SELECTIVE EMPLOYMENT PAYMENTS

HC Deb 21 May 1969 vol 784 cc460-527

4.35 p.m.

Mr. Terence L. Higgins (Worthing)

I beg to move Amendment No. 92, in page 64, line 9, at end insert: (12) Where an employer has paid selective employment tax for any contribution week beginning on or after 7th July 1969 in respect of a full-time worker employed solely in the gaining of exports and it is shown to the satisfaction of the Secretary of State for Social Security that throughout that week that person was so employed the Secretary of State shall make to that employer in respect of that person and that week a refund equal to the tax paid.

The Chairman

With this Amendment, we may discuss also the following Amendments:

Amendment No. 91, in line 9, at end insert: (12) Where an employer has paid selective employment tax for any contribution week beginning on or after 7th July 1969 in respect of a full-time worker employed on the staff of a consulting engineer exclusively engaged on overseas projects the Secretary of State for Social Security shall make to that employer in respect of that person and that week a payment of an amount equal to the tax paid. Amendment No. 93, in line 9, at end insert: (12) Where an employer has paid selective employment tax for any contribution week beginning on or after 7th July 1969 in respect of an employee who is wholly or partly occupied in the provision of services in connection with the export of goods by such employer on his own behalf or on behalf of another or in the obtaining of earnings from overseas the appropriate Minister shall make to that employer in respect of that employee and that week a payment of

1. (i) in the case of an employee wholly occupied in such activity an amount equal to the tax paid; and
2. (ii) in the case of an employee partly occupied in such activity such amount of the tax paid as is proportionate to the time so occupied:

Provided that when the activities in which a group of employees are engaged are only partly in the provision of such export services or in the obtaining of overseas earnings the appropriate Minister may fix the amount of the repayment in respect of such employees by reference to the relation of the total exports or overseas earnings to the total turnover or earnings of the employer. Amendment No. 110, in line 9, at end insert: (12) Where any consulting engineer has paid selective employment tax in respect of any employee engaged on drawing office work concerning overseas projects during any week after this clause comes into operation that employer shall be entitled to a refund of that tax for that person for that week. Although the requirements of procedure have dropped off Amendment No. 82—in page 64, line 9, at end insert: (12) Where an employer has paid selective employment tax for any contribution week beginning on or after 7th July, 1969 in respect of a person employed in the business of consulting engineering and working exclusively on overseas projects, the Secretary of State for Social Services shall make to that employer in respect of that person and that week a payment of an amount equal to the tax paid. —because we have reached Amendment No. 90, I still propose to allow Amendment No. 82 to be included in this selection of Amendments.

Mr. Higgins

Thank you, Mr. Irving.

Amendment No. 92 is concerned with giving relief effectively against selective employment tax to full-time workers employed solely in the gaining of exports. We are grateful to you for linking with it the other Amendments, particularly No. 91, which is concerned with giving relief from S.E.T. to those who are employed on the staff of consulting engineers exclusively engaged on overseas projects.

An Amendment similar to this one was moved in Committee on the Finance Bill upstairs last year, when my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) brought this matter forward a few moments before the Guillotine which was to restrict the debate fell. None the less, we had a useful debate, albeit short, in which my right hon. Friend stressed that the imposition of S.E.T. on those who were engaged in encouraging exports was clearly contrary to the avowed policy of the Chancellor of the Exchequer of that time. I would think that it is even more clearly against the policy of the Chancellor as put for- ward in his latest Budget speech. Therefore, we take the view that the Amendment is one which the Government should welcome.

I appreciate that the wording of the Amendment may not necessarily be perfect, but it is the overall principle which we wish to bring forward. We dispute the arguments which the Government employed in rejecting our similar Amendment last year. If we are to be successful in selling our exports, it is surely crucial that the marketing process should be efficient. Unless that is so, we cannot hope to promote our exports overseas. I certainly dispute the view, expressed by the Chancellor, that the effects of devaluation in encouraging exports still amount to 7 per cent. on a price or profit differential.

I enumerated in my speech on the Budget—I will not weary the Committee with the matter again—the action which the Government have taken which has, I believe, eroded away almost entirely any value which exporters may have obtained from devaluation. Since that time we have had further increases in costs and in inflation and we are now debating further increases in the selective employment tax. It has become clearer than it was at that time that the imposition of further payments for pensions contributions will impose a further burden on those who are exporting. Therefore, it is surely extremely important that as far as possible, we should do everything we can to encourage exports. It is absurd that we should tax those who are engaged in trying to promote exports.

I should like to take three brief examples to demonstrate how this works. The first is the question of those who employ people engaged wholly in promoting exports within a larger concern. Hon. Members may have noticed in The Times of, I think, 19th April, a letter from the managing director of Dexion Limited, who pointed out that the public as a whole did not appreciate that firms, such as the one of which he was managing director, actually have to pay selective employment tax on those members of their staff—for example, export salesmen and the shipping department—who are engaged in promoting their sales overseas. He points out that the company with which he was concerned, which last year earned £3,400,000 in foreign currency from exports and overseas trading, paid over £40,000 in taxation on those who were engaged in promoting those exports. This surely is a ludicrous situation.

To take the reciprocal of that argument, many firms and individuals are engaged in this country as buying houses or buying agents for companies overseas; for example, large department stores in the United States or in Australia. Selective employment tax must be paid on this staff although they are entirely engaged on behalf of companies overseas in encouraging United Kingdom firms to export to them. It is ludicrous that a tax should be imposed on such people who are doing work which benefits specfically and explicitly our balance of payments.

Various other groups are affected in this way, even although they do not come in the service category which I have just mentioned. One group of people who fall within the wording of the Amendment in that they are employed purely on the gaining of exports, are those employed in television companies, either commercial companies or the B.B.C., who are concerned with producing exports of television programmes.

The odd thing about this situation is that in one sense they are manufacturing a physical article, and one would, therefore, expect that they would be exempt from S.E.T. The television programmes are recorded on video tape, which is then exported to overseas markets, with the result that substantial sums of foreign exchange accrue to this country.

One would have expected this process to be automatically exempt as a manufacturing process, but, because of the absurd operation of the Standard Industrial Classification, either in its old form or in its new form which the Clause now proposes to employ, and because it was not designed for the purposes of S.E.T., the television industry pays S.E.T. on the people who are engaged in producing a physical product, which embodies many services necessary to produce the television programme, in addition to the many other burdens imposed upon it.

The tax is imposed after the overall profit position has been determined in negotiation with the Government. We hope, therefore, that the Government will exempt those who are engaged in producing television programmes which are subsequently exported and which go to improve our balance of payments position.

The other absurdity is that the Government have recognised the strength of this case in the production of ordinary films in ordinary film studios. The result is that if films are produced in a film studio and subsequently exported, S.E.T. is not paid, but if films are produced for a television programme on video tape instead of on ordinary film, S.E.T. must be paid on those engaged in the operation.

This is clearly an area where the Government have made a mistake. They can perhaps put it right, and I hope that the Chief Secretary will give an assurance that a suitable Amendment will be put down on Report. He will appreciate that it is difficult for us to draft an Amendment in specific terms to cover the entire area of commercial and B.B.C television.

4.45 p.m.

I know that many of my hon. Friends are more expert in this area than I am, so I will do no more than mention Amendment No. 91, which is one of several Amendments concerned with consulting engineers. The point here is that S.E.T. has to be paid on consulting engineers who are operating exclusively on work in the overseas market. It might be argued that S.E.T. should not be paid even if they are only partially engaged in the overseas market, but the Amendment is moderate and straightforward in that respect.

I hope that the Government will give an assurance and perhaps even deal with this point more widely than the Amendment does. Selective employment tax is putting consulting engineers in British firms at about a 5 per cent. disadvantage at present rates. This is a sufficient margin to result in their losing out in the overseas market because the margin on which such firms operate is necessarily very competitive and not large.

This is a growth market overseas, and the extent to which British consulting engineers overseas have raised the capital value of overseas works since 1964 has been substantial; an increase from £950 million in 1964 to £1,638 million last year. This is a substantial increase in an expanding market which one would have thought the Chancellor of the Exchequer would wish to encourage if he seeks to put our balance of payments position into equilibrium, or to get the surplus which he maintains he will still achieve, even though it will be somewhat later than he orginally hoped.

The direct contribution of consulting engineers working on overseas projects is approximately £18 million per annum; yet they are being penalised by S.E.T. to the extent of about £640,000 per annum. This is not merely losing us invisible earnings, but is deterring many people overseas from buying British goods. People employing British consulting engineers would also buy physical assets which were British and physical capital goods which were British.

The case is overwhelming. We are not satisfied with the explanation given last year by the Financial Secretary that this is an area where we run into problems with G.A.T.T. and E.F.T.A. agreements. No one is more anxious than I not to set off a protectionist war in world trade, but in many areas reasonable arrangements could be made about the payment of S.E.T. which were not contrary to international agreements. Whereas value-added tax can be rebated, S.E.T. cannot, and that is a basic flaw in S.E.T., but, even so, the imposition of the tax on this area seems to be determined not by our international agreements, but by the idiosyncratic way in which the Standard Industrial Classification places people on one side of the line or the other. If films can be on the right side of the line, there should be no difficulty in video tape being on the right side of the line.

I hope that the Committee will accept the Amendments, because, although there may be arguments in individual G.A.T.T. or E.F.T.A. agreements, these do not run to our invisible exports which make such an important contribution to our balance of payments.

Mr. W. Howie (Luton)

I propose to take up some of the points made by the hon. Member for Worthing (Mr. Higgins) because I, too, have tabled an Amendment dealing with consulting engineers. It is in somewhat different terms from the hon. Gentleman's Amendment. I drafted it myself, and on looking through the Amendments on S.E.T. I see that my Amendment is unique. I do not claim, therefore, that it is better; I merely claim that it is different.

