HC Deb 28 June 1967 vol 749 cc561-85
Mr. MacDermot

I beg to move Amendment No. 61, in page 81, line 41, to leave out 'section 25' and to insert 'Part IV'.

It would also be convenient if we took with this Amendment No. 62.

These Amendments are consequential upon the addition of Clause 26 to the Bill and they extend to employers under that Clause the arrangements for the "set off" payments which apply to employers under the S.E.T. Act and Clause 25 of the Bill.

Amendment agreed to.

Further Amendment made: No. 62, in page 81, line 44, leave out 'section 25' and insert 'Part IV'.

Mr. Iain Macleod (Enfield, West)

I beg to move Amendment No. 63, in page 82, line 5, at the end to insert: 15. The Minister by whom any register of establishments is maintained under section 7(1) of the principal Act shall not refuse to exercise his power by virtue of section 10(3)(a) of that Act to register a part of an employer's business as a separate establishment by reason only of the fact that the persons employed on the part of the employer's premises proposed to be treated as the site of that establishment are supervised by a person working in some other part of those premises. It was around midnight on Thursday, 8th June, that my hon. Friend the Member for Woking (Mr. Onslow) embarked on the saga of two dental practices in his constituency and the fate of the dental technicians attached thereto when steps were taken to ascertain whether a refund or premium was payable in respect of them under the Selective Employment Tax. The reply of the Parliamentary Secretary to the Ministry of Labour was received by us on this side with a mixture of hilarity and horror. We therefore thought that we should return, however briefly, at the end of the Report stage to a very important matter of principle. We said some rough and some kind things to the hon. Gentleman. I should be delighted one day to see him become Minister of Labour—and I cannot pay him a higher tribute than that—perhaps after a decent interval of 13 years' of Conservative Goverment. I have a high regard for his ability, although I think that his answer was sadly wrong on 8th June.

I outline the case very briefly. A dental surgeon in Woking had a dental technician and decided to apply for the premium. Being, presumably, a friendly sort of chap, he notified the other practice in Woking which had two dental technicians, and accordingly both practices put in for the relief. Somewhat to their surprise, they were told that the practice with two dental technicians was allowed the relief, and the practice with one technician which had originated the idea was not.

The matter was taken up with the Minister of Labour who wrote a letter to my hon. Friend the Member for Woking, which included the following words: As one person only is employed in the dental workshop, the inference is that he is supervised by the partners who control the practice as a whole. If it can be shown that this is not the case, for example, that the technician is self-supervising, I would be prepared to reconsider my earlier decision. Where on the other hand more than one employee is working in an establishment it is open to the employer to establish that one worker is supervised by the other and that the 'separately organised' test is satisfied". That is a delicious comment. A number of similar examples were given by my hon. Friends the Members for Ormskirk (Sir D. Glover) and the Cities of London and Westminster (Mr. John Smith).

In reply, the Parliamentary Secretary said at the beginning of his speech—with a completely straight face, as far as I can make out: The two examples which hon. Members have put to the Committee both arise naturally, inevitably and properly out of the workings of Section 10(3,a) of the Selective Employment Payments ACt."—[OFFICIAL REPORT, 8th June, 1967; Vol. 747, c. 1447–9.] There must, of course, be rules in this matter and the hon. Gentleman went on to consider the criteria which had been used by the Ministry of Labour. They are three: first, the activities must be genuinely different in kind; secondly, they must be carried out in separate parts of the establishment; and, thirdly, the two activities must be separately organised. In other words, he raised the spectre of repercussions which is the standard answer which one is accustomed to getting when one presses a particular point.

The hon. Gentleman said. Its application as a general principle would erode the basic establishment rule on which the tax is based."—[OFFICIAL REPORT, 8th June. 1967; Vol. 747, c. 1451.]

Mr. John Peyton (Yeovil)

Would my right hon. Friend repeat that?

5.45 p.m.

Mr. Macleod

It is a terrible thing to repeat, but I will repeat it if my hon. Friend wishes: Its application as a general principle would erode the basic establishment rule on which the tax is based. Later, my hon. Friend the Member for Woking tabled a Written Question to the Ministry of Labour in which he asked how many applications he"— that is, the Minister of Labour— has received for dental surgeons' establishments to be divided so that a single technician may qualify for selective employment premium; and how many of these he has approved". The Answer was: Twenty-nine, of which two have been approved."—[OFFICIAL REPORT, 26th June, 1967; Vol. 749, c. 11.] Perhaps the Parliamentary Secretary will say—because his Answer does not make it clear—whether the other 27 have been rejected, or whether some have been rejected and others, as may well be the case, are still under consideration.

I am convinced that the real trouble springs from a point which was put by my hon. Friend the Member for the Cities of London and Westminster. He said: These cases are not decided on their merits but by reference to this standard industrial classification which was devised for quite another purpose. The Government have got hold of this bed of Procrustes and are going to stamp us all into it the old, the disabled, and so on, whether we fit it or not"—[OFFICIAL REPORT, 8th June, 1967; Vol. 747, c. 1453.] It is within my knowledge that that is exactly true, because the Standard Industrial Classification was revised in 1958 when I was Minister of Labour. It was revised as a statistical exercise. The Director of Statistics, Mr. Fowler, an extremely able and most distinguished man in his field—I think that he is still with the Ministry—naturally did most of the work on it.

