen to a point of order unless the hon. Member is seated and covered.

The Committee divided: Ayes 163, Noes 114.

Division No. 61.] AYES [11.54 p.m.
Allaun, Frank (Salford, E.) Gordon Walker, Rt. Hn. P. C. Mulley, Rt. Hn. Frederick
Allen, Scholefield Gregory, Arnold Noel-Baker, Rt.Hn.Philip(Derby,S.)
Archer, Peter Grey, Charles (Durham) Oakes, Gordon
Armstrong, Ernest Griffiths, David (Rother Valley) Ogden, Eric
Atkinson, Norman (Tottenham) Griffiths, Will (Exchange) O'Malley, Brian
Bagier, Gordon A. T. Hale, Leslie (Oldham, W.) Orme, Stanley
Barnes, Michael Hamilton, James (Bothwell) Owen, Dr. David (Plymouth, S'tn)
Barnett, Joel Hamilton, William (Fife, W.) Owen, Will (Morpeth)
Benn, Rt. Hn. Anthony Wedgwood Hannan, William Paget, R. T.
Bennett, James (G'gow, Bridgeton) Hattersley, Roy Parker, John (Dagenham)
Binns, John Hazell, Bert Pavitt, Laurence
Bishop, E. S. Heffer, Eric S. Pentland, Norman
Blackburn, F. Henig, Stanley Perry, Ernest G. (Battersea, S.)
Boardman, H. Hilton, W. S. Perry, George H. (Nottingham, S.)
Booth, Albert Hooley, Frank Prentice, Rt. Hn. R. E.
Braddock, Mrs. E. M. Houghton, Rt. Hn. Douglas Price, Christopher (Perry Barr)
Bray, Dr. Jeremy Hoy, James Rankin, John
Brooks, Edwin Hughes, Emrys (Ayrshire, S.) Redhead, Edward
Brown, Rt. Hn. George (Belper) Hunter, Adam Reynolds, G. W.
Brown, Hugh D. (G'gow, Provan) Hynd, John Richard, Ivor
Brown,Bob(N'c'tle-upon-Tyne,W) Jackson, Peter M. (High Peak) Roberts, Albert (Normanton)
Brown, R. W. (Shoreditch & F'bury) Jay, Rt. Hn. Douglas Robertson, John (Paisley)
Callaghan, Rt. Hn. James Jenkins, Hugh (Putney) Robinson, Rt.Hn.Kenneth(St.P'c'as)
Carmichael, Neil Johnson, James (K'ston-on-Hull, W.) Robinson, W. O. J. (Walth'stow, E.)
Coe, Denis Jones, Dan (Burnley) Roebuck, Roy
Coleman, Donald Jones,Rt.Hn.Sir Elwyn(W.Ham,S.) Rogers, George
Conlan, Bernard Jones, J. Idwal (Wrexham) Rose, Paul
Corbet, Mrs. Freda Judd, Frank Shaw, Arnold (Ilford, S.)
Craddock, George (Bradford, S.) Kelley, Richard Shore, Peter (Stepney)
Crawshaw, Richard Kenyon, Clifford Short,Rt.Hn.Edward(N'c'tle-u-Tyne)
Cullen, Mrs. Alice Lestor, Miss Joan Silkin, John (Deptford)
Dalyell, Tam Lever, Harold (Cheetham) Silkin, S. C. (Dulwich)
Davidson, Arthur (Accrington) Lever, L. M. (Ardwick) Silverman, Julius (Aston)
Davies, Dr. Ernest (Stretford) Lewis, Ron (Carlisle) Slater, Joseph
Davies, G. Elfed (Rhondda, E.) Lomas, Kenneth Small, William
Davies, Ifor (Cower) Loughlin, Charles Summerskill, Hn. Dr. Shirley
Davies, Robert (Cambridge) Luard, Evan Taverne, Dick
Dell, Edmund Lyon, Alexander W. (York) Tinn, James
Dempsey, James Lyons, Edward (Bradford, E.) Urwin, T. W.
Dewar, Donald MacDermot, Niall Walden, Brian (All Saints)
Diamond, Rt. Hn. John Macdonald, A. H. Walker, Harold (Doncaster)
Dickens, James McGuire, Michael Watkins, David (Consett)
Doig, Peter McKay, Mrs. Margaret Wellbeloved, James
Dunnett, Jack Mackenzie, Gregor (Rutherglen) Wells, William (Walsall, N.)
Dunwoody, Mrs. Gwyneth (Exeter) Mackie, John Whitaker, Ben
Dunwoody, Dr. John (F'th & C'b'e) Mackintosh, John P. White, Mrs. Elrene
Eadie, Alex Maclennan, Robert Whitlock, William
Edelman, Maurice McNamara, J. Kevin Williams, Clifford (Abertillery)
Faulds, Andrew Manuel, Archie Wilson, William (Coventry, S.)
Fernyhough, E. Mapp, Charles Winnick, David
Finch, Harold Mendelson, J. J. Winterbottom, R. E.
Foley, Maurice Molloy, William Woof, Robert
Ford, Ben Moonman, Eric
Fraser, John (Norwood) Morris, Alfred (Wythenshawe) TELLERS FOR THE AYES:
Gardner, A. J. Morris, Charles R. (Openshaw) Mr. Harper and
Moyle, Roland Mr. Walter Harrison
NOES
Allason, James (Hemel Hempstead) Batsford, Brian Biggs-Davison, John
Astor, John Bessell, Peter Black, Sir Cyril
Baker, W. H. K. Biffen, John Blaker, Peter
Boyd-Carpenter, Rt. Hn. John Hirst, Geoffrey Onslow, Cranley
Boyle, Rt. Hn. Sir Edward Hogg, Rt. Hn. Quintin Orr-Ewing, Sir Ian
Brinton, Sir Tatton Holland, Philip Page, Graham (Crosby)
Brown, Sir Edward (Bath) Hooson, Emlyn Pardoe, J.
Bruce-Gardyne, J. Hordern, Peter Peel, John
Campbell, Gordon Howell, David (Guildford) Percival, Ian
Carlisle, Mark Hunt, John Pink, R. Bonner
Channon, H. P. G. Iremonger, T. L. Pounder, Rafton
Chichester-Clark, R. Jenkin, Patrick (Woodford) Price, David (Eastleigh)
Clark, Henry Jopling, Michael Ramsden, Rt. Hn. James
Clegg, Walter Kimball, Marcus Rees-Davies, W. R.
Cooke, Robert King, Evelyn (Dorset, S.) Renton, Rt. Hn. Sir David
Corfield, F. V. Kirk, Peter Ridley, Hn. Nicholas
Cunningham, Sir Knox Kitson, Timothy Ridsdale, Julian
Davidson, James(Aberdeenshire, w.) Knight, Mrs. Jill Roots, William
Deedes, Rt. Hn. W. F. (Ashford) Lambton, Viscount St. John-Stevas, Norman
Dodds-Parker, Douglas Lancaster, Col. C. G. Scott, Nicholas
Eden, Sir John Langford-Holt, Sir John Sharples, Richard
Fortescue, Tim Longden, Gilbert Smith, John
Foster, Sir John Loveys, W. H. Steel, David (Roxburgh)
Garrow, Alex Lubbock, Eric Taylor, Sir Charles (Eastbourne)
Glover, Sir Douglas Mac Arthur, Ian Thatcher, Mrs. Margaret
Goodhart, Philip Mackenzie, Alasdair(Ross&Crom'ty) Thorpe, Jeremy
Goodhew, Victor Maclean, Sir Fitzroy Turton, Rt. Hn. R. H.
Gower, Raymond Macleod, Rt. Hn. Iain Wainwright, Richard (Colne Valley)
Grant-Ferris, R. McMaster, Stanley Walker, Peter (Worcester)
Grieve, Percy Maddan, Martin Walker-Smith, Rt. Hn. Sir Derek
Griffiths, Eldon (Bury St. Edmunds) Maude, Angus Ward, Dame Irene
Grimond, Rt. Hn. J. Maxwell-Hyslop, R. J. Weatherill, Bernard
Hamilton, Marquess of (Fermanagh) Mills, Peter (Torrington) Webster, David
Harvey, Sir Arthur Vere Miscampbell, Norman Whitelaw, William
Hastings, Stephen Mitchell, David (Basingstoke) Winstanley, Dr. M. P.
Hawkins, Paul More, Jasper Younger, Hn. George
Heald, Rt. Hn. Sir Lionel Munro-Lucas-Tooth, Sir Hugh
Higgins, Terence L. Murton, Oscar TELLERS FOR THE NOES:
Hiley, Joseph Nott, John Mr. Pym and Mr. Grant.
The Chairman

Amendment proposed——

Mr. Eldon Griffiths

On a point of order.

The Chairman

Order. No point of order can arise until the Question has been put.

Question put accordingly, That the proposed words be there inserted: —

The Committee proceeded to a Division—

Mr. Eldon Griffiths

(seated and covered): On a point of order. After the Division began some 10 minutes ago, I sat here with this hat on my head and sought to engage your attention, Sir Eric. There was so much noise and confusion in the Chamber that it was impossible, I quite see, for you to appreciate that I was seeking to raise this point of order.

Therefore, with your permission I will raise it now.

I could not hear the Motion put by the Treasurer of Her Majesty's Household. It was impossible for us, Sir Eric, to tell what point he was on. All that I could tell was that the First Secretary entered the Chamber, interrupted our discussion, and no sooner had he appeared than the Question was put. I protest at this disgraceful invasion of the Committee. The First Secretary has sat through not one minute of our debate. He came in and sought to bring it to an end. I think that it is necessary that, even when there is noise in the Chamber, hon. Members should be able to hear what is proposed.

The Chairman

Whether an hon. Member sits throughout the debate or not is not a point of order.

The Committee divided: Ayes 108, Noes 152.

Division No. 62.] AYES [12.6 a.m.
Allason, James (Hemel Hempstead) Boyd-Carpenter, Rt. Hn. John Clegg, Walter
Astor, John Boyle, Rt. Hn. Sir Edward Cooke, Robert
Baker, W. H. K. Brown, Sir Edward (Bath) Davidson, James (Aberdeenshire, W.)
Batsford, Brian Bruce-Gardyne, J. Deedes, Rt. Hn. W. F. (Ashford)
Bessell, Peter Campbell, Gordon Dodds-Parker, Douglas
Biffen, John Carlisle, Mark Eden, Sir John
Biggs-Davison, John Channon, H. P. C. Fortescue, Tim
Black, Sir Cyril Chichester-Clark, R. Foster, Sir John
Blaker, Peter Clark, Henry Gibson-Watt, David
Glover, Sir Douglas Kitson, Timothy Pounder, Rafton
Goodhart, Philip Knight, Mrs. Jill Price, David (Eastleigh)
Goodhew, Victor Langford-Holt, Sir John Ramsden, Rt. Hn. James
Cower, Raymond Longden, Gilbert Rees-Davies, W. R.
Grant-Ferris, R. Loveys, W. H. Ronton, Rt. Hn. Sir David
Grieve, Percy Lubbock, Eric Ridley, Hn. Nicholas
Griffiths, Eldon (Bury St. Edmunds) MacArthur, Ian Roots, William
Grimond, Rt. Hn. J. Mackenzie, Alasdair (Ross&Crom'ty) St. John-Stevas, Norman
Hamilton, Marquess of (Fermanagh) Maclean, Sir Fitzroy Scott, Nicholas
Harvey, Sir Arthur Vere Macleod, Rt. Hn. Iain Sharples, Richard
Hastings, Stephen McMaster, Stanley Smith, John
Hawkins, Paul Marsh. Rt. Hn. Richard Steel, David (Roxburgh)
Heald, Rt. Hn. Sir Lionel Maude, Angus Taylor, Sir Charles (Eastbourne)
Higgins, Terence L. Maxwell-Hyslop, R. J. Thatcher, Mrs. Margaret
Hiley, Joseph Mills, Peter (Torrington) Thorpe, Jeremy
Hirst, Geoffrey Miscampbell, Norman Turton, Rt. Hn. R. H.
Hogg, Rt. Hn. Quintin Mitchell, David (Basingstoke) Wainwright, Richard (Colne Valley)
Holland, Philip More, jasper Walker, Peter (Worcester)
Hooson, Emlyn Munro-Lucas-Tooth, Sir Hugh Walker-Smith, Rt. Hn. Sir Derek
Hordern, Peter Murton, Oscar Ward, Dame Irene
Howell, David (Guildford) Nott, John Weatherill, Bernard
Hunt, John Onslow, Cranley Webster, David
Iremonger, T. L. Orr-Ewing, Sir Ian Whitelaw, William
Jenkin, Patrick (Woodford) Page, Graham (Crosby) Winstanley, Dr. M. P.
Jopling, Michael Pardoe, J. Younger, Hn. George
Kimball, Marcus Peel, John
King, Evelyn (Dorset, S.) Percival, Ian TELLERS FOR THE AYES:
Kirk, Peter Pink, R. Bonner Mr. Pym and Mr. Grant.
NOES
Allaun, Frank (Salford, E.) Ford, Ben Moyle, Roland
Allen, Scholefield Fraser, John (Norwood) Mulley, Rt. Hn. Frederick
Archer, Peter Gardner, A. J. Oakes, Gordon
Armstrong, Ernest Gordon Walker, Rt. Hn. P. C. Ogden, Eric
Atkinson, Norman (Tottenham) Gregory, Arnold O'Malley, Brian
Bagier, Gordon A. T. Grey, Charles (Durham) Orme, Stanley
Barnes, Michael Griffiths, David (Rother Valley) Owen, Dr. David (Plymouth, S'tn)
Benn, Rt. Hn. Anthony Wedgwood Griffiths, Will (Exchange) Paget, R. T.
Bennett, James (G'gow, Bridgeton) Hamilton, James (Bothwell) Parker, John (Dagenham)
Binns, John Hamilton, William (Fife, W.) Pentland, Norman
Bishop, E. S. Hannan, William Perry, Ernest G. (Battersea, S.)
Blackburn, F. Hattersley, Roy Perry, George H. (Nottingham, S.)
Boardman, H. Hazell, Bert Prentice, Rt. Hn. R. E.
Booth, Albert Heffer, Eric S. Price, Christopher (Perry Barr)
Braddock, Mrs. E. M. Henig, Stanley Redhead, Edward
Bray, Dr. Jeremy Hooley, Frank Reynolds, G. W.
Brooks, Edwin Houghton, Rt. Hn. Douglas Richard, Ivor
Brown, Rt. Hn. George (Belper) Hoy, James Roberts, Albert (Normanton)
Brown, Hugh D. (G'gow, Provan) Hughes, Emrys (Ayrshire, S.) Robertson, John (Paisley)
Brown, Bob(N'c'tle-upon-Tyne, W) Hunter, Adam Robinson, Rt.Hn.Kenneth(St.P'c'as)
Brown, R. W. (Shoreditch & F'bury) Hynd, John Robinson, W. O. J. (Walth'stow, E.)
Callaghan, Rt. Hn. James Jay, Rt. Hn. Douglas Roebuck, Roy
Carmichael, Neil Jenkins, Hugh (Putney) Rogers, George
Coe, Denis Johnson, James (K'ston-on-Hull, W.) Rose, Paul
Coleman, Donald Jones, Dan (Burnley) Shaw, Arnold (Ilford, S.)
Conlan, Bernard Jones,Rt.Hn.Sir Elwyn(W.Ham,S.) Shore, Peter (Stepney)
Corbet, Mrs. Freda Jones, J. Idwal (Wrexham) Short, Rt. Hn.Edward (N'c'tle-u-Tyne)
Craddock, George (Bradford, S.) Judd, Frank Silkin, John (Deptford)
Crawshaw, Richard Kelley, Richard Silkin, S. C. (Dulwich)
Cullen, Mrs. Alice Kenyon, Clifford Silverman, Julius (Aston)
Dalyell, Tarn Lestor, Mist Joan Slater, Joseph
Davidson, Arthur (Accrington) Lever, Harold (Cheetham) Small, William
Davies, Dr. Ernest (Stretford) Lever, L. M. (Ardwick) Summerskill, Hn. Dr. Shirley
Davies, G. Elfed (Rhondda, E.) Lewis, Ron (Carlisle) Taverne, Dick
Davies, Ifor (Gower) Lomas, Kenneth Tinn, James
Loughlin, Charles Urwin, T. W.
Davies, Robert (Cambridge) Luard, Evan Walden, Brian (All Saints)
Dell, Edmund Lyon, Alexander W. (York) Walker, Harold (Doncaster)
Dempsey, James MacDermot, Niall Watkins, David (Consett)
Dewar, Donald Macdonald, A. H. Wellbeloved, James
Diamond, Rt. Hn. John McGuire, Michael Wells, William (Walsall, N.)
Dickens, James McKay, Mrs. Margaret Whitaker, Ben
Doig, Peter Mackenzie, Cregor (Rutherglen) White, Mrs. Eirene
Dunnett, Jack Mackle, John Whitlock, William
Dunwoody, Mrs. Gwyneth (Exeter) Maclennan, Robert Williams, Clifford (Abertillery)
Dunwoody, Dr. John (F'th & C'b'e) McNamara, J. Kevin Wilson, William (Coventry, S.)
Eadie, Alex Manuel, Archie Winnick, David
Edelman, Maurice Mapp, Charles Winterbottom, R. E.
Faulds, Andrew Mendelson, J. J. Woof, Robert
Fernyhough, E. Molloy, William
Finch, Harold Molloy, William
Finch, Harold Moonman, Eric TELLERS FOR THE NOES:
Foley, Maurice Morris, Charles R. (Openshaw) Mr. Pym and Mr. Grant.

12.15 a.m.

Mr. Iain Macleod

I beg to move, That the Chairman do report Progress and ask leave to sit again. So far as the events of the last 20 minutes are concerned I would only make two observations. The first is that it is not proper to criticise the conduct of the Chair except by formal Motion, but if the Opposition feel that their rights are being abused we will not hesitate to put such a Motion on the Order Paper.

But it is perfectly proper to criticise the conduct of the Government in their handling of the Bill, and the traditional way of doing this is to move the Motion which is now before the Committee. We have had three discussions. On the last one no reply was permitted by the Chief Whip from the Opposition Front Bench. Many hon. Members were on their feet to speak. In those circumstances, I think it was grotesque of the Whips to attempt to closure such a debate.

I come now immediately to the Motion I have put before the Committee, and to ask the Chancellor to reply to this. The next Amendment, one on development areas, is clearly going to occupy the Committee for a very long time, and all the longer in view of the shabby nature of the answers we have been given from the Treasury Bench. It is after midnight. We have disposed of three Amendments. I would suggest to the Chancellor that, if he wants progress on this Bill, we should take an important issue like the development areas at the beginning of a day's sitting, and that therefore we should now accept this Motion and adjourn the Committee.

Sir D. Glover

We have in the last 20 minutes gone through some of the most disgraceful scenes I have ever seen in this Chamber, scenes largely brought about by the disgraceful behaviour of the First Secretary of State, and I submit to the Committee that we are not in the mood to consider the important Amendments which we have on the Paper. When anger takes the place of reason it is hurtful to debate, and the anger on this side of the Committee is real. I am white hot, and particularly with the right hon. Gentleman. I have never seen more disgraceful behaviour from a Cabinet Minister in the whole of the years I have been a Member of the Committee.

Mr. Harold Lever (Manchester Cheetham) rose——

Sir D. Glover

No. I will not give way.

The Closure which, in my opinion, you mistakenly accepted, Sir Eric, though I am not criticising the Chair, was largely brought about because the right hon. Gentleman suggested to the Deputy Chief Whip, "Put the Closure". The Committee has been treated to the most outrageous discourtesy. [HON. MEMBERS: "Nonsense."] It is no use hon. Gentlemen opposite saying "Nonsense". Most of them were not here. They have shown such a great deal of interest in the problems of the old—[HON. MEMBERS: "Oh."]—of the under-privileged—[HON. MEMBERS: "Oh."]—that they have been sitting outside the Chamber and have not heard a word of the debate which has been going on. I can assure hon. Members opposite that if they had heard the debate which went on tonight——

Mr. Ridley

On a point of order. Is it in order for the hon. Member for Glasgow, Govan (Mr. Rankin) to smoke at this stage of our proceedings?

Sir D. Glover

To what?

The Chairman

The hon. Member for Glasgow, Govan (Mr. Rankin) knows perfectly well that smoking is not in order in the Chamber.

Mr. John Rankin (Glasgow, Govan)

Further to that point of order, Sir Eric. I was not smoking. I was merely holding the pipe of peace in my mouth. Is that out of order?

The Chairman

I think that it is undesirable that hon. Members should hold pipes in the Chamber.

Mr. Hirst

Further to that point of order, Sir Eric. It may be that the hon. Member for Glasgow, Govan (Mr. Rankin) is suggesting that his Dunhill, or whatever he calls it, is a dummy, but I should like to assure you that I can smell it from here.

Sir D. Glover

Having got rid of the Red Indian atmosphere, perhaps the hon. Member for Govan will keep his pipe of peace out of sight, because I am not prepared to smoke it for a very long time.

As I was saying before I was interrupted, if hon. Members opposite had been in the Chamber listening to the debate and had heard what had gone on, most of them would have been taking part in this censure on their own Front Bench.

There were as many speeches and interjections from that side. The hon. Member for Sheffield, Brightside (Mr. Winterbottom) was listening with great interest. My hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) and he had formed a coalition on what they thought ought to be done. We were having a really constructive debate, the only weakness in which was the reply by the Financial Secretary. For the debate to have gone on the time that it did without a reply from the Opposition Front Bench is something which, as far as I am aware, is without precedent in our debates on the Finance Bill.

How can the Government know, on an Amendment which was not an official Amendment but which was brilliantly moved by my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell)—[Interruption.] All right. Hon. Members opposite can go on interrupting. I can go on all night, if necessary.

How can the Committee know what was the view of the Official Opposition to my hon. and learned Friend's Amendment. Were we going to support it officially? Were the Official Opposition going to say, "We have had a very interesting debate"—[Interruption.] I can see that the right hon. Gentleman the First Secretary wishes to intervene from a sitting position. He also knows that it is out of order. But if he says that I would not have known which Lobby to go into, it is significant that the right hon. Gentleman led all his hon. Friends into the wrong Lobby. The right hon. Gentleman wants to get up a lot earlier in the morning or stay up a lot later at night if he is going to catch me on that simple procedural point.

We are now here, after midnight, with the Committee obviously not in the mood to debate important matters affecting the people—[Interruption.] Hon. Members opposite say that they are. Of course they are. They will immediately go out and disappear. They are Lobby fodder. Under those conditions, anyone who is prepared to continue with the business of the Committee—[Interruption]—I am talking about those hon. Members who are sufficiently concerned with the interests of the people of the country and their constituents—the old people, the disabled, the under-privileged—to stay in the Committee and debate the problem—it is obvious from the way in which these suggestions are being greeted that the Committee is not prepared to debate these matters in the mood that the people about whom we are talking have every right to expect the Committee to adopt when dealing with these problems.

We are not expected to deal with regional problems in the mood that the Committee is in at the moment. There is not an hon. Gentleman opposite who is not at this moment full of levity. There is not an hon. Member on this side of the Committee who is not full of rage. Under these conditions, this is not the mood in which this Committee should go on debating the important Amendments that we have before us on the Notice Paper.

My criticism, and I am sure that it is shared by most of my hon. Friends, and certainly by my hon. Friend the Member for Bournemouth, West (Sir J. Eden), is that during the last debate when we were debating the problems of the old, those on limited incomes—[Interruption.]—if right hon. and hon. Gentlemen opposite wish to break the rules of order by making remarks from a sitting position, I do not mind, but perhaps it might be as well, Sir Eric, if you called them to order before this becomes too much of a circus on the other side of the Committee. The right hon. Member for Belper (Mr. George Brown) has made as long a speech from a sedentary position as I have made while on my feet and within the rules of order. I think that it is time the Chair drew the right hon. Gentleman's attention to the fact that he should not make a speech while sitting down.

I find it rather difficult to address the Chair when, in my left ear, while I am trying to do so, there is this rather asinine voice of the right hon. Member for Belper muttering from his comatose position on the Front Bench. Being the cause of most of the bother, I should have thought that by this time he would have realised that as long as——

Mr. David Webster (Weston-super-Mare)

I am trying to follow what my hon. Friend is saying. I heard him say something about his left ear. It is very tantalising. Can he tell me what other words he employed?

Sir D. Glover

I do not think that I will reply to that intervention, because I want to come to the reason why we on this side of the Committee object to the Closure being moved in the way that it was.

We had been debating, I should have thought in a most constructive and friendly atmosphere, a very important Amendment which disclosed—and there is no argument about this—that there are an enormous number of anomalies in the Bill, anomalies which meant that great hardship would be created for an enormous number of people who, because they are unorganised, are unable to provide the sort of Lobby that is provided by the Co-operative movement, by the trade union movement, or by anybody else.

We had not had a reply to the argument, and what I should like to make clear to the Committee is that what happened from the other side tonight made it clear that it will stick in their gullets for all eternity if anybody on the benches opposite has the hypocrisy to say that they are the people who protect the under-privileged.

12.30 a.m.

They were not in the Committee. They were not interested. They did not know what we were discussing but they thought that it was a good thing to move the Closure. What were we discussing? We were discussing the problems of a person of 80 years of age with somebody looking after him, who is working on a very narrow budget, probably not even saving 2s. a week out of his weekly income. Now he is being asked for a contribution of 12s. 6d. or 25s. a week for five months before he gets any of it back.

These are problems which we have to face and which should be faced and problems which should be amended by this Bill or, at least, there should be a promise that other arrangements will be made, or that the Ministry of National Insurance should take care of the problems which we have been putting to the Chancellor tonight.

But what has happened as a result of all these arguments? The Financial Secretary got up and told us that nearly everything that we had said was unimportant. He implied that there were none of these cases and said that administratively the Amendment was not workable. My hon. Friend did not ask for that. He asked that the Chancellor and the Treasury should realise that these were real problems and that they would bring in proposals to overcome most of them. Not one word did the Committee get to persuade them to allow this Amendment to be withdrawn.

We had been debating a most important Amendment and then, when we got to that Amendment being, as it were, clarified by both Front Benches, what happened at that crucial moment? The First Secretary came into the Chamber, not having listened to the debate—and I should hate to think what the Chancellor will say to him when they get outside—and completely ruined the atmosphere which existed. There was no sense in any part of the Committee of filibustering. The debate was going on at a very serious level and everybody was waiting to hear the final speeches. There were about two more hon. Members on this side wanting to speak and then there was the hon. Member who was to have wound up from our Front Bench.

That would have been the end of the debate in friendship and animity and the Chancellor knows this. Perhaps we would have divided on the Amendment, and then we would have proceeded to the next Amendment with the Committee in the right mood to proceed. But, because of his wretched stupidity, the First Secretary has ruined the whole atmosphere and, whatever happens, I am sure that neither side of the Committee is in the mood to go on debating important matters affecting hundreds of thousands or millions—[Interruption.]—of people whom we represent in this Committee.

It was and is our duty to debate these problems affecting this vast number of the electorate in a mood that the electorate would expect us to be in when we are debating matters of this kind. I support my right hon. Friend's proposal, because I do not think that either you, Sir Eric, or anyone in the Chair or even the Chancellor, can get the Committee back to the right mood for debating these problems.

Mr. Boyd-Carpenter

I think that it was a little odd that the Chancellor did not rise to reply after my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) had moved this Motion. The Chancellor knows as well as anyone in the Committee that it is the normal, polite thing on these occasions, when a Motion of this kind is moved from the Opposition Front Bench, for the Minister in charge of the Bill to reply. There is a practical reason: it enables the Minister to indicate the Government's intentions fairly and openly, it very often saves a great deal of time and it is a normal courtesy to the Committee.

This is typical of the mishandling of the debate this afternoon by the Chancellor. That is one of the major reasons why I support my right hon. Friend's proposal that we should at this stage report Progress. One must admit that the Chancellor has had a very bad day. He began with an admission that he had tried to take some politically embarrassing words out of HANSARD, and that was followed by a pitiful attempt to reply to the first Amendment when he did not deal with the main proposals put forward, and it has culminated, as my right hon. Friend said, in the grave misjudgment, to put it no worse, of the employment of the Closure on the last Amendment at the moment that one of my hon. Friends on the Front Bench was on his feet—as were a number of my hon. Friends on the back benches—thus showing pointed discourtesy to the Opposition.

I have had a little experience of handling Finance Bills, and I say to the Chancellor that this is not the way to make progress. If one tries to treat the Committee and the Opposition in it with pointed discourtesy, with a refusal to answer arguments, with a reliance on the Closure rather than a proper wind-up of the debate, and with a refusal even to rise in the normal way to follow the Opposition spokesman on this Motion, one cannot grumble if one does not get co-operation and help from the Committee.

That is the first reason for suggesting that we should adjourn. The Chancellor and the Government have had a bad day. They have mishandled the debate and they have put the Committee in a difficult mood in which progress on a serious matter will be extremely difficult. Secondly, this is not the hour of the night to proceed with these Amendments. I know that we have often gone through the night on Finance Bills, but there must be a certain judgment in the selection of the issues to be debated through the night. Part of the Chancellor's mishandling of this matter which I do not think he has even yet grasped is that this Clause and the Amendments to it deal with matters about which my hon. Friends care enormously and about which people outside care even more. These are the major controversial measures of his Bill, and people outside will not understand if, simply to suit the Government's time-table or because of the mishandling of the matter by the Government, we are driven to debate them until 2 a.m., 3 a.m., 4 a.m., 5 a.m. or 6 a.m. The Chancellor must recognise that people outside will resent this treatment of these parts of the Bill.

I assume from his silence that the Chancellor will not accept the Motion, because obviously he would have saved time by rising to accept it. I do not know what he thinks he is doing. Does he think that at this stage of the Bill, driving on from Closure to Closure, he will get the Clause at this Sitting? The only possible explanation of such a theory is that he is trying to kill this afternoon's Sitting in order to avoid the Prime Minister's revelations about the National Union of Seamen. That is about the only logical justification for the right hon. Gentleman's conduct of the matter. His conduct has been so lacking in logic that I doubt whether that—the one sensible conclusion—is the real one to draw.

The Chancellor has had considerable co-operation from my hon. Friends on the Bill. He does not dispute that. He has had a good atmosphere in the Committee. Does it make sense to sacrifice this, just because things have gone wrong, as they go wrong on Finance Bills from time to time?

Mr. Archie Manuel (Central Ayrshire)

The right hon. Gentleman should know.

Mr. Boyd-Carpenter

I have had the sense to obey the good military maxim, "Do not reinforce failure". Does it make sense, something having gone wrong or in a fit of pique—or even because the First Secretary has recovered sufficiently from tiredness to come in and intervene—to spoil that atmosphere; to attempt what the right hon. Gentleman knows he cannot do, and get the Clause at this sitting? Would it not be better to make a virtue of necessity and say that he recognises that my hon. Friends, and I think many hon. Gentlemen opposite, care a great deal about the next Amendments and the Clause and want them discussed fairly and properly and at the right time of the day when the Committee is in the right mood and when the matter can be properly discussed so that—and I do not want to commit my hon. Friends—we can then make the sort of progress the right hon. Gentleman wants? This is really a testing moment for the right hon. Gentleman—of his judgment and of his command of the Committee. I hope that he will, by accepting the Motion, show that he passes the test.

Mr, Callaghan

The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) has stood at the Dispatch Box dealing with Finance Bills on many occasions. He has drawn on his experience tonight to tell us of some of the phases through which the Committee has gone, in his experience and in mine. I would have responded immediately to the request of the right hon. Gentleman if we had been in the situation in which we are normally; in which an hon. Member makes his request and then the Minister rises to answer.