For the encouragement of my right hon. Friends on the Front Bench, I preface my remarks by saying that I entirely approve of S.E.T., or almost entirely. I think that it is an excellent tax, for three reasons.

Mr. Patrick Jenkin (Wanstead and Woodford)

It is not only his Amendment but the hon. Gentleman himself who is unique.

Mr. Howie

I have only just started and my uniqueness will become the more apparent as I go on. I am encouraged by the hon. Gentleman's praiseworthy intervention, but it shows most unusual impatience on his part. He usually waits until the argument has been started before he gets excited.

My first reason for liking S.E.T. is one which should appeal to hon. Gentlemen opposite. It is that this tax raises a large sum of money for a very small outlay. It is, therefore, a very profitable tax, and on profit-making grounds alone I find it extremely desirable. It is also, in theory at any rate, an infinitely flexible tax. I am not sure that it has as yet been used sufficiently flexibly by my right hon. Friends, but it is that very flexibility which I hope to prompt them into exercising in respect of the consulting engineering profession.

I do not support the hon. Member for Worthing in his general demand for exemption in connection with exports. As a consulting engineer, I am not strongly inclined to link my profession with that of the manufacturers of television films. They are no doubt excellent people in their own way, but the kind of service which they provide for society is of a totally different order from the kind of service which consulting engineering provides for society. When I talk about service, I am talking about service in the general humanitarian sense of the word, not in terms of a service industry as it is thought of in terms of S.E.T. I do not regard the consulting engineering profession as a service industry in the terms of this Bill at all.

I shall not attempt to rehearse all the arguments. They were laid out strongly enough yesterday by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) when he talked about the building industry, and what he said then applies to the consulting engineering industry today, which includes builders and engineers.

In my Amendment the people in whom I am principally interested are the drawing office staffs, the technologists of the consulting engineering world. I am not so much concerned with the peripheral people employed by consulting engineers to look after the filing, to do the typing, and so on. I am concentrating on the technologists, the engineers, and the draughtsmen. It is their work which should be excluded in so far as it relates to exports.

Drawing office staffs are an integral part of the chain of production, and to call them anything else is quite wrong. This error arose originally from the crudity of the classifications upon which S.E.T. is based. We know that certain exemptions have been made. As I recollect it, if a drawing office is attached to a manufacturing establishment it is exempt, whereas if it is along Victoria Street it is not, and yet the draughtsmen may be doing the same kind of work and using the same kind of drawing boards and pencils. This is an anomaly which is too great to be borne reasonably.

I am asking for exemption in respect of people engaged on overseas work. I am being very modest in my demands. I know that the Government are beset with problems on both sides, and I do not wish to add to annoy them. I am not asking that all technologists should be excluded, only those who are engaged on export work. I am inclined to quibble a little with the Opposition Amendment, but the fault may be mine. I know that the hon. Member for Worthing is meticulous in these matters, and he is at least as likely as I am to be right in understanding his own Amendment, possibly more so.

I rather got the notion that the hon. Gentleman was under the impression that odd bodies of consulting engineers were devoting themselves exclusively to export work. This is not quite the case. It is much more complicated than that. There is a substantial body of consulting engineers whose work is partly for the home market and partly for exports. In addition, individual employees may find that their time is devoted partly to overseas work and partly to work for the home market. I realise that I am quibbling with the hon. Gentleman at this point. I am merely suggesting that his Amendment is perhaps rather more blunt than he really means it to be, though I support the general tenor and the thought behind his Amendment.

I am asking for exemption for these very important exporters because of the importance of our export problem. We debate this problem day after day and week after week in this House. No one would say that our export performance, even since devaluation, is as good as we would desire. No doubt our exports have greatly improved compared with what they were, but we can all agree that improvements can still be made and that we should be doing everything we can through legislation to promote those exports. This is a small way in which we can help.

The hon. Member for Worthing gave us some figures. He showed that the total capital value of work done overseas by British consulting engineers amounted to £1,600 million, an increase of nearly 100 per cent. since 1964. It produces a substantial sum in the form of invisible exports, amounting to about £18 million a year, and this is by no means a sum which we can laugh off.

In addition, this work puts Britain and British engineering into a large and expanding market in the world. When British consulting engineers are working overseas, two things seem to follow. First, British engineering goods are bought because the engineer concerned naturally hopes that the capital goods which he is designing will be exported from Britain, and very often they are.

But there is another factor in this. A British consulting engineer working abroad establishes a very useful connection with foreign engineers, not merely established engineers but young ones, of whom substantial numbers are coming forward from the expanding parts of the world, the Middle East and so on. If British consulting engineers work hard overseas, we draw into what one might call the British technological sphere of influence a large body of foreign engineers who become orientated towards British engineering and British-manufactured engineering goods. That is not something which we can show in the balance of payments accounts or argue about when dealing with these matters. It is an intangible which in my opinion shows a great promise for the future for British engineering.

5 p.m.

I have said that the Government are very anxious that we should encourage exports. I believe that the hon. Member for Worthing said that a British consulting engineer finds that S.E.T. places him at a price disadvantage of about 5 per cent. as compared with foreign competitors, when he is seeking work abroad. Five per cent. can be a very crucial margin in seeking that work. In trying to encourage exports the Government have gone as far as setting up a special bureau to encourage consulting engineers to work overseas and to draw into that work many British consulting engineers who have never done it before. Yet S.E.T. remains as a burden and an impediment to them.

I do not think that there would be any administrative difficulty in allowing this exemption. A slight complication might arise from the fact that engineers would be dividing their work between the home market and overseas markets, but that difficulty would not be impossible to overcome. The cost to the Exchequer would not be significant. If this exemption were allowed the loss to the Exchequer would be about £640,000 out of a total yield of £600 million from this tax.

Mr. Laurence Pavitt (Willesden, West)

It is £630 million.

Mr. Howie

It would be £640,000 out of a total of £630 million. The loss to the Exchequer would be insignificant—certainly compared to the gain that would be derived.

I have asked the Chancellor to be flexible in the use of this tax. He has shown some flexibility in the past, notably in respect of the hotel industry. I am asking him to show flexibility in this respect and to consider, at a later stage, allowing an exemption for consulting engineers to the extent that their staff are engaged in overseas work and are producing invisible exports.

Mr. Tom Boardman (Leicester, South-West)

I am not sure from his remarks whether the hon. Member for Luton (Mr. Howie) was in favour of S.E.T. in general and opposed to it in principle—the principle being any interest of which he had some knowledge. His remarks on that point would apply to almost any aspect of the service industries of which each of us has some knowledge. There is common ground between hon. Members on both sides on one point: we both wish to increase exports. But the Government do not begin to know what is necessary to create exports. It is not just a question of the manufacturing process. That is vital, but in many ways it is the easiest part of the process. First, it needs, market research. It needs people in overseas countries discovering what is required. We need the selling people. There is a great task for export salesmen, and there are the questions of transportation, documentation, credit arrangements, after-sales services, P.R.O.s and all the other factors that go to make up the export sales that appear in our balance of payments.

Some large vertical firms can do all this by themselves. If they are clever enough to position their people in the right places so that they have the right percentage in the right sites where the factories exist, all these services can be provided by one firm, which then receives a refund from S.E.T. The majority of firms, however, need the help of other firms of export agents, merchant bankers, shippers and insurers. It is these smaller firms to which my Amendment refers—those which are wholly or partly engaged in overseas earnings.

I draw the Chief Secretary's attention to some figures with which he is probably familiar. The British Export Houses Association is collectively responsible for about £1,000 million worth of exports a year. All its members are paying S.E.T. The Overseas Marketing Corporation rightly pays S.E.T. in respect of its staff. I say "rightly" because it would be wrong to put it in a different category from the British Export Houses Association and many similar export firms. But it exposes the farce that corporations of that kind, established to promote exports, have this additional penalty put round their necks. The people doing these jobs are no less important than those engaged in factories, yet they all pay S.E.T.

On many occasions the Prime Minister has referred to candyfloss. He seems to have an irrational dislike of it. He may have an irrational dislike of many things, but the development of that argument, namely, that the candyfloss manufacturer shall have immunity whereas people engaged in the promotion of exports shall pay the tax, is candy-floss logic of the worst kind. It is so much nonsense when the bulk of our manufacturing, in respect of which a refund is paid, goes to home consumption. The Amendments that we are discussing all cover people who are engaged in exports. It is a nonsense that they should have to pay the tax while manufacturers for home consumption do not.

My Amendment goes rather further than that of my right hon. Friend the Member for Enfield, West (Mr. Macleod). My Amendment seeks to cover those who are not only wholly engaged but partly engaged in exports. We have also covered those who are engaged in obtaining overseas earnings. The drafting of the Amendment is amateurish, and I do not doubt that the Chief Secretary would be able to find a number of holes in it. Nevertheless, I hope that we shall have his support for its principle.

It has been suggested in similar debates in other years that such an Amendment would be an infringement of G.A.T.T. or the E.F.T.A. Convention. I find it difficult to accept that, but if it is so it merely emphasises the folly of imposing this tax on people who are engaged in export industries. The Government now have an opportunity to show that they wish to help the exporters. We have had a lot of lip service to the idea; the acid test is whether the Government are prepared to do something about it, and about those who are engaged in invisible exports. The figures show that £3 out of £8 of our exports come from invisibles—from merchant banks, insurers, and so on. Tributes have often been paid to the City, and these normally provoke sneers from hon. Members opposite. But I hope that hon. Members will bear those figures in mind—£3 out of every £8 comes from institutions referred to collectively as "the City". These are the people who are being penalised, and our Amendment would provide a formula for them to have a refund.