I can best illustrate the point by making a short quotation from the introduction to the Standard Industrial Classification which came into such unexpected prominence with the introduction of the Selective Employment Tax a year ago. It is stated in paragraph 8(c) on page 2: Thus establishments repairing radio and television sets, watches and clocks, furniture, etc., are classified to the distributive trades. Establishments engaged in the repair of ships, locomotives, aircraft, and most kinds of plant and machinery are classified to manufacturing industry. In a few cases repair work is not classified to either manufacturing or distribution. Establishments engaged in the repair and maintenance of buildings are included in Construction. In the cases of motor repairing and boot and shoe repairing the repair activities, … are … treated as industries in themselves …". The point is—and the Parliamentary Secretary will basically agree with this—that that makes absolute sense in considering statistical classification. It makes absolute nonsense for taxation purposes. It was never devised for such purposes. There was never the faintest intention that it should be used for those purposes. The Treasury was so busy that it had to sub-contract the work to the Ministry of Labour. This is why these cases arise and why we have proposed the Amendment. Hence all the fiddles about being self-employed. My hon. Friend the Member for Ormskirk was right to suggest in Committee that probably even this case could have been got round if the dental surgeon had given a special title to the dental technician.

The Ministry of Labour, in its adminisstration of these matters, has been generally absolutely excellent. I should like to put that clearly on record. I have had many illustrations of how wise, as one would expect, and sympathetic its officials have been in the inevitable difficulties which have arisen. But that does not alter the fact that occasionally examples which appear to be and are idiotic emerge, and it is such an example that we are discussing. I am sure that the Parliamentary Secretary would know from even a brief experience of administration that it is possible for each step to be O.K. and defensible in itself and yet for the end product to be ludicrous. As I made clear in Committee, there is a special responsiblity on him to exercise his position as a Minister, particularly because this matter fell under the Guillotine a year ago and was not discussed by Parliament.

The Parliamentary Secretary said, unusually and rather patronisingly, that we did not understand our Amendment. With respect, we do. It is only a peg on which to hang an argument, and I am sure that the hon. Gentleman is a good enough Parliamentarian to realise that. What we seek to do could be done without an Amendment at all, if I could convince him that I was right and he was wrong, but this is a Parliamentary way of enabling the House to discuss the matter.

I do not expect him to stand up in a white sheet and announce that he has sinned, although I believe that he has, but I do expect him to go away and be a little more sensible in future about these sorts of matters. If he gives the same sort of reply as he gave in Committee, in all friendliness to him, I shall regard his case as hopeless. However high he may rise in the present Government, he will always be a prisoner, because he will not have realised the fundamental distinction in the work which a Minister has to do. If he is wise, he will reflect closely on what has been said both in Committee and on Report, not just about the particular instance, although it is the one on which the Amendment hangs, but about the working and the difficulties of the S.E.T. and, with the splendid record which his Ministry has for administering what is almost an impossible task, in my view he ought to take special care to see that the small absurdities, of which this is clearly one, should be removed as well.

Mr. Peyton

I had no intention of making any contribution to the proceedings today, but I have been so moved by the utterances of my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) that I must do so.

It is most extraordinary that the Government should confess that a man cannot supervise himself. It must be something out of their own subconscious. It is the whole ground for the exemption that where one man is on his own, it is clear that he cannot supervise himself. I take it that that is something which the Parliamentary Secretary believes, and it is probable that the belief is shared widely in the Government. It is obvious to us all that the Prime Minister is wholly incapable of supervising himself, but I will not pursue that now.

My right hon. Friend quoted the splendid phrase, arise naturally, inevitably and properly out of the workings of the Section. I doubt whether anything could be said to arise naturally from something so unnatural. It is true that something could arise inevitably, but certainly not properly. There is nothing natural or proper about the whole of this tax and, after the bitter experience which the hon. Gentleman has had with it, he should be the last person to be surprised by things arising unnaturally and improperly. I only wish that everything which arises from it could be avoided.

Then my right hon. Friend quoted the phrase, Its application as a general principle would erode the basic establishment rule. I wonder how often such classic words have been quoted. These sorts of sentences can only be conceived and born in the ivory tower of the Establishment, that rarified world where no common sense is allowed to break in and where the totally indefensible has to be maintained at all cost.

I share the sentiments expressed by my right hon. Friend about the way in which the Ministry of Labour has done this impossible job. I do not see why it is, when we possess perhaps the finest Civil Service in the world, that we should seek to prove it always by giving it the most impossibly silly tasks. In showering upon it impossible tasks of a silliness which is quite monumental, the present Government have exceeded the efforts of their predecessors, and I am bound to say that their predecessors have not been guiltless in this respect.

We are confronted here with a singularly foolish consequence of a completely idiotic tax. It is a proposal which has been pursued with a folly at which one can only wonder, even in the light of experience of the last two years of the present Administration.

My right hon. Friend drew attention to the fact that, in trying to get this tax on its legs at all, the Government were forced to cast round into all sorts of unlikely nooks and crannies for some legislative materials with which to build it. If Noah had been faced with the task of building the Ark in a hurry in a treeless land, he would not have had a more difficult or onerous responsibility to discharge.

No words of mine would be capable of encompassing the folly. I believe that the nice, cautionary tale of the dental mechanic who, in the view of the Government, was unable to supervise himself and whose employer was therefore deprived of his premium, is a good example of the sort of quagmire into which we are plunged by such foolish experiments. I wish only that I had words adequate enough to describe it.

Sir Douglas Glover (Ormskirk)

I felt that we had reached the point of absurdity when I saw the Parliamentary Secretary to the Ministry of Labour sitting on the Treasury Bench presumably waiting to reply to the debate, because he is always put up when there is an impossible case to answer.

I will not go over the arguments which have been put forward before, but I hope that the hon. Gentleman and his Ministry will realise that we are dealing with an Amendment which is only a peg on which to hang our argument and which discloses a complete nonsense in the working of the S.E..T

As my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) said, it all starts from the fact that the Government were in a panic to find a new tax, the Chancellor having decided not to put any more on whisky or cigarettes and made a great oration in the House. Suddenly, the Chancellor had to think of some other way of raising money, but he found that it was too complicated to deal with himself, and pitched it over to the Ministry of Labour. Heaven knows what that Ministry said when it got it. That has never been disclosed in public and probably was not printable in Parliamentary language.