But it seemed that there were a great many other hon. Members anxious to speak at that time—and, maybe, are still anxious to press their views on us—and I thought, therefore, that it would be courteous on my part to hear all the reasons they might wish to advance why we should report progress now, because I would not want to be accused of pre-empting their arguments, of anticipating them or of not bothering to listen to them before replying. I am sure the Committee agrees that it was proper for me to wait, and as the right hon. Gentleman has said that now is the moment for me to rise to reply, I will do so.

The right hon. Member for Kingston-upon-Thames asked what I thought about the progress of the Committee in future, as did the right hon. Member for Enfield, West (Mr. Iain Macleod) to whom I am specifically replying now. Even making allowances, because this is an important Bill, I think that our progress has not been over-speedy. We have been deliberate and mature in our consideration. We have had a very ripe discussion of all the facets of the Amendments before us, and no one can say that that is not the function of the Committee. However, I would not accuse the Committee of being over-speedy today and, therefore, I feel that, having taken part, as have hon. and right hon. Members in all parts of the Committee, in the very serious debates we have had, I do not accept the commonly held view outside that it is not possible to debate these matters because it is one o'clock in the morning.

In the course of our deliberations on the Finance Bill I have heard some very serious debates indeed on matters of very great importance, and as we have a great deal of work to do, I propose that the Committee should continue for the time being on this important subject of regional differentiation. We will then have to follow it with another very important Amendment, No. 34, and with it will be taken a number of others. There are, then, Amendments dealing with hotels, small employers who have employees abroad—that is a Liberal Amendment—the Industrial Training Board, the right of appeal to courts and the position of Northern Ireland. It seems to be rather a heavy night's work to get through all that.

Mr. Hirst

It sounds like next week's business.

12.45 a.m.

Mr. Callaghan

I would not suggest that we could get through the whole load tonight, but I believe that substantial progress could stall be made. It will be generally agreed that the arguments on this Clause can be readily deployed. Some very succinct speeches have been made. They have been none the less forceful for that reason. Having given some indication that I should like to make some substantial progress on the major Amendments which lie ahead, we could probably then, I hope with the consent of the Committee, call it a day—or a night, whatever the appropriate terminology—and retire to our beds.

I hope therefore, in the light of that that the right hon. Gentleman will be willing to withdraw his Motion and that we can proceed with discussion of the Bill. [HON. MEMBERS: "No."] Hon. Members say "No". That was one reason why I did not rise earlier, because I feared that that would be the response, but I have given the reply I have been asked for by the right hon. Gentleman the Member for Enfield, West and the right hon. Member for Kingston-upon-Thames. That would be my view of the sort of progress we should try to make through the rest of the night.

Mr. Peyton

The Chancellor has given the Committee a reply that was at least courteous in tone, but he has given us nothing in substance. Nor has he given any acknowledgment of the reasons for the dismay, the discontent and anger felt on this side of the Committee that the previous Amendment, which had been very reasonably discussed without a trace of filibustering, should have been closured in that fashion.

It would be wrong for me, Sir Eric, to make any comment on the fact that you accepted the Closure, but I object to the appearances on such occasions of what the other day I called the "vet." with his humane killer to put this wretched Government out of their misery without any attempt to see what the debate is about, the mood of the Committee, whether points are being well made or not, or whether there has been tedious repetition or not. He does not do that but comes in and moves the Closure without apparently ascertaining whether a Front Bench speaker from this side of the Committee has addressed the Committee. I find that extraordinary.

The Motion we are discussing is the oddly phrased one that you should report Progress and ask leave to sit again. This Motion is always moved by those who are conscious of the fact that they have made no progress at all and it is listened to by those who hope never to have to sit again in dealing with the Measure before them. Never were those words more true than on this occasion. We have made virtually no progress with a horrible Measure and none of us on this side of the Committee wants to discuss this dreadful thing again.

I am absolutely convinced that the merits of the argument on the Amendment we discussed this afternoon were never weighed by the Chancellor or any Government spokesman. We wanted to give the Government an opportunity to consider again the growing voice of protest coming from the country—not only from these benches—about a tax which is manifestly unjust, manifestly ill-thought-out and which in its implementation will be the source of a great deal of trouble. I would not wish to echo some of the remarks that have been made by some of my hon. Friends, doubtless in moments of exasperation, about some of the replies that we have been given. I think the Financial Secretary has always been courteous in his answers. I am very sorry that the burden that has been put upon him has involved a complete bankruptcy in his answers. He has done it with great civility and courtesy, but the instructions that he has been given have been such that he could not afford the Committee any satisfaction at all. If one were feeling in an intemperate mood, one would state that future replies in these debates upon this wretched tax might well come from the Government Front Bench in Hungarian because they could not mean less to us in that or in any other language that we did not understand.

Many of us have been here a long time and have sat through many Finance Bills. We all accept what the Chancellor said, that it is quite normal to sit into the early hours of the morning, and in fact well into daylight, discussing these things. But here we have a wholly new tax. This is a new matter, and I do not believe it is right that the Chancellor should ask the Committee to sit through the night debating a tax which all the evidence goes to show is ill-thought-out and thoroughly unright.

I hope the right hon. Gentleman will have second thoughts before he imposes his will upon us. Of course, the Government can use their majority to force the Committee to go on, but you, Sir Eric, are just as familiar as I am with the fact that the view which has been facing this side of the Committee during all the previous hours of this sitting has been like a bare, grassy bank, unoccupied benches resembling a green unrelieved by even a weed growing here and there, not even a dandelion——

Mr. Emlyn Hooson (Montgomery)

Will the hon. Gentleman give way?

Mr. Peyton

No. [Interruption.] The right hon. Member for Belper (Mr. George Brown) has suddenly come to, with a passionate desire to attack me for not giving way to a member of the Liberal Party. I was about to say something to the right hon. Member for Belper, and I will not be interrupted at the moment. I wish to complete my sentence.

I was engaged in a botanical survey of what the faces opposite look like. I do not exactly wish to disgrace the whole dandelion class by a reference to the right hon. Member for Belper. Having said that, I will be glad to give way.

Mr. Hooson

I am obliged to the hon. Gentleman. If he and his party are so concerned about the Selective Employment Tax, can he explain the fact that in the hours of daylight during the Second Reading debate of the Bill, for a good deal of the time there were only three Conservative Members in the House?

Mr. Peyton

Here, once again, we have evidence of the passionate desire of the Liberal Party to help the Government out of their embarrassment. I am extraordinarily grateful to the hon. and learned Member for reminding me of this gross omission of which I was very nearly guilty. I am very much obliged to the hon. and learned Gentleman who has reminded me that I should pay tribute, on behalf of the Government, to the way in which the Liberal Party is anxious to help the Government on every possible occasion. It does seem to me——

Mr. Lubbock rose——

The Chairman

Order. The hon. Gentleman must resume his seat unless the hon. Member gives way.

Mr. Manuel

On a point of Order, Sir Eric. I would ask you to give some consideration as to whether the inanities of the hon. Gentleman in dealing with the botanical survey, as he called it, and the Liberal Party are in order of this Motion.

The Chairman

I have not yet heard anything that is out of order.

Mr. Manuel

Botanical surveys in order? Shocking.

Hon. Members

Oh.

The Chairman

Order. The hon. Member must not say that. Botanical references in support of an argument are in order.

Hon. Members

Withdraw.

Mr. Bessell

On a point of order. Is it in order for an hon. Member to discuss on this particular Motion the conduct of the Parliamentary Liberal Party in relation to the Government? What possible connection does this have with the Motion proposed by the right hon. Member for Enfield, West (Mr. Iain Macleod)?

The Chairman

It is quite clear. The Motion that I do report Progress and ask leave to sit again admits of a very wide debate.

Sir Arthur Vere Harvey (Macclesfield)

On a point of order, Sir Eric. When you gave your Ruling a few minutes ago I distinctly heard the hon. Member for Central Ayrshire (Mr. Manuel) say to you "Shocking." Should he not withdraw that remark?

The Chairman

I called the hon. Member for Central Ayrshire to order because of the expression he used. I understand that he withdraws it. Is that right?

Sir A. V. Harvey

The hon. Member has not withdrawn it so far as this side of the Committee could observe. Surely he should withdraw it?

Mr. Harold Lever

I must confess that I, too, heard the word "shocking", but I understood it to refer to the speech of the hon. Member for Yeovil (Mr. Peyton) and not to your Ruling, Sir Eric.

Hon. Members

No. Withdraw.

Mr. Ridley

On a point of order, Sir Eric. Is the hon. Member for Central Ayrshire not going to comply with your request? I distinctly heard you ask him to withdraw the word "Shocking."

The Chairman

I am sure the hon. Member for Central Ayrshire wants to clear this matter up. If he was applying the word to something said by an hon. Gentleman opposite it would not be out of order. If he was applying the word to the Ruling of the Chair, it would be out of order.

Mr. Manuel

Sir Eric, I was surprised by your Ruling that botanical surveys—[HON. MEMBERS: "Oh."] Shut up, you dumb heads.

The Chairman

Order. The hon. Member really must not say that. If the hon. Member is in the process of withdrawing an earlier observation, will he please continue?

1.0 a.m.

Mr. Manuel

I was explaining, Sir Eric, that I did express annoyance at your Ruling. I regret that, and I unreservedly withdraw it.

Sir D. Glover

On a point of order, Sir Eric. The hon. Gentleman has now withdrawn the expression, but I had not thought there was anything unparliamentary in the word "dumb" or in the word "head". [HON. MEMBERS: "Wrong again".] Quite honestly, Sir Eric, I do not think there is anything very unparliamentary in the word "shocking" either. It is only what one would expect from the hon. Member for Central Ayrshire (Mr. Manuel), but I do not think there is anything very unparliamentary in it.

Mr. Peyton

I can well imagine that there are times—it would never occur to me—when an hon. Member might wish to delay the proceedings by making an unnecessarily long speech. Had that been my desire and aim now, I could not have been more liberally or more generously helped. I have had help from the Liberal Party and from the hon. Member for South Ayrshire——

Mr. Manuel

Central Ayrshire.

Mr. Peyton

Central Ayrshire—I apologise to the hon. Member for South Ayrshire (Mr. Emrys Hughes). We have had quite a number of interruptions of that sort from the hon. Gentleman. They have recently received some public notice. I leave the hon. Gentleman with the comment that I know of no better judge of inanities than he.

We on this side regard this new tax as hastily contrived, ill judged and bad. We consider it wholly wrong that the Committee should now be asked to sit into the morning discussing measures specifically connected with development areas. These matters deserve the attention of all hon. Members who sit for constituencies in development areas. I wonder how many will be here to contribute. I do not represent a development area, but I am certain that all those who do will wish to give their views, which, presumably, must be hostile to the Government, no matter on which side they sit, even if it should inconvenience the First Secretary of State. The right hon. Gentleman is easily upset, we know, but there must be more important considerations to be borne in mind than his inconvenience.

One of my earliest recollections in the House of Commons is of when the right hon. Gentleman was No. 2 to Lord Williams, then the Opposition spokesman on agriculture. Pages of HANSARD were regularly punctuated by sedentary interruptions from the right hon. Gentleman. Power and office have not altered his habits. He is just as noisy as he ever was. But, of course, if he goes on like this, he provokes even the most mild mannered people, like myself, into conduct which otherwise one would, perhaps, be tempted to regard as excessive. [Interruption.] But the right hon. Gentleman still gabbles on. Nobody can turn that tap off.

I am sure you sympathise with me, Sir Eric, as much as anyone here. It is terribly difficult to sit down because, everytime I come to the end of my remarks, there is an interruption from the other side which even I feel obliged to deal with. So here I am, Sir Eric, still on my feet.

I conclude my remarks to the Committee and to the Chancellor with the following. I hope very much that this euphemistically phrased Motion, to which we are all so accustomed, will not fall on deaf ears. I hope that in the interests of the progress which the Chancellor must wish to make with the Bill he will have second thoughts and accept my right hon. Friend's Motion.

Mr. Harold Lever

It is with some diffidence, but not without hope, that I rise to make a brief speech to appeal to the better and more reasonable sense of the Opposition. The diffidence is due to the fact that I, unfortunately, and to the undying gratitude of the Chancellor, was not able to be present during the earlier debates this evening. I was studying other aspects of the Finance Bill outside the Chamber, as is common. [Interruption.]

It is a false point that some of my hon. Friends were not here either. One must accept the principle that hon. Members may reasonably be outside the Chamber engaged in other tasks, correspondence and study, devoting themselves to their duties in their own way and by their own choice. If one accepts that any hon. Member may be out of the Chamber devoting himself to his duties, one must inevitably accept the fact that great numbers of hon. Members may at any particular time be out of the Chamber. I hope that the Opposition will not feel incensed by the absence of a politically biased audience to hear their many cogent arguments, which will be studied, I am sure, with great care in tomorrow's HANSARD.

I rose to appeal to the better sense of the Committee and, in particular, to the better sense of the Opposition. We are engaged upon a long, complex Bill. Nobody would challenge that the Opposition have made many useful and cogent contributions to our discussion. We do not want them to blunt the fine edge of their reasoning by interminable debating as to whether we should sit again or continue our debate. The Chancellor has spoken. The Chancellor, with words of sweet reasonableness, has indicated to the Committee that he would like a little more progress tonight.

I wonder whether I do not strike an answering echo in many hearts on the other side of the Committee when I suggest that it is not to our advantage that in proving our devotion to the study and argument of the Bill we undermine each other's health annually at this time of the year. It seems to me on the whole that we shall emerge with greater credit if we continue our discussions of the Bill in the same spirit of reasonableness.

I was not present during the earlier discussions on this Bill, as I have admitted, and I hope that the Committee will forgive me for that, but from previous experience of these discussions I am sure that every word spoken was germane, cogent and relevant and will be studied by the Chancellor in due course. 1 appeal to the Committee now to abandon the Motion to report Progress and let us make some progress with the proceedings on the Bill.

Mr. Iain Macleod

I wonder whether the hon. Member realises—he certainly would have done had he attended the earlier debates; I understand why he did not and make no complaint about it—that if the Closure had not been moved the debate would have gone on perhaps for 20 minutes. The fact that an hour and twenty minutes have been lost is entirely due to the stupidity of the Government Chief Whip.

Mr. Lever

I was not present and 1 am prepared to assume as a hypothesis, however unlikely, that my right hon. Friend was guilty of an error of judgment. But surely the point has been effectively made. Surely we have all taken it. If there was an error of judgment, which I can neither admit nor deny, long experience has taught me that errors of judgment occur from time to time—and not only on this side of the Committee.

Sir A. V. Harvey

Will the hon. Gentleman cast his mind back to some years ago when he spoke for two hours and 50 minutes on a fishing industry Measure and his shirt came out in the process?

Mr. Lever

I am not sure that I should be in order if I referred in detail to the speech I made on that occasion.

Mr. Ridley

Would the hon. Gentleman admit that it was an error of judgment?

Mr. Lever

I am not prepared to consider that the close and considered scrutiny I gave to all aspects of the White Fish Authority on that occasion was not entirely justified in the circumstances of the debate. You would rebuke me, Sir Eric, if I made a more extended defence of my modest intervention on that occasion.

What I am seeking now is to say to hon. Members opposite that they have made their point and that I can understand that they may suppose, perhaps wrongly—and I hope they believe that they can possibly be wrong—that my right hon. Friend had the Closure moved too early under a misapprehension or because of some error of judgment. We have taken the point and it would be in the best interests of the Committee and of the Opposition if we were now to proceed not to debate whether we should not debate the Bill but to get on with the Bill and make a little further progress.

Mr. St. John-Stevas

The hon. Gentleman's argument would be more effective if he included an appeal to the First Secretary of State to make an apology to the Committee for his misjudgment, in which case we would make progress.

Mr. Lever

I am sure that when the hon. Gentleman comes to reflect upon that intervention—he is a chivalrous person—he will not wish, even if my right hon. Friend has made an error of judgment, to humiliate him in any way. I am sure that is not the object of the Motion. I am sure the Motion proceeds in a normal spirit without any desire to humiliate or injure my right hon. Friend.

I sincerely urge upon the Committee that, in a sense, we on this side are dependent upon the great power, effectiveness and alertness of the Opposition. We sincerely believe that there should be an Opposition—although perhaps with some reduction in their number, for political considerations. But we believe in the two-party system—[HON. MEMBERS: "There are three parties."]—or the three-party system. We believe that there should be as many parties as the people feel should be represented in the House of Commons—and the fewer the better.

I hope hon. Members opposite realise that, in a sense, they are tantalising those like myself on this side who are eagerly awaiting their arguments about regional development questions and who believe that there is much that they can contribute to our enlightenment and stimulation. I plead with them not to delay their words of wisdom too long until we are too sleepy to get the benefit from them that we should derive.

Mr. Jeremy Thorpe (Devon, North)

I want to say a word or two as one of the signatories to the Amendment the debate on which is now in balance, as one who represents a constituency which has a development district within it and as one who voted with the Opposition on the basis that there should perhaps have been a longer debate on a matter of great importance.

1.15 a.m.

Having said all those things we have had, for the last hour, a sort of exercise in mass psychoanalysis from the Conservative Opposition as to what is the mood of the Committee. Because the Conservative Party, with some justification, is angered that the Closure should have been moved, they all want to go off to bed——

Hon. Members

Oh, no.

Mr. Thorpe

Perhaps they want to listen to a few more of the speeches like that of the hon. Member for Ormskirk (Sir D. Glover) and the hon. Member for Yeovil (Mr. Peyton), whose constituency is conspicuously absent from the list of development districts.

Those speeches, on the eve of the discussion about the seamen's strike, are an excellent example to the nation of productivity at its best; of how we can really get on with business. We can spend a whole hour discussing whether or not we are going to do something or go to bed. No doubt this will make a great impression upon the nation. It will prove a spur to greater productivity throughout British industry and no doubt there will not be a man in the workshops who will not have read of this great debate of the last hour, with the Opposition debating whether they should go to bed because they happen to be angry. The hon. Member for Macclesfield (Sir A. V. Harvey), the Chairman of the 1922 Committee, in an interjection, made what may have been a Freudian slip.

His only previous contribution, if I heard him right, was to tell an hon. Gentleman opposite not to pick his nose. He will correct me if that was not his intellectual contribution to the proceedings. If I am wrong I will withdraw, but I see that he remains sedentary. No doubt he will continue making these observations.

It is perfectly true that the First Secretary came down here and constituted himself into a sort of supernumerary Chief Whip. This may well be the answer to the Government's problems. Maybe he will take a vow of silence. As to whether the right hon. Gentleman will obey it or not, we do not know. If the Tory Opposition want to go home, let them go, every one of them. We are concerned about the future of the development districts, and we think that it is more important that this Amendment should be discussed than that an angry Tory Opposition should meet a gag with a filibuster, because that is what it amounts to. [An HON. MEMBER: "What is the hon. Gentleman doing now?"] I would suggest to the Tory Party that they answer this question: are they interested in discussing the future of the development districts and whether there should be some alleviation to them under this monstrous Selective Employment Tax? Is it more important to them to discuss this in Committee than to have a filibuster about whether we go home now, after three hours of filibuster?

For a change the Tory Party might try to be a little more responsible. After all, this is the party which was born to lead. We should have the logical reaction from them that they are prepared to discuss matters of great importance in preference to filibustering. We have had enough filibustering from the Tory Party and we should now get on and discuss something which, at any rate, those of us on this bench, think is more important than a lot of hot air.

Mr. Ridley

It was extremely fortunate that the Closure was not moved on this occasion before I was able to catch your eye, Mr. Irving. On the previous occasion this is exactly what happened to me, although I had the honour to seek to close the debate from the Front Bench on this side of the Committee. The Chief Secretary is well aware that this was my intention and he asked me with a grimace whether I intended to speak, to which I nodded. It was then that his right hon. Friend moved the Closure. I rarely have the honour and privilege of winding up on behalf of the Opposition. I feel that some discourtesy has been done to my right hon. and hon. Friends.

I would answer the hon. Member for Devon, North (Mr. Thorpe) by saying this. It is now 1½ hours since the Closure Motion was moved. By this time we would probably have got the Amendment dealing with development districts and the previous Amendment. We might well be on the way to getting the next Amendment. The mood of the Committee would have been thoroughly happy and favourable. If the hon. Member for Devon, North thinks that the Opposition are behaving in an irresponsible way, perhaps he will reflect that one of the rights of hon. Members is the right of freedom of speech.

This is a brand new tax, a tax unique in the fiscal history of this country.

Mr. Lubbock

We are not discussing the tax.

Mr. Ridley

This is the first time that Amendments on this tax have come before this Committee. For the benefit of the hon. Member for Orpington (Mr. Lubbock), may I remind him that the last Amendment was on the question of exempting employers of one employee or the first employee in any business from the effects of the Selective Employment Tax. This is the first day on which the Committee has debated this tax.

We have had five days on the Committee stage, and we have covered 41 Clauses. That is co-operation and good progress. The Chancellor of the Exchequer has nothing to complain about in the progress made. It was the intention of my right hon. Friends to make good progress so that there would be more time available to debate the Selective Employment Tax. I have constituents, to whom I wished to refer, who are vitally and perhaps painfully affected by what the Committee decides tonight. I wanted, not only to talk on behalf of my constituents, but to put a point on the collective viewpoint of the Opposition which affects the poor, the elderly, the disabled, the widowers, and people of this sort.

This was the most tactless of all the debates which the Government could have closured. It shows a basic lack of decency and humanity to choose this subject on which to gag the Opposition. If right hon. and hon. Members opposite sit here through the hours watching the clock go slowly round, and if they get not one more Clause, I hope that they will, when they wake up in the morning with a hangover, realise that it is just as important to afford the Opposition, when they are being reasonable, the opportunity to debate reasonably these crucial issues which concern individuals about whom we happen to care. Then perhaps they will know that it will not pay them to do it again.

Mr. Stanley Henig (Lancaster)

Like my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever), I rise with diffidence to address a few words to the Committee. It is the first time that I have had the pleasure of being in the Committee when this important Bill has been discussed—[HON. MEMBERS: "Oh."]—I do not think that I am the only new Member to be in the same position.

The events of the last 1½ hours leave one feeling more than slightly sad. We have had an exhibition of the great minds of the nation exercising themselves on the nation's affairs—not about whether the Selective Employment Tax is good or bad, not about whether the Finance Bill is good or bad, not about the problems of development districts, which many of us have in our constituencies, but about the earth-shattering subject of whether we should report progress.

One knows what party politics is all about. One knows that during a debate of this nature it is the Government's job to get through their business and it is the Opposition's job to oppose. One knows that from time to time the Closure Motion will apply and that the Opposition will not like this. After the past 90 minutes of discussion one would suppose, in a reasonable country with reasonable people, that perhaps—just perhaps—the Chancellor of the Exchequer and his opposite number on the Opposition Front Bench would like to get together, perhaps over a glass of whisky or something similar, and decide that the interests of the nation demand that we stop this farce now, decide how many more Amendments the Committee will dispose of tonight and get down to business.

I can, however, say one thing. Outside the House of Commons the nation is viewing with increasing contempt what goes on here. It views with contempt—[Laughter]—the Opposition can laugh—that we are having an exhibition like this, wasting time instead of discussing the things that really matter.

There is more at stake than the heat of hon. Members opposite who wanted to speak but could not or of the Government who, perhaps, want to get through an extra Amendment tonight. What is at stake is the prestige of Parliament. I may be a new member of the Committee, but I urge those on the Front Benches, on both sides, who think that they are our betters to remember that, so far, this is a democracy in which we can discuss reasonably and try to get on with the business of the country. If, however, this tomfoolery is to epitomise our Parliament, then it seems to me that Parliament and all of us will be swept away and no one will care less.

Sir J. Eden

I am sure that the whole Committee welcomes the views of the hon. Member for Lancaster (Mr. Henig). I could not quite make out whether it was his maiden speech in this place. At least, I understand that he feels strongly about the position. I am quite certain that he would wish to emphasise at every possible opportunity also the rights of the Opposition in the House of Commons as much as of those who support the Government of the day.

I know perfectly well, having been in a similar position myself, how infuriating it is for Government back-benchers to have to sit in a semi-paralytic condition listening to this procedure. It is, however, an essential part of our procedure.

The hon. Member for Manchester, Cheetham (Mr. Harold Lever) made a charming gamekeeper but, having witnessed him in his somewhat nefarious activities as a poacher on so many occasions in the past, I find his remarks somewhat unconvincing. At least, he put them forward in the best of spirit. He was, of course, at a grave disadvantaage because he had not been present during the earlier part of the Committee's proceedings today. Had he been here, he would by no means have wished to be a party to the rather dusty manoeuvre perpetrated by his right hon. Friend the First Secretary and the deputy-Chief Whip.

Mr. Harold Lever

I hope that the hon. Member did not misunderstand my remarks as conveying that effect. I was saying that it would be wrong, and probably indefensible, for somebody who was not in the Chamber when the incident occurred to pass an opinion hostile to the opinions expressed on the other side of the Committee. I certainly was not endorsing that opinion. It would have been quite improper for me, not having been present at that particular moment, to have controverted what was said from the other side of the Committee.

1.30 a.m.

Sir J. Eden

I fully understand the hon. Gentleman's position, and I know he was doing his best to be helpful. The fact remains, however, that I am convinced that had he been present in the Committee during those proceedings—this is what I said earlier—he would not himself have wished to be a party to the manoeuvre perpetrated by his right hon. Friend the Member for Belper (Mr. George Brown).

I think it was very significant that the Chancellor of the Exchequer himself did not appear to be a party to that operation. Certainly, he was not present in the Chamber at the time when that happened. The Chancellor, who has already spoken to us on the Motion now before us, clearly realises that he is in a spot. He sought to pour oil on troubled waters, to mollify the Members of the Committee, quite reasonably telling us that we should make progress with his Bill.

It is, however, a little bit late in the day to start worrying about that. The time when he should first have started worrying about the atmosphere in the Committee and the attitudes of hon. Members on this side was when he replied to the first Amendment we took this afternoon. It was that which started the proceedings off on the wrong foot, because it was in that debate that he made it quite clear that he had scant interest in what was being said from this side of the Committee, when he paid very little regard at all to the series of extremely telling and important points which had been made, admittedly in great variety, from this side of the Committee. I thought then that his intransigent attitude, the utterly inflexible attitude which is becoming typical of him during these proceedings, is typical of the Government of the day.

The right hon. Gentleman the Member for Belper is a natural bully—[HON. MEMBERS: "Oh."]—he is a natural bully. He lacks finesse. He likes to enter on the scene in a rumbustious manner. He has a full-fruity voice, and he does not like in any way to be interrupted in what he believes to be the proper way of doing things, and he makes his protest known pretty volubly when he chooses, and pretty vulnerably. I have seen him making such protests from this side of the Chamber——

The First Secretary of State and Secretary of State for Economic Affairs (Mr. George Brown)

And rather better than that.

Sir J. Eden

—most effectively and most continuously and in a very heated manner over a very long period of time. He will, therefore, I am certain, be among the first to recognise now that he committed an error of judgment in being a party to this particular manoeuvre. The right hon. Gentleman walked into this debate looking angry and upset. He had not bothered to listen to any of the proceedings whatever. He got into consultation with his hon. Friend the Deputy Chief Whip, and together they cooked up this operation.

What particularly annoyed me was not that the right hon. Gentleman was in any way anxious to get on with the debate or to move the Closure. That did not worry me. This is a weapon in the hands of the Government, and a perfectly legitimate weapon it is, and they can use it at any time they choose, and they will, no doubt, do so again from time to time. But it is a weapon which, if it is to achieve its objective, must be used with some care and restraint. At any rate, before it is used, there must have been some understanding of the atmosphere of the Committee and of the nature of the debate which had been taking place.

The fact remains that there were still a number of hon. Members rising to their feet wishing to speak on Amendment No. 268. I was one of them, though I make no special point of that. I had a number of points to make which had not previously been raised in the Committee, and I was hoping to have an opportunity of doing so.

If there are a number of hon. Members who wish to raise points on Amendment after Amendment during the passage of the Bill and during our consideration of this tax, right hon. and hon. Gentlemen opposite have only themselves to blame. I have had more correspondence on this proposal than on anything else since I became a Member of the House. I have had letters from constituents who have never previously written to me on any subject, from businessmen, from individuals, from old people and from doctors writing on their behalf.

Surely the Chancellor knows that we are anxious to take whatever opportunity is given to us to bring to his attention the very valid points which have been raised by our constituents. This is the only opportunity that we have of doing it. If we cannot convince him during the course of a debate, there is little point in attempting to continue to be a Member of the House.

I have no objection to debating far into the night. I am sure that no hon. Member has. I have no objection to going on all night and all next day, if necessary. What I am concerned with is that we should be given a reasonable opportunity to debate proposals brought before the Committee by the Government, and I do not believe that we were given such an opportunity. We were cut short in the middle of the debate in a thoroughly abrupt, objectionable and offensive manner. It is that sort of manner which has already done great harm to the nation's interests. It is that sort of manner, after all, which coloured the negotiations earlier in Rhodesia. It is that sort of manner which has caused a great deal of unrest and dissatisfaction in our relations with France. It is that typically intransigent manner which has given trouble over the Aden situation—[Interruption.]

The Chairman

Order. I do not think that we can enter into discussions of foreign policy.

Sir J. Eden

I was not entering into any discussion. I was merely trying to explain why I object to the manner in which this Closure was originally moved. I hope that I have made that point abundantly clear.

I want to say to the Chancellor that there are a large number of Amendments on this tax waiting to be taken. In the Financial Secretary's speech on Amendment No. 266, the hon. and learned Gentleman called in aid Clause 6 of the Selective Employment Payments Bill. He made the point that there was no need for us to go over it all, emphasising this aspect and that aspect, because we should find that many of the points were met when we came to the Committee stage of the other Bill. That is not good enough, and this is a dilemma of their own creation. If they had brought these two Measures forward at the same time, if they had run these two Measures concurrently, we should not be in this difficulty, but the fact remains that the only thing before this Committee at the moment is the Finance Bill, and the only thing that we are concerned with is this Clause.

I do not think that anyone on the benches opposite can divert us from putting forward Amendments which we believe to be necessary and desirable by saying that at a later stage we may have the opportunity to speak to them on another Bill.

Mr. Angus Maude (Stratford-on-Avon)

Would not my hon. Friend agree that if the Opposition on this occasion divest themselves of their right to debate these matters at length, we have no guarantee that the Government will not closure the ensuing debate on the Committee stage of the other Bill before we have a chance to debate them?

Sir J. Eden

I am obliged to my hon. Friend. That brings me to my final point, and it is really addressed to you, Sir Eric.

As a member of this Committee, I should like some guidance from the Chair. I want to know what my position, and that of other hon. Members, is likely to be on later Amendments. As I explained—and I am sure that this applies to every one of my hon. Friends—I have had an enormous amount of correspondence on this subject. I intend to speak on every Amendment that I can. That is my wish, because I desire to make it clear to the Government that their proposals are wholly obnoxious and objectionable to a vast number of my constituents. I have been sent here to do just that.

If it so happens that I do not catch the eye of the occupant of the Chair in the early stages of a debate on any Amendment, will this mean that I shall be closured? Will it mean that I shall be denied the opportunity of representing the views of my constituents? What guidance can we have as to the intentions of the right hon. Member for Belper, and of the Patronage Secretary and the Deputy Chief Whip, and of the decision which may be taken by the Chair at any time? What critera will the Chair adopt in deciding whether to accept a Closure Motion, such as was done earlier today?

It is very important that we know exactly what are the intentions not only of right hon. Gentlemen opposite, but of the Chair as well, so that we may be certain that we shall have an opportunity to speak to these Amendments. I emphasise this point, because if I had been called I would have done my best to keep strictly to the terms of Amendment No. 268. Unless one gets an opportunity to speak to the Amendments, it will be necessary to make a speech on the Question "That the Clause stand part of the Bill" to cover all the points for fear that one will not get another opportunity to speak.