Of course there are administrative problems, but to anyone who has devised the present system of S.E.T.—the division between those who pay, those who are refunded and those who used to be paid—the problem of separating those engaged in exports from those who are not will be child's play—

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

indicated dissent.

Mr. Boardman

The right hon. Gentleman shakes his head, but if he gave thought to the problems in the present tax and then to the comparatively simple way in which this rebate could be given, he would find that it is child's play.

We have inserted a proviso to try to achieve a global effect by setting the amount to be refunded in proportion to the overseas activity of the firm concerned. This may need careful redrafting to avoid the G.A.T.T. and E.F.T.A. Conventions, but it is the principle which is at stake, Some such proviso would provide some rough justice, but it would at least be justice instead of the smooth talking injustice of the present system.

The Amendment provides for those partially as well as wholly employed on overseas work. This also may present some administrative difficulties, but the present situation is a complete farce. If 51 per cent. of employees are engaged in manufacturing, the whole lot are exempt, but if only 49 per cent. are so engaged, none of them does. Also, one must be careful to site one's office on the right side of the road and to see that offices fit into the pattern which allows firms to reduce their S.E.T. liability by the maximum amount. The ridiculous state of the present application would, as I said, make the devising of a system of rebate along these lines appear child's play.

The Government have an opportunity here to make a small gesture to our exporters. After all the letters of intent, let us at least have a message of intent in this direction. Let the Government with their dying gasp, show that if they cannot initiate anything sensible at least they can still listen to reason.

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

I support this Amendment and associate myself with the two Amendments which are being discussed with it. The hon. Member for Luton (Mr. Howie) referred to consulting engineers, who have a strong case. I must declare an interest. I am in the contracting profession, and we have interests in consulting and in the work of architects. I was surprised that the hon. Member referred only to consulting engineers, since nothing in his argument could not apply also to architects. I assume that, should the Government accept his Amendment—

Mr. Howie

I referred only to consulting engineers because that is what my Amendment is about, and I am like that.

Mr. Costain

I appreciate that the hon. Gentleman is like that. I should not like to suggest that he referred only to consulting engineers because he was a consulting engineer and not an architect.

What we are talking about are the invisible exports. Few people realise that, over 175 years, in only five or seven years have we had a balance of payments surplus on our ordinary exports, so our invisibles are some of the most important factors in our balance of payments.

5.15 p.m.

I would draw attention particularly to the work of those who produce know-how—the consulting engineers, architects, structural and constructing engineers. It shows the absurdity of this tax that anyone who manufactures a plant or design is considered to be in a service industry, whereas anyone who produces candy-floss is manufacturing. There is a strong case for supporting the consultants and those with know-how.

The hon. Member for Luton weakened his case—we will put that right in a moment—by saying that there was some difficulty over deciding which staff in the offices were working on overseas work alone. Another hon. Member suggested that all consulting engineers worked at home and overseas. I dissented at the time because I can quote one or two who work exclusively overseas, specialising in such work as pipelines.

If the Chief Secretary intends to quote the absurd argument—it is the only possible one that I can see—of the difficulty of checking, he should remember that even the Treasury has faith in audited certificates; even the Treasury agrees to employ management consultants and to pay them on the basis of time worked. The Treasury has agreed that, for repayment of investment grants, it will take an audited certificate as proof of what has been paid or the work that has been done. Therefore, unless they think that every consulting engineer, architect and professional man is an out-and-out crook, and clever enough to swindle the Treasury, there will be no difficulty in separating these activities. There is a strong case for exempting from S.E.T. all the know-how of these people, but that would be outside the Amendment.

I want to draw particular attention to the advantage of giving these people an incentive to get overseas work. I must declare another interest, in that I sit on the Council of the Export Group for the Constructional Industries. This week, we are about to publish an interesting document showing what consulting engineers and architects have done for exports. We have been honoured by a letter on Board of Trade stationery from no less an individual than the President of the Board of Trade himself. I am sorry that he is not here to convince the Treasury of the weight of our argument, but, in this letter, he says: By any standards the great diversity of projects undertaken and the international scale on which it operates put the British constructional industry amongst the foremost in the world. The industry has played a conspicuous part in meeting the demands of the developing countries for infrastructure projects and at the same time supplying overseas countries generally with projects ranging from public buildings of all kinds to the most sophisticated and technologically advanced industrial plants. I greatly welcome this illustrated publication by the Export Group for the Constructional Industries which will provide potential overseas buyers, whether in the public or private sector, with valuable information about the British constructional industry. The relations between Government and that industry are very close and will become even closer following establishment in the Board of Trade of a focal point to co-ordinate the diverse Governmental activities bearing on the industry's approach to projects overseas. I hope that there will be co-ordination and that, if the Government really wish to increase exports, they will get some sense into S.E.T.

I fear that the effect of not accepting the Amendment will be that consulting engineers engaged on overseas work will decide to do the detailed designing of that work abroad. After all, they will not only not have to pay S.E.T., but will avoid the other taxes which the Government have imposed. I know from experience of at least one firm of architects which was doing a large amount of work in the Middle East who got so fed up with the imposition of taxes in Britain that it opened an office in Cyprus and is now operating from there. We see that the Government are not only losing S.E.T., but are losing considerable amounts in income tax and surtax. This illustrates the small-mindedness and short-sightedness of the Government.

We must not overlook the fact that when consulting engineers design work in this country for overseas clients they normally, though not to the extent that this is done by some foreign consulting engineers, specify the use of British products. I am thinking not only of structural steel and heavy machinery, but even things like sheets for hotels.

My hon. Friend the Member for Worthing (Mr. Higgins) quoted some interesting figures. Mine may be a little more up to date because I obtained them this morning from the British Consultants' Bureau. I am assured that there are 1,500 projects under way, 1,000 of them by consulting engineers and 500 by architects and management consultants. The work is worth about £1,800 million. We should not forget that the fees are worth about £20 million. While the President of the Board of Trade explains the importance of this work in a prefix to a new book, the Government take the view that because these people are successful they must be heavily taxed.

Because a number of my hon. Friends wish to speak I will be brief. Basically, we must agree that someone who manufactures a plan or design is manufacturing an article. I will resist the temptation to show how absurd it is that S.E.T. should be paid by the building industry, since the hon. Member for Liverpool, Walton (Mr. Hefter) dealt admirably with this point yesterday. It is indefensible that a person who manufactures a plan should be considered to be manufacturing something else. It is indefensible that those who are helping our exports and are, at the same time, increasing the exports of other industries as a by-product of their efforts, should be treated in this way. If the Treasury has any interest in improving our balance of payments it has a chance to do so by accepting the Amendment.

Mr. Cyril Bence (Dunbartonshire, East)

I support the proposals of my hon. Friend the Member for Luton (Mr. Howie), although while he likes the idea of S.E.T., I am not at all partial to it. As an engineer, I find it difficult, in a complex industry such as that in which I served for many years, to separate service from manufacturing activities. Indeed, in my profession it is virtually impossible to divide the industry up into the two concepts because in, for example, the servicing of machines, everybody engaged in that work is performing a service.

I support my hon. Friend because in Britain today we are engaged in a process which may last for a decade or more. We are transforming many of our out-of-date industries into modern, viable ones. In many instances we can achieve a higher conversion value in terms of final output between raw materials and products.

When a vast investment programme in a big engineering plant is undertaken, outside consulting engineers are frequently called in. They are often able, after considering the layout and techniques required to speed production, to bring an analysis to the problem which those who are engaged in the plant may not be able to produce. This often occurs simply because those who have spent many years in a plant are not able to take as objective a view as an outside consulting engineer. The engineering industry is aware that the outside consultant can often represent the most economic way of redeveloping a plant. For this reason, my hon. Friend the Member for Luton has a good case in calling for the exemption of consulting engineers from S.E.T.

During the war the consulting engineer showed what a valuable contribution he could make to industry. His services were readily called on at that time, as they were in the post-war period when industry had to transfer to peacetime production to compete in the markets of the world.

With my experience of engineering, I assure my right hon. Friend the Chief Secretary that it is virtually impossible to split engineering activities into export and non-export divisions. The majority of engineers work on both types of project and one cannot say what percentage of their time is spent on producing goods for the home market as against producing goods for abroad. For example, if I were tooling up to produce a large commercial lorry to convey goods from Birmingham to the London docks where they were to be shipped to the United States, I would not be sure if I were producing something for export or for home consumption.

For this reason, I prefer the concept of a payroll tax right across the board.

[Dr. A. D. D. BROUGHTON in the Chair]

Mr. John M. Temple (City of Chester)

Even the Government are appreciating the extraordinarily valuable contribution which invisible earnings make to our exports. Whereas I should like to support the Amendment which was so ably moved by my hon. Friend the Member for Worthing (Mr. Higgins), I am inclined to give greater support for the more flexible proposal made by my hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) because the Amendment standing in his name recognises the difficulty involved in saying that a worker is employed only on exports and that some of his time is not devoted to work concerned with home consumption.

I have had the good fortune to travel abroad a considerable amount in recent years. Last year I was in Lima, Peru, on a Parliamentary conference. I had lunch with one of our leading insurance men who, to my surprise, told me that the Peruvian fishing industry was the largest in the world and that its vessels were insured in the London markets. Those who know about insurance matters appreciate that in the London market it is impossible, when dealing with the servicing of insurance business from overseas, to separate what is being done for overseas clients from the work being done for clients in this country. I maintain that it would be comparatively easy for an accountant to certify approximately the proportions of work being done for customers overseas and for business within this country.

5.30 p.m.

The Chief Secretary, in a former existence, was a professional man, and will recognise that tax inspectors today have to settle big claims with accountants. It is often a matter of what to do at the end of the day. The tax inspector says that the amount should be so much, the accountant says that his estimate puts the figure slightly lower, and in the end they split the difference. My point is that today the Revenue and accountants are used to "horse trading" in these matters, and they could quite easily fix the proportions in which a certain firm was dealing with the home and the export markets.