However, being good loyal members of the Government, they took on the task. They started off with a premise which was untenable, because they began with these lists of classifications which were not designed for the purpose. That is what has led the Government into nonsense after nonsense.

The tax has now been in operation for 12 months. We accept that, when they were bringing it in last year, perhaps they could not refine it, and so on. But that was 12 months ago. As these cases of absurdity are shown up, it is time that the Government did something about it.

6.0 p.m.

I do not know whether my hon. Friend the Member for Woking (Mr. Onslow), who raised this point about the two dental technicians in a brilliant speech in Committee, will be able to tell the House that this single dental technician has been put into the category of being able to draw a premium. If he has not, I think that the Government are going round the bend. It is obvious that these two dentists, one with two technicians, and the other with one, with all three technicians carrying out the same job, ought to have the same conditions. It is Bumbledon gone mad to say that nothing can be done to put the matter tight. Of course, something can be done to put it right. As I said in Committee, I am sure that the Ministry could suggest to the dentist concerned how he could put it right, and tell him what classification he ought to give this technician to put the matter right. I hope that the Parliamentary Secretary will tell us that the matter has been righted.

To diverge for a moment to what was said by my hon. Friend the Member for Yeovil (Mr. Peyton), thank heaven that the Prime Minister is not covered by a premium for the work he does. If there is one person in the country who does not earn a premium at the moment it is the Prime Minister, but if I pursue this I might get out of order. I do not think that he comes under S.E.T. at all.

Mr. Peyton

Surely my hon. Friend would not describe the Prime Minister as a service industry?

Sir D. Glover

I would describe the Prime Minister—[AN HON. MEMBER: "As a fabricator."]—either, as one of my hon. Friends says, as a fabricator—

Mr. MacDermot

Monstrous.

Sir D. Glover

Even at this late stage one ought to have a little sense of humour. I would describe him either as that, or as a person running a non-movable business, where turnover is nil, and production is a minus quantity, but I think that this is getting a little out of order.

I ask the Government—and I mean this seriously—to go into this matter to see that these nonsenses are put right. Do the Government realise that this makes it almost impossible for a one-man firm to run a manufacturing business, because he is bound to be supervising himself? How do firms start in business? Most firms are inclined to start as one-man businesses and build themselves up. Why should they, because of some classification, be at a disadvantage against somebody who can say that he is employing staff and is supervising and is therefore treated as a manufacturing industry?

The whole thing is so crazily stupid that I do not know why it was necessary for us to table this Amendment. I am surprised that the Government did not accept it in Committee and say that they would do something about it and put the matter right. This is Bumbledon and bureaucracy gone mad, and the sooner the Government do something about it the better it will be for the efficiency of the nation.

Mr. Cranley Onslow (Woking)

I must apologise for not being here when the debate started, but I understand that the circumstances underlying the particular case which first prompted me to table a similar Amendment in Committee have been outlined, and I shall not go over them again.

I would like to comment briefly on one or two points which were made by the Parliamentary Secretary when he replied to the debate on 8th June. I shall pass over the "naturally, inevitably, and properly" line which he attempted to sell us, and forbear to comment on the statement that Clause 10(3,a) is intended to help industry, and proceed to two of the hon. Gentleman's remarks at the end of his short speech on that occasion.

The first of these, which the hon. Gentleman seemed to regard as his strong argument, was: I hope that he will accept that very many single individual establishments have been so classified."—[OFFICIAL REPORT, 8th June, 1967; Vol. 747, c. 1451.] I do not know why I am always reluctant to accept at face value statements made from the other side of the House. I confess this to be a weakness, but on this occasion I yielded to it and tabled a Question to the Ministry of Labour on 16th June to find out how many there had been, and I was told—and if this has been referred to I make no apology for quoting it again— The Ministry has received about 350 applicants for an establishment to be divided so that a single employee may qualify for Selective Employment premium or refund. About 90 of these have been approved and the remainder rejected.—[OFFICIAL REPORT, 16th June, 1967; Vol. 748, c. 155] I do not know the Parliamentary Secretary's ideas of magnitude, but in the context of the total employed population of this country I do not regard 90 as very many, nor even as many. I am not sure that I even regard it as being a few. I regard it as being very, very, very few, and how he has the gall to rely on a statistical argument as flimsy as this passes my comprehension. But perhaps he was being rather pompous on that occasion, and if he is not feeling quite so pompous today no doubt he will drop the argument.

The hon. Gentleman then said: I hope that he will also understand that if the Ministry lays down rules and establishes criteria we have an obligation to stick to those criteria and to hang on to those rules."—[OFFICIAL REPORT, 8th June, 1967; Vol. 747, c. 1451–2.] It was rather as though he was a small child hanging on to his blanket. I would like the Parliamentary Secretary to explain what these criteria are and precisely what is this rule blanket on to which he is hanging so tight for such comfort as he can get from it. How widely are these criteria and these rules known? I would like a definition again of this interesting term "self-supervising" which was first thrown out in the Minister's original letter to me, and to which my hon. Friend the Member for Yeovil (Mr. Peyton) has drawn attention.

It may be that the Parliamentary Secretary is self-supervising, although judging by his present companions on the Front Bench it does not seem that on this occasion he is allowed to be. The hon. Gentleman may stick to all the criteria that he likes, and hang by all the rules that he wishes, but I suggest to him that he ought to make sure that the public understand these criteria and these rules because the Government have a duty to the public to explain the rules by which they believe themselves to be bound.

What guidance has been given to local offices of the Ministry of Labour about these rules and criteria Have they been specifically informed? What guides the Minister when he comes to make these decisions? We know that the local offices of the Ministry of Labour are very helpful, but the Minister should see that they are able to be even more helpful, and I hope, therefore, that in respect of the dental technicians he will tell us what rules and criteria the two successful applicants have been able to satisfy which the 25, or 27 other unsuccessful applicants have been unable to meet.