Mr. Harold Lever

Is not the hon. Gentleman complaining of the rules of order? The Chief Whip is not in a position to give an indication of when he will move the Closure. It is for the Chair to decide when the Motion for the Closure can be accepted.

Sir J. Eden

That is a fair comment, and that is why I was addressing my remarks to the Chair, in the hope that I might get some guidance from the Chair as to the terms on which the Closure Motion would be accepted. But if that is not to happen, I shall not persist in this.

I repeat to the Chancellor that at any and every opportunity that I get to do so I shall emphasise that the proposals in this Selective Employment Tax are utterly wrong, and that they are wholly disliked by my constituents, by my

hon. Friends, and, I believe, by some hon. Gentlemen opposite. I hope that we make the point abundantly clear that we thoroughly object to these proposals. So strongly do I feel on this subject that I take this opportunity of supporting this Motion. I support it in particular because of the manner in which the right hon. Gentleman the Member for Belper barged his way into the Committee and bullied his way to cutting short the debate. I hope that it sticks in his throat.

1.45 a.m.

Mr. Pavitt

The Committee will know that I have sat through the whole of the debate except for 20 minutes about 10 o'clock. This is a serious Clause which is before the Committee. Ten debates were scheduled on 35 Amendments, some of which were my own. We have had some thoughtful contributions from both sides of the Committee and I was under the impression that hon. Members opposite were serious in their intentions to probe the tax and to seek to gain amelioration where they thought it was due and just. The present tactic is purely one of obstruction, unworthy of some of the contributions that hon. Members have made in their real concern for their constituents.

One hopes that, having got only three of the debates through, we will be able to proceed with the serious things which have given most of us a considerable amount of concern and caused most of us to have to make difficult decisions. It is an abuse of the privileges of the Opposition to prevent their hon. Friends and hon. Members from proceeding with this debate in a serious manner. I hope that we will be allowed to proceed.

The Parliamentary Secretary to the Treasury (Mr. Edward Short)

rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The Committee divided: Ayes 161, Noes 93.

Division No. 63.] AYES [1.46 a.m.
Allaun, Frank (Saltord, E.) Barnes, Michael Blackburn, F.
Allen, Scholefield Benn, Rt. Hn. Anthony Wedgwood Boardman, H.
Archer, Peter Bennett, James (G'gow, Bridgton) Booth, Albert
Armstrong, Ernest Bessell, Peter Braddock, Mrs. E. M.
Atkinson, Norman (Tottenham) Binns, John Bray, Dr. Jeremy
Bagier, Gordon A. T. Bishop, E. 8. Brooks, Edwin
Brown, Rt. Hon. George (Belper) Hoffer, Eric S. Parker, John (Dagenham)
Brown, Hugh D. (G'gow, Provan) Henig, Stanley Pavitt, Laurence
Brown, Bob(N'c'tle-upon-Tync.W.) Hilton, W. S. Pentland, Norman
Brown, R. W. (Shoreditch & F'bury) Hooley, Frank Perry, Ernest G. (Battersea, S.)
Callaghan, Rt. Hn. James Hooson, Emlyn Perry, George H. (Nottingham, S.)
Carmichael, Neil Hoy, James Prentice, Rt. Hn. R. E.
Coe, Denis Hughes, Emrys (Ayrshire, S.) Price, Christopher (Perry Barr)
Coleman, Donald Hunter, Adam Redhead, Edward
Conlan, Bernard Hynd, John Reynolds, G. W.
Corbet, Mrs. Freda Jackson, Peter M. (High Peak) Roberts, Albert (Normanton)
Craddock, George (Bradford, S.) Jenkins, Hugh (Putney) Robertson, John (Paisley)
Crawshaw, Richard Johnson, James (K'ston-on-Hull, W.) Robinson, Rt. Hn. Kenneth (St.P'c'as)
Cullen, Mrs, Alice Jones.Rt.Hn.Sir Elwyn (W.Ham,S.) Robinson, W. O. J. (Walth'stow, E.)
Dalyell, Tarn Judd, Frank Roebuck, Roy
Davidson, Arthur (Accrington) Kenyon, Clifford Rogers, George
Davidson, James (Aberdeenshire, W.) Lestor, Miss Joan Rose, Paul
Davies, Dr. Ernest (Stretford) Lever, Harold (Cheetham) Ryan, John
Davies, G. Elfed (Rhondda, E.) Lever, L. M. (Ardwick) Shaw, Arnold (Ilford, S.)
Davies, Ifor (Gower) Lewis, Ron (Carlisle) Shore, Peter (Stepney)
Davies, Robert (Cambridge) Lomas, Kenneth Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Dell, Edmund Loughlin, Charles Silkin, John (Deptford)
Dempsey, James Luard, Evan Silkin, S. C. (Dulwich)
Dewar, Donald Lubbock, Eric Silverman, Julius (Aston)
Diamond, Rt. Hn. John Lyon, Alexander W. (York) Slater, Joseph
Dickens, James MacDermot, Niall Small, William
Doig, Peter Macdonald, A. H. Steel, David (Roxburgh)
Dunnett, Jack McGuire, Michael Summerskill, Hn. Dr. Shirley
Dunwoody, Mrs. Gwyneth (Exeter) McKay, Mrs. Margaret Taverne, Dick
Dunwoody, Dr. John (F'th & C'b'e) Mackenzie, Atasdair (Ross&Crom'ty) Thorpe, Jeremy
Eadie, Alex Mackenzie, Gregor (Rutherglen) Tinn, James
Edelman, Maurice Mackle, John Urwin, T. W.
Faulds, Andrew Maclennan, Robert Wainwright, Richard (Colne Valley)
Fernyhough, E. McNamara, J. Kevin Walden, Brian (All Saints)
Finch, Harold Manuel, Archie Walker, Harold (Doncaster)
Foley, Maurice Mapp, Charles Watkins, David (Consett)
Ford, Ben Mendelson, J. J. Wellbeloved, James
Fraser, John (Norwood) Molloy, William Wells, William (Walsall, N.)
Gardner, A. J. Moonman, Eric Whitaker, Ben
Gordon Walker, Rt. Hn. P. C. Morris, Alfred (Wythenshawe) White, Mrs. Eirene
Gregory, Arnold Moyle, Roland Williams, Clifford (Abertillery)
Grey, Charles (Durham) Mulley, Rt. Hn. Frederick Wilson, William (Coventry, S.)
Griffiths, David (Rother Valley) Oakes, Gordon Winnick, David
Griffiths, Will (Exchange) Ogden, Eric Winstanley, Dr. M. P.
Hamilton, James (Bothwell) O'Malley, Brian Winterbottom, R. E.
Hamilton, William (Fife, W.) Orme, Stanley Woof, Robert
Hannan, William Owen, Dr. David (Plymouth, S'tn)
Harper, Joseph Owen, Will (Morpeth) TELLERS FOR THE AYES:
Harrison, Walter (Wakefield) Paget, R. T. Mr. Charles R. Morris and
Hazell, Bert Pardoe, John Mr. Whitlock.
NOES
Allason, James (Hemel Hempstead) Hamilton, Marquess of (Fermanagh) More, Jasper
Astor, John Harvey, Sir Arthur Vere Munro-Lucas-Tooth, Sir Hugh
Baker, W. H. K. Hastings, Stephen Murton, Oscar
Bateford, Brian Hawkins, Paul Nott, John
Biffen, John Heald, Rt. Hn. Sir Lionel Onslow, Cranley
Biggs-Davison, John Higgins, Terence L. Orr-Ewing, Sir Ian
Black, Sir Cyril Hiley, Joseph Page, Graham (Crosby)
Blaker, Peter Hirst, Geoffrey Peel, John
Boyd-Carpenter, Rt. Hn. John Hogg, Rt. Hn. Quintin Percival, Ian
Boyle, Rt. Hn. Sir Edward Hordern, Peter Pink, R. Bonner
Brinton, Sir Tatton Howell, David (Guildford) Pounder, Rafton
Brown, Sir Edward (Bath) Hunt, John Price, David (Eastleigh)
Bruce-Gardyne, J. Iremonger, T. L. Pym, Francis
Campbell, Gordon Jenkin, Patrick (Woodford) Ramsden, Rt. Hn. James
Carlisle, Mark Jopling. Michael Rees-Davies, W. R.
Channon, H. P. G. Kimball, Marcus Renton, Rt. Hn. Sir David
Chichester-Clark, R. King, Evelyn (Dorset, S.) Ridley, Hn. Nicholas
Clark, Henry Kirk, Peter Roots, William
Clegg, Walter Kitson, Timothy St. John-Stevas, Norman
Cooke, Robert Knight, Mrs. Jill Scott, Nicholas
Deedes, Rt. Hn. W. F. (Ashford) Langford-Holt, Slr John Sharples, Richard
Dodds-Parker, Douglas Longden, Gilbert Smith, John
Eden, Sir John Loveys, W. H. Thatcher, Mrs. Margaret
Fortescue, Tim MacArthur, Ian Turton, Rt. Hn. R. H.
Foster, Sir John Maclean, Sir Fitzroy Walker, Peter (Worcester)
Gibson-Watt, David Macleod, Rt. Hn. lain Ward, Dame Irene
Glover, Sir Douglas McMaster, Stanley Weatherill, Bernard
Goodhart, Philip Maude, Angus Webster, David
Goodhew, Victor Maxwell-Hyslop, R. J. Whitelaw, William
Cower, Raymond Mills, Peter (Torrington)
Grant-Ferris, R. Miscampbell, Norman TELLERS FOR THE NOES:
Griffiths, Eldon (Bury St. Edmunds) Mitchell, David (Basingstoke) Mr. Grant and Mr. Younger

Question put accordingly, That the Chairman do report Progress and ask leave to sit again: —

The Committee divided: Ayes 93, Noes, 159.

Division No. 64.] AYES [1.56 a.m.
Allason, James (Hemel Hempstead) Griffiths, Eldon (Bury St. Edmunds) Munro-Lucas-Tooth, Sir Hugh
Astor, John Hamilton, Marquess of (Fermanagh) Murton, Oscar
Baker, W. H. K. Harvey, Sir Arthur Vere Nott, John
Batsford, Brian Hastings, Stephen Onslow, Cranley
Biffen, John Hawkins, Paul Orr-Ewing, Sir Ian
Biggs-Davison, John Heald, Rt. Hn. Sir Lionel Page, Graham (Crosby)
Black, Sir Cyril Higgins, Terence L. Peel, John
Blaker, Peter Hiley, Joseph Percival, Ian
Boyd-Carpenter, Rt. Hn. John Hirst, Geoffrey Pink, R. Bonner
Boyle, Rt. Hn. Sir Edward Hogg, Rt. Hn. Quintin Pounder, Rafton
Brinton, Sir Tatton Hordern, Peter Price, David (Eastleigh)
Brown, Sir Edward (Bath) Howell, David (Guildford) Pym, Francis
Bruce-Gardyne, J. Hunt, John Ramsden, Rt. Hn. James
Campbell, Gordon Iremonger, T. L. Rees-Davies, W. R.
Carlisle, Mark Jenkin, Patrick (Woodford) Renton, Rt. Hn. Sir David
Channon, H. P. G. Jopling, Michael Ridley, Hn. Nicholas
Chichester-Clark, R. Kimball, Marcus Roots, William
Clark, Henry King, Evelyn (Dorset, S.) St. John-Stevas, Norman
Clegg, Walter Kirk, Peter Scott, Nicholas
Cooke, Robert Kitson, Timothy Sharples, Richard
Deedes, Rt. Hn. W. F. (Ashford) Knight, Mrs. Jill Smith, John
Dodds-Parker, Douglas Langford-Holt, Sir John Thatcher, Mrs. Margaret
Eden, Sir John Longden, Gilbert Turton, Rt. Hn. R. H.
Fortescue, Tim Loveys, W. H. Walker, Peter (Worcester)
Foster, Sir John MacArthur, Ian Ward, Dame Irene
Gibson-Watt, David Maclean, Sir Fitzroy Weatherill, Bernard
Glover, Sir Douglas Macleod, Rt. Hn. Iain Webster, David
Goodhart, Philip McMaster, Stanley Whitelaw, William
Goodhew, Victor Maude, Angus Younger, Hn. George
Gower, Raymond Maxwell-Hyslop, R. J.
Grant, Anthony Mills, Peter (Torrington) TELLERS FOR THE AYES
Grant-Ferris, R. Miscampbell, Norman Mr. More and
Mr. David Mitchell.
NOES
Allaun, Frank (Salford, E.) Diamond, Rt. Hn. John Kenyon, Clifford
Allen, Scholefield Dickens, James Lestor, Miss Joan
Archer, Peter Doig, Peter Lever, Harold (Cheetham)
Armstrong, Ernest Dunnett, Jack Lever, L. M. (Ardwick)
Atkinson, Norman (Tottenham) Dunwoody, Mrs. Gwyneth (Exeter) Lewis, Ron (Carlisle)
Bagier, Gordon A. T. Dunwoody, Dr. John (F'th & C'b'e) Lomas, Kenneth
Barnes, Michael Eadie, Alex Loughlin, Charles
Benn, Rt. Hn. Anthony Wedgwood Edelman, Maurice Luard, Evan
Bennett, James (G'gow, Bridgeton) Faulds, Andrew Lubbock, Eric
Bessell, Peter Fernyhough, E. Lyon, Alexander W. (York)
Binns, John Finch, Harold MacDermot, Niall
Bishop, E. S. Foley, Maurice Macdonald, A. H.
Blackburn, F. Ford, Ben McGuire, Michael
Booth, Albert Fraser, John (Norwood) McKay, Mrs. Margaret
Braddock, Mrs. E. M. Gardner, A. J. Mackenzie, Alasdair (Ross&Crom'ty)
Bray, Dr. Jeremy Gordon Walker, Rt. Hn. P. C. Mackenzie, Gregor (Rutherglen)
Brooks, Edwin Gregory, Arnold Mackie, John
Brown, Rt. Hn. George (Belper) Grey, Charles (Durham) Maclennan, Robert
Brown, Hugh D. (G'gow, Provan) Griffiths, David (Rother Valley) McNamara, J. Kevin
Brown,Bob (N'c'tle-upon-Tyne,W.) Griffiths, Will (Exchange) Manuel, Archie
Brown, R. W. (Shoreditch & F'bury) Hamilton, James (Bothwell) Mapp, Charles
Callaghan, Rt. Hn. James Hamilton, William (Fife, W.) Mendelson, J. J.
Carmichael, Neil Hannan, William Molloy, William
Coe, Denis Harper, Joseph Moonman, Eric
Coleman, Donald Harrison, Walter (Wakefield) Morris, Alfred (Wythenshawe)
Conlan, Bernard Hazell, Bert Moyle, Roland
Corbet, Mrs. Freda Heffer, Eric S. Mulley, Rt. Hn. Frederick
Craddock, George (Bradford, S.) Henig, Stanley Oakes, Cordon
Crawshaw, Richard Hilton, W. S. Ogden, Eric
Cullen, Mrs. Alice Hooley, Frank O'Malley, Brian
Dalyell, Tarn Hooson, Emlyn Orme, Stanley
Davidson, Arthur (Accrington) Hoy, James Owen, Dr. David (Plymouth, S'tn)
Davidson, James (Aberdeenshire, W.) Hughes, Emrys (Ayrshire, S.) Owen, Will (Morpeth)
Davies, Dr. Ernest (Stretford) Hunter, Adam Paget, R. T.
Davies, G. Elfed (Rhondda, E.) Hynd, John Pardoe, J.
Davies, Ifor (Gower) Jackson, Peter M. (High Peak) Parker, John (Dagenham)
Davies, Robert (Cambridge) Jenkins, Hugh (Putney) Pavitt, Laurence
Dell, Edmund Johnson, James (K'ston-on-Hull,W.) Pentland, Norman
Dempsey, James Jones,Rt.Hn.SirElwyn(W.Ham,S.) Perry, Ernest G. (Battersea, S.)
Dewar, Donald Judd, Frank Perry, George H. (Nottingham, S.)
Prentice, Rt. Hn. R. E. Short,Rt.Hn.Edward (N'c'tle-u-Tyne) Walker, Harold (Doncaster)
Price, Christopher (Perry Barr) Silkin, John (Deptford) Watkins, David (Consett)
Redhead, Edward Silkin, S. C. (Dulwich) Wellbeloved, James
Reynolds, G. W. Silverman, Julius (Aston) Wells, William (Walsall, N.)
Roberts, Albert (Normanton) Slater, Joseph Whitaker, Ben
Robertson, John (Paisley) Small, William White, Mrs. Eirene
Robinson,Rt.Hn.Kenneth(St.P'c'as) Steel, David (Roxburgh) Williams, Clifford (Abertillery)
Robinson, W. O. J. (Walth'stow, E.) Summerskiil, Hn. Dr. Shirley Wilson, William (Coventry, S.)
Roebuck, Roy Taverne, Dick Winnick, David
Rogers, George Thorpe, Jeremy Winterbottom, R. E.
Rose, Paul Tinn, James Woof, Robert
Ryan, John Urwin, T. W.
Shaw, Arnold (Ilford, S.) Wainwright, Richard (Colne Valley) TELLERS FOR THE NOES:
Shore, Peter (Stepney) Walden, Brian (All Saints) Mr. Charles R. Morris and
Mr. Whitlock.
Mr. Bessell

I beg to move Amendment No. 339, in page 48, line 21, after "shillings", to insert: except within a development area so designated by the Board of Trade, where the amount shall be twelve shillings and sixpence".

The Chairman

With this Amendment can be discussed Amendments No. 340, in line 23, after "sixpence", insert: except within a development area so designated by the Board of Trade, where the amount shall be six shillings and threepence". No. 341, in line 25, after "sixpence", insert: except within a development area so designated by the Board of Trade, where the amount shall be six shillings and threepence ". No. 343, in line 27, at end insert: except within a development area so designated by the Board of Trade, where the amount shall be four shillings ". No. 148, in line 27, at end insert: Provided that in the case of persons who are employed in any area which the Chancellor of the Exchequer may by order determine the tax shall be one penny for such period as may be specified in the said order. No. 211, in line 27, at end insert: Provided that Her Majesty's Government may by order impose varying rates of tax in different parts of the country. and No. 359, in page 50, line 24, at end add: (10) The Minister shall by order restrict or vary the application of this section in respect of such local government areas as he may prescribe.

Mr. Bessell

At this time of the morning it is difficult to initiate a debate, and particularly after the somewhat hilarious and at times disturbing interlude which we have just passed through. However, I believe that hon. Members on both sides of the Committee are satisfied that this series of Amendments is of particular importance not only to their own constituents if they represent development areas, but also to the whole economy of the country, because it is true to say that the purpose behind the Government's avowed intention to develop certain areas of the country is in order not only to assist those areas and the people who live in them but generally to strengthen the economy of the nation as a whole.

This group of Amendments, in the names of my hon. Friend the Member for Devon, North (Mr. Thorpe), Cornwall, North (Mr. Pardoe) and myself, and which we are glad to see has been supported by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin), are self-explanatory. We are seeking to reduce the rate of this tax by 50 per cent. in the development areas so designated by the Board of Trade. At this stage I should like to say that we do not on this bench like the Selective Employment Tax in its present form, but we are realistic enough to know that when the Government have a majority of nearly 100, there is very little likelihood indeed that a Clause of this sort will be removed from their Finance Bill. Therefore, we are seeking a compromise which I hope and believe may commend itself not only to Members of the Conservative Opposition but also to Members of the Government party who represent development areas in their own constituencies.

Her Majesty's Government have made it one of the main items of their policy to extend special aid to certain areas of the country, and this is a principle of which we in the Liberal Party approve. Indeed, we believe that the Government have been wholly right in adopting this attitude to areas of the nation which have been neglected for far too long. Moreover, we believe that it is important to correct the imbalance of the nation's economy, that certain areas of the country should be designated for special relief and special assistance.

We are all too well aware of the congestion in terms of traffic and in terms of people, the over-employment, the speculation which has taken place in land, and the housing shortages in areas like the South-East, in parts of the Midlands and parts of the northern industrial belt. We are aware equally of the under-employment, the depopulation, the low wage standards and the many problems which have confronted areas like the Highlands of Scotland, Mid-Wales and the Southwest of England from which I come.

To this end, Her Majesty's Government over a year ago initiated a number of economic planning councils, including one for the South-West, and it is part of their policy to do what they can to assist these areas in a pattern of growth and development. I venture to suggest that anyone who looks at Clause 42 logically must agree that a Selective Employment Tax applied in full to the areas which the Government have designated as being suitable for development is a complete contradiction of the Government's own policy.

It is a contradiction of their policy, but only in its present form, and I should like to make it clear that we on this bench are not by any means opposed to the principle of a Selective Employment Tax. I think that my hon. Friend the Member for Cheadle (Dr. Winstanley) in his speech on Thursday made this point abundantly clear to the House and it will be within the recollection of many Members on both sides of the Committee.

We believe that a payroll tax or Selective Employment Tax varied according to the resources of the various regions could indeed assist the Government in pursuing the policy of regional development and the special aid to development areas which they have declared an integral part of their overall policy for the economic recovery of the nation.

I would say to the Chancellor that the purpose of the Amendment is to help the Government to achieve the objects to which they have set their hand. To that extent, I hope and believe that the Chancellor will find it possible to accept the Amendment, which I am sure will certainly have the approval of the President of the Board of Trade who has shown himself to be eager, along with the First Secretary, to pursue this policy of regional development.

Mr. Winterbottom

When the hon. Gentleman is speaking of the payroll tax, I should like him to make it clear, because of what has been said previously, that the Liberal Party prefer a graduated payroll tax instead of the Selective Employment Tax, and that the hon. Gentleman is accepting the Selective Employment Tax as an alternative.

Mr. Bessell

I am obliged for the hon. Member's intervention. I realise that at this time of night one's thinking is sometimes not as clear as one would like it to be.

I accept what the hon. Member said. The Liberal Party would prefer a payroll tax in the form he suggested as compared with the Selective Employment Tax in its present form, but I am not so foolish as to think I can persuade the Government to accept a major change at this stage of the Finance Bill.

I want now to refer to the effects of Clause 42 on Cornwall. I am doing this in the knowledge that my hon. Friends, including the hon. and learned Member for Montgomery (Mr. Hooson), will undoubtedly wish to explain to the Committee the way in which this tax will affect Mid-Wales, and indeed that some of my hon. and right hon. Friends who represent constituencies in Scotland will wish to put before the Committee the problem as it affects their own areas. Indeed, the arguments which I hope to deploy for a few moments could apply equally, I believe, to any development area throughout the British Isles.

I should like to take as my first example of the effect of the Selective Employment Tax in its present form the effect it will have on the tourist industry, and anyone who believes that the tourist industry is not a vital part of the development of areas like Cornwall, Mid-Wales or Scotland, lacks a proper understanding of the problems of those areas.

2.15 a.m.

In 1965, about 2 million tourists came to the Duchy, and they spent about £42 million. The effect of this upon the economy of the country is two-fold. The coming of tourists to a development area assists the general economy and growth of the area. In addition, it assists the Chancellor in his vital task of balancing our overseas payments. It is estimated that visitors to this country from abroad last year spent something over £300 million in foreign currency here. But against that we have to set the amount of British currency expended by our own people who go abroad for holidays. It is in this way that an area like Cornwall can contribute to the balance of payments.

We know that the rate at which the British tourist spends money overseas is very little short of the amount spent by foreign tourists coming to this country. This being so, it is vital that we do everything in our power to assist areas like Cornwall in keeping down the price of holiday and tourist accommodation to a level which will enable them to continue to attract British tourists who might otherwise go abroad.

Dr. John Dunwoody (Falmouth and Camborne)

There is a small point to be emphasised here. Figures for the last complete year in Cornwall show that only 2 per cent. of visitors came from overseas. There is a problem here, but to present it, so far as Cornwall is concerned, in terms of large overseas earnings is to falsify the position.

Mr. Bessell

I did not suggest for a moment that any proportion or any large proportion of the amount I gave came from overseas visitors. I said that these were visitors to Cornwall spending about £42 million in British money, and, if they were prevented from coming to Cornwall by higher hotel prices, they might very well go overseas; thus adding to our balance of payments difficulties. I am sure the hon. Gentleman will accept that point as valid.

The British resort areas like Cornwall save the Chancellor an unknown sum of money. But the Selective Employment Tax could encourage people to go abroad. This is a valid illustration of how a development area, in spite of the intense economic problems which may beleaguer it, can assist the general economy of the country if itself assisted to do so. I have always maintained that it has never been part of the argument of the people of Cornwall that they seek assistance purely for their own economic benefit. On the contrary, we seek to improve our lot in order that we may make a valid and valuable contribution to the economy of the nation as a whole.

If the Selective Employment Tax is applied in full to the hotel and catering trades in Cornwall, as elsewhere, it must inevitably result in an increase in the cost of holidays there, which in turn will discourage people from coming to an area which the Board of Trade and the Government have declared to be one which they wish to assist in the interests of the national economy as well as of the people living there.

I want next to say a word about industry. The purpose of designating certain areas as development areas is to increase the opportunities for employment within those areas. If the Selective Employment Tax is applied at the full rate within the development areas it will tend to discourage potential developers and investors from going to those parts of the country. On the other hand, the Government's own policy could be furthered by reducing the rate of Selective Employment Tax within the development areas because the effect would be to attract industrial development within those areas which might otherwise take place in other parts of the country.

That is why I suggest in all seriousness to the Chief Secretary that it is an integral part of the Government's own policy of promoting the regions and the development areas that the Amendment should be accepted, because it would have precisely the effect which he and the Government require, of attracting to those areas development which might otherwise take place within the congested areas of the South-East, the Midlands or the North.

I would next say a word about housing. There is no hope of attracting additional population to the development areas unless we can provide the people who must go there to enable the development to take place with proper housing accommodation. The majority of the development areas cannot become viable economic units unless there is an increase in the population, and an increase in the population is not dependent purely upon the development of the integral trades and industries, such as agriculture, horticulture and tourism or even tin mining and china clay development. It also involves the provision of proper housing accommodation.

The Selective Employment Tax will hit the builder, particularly the small builder, very hard, and it will not attract to the industry any additional labour. Yet this is one of the most vital of our industries today. Also, it will not cause any person who is employed in the building industry to be removed from his post to go into any other occupation. We know that that cannot be so because of the shortage of labour in the building trade. But what we know beyond all possible doubt is that the Selective Employment Tax will once again lift the price of the finished article, in this case mainly the home which the builder is setting out to construct.

Therefore, I believe that within the development areas, where we know that housing, new hospitals, new schools and new factories must be built, it is vitally important that the tax should be levied at a completely different rate from that which will be charged in the rest of the country. I do not apologise for making a special plea on behalf of the development areas, for they are already recognised by the Government as parts of the country which require special help.

Having recognised that, there is nothing inconsistent with their policy if the Government accept the Amendment. I see no reason why they should not be able to accept it. If they fail to do so, they will be in clear contradiction of the policy upon which they fought the election and which we on the Liberal bench welcome because we believe that this kind of special development is essential. Housing, the tourist industry, hotels and catering, industrial development, schools, hospitals and roads—all these things within the development areas are affected adversely by the imposition of the tax.

Although we should like to see the Clause removed altogether, we know that this is a vain hope. Hence this Amendment. We have already had a long day's journey into night and it looks as though, before long, we shall see dawn breaking. I believe that hon. Members on this side of the Committee and, indeed, hon. Members opposite, will wish to speak on this vital subject of the development areas and the effect of the tax. Therefore, without further comment, I commend the Amendment to the Committee.

Mr. J. Grimond (Orkney and Shetland)

I shall not go again over the admirable points on Amendment No. 339 made by my hon. Friend the Member for Bodmin (Mr. Bessell). I do not like this tax in its present form. I have made that clear in the debate on the Budget and since. I have been fortified in my objection by numerous protests from all kinds of bodies both locally within my constituency and further afield.

One of the advantages of a well-thought-out employment tax should have been to help the development areas because it could have, been levied at a lower rate in such areas than in areas of full employment such as the Midlands. But the way in which the tax is to be imposed will achieve the opposite. The people who will gain are the already over-employed areas around Birmingham and in the South-East.

Earier, we discussed the effect of the tax upon various trades and occupations. One of the points which should now engage us is its effect upon various areas. The purpose of Amendment No. 148, standing in my name and the names of my hon. Friends, is to give the Chancellor greater flexibility over the areas and timing of the application of the tax to those areas. In this, I understand, it has an objective similar to that of Amendment No. 211 and Amendment No. 359.

This is not the occasion for developing a general argument against the tax as a whole but, although we may be unable to abolish this highly deleterious tax altogether, the Amendments would be of great advantage in meeting one of the points made by the Chancellor himself.

Mr. Evelyn King

Is it suggested that we should pass Amendments No. 148 and Amendment No. 339?

2.30 a.m.

Mr. Grimond

I understand that one Amendment has been selected to be moved and the others are to be discussed with it. [HON. MEMBERS: "Wake up."]

Mr. Evelyn King

I was asking the right hon. Gentleman whether he was arguing that both Amendments should become law, or whether what he is proposing is an alternative to the Amendment of his hon. Friend.

Mr. Grimond

I do not want to get diverted. I am referring to Amendment No. 148, the object of which is to give the Chancellor some flexibility and I am going on——

Mr. Michael Jopling (Westmorland)

rose——

Mr. Grimond

I only mentioned the other Amendments because I thought that they had a similar purpose. If it makes the matter easier, please forget anything that I said.

Mr. Jopling

The Committee would be most grateful to know which of the Amendments is Liberal Party policy.

Mr. Thorpe

On a point of order. Would you be good enough, Mr. Irving, to repeat, for the benefit of hon. Members not able to hear, your Ruling at the beginning of the discussion? Am I not right in thinking that what you told the Committee was that the Amendment which would be discussed would be Amendment No. 339 but, as has been the custom throughout the whole of this Committee, it would be in order to discuss other Amendments alongside of it?

Mr. Evelyn King

The hon. Gentleman has completely misunderstood the point, which is not what can be argued, but what is the Liberal Party arguing?

Mr. Grimond

It is a common practice to have a variety of Amendments down in the hope that, possibly, the Government may find one more acceptable than the others. We should like to see the Government adopt the Amendment moved by my hon. Friend the Member for Bodmin (Mr. Bessell). The Chairman has ruled that the other Amendment, which I am now arguing, can be discussed with it. May I proceed with the discussion, because this is not uncommon in the conduct of Finance Bills.

The point that I was trying to make was that the Chancellor has said that this tax may well have to be amended. My view is that he will have to amend it very quickly. I believe that he will find that many of the objections to the tax, for example, in its effect on the tourist industry, will take effect very quickly. It may have a much more serious effect than the Government realise, not only upon the hotels, but upon many subsidiary occupations, which are carried on in the tourist areas, shops, garages, and small businesses of all kinds. There will be areas in which it would be equitable to lessen the incidence of the tax from time to time. I do not want to go over again in detail the effect on the Scottish Islands of the seamen's strike, but it is a very good example of what I mean. It is the same people there, who have been devastatingly hit by the strike, who are going to be hit again by the tax.

This is an example of an occasion upon which the Chancellor ought to have some power to remit the tax. He has refused to accept an earlier Amendment giving him power to vary the date at which it comes into operation and I am suggesting a further alternative. He can make provision for exempting certain areas for a certain period of time from the full incidence of the tax.

I do not want to reopen the argument for the general reduction of the tax upon development areas, but on his own admission the Chancellor agrees that the tax will have to be amended. In the face of the very cogent arguments put forward about the effects of the tax upon certain areas, he should consider whether he ought not now to take some power to enable him to vary its incidence in a particular area.

Mr. Winterbottom

I have a great deal of sympathy with the Amendment, but I also have a great deal of practical knowledge, and I must face some of the difficulties associated with the subject-matter.