I can quote another example from the insurance world. Only the other day I came across a foreign international airline, 95 per cent. of whose reinsurance was placed in the London market, yet the employers of those workers in the London market have to pay the full contribution to selective employment tax.

My hon. Friend the Member for Folkestone and Hythe (Mr. Costain), and one or two hon. Members opposite, have spoken particularly about consulting engineers. In my constituency we have a number of very important architects who do a great deal of work for customers overseas, advising on the building of hospitals, universities and schools. The Amendment in the name of my hon. Friend the Member for Leicester, South-West would cover just such a situation. It is not only the architectural work which is so important, but the fact that once a plan drawn in this country has been accepted, much of the capital equipment for the project, which will be supplied by manufacturing firms not subject to selective employment tax will follow the initial plans drawn up and approved in architects' offices here.

I pass on to a slightly different but in a way a related topic—the agricultural industry. In a few weeks' time, one of my privileges will be to assist with the international pavilion at the Royal Agricultural Show at Stoneleigh. The whole object of that pavilion is to welcome visitors from overseas in the hope that they may become purchasers of our livestock and equipment. The pavilion will be staffed entirely by people for whom the society will have to pay selective employment tax. Whilst it would be impossible to prove that one or two home buyers had not gone into the pavilion during that week, the society would be able to prove that a very high proportion of the staff employed there were devoting their efforts entirely to generating export business. Yet it is for those employees that the tax will have to be paid.

Our livestock export business is growing fairly fast. Here I must declare a personal interest. In about a week's time, animals from my farm will go to Libya. In the last few years, animals from my farm have gone to the Middle East and to Spain. I know that the farming industry is in the neutral zone, but what about the livestock export companies and the breed societies? The breed societies have large parts of their organisations devoted entirely to getting statistics of the performance of the animals to be sold so that overseas buyers can have confidence in those animals. The work of the livestock export companies is entirely devoted to the shipping and general sales arrangements in respect of these animals for overseas countries. This is an aspect of the incidence of the selective employment tax which has been very much overlooked by the Government, yet these services industries are vital to the sales of our capital goods overseas.

I therefore hope that the Chief Secretary, recognising the country's desperate export position, will have a change of heart this evening and say, knowing that it could do so much good in encouraging exports, that those who are partially or wholly connected with the acquiring of these orders should receive the selective employment tax rebate.

Mr. F. A. Burden (Gillingham)

I want to appeal for the people who are engaged wholly in exports. I take the point in Amendment No. 92 that the person for whom a refund is made shall be … a full-time worker employed solely in the gaining of exports … One category of firms so engaged can be very clearly defined. They are those firms, mostly in London, which act as buying agents entirely and absolutely for companies overseas. In most instances, they are engaged solely in selling consumer goods or in sending consumer goods against orders to their principals overseas. I can give very definite examples, and the companies can be easily recognised.

One of these firms buys in the London market for no fewer than 26 American stores. It has no other function. The merchandise is bought for and by the American firms in their name on the English market. The orders are placed on the London market with English firms. The firm goes so far as to give guidance on design, selling and packing, and on everything that might be required by their people in America. It discusses the promotion of those goods in America, and it places the orders. It goes even further than that. It arranges the shipment of the goods, handles all the shipping documents and pays in England within seven days on behalf of its American clients.

Those circumstances do not apply only to America. I give that case as an instance, because this is a very big firm dealing with very considerable quantities of British merchandise. It does not buy anything at all for sale on the British market. Its books would show quite clearly that every purchase it has made has been made for export.

There is a firm in Bermuda, well known for its set-up. It has its own London buying office. Not only is the office interested in placing orders given by its principals overseas but it is constantly seeking out new products for the principals' markets. The same thing applies to the South African and other markets. These people and firms are exclusively engaged on exports, and it can be quite clearly shown that every member of their staffs is so engaged. The Treasury would have no difficulty at all in establishing their function. These people are very bitter because they, too, have to pay the selective employment tax.

I ask the right hon. Gentleman to give particular consideration to this comparatively small number of firms. They are few in number, but they are of vital importance to us. In almost every case they are owned by their principals overseas. They are not even owned by anyone here. There are some free buying agencies which are owned by people in this country but, again, if they are engaged solely in dispatching British merchandise to overseas customers, they form a vital link in the export chain. Very serious consideration should be given to the exclusion of these firms.

Companies with principals in this country, engaged entirely and exclusively in the export trade, feel they are hard done by. My hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) has referred to candyfloss. No one would suggest that a candyfloss manufacturer would sent his produects overseas or that he is doing much for the economy, but the companies I have spoken of, both those run by British principals and those run for foreign principals, and entirely owned by overseas companies to whom they export, feel very bitter about this tax which is adding considerably to their costs.

Mr. Keith Speed (Meriden)

This debate has followed the usual pattern of S.E.T. debates in that all hon. Members who have taken part in it are concerned about the tax. About a year ago I made my maiden speech and said that one of the troubles with British industry was that its output was production-orientated rather than marketing-orientated. For anyone to imagine that the sheer production of goods which will then qualify for S.E.T. refund in course of time is the end of the story, is to display a lamentable ignorance of what exporting is about.

Exporting is, first finding a market, then doing design work. Production comes into this pattern and one has to have the sales and after-sales service, credit arrangements and the rest. The whole thing is a marketing operation. Any company which thinks it can solve its difficulties merely by production will soon be out of business. We have not done so well as we might, because in so many respects companies are not marketing-orientated. The present S.E.T. exacerbates this already bad situation. Is it seriously argued that too many people are employed in marketing, too many in providing credit for exports or too many in providing necessary insurance and documentation? Surely that is not so.

My hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) spoke about firms with a good vertical structure whereby the whole operation can be carried out within the firm. Many firms are doing well on that score. I have had personal experience of small firms which have been trying to export but they have not the staff to do the whole marketing concept.

5.45 p.m.

Mr. Burden

Does my hon. Friend agree that what he has been saying highlights the importance of the firms of which I spoke, which set up their market research in this country to help British firms to design for export?

Mr. Speed

I am grateful to my hon. Friend. Where companies have not within their orbit all the exporting expertise and have not grown to this stage, they have to employ outside people to help them. As we have heard from almost every hon. Member who has spoken in this debate, those outside people are penalised by selective employment tax in their export efforts. My hon. Friend the Member for Leicester, South-West and I realise that we could not ask for everything in this respect. That is why in suggesting Amendment No. 93 we have suggested this differential for people who are employed in exports only to a certain extent. They may be in service partly for exports and partly for the home market. No doubt the drafting of our Amendment is far from ideal, but I hope that the Chief Secretary will accept its principle.

The hon. Member for Luton (Mr. Howie) and my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) have spoken of consulting engineers. When I took part with other hon. Members in a tour of North Africa recently we met a number of such people in Algeria and other countries who were working on pipelines. They are doing a first-class job particularly in follow-up services and for the exports which may follow. If anyone should suggest that a 5 per cent. differential would not make much difference, they should speak to these people on the spot. This is a very competitive market in which we have to compete against Americans, Germans, Italians and Japanese. Some of the contracts run into six or seven figures. The potential in North Africa is considerable.

The first essential must be balance of payments and increased exports. A former Prime Minister said, "Exporting is fun." It may be fun, but it is damned hard work. Those engaged in exporting should be rewarded, not penalised. We want a fundamental reappraisal of the whole concept, which is a marketing rather than a production approach. That is why I hope our Amendment will be supported.

Mr. Bruce Campbell (Oldham, West)

I support Amendment No. 93. If it were accepted it would certainly bring very welcome relief to certain industries in my constituency which are finding that crippling effect of selective employment tax so serious that some—principally the small ones—are being driven out of business.

Oldham is an old cotton town. The cotton industry has been in decline for a number of years now, but a resilient and resourceful people have turned their talents to other industries and those industries contribute a great deal to exports. Yet many of them are crippled by the imposition of selective employment tax. In Oldham there is an industry called the textile waste reclamation industry. It brings great benefits to our country. It converts old textiles, worn-out clothing and other products, into new products. Some of these wastes can be turned into high quality paper which otherwise we should have to import. Other kinds of textile waste are turned into surgical dressings, felts and useful products of that kind, many of which are exported.

If the industry did not utilise these waste products in this way, those surgical dressings, for example, would have to be made out of raw cotton, all of which would have to be imported, because we do not grow cotton here. However, for some reason which I and those engaged in this industry cannot understand, selective employment tax is imposed upon this industry. If this is not a manufacturing industry, I do not know what is. However, the tax is imposed.

I have been very glad to learn that the Chancellor proposes to relieve from selective employment tax some of the other reclamation industries. I understand that the scrap metal reclamation industry and the waste paper reclamation industry are to be relieved of the burden of this iniquitous tax. All the arguments that apparently prevailed in regard to those industries applied with equal force, if not more forcibly, to the textile waste reclamation industry. Yet apparently no similar relief it to be given to that industry.

I understand the Chancellor's difficulties. I understand that he probably has to draw a line somewhere. What I cannot understand is what logical reason there can be for drawing a line in such a way that the scrap metal reclamation industry falls on one side of it and the textile waste reclamation industry falls on the other. I assure the Chief Secretary that this is an industry which is important for exports. One firm in my constituency tells me that it has a turnover of £4 million a year and that between 25 per cent. and 30 per cent. of its products are exported. I am therefore talking about an industry which not only saves us a great amount of imports, but also contributes a great deal towards our exports. There are those of us who cannot understand why a Government who constantly talk about their balance of payments problem can cripple industries such as these, which contribute so much to the solution of that very problem. I ask the Chief Secretary to think again, particularly about this industry.