Have their employers been informed? Have they been given an opportunity to reapply? My own constituent who first brought this case to public notice is still trying to draft his letter of reapplication because he really cannot understand what is going on, and being a busy man, he does not have much time to devote himself to these abstruse matters. He has had no guidance, and he cannot understand how it is that somewhere in the United Kingdom there are two dental technicans working single-handed under such conditions that they can supervise themselves and qualify for the premium, but that by the same token there are ten times that number who are unable to satisfy these conditions whatever they may be. The same comment applies to all the other unsuccessful applicants. Out of 350, 90 have been successful. Have the others been told how they might yet succeed if they reapply?

If the hon. Gentleman will not yield on this absurd provision as it is now stuck in our legislation, I hope that he will at least understand that if he wishes this idiotic tax to achieve its secondary purpose—which he defined on 8th June as being the redistribution of employment resources between manufacturing and service industries—it is in his own interest to do something about this particularly ridiculous situation.

We know that the prime purpose of this tax was to get the Chancellor of the Exchequer off the hook because of his pre-election statement that there would be no severe increase in taxation, but if we address ourselves to the secondary purpose, to secure redeployment, then if these single applicants who have so far not been successful in applying for the receipt of premium were somehow or other, to be enabled to receive it, the hon. Gentleman would be able to claim that they had been redeployed into a productive sector of industry. Because they would now appear statistically on the manufacturing side of the ledger, having teen transferred statistically from the "non-productive" service side of the ledger.

Of course, it would only be on paper, and they would still be doing just the same jobs, but it would enable the hon. Gentleman to come to the House and say that the Selective Employment Tax was achieving its purpose and to say, "Lo and behold, here are men moving from one side to the other, and this justifies this remarkable piece of fiscal legislation". Perhaps such a solution is too absurd even for him to contemplate, though I would not put too much faith in that proposition.

I would only put this to him. He can prate as long as he likes about eroding rules, and he can attempt as much and as stoutly as he wishes to avoid any deflation of his ego, but much the most sensible course which he could adopt would be to accept this Amendment, or better still, to scrap the whole tax.

Mr. John Smith

I should like, briefly, to support this Amendment for two reasons, first, because, as I mentioned in Committee, there are two rather comparable cases in my constituency, and, secondly, because I do think that it raises a very important human point.

I should like to comment on one or two things which the Joint Parliamentary Secretary said when he answered the debate in Committee. I have no wish to go for the Joint Parliamentary Secretary—I have never had the opportunity before. Indeed, when the "Week in Westminster", on the "steam radio", took the form of a monologue, which now it no longer does, the hon. Gentleman, if I may say so, was very much the best at it among those on that side of the House; but what he said in Committee in answer to the Amendment by my hon. Friend the Member for Woking (Mr. Onslow) was, I think, deplorable.

Among other things the hon. Gentleman said that … the two activities must be separately organised … which … means that they can be separately identified in the employer's records and are separately managed and supervised."—[OFFICIAL REPORT, 8th June, 1967; Vol. 747; c. 1450.] We are talking here about tiny enterprises, enterprises of one, two or three people, and in such enterprises—and we all know some—the idea of separately identifying things in the employers' records and showing they are separately managed and supervised bears no relation to the conditions under which such firms work. They work off the backs of envelopes and they work very cheaply as a result.

The hon. Gentleman also talked about "eroding the establishment rule", a phrase which, to me, is extremely provoking. He talked about the "enormous technical complication" of charging "on an individual rather than establishment basis"—two words, in my view, put in exactly the wrong order of priority.

Finally, the hon. Gentleman said to my hon. Friend the Member for Woking that the example my hon. Friend had given "was numerically small". I am reminded by that of the definitions current before the war of various form of government in terms of cows, with which the House will be familiar. There was New Dealism: "You have two cows; the Government shoot one, buy the milk from the other and pour it down the drain". There was Fascism: "You have two cows; the Government shoot you and take both cows". And so on. But the definition for Whitehallism was: "You have two cows; the Government say that this is too few to count".

That is the principle which we are fighting here. The Government are giving many signs that they are not sincerely concerned with the individual, still less with the individual enterprise, and I feel that their attitude to individuals and to small enterprises will be judged very much by their attitude to this Amendment.

6.15 p.m.

The Joint Parliamentary Secretary to the Ministry of Labour (Mr. Roy Hattersley)

The right hon. Gentleman the Member for Enfield, West (Mr. lain Macleod) was so generous to me in his opening remarks that it is with genuine regret that I have to warn him that he may well be as disappointed this afternoon as he was on the last occasion when I addressed myself to this subject. I think that he is sad, but not surprised. Because of his generosity it is even more painful for me to have to point out at the outset two mistakes in his speech.

The first was his denunciation of the Standard Industrial Classification, which he described as totally irrelevant to the task which it is intended to perform in regard to the Selective Employment Tax. In fact, I have to tell him that the Standard Industrial Classification is totally irrelevant to this debate. If the problem exists in the terms in which he described it this evening, if the problem exists in the rather more dramatic terms which were used by the hon. Member for Woking (Mr. Onslow), it exists in exactly the same way even if the two activities under discussion come under different headings of the classification or different groups. I hope, therefore, that the right hon. Gentleman will understand that that rather omnibus criticism of the tax was really entirely mistaken.

I hope that he will also understand that the sort of job which he did this evening was, in the past, better done by the hon. Member for Worcestershire, South (Sir G. Nabarro). In a complex system of taxation it is, invariably, easy to pick on marginal cases, and those marginal cases can be so explained and so expounded and so discussed as to make the entire rule look fatuous.