I believe in a proper tax, and a proper tax would meet the needs, for instance, of the tourist industry. But if we have the present type of selective tax, however we try to amend it, we shall be in the difficulty of creating even more anomalies—and goodness knows we have enough now. It is easy to set up something which is contradictory to what we intend to set up. I have great sympathy with the tourist industry, and I think that we should have been able to graduate a proper poll tax to meet the needs of the development districts. But how can we do that with a tax of this description?

The right hon. Member for Orkney and Shetland (Mr. Grimond) is perfectly right: we cannot deal in isolation with the districts which meet the needs of the tourist industry. We have to deal also with the garages, the shops, and a whole host of things touched on by this tax. Then there is the problem of the catering industry. Where are we to start and end?

The catering industry is a vast conglomeration of things. For my sins, I was one of those who served on the catering wages boards which were set up by the late Ernest Bevin to meet the needs of the catering industry. We came across some very serious problems. Five boards were set up. One was a canteen board. We do not need to deal with that. There was the licensed residential establishments board, which dealt with hotels and licensed restaurants. But they are not confined to areas which largely take in tourists; they are throughout the country. How are we to make a just and right distinction for the tourist industry? We cannot make a separation into localities or seasons because some of the tourist industry is dependent on purely seasonal trade. Difficulty would be caused if we attempted to draw a distinction under the Selective Employment Tax, because some licensed establishments and restaurants would be covered and some would not be covered.

How would we deal with the public houses, because they are part of the catering industry? They come within the category of licensed non-residential establishments.

Then there is the board dealing with unlicensed places of refreshment, which covers all the catering establishments excluding those unlicensed places which are known as private hotels and boarding houses, for which another board was set up but which has fallen into desuetude because nobody could agree on it. Something would have to be done in regard to the wages paid to those people in the boarding houses and private hotels if one were to justify something in the nature of a concession to that part of the catering industry for the tourist trade.

It is, therefore, a complicated task that the Liberal Party have set out in the Amendment to this selective tax. Whilst I have all the sympathy in the world with them, I do not see how they can overcome some of the difficulties which flow from the industrial life of Britain, and solve them in such a way as to meet the immediate needs of the Selective Employment Tax.

I rather think that it is because of the peculiarities and the complications that the Government must be automatically compelled to reject the Amendment. I say that with great regret, because I hope that out of all the discussions that are taking place in this Committee and in the House on the Finance Bill we shall not enforce, because "enforce" is the wrong word, but possibly inspire some forward move concerning this type of tax to make it possible for it to be introduced by the Government to meet the special needs of the development areas, including the tourist industry and the catering industry in the special areas of the country where these predominate.

Even though I think that the Amendment is well conceived and something that is necessary, I visualise success with it only if fundamentally this Selective Employment Tax is changed into the type of tax that most of us would like to see.

Mr. Paul Dean (Somerset, North)

It is a matter of great regret that we begin a debate on this highly important subject after 2 o'clock in the morning. This is the first occasion during the progress of the Bill when we have been able to deploy the case for regional rates of tax. It is equally deplorable that the First Secretary, having blundered in here earlier and gagged our debate, should not now be here when we are discussing a subject concerning regional rates of tax which is of prime concern to his Ministry.

Having said that, I should like to address my remarks largely to Amendment No. 211, tabled by a number of my hon. Friends and myself representing West Country constituencies. In that Amendment, rather like the Amendment of the right hon. Member for Orkney and Shetland (Mr. Grimond), we do not intend to pin down the Chancellor to specific rates of tax. Our intention is to establish that the rates should vary in accordance with economic conditions in different parts of the country.

I go further than the hon. Member for Bodmin (Mr. Bessell). I believe that if this regional rate of tax is to be successful, it should go wider than merely the development areas. If, however, we are to have a selective tax of this kind, it is a fundamental mistake to make it selective by industries rather than geographically. I hope to establish the case by reference in particular to the West Country. In doing so I recognise that the case for other parts of the country, particularly Scotland, is equally strong, but I draw my illustrations from the West Country because, naturally, I know more about that than any other area.

2.45 a.m.

This will hit the West Country hard, for two main reasons. The first is the economic difficulties which we face art the moment, and the second is that the service industries predominate in our economy. On the economic side I should like to remind the Committee of one or two important facts which emphasise the case for a varying regional rate. The first is the age structure of our population in the West Country. We have nearly 4 per cent. more people over working age than the country as a whole. Indeed, this percentage is growing year by year. We have now over 15 per cent. of the population aged 65 or over, in comparison with under 12 per cent. for the country as a whole.

The second main point is our comparatively low average income, and also that the average weekly earnings are much lower in the region than in England and Wales. The third point is the comparatively small percentage of our working population which is engaged in manufacturing industry. Manufacturing industry in the West Country accounts for only 25 per cent. of employment, compared with 38 per cent. for the country as a whole. In other words, a very much smaller proportion of our employed people are going to get the benefit of the rebate in comparison with other parts of the country. Another factor, brought out very clearly in the National Plan, is that we have one of the lowest activity rates in the country, and, therefore, a large potential reserve of labour. These are, I believe, immensely powerful factors in this case for a varying rate of tax.

I admit—and I know that the Chief Secretary will say this—that our main problem areas in the West Country are getting valuable help under the previous development district policy now being continued under the development area policy, but, as the hon. Gentleman the Member for Bodmin pointed out, this tax will work against the regional development policies.

There are other important factors, too, which I wish to put, and the first is what one may call the magnet of Europe. The closer we get in economic and other relations with Europe—I am not arguing this case one way or the other, but am merely saying that the closer those relations become—the stronger the pressures will be for development in the eastern half of this island. Indeed, this is one of the reasons why we are angry and frustrated by the delay by the Government on a decision on the Portbury dock scheme, and why we attach immense importance to a motorway from Bristol far west into the peninsula.

Portbury is essential to the development of Severnside, and the economic development which Portbury could create can only spill over effectively into the far west if we get better communications than we have at present. All of us in the South-West, including our economic planning council, agree that the combination of the go-ahead for the Portbury dock scheme plus the spine road into the far West Country can have the most immediate effects on the economic growth and on the development of the region as a whole.

These two developments, one for a port and the development which would go with it and the other for a spine road, could be powerful counter-magnets to the pull of Europe and the development in the eastern counties which that will perfectly naturally and perfectly properly tend to generate. I see my hon. Friend the Member for Bury St. Edmunds (Mr. Eldon Griffiths) nodding his head. Yet on both these things, we wait. We wait for a decision on the Portbury Dock scheme, and, as for the spine road, all that we can expect under present plans is a short distance into Somerset by the early 1970s, with no specific date for the road to go further.

There is also the significance of the discovery of natural gas in the North Sea, which is a highly welcome development from the point of view of the country as a whole. There is no doubt that that, too, will be a powerful magnet for development in the eastern half of the country, and it is another reason why a lower rate of Selective Employment Tax for the south-west region is one which can be justified very strongly.

The second main point to which I want to refer is the importance of the service industries to our economy in the Southwest. Our two foremost industries are agriculture and tourism. Under the original proposals of the Government, both were to be hit; both were to pay the tax in full. Fortunately, agriculture is now in the neutral zone and will get refunds, but tourism is not.

I was glad to know that the Chief Secretary said a few days ago in earlier discussions on the Bill that the Government were having another look at the problems of the tourist trade to see if anything could be done to relieve them. I hope very much that that will result in some change of view about the tourist trade. Unless the Government change their mind, there is no doubt that the tourist trade and the West Country will be hit very hard.

Tourism is one of our main livelihoods. It is quite as important to us as manufacturing industry is to the Midlands; yet the prosperous Midlands will get a rebate under the tax, while the less prosperous South-West will bear the full burden of it. Indeed, there will be a double blow to our tourist trade, not only the Selective Employment Tax but also no investment grants. When one considers what roughly one-third of the population of the West Country depends upon tourism for its livelihood, one can realise what a serious situation it is from the point of view of our economy.

The South-West is the main holiday area in these islands. We take something like 20 per cent. of those choosing holidays at home, in comparison with 14 per cent. in the case of Wales and 12 per cent. in the case of Scotland. We also attract a good many foreign tourists. The total expenditure of holiday makers from home and tourists from abroad is something like £100 million a year.

The Chancellor has tended to answer these pleas from the regions in the past by saying, "Look what we are doing to help under our development area plans." This argument simply does not stand up to examination, certainly in the West Country. It is estimated that more than two-thirds of the foreign currency earned by tourism in the West Country, is earned outside the development areas, and that more than two-thirds of domestic holidays taken in the West Country are taken outside the development areas. There are four main accommodation centres for tourists in the South-West—Newquay, with one-quarter of the rooms in Cornwall; Tor Bay, with half the rooms in Devon; Weymouth, with a quarter of the rooms in Dorset; and Weston-super-Mare, with one-third of the rooms in Somerset. Only one of these, namely, Newquay, is in a development area, so I hope that if the Chief Secretary is tempted to use this argument he will bear in mind those cogent facts about the tourist industry in the West Country.

I conclude by saying that we do not feel that we are getting a fair crack of the whip in the West Country. We do not feel that the Government are giving us a fair chance to help ourselves. We are not getting sufficiently serious attention from the Government with regard to the forces which will inevitably tend to attract development to the eastern part of the country at the expense of the west, unless counterbalancing action is taken. We resent the discrimination against our major industry, tourism, through no investment grant, and now through the Selective Employment Tax. I appeal to the Government to recognise the force of these arguments and the need to levy a lower rate of tax in the West Country and in areas similarly situated.

Mr. Pavitt

The hon. Member for Somerset, North (Mr. Dean) has made a very good case for his area, and particularly for the tourist trade. My main concern in following the hon. Gentleman's case is whether a varying incidence of the Selective Employment Tax in different parts of the country would make the scheme so complicated that it would be difficult to work out. But it is not my job to do that. That is my right hon. Friend's job.

I want to follow the interesting case put by the hon. Member for Bodmin (Mr. Bessell). He suggested that a special effort should be made with regard to the development areas, but at the same time he recognised that by other measures, by Board of Trade grants, and so on, the Government had already taken steps in the direction that he wants to go. The hon. Gentleman seemed to be saying that this tax could be used as another weapon in the massive armoury which the Government were using to develop these areas and to ensure a more even spread not only of population but of industry.

It seems that from the point of view of manufacturing industry these areas will be no better and no worse off than any other area of the country, and therefore there will be enough incentives in the other measures to make sure that we get more factories and more jobs and that we are able to spread them further afield. My concern is whether we can have a balanced development in the areas where there will be a massive growth of factories, new estates and new towns, designed to provide more jobs spread more evenly over the country instead of being too heavily concentrated in the South-East.

The incidence of this tax with which I am concerned is the weighting of it in favour of the manufactured article as opposed to the services of the people who manufacture them. In the early days of the development of areas, one of the big problems was that houses were put up without adequate jobs being provided in the area, and that factories were erected without adequate social amenities and services being provided to go with them.

3.0 a.m.

If we are to have a massive redeployment of labour then that labour needs bread, milk, groceries, butchers and other services to cater for it. One does not want to exaggerate the importance of the incidence of the tax because the Government have a number of weapons in their armoury to deal with these kinds of problems. I should be grateful if a Treasury Minister would, whether or not this Amendment receives the support of the Government, give an assurance that we shall not, as a result of this tax, get uneven development but that as the number of jobs and the number of producers in industry increases so will be services required by the people.

Mr. Gower

The hon. Member has referred a number of times to the armoury which the Government possess for bringing industry to these areas. Does' he not think that it is rather absurd that, while the Government have certain powers to take new industries to these areas, this tax and other things done by the Government are designed to inflict the utmost damage on the industries in these areas? It seems rather absurd.

Mr. Pavitt

I cannot accept that. It is true that in some cases there could be a conflict of that kind. The hon. Member for Somerset, North instanced the tourist trade and there have been examples of hotels and we have discussed the difficulties there. This is something which affects some things harder than others and it will depend entirely on how the tax works. I am sure that the Government will be flexible in their deployment of labour and in spreading labour from the South-East, and that their plans for housing, jobs and services will be continued in an orderly manner. Even if the Selective Employment Tax does not help, I hope that the Government will have regard to the other means whereby planned development can be assured.

Mr. Evelyn King

Any criticism which I have to offer will be directed not to a Selective Employment Tax as such but to the fact that it is not selective, or selective only to a minor degree between two particular forms of occupation.

The seven Amendments which we are discussing are directed only to one issue and that is to try to make this rusty engine into a precision instrument. We seek to give it a pre-selector gear. The debate must range over the problem of, if we are to do this, what is the best method of doing it? That is why I interrupted the right hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond). I am not quite clear whether he was suggesting that there should be a reduction in the tax in the case of development areas and that in addition the Chancellor should have the right to designate other areas, or whether these two things were alternatives. The hon. Member for Devon, North (Mr. Thorpe) did not seem able to grasp this. I was not making a general criticism of the Liberal Party, but sought only to clarify the debate.

We start from the point that the tax is designed, as part of its economic effects, to shift people from service industries to manufacturing industries. In development areas the tax could do this as there are manufacturing industries into which people could transfer. But I am more concerned with areas such as South Dorset in which there is no manufacturing industry to which a person can go. For this reason the tax, as it is arranged now, seems to be pointless. I should like to address my observations to the Amendment in my name which would add to line 24 of page 50 the words: The Minister shall by order restrict or vary the application of this section in respect of such local government areas as he may prescribe. I want to turn this blunt instrument into something sharper.

I want to indicate to right hon. and hon. Gentlemen opposite what they have done to South Dorset, and I hope they will believe that 1 am not exaggerating. Every area has certain economic bases on which it depends for its life. In South Dorset these are not hard to identify. The first is the stone industry at Portland. Next is agriculture. Next is the old and pensioned, who form a far-above-average proportion of the population. Next, are such light industries as exist.

Every one of these economic interests has received a hammer blow from the Government at some time in the last 20 months, not, I am sure, by design but simply because of the habit of forging some control or new tax in Whitehall without thinking of the effects at the furthest end of the line of communication.

To give one example, when the President of the Board of Trade banned office building in London which, within the context of London may, for all I know be a sensible thing to do, I wonder whether he or the Government took into account the fact that office building is the largest consumer of Portland stone and that the immediate effect was to cause unemployment in Portland. I would not make so much of the point if I thought that the Government had considered this as one of the inevitable risks of the policy and had nevertheless taken the risk. In fact, I believe that the Government did not think of it at all. I suggest that frequently in a number of controls and taxes which they impose they do not think of the result at the end of the lines of communication. They ignore rural and coastal England. Portland is very important to my constituency.

The second interest is agriculture. We have had two disastrous Price Reviews and then this tax. It will have the effect at the end of harvest time of imposing upon the farmer, just when his bills are coming in, a forced loan which will be given back to him five months later. There is the hammer blow at agriculture, the second economic interest on which Dorset depends.

The third interest is the old. I do not want to talk at length about them, because many hon. Members have done so, nor do I want to be sentimental about them, but the fact remains that proportionately they are a large section in my constituency and everyone knows that this tax will hit them. At Question Time this afternoon we heard that the addition to pensions 20 months ago is already worth 5s. less. Many of these people live in old peoples' homes, often privately run. There will be further difficulties in servicing these homes. Many pensioners are in employment, as old-age pensioners, and the prospect of their retaining their employment must be diminished.

Light industries represent another example of Ministers not knowing what each other is doing. Poor Weymouth! It has just one sizeable factory—only one—and that is Vickers. It employs 1,000 men and in a town of 40,000 probably 3,000 to 4,000 live on it. Only a few weeks before the Chancellor imposed this tax urging that men must transfer from service industries to manufacturing industries, it was announced that the Vickers factory would close down. How do men transfer to factories which are not there? In addition, two further light engineering factories in the area are closing down. It may be claimed that this is bad luck, but on top of this we come up against the policy of the President of the Board of Trade who for some years has refused to issue i.d.c's. in respect of Weymouth and the area. Not only are there no factories to which men can go, but none is allowed to be built, and therefore the Chancellor's aim of transferring men and women from service industries to manufacturing industries becomes impossible of achievement. Do not the Chancellor and the President of the Board of Trade understand each other's policies?

I have taken each one of the economic interests on which my constituency depends. Each one in turn has been picked out by the Government and has been hit. I hope that the Chief Secretary will realise that while I am sure that the Government have not deliberately picked out these interests to be hit, the fact is that they govern in the interest of London, Birmingham or other big cities and have not realised that more than half the population of the country does not live in the large cities. People who live and earn their living in the smaller areas receiving insufficient attention from the Treasury Bench.

We come to the last industry in which my constituency is interested, for Dorset relies to a great extent on tourism. I will not deploy all the arguments again about the way in which the tourist industry is being hit, but I ask the Chief Secretary to realise that to Dorset it is our only lifeline. He has already hit all the others. There is not much liking left in Dorset for what the present Government have done. If tourism is hit there is little hope left.

When one talks about tourism one tends to think of what is sometimes seen on television. The other week I appeared on T.V. in a programme in which we discussed the Selective Employment Tax. Preceding that programme was a film showing a luxury hotel complete with corpulent commissioner outside looking as if he received 10s. every time he opened a car door. But that is not the kind of tourist industry we have in Weymouth. The two largest hotels are most modest in size and I am more concerned with the tourist industry run by seaside landladies, and along the front is Pontin's holiday camp.

No millionaires come to our part of the world. Most of the people who spend their holidays in Dorset are car workers from Coventry, Birmingham and Wales. The Government must realise that what they are doing by the introduction of S.E.T. is affecting the prices that are charged to those with modest incomes who come to spend their holidays in my part of the world. They are, therefore, harming both sides—those who take their holidays and those who provide holidays.

Anyone with a heart beneath his ribs must feel some sorrow at the plight of seaside landladies, for whom I have great affection. These are mainly widows; often people who have endured some hardship and for whom this is the only career available. They work round the clock, running up and down stairs even when they are 60 and 70 years of age. I resent the Government making their lives even harder.

How far is it suggested that there is hoarding of labour in this industry? I have a friend—other hon. Members probably have similar friends—who is the head waiter in one of the major hotels in my area. He has served me with meals at all hours of the day and night. He told me that in a recent week he worked 64 hours. This is not an industry which is hoarding labour. Indeed, there is a desperate shortage of staff.

Mr. Bessell

The hon. Gentleman might care to mention that there is a shortfall in the tourist industry, in hotels, of 48,000 people at present.

Mr. King

I was about to mention that. It is true. It is part of the Government's argument that had they not introduced S.E.T. they might have had to raise Income Tax and that would not have been popular. However, it would have been very popular indeed among the people about whom I have been speaking. I am concerned with the small hotel or boarding house which employs, perhaps, seven people. That would be an average establishment. Such an hotel would be likely to earn a profit of £1,200 to £1,300 a year. The S.E.T. will remove about £300 of that, or 25 per cent. of the profit. However, 1s. or 1s. 6d. on Income Tax—because it is charged only on the profit actually made—would have been better from their point of view. Some boarding houses of this type make hardly any profit at all. At least, with Income Tax, one pays it only on one's profit. With S.E.T. one pays it whether or not one makes a profit.

3.15 a.m.

Finally, I turn to the other kind of hardship. All these hotels and boarding-houses live on part-time labour. In South Dorset and the West of England there is a low-wage economy. We do not suffer from much unemployment, although in South Dorset we have double the national average, but we do suffer from having a low-wage economy. To give an example which I hope will shock hon. Members in all parties, a dockyard labourer in Portland still earns under £9 a week. We heard at Question Time that the national average wage is £20 a week. That dockyard labourer finds life hard, but in summertime his wife often goes to work at the local hotel and adds considerably to the family income. Even then the family income is modest. If the effect of this tax is to remove those part-time workers—if not there seems no object in the tax—it will incite such places to operate much more through employment of students, Italians and Spaniards, and families in Dorset will suffer real hardship. These arguments apply largely to the West of England and to Scotland.

I hope that the Chief Secretary will find time to answer these points. In Birmingham, Manchester, Leeds and Liverpool people may be attracted from the service industries to walk across the road and obtain work in a factory, but in Weymouth and South Dorset that is impossible because there is no factory for them to go to. The tax is left without a purpose in that case. That is the reason why I suggest that there is good ground for making the tax selective by way of area because it is possible to identify the sort of area I have in mind which frequently is not a development area and we can ease problems which otherwise will become increasingly harsh as years go by.

Dr. David Owen (Plymouth, Sutton)

It is with some diffidence that I address the Committee at this late hour, but there are a number of things I wish to point out. Like my hon. Friends who have spoken in this debate I do not feel able to support this Amendment, but I feel great sympathy for the motives behind it.

I feel that there is a need to put, not in this Bill but in the Selective Employment Payments Bill, some degree of regional flexibility. I do not believe that this Amendment is appropriate as it is framed. The only way to obtain regional flexibility is in the form of a refund. Therefore, it is to the Selective Employment Pay- ments Bill that those of us who wish to get some concession should direct attention. I do not think it fair to tie the Government to any exact figure at this stage. I would much prefer to extract from the Government a concession in principle for regional flexibility.

I do not want to reiterate what I said on Second Reading of the Selective Employment Payments Bill, but the difficulty with which we have been faced in these debates has been the inevitable overlap between that Bill and the Finance Bill. This is an understandable difficulty and hon. Members opposite who complain that they have not had time to debate these issues are being given in fact two opportunities to debate them. I certainly have nothing to complain of. The Government have gone out of their way to handle the whole affair generously and fairly, and I think it is totally irresponsible to criticise them in the way that they have been criticised.

Mr. Michael Noble (Argyll)

Does not the hon. Gentleman think that in making that argument, it would be a little easier for him if there were on the Government Front Bench a single Minister who had responsibility for these affairs? We have not got the First Secretary, who is the Minister responsible for regional development. We have not got—indeed, we have not had all day—one single Minister from the Scottish Office, which represents an important part of the British Isles. We have not got the Minister of Agriculture, Fisheries and Food, or the Minister of Land and Natural Resources. I know the Chief Secretary will do his best to be Poo-Bah for the whole lot, but does not the hon. Gentleman think that it is a slight affront to him and to those of us who are working at this time of night that there is not one responsible Minister on the Government Front Bench?

The Temporary Chairman (Mr. Harold Gurden)

I hope the hon. Member for Plymouth, Sutton (Dr. David Owen) will not follow up this point too much because it is not in order to discuss the Government's handling of affairs. Hon. Members should keep to the Amendment.

Dr. Owen

Since the point has been made, I should like to answer it briefly. I am new to the House, but it has always been clear to me that HANSARD is available to all Members of the Government, and that is what they read. They cannot always be here on these occasions. Anyway, I am directing my attention to the matter before the Committee, and the issue is sufficiently important for us not to waste time on these points of detail.

We have not heard much about unemployment, and this is the most important reason for regional flexibility. We ought to analyse what is the likely effect of this tax. We all know that it is extremely difficult to forecast its exact effects. The first thing that ought to happen, and one hopes will, is that the tax should be absorbed. I believe that this is unlikely to occur, particularly in those regions of the country which have low incomes and development problems. I therefore think that they are faced largely with two options. The first option would be to keep prices steady and to throw off labour immediately. The second option is to put prices up, to wait for the cut in demand and then be forced to throw off labour. I believe that in development areas and in regions which are hard hit, in particular in the South-West, it is that first option that they would be forced to take. The danger of that first option is that we would throw off much more labour by taking this rather than the second option.

The reason they will take the first option is that in the South-West incomes are low. We know from the survey of incomes that was carried out in 1959–60 that in the Soudi-West the average income was £690, whereas the national average for the United Kingdom was £731. Here I would remind the hon. Member for Dorset, South (Mr. Evelyn King) that the southern region average was £733. The points that the hon. Gentleman was making were largely constituency points. We must try to look upon the country and the regions as a whole.

The hon. Gentleman also made a number of other points which were allowed by the Chair and which I feel need a reply. He said that he would be happy to have the standard rate of Income Tax increased. I have spent hours in the Committee listening to the hon. Gentleman's hon. Friends propos- ing that we should cut the standard rate of Income Tax, despite the fact that we face a severe economic crisis. That is irresponsible. Let us have some consistency, for goodness sake. We must analyse this situation on a regional basis and take careful note of the unemployment figures.

In the South-West the unemployment figures vary very considerably from unemployment exchange to unemployment exchange. The hon. Member for Dorset, South drew attention to his Amendment in which he proposed that the difference should be made on local government areas. I cannot imagine any area more inappropriate because the statistics available for local government areas are worse even than for most other areas. I have made this point before. Our real need is to unify and standardise our sub-regions so that we are able to act on sufficient information which at the moment we do not have. We must have a collation of information in order to have some form of statistical analysis.

This question of regional flexibility is one which the Government must seriously consider. Low-income areas like the South-West, where the economy is very insular, and where there are no great national companies to absorb the tax, will be forced to keep prices steady, and the tendency will be to throw off labour and thus raise unemployment in an area where unemployment is traditionally high.

The Government have already done a great deal to lower unemployment figures, and we are very grateful for their regional policies. All I would ask the Government is to allow themselves in their other legislation, which we will be discussing again, to enshrine the principle of regional flexibility so that if unemployment does arise in these regions or sub-regions they can act swiftly without coming back to the House for further legislation to give them that power.

Let us have that power on a very wide and permissive basis now; then I think we can welcome the Selective Employment Tax with much greater enthusiasm than we would at the present time.

Mr. Pardoe

I should like to clear up a confusion which may have arisen in the minds of some hon. Members and which has been raised by the hon. Member for Dorset, South (Mr. Evelyn King) about the two Amendments—one standing in the names of certain of my hon. Friends, and one in the names of the hon. Member for Bodmin (Mr. Bessell) and myself.

The point about these two Amendments is that our Amendment seeks to lower the rate of Selective Employment Tax to half the proposed rate, in areas designated by the Board of Trade as development areas. The other Amendment seeks to reduce it to the nominal figure of a penny in any areas that are designated from now on by the Chancellor of the Exchequer, and this goes back to the problem of the old development districts which were smaller areas within the present development areas. There might well be a case in the future for having a lower rate of tax than the half rate we have proposed in certain areas.

I would like to follow the hon. Member for Plymouth, Sutton (Dr. David Owen) in his remarks about the South-West. Of course the Chief Secretary will have seen the survey published in The Guardian concerning the effects in the various regions. I know that this has to a certain extent been outdated by changes the Government have made in the tax since it was originally announced, but he will have seen that the South-West comes out second highest of all the areas in relation to the incidence of this tax, it is an area that cannot stand this kind of treatment.

I do not want at this stage to deal with the South-West as a whole. Many points have already been made about the area, and I agree with all these. The point I want to make is that, within a region, one can have areas in which the effects of this tax are hidden, and this is particularly true of Cornwall, almost the whole of which is a development area. The primary purpose of the tax, we understand, is to direct labour out of the service industries into manufacturing industries. There are various reasons why this should be done and I do not argue that it does not need to be done in certain cases. But what happens in areas where there is little manufacturing industry?

3.30 a.m.

In Cornwall manufacturing industry employs only 13.4 per cent. of all insured workers compared with 38.1 per cent. for the country as a whole. Thus, we have a substantially smaller proportion of manufacturing industry into which employees can be drafted when turned out of services. Our services, on the other hand, account for 61 per cent. of all insured workers, as opposed to 39.4 per cent. in the United Kingdom.

Where will they go? They will cross the Tamar, as their fathers and grandfathers have been doing for a very long time. The population of Cornwall in the 1861 census was precisely what it was in the 1961 census.

We have the problem of a low activity rate. Taking the 1961 figures, 62 per cent. of our working-age population were actually at work compared with 76 per cent. in the United Kingdom. Our problem is to encourage into work those people who are not at present working—a much higher proper proportion of the population than elsewhere in the United Kingdom. Our local authorities undertake surveys to try to establish how many people there are who would work if industry were brought to the area. Our problem is not to discourage employment, which is the aim of this tax, but to encourage it.

We have the problem of slow growth of employment in Cornwall compared with the South-West as a whole. In the period 1952–63 the number of insured employees rose in Cornwall by 8 per cent. compared with 14 per cent. in the south-western region. Again we see that within the South-West as a whole there can be smaller areas which are worse off. The level of employment in manufacturing industry reveals this even more clearly. Between 1953 and 1963, employment in Cornish manufacturing industry fell by 15 per cent. whereas in the whole of the South-West it rose by 15 per cent.

We have considerable problems with seasonal unemployment. These will not be helped by the tax because most of the seasonal unemployment is brought about as a result of our dependence on the tourist trade. Between January and July, it is quite common for unemployment in Cornwall to fall from 6½ to less than 2 per cent. This differs entirely from the rest of the South-West or the United Kingdom. Average unemployment in Cornwall throughout the year is two or three times what it is in the rest of the south-western region.

>As the hon. Member for Plymouth, Sutton pointed out, we have substantially lower incomes in the South-West than elsewhere.

Mr. Robert Cooke (Bristol, West)

Reverting to what the hon. Gentleman said about unemployment in the summer being so different from what it is in the winter, how would he deal with the consequential problem there? If those people were brought. into industrial employment in the winter, how would he hold them during the summer?

Mr. Pardoe

I do not think that that has anything to do with the Amendment. Neither the Selective Employment Tax nor the abandonment of it can entirely cure that problem. It is, however, a point, and it leads to the very substantial average level of unemployment in the area.

The hon. Member for Plymouth, Sutton said that in the South-West we have substantially lower incomes than elsewhere. This is of immense importance in viewing the tax. Earlier today I said that I supposed it was a principle of Socialism in taxation that one should levy from those with the ability to pay. This applies to regions. But the trouble is that the tax will be a very much higher proportion of wage and salary payments in the South-West than in the rest of the country. I follow that argument about the South-West by pointing out that employment incomes in Cornwall averaged £530 per head per annum this year compared with £645 for the United Kingdom. So they are even lower than the figures for the South-West quoted earlier.

On an earlier Clause the Chancellor told us that it was nonsense to suppose that the investment grants had been entirely cancelled out in their effect on areas like Cornwall and the South-West by such proposals as this. I am not convinced by that argument. I fear that it will be the argument put forward by the Chief Secretary to this Amendment. Of course the grants are very welcome, but the effect of the tax, with certain other Government measures recently announced, will be largely to cancel out the very beneficial effects of the investment grants.

I want to show the Chief Secretary how I reach that point. The construction industry is extremely important, particularly in Cornwall, and it employs a much higher proportion of the insured population there than in the rest of the country. But in Cornwall the industry depends very heavily on two factors. One is additions and new building for the tourist industry, and the second is new buildings for housing. We do not have much industrial building. We have no investment grants for the tourist industry, and we now have this heavy tax on top, and so it is unlikely that we shall see any vast expansion in building for the purposes of the tourist trade.

We have also just had a circular from the Ministry of Housing and Local Government telling us that almost none of the houses we want to build in Newquay, say, will in future qualify for loan sanction. So we are hitting the construction industry at both ends. Newquay is a major tourist area. The growth in the number of insured employees in the tourist industry there between 1955 and 1963 was 55 per cent. This is a growth industry if ever there was one. We have the finest beaches in Europe. If we want growth—presumably growth industries is what we are looking for—here we have an instance of a 55 per cent. increase in the insured employees in one industry in one town. Yet the Government now say that the building industry is not allowed to provide new houses for them. So there is an interaction here between the tax and all sorts of other measures announced recently by the Government.

I feel that the Government's main point for not doing anything about the Amendment will be that it would be administratively difficult. No doubt the Chief Secretary will put his hand on his heart and say that the Government would love to do something for areas such as Cornwall and that their hearts bleed for them but that it is administratively impossible. I can suggest a way in which it could be simply done by means of the National Insurance stamp. We could quite well have a different value stamp issued through the post offices in Cornwall for all the industries there. It would at least get the Cornish stamp that my hon. Friend the Member for Bodmin has been campaigning for.

I do not accept that any Government are entitled to bring in such a tax and say, "We cannot do anything to make it less onerous in certain areas because we do not have the tools to hand." Government is not the art of the possible but the art of making possible. If a Government find that they have not the tools to hand, that the administrative system will not cope with what they want to do, then it is their duty to alter the administrative system.