Mr. John Nott (St. Ives)

I congratulate my hon. and learned Friend for Oldham, West (Mr. Bruce Campbell) on a short but very telling speech. I want too to congratulate my hon. Friend the Member for Meriden (Mr. Speed) on putting his finger on one of the most serious anomalies in the operation of this tax. I am sure that my hon. Friend is right that the major problem in Britain is that we are too product-orientated rather than market-orientated.

A perfect example of this was the Chief Secretary's speech on Second Reading, when he went into a long academic dissertation, stretching some tattered economic theory to absurdity, to explain to us the difference between above and below the line costs in industry, until someone on these benches said, "And what about price?" The Chief Secretary had to be reminded that price was an important element in the selling of a product overseas.

This demonstrates a general attitude of mind on the Government Front Bench, that the production and the manufacturing side are infinitely more important than the marketing and servicing sides. This is an attitude which prevails throughout the country. Many British industries speak about their product with immense pride but seldom speak about their marketing. I agree with my hon. Friend that many firms rely on the services of export agents and that the successful exporting companies are those which go around the world knocking on the doors of agents and chasing their distributors day by day. It is the marketing side that we should be helping more.

Mr. Geoffrey Rhodes (Newcastle-upon-Tyne, East)

I have been following the last two or three speeches very closely. I agree wholeheartedly that there is a fundamental incorrectness of philosophy in arguing that servicing is less important than production. I am sure that we are wrong to consider the marketing operation as the country's soft under-belly, as one member of the Government described it when he was on the back benches. In the presence of the right hon. Member who has suggested the value-added tax, I should like to ask how that tax, which I understand is the Opposition's policy, could stop this problem.

Mr. Nott

I was interested yesterday when the Chancellor devoted one-third of his speech to what he thought Tory policy would be. I can only assume that the Chancellor devoted so much time to the subject because he was rehearsing his first speech as Shadow Chancellor. There was no other reason why he should have devoted so much time to dealing with what he assumed our policy to be. In fact, a value-added tax such as in France and in Germany, where it is in a different form, can be rebated to people who are operating in the export services field.

I want to be brief, so I will move on now to the comments I intended to make. One of the principle reasons which the Government have always given for taxing services is that it is a quid pro quo for purchase tax on goods and for excise duty. I do not want to argue the logic of this. I do not agree with the logic because services are a vital element in total costs. Services are taxed, because they are taxed when the ultimate product comes to market, in the form of purchase tax. Services are just as much an element in costs as wages are.

Leaving that aside, it cannot be denied that the Government's whole principle and that of practically every other trading nation is that indirect taxes fall away at the frontier. The major anomaly of S.E.T., as shown by the Amendment, clearly is that indirect taxes do not fall away at the frontier on services. Therefore, a way must be found of overcoming this obstacle.

When the S.E.T. was introduced, the Government had a premium for manufacturing industries. I well remember that an argument was then advanced, which I have heard several times since, to the effect that our manufacturing sector is exporting a far greater percentage of its total production than the services are. In 1963—this is the latest year for which I have figures—28 per cent. of our total manufactured goods were exported, whereas the Committee on Invisible Earnings estimated that 19 per cent. of total services went directly or indirectly to exports.

The interesting thing is that over the last few years the proportion of exports represented by services has risen, whereas the percentage of exports represented by manufactured goods has remained static. Our invisible exports have been increasing as a ratio faster than our visible exports.

Recently, following on devaluation, this has become an infinitely more important subject, as the Chief Secretary well knows. Let us say that about £20 is the import content of £100 of exports. In the case of services about £9 of every £100 is the import content of an exported invisible item. Since devaluation the whole value of our invisibles has obviously been tremendously enhanced for Britain, and for this reason. I therefore suggest that the Chief Secretary needs to look at this whole matter again in this Finance Bill.

The problem is that S.E.T.—this is one of its major deficiencies—is not levied by type and destination of service or of product. It is levied on the nature of the employment of the person. The difficulty about Amendment No. 92, and the even greater difficulty about Amendment No. 93, is that in many cases the export earnings cannot be identified. It would be difficult to identify, for instance, the invisible export content in tourism. For that reason, I think that I prefer my right hon. Friend's Amendment No. 92, because there is no doubt about it there.

My hon. Friend the Member for the City of Chester (Mr. Temple) referred to insurance. It would be simple to ascertain the premiums represented by overseas insurance business. Likewise, it would be simple to take the turnover of export houses directly related to overseas business. But, as I say, it would be difficult to identify the export and non-export content of the tourist trade.

I hope that the Chief Secretary will give us some joy by accepting my right hon. Friend's Amendment, which is the one which I prefer.

6.0 p.m.

Mr. Diamond

I want there to be no misunderstanding about this, so I say at the outset that I am as anxious as any right hon. or hon. Member to pay my tribute to those who are engaged in the export of goods or services. I recognise the value of it and the need for it. I agree with what has been said about the need to concentrate more on or, as it was put, to orientate our minds to, the need to export on the services side as well, and I accept what is said about the need to be more up to date in one's view about packaging and so on. I pay my tribute to those who are engaged in the export of goods or services, since the improvement in our balance of payments is a first consideration, as the Chancellor has made clear time and again.

But I go further than a tribute to those who are concerned in the export of goods or services. The balance of payments is a balance, the difference between certain things, and in the balance of trade it is the difference between exports and imports. Therefore, it would be churlish of me to restrict my tribute to those concerned in promoting exports, be they of goods or services. Although I recognise the importance and growing value of the export of services, I pay a sincere tribute also to those who are engaged in import substitution, equally valuable, often overlooked, but vital work. I refer to the encouragement of greater efficiency so that we are able by price, by service and in every other way to compete effectively with imports coming in from abroad. The only way open to this country to reduce imports in the long run is by substituting a better, cheaper, more efficient, better made and better serviced British article.

We all agree in paying our tribute to the exporters of goods and of services, but—I am sorry that it is I alone who have to say this; I have not heard it expressed by a single hon. Member opposite—I pay my tribute also to those who are engaged in the substitution of imports.

Mr. Burden

On a point of order, Dr. Broughton. Would it not have been completely out of order if we had referred to that aspect?

Mr. Diamond

It was an observation lasting only one sentence, Dr. Broughton—

Mr. Burden

May I press that point of order, Dr. Broughton? May we have your Ruling?

The Temporary Chairman (Dr. A. D. D. Broughton)

It would not have been out of order to refer to it.

Mr. Diamond

Hon. Members should not have a conscience about it already.

Mr. Burden

rose—

Mr. Diamond

I shall be glad to give way later. We are in Committee, and perhaps the most expeditious way to proceed is to give way during one's speech rather than wait for a subsequent speech. But I hope that the hon. Gentleman will allow me to make one or two points, after which I shall give way.

I wish to correct certain matters of fact so that we may proceed on agreed facts. The hon. Member for Worthing (Mr. Higgins) drew attention to what he thought were certain difficulties regarding videotape. In fact, the manufacture of videotape is a manufacturing industry under the Standard Industrial Classification, and separate establishments of T.V. companies engaged in it will have a refund of tax, whether exporting or not.

Mr. Higgins

Will the right hon. Gentleman clarify what he has said? What is the position of those who are engaged in performances which are then embodied in a videotape which is exported? The relevant question relates not to the actual tape but to the programme which is being exported. Second, what is the position as regards those who may for a given period be engaged on export items but are then subsequently engaged on domestic matters?

Mr. Diamond

The hon. Gentleman drew attention to what he regarded as an anomaly between videotape and film. I wanted to make clear that he was mistaken as to the facts, and I thought that the first thing to do was to get our facts right.

In as much as the manufacture of film is a manufacturing activity and the exhibition of a film in a cinema is a service, so the manufacture of videotape is a manufacturing activity and there may then be services carried out subsequently which may partake of entertainment services or information services, so one distinguishes between the two.

Mr. Higgins

It is not a question of the making of film; it is the making of films or the making of videotape which embodies a performance. Is it the fact that a series of people engaged in making a film are not subject to tax now and a series of people engaged in taking part in a performance which is then placed on videotape are subject to tax?

Mr. Diamond

Yes, because there is that distinction to be drawn which the hon. Gentleman has himself just drawn. I repeat that where there is a manufacturing activity as there is in the manufacture of videotape, it does not ultimately bear the tax. Where there is a service, it bears the tax. In that sense, it is exactly comparable with the manufacture of film and the exhibition of it. The manufacture of film now includes the manufacture of film and the production of the film because that is held to be a similar process. The hon. Gentleman introduced this only incidentally, and I did not want him to base his case on a misconception of facts.

My hon. Friend the Member for Luton (Mr. Howie) drew attention to what he thought was an anomaly between a drawing office in London away from the manufacturing organisation and a drawing office situated within the factory. He has misunderstood the position. Drawing office staff who carry out design work for manufacturing are treated as engaged in a manufacturing activity, and that is so whether it be sited at the factory or entirely separate. If my hon. Friend had in mind a drawing office concerned with work on construction, then, since con- struciton is treated as a service, the drawing office follows that way, too.

The hon. Member for Folkestone and Hythe (Mr. Costain) referred to consultants. It was not a major part of his speech but he referred incidentally to the position of consultants or consulting engineers working entirely abroad. No doubt he had in mind work on civil engineering contracts abroad. If they are working full-time abroad, after a qualifying period they are not called upon to pay S.E.T.

Mr. Costain

Obviously, I must have put the point badly. I was referring to those designing work in this country for contracting wholly abroad.

Mr. Diamond

I did say that this was not a major part of the hon. Gentleman's speech. But he went on to refer to consultants working abroad full-time on the same process.

Mr. Temple

They pay the tax.

Mr. Diamond

The hon. Member for City of Chester (Mr. Temple) is wrong. They do not pay the tax. After a qualifying period, they are relieved of the tax if they are working full-time abroad.