I believe that what we have to decide this evening is whether the basis of the rule is right, and whether the rule is applied accurately. It is freely acknowledged, and I am sure my hon. and right hon. Friends at the Treasury will acknowledge as well, that most complex systems of taxation do have at their margins cases which can be argued, by those who choose to do so, in the way the case has been argued this evening. I freely confess, and this may be a little comfort to the right hon. Gentleman, that I understand why the hon. Member for Woking brought the case before us two or three weeks ago. Bu I do not think that his case invalidates the rule, and I do not think that the arguments he brought forward justify a change. I understand very well how a case of that sort at the margin provokes the sort of interest and the sort of debate, and, perhaps, the rather overheated sort of debate, we have had twice on this subject, on this Section 10(3,a).

I will try to answer some of the questions asked this evening. I think the actual nub of the problem was pointed out, perhaps unwittingly, by the hon. Gentleman the Member for Ormskirk (Sir D. Glover), who said that in his view everybody, carrying out the same sort of job, should receive the tax back in the same way. I am sure he knows perfectly well that the principle on which the entire Selective Employment Tax is based is quite opposite to that. The tax is dependent upon the establishment principle; that everybody in one establishment receives the rebate, receives the premium, or pays the tax in toto. If this were to be operated in the way the hon. Member suggests we would, of course, be in this position—and I take this example at random: say, the British Motor Corporation would receive the premium only for those people directly engaged in manufacturing activity, but it would not receive the premium for clerks and for other similar people. It would then be received according to the nature of the job. The hon. Gentleman is probably rising to say that that is the way it should be, but I hope that he will understand, in terms of this debate and in terms of this Amendment, that we have an obligation, in part to the House and in part, I think, to logic, to realise that we are debating the details of the tax. We are not embarking for 40 minutes this evening on rewriting or altering or abolishing the tax. What we must consider is that the Amendment attacks the principles which were accepted by the House last year and have been confirmed by the House since.

Let me try to explain how Section 10(3,a) is intended to help industry. Section 10(3,a) enables firms with two separate and distinct activities to be classified for purposes of the tax in two separate and distinct ways. But if the major activity already qualifies for premium, there is no split between the two activities. Then the entire organisation receives the premium—major activity which qualifies and minor activity alike.

Only when a firm argues that it is organised in two separate activities, the major one of which does not qualify for premium and which therefore, were it to be classified as one unit, would prohibit anyone in the firm from qualifying for the premium, are the powers of Section 10(3,a) exercised. The establishment is notionally split into two separate units, thus enabling the firm, under those specific circumstances, to obtain premium payment for its minor activity.

Thus, the Section is in the interests of firms, because, whenever it is applied, a firm gets a premium payment which it would not get if Clause 10(3,a) did not exist. That is why it is to their advantage and why it was generally welcomed by industry when it was put in the Bill. If we are to say that it is reasonable and proper, as I believe it is, that separate activities should, on these specific occasions and in these specific senses, be separately classified, it is equally proper to say, as hon. Gentlemen opposite have said today, that it is important for British industry—firms which are likely to apply for the split to be operated in their favour—to know exactly how the distinction is made and how they are classified in separate establishments.

I was astonished to hear the hon. Member for Woking ask when these rules had been spelled out and when we had explained our criteria for making the division. My right hon. Friend the Minister of Labour explained this to the House on 23rd June, 1966. If the hon. Gentleman wants to confirm that, since he has some scepticism about assurances from this side, he may care to look at columns 934–5 of HANSARD for that date. It was reaffirmed and the rules redefined by my hon. and learned Friend the Financial Secretary on 9th August, 1966; that appears in column 862.

Both speeches included a statement of the three criteria and those criteria, as outlined by my right hon. Friend and my hon. and learned Friend on those occasions, have since been incorporated into the S.E.T. Guide. It is, of course, available at local employment exchanges to members of the public who want to understand exactly what the rule stands for. It has been available during the whole period of the Section's operation.

There is no case for saying that Parliament was not informed or that industry does not know what the three criteria are. However, since the hon. Member for Woking apparently does not know, let me tell him. They are, first, that the activities should and must be different in kind; second, that they should be car- ried out in a separate part of the premises, and, third, that they should be separately organised. Since—I freely acknowledge this—"separately organised" is a rather vacuous concept, we went on to define what it meant and said that they must be separately identified in the firm's records and separately managed and supervised.

When I told the House at midnight on that previous occasion that the Government had an obligation to hang on to these rules, I did not mean that the Government would fall but that the rules would fall if we let go. We are hanging on to preserve the rules, because, having established and publicised them, we have a duty to tell the public and the House that these, the rules which we publicised and laid down, are the rules by which we abide.

With all respect to the right hon. Member for Enfield, West, if my right hon. Friend were exercising his right under this paragraph to divide establishments into two activities capriciously and arbitrarily, without the guidance of rules and without consistency or pattern, the right hon. Gentleman would be the first to rise and complain that there was no rhyme, reason, pattern or consistency. There are all those things and we have an obligation to stick to them—

Mr. Onslow

I am pleased to hear that the country is so flooded with copies of statements by right hon. and hon. Gentlemen in HANSARD and elsewhere, but I ask the hon. Gentleman to consider that this may still not be adequate. Particularly, would he say whether the local offices of the Ministry are equipped with a definition of "self-supervising", a term which the Minister used in his original letter to me? Is he satisfied that the employers of the 27 dental technicians who are not qualified to receive this premium are aware of the terms which enabled the two successful applicants to get premiums?

Mr. Hattersley

That is a different point, to which I will come, but I am glad that the hon. Gentleman no longer pursues the claim that the criteria are not known in the country. At least we are on common ground in saying that there is no doubt as to what the criteria are.

We should remember that, during the debate to which I have referred on 4th August, the right hon. and learned Member for Warwick and Leamington (Sir J. Hobson) chose, from the Opposition Front Bench, specifically to go on record against the prospect of Section 10(3,a) being operated without rules being made public, without the House knowing the criteria, and without pattern or consistency. What we are doing, and what we are being castigated this evening for doing, is operating the rules consistently and according to the pattern.