It is precisely the same with the House of Commons. If the Government find they cannot get legislation through and that a large amount of time is wasted, then let them reform the place. That is what radicalism is about.

Mr. William Hamilton

I cannot complain about the tenor of the debate up to now. There has been a great deal of special pleading of one kind or another, and one cannot object to that either. We have heard arguments in favour of differentiating for development areas and development districts and of other communities which are neither of these two, arguments for the latter coming from the hon. Member for Dorset, South (Mr. Evelyn King). This is precisely the sort of argument, however, which leads to the colossal difficulties to which the hon. Member for Cornwall, North (Mr. Pardoe) referred.

The initial purpose of the tax was not primarily as an instrument for regional development or even to transfer labour from services to manufacturing. The primary purpose was to raise cash, about £240 million a year, and it was important to raise it fairly quickly and to make sure that everyone knew who would pay and how much.

This led to many rough edges—one cannot deny that. But when debating the Amendment and the desirability of regional differentiation, I hope that the Tory and Liberal Parties are now saying that they are committed to fiscal differentiation on a regional basis. We should be glad of such an assurance. I hope that the Conservative Party is committed to fiscal differentiation in favour of areas like Scotland, the North-East, the North-West, South Wales and the South-West. If they are, we are glad to know it because we shall know what to do in the next four or five years.

Mr. Bruce-Gardyne

If the hon. Gentleman does not think that the Con- servative Party was committed to fiscal discrimination, what does he think the system of free depreciation introduced by my right hon. Friend the Member for Barnet (Mr. Maudling) in favour of development districts was?

Mr. Hamilton

The answer to that was in the results in Scotland in the last two General Elections. The Tory Party was given a kick in the pants in 1964 and a worse kick in 1966 precisely because it did not differentiate in favour of these areas.

It is no good debating these matters in a vacuum without regard to what the Government have been doing about regional development of one kind or another, both financially and physically, through positive incentives to go to areas like Scotland and through negative disincentives to discourage further development in areas like the Midlands and the South-East.

3.45 a.m.

I will concede that it is difficult to argue against the proposition that the effects of the Selective Employment Tax will retard regional development, to which the Government are committed. I hope that when my right hon. Friend winds up the debate he is going to say that the total cost to the development areas will be reimbursed in some other way. It is important that this should be used as an additional weapon in the armoury of regional development. If this is said, then it is a very powerful instrument and an extremely flexible one.

One can change the incidence of it as between one industry and another, almost between one factory and another, and certainly between the sexes if need be. There is an infinite variety of ways in which this tax can be used. If my hon. Friend is going to make this kind of noise no one would be more delighted than I. I come from an area, as does almost every hon. Member who has spoken, which is crying out for this kind of discrimination. I have already tabled Amendments, which would have the effect of discriminating between these and other areas, to the Bill which is in the hands of the Minister of Labour.

I want the premium paid only to industrialists in development areas and not to industrialists in the South-East and Midlands. If we can use the premiums as well as the tax payments, in favour of the kind of regional discrimination that I have in mind, then we on this side of the Committee will be well pleased.

Mr. Jopling

I cannot quite understand why the Government have tried to pursue a policy of regional development, with the establishment of regional economic planning boards and councils and so on, and why, at the same time, they are anxious to bring in a tax of this sort. I agree with the hon. Gentleman the Member for Fife, West (Mr. William Hamilton) that the effect of this tax, without any question, will be against the aims of regional development.

Here are the Government—who came in with such a shout, setting up the regional economic planning councils, now proposing to set up rural development boards, with a whole plethora of organisations supposed to help the development areas and those areas which have not been getting along quite as fast as the South-East—producing this iniquitous tax. It is quite illogical. I hope that when the Chief Secretary replies to the debate he will tell us where regional development stands if he cannot accept this Amendment.

I very much prefer the Amendment in the name of my hon. Friend the Member for Somerset, North (Mr. Dean). One should give the Government a greater degree of flexibility so that they could help these areas where help is most needed. This tax is going to bear very hard indeed, particularly upon the rural areas within development areas. It will hit the tourist industry harder than other industries. Perhaps I could tell of my own experience this weekend, in my own constituency, in the Lake District. I found that it is the shortage of staff in the hotel industry which is causing the greatest problems.

On Saturday I was most impressed when I met a small group of hoteliers in my constituency in the southern part of the Lake District. They were proprietors, not of the Grand Excelsior type of hotel, but of medium-sized hotels who were doing their job to the best of their ability. They were hampered partly because of a short season, which many parts of this country have, particularly those parts in the development districts, like the Lake District and the Highlands, but also by the difficulty of getting staff. One of the people whom I met told me that within the last month or so he had had to close his restaurant because he could not get staff. He found it uneconomic to pay the wages which were necessary to attract people to staff his restaurant.

Another person in the group told me that, because of the shortage of staff, he was seriously contemplating closing his restaurant and converting his hotel—a very attractive, medium hotel in Bowness on Windermere, which I am sure many hon. Members know—into a glorified snack bar to attract day trippers. I hope that this is a trend of which the Government would be very wary.

On Saturday, when I was in Langdale, in part of my constituency, I talked to a hotel owner who told me about the problems of part-time staff caused by the Selective Employment Tax. He said that he would have to employ fewer part-time workers, particularly women, who work a few hours a week. He wondered where the Government expected these people to work. The only employment in Langdale apart from tourism and agriculture is in the quarries. I do not know whether the Government expect ladies who work part-time as waitresses, and so on, in the hotels to work in the quarries.

My constituency is in a development district where there is a very low level of manufacturing industry. It is predominantly a scattered rural area. The tax will have a harmful effect on depopulation in my constituency. In the north of Westmorland, in particular, depopulation is a very serious problem. It is essential to keep the countryside prosperous and populated. We must have an agriculture policy which enables the farming industry to be kept at a high level of prosperity. We have had two scandalous Price Reviews—one which was not agreed with the N.F.U., and the other which was agreed only because, as the N.F.U. said, of the grave national economic crisis with which we were faced. The agricultural industry is being faced with the new imposition of having to lend money to the Government interest free.

This tax will bear harshly not only on agriculture but on the economy of the small market towns which are the hub and nucleus of rural and country life. The small shopkeepers and professional people in these market towns will be very sorely hit by the tax.

I began by saying that I did not understand what the Government were up to. These policies are completely contradictory to the setting up of all these grandiose committees and councils. I spent part of Friday afternoon in Newcastle listening to a great harangue by the Chairman of the Northern Economic Planning Council. We were told of all the things which would be done. None of them seems to get done.

We are also faced with the prospect of setting up the rural development boards through the Agriculture Bill, with wide powers to help the rural upland areas, yet here we have this tax which is completely contradictory. It seems to me that the two are almost on a collision course. It is like the Government making a rowing boat with half the seats facing forward and half facing backwards, with one rower pulling to go forward and the other to go backwards. The Selective Employment Tax and regional development seem to be working in exactly this way.

The longer the Government stay in office, the more seats they put into the boat, so that the greater is the clash of pulling against each other. This is just another part of the Socialist Party's well-known love of bureaucracy and love of the State. I hope that we shall put a stop to all this opposing trend which is so deplorable.

Mr. Eric Ogden (Liverpool, West Derby)

The Committee will, no doubt, forgive me if I make my remarks brief and confine them particularly to Amendment No. 339, which, on the face of it, makes the most radical proposal which has come from the Liberal Party in either the present Parliament or the last. I shall endeavour to ascertain whether they appreciate the importance of that Amendment and the principles behind it.

If the Liberal Party are suggesting that the tax in certain areas should be half of what it is in other areas, and the purpose of the tax, as the Government Front Bench have reminded us, is to raise taxation, do Liberal Members also agree that the revenue which would be lost under the Amendment would have to be raised under a subsequent Amendment? That is implicit in the argument which has been made. If we are to raise £240 million net but we reduce it from certain areas and certain industry, would the Liberal Party agree to adding whatever the deficit might be to the overall rate of tax or to the tax on the other areas?

Mr. Thorpe

I accept that there would be a shortfall on tax. We would cut a considerable amount east of Suez.

Mr. Ogden

That is as good a way as any of avoiding a straight answer to a straight question.

Various arguments have come from the benches opposite, even from the hon. Member for Dorset, South (Mr. Evelyn King), who now says that he is in favour of increased Income Tax, which he voted against on a number of occasions in the last Parliament. The hon. Member has argued for a specific local government area, others have argued for a development area and yet others have argued for regions as large as Scotland. In fact, development areas are now more than half the gross geographical area of these islands.

Even allowing all those areas, does the hon. Member accept that there is the objection in principle that hitherto taxation has always been on the same basis for everyone? [HON. MEMBERS: "No."] I said that I would try to be brief. The same rate of tax applies to everyone, wherever he lives or whatever he does. The tax on income is the same wherever a person lives. Similarly, the same taxation rates apply for industry in any area, whether in Scotland or in the South-West. It is only the benefits and allowances that change for particular individuals or industries, according to their circumstances. The tax is at the same level for individuals or for industry.

If the principle of the Clause is accepted by the Committee, I think that it would be argued from the Liberal benches that the principle should be carried further and that if industry is established in a certain area, it should be entitled to reduced rates of taxation in that part of the country. All I am trying to find out is whether they are going to try to carry this kind of principle through to its logical conclusion in all the other aspects.

4.0 a.m.

Mr. Peter Mills (Torrington)

I rise to support Amendment No. 211, which is the one which would provide for varying rates of tax in different parts of the country. I think it is important to look at the history of the south-west region, and even though it is a very late hour I think it is important still to go into these matters very thoroughly, and I hope that this debate will go on for a long time, so that we really get to the bottom of this very difficult problem.

In looking into the problems of the south-west region and the background to them we must remember that tin mining, agriculture, horticulture, forestry, the holiday industry, the clay and stone industries, and fishing have been the backbone of our enterprise; they have been our main industries for a very long time. Some are beginning to fade away, and new ones take their places. It is true, as has been said tonight, that the standard of living and wages have been lower there than in many other regions.

However, change is on the way, and I think that that is true for two reasons. Some people will, of course, not agree with the reasons I am going to put, but I think that the first reason is the gradual awakening by the people themselves. They see the need for change, the need for a much higher standard of living and wages. Those measures which were begun by a Conservative Government will be the foundation for these improvements—the development districts, and so on, which they started. Those of us who have experience of them know that that is true. Vigorous representation has been made in this Chamber, so that progress is being made. Of course, there is much more which should and can be done, but I wonder, when we have a tax like this, whether it is really the aim of this Government to have this progress, and I wonder whether they really want it, particularly in some of the regions.

What will be the effect of this tax on the South-West? Of course the arguments I bring forward are applicable to many other regions as well, but I want to confine my remarks to the South-West. Its effect, before the announcement of the concession as it applies to agriculture, horticulture, forestry, and the clay and quarrying industries, could be described as disastrous. I think that is true. If we had not had this concession, it would have been disastrous to the South-West, but, fortunately, reason has prevailed. I only wonder why this was not thought out carefully before. Indeed, even having this concession, I think it is true to say that the effect of the tax will be that much of the progress which has been made will be undone. I believe that S.E.T. will cause unemployment in the South-West. As the hon. Member for Plymouth, Sutton (Dr. David Owen) mentioned, there is a very real danger that we shall have increased unemployment.

Very great strides have been made in my own constituency to overcome this problem of unemployment, but I should like to quote the unemployment figures. At 13th June, 1966, there was a total of 189. At 14th June, 1965, there were 203. In a year, a difference of 13 or 14. This shows how very difficult it is to get the unemployment figures down, in spite of all that has been done, in a development area. Therefore, if a tax like S.E.T. comes upon the scene the danger of further unemployment, I believe, is very great. It has been the desire of many of us in the South-West to mop up these pockets of unemployment. Pockets have been reduced, to the benefit of all.

It has already been mentioned by one or two hon. Members that the drift away from certain areas has been curtailed. That is very important, because in some areas the drift is as high as 10 per cent. Under the Selective Employment Tax, the figures will creep up again, particularly among seasonal workers and the elderly who are employed in some of our light industries. That the elderly should play their part is a very good idea and something which should be encouraged, particularly if suitable jobs can be found for them.

Then we shall find that there is severe pruning of shop assistants and all those concerned in the service industries. Some would say that that is just what is wanted, and that the tax is doing its job. But is it? I do not think so. Where can these people turn, particularly in an area such as that which I represent? It is quite different from the great conurbations, where a person can get another job quite easily. That is not so in the South-West.

I believe that there is a special case, obvious to us all, for a variation of the tax in certain regions. However, I do not say that any reduction for the Southwest should be permanent. If we have to accept the Selective Employment Tax, and I suppose that that is inevitable with a Government having such a large majority, it could be placed on the shoulders of development areas provided that a special concession was made until an area became viable. Such a concession is most important until alternative work for people displaced by the tax is found. At that time, we shall be able to bear our responsibilities with the other regions.

My plea is for a temporary variation, so that progress in building up the economic viability of the region can continue. When that is done, we can bear the tax. That is not to say that it will be accepted, but we shall be able to bear it. I believe that we can and must raise the general standard in the South-West and the other poorer regions, and that time and help must be given before the full impact of the tax can be borne. Surely that is sensible and feasible. It is the whole idea of such a tax.

I want now to quote some words of Professor Tress. Some hon. Members have had the pleasure of meeting him recently; I understand that hon. Members on the Liberal benches have met him. For those who do not know, he is Chairman of the South-West Economic Planning Council, and he has this to say about the region: In the south-western half of the Region, agriculture and tourism, the latter embracing retirement, are currently the two most important sources of income, directly and through the ancillary activities which they generate … Nevertheless, these activities form an inadequate base for self-perpetuating communities having contemporary standards of economic and social provision unless there are added complementary employments yielding a range of skills and opportunities. He says much more. He goes on to say that the rest of the area presents various kinds of serious problems.

He knows that there are these problems in the South-West, and I do not believe that the Selective Employment Tax will help the work that he is trying to do. So I make a very strong plea for varying rates. I ask the Minister to look at the matter again, and I ask him to give our Amendment further close consideration.

One last point which I should like to make is that it is worth looking at what happens in other countries. In Australia there is a payroll tax, though it is less comprehensive than is proposed in the Bill. It is more limited in its scope. It has an exemption for farmers, for charities, and for small business people. This is very important. Small and growing businesses are not affected. This is a point which the Minister should consider. Australia is a vigorous country, and we have much to learn from her. Let us hope that this Socialist Government will learn that small and growing businesses are not affected by this sort of tax. I make a strong plea this morning for the South-West, and I remind the right hon. Gentleman that there are these varying forms of tax.

Mr. Diamond

We have had a long and very interesting debate on a matter which is naturally of considerable interest both to the Committee as a whole and to many hon. Members who have constituency interests which are close to their hearts, and indeed the heart of everybody in the Committee.

The hon. Member for Bodmin (Mr. Bessell) who opened this debate said that he was making a plea for the development areas. I can tell the hon. Gentleman that he is pushing at a wide open door. It is the Government's intention to continue their policy of helping the development areas in every conceivable way, and, as I shall show shortly, this policy has achieved considerable success.

Before I come to the detail of what the Government are doing for development areas, may I say how much I welcome the consensus of opinion on both sides of the Committee that what is good about this tax is its selectivity, and that if there is any complaint to be made it is that it is not selective enough. I think that this is a most welcome consensus, because up to this point the general argument has been that although there are many hon. Gentlemen opposite—and indeed the Liberals in particular said this—who are in favour of a non-Selective Employment Tax, a straight payroll tax, some of them are anxious about the selectivity.

We now know that they are anxious to have at least as much selectivity as we want, and indeed a good deal more. They want selectivity applied to development areas, in other cases to areas which are not development areas, in other cases to local government areas, to areas within development areas, to small pockets within development areas, and indeed there is nothing in the structure of this tax which could not enable it to be used in a selective way in the course of time, nothing at all.

As my hon. Friend the Member for Fife, West (Mr. William Hamilton) wisely pointed out, it is necessary to have regard to the purpose of the tax, to the need for the tax, and in particular to the need for getting a new tax into existence, to get it floated. It is very important to have regard to that, but there is nothing in the structure of the tax which in the course of time will prevent it from being used in a more refined way, in a more selective way—which inevitably means more costs in administration, but there is nothing which will prevent it from being used in a more selective way, and indeed to correspond with what some hon. Gentlemen have been asking with regard to selectivity in relation to development areas.

The Government are not proposing to do that because they do not feel that there is any need as yet. Let me tell the Committee why we do not feel that it is necessary to go that far yet, and why we would prefer to keep an open mind on this. We feel we must look at the development of the tax in its effects upon the different regions of the country, bearing in mind that development areas are by no means exclusively service areas and that many of the largest factories in the country are situated in the development areas.

4.15 a.m.

It has been alleged—I am not controverting this because I do not know the source of the figures—that there are more service employees in the development areas than there are factory employees. This may be so. The point I am making is that there is no great difference between the proportion in the development areas and the proportion in certain other areas. Birmingham and the Midlands are highly concentrated areas of factory development, but in other areas of the country the difference is quite considerable.

What I want to impress on the Committee is not the unwillingness of the Government to look at this but the present unwillingness of the Government to sacrifice the possibility of starting a good tax by trying to over-refine it in the early stages. The need is to look at it and have regard to the totality of the things which the Government are doing in order to help the development areas.

I can give a short list—I do not want to be long; the debate has gone on for a long time—[HON. MEMBERS: "There is plenty of time."]—of what the Government are doing in order to help the development areas. I will start with some of the minor things which together have a cumulative effect.

We have the control of office development, which has a beneficial effect in the development areas. We have the extension of control by industrial development certificates. We have the new programmes of advanced factories. We have preferential access to the Public Works Loans Board for certain local authorities. We have made a request to the banks to pay regard to regional policy. We have exempted development districts from the deferment of capital projects and building controls and we have loans and building grants which will continue to be available for new hotels and other employment-creating institutions in the tourist trade. We have the new 40 per cent. investment grant introduced in the Industrial Development Bill which is still a Bill and the effects of which have not yet been felt. It is a most important Bill and the Second Reading was as recent as 16th May. There has been nothing like time for the Bill even to become law, still less for its effects to be felt.

I remind the Committee of some of the things which the President of the Board of Trade drew attention to when he was moving the Second Reading of the Bill. He said: the Bill substantially improves a number of other services to industry in the development areas. We shall be able to make building grants of 25 per cent. for new projects in development as now, but shall also be able to increase these to 35 per cent. where the project is in a substantial sense 'new' to the area. He continued: where the factory is not privately financed but is Board of Trade-owned, equivalent help will be given in the form of a two year rent-free period. That is a new power. The Bill also removes the bar which has prevented a building grant being given in the case of a capital intensive scheme; where instead of scaling it down, we were compelled to give no help at all because of the so called "cost per job" rule. The Bill will enable us to give a scaled-down grant in such cases—for instance, a new petrochemical plant in a development area. All these building grants, including the improvements, will also, of course, be available not just to manufacturing industry but to service trades also in development areas, including offices, hotels and the tourist trade generally, provided only that they contribute to the employment in the area. This applies to all the services offered in the Bill by way of building grants, and general loans and grants; and this will be of great value to the tourist trade and the growth of non-industrial employment in these areas. He went on to refer to the 40 per cent. grants and said: The new grant will no longer depend, as did the old, on whether or not the investment provides new employment. There is no doubt, therefore, that the new 40 per cent. development area grant will cover a much broader area of plant and machinery, as well as wider geographical areas than the old grants; and will be a powerful stimulus to development in the parts of the country where they apply."—[OFFICIAL REPORT, 16th May, 1966: Vol. 728, c. 945–6.] It is appropriate to remind the Committee of the tremendous advances represented by that Bill. It is impossible to say at this stage that the powers given in that Bill will not encourage development in the development areas, not only of services but of new industries sufficient to provide what we all want to provide—increasing employment in these areas.

Mr. Gordon Campbell (Moray and Nairn)

I hope to have an opportunity later to go into all the points which the right hon. Member has made, but may I ask whether the control of office development has provided any extra jobs in the Highlands yet?

Mr. Diamond

I am talking of the totality of these policies. I cannot pinpoint a particular case in which we can say, "As a result of this there is extra work in the Highlands". The Highlands are not the only areas with which we are concerned. I am dealing with the generality of the case and I think that I have succeeded in putting to the Committee the great variety of actions taken by the Government which will undoubtedly have the effect of improving employment conditions in these areas and encouraging the economy of these areas.

Not only will our new policies greatly assist but existing policies, too, have had their effect. During 1965, Scotland, Wales, the North and the North-West together got 50 per cent of the new factory approvals in square feet compared with 40 per cent as an average over the previous four years—a 25 per cent increase. That is 50 per cent of new factory approvals in an area with only one-third of the country's population. I am glad to say that Board of Trade officials report growing interest in factory development in development districts in the most recent period, particularly in Wales.

Mr. Eldon Griffiths

I appreciate the long list of policies which the right hon. Gentleman has given. Does he feel that these policies have achieved anything in the great area of East Anglia? We have heard, and are glad to have heard, a great deal about the South-West, but the whole area of East Anglia has not yet been mentioned. Will he draw that to the attention of the Patronage Secretary?

Mr. Diamond

I recognise that the hon. Member has not had an opportunity to represent his constituency interest in East Anglia. We have heard a great deal about the South-West and nothing about East Anglia. There are other areas.

Mr. Robert Cooke rose——

Mr. Diamond

I will not give way again. The South-West has had the best possible speeches delivered in a most persuasive way and the hon. Member can relax. When the Committee is good enough to permit Ministers to reply, it is convenient to the Committee for Ministers to explain Government proposals and to answer the debate. I have given a long list of the actions which we have taken and are taking and of the results which we have achieved and can reasonably hope to achieve, all of which add up to a vast improvement in these areas. We are most sympathetic towards encouraging the growth of these areas. I would add further that there is nothing in the structure of the tax which would prevent us from applying it in a selective way in the regions. This is one of its advantages, and I am glad that the whole Committee has been persuaded of the advantage of the principle of selectivity being added to the flat-rate principle of a payroll tax. This is indeed encouraging.

Hon. Members who have insisted that the one and only purpose of this tax is to divert employment from services into industry should remember that this is by no means the case. The main purpose of this tax is to raise revenue. Any hon. Gentleman opposite who is judging the effects of this tax is not doing justice to his own powers of reasoning and comparison if he leaves out of account the alternative revenue which would have had to be raised. The hon. Member for Dorset, South (Mr. Evelyn King) solved the problem to his own satisfaction—I hope to the satisfaction of his Front Bench also—because he wanted an increase in the standard rate of Income Tax. I have understood that that was not the official policy of the Opposition, but I hope that it will shortly become so.

Mr. Evelyn King

I did not say anything of the kind. I said that there were hotel keepers making moderate profits of, perhaps, £1,200 a year and that, in their case, 1s. on Income Tax would have been much more profitable to them than their having to spend £300 a year on S.E.T. That is quite a different matter.

Mr. Diamond

The hon. Gentleman should not try to run away. I heard exactly what he said. I do not agree that he did not say anything of the kind. I noted his words and he will see them in to-morrow's OFFICIAL REPORT. I do not know why he is trying to run away. He has a habit of running away. He said that he would settle for an increase in the standard rate of Income Tax. He is now trying to say that he has changed his mind.

Mr. Evelyn King

The right hon. Gentleman really must not deliberately misquote me. I have told the right hon. Gentleman what I said. I know precisely what I said. [Interruption.] If he reads the report of what I said in tomorrow's HANSARD he will see that, unlike some of his right hon. Friends, I have not faked what I said. What the right hon. Gentleman said is entirely untrue.

Mr. Diamond

I assure the hon. Gentleman that my sincere recollection is that he said that he would settle for such an increase, and if he says that he did not use those words I can only assume that I am wrong in my recollection. The short point I was trying to make was simply that one must take into account, first, the fact that the main purpose of the tax is to raise revenue and that a judgment can be made of the proposals we are putting forward only if some alternative source of revenue is borne in mind. Secondly, a further purpose of the Bill is to go some way towards righting the distortion which already exists as a result of previous legislation in the fiscal sphere. At present, as we have already explained, taxes on commodities are something like 40 to 1 in relation to taxes on services. If one leaves out the doubtful commodities like tobacco and drink one gets to a figure of 15 to 1. If this revenue had been raised in the normal way, by increasing some of these taxes, one would have had a higher figure than 40 to 1 or 15 to 1. We are going some way to righting the distortion which already exists.

It is no use hon. Gentlemen opposite thinking that the present situation is perfect and ideal and that everything we are doing is going away from that situation. If any hon. Gentleman opposite considers that his constituents might be to some degree prejudiced by this tax, then he has not completed the argument and reasoning until he considers to what extent the same constituents might have been prejudiced by action in other forms of tax which might have been taken.

4.30 a.m.

Mr. Stanley R. McMaster (Belfast, East)

The right hon. Gentleman keeps repeating that the purpose of the tax is to raise revenue. Will he tell the Committee what the Government intend to do with the revenue? Do they intend to spend it or to use it to discharge Government debt? What is the purpose?

Mr. Diamond

I would not dream of responding to a request like that. The hon. Member will find it all in the Budget statement. I thought he was present during the Budget speech. He will find it reported, and accurately reported, in HANSARD.

I do not want to make too much of the technical point that what I am asked by a number of hon. Members to do does not come under this Bill but under the Selective Employment Payments Bill, as my hon. Friend the Member for Plymouth, Sutton (Dr. David Owen) recognised. After two and a half hours, or two hours and three quarters——

Mr. Iain Macleod

Two hours and 25 minutes.

Mr. Diamond

I am grateful to the right hon. Gentleman—two hours and 25 minutes, nearly two and a half hours' discussion, we look forward to hearing the reply of the Front Bench opposite to our proposals. After that I hope that we can come to a conclusion.

The Chairman

Mr. Jenkin.

Mr. Patrick Jenkin (Wanstead and Woodford)

rose ——

Mr. Robert Cooke

Before the right hon. Gentleman sits down——

The Chairman

Order. I called Mr. Jenkin.

Mr. Jenkin

I rise to speak at this point in the debate, but I wish to make clear that as there are a number of my hon. and right hon. Friends who wish to join in the debate, and also a number of members of the Liberal Party—whose Amendment this is, to which I have appended my name—who also wish to speak, I hope that the debate will not be curtailed. We have had no one yet speaking for the North-East, we have had no one from Merseyside, no one from Wales, and none of my hon. Friends from Scotland has yet spoken. It would be absolutely intolerable if at this stage the Government saw fit to move the Closure and to curtail the debate.

It is perfectly obvious why two hours and 25 minutes ago we started on this debate and why the Government were insistent on closuring the earlier debate. No one who has listened, as I have, to speeches by hon. Members of all three parties can fail to have recognised the strength of the case which has been made for regional treatment of this tax. Everyone who heard the reply by the Chief Secretary must have been convinced that the Government are on a very poor wicket in this matter. Apart from a very few minutes the First Secretary of State and Secretary of State for Economic Affairs—whom we are glad to welcome back; regional policy is his particular baby—did not stay to listen to points made. I wish that he could have heard the strong arguments from all parts of the Committee on this question.

Of all Ministers who have an interest in that policy, the Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance has the least, but he has been here the whole time. It may interest the Committee to know that I shared a platform with him during the General Election. I was not able to speak there. I wonder what his audience would have said if he had told them that the Government were to introduce a new tax which would make no provision whatever for any regional plans or regional weighting.

May I say a word about the various Liberal Amendments, which, despite what the hon. Member for Cornwall, North (Mr. Pardoe) said, do not appear to be consistent with each other? After he offered an explanation to my hon. Friend the Member for Dorset, South (Mr. Evelyn King), who asked which Amendment was Liberal policy, his answer was as clear as mud. I have appended my name to the Amendment which we are debating. On that we shall hope to divide with the Liberals against the Government.

Mr. Lubbock

Does this Amendment represent Conservative Policy?

Mr. Jenkin

If the hon. Gentleman will be prepared to wait, he will hear.

The one point that has shone through the debate from all quarters of the Committee is the manifest and illogical conflict in policy which the whole tax represents. This was made clear in the first speech by the hon. Member for Bodmin (Mr. Bessell). He was followed by the hon. Members for Willesden, West (Mr. Pavitt), for Plymouth, Sutton (Dr. David Owen) who pleaded for a regional balance in these matters, and the hon. Member for Fife, West (Mr. William Hamilton) who is in a somewhat unusual place in the Committee, and this point was echoed by many hon. Members on this side of the Committee.

This tax is manifest nonsense. The Chancellor's excuse that we were offered the other night on the Selective Employment Payments Bill was echoed tonight by the Chief Secretary with a long tally of all the measures which the Government are taking, as if that were an excuse for the inconsistency of their failure to take the proper measures in this case. If ever there were an instrument which could be used as a valid tool to strengthen and enforce a regional policy, it is a tax that is based upon the place at which a man is employed. I shall return to this point later.

One of the matters in which the Government have the greatest pride—although if they had sat, as I have, three mornings a week, listening to the debate on the Industrial Development Bill, perhaps that pride would be somewhat less—is the new system of investment grants. This is designed to replace the system which was introduced, as the hon. Member for South Angus (Mr. Bruce-Gardyne) pointed out, of the investment allowances on a regional basis, the free depreciation, introduced by my right hon. Friend the Member for Barnet (Mr. Maudling) in 1963. Thus we have this situation, that where the Government are following and to a large extent imitating their predecessors, as with the industrial grants, they introduce and maintain a regional bias, a regional bent. Where they are introducing a new tax, where they are not following their predecessors, no regional bent is introduced.

It might be asked—indeed, it has been asked—why should we place all this importance on the regions, bearing in mind what has been done? Indeed, it was suggested in an earlier debate that the problems of the regions were being greatly exaggerated. I do not think anybody who has listened to this debate could possibly still adhere to that view. It is perfectly clear that the housing problem, the cost of building problem, in the regions is very much more serious than it is in the South-East and in the Midlands. The cost of building a house or a factory is much higher in Scotland and in the South-West than it is anywhere else.

My hon. Friend the Member for Dorset, South made the point about part-time employees. If part-time employees are dismissed in, let us say, London, the chances are that they may well find other employment. The pressure here is such that their services will be in demand. But if part-time employees are dismissed as a result of the Selective Employment Tax in the under-developed regions, there is nowhere for them to go. Over and over again, we were told that there are no industries or factories into which people can go if they move from the services.

Again, there is the position of tourism which affects particularly many of the outlying regions. The tourist industry, of course, has been particularly hard hit, partly by building controls, certainly by the withdrawal of the investment allowances, and now by the Selective Employment Tax. Exactly the same can be said with regard to the elderly and the handicapped and those others who will be placed in a very difficult position under this Bill. All these problems are accentuated and made more difficult in the regions, and this is one of the arguments, and a powerful argument, why there should be a regional balance in this tax.

We had the very powerful plea made by the right hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond) with reference to the strike and to the acute dislocation, particularly in the islands, that will be created by the strike even if this should be settled fairly soon. And, just at the time when the shipping can be expected to be getting back into schedule—though long after the bulk of the holiday season will have gone past—this new tax will come as an additional impost to make life for the people in these areas all the more difficult.

Then there is this nonsensical distinction between services and manufacture. The hon. Member for Willesden, West could not have put it better when he said it is no use trying to attract manufacturing industry to a development area where there is high unemployment, because all the people who are going to work there and all the development that is going to come will need services which are part and parcel of a civilised community. To try to draw the distinction between manufacturing and services, to say one is good and one is bad, one can get the premium and the other cannot, if it is nonsense in the country as a whole is more particularly nonsense in a development area. This shows the Government's case as the transparent nonsense that it is.