I come now to the main arguments advanced. There are a number of difficulties which I want to put to the House in connection with this group of Amendments. The first is the fatal difficulty—and I am sorry that the hon. Member for Worthing did not deal with this with sufficient care—concerning our international position. There is no question but that, so far as the export of goods is concerned, we cannot take exceptional measures. Government after Government have turned their thoughts to this proposition and have rejected it for the best of reasons—that the maintenance of these international rules is in the best interests of a trading nation such as ours. So far as the export of goods in concerned, both to E.F.T.A. countries and under the G.A.T.T., we could not adopt methods of the kind proposed, since they would be a form of subsidy.

I come now to the question of the export of services. It is equally the case that, for exporting services in connection with goods, the E.F.T.A. rules are quite clear. The Amendment would be a breach of the rules. For us to try and expand this in other countries or to try and get around it in some way with E.F.T.A. would be counter-productive. We already have considerable difficulties in maintaining the channels of trade open. We are the subject of continual complaints from other countries alleging that we are going a little too far or considerably too far in a variety of ways. We have to bear in mind that trade consists in having good relations between buyer and seller. Thus, in relation to the G.A.T.T. and E.F.T.A. positions, we could not in the one legally and in the other wisely adopt any of these proposals.

Mr. Burden

As a result of the imposition of this tax our exports are being penalised above their true cost. This does not happen in the case of other members of E.F.T.A. and the G.A.T.T., whose products are not so impeded. Surely there is a good argument for pointing out to them that this is not equity and they would not suffer from our proposal because, in the international markets, our goods are the only ones penalised? Will the Government discuss it with them?

Mr. Diamond

The hon. Gentleman might have waited until I got to that point, but perhaps it is convenient for me to deal with it now. The hon. Gentleman is wrong. So far as the addition to the cost of the goods is concerned, the hon. Gentleman would not maintain that S.E.T. is included in the cost of the goods because the manufacturer does not have to pay it. The hon. Gentleman is therefore saying that—

Mr. Burden

rose—

Mr. Diamond

I hope that the hon. Gentleman will be patient. Communication is a process of listening both ways. What he is saying—and he is wrong—is that as compared with countries in the E.E.C our on-cost of labour as a result of our bearing this tax is greater than theirs. The fact is that, prior to the present increase in the tax, we were the lowest. Our on-cost on labour was lower than any of the E.E.C. countries. Our exporters therefore were advantaged and not disadvantaged in relation to the cost of labour for supplying services in relation to the export of goods. With the new rates we shall still be comparable or less, but not more, in every case. I may add that I am taking the E.E.C. figures as my guide.

6.15 p.m.

Mr. Speed

rose—

Mr. Diamond

It is not possible for me to make progress with my speech.

Mr. Speed

This is on a point of clarification. What about insurance contributions? Will these not push these costs even higher when they are put on to on-cost?

Mr. Diamond

That is another reason for not giving way to interventions. I am sure that the House will wish me to stop giving way so much. It is impossible to reply to such an important debate if, when one is trying to deal with points in succession, one is asked to deal with what was to be a later part of one's speech. I hope that hon. Members will be patient and let me get on.

As I have said, we are in this considerable difficulty with E.F.T.A. and in the not quite so considerable difficulty with G.A.T.T. I do not want to exaggerate the position. The reason why there is not the same precision in the G.A.T.T. arrangements is that it has not been thought necessary to have the same regard to this matter since, of course, the cost involved is so insignificant. So far as the total of the exports handled by the export houses and the total of S.E.T. paid by them are concerned—I am talking about goods where S.E.T. is higher than in relation to services and where the price is less elastic—S.E.T. represents a cost of approximately one-tenth of 1 per cent.

I have already said that the overhead cost of labour in relation to services for export goods has been less in this country than in any of the E.E.C. countries and is still competitive. In these circumstances, it is a gross exaggeration to say that this is a bar to exporting—quite apart from the fatal difficulty to which I have referred—and, of course, so far as services are concerned, I underline what the hon. Member for St. Ives (Mr. Nott) said. I am grateful and am most willing to acknowledge the good work of all those in the City and elsewhere who have contributed to exporting. I shall not use a post hoc procter hoc argument—the hon. Gentleman referred to the figures—but they have been forging ahead, including during the whole of the time that S.E.T. has applied. All I am saying is that there is no evidence that S.E.T. provides any difficulty whatever or is a bar to increases in our exports of goods or services.

I come now to the scope of the Amendments. They are intended to be restrictive in some cases but I do not think that anyone would suggest that the frontiers drawn by some of them could be sustained. Indeed, many hon. Members have argued against them. Some have urged the case for those engaged full time in exporting, others for those engaged part-time in exporting. Some have talked about consulting engineers only. Others, quite properly, have asked why we should distinguish between consulting engineers and architects, between architects and surveyors and many others, all of whom are providing excellent and essential services. It would be impossible to draw an agreed line and hold it. There would obviously be enormous pressures to extend it immediately. To accept these Amendments would be fatal to our international position, unhelpful to our exports, irrelevant to our export of services and would cause enormous difficulties in drawing the line between A and B and C.

There is finally the suggestion that it is a simple matter for an accountant to provide a certificate of the relevant cost involved. I ought not to go into this at too great length, because I do not think that anybody really believes that there is a basis for doing this. However, I will say that of course any accountant can provide any information which he is asked to provide and he can certify it, as he always does, because he takes care to certify no more than he knows to be the truth and if he does not know the truth, he merely certifies that someone else has said that it is the truth. No sensible accountant will stick his neck out and every accountant's certificate is given on the basis that not only is he insured against negligence as a further protection, but there is not likely to be any responsibility which he has not wholly fulfilled.

I say in particular to the hon. Member for the City of Chester that I am satisfied that the cost to the client, or the taxpayer, or the State—never mind who bears it—of providing records for a separate ascertainment of the salaries and wages involved in order to comply with these Amendments would be greater than the relief from the tax which might, if it were possible on these grounds, ensue.

I hope that I have satisfied the Com- mittee that I am fully appreciative of the work done by exporters and substituters of imports, that I regret that we are unable because of our international position, to accept any of these Amendments, and that even if it were not for the international position, it would be unwise, unnecessary and irrelevant to do so.

Mr. Kenneth Baker (Acton)

Would not the right hon. Gentleman agree that his main argument is that the fatal difficulty, to use his words, is that if we rebated S.E.T. on exports, G.A.T.T. and E.F.T.A. would object? Is it not the logical conclusion of that argument that when we abolish S.E.T., they will object even more, since they could then argue that we were giving all our economy and all our exports a tremendous boost?

Mr. Diamond

The logic of that argument is that when the hon. Gentleman has his own way—and he is a young man and I hope that he lives long enough to have his own way, because he is a very able man and he will add knowledge and grace to these benches in the course of the next 50 years—

Mr. Bence

Never.

Mr. Diamond

One must be democratic and encouraging and it is right to encourage the hon. Member to look forward to the next 50 years. In 50 years' time, he will be able to put into effect what he and his hon. Friends are claiming to be the right thing to do about S.E.T., namely, to turn it into an employment tax. If it is a payroll tax, or an employment tax, it will again not fall away at the frontier, precisely as the hon. Gentleman objects that the present tax does not fall away at the frontier.

Mr. Patrick Jenkin

If the Chief Secretary honestly believes that he has satisfied the Committee with that deplorable answer, he is indeed an optimist. Two things came out of his reply to the debate. First, all the objections he advanced to the Amendments would be irrelevant to a value-added tax. The answer is that if the Amendments cannot be accepted for selective employment tax, it is not the Amendments which are wrong; it is the tax which is wrong. All the cases that have been made—consulting engineers, architects, structural engineers, export salesmen, the insurance industry, the production of video-tapes—for not taxing export content have been overwhelming.

Secondly, the tax on these export activities is not deliberate. On the contrary, it is merely an unintended but unavoidable by-product of the system adopted in the standard industrial classification, and if this is a by-product of the tax system, that is another argument why the tax must go.

I want to refer to videotapes. It is rare—and I say this as a tribute to the Chief Secretary—that he deliberately attempts to evade the argument, but I am bound to say that his reply on videotapes did just that. He sought to argue about the manufacture of the tape, whereas the argument is about selling the tape with the programme on it. The distinction which he sought to draw between the manufacture of films and the manufacture of videotapes was wholly unreal.

The present position is that film studios and laboratories can now claim rebates of S.E.T. for those of their employees who are directly concerned with the production of films, but it is wholly anomalous—

Mr. Bence

They get exemption for processing.

Mr. Jenkin

For making a film, the finished product of the film with the movie on it. That is treated as production.

Mr. Diamond

May I interrupt merely to state the fact? If I seemed to be evading the argument, I am sorry and obviously I did not take on board fully what the hon. Gentleman was saying. If he is now saying that the videotape with the recorded programme on it attracts S.E.T., he is inaccurate. It does not. If he looks at the new Standard Industrial Classification he will see that it is classified as a manufacturing activity.

Mr. Jenkin

That is extremely difficult for those of us who are dealing with this matter, because the Standard Industrial Classification is not available in the Vote Office. I do not know how many hon. Members have been able to get one, but I have not been able to get a copy of the 1968 edition and I am having to work from the 1958 edition. However, it is certainly the impression of the television studios and they will be most interested to hear this.

Mr. Diamond

My hon. and learned Friend the Minister of State saw them only the day before yesterday and made all this quite clear.

Mr. Roy Roebuck (Harrow, East)

Withdraw.

Mr. Jenkin

On the contrary. The impression of those who operate television studios where they make the videotapes is that they are far from satisfied that they are getting equal treatment. However, no doubt we shall be able to return to this matter on Report in view of what the Chief Secretary has just said.