I hope that the House will agree that, if there have to be rules which determine whether establishments can be legitimately separated, these criteria are reasonable. They are a simple but substantial test of whether the two activities are genuinely separate, although operated under the same roof. I hope that the House will also understand that, as we come to consider the application of these rules, we do it in as sensible and practical a way as possible.

Of course we accept—[Laughter.] The hon. Member for Ormskirk laughs. Since he chooses to interrupt, let me tell him this. During the so-called "midnight debate", he put to me the problem of one of his constituents, about whom he had already written to my Ministry, and asked me to judge those facts there and then. I did so, and, because I felt that I owed it to the hon. Gentleman, I also examined the case on my return to the Ministry.

What I found was that the details as outlined by the hon. Gentleman on that occasion were incorrect in every particular. It is a matter for him and his conscience, and perhaps his constituent's, to judge the accuracy with which he advances cases in the House. But if he puts up a case which proves on examination to be absolutely inaccurate, our general belief in his right to comment on these matters must be—if I may use a term which causes more offence than it should—eroded.

As I was saying before the hon. Gentleman diverted my attention, of course we accept the concept of self-supervision. Of course some of the 90 people whom he was told are already receiving the benefits of this paragraph are, because of their self-employment (I use that term in the loosest sense, to signify that they are working on their own) judged to be self-supervising. But he will recall, from the case which he presented to the Ministry, that one of the dental practitioners was clearly, in this case, supervising a technician. Had it been self-supervision, the payment would have been possible. But this case was not advanced. The case advanced is that one of the partners was directly responsible for the supervision of the mechanic's work, and, by making that concession—as the hon. Gentleman's constituent honestly, reasonably and honourably did—he is, of course, conceding that the man's supervision is not a separate activity.

Therefore, in those terms, we must judge, if we are sticking to the rules and the stipulations announced to the House and the country, that it is not a separate establishment—

Mr. Onslow

I assure the hon. Gentleman that it is not within my knowledge that any statement that one of the partners was in fact supervising the technician had been made, and there is no mention of that in my correspondence with the Ministry, although the information might have been passed in some other way. I have been told that the information in the two cases was substantially similar and that, in the second case, as two technicians were employed, it was open to their employer to establish that one was supervising the other.

6.30 p.m.

Mr. Hattersley

The two cases are similar to a degree but are not totally similar. In the case of the establishment to which premium has already been paid there was no need for one of the technicians to be self-supervising because he had the senior technician to carry out that supervising function. The hon. Gentleman says that there was nothing to his knowledge about self-supervision but, as I remember, the letter from my right hon. Friend which both the hon. Member for Woking and the right hon. Member for Enfield, West quoted, made specific reference to self-supervision, so that the concept was clearly in his mind. We had explained to the hon. Member's constituent that self-supervision was possible and that self-supervision qualified, and we told him that if that was the case in his establishment he would receive the premium.

Mr. Onslow

Will the Parliamentary Secretary give way?

Mr. Hattersley

No. I think that I have been at least generous to the hon. Gentleman, and I do not want to intrude further on the lime of the House.

Mr. Onslow

On a point of order, Mr. Speaker. Is it open to the Minister to misquote by inference an exchange already reported in the columns of the OFFICIAL REPORT? The document is there, and I should like to read it to the hon. Gentleman.

Mr. Speaker

I am not sure what a misquotation by inference is, but it is not a point of order.

Mr. Hattersley

I may say that I was reinforced in quoting it by the nodding agreement of the right hon. Member for Enfield, West, and although it was a paraphrase I hope that I was quoting with a degree of accuracy.

Mr. Onslow

The words in question are: As one person only is employed in the dental workshop"— that is the place in question— the inference is that he is supervised by the partners who control the practice as a whole. If it can be shown that this is not the case, for example, that the technician is self-supervising …".—[OFFICIAL REPORT, 8th June, 1967; Vol. 747, c. 1447.] Those are words which came originally from the Minister, not from me.

Mr. Hattersley

I agree. Those are the words and they came originally from the Minister and not from the hon. Gentleman.

I should like to say just two things in defence of Section 10(3,a), which concern the benefits which it undoubtedly confers. There have been many hundreds of successful applicants who, in general, have applied for the benefit on dividing their establishments into two parts, and receiving premium for one part. As the right hon. Gentleman accurately said, 90 establishments have obtained premium for single persons, operating as a single unit. I could give many examples of the benefits offered to industry in this way. I hope that the House will continue to believe that if we are to continue to make this provision available, as I am sure we must, we must go by some precise publicised rules.

That is all that Section 10(3,a) claims to do. That is the only reason why I oppose the Amendment. I acknowledge that the right hon. Gentleman may think that this case is marginal, and that the final paragraph of the letter which has been so much quoted concedes that it is a marginal case. But I hope that he and the House will understand that such cases arise from a complicated taxation system, and that it would be absurd to throw away the entire concept of the tax because such marginal hard cases exist.

Mr. Iain Macleod

By leave of the House, Mr. Speaker, I will reply very briefly. With respect, I think that the Parliamentary Secretary is wrong to say that the Standard Industrial Classification is irrelevant to the case. It is from that Standard Industrial Classification that the conception of division between service and manufacture comes, and that the conception of the unit of establishment comes. All these matters are quite clearly relevant to the case now before us.

I repeat that something absolutely sensible, and which was plainly sensible for statistical purposes, makes little sense 10 years later when used for taxation proposals—

Mr. Hattersley

I am sure that the right hon. Gentleman will concede that if there was any other split between services and manufacturing, if there were something other than the Standard Industrial Classification, no matter how precise and tailor-made, the sort of problem we have this evening might well arise.