The Chief Secretary went on record, and he attacked one of my hon. Friends who said this tax was regressive, as saying that this is a progressive tax, and he actually took this distinction between services and manufacture as a justification for proving the progressiveness of the tax. Has the Chief Secretary read the National Institute Economic Review which, commenting upon the effect of the tax on regional policy, says The new tax could be made a powerful instrument of regional policy. As it is, its regional policy is rather haphazard. It falls relatively heavily on the London and the South-Eastern region, which is in line with regional policy generally; on the other hand the region which receives most benefit is the West Midlands, and there is a small bias against Scotland. At the foot of the page are figures which show the difference between what the incidence of the tax would be if it were a flat-rate tax and what it is actually going to be because of the distinction drawn between services and manufacturing. It shows that in many of the areas this is going to have a bias. Because of the small amounts of manufacture and large amount of services in some of the regions there is going to be a distinct bias against areas of high unemployment. What can be less sensible than that?

Mr. Tinn

Would the hon. Gentleman care to say what the effect on the North-East is likely to be, according to that article?

Mr. Jenkin

The North-East does not appear to be separately noted. No doubt if the hon. Gentleman wants an answer to that he can put down a Question to his hon. Friend.

The fact is that although there will be a difference depending on the sex mix, as it were, of the employees, assuming they were all men, any area—and this applies to a factory as well—where there is less than 23 per cent. in manufacturing will be worse off. This applies to industrial establishments, it applies to whole firms, and it would apply broadly to whole regions. Of course, there will be a variation depending on the proportion of the neutral category there may be in any area, but roughly, if there is less than a quarter of employees in manufacturing, that area is going to be worse off.

When one realises that in the Highlands the figure is 5 to 10 per cent., all the rest being in services or neutral, one begins to realise how much worse off the Highlands are as an area under this tax.

4.45 a.m.

Some of the figures were brought out in a Written Answer by the Chief Secretary on 19th May. As a proportion of total tax payments, it is estimated that the premiums will work out at about 68 per cent. in England, 63 per cent. in Wales, 60 per cent. in Scotland, but only 18 per cent. in the Highlands. This is a measure of the damage which the tax will do to the Government's regional policy in these areas. How can they possibly justify introducing a tax of this kind which will nullify so much of the policy which they are carrying on from the previous Government and building on in the regions?

As my hon. Friend the Member for Somerset, North (Mr. Dean) so powerfully argued, the need now is to strengthen the regional policy. He referred to the increased attraction of the South-East because of the pull of Europe and of the Eastern counties because of the advent of North Sea gas. The argument about the "golden triangle" of London-Paris-Hamburg will become ever stronger. Instead of weakening the impact of their regional policy, the Government ought now to be strengthening it. Here is an instrument which could be used to that end.

The Chief Secretary trotted out the figures which we have so often had from Board of Trade Ministers about the impact of the Government's policy on factory building in the regions, trying to suggest that this was justification for their other measures and for doing nothing about this tax. But he fell into exactly the same trap as anyone opposite must do in quoting these figures. He used a four or five-year average compared with the last year or two. This totally conceals the true position. Anyone who has examined the figures for factory building or for new employment attributable to the grant of industrial development certificates year by year since 1960 knows that the situation was virtually static until 1963.

It was not 1964 or 1965 which marked the turning point in that matter. It was 1963. The figures show clearly that it was the free depreciation introduced in the Budget of my right hon. Friend the Member for Barnet which made the turning point in industrial building. Nothing that this Government have done since has had anything like the dramatic effect that that measure had. I wish that Government spokesmen would not go on referring to four or five-year averages. They ought to know by now that such figures are misleading. The only conclusion one can draw, if they continue to use them, is that they wish to mislead.

I return to the nub of the case for a regional incidence in a tax of this sort. The place where a man is employed is a fact. It is certain. One cannot charge Income Tax on a regional basis, though in our investment allowances we made a very effective attempt. [Interruption.] The deputy Chief Whip need have no illusion about the sense of outrage which would be created on this side if he attempted to emulate his previous exploit.

Where an employee is employed is a question of fact, though I must say that, in the other Bill to which we shall come next week, I suppose, the Government have made it about as difficult as they can to determine where a chap is employed. He will be employed in an establishment which may or may not be at an address, which may conceivably be part of premises—or, alternatively, the premises may be part of the establishment—and the whole or some part of it might be described as a unit. It all becomes impossibly complicated.

If one wants to know whether a man is employed on one side of a line or the other—I have in mind a line between the development areas and the rest of the country—it is a question of fact on which there can scarcely be any argument. There might be argument about a few fringe cases, such as men on oil rigs in the North Sea, who may not be inside a development area.

But this is why a payroll tax is an ideal instrument for regional policy. That is why we think that the tax is made nonsense of by introducing it with all the anomalies and complications that it has without introducing the crucial element of a regional balance in the tax. The Prime Minister at the Press Gallery Luncheon on 11th May described the tax as crude and clumsy. Many other Government spokesmen have referred to its imperfections and described it as a very rough and ready instrument. Now we are promised refinements at a later stage.

The fact remains that this is the centrepiece of the Government's budgetary policy in the present Budget and Finance Bill, and it is a monstrosity. It is wrong in discriminating between services and manufacturing with the new ludicrous anomalies which will be thrown up, and, I hope, exposed, in the 50 per cent. rule with regard to employment, but, above all, it is wrong in failing to use the instrument which it represents, an instrument which could be made readily to hand, by using the fact of the location of employment as an instrument to strengthen and reinforce the Government's regional policy.

I see that the Patronage Secretary has entered the Chamber. I am prepared to say exactly the same to him as I said to his deputy just now, that it would be intolerable if at this stage in a debate on regional policy the discussion were closed.

It is for the reasons that I have outlined that I believe that a policy along the lines of Amendment No. 339 is the direction in which we ought to move. To make the tax a regional tax would give it logic and a sense which it sadly lacks at present. For this reason, when the time comes, and perhaps it will not come for a long time, I ask my right hon. and hon. Friends to join me in voting for the Amendment.

Mr. David Steel (Roxburgh, Selkirk and Peebles)

It is remarkable that as the debate has gone on throughout the night from two o'clock to five o'clock it has been coherent and of a fairly high standard. The arguments have been cogent. But I regret that it should have been necessary for us to discuss this matter through the small hours of the morning.

On Budget day I happened to be having lunch with a Parliamentarian from a country in Europe who went into the Gallery to listen to the Budget speech. Afterwards he asked whether we had previously discussed the Selective Employment Tax. I said that that was the first that we had heard of it, and he was greatly surprised. It seems to me that the practice in some other countries of floating the idea of a new tax of this kind before legislation is introduced is a very good one.

I should have thought in regard to discussion of regional policies that among the people who could have contributed their views to the Government would have been the regional planning councils set up by the Government, and that a great deal of the time that we are spending through the night in this debate could have been saved if there had been more open discussion before legislation was introduced. The concessions already made to agriculture, charities and the elderly at home have shown the need for that kind of discussion.

I should like to make clear exactly what Liberal Party policy is on this matter. I remind hon. Members on this side of the Committee that it is a Liberal Amendment that we are discussing. Liberal policy on a regional payroll tax was very adequately outlined by my hon. Friend the Member for Cheadle (Dr. Winstanley) on Second Reading. We indicated that we wished for a general payroll tax and my hon. Friend gave the amounts we would apply in the regions. Accepting that the Government will not take up that suggestion, we are now trying to improve the Selective Employment Tax. We hope that some of our suggestions at least will be taken up by the Government. The main Amendment on which we shall divide proposes a 50 per cent. cut in the tax in the development area. Amendment No. 339 is simple. The definition is clear, for development areas are already defined by the Government. But our complaint about Government regional policy is that it does not invade the totality of Government policy, to use the Chief Secretary's own word. There is a difference between the Conservative and Liberal Parties in that we accept the list of what the Government are doing in other directions for development areas but it is no answer to the Amendment.

If the totality of Government Policy were taken into account in considering regional policy, the Treasury should have asked itself not only how it could raise additional revenue without the traditional methods but how it could promote the regional policy of the Government. It has not done this. One consequence of the tax is that it will raise £35 million in Scotland, which is a development area, whereas in the prosperous area of Yorkshire and Humberside, with the same size labour force, the tax will yield only £29 million. Thus, the tax which the Chief Secretary tried to persuade us is part of the totality of Government policy, will take out of a development area more than it will take out of a prosperous area. This suggests that the Treasury has taken no account of regional policy. That is our chief objection.

Mention has been made of the effect in development areas on housing and building of all kinds. I represent part of the country which has at last been designated a development area. A consultative group has recently been appointed and immediate development of housing in the Galashiels area is planned. We shall require a new hospital. All this infrastructure for future development will be more expensive because of the tax.

5.0 a.m.

As has been pointed out by other hon. Members, the tax will have a serious effect on the tourist trade and on the development areas. It is, therefore, most harmful where these two come together, that is, on the tourist trade within the development areas. Yet the Government, by their own public policy declarations, are bound to promote the industry. The White Paper on the Scottish Economy lists tourism as one of the main potential economic boosters in these areas. The Under-Secretary of State for Scotland, the hon. Member for Greenock (Dr. Dickson Mabon), said of the tourist industry on 22nd July: It is, of course, a notable foreign exchange earner and foreign exchange saver and so ranks high in the export drive. At a time when we are facing a balance-of-trade problem of such severity, this must obviously be a point of great importance."—[OFFICIAL REPORT, Scottish Standing Committee, 22nd July 1965; c. 5.]

This aspect of Scottish Office policy is not reflected in the speeches which we have heard from the Treasury Bench. We on the Liberal Bench regret that the Treasury Bench have not taken sufficient account of the policies which the Liberal Party has been putting forward. The hon. Member for West Fife (Mr. William Hamilton) and the hon. Member for Liverpool, West Derby (Mr. Ogden), said that no one had ever suggested that taxation ought to be at varying levels in different parts of the country and that it should not be done now. This was a classic statement which would qualify them for entry to the Conservative Party.

My right hon. Friend the Leader of the Liberal Party argued four or five years ago that the present National Insurance stamp system should be varied in different parts of the country. The Treasury ought to be able to tell us much

more than the Chief Secretary was able to tell us, besides the policies which other Government Departments are pursuing. In the absence of any assurance that they will look at this again and are prepared to use the machinery of the Selective Employment Tax to continue and further the promotion of their regional policies, instead of hindering them, my hon. Friends will certainly wish to divide the Committee.

Mr. Edward Short rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be be now put.

The Committee divided: Ayes 139, Noes 95.

Division No. 65.] AYES [5.2 a.m.
Allaun, Frank (Salford, E.) Finch, Harold Ogden, Eric
Allen, Scholefield Foley, Maurice O'Malley, Brian
Archer, Peter Fraser, John (Norwood) Orme, Stanley
Armstrong, Ernest Gardner, A. J. Owen, Dr. David (Plymouth, S'tn)
Bagier, Cordon A. T. Cordon Walker, Rt. Hn. P. C. Owen, Will (Morpeth)
Barnes, Michael Gregory, Arnold Parker, John (Dagenham)
Beaney, Alan Griffiths, David (Rother Valley) Pavitt, Laurence
Benn, Rt. Hn. Anthony Wedgwood Griffiths, Wilt (Exchange) Pentland, Norman
Bennett, James (G'gow, Bridgeton) Hamilton, James (Bothwell) Perry, Ernest G. (Battersea, S.)
Binns, John Hamilton, William (Fife, W.) Perry, George H. (Nottingham, S.)
Bishop E. S. Hannan, William Prentice, Rt. Hn. R. E.
Blackburn, F. Harper, Joseph Price, Christopher (Perry Barr)
Booth, Albert Harrison, Walter (Wakefield) Redhead, Edward
Braine, Bernard Hazell, Bert Reynolds, G. W.
Bray, Dr. Jeremy Heffer, Eric S. Robertson, John (Paisley)
Brooks, Edwin Henig, Stanley Robinson,Rt.Hn.Kenneth (St.P'c'as)
Brown, Rt. Hn. George (Belper) Hooley, Frank Robinson W. O. J. (Walth'stow, E.)
Brown, Hugh D. (G'gow, Provan) Hoy, James Roebuck, Roy
Brown,Bob (N'c'tle-upon-Tyne,W.) Hughes, Emrys (Ayrshire, S.) Rogers, George
Brown, R. W. (Shoreditch & F'bury) Hunter, Adam Rose, Paul
Callaghan, Rt. Hn. James Hynd, John Ryan, John
Carmichael, Neil Jackson, Peter M. (High Peak) Shaw, Arnold (Ilford, S.)
Coe, Denis Jenkins, Hugh (Putney) Shore, Peter (Stepney)
Coleman, Donald Johnson, James (K'ston-on-Hull, W.) Short,Rt.Hn.Edward (N'C'tle-U-Tyne)
Conlan, Bernard Judd, Frank Silkin, John (Deptford)
Corbet, Mrs. Freda Lestor, Miss Joan Silkin, S. C. (Dulwich)
Craddock, George (Bradford, S.) Lever, Harold (Cheetham) Silverman, Julius (Aston)
Crawshaw, Richard Lomas, Kenneth Slater, Joseph
Cullcn, Mrs. Alice Loughlin, Charles Small, William
Dalyell, Tam Luard, Evan Summerskill, Hn. Dr. Shirley
Davidson, Arthur (Accrington) Lyon, Alexander W. (York) Taverne, Dick
Davies, Dr. Ernest (Stretford) MacDermot, Niall Tinn, James
Davies, G. Elfed (Rhondda, E.) Macdonald, A. H. Urwln, T. W.
Davies, Ifor (Cower) McGuire, Michael Walden, Brian (All Saints)
Davies, Robert (Cambridge) McKay, Mrs. Margaret Walker, Harold (Doncaster)
Dell, Edmund Mackenzie, Gregor (Rutherglen) Watkins, David (Consett)
Dempsey, James Mackie, John Wellbeloved, James
Dewar, Donald Maclennan, Robert Wells, William (Walsall, N.)
Diamond, Rt. Hn. John McNamara, J. Kevin Whitaker, Ben
Dickens, James Mapp, Charles White, Mrs. Eirene
Doig, Peter Mendelson, J. J. Whitlock, William
Dunnett, Jack Molloy, William Williams, Clifford (Abertillery)
Dunwoody, Mrs. Gwyneth (Exeter) Moonman, Eric Winnick, David
Dunwoody, Dr. John (F'th & C'b'e) Morris, Alfred (Wythenshawe) Winterbottom, R. E.
Eadie, Alex Moyle, Roland Woof, Robert
Edelman, Maurice Mulley, Rt. Hn. Frederick
Fernyhough, E. Oakes, Gordon TELLERS FOR THE AYES:
Mr. Grey and Mr. Charles R. Morris
NOES
Allason, James (Hemel Hempstead) Batsford, Brian Biggs-Davison, John
Astor, John Bessell, Peter Black, Sir Cyril
Baker, W H. K. Bitten, John Blaker, Peter
Boyd-Carpenter, Rt. Hn. John Hiley, Joseph Page, Graham (Crosby)
Boyle, Rt. Hn. Sir Edward Hirst, Geoffrey Pardoe, J.
Braine, Bernard Hordern, Peter Peel, John
Brinton, Sir Tatton Howell, David (Guildford) Percival, Ian
Brown. Sir Edward (Bath) Hunt, John Pink, R. Bonner
Bruce-Gardyne, J. Iremonger, T. L. Pounder, Rafton
Campbell, Gordon Jenkin, Patrick (Woodford) Price, David (Eastleigh)
Channon, H. P. G. Jopling, Michael Pym, Francis
Chichester-Clark, R. Kimball, Marcus Ramsden, Rt. Hn. James
Clark, Henry King, Evelyn (Dorset, S.) Ronton, Rt. Hn. Sir David
Clegg, Walter Kirk, Peter Ridley, Hn. Nicholas
Cooke, Robert Kitson, Timothy Roots, William
Davidson, James(Aberdeenshire,W.) Langford-Holt, Sir John St. John-Stevas, Norman
Deedes, Rt. Hn. W. F. (Ashford) Longden, Gilbert Scott, Nicholas
Dodds-Parker, Douglas Loveys, W. H. Sharples, Richard
Eden, Sir John MacArthur, Ian Steel, David (Roxburgh)
Fortescue, Tim Mackenzie, Alasdalr(Ross&Crom'ty) Thatcher, Mrs. Margaret
Foster, Sir John Maclean, Sir Fitzroy Thorpe, Jeremy
Gibson-Watt, David Macleod, Rt. Hn. Iain Turton, Rt. Hn. R. H.
Glover, Sir Douglas McMaster, Stanley Wainwright, Richard (Colne Valley)
Goodhart, Philip Maude, Angus Ward, Dame Irene
Coodhew, Victor Maxwell-Hyslop, R, J. Weatherill, Bernard
Gower, Raymond Mills, Peter (Torrington) Webster, David
Grant, Anthony Miscampbell, Norman Whitelaw, William
Griffiths, Eldon (Bury St. Edmunds) Mitchell, David (Basingstoke) Winstanley, Dr. M. P.
Grimond, Rt. Hn. J. More, Jasper Younger, Hn. George
Hamilton, Marquess of (Fermanagh) Munro-Lucas-Tooth, Sir Hugh
Hastings, Stephen Murton, Oscar TELLERS FOR THE NOES:
Hawkins, Paul Nott, John Mr. Lubbock and
Higgins, Terence L. Orr-Ewlng, Sir Ian Mr. Hoosod.

Question put accordingly, That the proposed words be there inserted: —

The Committee divided: Ayes 94, Noes 135.

Division No. 66.] AYES [5.10 a.m.
Allason, James (Hemel Hempstead) Griffiths, Eldon (Bury St. Edmunds) Murton, Oscar
Astor, John Grimond, Rt. Hn. J. Nott, John
Baker, W. H. K. Hamilton, Marquess of (Fermanagh) Orr-Ewing, Sir Ian
Batsford, Brian Hastings, Stephen Page, Graham (Crosby)
Bessell, Peter Hawkins, Paul Pardoe, J.
Biffen, John Higgins, Terence L. Peel, John
Biggs-Davison, John Hiley, Joseph Percival, Ian
Black, Sir Cyril Hirst, Geoffrey Pink, R. Bonner
Blaker, Peter Hordern, Peter Pounder, Rafton
Boyd-Carpenter, Rt. Hn. John Howell, David (Guildford) Price, David (Eastleigh)
Boyle, Rt. Hn. Sir Edward Hunt, John Pym, Francis
Brinton, Sir Tatton Iremonger, T. L. Ramsden, Rt. Hn. James
Brown, Sir Edward (Bath) Jenkin, Patrick (Woodford) Ronton, Rt. Hn. Sir David
Bruce-Gardyne, J. Jopling, Michael Ridley, Hn. Nicholas
Campbell, Gordon Kimball, Marcus Roots, William
Channon, H. P. G. King, Evelyn (Dorset, S.) St. John-Stevas, Norman
Chichester-Clark, R. Kirk, Peter Scott, Nicholas
Clark, Henry Kitson, Timothy Sharples, Richard
Clegg, Walter Langford-Holt, Sir John Steel, David (Roxburgh)
Cooke, Robert Longden, Gilbert Thatcher, Mrs. Margaret
Davidson,James(Aberdeenshire, W.) Loveys, W. H. Thorpe, Jeremy
Deedes, Rt. Hn. W. F. (Ashford) MacArthur, Ian Turton, Rt. Hn. R. H.
Dodds-Parker, Douglas Mackenzie, Alasdair(Ross&Crom'ty) Wainwright, Richard (Colne Valley)
Eden, Sir John Maclean, Sir Fitzroy Ward, Dame Irene
Fortescue, Tim Macleod, Rt. Hn. lain Weatherill, Bernard
Foster, Sir John McMaster, Stanley Webster, David
Gibson-Watt, David Maude, Angus Whitelaw, William
Glover, Sir Douglas Maxwell-Hyslop, R. J. Winstanley, Dr. M. P.
Goodhart, Philip Mills, Peter (Torrington) Younger, Hn. George
Goodhew, Victor Miscampbell, Norman
Gower, Raymond Mitchell, David (Basingstoke) TELLERS FOR THE AYES:
Grant, Anthony More, Jasper Mr. Lubbock and
Munro-Lucas-Tooth, Sir Hugh Mr. Hooson.
NOES
Allaun, Frank (Salford, E.) Bishop, E. S. Carmicheal, Neil
Allen, Scholefield Blackburn, F. Coe, Denis
Archer, Peter Booth, Albert Coleman, Donald
Armstrong, Ernest Bray, Dr. Jeremy Conlan, Bernard
Bagier, Gordon A. T. Brooks, Edwin Corbet, Mrs. Freda
Barnes, Michael Brown, Rt. Hn. George (Belper) Craddock, George (Bradford, S.)
Beaney, Alan Brown, Hugh D. (G'gow, Provan) Crawshaw, Richard
Benn, Rt. Hn. Anthony Wedgwood Brown, Bob(N'c'tle-upon-Tyne,W) Cullen, Mrs. Alice
Bennett, James (G'gow, Bridgeton) Brown, R. W. (Shoreditch & F'bury) Dalyell, Tarn
Binns, John Callaghan, Rt. Hn. James Davidson, Arthur (Accrington)
Davies, Dr. Ernest (Stretford) Hynd, John Redhead, Edward
Davies, G. Elfed (Rhondda, E.) Jackson, Peter M. (High Peak) Reynolds, C. W.
Davies, Ifor (Cower) Jenkins, Hugh (Putney) Robertson, John (Paisley)
Davies, Robert (Cambridge) Johnson, James (K'ston-on-Hull, W.) Robinson, Rt.Hn. Kenneth (St.P'c'as)
Dell, Edmund Judd, Frank Robinson, W. O. J. (Walth'stow, E.)
Dempsey, James Lestor, Miss Joan Roebuck, Roy
Dewar, Donald Lever, Harold (Cheetham) Rogers, George
Diamond, Rt. Hn. John Lomas, Kenneth Rose, Paul
Dickens, James Loughlin, Charles Ryan, John
Doig, Peter Luard, Evan Shaw, Arnold (Ilford, S.)
Dunnett, Jack Lyon, Alexander W. (York) Shore, Peter (Stepney)
Dunwoody, Mrs. Gwyneth (Exeter) MacDermot, Niall Short,Rt. Hn. Edward(N'c'tle-u-Tyne)
Dunwoody, Dr. John (F'th & C'b'e) Macdonald, A. H. Silkin, John (Deptford)
Eadie, Alex McGuire, Michael Silkin, S. C. (Dulwich)
Edelman, Maurice McKay, Mrs. Margaret Silverman, Julius (Aston)
Fernyhough, E. Mackenzie, Gregor (Rutherglen) Slater, Joseph
Finch, Harold Mackle, John Small, William
Foley, Maurice Maclennan, Robert Summerskill, Hn. Dr. Shirley
Ford, Ben McNamara, J. Kevin Taverne, Dick
Fraser, John (Norwood) Mapp, Charles Tinn, James
Gordon Walker, Rt. Hn. P. C. Mendelson, J. J. Urwin, T. W.
Gregory, Arnold Molloy, William Walden, Brian (All Saints)
Griffiths, David (Rother Valley) Moonman, Eric Walker, Harold (Doncaster)
Griffiths, Will (Exchange) Moyle, Roland Watkins, David (Consett)
Hamilton, James (Bothwell) Mulley, Rt. Hn. Frederick Wellbeloved, James
Hamilton, William (Fife, W.) Oakes, Gordon Wells, William (Walsall, N.)
Hannan, William Ogden, Eric Whitaker, Ben
Harper, Joseph O'Malley, Brian White, Mrs. Eirene
Harrison, Walter (Wakefield) Orme, Stanley Whitlock, William
Hazell, Bert Owen, Dr. David (Plymouth, S'tn) Williams, Clifford (Abertillery)
Heffer, Eric S. Parker, John (Dagenham) Winnick, David
Henig, Stanley Pentland, Norman Winterbottom, R. E.
Hooley, Frank Perry, Ernest G. (Battersea, S.) Woof, Robert
Hoy, James Perry, George H. (Nottingham, S.) TELLERS FOR THE NOES:
Hughes, Emrys (Ayrshire, 8.) Prentice, Rt. Hn. R. E. Mr. Grey and
Hunter, Adam Price, Christopher (Perry Barr) Mr. Charles R. Morris

5.15 a.m.

Mr. Iain Macleod

I beg to move, That the Chairman do report Progress and ask leave to sit again. Some five hours ago I moved a similar Motion, and in view of the dwindling Government majorities the time has come when we should begin to draw our deliberations to a close, but the point I want to put to the Chancellor is this. The next Amendment, No. 231, is, of course, an important one, but the one after that, No. 34, I think everyone will agree, is one of the most important, perhaps the single most important, Amendment to the Clause, and perhaps to the whole Finance Bill. I think it would be a great mistake, and I hope the Chancellor will agree, to start Amendment No. 34 at this time of the morning, and therefore I move the Motion simply to ascertain what the Government's intentions are.

Mr. Callaghan

If I may say so, I think it is reasonable to ask what our intentions are, after the lapse of time since the right hon. Gentleman last moved such a Motion. As he says, Amendment No. 231 is related to the debate we have had. It takes a specialised sector of the areas we have been discussing and endeavours to relate what we are doing to that sector. I should have thought that it would have made for continuity if we had dealt with that Amendment, at least. It will mean that we shall then have done five Amendments today.

As for the rest, I agree that to start on Amendment No. 34 now, which contains within it a large number of other Amendments, would mean that we should find it difficult to finish the debate, in view of the other preoccupations which hon. Gentlemen may have during the course of the morning. If it met with the consent of the Committee, I would myself move to report Progress when we had got the next Amendment. No. 231.

Mr. Iain Macleod

Very well. I am content with that. May I beg to ask leave to withdraw the Motion.

Motion, by leave, withdrawn.

Mr. Bruce-Gardyne

I beg to move Amendment No. 231, in page 48, line 27, at the end to insert: (e) if that person is employed in any regional planning area where, over a period of one calendar year prior to the application of this tax, the average rate of unemployment exceeded the national average rate of unemployment by more than 60 per cent., one penny. As my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has just said, this is an important Amendment, and I only regret that we reach it at this hour, but I am sure that that will not deter any of my hon. Friends and, I hope, some hon. Gentlemen opposite from rising to comment upon it.

In some respects, the Amendment is similar to the ones that we were discussing just now, except that it deals with areas of above average unemployment specifically. I suggest that it has certain specially attractive features, by which I mean features which should make it specially attractive to the Treasury Bench.

In the first place, unlike the previous Amendments, it applies to regional planning areas. I appreciate that where we are dealing with development areas, administrative difficulties may arise. The whole of Scotland is a development area, except, for some obscure reason buried in the minds of the Board of Trade, the Cities of Leith and Edinburgh. Clearly, that exception might lead to special administrative difficulties. But in the case of the Amendment, we are talking about regional planning areas, and those sorts of administrative difficulties should not arise.

The second speciality of the Amendment should make it even more attractive to the Government Front Bench. I feel fairly confident that, having heard the arguments which we shall advance in its support, the Government will be prepared to accept it. If we are to believe right hon. Gentlemen opposite in all that they have said about the effectiveness of the Government's regional planning policies, they can accept the Amendment with impunity, because the exceptions from the payroll tax which it seeks to make will never be called into operation. If their policies for regional development are as effective as they claim they will be, the time will soon come when certain regions in the country will not have unemployment of 60 per cent. or more above the national average. The Amendment provides that if the regional level of employment is not 60 per cent. above the national average the exception will not apply.

Furthermore, the Amendment has to be considered in conjunction with the fact that, when the time comes to do so, my right hon. and hon. Friends will suggest that the whole system of premiums proposed under the Selective Employment Payments Bill should be withdrawn, and the Amendment that we are discussing will provide an additional saving.

If, despite our views, the Government insist on retaining the premium system, we would propose, if they accept this Amendment, a further Amendment to the Ministry of Labour Bill to ensure that establishments in regional planning areas which qualify for the concession in the Amendment do not get the premium. That is only reasonable.

I think that the Chancellor can only agree that we are approaching this Amendment in a spirit of considerable reasonableness, and also, I think, in a spirit of considerable concern for the Revenue. I, therefore, feel fairly confident that he will accept it.

We have tabled the Amendment because we do not trust right hon. Gentlemen opposite. We do not believe that their regional policies will be nearly as efficient or as effective as they like to claim they will be. We do not believe, in particular, that the Selective Employment Tax can be imposed, with no rebates, for service and construction industries in areas like the Highlands, where 76 per cent. of the employment is in these industries, without adding to the problems of unemployment and depopulation. If the Government have the courage of their convictions, they have nothing whatsoever to lose by accepting the Amendment.

At this point I should like to refer to what the Chief Secretary said on an earlier Amendment. He said that we on this side of the Committee had accepted the idea of selectivity, and we wanted to extend it. We have heard this before, and no doubt we will hear it again. It is rubbish, and the right hon. Gentlemen know that it is. The truth of the matter is that what many of us on this side of the Committee have argued for on many occasions is a degree of differentiation in a payroll tax. We have always opposed—and we always will—selectivity between different industries. There is a clear distinction here, and I am certain that the Chief Secretary can understand that as well as the next man can.

As I said, we do not feel able to rely on the Government's protestations that the areas of high unemployment will not be severely affected by this tax, and that areas such as the Highlands that suffer from considerably above average unemployment and at the same time depend so heavily on the construction and service industries, will not be affected.

5.30 a.m.

We are simply not prepared to rely on the Secretary of State for Scotland waving his wand and producing manufacturing industries to benefit from the Selective Employment Tax. Frankly we do not believe that he ever had a wand, and we believe that if he ever had one he lost it a long time ago.

I would comment again that, as so often happens when we are discussing a matter of crucial importance to the Scottish economy—and goodness knows, from listening to the speeches of right hon. and hon. Members opposite on so many occasions, we can be in no doubt that one of the crucial problems of Scotland over the years has been the high level of unemployment—we have nobody from the Scottish Office on the Front Bench. There is nobody to consider the comments which we have made and will make on this matter of vital importance to the Scottish economy. This is the sort of treatment which we are getting used to from this Government, but we do not like it any more the longer it goes on.

The Minister of State, Board of Trade, assured us the other night that if it were found that the application of the Selective Employment Tax on areas of high unemployment had undesirable effects, he would at least draw the attention of the Chancellor to the suggestion made by my hon. Friend the Member for Worthing (Mr. Higgins) that the system of free depreciation, which has proved so valuable in the past, should be reinstituted in these areas.

A small offering of that kind is not enough and I can assure the Chancellor here and now that we should be pressing for its fulfilment in the future. We still do not believe that it is enough and for that reason we have put down this Amendment.

I do not want to rub the nose of the Chancellor once more now into the things he and some of his right hon. Friends said about the proposal for a payroll regulator introduced by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) in his 1961 Budget. I cannot allow the Chancellor to get away with what he said on Thursday evening when my right hon. Friend the Member for Enfield, West reminded him, not for the first time, when he claimed that my right hon. and learned Friend the Member for Wirral could not impose the payroll regulator in 1961 because of the high incidence of unemployment in certain regions, that the claim simply was not borne out by the facts. My right hon. Friend challenged him to agree that the rate which he refers to as a rate of heavy unemployment in 1961 was precisely one-tenth of 1 per cent., different from what it is today. The Chancellor replied: The right hon. Gentleman has made that point before. It does not destroy my case, because at the first whiff of disinflation the regions suffered most. That was why my predecessor, the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) was not able to do the job that we are now doing."—[OFFICIAL REPORT, 23rd June, 1966; Vol. 730, c. 1043.] Let us look at the figures. In April, 1966, the latest regional unemployment figures that we have, the rate of unemployment in London and the South-East was 0.7 per cent. The figure for the West Midlands was 0.7 per cent., for Scotland 2.6 per cent., and the national average was 1.3 per cent. The figures for March, 1961, the last monthly figures which my right hon. and learned Friend would have had in his hands in making his proposal in the 1961 Budget, were: London and the South-East, 10 per cent.; West Midlands, 1.3 per cent.; Scotland, 3.2 per cent., and overall, 1.5 per cent. The regional spread between the highest and the lowest was proportionately higher in the latest figures than in the figures at the time that my right hon. and learned Friend introduced his proposal in 1961. Yet the Chancellor says that at the first whiff of disinflation, the regions suffered most.