He said that there was no evidence that S.E.T. was acting as a hindrance to the earning of exports. This is a ludicrous proposition. I refer him to the evidence which I know he has had from the British Export Houses Association setting out chapter and verse of the cost disadvantage which export houses face because their people wholly engaged in merchanting goods for exports have to pay S.E.T. I would quote—but I am anxious to be brief—the figures which have been put to the Chancellor of the Exchequer, and it is absolute nonsense for the Chief Secretary to say that there is no evidence. Industry after industry in the City has complained to the Chancellor of the cost disadvantage, of the effect on their liquidity, of the difficulties that it makes for them in finance.

The balance of payments argument has always been stressed by the Government as a need to introduce this tax. One remembers the present Home Secretary's famous dictum, "You cannot export a haircut". He was quite right, but it has been asserted time and again that S.E.T. operates directly against the correction of our balance of payments deficit. The case was argued cogently in last August's issue of the Westminster Bank Review by an Oxford economist, Margaret Hall. The fact is that 44 per cent. of manufacturing output is exported, and 31 per cent. of services output is exported, yet the import content of the services output is vastly lower than the import content of the manufacturing output. This makes a complete nonsense of the use of S.E.T. to discriminate against the service industries.

Some service industries have a nil import content and a substantial export earning content, yet they are penalised by S.E.T. because the Government cannot bring themselves to admit that office work can be productive. This ancient prejudice goes right to the heart of the S.E.T. It is a fiscal brontosaurus, and the country will not be happy until it is as extinct as every other brontosaurus.

In the meantime, the Amendments would go some way to relieving export industries of the penalties of the tax. I hope that my hon. and right hon. Friends will feel it right to divide in their favour in the Lobby.

Question put, That the Amendment be made:—

The Committee divided: Ayes 223, Noes 279.

Division No. 226.]	AYES	[6.32 p.m.
Alison, Michael (Barkston Ash)	Ewing, Mrs. Winifred	Maclean, Sir Fitzroy
Allason, James (Hemel Hempstead)	Eyre, Reginald	Macleod, Rt. Hn. Iain
Amery, Rt. Hn. Julian	Farr, John	McMaster, Stanley
Atkins, Humphrey (M't'n & M'd'n)	Fortescue, Tim	Macmillan, Maurice (Farnham)
Awdry, Daniel	Foster, Sir John	McNair-Wilson, Michael (W'stow, E.)
Baker, Kenneth (Acton)	Galbraith, Hn. T. G.	McNair-Wilson, Patrick (New Forest)
Baker, W. H. K. (Banff)	Gilmour, Ian (Norfolk, C.)	Maddan, Martin
Balniel, Lord	Glover, Sir Douglas	Maginnis, John E.
Barber, Rt. Hn. Anthony	Godber, Rt. Hn. J. B.	Marples, Rt. Hn. Ernest
Batsford, Brian	Goodhart, Philip	Marten, Neil
Beamish, Col. Sir Tufton	Goodhew, Victor	Maude, Angus
Bell, Ronald	Gower, Raymond	Mawby, Ray
Bennett, Dr. Reginald (Gos. & Fhm)	Grant-Ferris, R.	Maxwell-Hyslop, R. J.
Berry, Hn. Anthony	Gresham Cooke, R.	Maydon, Lt.-Cmdr. S. L. C.
Bessell, Peter	Grieve, Percy	Mills, Peter (Torrington)
Biffen, John	Grimond, Rt. Hn. J.	Mills, Stratton (Belfast, N.)
Biggs-Davison, John	Gurden, Harold	Miscampbell, Norman
Birch, Rt. Hn. Nigel	Hall, John (Wycombe)	Mitchell, David (Basingstoke)
Black, Sir Cyril	Hall-Davis, A. G. F.	More, Jasper
Blaker, Peter	Hamilton, Lord (Fermanagh)	Morgan-Giles, Rear-Adm.
Boardman, Tom (Leicester, S. W.)	Hamilton, Michael (Salisbury)	Morrison, Charles (Devizes)
Body, Richard	Harris, Frederic (Croydon, N. W.)	Munro-Lucas-Tooth, Sir Hugh
Boyle, Rt. Hn. Sir Edward	Harris, Reader (Heston)	Murton, Oscar
Braine, Bernard	Harrison, Brian (Maldon)	Nabarro, Sir Gerald
Brewis, John	Harrison, Col. Sir Harwood (Eye)	Neave, Airey
Brinton, Sir Tatton	Harvey, Sir Arthur Vere	Noble, Rt. Hn. Michael
Bromley-Davenport, Lt.-Col. Sir Walter	Harvie Anderson, Miss	Nott, John
Brown, Sir Edward (Bath)	Hastings, Stephen	Onslow, Cranley
Bruce-Gardyne, J.	Hawkins, Paul	Orr, Capt. L. P. S.
Buchanan-Smith, Alick (Angus, N & M)	Hay, John	Orr-Ewing, Sir Ian
Buck, Antony (Colchester)	Heald, Rt. Hn. Sir Lionel	Osborn, John (Hallam)
Bullus, Sir Eric	Heseltine, Michael	Osborne, Sir Cyril (Louth)
Burden, F. A.	Higgins, Terence L	Page, Graham (Crosby)
Campbell, B. (Oldham, W.)	Hiley, Joseph	Pardoe, John
Campbell, Gordon (Moray & Nairn)	Hill, J. E. B.	Peel, John
Channon, H. P. G.	Holland, Philip	Percival, Ian
Chichester-Clark, H.	Hooson, Emlyn	Peyton, John
Clark, Henry	Hordern, Peter	Pike, Miss Mervyn
Clegg, Walter	Hunt, John	Pink, R. Bonner
Cooke, Robert	Hutchison, Michael Clark	Pounder, Rafton
Cordle, John	Iremonger, T. L.	Price, David (Eastleigh)
Corfield, F. V.	Jenkin, Patrick (Woodford)	Prior, J. M. L.
		Pym, Francis
Costain, A. P.	Johnson Smith, G. (E. Grinstead)	Quennell, Miss J. M.
Craddock, Sir Beresford (Spelthorne)	Jones, Arthur (Northant, S.)	Ramsden, Rt. Hn. James
Crouch, David	Jopling, Michael	Rawlinson, Rt. Hn. Sir Peter
Crowder, F. P.	Joseph, Rt. Hn. Sir Keith	Rees-Davies, W. R.
Cunningham, Sir Knox	Kaberry, Sir Donald	Renton, Rt. Hn. Sir David
Currie, G. B. H.	Kerby, Capt. Henry	Rhys Williams, Sir Brandon
Dalkeith, Earl of	Kershaw, Anthony	Ridley, Hn. Nicholas
Dance, James	King, Evelyn (Dorset, S.)	Ridsdale, Julian
d'Avigdor-Goldsmid, Sir Henry	Kirk, Peter	Rodgers, Sir John (Sevenoaks)
Dean, Paul	Knight, Mrs. Jill	Rossi, Hugh (Hornsey)
Deedes, Rt. Hn. W. F. (Ashford)	Lambton, Viscount	Royle, Anthony
Digby, Simon Wingfield	Lancaster, Col. C. G.	Russell, Sir Ronald
Dodds-Parker, Douglas	Lane, David	Sandys, Rt. Hn. D.
Doughty, Charles	Lewis, Kenneth (Rutland)	Scott, Nicholas
Drayson, G. B.	Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)	Scott-Hopkins, James
du Cann, Rt. Hn. Edward	Lloyd, Ian (P'tsm'th, Langstone)	Sharples, Richard
Eden, Sir John	Lloyd, Rt. Hn. Selwyn (Wirral)	Shaw, Michael (Sc'b'gh & Whitby)
Elliot, Capt. Walter (Carshalton)	Longden, Gilbert	Silvester, Frederick
Elliott, R. W. (N'c'tle-upon-Tyne, N.)	Lubbock, Eric	Sinclair, Sir George
Emery, Peter	McAdden, Sir Stephen	Smith, Dudley (W'wick & L'mington)
Errington, Sir Eric	MacArthur, Ian	Smith, John (London & W'minster)
Speed, Keith	Vaughan-Morgan, Rt. Hn. Sir John	Williams, Donald (Dudley)
Stainton, Keith	Vickers, Dame Joan	Wilson, Geoffrey (Truro)
Stodart, Anthony	Waddington, David	Winstanley, Dr. M. P.
Stoddart-Scott, Col. Sir M.	Walker, Peter (Worcester)	Wood, Rt. Hn. Richard
Summers, Sir Spencer	Walker-Smith, Rt. Hn. Sir Derek	Woodnutt, Mark
Tapsell, Peter	Wall, Patrick	Worsley, Marcus
Taylor, Sir Charles (Eastbourne)	Walters, Dennis	Wright, Esmond
Taylor, Edward M. (G'gow, Cathcart)	Ward, Dame Irene	Younger, Hn. George
Taylor, Frank (Moss Side)	Weatherill, Bernard
Temple, John M.	Wells, John (Maidstone)	TELLERS FOR THE AYES:
Thatcher, Mrs. Margaret	Whitelaw, Rt. Hn. William	Mr. Timothy Kitson and
Thorpe, Rt. Hn. Jeremy	Wiggin, A. W.	Mr. Hector Munro.
Turton, Rt. Hn. R. H.
NOES
Albu, Austen	Edwards, Robert (Bilston)	Johnson, Carol (Lewisham, S.)
Allaun, Frank (Salford, E.)	Edwards, William (Merioneth)	Johnson, James (K'ston-on-Hull, W.)
Alldritt, Walter	Ellis, John	Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Anderson, Donald	English, Michael	Jones, J. Idwal (Wrexham)
Archer, Peter	Ensor, David	Jones, T. Alec (Rhondda, West)
Ashley, Jack	Evans, Albert (Islington, S. W.)	Kelley, Richard
Ashton, Joe (Bassetlaw)	Evans, Fred (Caerphilly)	Lawson, George
Atkins, Ronald (Preston, N.)	Faulds, Andrew	Leadbitter, Ted
Atkinson, Norman (Tottenham)	Fernyhough, E.	Lee, Rt. Hn. Frederick (Newton)
Bacon, Rt. Hn. Alice	Finch, Harold	Lee, John (Reading)
Bagier, Gordon A. T.	Fitch, Alan (Wigan)	Lestor, Miss Joan
Barnes, Michael	Fitt, Gerard (Belfast, W.)	Lever, Harold (Cheetham)
Barnett, Joel	Fletcher, Raymond (Ilkeston)	Lever, L. M. (Ardwick)
Beaney, Alan	Fletcher, Ted (Darlington)	Lewis, Arthur (W. Ham, N.)
Bence, Cyril	Foley, Maurice	Lewis, Ron (Carlisle)
Benn, Rt. Hn. Anthony Wedgwood	Foot, Rt. Hn. Sir Dingle (Ipswich)	Lipton, Marcus
Bidwell, Sydney	Foot, Michael (Ebbw Vale)	Lomas, Kenneth
Binns, John	Ford, Ben	Loughlin, Charles
Bishop, E. S.	Forrester, John	Luard, Evan
Blackburn, F.	Fowler, Gerry	Lyon, Alexander W. (York)
Blenkinsop, Arthur	Fraser, John (Norwood)	Lyons, Edward (Bradford, E.)
Booth, Albert	Freeson, Reginald	Mabon, Dr. J. Dickson
Boston, Terence	Galpern, Sir Myer	McCann, John
Bottomley, Rt. Hn. Arthur	Gardner, Tony	MacColl, James
Boyden, James	Garrett, W. E.	Macdonald, A. H.
Bradley, Tom	Gordon Walker, Rt. Hn. P. C.	McGuire, Michael
Bray, Dr. Jeremy	Gray, Dr. Hugh (Yarmouth)	McKay, Mrs. Margaret
Brooks, Edwin	Greenwood, Rt. Hn. Anthony	Mackenzie, Gregor (Rutherglen)
Brown, Rt. Hn. George (Belper)	Gregory, Arnold	Mackie, John
Brown, Hugh D. (G'gow, Provan)	Grey, Charles (Durham)	Mackintosh, John P.
Brown, Bob (N'c'tle-upon, Tyne, W.)	Griffiths, David (Rother Valley)	Maclennan, Robert
Brown, R. W. (Shoreditch & F'bury)	Griffiths, Eddie (Brightside)	McMillan, Tom (Glasgow, C.)
Buchan, Norman	Griffiths, Rt. Hn. James (Llanelly)	McNamara, J. Kevin
Buchanan, Richard (G'gow, Sp'burn)	Griffiths, Will (Exchange)	MacPherson, Malcolm
Butler, Herbert (Hackney, C.)	Gunter, Rt. Hn. R. J	Mallalieu, E. L. (Brigg)
Butler, Mrs. Joyce (Wood Green)	Hamilton, James (Bothwell)	Mallalieu, J. P. W. (Huddersfield, E.)
Callaghan, Rt. Hn. James	Hamilton, William (Fife, W.)	Manuel, Archie
Cant, R. B.	Hamling, William	Mapp, Charles
Carmichael, Neil	Hannan, William	Marks, Kenneth
Castle, Rt. Hn. Barbara	Harper, Joseph	Marquand, David
Chapman, Donald	Harrison, Walter (Wakefield)	Marsh, Rt. Hn. Richard
Coe, Denis	Hazell, Bert	Mason, Rt. Hn. Roy
Coleman, Donald	Healey, Rt. Hn. Denis	Mellish, Rt Hn. Robert
Corbet, Mrs. Freda	Heffer, Eric S.	Mendelson, John
Crawshaw, Richard	Henig, Stanley	Mikardo, Ian
Crosland, Rt. Hn. Anthony	Herbison, Rt. Hn. Margaret	Millan, Bruce
Crossman, Rt. Hn. Richard	Hilton, W. S.	Miller, Dr. M. S.
Darling, Rt. Hn. George	Hobden, Dennis	Milne, Edward (Blyth)
Davidson, Arthur (Accrington)	Hooley, Frank	Molloy, William
Davies, G. Elfed (Rhondda, E.)	Houghton, Rt. Hn. Douglas	Moonman, Eric
Davies, Dr. Ernest (Stretford)	Howell, Denis (Small Heath)	Morgan, Elystan (Cardiganshire)
Davies, Rt. Hn. Harold (Leek)	Howie, W.	Morris, Charles R. (Openshaw)
Davies, Ifor (Gower)	Hoy, James	Morris, John (Aberavon)
de Freitas, Rt. Hn. Sir Geoffrey	Huckfield, Leslie	Moyle, Roland
Delargy, Hugh	Hughes, Rt. Hn. Cledwyn (Anglesey)	Mulley, Rt. W. Frederick
Dell, Edmund	Hughes, Hector (Aberdeen, N.)	Murray, Albert
Dempsey, James	Hughes, Roy (Newport)	Neal, Harold
Diamond, Rt. Hn. John	Hunter, Adam	Newens, Stan
Dickens, James	Hynd, John	Oakes, Gordon
Dobson, Ray	Irvine, Sir Arthur (Edge Hill)	Ogden, Eric
Doig, Peter	Jackson, Peter M. (High Peak)	Oram, Albert E.
Dunn, James A.	Janner, Sir Barnett	Orbach, Maurice
Dunnett, Jack	Jay, Rt. Hn. Douglas	Orme, Stanley
Dunwoody, Mrs. Gwyneth (Exeter)	Jeger, George (Goole)	Oswald, Thomas
Dunwoody, Dr. John (F'th & C'b'e)	Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)	Owen, Dr. David (Plymouth, S'tn.)
Eadie, Alex	Jenkins, Hugh (Putney)	Owen, Will (Morpeth)
Edelman, Maurice	Jenkins, Rt, Hn. Roy (Stechford)	Palley, Walter