Mr. Macleod

With respect, that does not follow. The Government, being pressed for time, had to accept this classification of 10 years ago. If they had started from the beginning they could have produced their own qualification for this purpose, and then some of these absurdities would not have arisen.

The Parliamentary Secretary has, as usual, replied with considerable skill to what is, I think, a very difficult debate, but, after all, what his reply amounts to is that the Act is complicated, as it is, and that there must be rules, as there must. But then he goes on to say, to paraphrase him, that that is bound to throw out some nonsenses and that we should not be too surprised if this is one of them. This is the issue between us. I do not accept that Ministers should passively agree that nonsenses can be thrown up because of sticking to rules that may be all right for the generality

of cases. I therefore think that we ought to vote on the matter now, and I hope that the dental technicians of Woking will haunt the Parliamentary Secretary's dreams.

Question put, That those words be there inserted in the Bill:—

The House divided: Ayes 137, Noes 196.

Division No. 400.] AYES [6.36 p.m.
Atkins, Humphrey (M't'n & M'd'n) Hall-Davis, A. G. F. Page, Graham (Crosby)
Awdry, Daniel Hamilton, Michael (Salisbury) Pardoe, John
Baker, W. H. K. Harris, Frederic (Croydon, N.W.) Peel, John
Balniel, Lord Harris, Reader (Heston) Peyton, John
Bell, Ronald Harrison, Brian (Maldon) Pike, Miss Mervyn
Bennett, Sir Frederic (Torquay) Harrison, Col. Sir Harwood (Eye) Pink, R. Bonner
Biggs-Davison, John Harvey, Sir Arthur Vere Powell, Rt. Hn. J. Enoch
Birch, Rt. Hn. Nigel Harvie Anderson, Miss Prior, J. M. L.
Black, Sir Cyril Heald, Rt. Hn. Sir Lionel Pym, Francis
Body, Richard Heath, Rt. Hn. Edward Ramsden, Rt. Hn. James
Boyd-Carpenter, Rt. Hn. John Higgins, Terence L. Ridley, Hn. Nicholas
Braine, Bernard Hill, J. E. B. Ridsdale, Julian
Bromley-Davenport, Lt.-Col.Sir Walter Hirst, Geoffrey Rossi, Hugh (Hornsey)
Brown, Sir Edward (Bath) Hobson, Rt. Hn. Sir John Royle, Anthony
Bruce-Gardyne, J. Holland, Philip Scott, Nicholas
Bullus, Sir Eric Howell, David (Guildford) Sharples, Richard
Cary, Sir Robert Hunt, John Shaw, Michael (Sc'b'gh & Whitby)
Clegg, Walter Hutchison, Michael Clark Smith, John
Cooke, Robert Irvine, Bryant Godman (Rye) Steel, David (Roxburgh)
Cooper-Key, Sir Neill Jenkin, Patrick (Woodford) Stodart, Anthony
Costain, A. P. Johnston, Russell (Inverness) Stoddart-Scott, Col. Sir M. (Ripon)
Craddock, Sir Beresford (Spelthorne) Kaberry, Sir Donald Taylor, Sir Charles (Eastbourne)
Crosthwaite-Eyre, Sir Oliver King, Evelyn (Dorset, S.) Taylor, Edward M.(G'gow,Cathcart)
Cunningham, Sir Knox Kirk, Peter Taylor, Frank (Moss Side)
Currie, C. B. H. Kitson, Timothy Temple, John M.
Dance, James Langford-Holt, Sir John Thatcher, Mrs. Margaret
Davidson, James (Aberdeenshire, W.) Longden, Gilbert Thorpe, Rt. Hn. Jeremy
Dean, Paul (Somerset, N.) Lubbock, Eric Turton, Rt. Hn. R. H.
Dodds-Parker, Douglas McAdden, Sir Stephen van Straubenzee, W. R.
Doughty, Charles Macleod, Rt. Hn. Iain Wainwright, Richard (Colne Valley)
Walker-Smith, Rt. Hn. Sir Derek
Elliott, R.W. (N'c'tle-upon-Tyne, N.) McMaster, Stanley Wall, Patrick
Emery, Peter Maginnis, John E. Walters, Dennis
Farr, John Maude, Angus Ward, Dame Irene
Fletcher-Cooke, Charles Mawby, Ray Weatherill, Bernard
Fortescue, Tim Maxwell-Hyslop, R. J. Webster, David
Galbraith, Hon. T. G. Maydon, Lt.-Cmdr. S. L. C. Whitelaw, Rt. Hn. William
Gibson-Watt, David Mills, Peter (Torrington) Wills, Sir Gerald (Bridgwater)
Gilmour, Ian (Norfolk, C.) Mills, Stratton (Belfast, N.) Wilson, Geoffrey (Truro)
Gilmour, Sir John (Fife, E.) Mitchell, David (Basingstoke) Winstanley, Dr. M. P.
Glover, Sir Douglas Monro, Hector Wolrige-Gordon, Patrick
Goodhart, Philip Munro-Lucas-Tooth, Sir Hugh Worsley, Marcus
Gower, Raymond Murton, Oscar Younger, Hn. George
Grant, Anthony Nicholls, Sir Harmar
Grant-Ferris, R. Noble, Rt. Hn. Michael TELLERS FOR THE AYES:
Gresham Cooke, R. Onslow, Cranley Mr. Jasper More and
Griffiths, Eldon (Bury St. Edmunds) Orr-Ewing, Sir Ian Mr. Reginald Eyre.
Hall, John (Wycombe) Osborne, Sir Cyril (Louth)
NOES
Alldritt, Walter Booth, Albert Concannon, J. D.