Mr. Eric S. Heffer (Liverpool, Walton)

rose ——

Mr. Bruce-Gardyne

I will not give way.

Mr. Heffer

Let us have the numbers involved.

Mr. Bruce-Gardyne

In September, 1961, perhaps the last month in which my right hon. and learned Friend might have introduced a payroll regulator, the figures were: London and South-East, 0.9 per cent.; West Midlands, 1.1 per cent.; Scotland, 2.9 per cent.; and overall, 1.4 per cent. Far from the first whiff of disinflation being felt in the regions at that time, affecting my right hon. and learned Friend's proposals, the regional imbalance was declining.

Mr. William Hannan (Glasgow, Maryhill)

Will the hon. Member admit this basic fact—that the figures of unemployment in Scotland at the moment are the lowest they have been for 10 years?

Mr. Bruce-Gardyne

The hon. Member has anticipated my argument. If he will contain himself for a moment. I am coming precisely to that point. It is true that at the moment the level of unemployment in Scotland is very low, and we are glad of that, but the level of unemployment in England is far lower and the regional differentiation between Scotland and the areas of high over-employment in the South-East is more than it was in 1961. There is no ground for the right hon. Gentleman to pretend that that was the reason why the Chancellor opposed my right hon. and learned Friend's proposals in 1961. In terms of regional development, the Government have, in real terms, merely basked in the achievements of the last Conservative Government. [Interruption.] Hon. Gentlemen opposite may find themselves laughing on the other side of their faces when the Selective Employment Tax is in operation and has been felt in the areas of high unemployment.

As I say, the Government have been basking in the progress made by the last Conservative Government. However, they have also created a situation of very high over-employment indeed, as well as the over-utilisation of resources, in the South and Midlands. It is no surprise, therefore, if industry has continued to expand in Scotland, for expanding firms in other parts of the country have been totally unable to obtain labour except by going to areas where there is still a reservoir of labour on which to draw.

The test has yet to come. It is precisely because we do not believe that the Government's so-called policies of regional development will enable areas of high unemployment to surmount this test that we tabled the Amendment. I insist that if the Government have confidence in their policies of regional development, they have nothing to fear from accepting it.

Mr. David Steel

Does the hon. Gentleman not accept that his Amendment would take us right back to 1960, the Local Employment Act and the restrictions contained in that Measure relating to unemployment? Is he not aware that the Government are already one step ahead of the Amendment in the new development area scheme?

Mr. Bruce-Gardyne

I was coming to that. I would have liked to have drafted the Amendment to deal with the problem of depopulation as well as that of unemployment. However, my hon. Friends and I have wanted to submit the Amendment in such a way that it would be simple to operate and so that the Government could not argue that it would be unacceptable on administrative grounds alone. That is why we chose the criterion of unemployment, although the problem of depopulation is just as serious and, in parts of Scotland, is a great deal more serious.

I was about to deal with the Government's policies for the development areas, because we argue that the Clause, without the Amendment, would be contrary to the Government's intentions for areas of higher than average unemployment, such as Scotland. In the Government's so-called plan for the Scottish economy, it was stated in the summary on page nine that to deal with the problems of unemployment in Scotland, the Government looked to the creation of at least 130,000 new jobs by 1970, of which about 50,000 might be in manufacturing industry, 20,000 in the construction industry and 60,000—or almost half of the total—in the service industries. In other words, only 50,000 out of the 130,000 would be in manufacturing industry, which S.E.T. is ostensibly designed to help.

5.45 a.m.

On page 32 of the Scottish Plan, in page 124, there was pointed out the vital importance of adequate and up-to-date services if Scotland is to be an attractive area for incoming industrialists. I do not need to elaborate on this. [HON. MEMBERS: "Hear, hear."] If hon. Members encourage me, I certainly will. The Chancellor may have had this document drawn to his attention. I sometimes wonder whether the Secretary of State for Scotland serves this purpose, but I am sure that there are others who must do so.

In all these cases in the construction and service industries this tax will increase the risk of high unemployment in areas which already have above the national average. From Scotland in particular the Chancellor should bear in mind another consideration. This year when the Selective Employment Tax is being introduced coincides with rating revaluation in Scotland but not in England. This is an added burden which individuals will have to carry and it will hit particularly hard areas of high unemployment.

Perhaps the most striking example of how the new tax without this Amendment will fly in the face of the Government's own policies comes in its incidence for the hotel industry. I read a most interesting letter the other day from the head of one of the largest catering firms in Scotland. He pointed out that the tax applies equally to development areas and to areas of acute labour shortage. Thus you meet the quite remarkable anomaly that an hotel, for example, in a development area can apply for a 25 per cent. grant under the Local Employment Act and will receive that grant if it gives new direct employment on a sufficient scale in relation to the capital investment in buildings; there being thus a substantial discouragement to economy in staff. Having obtained the grant, there will be imposed a charge of 25s. (or 12s. 6d.) per head per week in order to encourage staff economies. He adds: Perhaps it is an understatement to describe this as the economics of the madhouse. Unfortunately, the economics of the madhouse are what we are becoming increasingly used to from right hon. Gentlemen opposite.

Several of my hon. Friends have further points to make on this Amendment, so I shall say no more. [HON. MEMBERS: "Hear, hear."] Hon. Members opposite had better be careful and not tempt me. I hope that I have said enough to convince the Chancellor that if he means what he says about regional development policies he can accept this Amendment with impunity. If he does not accept this Amendment, clearly he cannot mean what he says of regional development policy.

Mr. Tam Dalyell (West Lothian)

The hon. Member for South Angus (Mr. Bruce-Gardyne) should not be allowed to get away with blowing his trumpet like that. He knows perfectly well that the fact of 2.6 per cent. unemployment rate which is greater than in the West Midlands and the South-East of England is related to the nature of our industry. Unfortunately, we come from an area which by tradition has depended on the coal industry and foundries. Many people who have worked in those industries are not able to work and these figures are made up from people who suffer pneumoconiosis and other diseases.

The second point is of rather a different nature. [Laughter.] Of course, it is, and the former Secretary of State for Scotland, the right hon. Member for Argyll (Mr. Noble) knows it. Suppose we look at the Chancellor's alternatives. I cannot read the Chancellor's mind, but if he had not imposed a Selective Employment Tax it might be a fair guess that in the Chancellor's mind there might have occurred the thought that he would wish to impose taxation on motor vehicles. If this had happened, if he had concentrated on the narrow front of the motor industry, as he might have done, instead of going for a broad-based tax, then Scotland would have been hit much harder than it has been.

Sir Fitzroy Maclean (Bute and North Ayrshire)

I am naturally of a charitable disposition, even at this hour of the morning and in spite of what we have had to put up with in the course of the last 12 hours. It is this charitable disposition which leads me to the conclusion that it is simply a consequence of Socialist planning, and not anything worse, that leads to Socialist Governments always seeming to find themselves, as was said by the hon. Member for Fife, West (Mr. William Hamilton), who is not here at the moment, doing in practice the opposite of what they say, and perhaps even of what they think they are going to do. This seems to me the kindest explanation of the Government's conduct over this tax. Nobody could have been more lavish in their promises to help Scotland, the islands, the tourist industry and the development areas in general.

Again I want to be charitable, and I imagine that the reason why there is not a single Scottish Minister on the Government Front Bench this morning is not just that he cannot be bothered or is not interested. It must be that the Scottish Members are ashamed and embarrassed by what their colleagues have done. I hope hon. Members opposite who sit for Scottish constituencies are as shocked as we are that nobody from St. Andrew's House has spoken.

Mr. James Dempsey (Coatbridge and Airdrie)

There is a Scotsman here.

Sir F. Maclean

Where? I cannot see one. He must be a very small one.

Nobody could have laid greater emphasis than the present Government have done on the importance of the tourist industry and its potentialities. The hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) quoted the Under-Secretary of State in one of our debates in the Scottish Grand Committee. I should like to refer to something else that he said. He said that the tourist industry offers one of the most hopeful prospects for the development of large areas of Scotland. That is perfectly true. He went on to say that it is the foremost dollar earner in the country. It is also one of the greatest earners and savers of foreign currency, amounting to £350 million a year, and, if given a chance, it could be £500 million by 1970.

But the Government use these fiscal measures not to encourage the tourist industry, but deliberately to discourage it. They discourage it and all the subsidiaries which are linked with it, which help it and are helped by it. They discourage the building industry, which again is closely connected with tourism. Everybody knows that what the tourist industry in Scotland, and indeed in the country as a whole, suffers from is a shortage of skilled workers. What the Government are doing is deliberately aggravating it. I speak from first-hand experience on this subject. It is a well known fact that the labour costs of hotels represent about 30 per cent. of the turnover. Now this tax is going to increase these labour costs by 10 per cent. Then there is the whole question of part-time workers in hotels. There are a lot of part-time workers who do very useful work in the tourist industry. What is going to happen to them?

Once again, to take the Highlands, 76 per cent. of industry in the Highlands is service industry and only 10 per cent. is manufacturing industry. The other 14 per cent. is made up of agriculture, fishing, forestry and so on. In England, I understand that 68 per cent. of the people hit by this tax will get it refunded to them, but in the Highlands only 18 per cent. will get a refund. My own constituency is not in the Highlands but a very large part of it is in exactly this position of depending almost entirely on the service industries, such as the tourist industry.

What will be the result of all this so far as the industries in question are concerned? They will have the choice of either lowering their standards or, where they are able to, putting up their prices. Inevitably this is going to aggravate and cause unemployment. One of the things the Government were always saying when they were in Opposition was that they were going to combat depopulation, but they are going to make the Highlands altogether less viable by hitting at the small concerns.

My hon. Friend the Member for Perth and East Perthshire (Mr. Ian MacArthur) made some very good points a good many hours ago about how this tax would hit the small man employing one or two people in the Highlands.

I can think of a village—a small town almost—where at the moment there is no plumber and no electrician. There is some prospect of a small plumber and electrician coming there, but this tax will of course drive them away because they have to have one man running the business and one man out in the van, and if it can only be one man the whole thing just will not work.

What will happen to the labour that will inevitably be shed by the service industries hit by this tax? They will not be absorbed by manufacturing industries because in most parts of the Highlands there are no manufacturing industries to absorb them. So they will simply either move away and depopulate the Highlands still further, or go on the dole and use public money in that way. It is not surprising that the phrase "Callaghan's clearances" should have been coined to describe what is happening.

What the Government are in fact doing is asking people to do one thing and then forcing them to do another, giving people money with one hand, as they are through the Highland Development Board and the investment grant, and then taking it away with another and, as usual, paying a whole lot of civil servants to preside over these affairs. In the long run, as I have said, they will put a lot of people on the dole and waste a lot more public money. There could be no better demonstration of Socialism in practice.

The Times some time ago back spoke of the Government's "slow retreat" from their original proposals on this tax. It is true that we on this side have managed to extract some concessions from them. I hope that, as a result of our labours tonight, we shall extract a lot more concessions in the spirit of this Amendment and that the slow retreat will be converted into a complete rout.

6.0 a.m.

Mr. Peter Doig (Dundee, West)

The hon. Member for Bute and North Ayrshire (Sir F. Maclean) talks about the tourist industry as though it were the most important form of employment in Scotland. It is nothing of the kind. I do not underestimate its financial advantages to Scotland, but for providing employment any local authority would far rather have manufacturing industry in preference to tourism. Tourism provides employment only at certain times of the year for the bulk of employees.

Sir F. Maclean rose——

Mr. Doig

I am sorry. I cannot give way. The hon, Gentleman can come in again later if he wants to.

Sir F. Maclean

The hon. Gentleman makes a false point.

The Deputy Chairman

Order. If the hon. Member who has the Floor does not give way, the hon. Member for Bute and North Ayrshire must resume his seat.

Mr. MacArthur

On a point of order, Mr. Irving. Is it not in keeping with the usual custom, if an hon. Member whose speech has been directly referred to wishes to intervene, that the hon. Member making the reference should give way?

The Deputy Chairman

That is not a point of order.

Mr. Doig

At 6 o'clock in the morning, I do not feel like giving way.

Sir F. Maclean

Afraid to.

Mr. Doig

What is wanted in Scotland is regular, steady employment all the year round, and very few in the tourist industry get that.

The hon. Member for South Angus (Mr. Bruce-Gardyne) astonished me. He spoke of high unemployment in Scotland. In Dundee it is 1.6 per cent., the lowest it has ever been, so far as I can remember. Under the last Tory Government it was over 5 per cent. I can remember being one of 8,000 unemployed in Dundee, and today the total is less than 2,000. Whether it is more than double the national average or not I do not care in this argument. It is 1.6 per cent. under a Labour Government and it was 5 per cent. under a Tory Government. No wonder the people of Scotland are returning an ever-growing number of Labour Members. They know the difference. They are concerned not about percentages but about the number of people who get jobs.

The hon. Gentleman will know of what his Government did to the jute industry. They very nearly ruined some of the villages in South Angus. His predecessor, Sir James Duncan, also in the early hours of the morning, supported the two Dundee Members in pleading with his own Government to withdraw their cuts in protection for the jute industry because he knew how deadly they would be for South Angus.

Mr. Bruce-Gardyne

Is the hon. Gentleman aware that in recognition of the terrible things the Conservative Government did to the jute industry in South Angus, the constituency at the last General Election produced the biggest swing to the Conservatives in the country?

Mr. Doig

If the hon. Gentleman will look at the figures again he will find that he is wrong. The reason why there was a bigger majority was the intervention of a Liberal. For the same reason my majority nearly doubled. The intervention of a third candidate invariably helps the sitting candidate. The hon. Gentleman's overall majority did not go up; it went down.

Mr. Bruce-Gardyne

The hon. Gentleman is wrong.

Mr. Doig

I am not. I have studied the figures.

Let us consider some of those who have said that the Labour Government have done a great job for Scotland. Lord Polwarth has said that Scotland has never had a better balanced economy. The banks say the same time. The people of Scotland know, if the hon. Member for South Angus does not, that there are far more jobs and far less unemployment in Scotland than before. I am certain that Belfast Members of Parliament would be very happy if the unemployment figure for Northern Ireland was as good as that in Scotland. The Government have done a terrific job in providing jobs in Scotland and keeping down unemployment. I am amazed that any hon. Member opposite has the nerve to use that argument. The figures are contrary to what the hon. Gentleman has been saying.

Mr. G. Campbell

It has been pointed out that the Amendment has been drafted so as to be administratively easy to operate and to be easily acceptable to the Government. I hope that when the Chancellor is considering it he will be reminded of the attitude of his right hon. Friends when they were in opposition to the proposal for a payroll regulator, which was put forward in 1961. The First Secretary and the present President of the Board of Trade said that it should not be allowed to have full impact on the development areas, and the adjectives "insane" and "frightening" were used in describing what the effects might be of a uniform 4s. payroll tax in those areas. Now it is to be 25s. per man, and, with premiums to manufacturing industry, it means that benefits will be flowing to the flourishing areas at the expense of the others.

An hon. Member for Birmingham praised the inequality of the tax when he spoke on the Second Reading of the Selective Employment Payments Bill last week, but had the goodness at the same time to admit that it was his own area which would benefit most from it. I shall speak of a region at the other end of the scale—the Highlands and Islands and the North of Scotland. Figures have already been given, but I will give them again briefly. I mentioned them on the Second Reading of the Finance Bill and the Second Reading of the Selective Employment Payments Bill, when I said that in the seven crofting counties manufacturing industries provided only 10 per cent. of the employment.

As my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) said today, and as I said on both those occasions, the Chief Secretary has given the figure for the percentage of the tax collected which will return in premiums and refunds to the Highlands and Islands as 18, which compares with 68 per cent. for the whole of England. This demonstrates, as nothing else can, that the tax will be at a much higher rate per job in the Highlands and Islands than anywhere else.

When we heard about the problems of the South-West earlier—and I sympathise with them—we were told that manufacturing industry in that area provided 25 per cent. of the employment. It provides 10 per cent. in the Highlands and Islands. The Government have given no answer to this so far. All they have said is that they are doing other things in such areas through regional development. It has become a parrot cry. It was summed up by the Chancellor on Second Reading of the Selective Employment Payments Bill. He said: I will rehearse some of the things that are being done. In the development districts investment grants for plant and machinery for qualifying processes are to be given at the rate of 40 per cent. What is the use of 40 per cent. grant over a 20 per cent. grant if one does not qualify for a grant at all?

Where only 10 per cent. of employment in an area is provided by manufacturing industry, most of the businesses providing employment will not qualify for the 40 per cent. grant, although they qualified for the investment allowances which have been removed. To say that there will be a 40 per cent. grant in the Highlands and Islands for manufacturing industry is no help because there is so little manufacturing industry there and one cannot hope to introduce large quantities of new manufacturing industry in a short time. The Chancellor went on: In the case of Local Employment Act assistance there will be assistance for projects providing extra jobs in development areas. My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) has pointed out, in reference to the tourist industry—which is so important to the North of Scotland—that grants are available under the Local Employment Act, as amended by the Industrial Development Bill, only if extra work is provided. But the Government now propose to tax the employment of extra men in this way. That is complete contradiction of policies. The Chancellor also said: There is the control of office development providing extra jobs in development areas."—[OFFICIAL REPORT, 23rd June, 1966; Vol. 730, c. 1048.] What extra jobs have been provided so far in the Highlands and Islands by control of office development?

The Chancellor made a further point about the exemption of development areas from his deferment of capital projects in his measures of last July and continued by his statement on 8th February. The Government have been at pains to say that these postponements did not amount to very much. They have been playing them down. Now we are told that it is a special benefit for development areas that they have escaped the axe. The Government claim that this escape is a special measure of regional development.

But this again will not be of much help to the Highlands and Islands and the North of Scotland. It cannot compare with this proposal to tax the large majority of jobs in the area, including new ones, if they can be created. Most new jobs created are bound to be in services. This policy is leading to the depopulation of the rural areas of Scotland. The S.E.T. should be called the "Scottish Emigration Tax".

6.15 a.m.

The right hon. Gentleman, when he put forward these measures at the end of the debate last week, talked of "poppy- cock". I submit that the four points put forward by him, about which I have been speaking in relation to their application to the Highlands and Islands and the North-East, are complete poppycock and they will rebound on his head in the same way as he said the poppycock would rebound on other people's heads. It is no good his saying that the establishment of the Highland Development Board is yet another factor which will somehow neutralise everything else done under the tax.

Anyone can set up a new board. That does nothing in itself. The point is what the Government do in setting up the Board to enable it to go ahead with measures to assist regional development. Since it has been set up, the Board has been hit by two major measures, the cancellation of investment allowances and this tax. We have put Questions to Scottish Ministers, whose absence this morning is deplored, asking whether it is the Government's objective to reduce jobs in the service industries in the Highlands and the North-East of Scotland. The answer has been "no". If this tax is to carry out the objectives we have heard about, then surely it is supposed to reduce jobs in the service industries, and to try to steer men towards manufacturing industries.

When the Chief Secretary tries to make out that, in suggesting this regional variation, we have somehow come round to the Government's view about the tax, this is nonsense. Several of us made it perfectly clear on Second Reading that we were against this selectivity of premuims and so on, and that we were in favour, if a tax of this kind had to be introduced, of a rate applied across the board; and that if there were to be variations, it had to be done by regions. It is nonsense for the Chief Secretary to pretend that this is something new.

Mr. David Gibson-Watt (Hereford)

It is more poppycock.

We have heard a great deal of poppy-cock and no doubt we shall hear more. I hope that the Government will consider the effect of these measures which they are carrying out.

Mr. William Small (Glasgow, Scotstoun)

I intervene briefly to reply to the allegations of the hon. Member for Bute and North Ayrshire (Sir F. Maclean) and to deal with "Callaghan's Clearances". I ask him to bear in mind what the Treasury has done for Scotland, particularly in relation to Fairfield's. I do not see any clearances on shipbuilding under this Government. Taxation as such is not a total instrument for directing industry to Scotland.

I hear no praise for this Government's action in sending industry to Dounreay. I would suggest that many of the "Tartan Tories" now singing about Scotland fail to recognise the complexities of the tax.

Broadly speaking, transferability of premiums back to manufacturing is the strongest element of economic stability. It is the stabilising unit which will keep us competitive in the international sphere and enable us to sell more. I had thought that this was easy to understand, but it must have failed to get across to hon. Gentlemen opposite, who never did believe in planning. At each General Election—1959, 1964 and 1966—we have had this continual bleating about redistribution from hon. Members opposite.

Dame Irene Ward

I have come to the conclusion that this Amendment would most satisfactorily serve the North-East Coast, and therefore, on behalf of the North-East Coast, I add my words in support of it.

During the debate, no one has spoken up to explain to the Chief Secretary that we on the North-East Coast dislike the Selective Employment Tax very much indeed. We feel that the benefits which have flowed from regional development, which was started with such success by my party, are likely to be very seriously impaired by this tax.

I think that it was my hon. Friend the Member for Moray and Nairn (Mr. G. Campbell) who said that we on this side of the Committee had no confidence in the Chief Secretary. I should have thought that the right hon. Gentleman, with his wide professional experience, would have been alarmed that it has been said by Members on both sides that the detail of the tax hardly seem to be in line with the Finance Bill. The Bill has been badly conceived, is rotten from top to toe and was introduced at the last moment because the Chancellor could not persuade the Inland Revenue to accept responsibility for the Bill which he really meant to introduce.

One cannot conceive of any responsible Government introducing a Finance Bill and at a very early stage having to introduce an overwhelming number of Amendments to bring some sense of purpose or stability into it. I mention the decisions taken on charities and agriculture. I notice the new Clause on shipbuilding. This all goes to show that the Bill had not been thought out in detail. When the Chief Secretary announced suddenly how pleased he was that the Committee had chosen selectivity rather than a payroll tax, 1 began to think that he should have a part in the new production of "Alice in Wonderland" on television. He has shown that he has not grasped what the Committee and the areas think about this tax.

The hon. Member for Newcastle-upon-Tyne, East (Mr. Rhodes) made a vicious attack on the tax, not in this Chamber, but when he spoke in the North of England. He tore it to shreds. I would have preferred the hon. Member to have made his speech here. I will have a good look at the Division records in the morning, because he has a great habit of attacking his own Government root and branch outside the House of Commons and then the whole thing simply dissolves into lack of action.

The Deputy Chairman

Order. The hon. Lady is getting a little far from the Amendment.

Dame Irene Ward

I agree, Mr. Irving, but a great deal has been said rather far from the Amendment. I have made my point, however, so I will not go further.

I should like an assurance and information from the Chief Secretary, if he can get his mind back to proper detail and fact, which I rather doubt after his exposition during the small hours of the night and the early morning. If, as we all fear on the North-East Coast—and I speak for a moment of my constituency, where I have a hotel, a tourist industry, above the average of retired people and a lot of charming and delightful landladies—the Selective Employment Tax affects the tourist industry, it would be helpful to have the Amendment in the Bill so that we could use it.

No one has said a word about what the British Travel and Holiday Association, which is the spearhead of our tourist industry, has said either in private or in public to the Chief Secretary and the Chancellor of the Exchequer. I want to know whether in all these matters, whether they affect the tourist industry, industry in general, manufacturing industry or people in the service industries, the Chief Secretary has consulted the British Travel and Holiday Association. Did he have consultations about——

The Deputy Chairman

The hon. Lady is completely out of order. This has no relevance to the Amendment. I must ask her to come back to it.

Dame Irene Ward

I hate to disagree with you, Mr. Irving——

The Deputy Chairman

I am sorry, the hon. Lady cannot disagree with me. She must come back to the Amendment.

Dame Irene Ward

I am not disagreeing with you, Mr. Irving. I am disagreeing with the Chief Secretary. I repeat that, if all these most unfortunate developments occur on the North-East Coast, it would be valuable to have the Amendment in the Bill. It should be in order somehow, Mr. Irving, to explain what the difficulties might be, because a lot of people have explained what the difficulties will be. Everybody has explained about the Highlands and Islands, which are not specifically mentioned in the Amendment. We are all arguing that when things go wrong, as they are bound to do—the whole thing will be in chaos before long—we want a remedy within the Bill. That is what we are asking for by the Amendment.

I want to know whether, if things go wrong with the tourist industry, the Chief Secretary will use the Amendment, if he agrees to have it in the Bill, and whether he has discussed the matter with the British Travel and Holiday Association, which, as I have said, is the spearhead——

The Deputy Chairman

Order. The hon. Lady must relate her remarks to the fact that the selectivity is to be based upon unemployment. She is not doing that. May I ask her to do it?

6.30 a.m.

Dame Irene Ward

Yes, certainly. If selectivity is based on unemployment the tourist industry will disappear. We cannot have more totality than the disappearance of the tourist industry. But the fact is that total unemployment can be limited—that was the word used so often by the Chief Secretary, who talked a lot about totality, and totality in damage to the tourist industry certainly can arise.

Therefore, it is tremendously important that we have this Amendment to the Bill, to deal with this totality—though, of course, I fully realise that I am using "totality" in a sense different from that of the Chief Secretary. That is the difference between us. His totality is in favour of Government policy. My totality is in pointing out that, unless we have some amelioration by acceptance of this Amendment—and, after all, this is probably our last chance to get amelioration—unless we have the protection which this Amendment would give, we shall have nothing. Indeed, it will be the tourist industry which will go into the tourist world naked; there will be nothing to protect it.

What I want to know from the Chief Secretary, in relation to this Amendment we are arguing for with such emphasis, is whether he will please explain, whether it will be acceptable to the British Travel and Holidays Association. I want to know how many experts agree with him. I will go through the whole lot, if you like, because, after all, the Chief Secretary read out a whole lot of things which the Government are supposed to have done for the development areas. Though they did not relate to this Amendment they were read out in great detail. What I want to know is whether the experts agree with him. Will the Chief Secretary, when he replies, say whether he consulted the experts, so that we may know whether the experts agree with this side of the Committee or whether they agree with the Chief Secretary? If I know the British Travel and Holidays Association—which I do—I am sure it will not agree with the Chief Secretary on this Amendment.

Therefore, I hope that the Chief Secretary will give to the North-East Coast, to Scotland, and to all the other areas whose case we, their representatives here, are putting tonight, some protection against the absolutely wild folly of this ridiculous Finance Bill.

Mr. Donald Dewar (Aberdeen, South)

I want to intervene, very briefly, in the debate at this ridiculous hour of the morning, because I have been a bit distressed by the proceedings. I have been, so to speak, drowned by the wave of demands coming from the benches opposite, and almost crushed by the great mass of their irrelevancies.

I was particularly aggravated by the hon. Member for Moray and Nairn (Mr. G. Campbell) who, I think, ought to have known better. I listened to his speech with particular attention, and at the end of it I could not have told you which Amendment he was speaking to. I gathered that the hon. Member was speaking about the Selective Employment Tax; I gathered, also, that he did not like the tax for one or another of three reasons. They were all the same, but he repeated them several times.

Mr. Gibson-Watt

That comes very badly from any hon. Member on that side of the Committee, because if the hon. Member had listened to the last speeches from his side he would have noticed that they were entirely a repetition of the election results in Scotland.

Mr. Dewar

That may be so, but I prefer to concentrate on the speeches on the hon. Member's side of the Committee at the moment.

I was coming to the reasons the hon. Member for Moray and Nairn gave in support of the Amendment. The first was that he did not like the Selective Employment Tax basically because it was selective. He said that he preferred a payroll tax which would apply over the whole country. He objected to the idea of selection which discriminated against certain districts and. particularly, against certain industries.

Listening to large sections of the hon. Gentleman's speech, one would have thought that the Amendment was one dealing specifically with the tourist trade. He went on to say that the tax would become known as the Scottish emigration tax, and it is largely because of that that I find myself on my feet.

One thing which the Amendment does is to be selective within the development districts. It provides a built-in safety clause for those areas with high unemployment. However, there are large parts of the development districts which have low unemployment, but which are particularly in need of help. My own constituency is part of an area where unemployment is 1.6 per cent. There are other areas where emigration is heavy but where unemployment is lower than it has been for many years and may drop even further. Yet such places will not get the benefit of this escape clause.

If the Amendment is accepted, there will be a vicious sort of selectivity built in within the development districts which will put us back years in our whole programme of regional development.

It was embodied and enshrined back in the Local Employment Act, and it took the Labour Party years of propaganda to get it into the heads of some hon. Gentlemen opposite that it was a vicious and unfair principle. I should have thought that we would have succeeded by this time. Now we get hon. Members opposite putting it forward in a slightly different guise because they are only anxious to make, under a new Amendment, the same speeches that they hoped to make on a different Amendment earlier in the evening. They have failed to address themselves to the problems which their Amendment raises.

If this discriminatory Amendment is passed, it will destroy the whole point of the Selective Employment Tax, which is that at least in the development districts everyone is to be on the same basis. It will put back the concept of regional development further than it would be put by the Selective Employment Tax, supposing that it were as vicious as it appears to the distorted imaginations of the most bigoted hon. Gentlemen opposite.

I hope that my hon. Friends will combine to throw out the Amendment.

Mr. James Davidson (Aberdeenshire, West)

Hon. Members on the Liberal benches have been accused of being somewhat inconsistent in their views about the way to tackle the Selective Employment Tax. My hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) outlined clearly the basis of Liberal policy, and that was choice No. 1. Our own Amendment was choice No. 2. Now we come to this pale shadow of an Amendment, which is third best. We on these benches would find it difficult to oppose it, but I cannot say that I think very much of it.

I noticed a considerable quantity of inconsistency from behind me. Among other things, there seems to be a nostalgia for a return to the Local Employment Act of 1960. Hon. Members of the Opposition seem to wish to oppose the investment incentives Bill, with its 40 per cent. grants, and the expansion of the development districts into development areas. Yet they have been talking about development areas largely as if they were their own idea. They have been talking about regional development as if it was something which they supported all along. It is something about which we never heard from the Tory Party for many years.

Over two years ago, I raised a Liberal committee in the North-East, and we produced a plan for the North-East. We put a lot of hard work into it. One of the things that we proposed was that the North-East of Scotland should be made a development area. When I talk about the North-East, I mean the North and the East, not the North-East Coast, which is about the middle of England.

Mr. Ernest Armstrong (Durham, North-West)

On a point of order. Should not this be transferred to the Scottish Grand Committee?

The Deputy-Chairman

That is not a point of order.

Mr. Davidson

The hon. Gentleman can go out and have his breakfast if he wants to.

As I was saying, we proposed that the whole of the North-East should be made a development area. We are delighted that this has been done, but I must repeat what has been said already, that this tax is working in direct opposition to the development area policy, and I cannot believe that this is not clear to right hon. Gentlemen on the Front Bench opposite.

In the North of Scotland we have five or six different bodies working for regional development. There is the North-East Planning Council, the North-East Development Committee, the North-East Consultative Group, a representative office of the Scottish Council of Development and Industry, and so on. All these bodies advise and discuss and get practically nowhere. Why not have a development board for the area such as the Government have set up for the Highlands? Why not have one such board for other parts of the United Kingdom which need it? I make this plea because this possibly is the last chance to do so on this Bill.

I wish to raise some points which have been raised with me in letters from my constituents. The question of village bakeries has been raised. They are disappearing fast, and the point has been made that where a bakery is making bread for human consumption it is to be regarded as a manufacturing industry, but if there is a shop attached it is not to be categorised as such. This seems to be a strange discrimination.

I refer next to agricultural trainees. For years we have been asked to train people for work in agriculture. We were asked to do this when the Tories were in power, and we have been asked to do this by the present Government. Here I must declare an interest, in that for the last 10 years or so I have been a practical farmer. As a result of this tax it will not pay anyone to train people. In fact, one can expect to be paid by them for the training they receive.

Reference has been made to part-time workers, and I am thinking particularly of the part-time forestry worker and crofter. There are more crofts and small farms in Aberdeenshire than there are in the whole of Caithness and Sutherland, a fact which is not often realised. There are many crofters who work part-time as unestablished forestry workers. If this tax is to apply to them in their part-time employment with the Forestry Commission, or with the owners of private forests, they will lose their jobs. In fact, many of them have already lost them. It may be that when the proprietors concerned realise the intricacies of this Bill, and appreciate that forestry is excused from the tax, they will start taking some of these men back, but at the moment they are losing their jobs.

The point has already been made about the effect—and this will cause unemployment and, therefore, is connected with the Amendment—on the theatre in provincial areas. In Aberdeen, there is only one major theatre and I have a letter to the effect that when this tax comes into force it is more than likely that this theatre will have to close down. It is the only theatre in the North of Scotland which provides a continuous programme on the stage and even this often has to give way to cinema.

6.45 a.m.

A point which I would like to mention briefly is the effect of the tax on smaller farmers. I know that they will get it back, but they will have to wait for a long time. The average size of a farm in my area is under 100 acres and those who know anything about farming will realise that this means a one man plus farm—one man plus a part-time worker, usually at the weekend. If these farmers have to pay the tax on these part-time workers, even if they can claim it back later, it will be a great hardship to many of them. Most of them have bank overdrafts on which they are paying 7 or 8 per cent., and yet they will have to make an interest free loan to the Chancellor.

Mr. Dewar

The hon. Member is launching a general attack on the Selective Employment Tax and has grudgingly indicated that he will support the Amendment. Does he not agree that his area is one of high emigration and low unemployment and that it will be disadvantaged compared with other development areas in Scotland? How can he reconcile that with his support for the Amendment?

Mr. Davidson

This is the third Amendment which we have put forward, as the hon. Member for Aberdeen, South (Mr. Dewar) will know, and it is our third choice of Amendment which would have had the effect of taking account of the emigration as well as unemployment. This is one of my criticisms of the Amendment. Although in principle we would find it difficult to vote against it, it does take account of emigration.

Mr. Bruce-Gardyne

Will the hon. Gentleman give way?

Mr. Davidson

I have just about finished. It is for the Chair to rule who speaks next.

Mr. MacArthur

I would like to call further attention to the shocking absence from our debates of any Scottish Minister. I can well understand that the Secretary of State for Scotland may well be engaged in his official duties in Edinburgh this week, in view of what is happening there, but it is inexcusable that the Minister of State should not be here; and neither is either of the two Joint Under-Secretaries. It is all the more inexcusable as the Chancellor himself directed Conservative Members to the Secretary of State when we wished to make protestations about the effect of the tax on Scotland.

I am glad that the Chancellor has been here although I am not sure whether I am glad or sorry that the First Secretary is not here. He is responsible for development districts and should be here, but whenever he comes it is to gag us and suppress freedom of speech so perhaps, on balance, I welcome his absence.

Sir D. Glover

I think that the Chancellor has had the right hon. Member for Belper (Mr. George Brown) locked in the Clock Tower until the end of the debate.

Mr. MacArthur

A number of hon. Members on the other side from Scottish constituencies have taken part in the debate and this is the second occasion on which I have had the pleasure of hearing the hon. Member for Aberdeen, South (Mr. Dewar) trying to justify the Selective Employment Tax—a point which, no doubt, his constituents will note. The hon. Member for Dundee, West (Mr. Doig) paid a splendid tribute to my right hon. Friend the Member for Argyll (Mr. Noble) and his predecessors and colleagues when he described how much unemployment in Dundee had fallen.

Mr. Doig

Under this Government.

Mr. MacArthur

The fall in unemployment in Dundee has been steady over the last few years as a direct result of the measures taken by a Conservative Government which have produced a steady drop in unemployment in Scotland and particularly in Dundee. The Labour Government, as the hon. Member knows quite well, have produced nothing in terms of planning or installing factories which are already producing any jobs in Scotland.

Mr. Doig

Unemployment went up considerably under the Conservative Government on many occasions. Since the Labour Government came to power there has been less in every month than in the same month in the previous year.

Mr. MacArthur

The hon. Member fails to take the point, which does not surprise me. Of course there were fluctuations from month to month, but the trend was downwards. If he looks at the factories in his constituency he will see that they are a tribute to the work of the Conservative Government.

The problem to which the Amendment refers is the higher rate of unemployment in Scotland which has followed the decline in the old industries before the build-up of new industries. The work has gone ahead quickly in the last few years and we hope that one effect, in the end, will be to reduce emigration abroad and the migration south of young people in Scotland who see little prospect of employment in their own country and who are lured away by the promise of higher wages and better opportunities in the Midlands and South.

Against this background the service industries have a vital role to play. First, they are large employers in their own rights, employing in Scotland over half the population. Second, their further development can act as a generator of industrial growth. Yet these are the industries which the S.E.T. hits hardest. In January this year the Government published a White Paper, The Scottish Economy 1965 to 1970, a Plan for Expansion. In the Chapter headed, "The Service Industries", paragraph 124 reads: Adequate and up-to-date services are important if Scotland is to be an attractive area for incoming industrialists. A satisfactory background of basic services and recreational facilities, good shops and adequate transport, schools and medical services—these are all things which may influence industrialists when they are considering factory locations. The service industries, therefore, have a major rôle to play in the build-up of modern manufacturing industry and in the reduction of emigration from Scotland. This was published by the Secretary of State in January of this year.

Paragraph 143 reads: The Government is conscious of the rôle which the service industries have to play in the expansion of the Scottish economy. In addition to the contribution which certain of them make directly to economic growth, they help provide the basic pre-requisites for industry as well as providing the facilities and opportunities which go with a rising standard of living. They also play an important part in influencing both the capacity to restrain migration and the ability to attract new industry. Here is all the more reason for not subjecting the service industries in the development areas to the full rate of the S.E.T.

Special attention was given to tourism in that White Paper. Indeed, there were constant references to the importance of tourism to the economy of Scotland. We are now told that the problems facing the tourist industry are being examined by the Government. The Minister of State, Board of Trade, said in Standing Committee the other day that something must be done to help certain sections of the hotel and catering industry. We have had similar statements today.

I do not have much faith in these declarations of good intent. What do they mean? We had another reference in the White Paper—[HON. MEMBERS: "Oh, no."] It is time that hon. Gentlemen opposite were reminded of what their Government have said. They must listen to their words and eat them. On page 8 of the White Paper it was stated that special attention would be given to tourism. What special attention has been given? First, the investment allowances were withdrawn and now the industry is having S.E.T. imposed on it.

I welcome the enthusiasm which Liberal hon. Members have made expressing for tourism. This is in contrast with the way in which they trooped into the Government Lobby not long ago in support of the White Paper which proposed the complete withdrawal of investment allowances from the industry.

Mr. David Steel

The hon. Gentleman may recall that in the debate on that Bill we indicated that we wanted the tourist industry to be included for the new investment grants, but that, in principle, we accepted it as a considerable extension from the old development district scheme which we had under the Conservatives. My constituency benefited not at all under the Conservative Government.

Mr. MacArthur

Whatever the hon. Gentleman may or may not have said during the debate on that Bill, I am referring to what hon. Members of the Liberal Party did months before the Bill, when they voted for the White Paper removing the investment allowances. I do not recall any such qualification then. When they realised the enormity of what they had done, they tried to find a way out later.

Tourism depends on part-time workers, and S.E.T. will hit the industry hard because of that. The industry is not overstaffed but understaffed, so that S.E.T. is irrelevant to the labour situation in the industry. If the tax in the development areas forces people out of the services industries, where will they go? There is no alternative manufacturing employment in many parts of Scotland. If they are squeezed out of employment in the service industries, some will find employment in manufacturing—but in England and not in Scotland—while others will simply become unemployed through losing their jobs, and we have heard a lot about that.

The part-time worker who will suffer most is less mobile than other workers. Often she is the married woman who cannot leave her husband and family and join the march South to find work. The social consequences of this tax are serious indeed for Scotland. If hotels do not reduce their staff—remembering that they must hold their staff if they are to keep up the standard of service they must offer—they will, it is estimated, have to increase their charges by 10 per cent. and this will have a serious effect on their ability to compete.

It is already cheaper to take a fortnight's holiday with B.E.A. from London to the Costa Brava than it is to take a fortnight's holiday with B.E.A. in Argyll. S.E.T. may well make this difference even greater. [Interruption.] I wish that the hon. Member for Coatbridge and Airdrie (Mr. Dempsey) would rise to his feet if he wishes to intervene, and not sit there mumbling.

Mr. James Dempsey (Coatbridge and Airdrie)

I was saying that the hon. Gentleman is making a rather wild statement without producing the facts of the relevant costs.

Mr. MacArthur

I do not have the precise figures with me, but I assure the hon. Gentleman that he will find them in B.E.A.'s holiday brochure in the transport office. He will see that the difference in cost between going to Argyll for a fortnight from London is £1 or £2 more than spending a fortnight on the Costa Brava.

This tax will increase this difference even more. This will mean, first, that the English visitor to Scotland will find it more attractive financially to go abroad, which will add a charge to our balance of payments, while, secondly, the overseas visitor coming to Europe will find it more attractive financially to go to Spain or Italy than to come to Scotland. Thus, we may lose both English and foreign visitors to Scotland. Only under a Labour Government do we lose on the swings and also lose on the roundabouts.

7.0 a.m.

I ask the Chancellor how he reconciles this tax with what has been said for months by the Government about the importance of the service industries in Scotland? How can this tax further the work of the Highlands and Islands Development Board? Will he tell us how this tax will help forestry in the North? How will it help the growth of the tourist industry? How will it solve the labour shortage in the construction industry? How will it promote the development of agriculture? All these are critical questions and all were thought to be part of Government policy in view of the declarations by the Government in the last few months. Now they have been shown by this tax to be a sham.

My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) referred to the first paragraph of the White Paper on the Scottish Economy and gave figures showing the Government's targets in January for increased employment in Scotland. The paragraph told us that 130,000 new jobs would need to be created by 1970 to take account of the loss of employment in the older industries and provide a net overall gain in employment. Of those 130,000 jobs, the White Paper told us, 50,000 would be in manufacturing industry, 20,000 in the construction industry and 60,000 in the service industries. Thus, 50,000 jobs were to be in manufacturing industry, and a total of 80,000 in the service industries.

A few days ago I asked the Government, and did not get a reply, what changes they intended in this forecast. I presume that the White Paper was written before the Selective Employment Tax was dreamed up. I cannot believe that in January the Secretary of State for Scotland or anyone else thought that there would be a Selective Employment Tax. Indeed, the whole nature of the tax shows that it has been a rushed and botched job. Can the Chancellor tell us what effect the tax will have on this forecast? If, as we are constantly assured, one purpose of the tax is to squeeze people out of the service industries into manufacturing industries, the Secretary of State's forecast can no longer hold good. It has been overtaken by events not within the control of the Secretary of State.

There is a serious problem here. If the Chancellor maintains that the forecast of employment in Scotland in 1970 is not changed but holds good, that in itself is a complete reason for getting rid of the Selective Employment Tax in Scotland.

Mr. MacDermot

We have been discussing this Amendment for am hour and three-quarters now. In its scope it is very similar to the Amendment we discussed previously at rather greater length. That Amendment dealt with development areas in general. This Amendment is confined to one aspect of what it describes as regional planning areas—to summarise it—which have a higher level of unemployment.

We have had many speeches from hon. Members representing Scottish constituencies. They have treated this as if it were, on the face of it, a Scottish debate. But I would remind them that there is nothing in the terms of the Amendment to confine it to Scotland. We had a contribution from the hon. Lady the Member for Tynemouth (Dame Irene Ward), perfectly in order, of course, speaking on behalf of the interests of the North-East.

I would only say to those hon. Members who complain about the absence of the Scottitsh Minister that if they had wanted, as they apparently did, to turn this into a specifically Scottish debate, the normal practice would have been to intimate that fact through the usual channels, and the usual arrangements could have been made. I apologise to hon. Members opposite if they have to put up with a mere Irishman replying to a Scottish debate. Of course, there could have been a large number of speeches from hon. Members from Northern Ireland on this Amendment. They have a problem of high unemployment. But, of course, their particular problems are the subject of other Amendments which have been selected later. So, I would say with respect, are a good many of the matters which have been canvassed during this debate, and I propose to leave our arguments on them till we reach the appropriate Amendments.

Having listened to the speeches made on the various Amendments which we have been discussing, I am led to conclude that all the arguments we get on the roundabouts are arguments which we also get upon the swings. I remember replying to a debate many hours ago dealing with the proposal to exempt the single or first employee. I remember hearing then the same arguments about the tourist industry in the Highlands, the single employee in the Highlands and the small industry in the Highlands, and I had that eerie feeling that I had been here before when I was listening to the arguments in the present debate.

As I say, we have selected special groups of Amendments dealing with part-time workers and with the tourist industry, and we shall come to those, so I hope hon. Members will not think I am being disrespectful to their Amendments if I ask them to await with patience our answers when we come to those Amendments.

Turning to the subject matter of this Amendment, the proposal that there should be a special exemption—it is put in the form of a rate of 1d., but in effect it is an exemption—for areas of high unemployment, I can summarise what I have to say shortly, because it is in effect the same answer as my right hon. Friend the Chief Secretary gave in the last debate, pointing out—I will not weary the Committee by summarising the points again—the many measures which have been taken to bring new employment and industry to these areas to assist development and to reduce unemployment in those areas.

Hon. Members who have complained that there is not a Scottish Minister here have at least had the satisfaction of having their arguments ably answered by many of my hon. Friends representing Scottish constituencies and who have added, from their great knowledge and experience, to the list of matters which my right hon. Friend the Chief Secretary itemised in the last debate, giving chapter and verse of the very low figures of unemployment in the areas which they represent in Scotland, reminding the Committee of what the Government have done in such matters as the shipbuilding industry and the bringing of the Dounreay project to Scotland. We had from the hon. Member for Perth and East Perthshire (Mr. MacArthur) most important confirmation of this when he was arguing that the reduction in unemployment in certain of these areas was due to the policies initiated by the previous Government.

Let us accept the hon. Gentleman's hypothesis for the moment. We need not argue about the extent to which those policies have been added to by the further policies since the present Government have been in power. But the point that he has made—which it is common ground is a valid one—is that as a result of the measures which have been taken to assist Scotland, the Scottish economy now is very much stronger than it was, and he is really conceding the point of the Chancellor which was attacked at the very outset of this debate by his hon. Friend the Member for South Angus (Mr. Bruce-Gardyne).

It is precisely the difference between the state of the Scottish economy now and at the time when the right hon. and learned Gentleman the Member for the Wirrall (Mr. Selwyn Lloyd) introduced and legislated for, but never put into effect, his payroll tax, which explains why it has been possible for the Chancellor to introduce this tax now.

This also relates to the point made by my hon. Friend in the very first intervention from this side of the Committee in this debate when he pointed out that if it is not to be this tax, and if the Chancellor is to find other forms of tax to raise the additional revenue which it is generally agreed on both sides he must do in his Budget, the alternatives are likely to weigh rather more heavily upon Scotland than does this tax.

My hon. Friend drew particular attention to one of the possibilities, which was widely canvassed among those who speculate about what the Budget might be, and he pointed out what the damaging effect on Scotland might have been if there had been an increase in Purchase Tax relating to motor vehicles or an increase in the vehicle licence duty.

When considering these general challenges to the Selective Employment Tax, we have got to judge the tax against possible alternatives, and the alternatives would have been likely to have more serious effects upon Scotland than hon. Gentlemen are fearing from this tax.

Mr. Bruce-Gardyne

But would the hon. Gentleman not agree that because of the wording of this Amendment, if the Government's regional policies work as they say they will work, then the Amendment would not come into operation and there would be no need to create additional revenue?

Mr. MacDermot

That point has been very ably answered by my hon. Friend, who pointed out that making an exemption as restricted as this is something that would undermine the whole regional development policy.

The only final point I would make is just to challenge—so that it does not go unchallenged—the proposition that this Amendment as it stands is something which would be simple and easy to operate.

I must make it clear, for reasons which will be familiar to hon. Members by now, that with the form in which this tax is now devised and raised through the addition to the National Insurance stamp, it would not be practicable for the kind of reasons I elaborated on an earlier Amendment to operate an exemption of this kind.

But I again repeat what the Chief Secretary said in replying to the last debate—that the tax, by its nature, is one which as it is developed in the future, and, as more refined methods of administration can be introduced, is capable of considerable differentiation and selection. But for the reasons that have already been given, that is not possible this year, and the fears which hon. Member's have expressed in this debate, in our view, are wholly exaggerated and do not justify their criticisms.

7.15 a.m.

Mr. Noble

For several hours we have listened to debates connected with much the same subject, and, if it is a fault on the part of my hon. Friends who have taken part in this debate that they did not take part in the earlier ones, I hope that the Financial Secretary will excuse it. I saw seven or eight of my hon. Friends standing at every opportunity in the hope of getting in, but they did not have the good fortune to catch the eye of the Chair. [HON. MEMBERS: "And before the Closure, too."] Yes.

The Financial Secretary returned to, though he did not quote again, the list of things which the Chief Secretary gave at the end of our last debate in an attempt to persuade us that it was the totality of measures which the Government were trying to take for the different regions which should be looked at and not the pernicious effect of this tax on its own. No one who has studied these matters as an economist or a specialist in any of the regions doubts what the effect of the tax will be on regional policy. But the attempt was made to say that so many things had been done that the pernicious effect of the tax would not be nearly so serious as we have said.

We are told about the control of office building. This may at some stage be useful, but everyone who has seen what has actually been happening in the last few months knows that the office buildings are going not to the development areas and the places where we need them, but to the London periphery and the Sourh-East. The moving of the Post Office Savings Bank to Glasgow, and so on, was the result of action taken some years ago. There is no advantage to the development areas there.

Mr. Callaghan indicated dissent.

Mr. Noble

If the right hon. Gentleman can tell me of some big office buildings which are going to the development areas, I shall gladly give him the opportunity.

Mr. Callaghan

Not on this Amendment.

Mr. Noble

I suspect that the Chancellor has to do some research in the hope of finding some. But these were the arguments which his colleagues put to the Committee, so we are entitled to ask questions about them.

Next, the question of advance factories. If the rest of the country measures up at all to the pattern which has been seen in Scotland, the advance factories will be 90 per cent. in the central belt, in the very area where we do not at the moment need all this extra employment. These actions will be of no help in solving the problem.

The Chief Secretary spoke of special help from the banks for the development areas. This is a point of the greatest importance in our future discussion on the tax. Will the Chancellor allow the banks to give overdrafts to meet the forced loans which many people will have to pay? We have not been told.

If the Chief Secretary had attended the sittings of the Committee on the Industrial Development Bill, he could not have made the remarkably naive remarks he made about that Measure tonight. Plainly, he has not even read the reports of its proceedings. Over and over again, my hon. Friends and I, sometimes supported by hon. Members opposite, have moved Amendments exactly in line with the thoughts which have been in the mind of the Committee on this Amendment, and every time the President of the Board of Trade or the Minister of State has had to say that, even if he agreed with the sentiment, it was totally impossible to do anything about it. All the Government have told us about what they are doing to counterbalance the damage that the tax will do in these areas is words, not action. I am sure that my hon. Friends are right to have doubts about the Government's intentions.

The hon. and learned Gentleman said that he had had a great deal of help from the benches behind him in confuting some of the arguments that had been made. What help did he have? He did not have a speech, as one might well have expected, from the hon. Member for Caithness and Sutherland (Mr. Maclennan), one of the people particularly involved, or one from the hon. Member for the Western Isles (Mr. Malcolm MacMillan). But every one of their constituents knows just how damaging this tax will be in their areas. He did not have a speech from the hon.

Member for West Stirlingshire (Mr. W. Baxter), who tabled Amendment No. 360; though it has not been selected, I have no doubt that the hon. Member would not have given much comfort to the Financial Secretary.

But the hon. and learned Gentleman got a speech from the hon. Member for Dundee, West (Mr. Doig), who said that he did not care whether the unemployment in Scotland was double the national average or not, a rather curious statement to put on the record even though he said that the thing that mattered to him was the number. Surely the hon. Gentleman resents very much—at least all his hon. Friends did when they were in Opposition—that Scotland should have double the national average.

We got a lecture from the hon. Member for Aberdeen, South (Mr. Dewar), who came into the Committee for a few moments and then gave us a tremendous amount of advice about how we should carry on our debates. He missed the whole point of all the arguments when he said that he resented this being called a Scottish emigration tax. If he knew his own area—he may well not, because he comes from a good distance away from it—he would know very well that the problem in the North-East is the steady emigration of the skilled and best people from the area.

Mr. Dewar rose——

Mr. Noble

I will give the hon. Gentleman a chance in a moment. He must allow me to develop my argument before he attempts to demolish it.

The hon. Gentleman said that selectivity was absolutely essential and that if we had development areas with a higher rate of selectivity and, thus, advantages over other parts, it would wreck the whole scheme. He said that within the development area everything had to be the same. [Interruption.] Is the hon. Gentleman trying to put his case in a different form?

Mr. Dewar

I recognised that the problem in my constituency was emigration, but because it is emigration, I am blessed in a back-handed way by having a very low unemployment rate. The Amendment—we are discussing that and not the Selective Employment Tax— would particularly victimise my constituency, which would be at a considerable disadvantage compared with other development areas.

Mr. Noble

That is almost exactly the same argument as the hon. Gentleman used before. The point that he is in grave danger of missing—it is a very valid one in Scotland as a whole—is that in a situation where we have the whole of Scotland, with one small exception, as a development area the incentives for industry to settle in the middle are now very much greater than they have ever been before. Under other action which the Government have taken, and particularly under the impact of this tax and the withdrawal of the investment allowances, transport costs in Scotland have risen and will rise very greatly. Thus, the opportunity for industries to go to places like the hon. Member's area and settle there are much less than before. His area is in grave danger of suffering severely.

Mr. Dewar

The right hon. Gentleman is avoiding the point. He is again making a general point about the tax, which may or may not be valid, and is avoiding argument about the Amendment, which would make worse the dangers he accurately describes.

Mr. Noble

I do not think that I can go on with this ad infinitum, but that is not necessarily so. The hon. Gentleman quoted one way in which it could happen. I am arguing that it is much more important to attract industry to development areas, perhaps with special help such as could be given by this tax, rather than to pursue the present policy of the Government which, if unwillingly, they are trying to persuade the Committee they are forced to follow.

When we come to other parts of the Bill there will be opportunity for points which the Government have not answered to be followed up, so I will not ask the Financial Secretary to go into them now. But I do ask him to bear in mind that, at some stage during the proceedings of the Bill, it will be the duty of the Government to tell us categorically what their estimate is of the cost of this tax to certain specified areas.

The calculations I have heard made for the Highlands range between £1½ million and £4½ million. No one can tell us what is the best calculation at the moment. I asked the Chairman of the Highland Development Board last Friday and he said that he had been unable to get any accurate calculation. Whether the Government like it or not, it is true that, at least for the next six or nine months, a great deal more money will be drawn out of these areas than they can reasonably stand.

The hon. and learned Gentleman said that, of course, the Government had to raise revenue. Both he and the Chief Secretary have, as usual, asked us how else we would have raised it. Perhaps it might have gone on to transport and if

so, those of us living in outlying parts of the country would have disliked that, perhaps, even more.

The fact is simple. The money had to be raised—perhaps—but there were many other ways in which it could have been raised with very much less damage to development areas and to the employment situation within them. That being so, we will, I know, want to divide the Committee.

Question put, That those words be there inserted: —

The Committee divided: Ayes 90, Noes 134.

Division No. 67.] AYES [7.28 a.m.
Allason, James (Hemel Hempstead) Griffiths, Eldon (Bury St. Edmunds) More, Jasper
Astor, John Grimond, Rt. Hn. J. Munro-Lucas-Tooth, Sir Hugh
Baker, W. H. K. Hamilton, Marquess of (Fermanagh) Murton, Oscar
Batsford, Brian Hastings, Stephen Noble, Rt. Hn. Michael
Bitten, John Hawkins, Paul Nott, John
Biggs-Davison, John Higgins, Terence L. Page, Graham (Crosby)
Black, Sir Cyril Hiley, Joseph Pardoe, J.
Blaker, Peter Hirst, Geoffrey Peel, John
Boyd-Carpenter, Rt. Hn. John Hordern, Peter Perclval, Ian
Boyle, Rt. Hn. Sir Edward Howell, David (Guildford) Pink, R. Bonner
Brinton, Sir Tatton Hunt, John Pounder, Rafton
Brown, Slr Edward (Bath) Iremonger, T. L. Price, David (Eastleigh)
Bruce-Gardyne, J. Jenkin, Patrick (Woodford) Pym, Francis
Campbell, Cordon Jopling, Michael Ramsden, Rt. Hn. James
Channon, H. P. G. Kimball, Marcus Renton, Rt. Hn. Sir David
Chichester-Clark, R. King, Evelyn (Dorset, S.) Ridley, Hn. Nicholas
Clark, Henry Kirk, Peter Roots, William
Clegg, Walter Kitson, Timothy St. John-Stevas, Norman
Cooke, Robert Langford-Holt, Sir John Scott, Nicholas
Davidson, James(Aberdeenshire, W.) Longden, Gilbert Sharples, Richard
Deedes, Rt. Hn. W. F, (Ashford) Loveys, W. H. Steel, David (Roxburgh)
Dodds-Parker, Douglas Lubbock, Eric Thatcher, Mrs. Margaret
Eden, Sir John MacArthur, Ian Turton, Rt. Hn. R. H.
Fortescue, Tim Mackenzie, Alasdair(Ross&Crom'ty) Ward, Dame Irene
Foster, Sir John Maclean, Sir Fitzroy Weatherill, Bernard
Gibson-Watt, David Macleod, Rt. Hn. Iain Webster, David
Glover, Sir Douglas McMaster, Stanley Whitelaw, William
Goodhart, Philip Maude, Angus Wlnstanley, Dr. M. P.
Goodhew, Victor Maxwell-Hyslop, R, J.
Gower, Raymond Mills, Peter (Torrington) TELLERS FOR THE AYES:
Grant, Anthony Miscampbell, Norman Mr. David Mitchell and Mr. Younger.
NOES
Allaun, Frank (Salford, E.) Conlan, Bernard Foley, Maurice
Allen, Scholefield Corbet, Mrs. Freda Ford, Ben
Archer, Peter Crawshaw, Richard Fraser, John (Norwood)
Armstrong, Ernest Cullen, Mrs. Alice Gardner, A. J.
Bagier, Cordon A. T. Dalyell, Tarn Gordon Walker, Rt. Hn. P. C.
Barnes, Michael Davidson, Arthur (Accrington) Gregory, Arnold
Beaney, Alan Davies, Dr. Ernest (Stratford) Griffiths, David (Rother Valley)
Bern, Rt. Hn. Anthony Wedgwood Davies, G. Elfed (Rhondda, E.) Griffiths, Will (Exchange)
Bennett, James (G'gow, Bridgeton) Davies, Ifor (Gower) Hamilton, James (Bothwell)
Binns, John Davies, Robert (Cambridge) Hamilton, William (Fife, W.)
Bishop, E. S. Delargy, Hugh Hannan, William
Blackburn, F. Dempsey, James Harper, Joseph
Booth, Albert Dewar, Donald Hazell, Bert
Bray, Dr. Jeremy Diamond, Rt. Hn. John Heffer, Eric S.
Brooks, Edwin Dickens, James Henig, Stanley
Brown, Rt. Hn. George (Belper) Doig, Peter Hooley, Frank
Brown, Hugh D. (G'gow, Provan) Dunnett, Jack Hoy, James
Brown,Bob(N'c'tle-upon-Tyne,W) Dunwoody, Mrs. Gwyneth (Exeter) Hughes, Emrys (Ayrshire, S.)
Brown, R. W. (Shoreditch & F'bury) Dunwoody, Dr. John (F'th & C'b'e) Hunter, Adam
Callaghan, Rt. Hn. James Eadie, Alex Hynd, John
Carmichael, Neil Edelman, Maurice Jackson, Peter M. (High Peak)
Coe, Denis Edwards, Robert (Bilston) Jenkins, Hugh (Putney)
Fernyhough, E. Johnson, James (K'ston-on-Hull, W.)
Coleman, Donald Finch, Harold Judd, Frank
Lestor, Mist Joan Orme, Stanley Silverman, Julius (Aston)
Lever, Harold (Cheetham) Owen, Dr. David (Plymouth, S'tn) Slater, Joseph
Lomas, Kenneth Parker, John (Dagenham) Small, William
Loughtin, Charles Pavitt, Laurence Summerskill, Hn. Dr. Shirley
Lyon, Alexander W. (York) Pentland, Norman Taverne, Dick
MacDermot, Niall Perry, Ernest G. (Battersea, S.) Tinn, James
Macdonald, A. H. Perry, George H, (Nottingham, S.) Urwin, T. W.
McGuire, Michael Prentice, Rt. Hn. R. E. Walden, Brian (All Saints)
McKay, Mrs. Margaret Price, Christopher (Perry Barr) Walker, Harold (Doncaster)
Mackenzie, Gregor (Rutherglen) Redhead, Edward Watkins, David (Consett)
Mackie, John Reynolds, G. W. Wellbeloved, James
Maclennan, Robert Robertson, John (Paisley) Wells, William (Walsall, N.)
McNamara, J. Kevin Robinson, W. O. J. (Walth'stow, E.) Whltaker, Ben
Mapp, Charles Roebuck, Roy White, Mrs. Eirene
Mendelson, J. J. Rogers, George Whitlock, William
Moonman, Eric Rose, Paul Williams, Clifford (Abertillery)
Morris, Alfred (Wythenshawe) Ryan, John Winnick, David
Morris, Charles R. (Openshaw) Shaw, Arnold (Ilford, S.) Winterbottom, R. E.
Mulley, Rt. Hn. Frederick Shore, Peter (Stepney) Woof, Robert
Oakes, Gordon Short,Rt.Hn.Edward(N'c'tle-u-Tyne)
Ogden, Eric Silkin, John (Deptford) TELLERS FOR THE NOES:
O'Malley, Brian Silkin, S. C. (Dulwich) Mr. Grey and
Mr. Walter Harrison.
Mr. Callaghan

I beg to move, That the Chairman do report Progress and ask leave to sit again. I can understand the jubilation of the right hon. Member for Enfield, West (Mr. Iain Macleod). Looking back 12 months, however, if we had thought that there was any conceivable possibility of having a majority of 44 in a Division, we should have thought that we were well away—and we still think that.

This is a good time to report Progress. It is time that we gave the Opposition an opportunity to recharge their batteries and to find some fresh arguments. In view of the tedious arguments which we have been listening to, repeated time after time, it is only fair that they should have an opportunity to think up something a little new to beguile the time.

Mr. Iain Macleod

It is very dangerous to make statements like that. There is no reason why we should not debate this Motion for another two hours until the First Secretary arrives, tired as usual from his labours, and bullies the Deputy Chief Whip into doing something he does not want to do; and then everybody gets very bad tempered with everybody else.

The Government's majorities have been very small. I do not make too much of that point. The arguments from this side of the Committee have been both concise and admirably phrased. The only thing which has gone wrong has been the consistent attempts of the Government and of the Government Chief Whip to closure the debates even on such important matters as development and the problems of the sick and disabled. If he had not just been beaten to the gun, he would have closured the debate on the last Amendment concerning the key development districts with relatively high rates of unemployment.

I suggest to the Chancellor that, after his experience yesterday, a certain amount of humility may help in making progress with the Bill.

Question put and agreed to.

Committee report Progress; to sit again this day.