Allen, Scholefield Bowden, Rt. Hn. Herbert Conlan, Bernard
Archer, Peter Braddock, Mrs. E. M. Crawshaw, Richard
Armstrong, Ernest Brooks, Edwin Cronin, John
Atkins, Ronald (Preston, N.) Brown,Bob (N'c'tle-upon-Tyne, W.) Crosland, Rt. Hn. Anthony
Atkinson, Norman (Tottenham) Brown, Hugh D. (G'gow, Provan) Crossman, Rt. Hn. Richard
Bagier, Gordon A. T. Brown, R. W. (Shoreditch & F'bury) Dalyell, Tam
Barnett, Joel Buchan, Norman Darling, Rt. Hn. George
Baxter, William Buchanan, Richard (G'gow, Sp'burn) Davidson, Arthur (Accrington)
Beaney, Alan Butler, Herbert (Hackney, C.) Davies, Dr. Ernest (Stretford)
Bence, Cyril Callaghan, Rt. Hn. James Davies, G. Elfed (Rhondda, E.)
Binns, John Cant, R. B. Davies, Ifor (Gower)
Bishop, E. S. Carmichael, Neil Davies, S. O. (Merthyr)
Blackburn, F. Chapman, Donald Delargy, Hugh
Blenkinsop, Arthur Coe, Denis Dempsey, James
Boardman, H. Coleman, Donald Dewar, Donald
Diamond, Rt. Hn. John Jones, J. Idwal (Wrexham) Price, Thomas (Westhoughton)
Dickens, James Kelley, Richard Price, William (Rugby)
Dobson, Ray Kerr, Dr. David (W'worth, Central) Probert, Arthur
Doig, Peter Kerr, Russell (Feltham) Rankin, John
Dunn, James A. Lawson, George Rhodes, Geoffrey
Dunnett, Jack Leadbitter, Ted Richard, Ivor
Dunwoody, Dr. John (F'th & C'b'e) Lestor, Miss Joan Roberts, Albert (Normanton)
Eadie, Alex Lewis, Ron (Carlisle) Robinson, Rt. Hn. Kenneth (St.P'c'as)
Edwards, Rt. Hn. Ness (Caerphilly) Lomas, Kenneth Robinson, W. O. J. (Walth'stow, E.)
Edwards, Robert (Bilston) Loughlin, Charles Rogers, George (Kensington, N.)
Edwards, William (Merioneth) Lyon, Alexander W. (York) Sheldon, Robert
Ensor, David McCann, John Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Evans, Albert (Islington, S.W.) MacColl, James Short, Mrs. Renee(W'hampton,N.E.)
Faulds, Andrew MacDermot, Niall Silkin, Rt. Hn. John (Deptford)
Fernyhough, E. Macdonald, A. H. Silkin, Hn. S. C. (Dulwich)
Finch, Harold Mackenzie, Gregor (Rutherglen) Slater, Joseph
Fitch, Alan (Wigan) Mackie, John Small, William
Fletcher, Ted (Darlington) Mackintosh, John P. Snow, Julian
Foot, Michael (Ebbw Vale) McMillan, Tom (Glasgow, C.) Spriggs, Leslie
Ford, Ben McNamara, J. Kevin Steele, Thomas (Dunbartonshire, W.)
Forrester, John MacPherson, Malcolm Swain, Thomas
Fraser, Rt. Hn. Tom (Hamilton) Mahon, Peter (Preston, S.) Swinglor, Stephen
Freeson, Reginald Mallalieu, E. L. (Brigg) Symonds, J. B.
Galpern, Sir Myer Manuel, Archie Thomas, George (Cardiff, W.)
Garrett, W. E. Mason, Roy Thomson, Rt. Hn. George
Greenwood, Rt. Hn. Anthony Millan, Bruce Tinn, James
Gregory, Arnold Morgan, Elystan (Cardiganshire) Tomney, Frank
Griffiths, David (Rother Valley) Morris, Alfred (Wythenshawe) Tuck, Raphael
Griffiths, Rt. Hn. James (Llanelly) Morris, Charles R. (Openshaw) Urwin, T. W.
Griffiths, Will (Exchange) Moyle, Roland Wainwright, Edwin (Dearne Valley)
Hamilton, James (Bothwell) Murray, Albert Walker, Harold (Doncaster)
Hamilton, William (Fife, W.) Neal, Harold Wallace, George
Hamling, William Newens, Stan Watkins, David (Consett)
Harper, Joseph Noel-Baker, Francis (Swindon) Watkins, Tudor (Brecon & Radnor)
Harrison, Walter (Wakefield) Noet-Baker, Rt. Hn. Philip (Derby, S.) Wellbeloved, James
Haseldine, Norman Ogden, Eric Wells, William (Walsall, N.)
Hattersley, Roy O'Malley, Brian Whitlock, William
Henig, Stanley Oram, Albert E. Willey, Rt. Hn. Frederick
Herbison, Rt. Hn. Margaret Oswald, Thomas Williams, Alan Lee (Hornchurch)
Horner, John Owen, Dr. David (Plymouth, S'tn) Williams, Clifford (Abertillery)
Howarth, Robert (Bolton, E.) Owen, Will (Morpeth) Williams, W. T. (Warrington)
Howie, W. Padley, Walter Willis, George (Edinburgh, E.)
Huckfield, L. Paget, R. T. Wilson, Rt. Hn. Harold (Huyton)
Hughes, Emrys (Ayrshire, S.) Palmer, Arthur Wilson, William (Coventry, S.)
Hughes, Hector (Aberdeen, N.) Pannell, Rt. Hn. Charles Woodburn, Rt. Hn. A.
Hughes, Roy (Newport) Park, Trevor Woof, Robert
Hunter, Adam Parkyn, Brian (Bedford)
Jackson, Peter M. (High Peak) Pavitt, Laurence TELLERS FOR THE NOES:
Janner, Sir Barnett Pearson, Arthur (Pontypridd) Mr. Charles Grey and
Jones, Dan (Burnley) Pentland, Norman Mr. Ioan L. Evans.
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.) Perry, Ernest G. (Battersea, S.)