Page, Derek (King's Lynn)	Rogers, George (Kensington, N.)	Walker, Harold (Doncaster)
Paget, R. T.	Shaw, Arnold (Ilford, S.)	Wallace, George
Pannell, Rt. Hn. Charles	Shinwell, Rt. Hn, E.	Watkins, David (Consett)
Park, Trevor	Shore, Rt. Hn. Peter (Stepney)	Watkins, Tudor (Brecon & Radnor)
Parker, John (Dagenham)	Short, Mrs. Renée (W'hampton, N. E.)	Wellbeloved, James
Parkin, Ben (Paddington, N.)	Silkin, Rt. Hn. John (Deptford)	Wells, William (Walsall, N.)
Parkyn, Brian (Bedford)	Silkin, Hn. S. C. (Dulwich)	Whitaker, Ben
Pavitt, Laurence	Silverman, Julius	White, Mrs. Eirene
Pearson, Arthur (Pontypridd)	Skeffington, Arthur	Whitlock, William
Peart, Rt. Hn. Fred	Slater, Joseph	Wilkins, W. A.
Pentland, Norman	Small, William	Willey, Rt. Hn. Frederick
Perry, Ernest G. (Battersea, S.)	Snow, Julian	Williams, Alan (Swansea, W.)
Perry, George H. (Nottingham, S.)	Spriggs, Leslie	Williams, Alan Lee (Hornchurch)
Prentice, Rt. Hn. R. E.	Steele, Thomas (Dunbartonshire, W.)	Williams, Clifford (Abertillery)
Price, Christopher (Perry Barr)	Stonehouse, Rt. Hn. John	Williams, Mrs. Shirley (Hitchin)
Price, Thomas (Westhoughton)	Strauss, Rt. Hn. G. R.	Williams, W. T. (Warrington)
Price, William (Rugby)	Summerskill, Hn. Dr. Shirley	Willis, Rt. Hn. George
Probert, Arthur	Swain, Thomas	Wilson, Rt. Hn. Harold (Huyton)
Rankin, John	Taverne, Dick	Wilson, William (Coventry, S.)
Rees, Merlyn	Thomas, Rt. Hn. George	Winnick, David
Rhodes, Geoffrey	Thomson, Rt. Hn. George	Woodburn, Rt. Hn. A.
Roberts, Albert (Normanton)	Tinn, James	Woof, Robert
Roberts, Rt. Hn. Goronwy	Tomney, Frank	Wyatt, Woodrow
Roberts, Gwilym (Bedfordshire, S.)	Tuck, Raphael
Robertson, John (Paisley)	Urwin, T. W.	TELLERS FOR THE NOES:
Robinson, Rt. Hn. Kenneth (St. P'c'as)	Varley, Eric G.	Mr. Ioan L. Evans and
Rodgers, William (Stockton)	Wainwright, Edwin (Dearne Valley)	Mr. Neil McBride
Roebuck, Roy

6.45 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

I beg to move Amendment No. 98, in page 64, line 9, at end insert: (12) Where an employer has paid selective employment tax for any contribution week beginning on or after 7th July 1969 in respect of a person employed as a recognised apprentice in the building and construction industries the Secretary of State for Social Security shall make that employer in respect of that person and that week a payment of an amount equal to the tax paid.

The Temporary Chairman (Dr. A. D. D. Broughton)

It will be convenient to discuss at the same time Amendment No. 86, page 64, line 9, at end insert: (12) Where an employer has paid selective employment tax for any contribution week beginning on or after 7th July 1969 in respect of a clerk articled to him, the Secretary of State for Social Security shall make to that employer in respect of that articled clerk and that week a payment of an amount equal to the tax paid.

Mr. Heffer

I indicated clearly yesterday that I was opposed to the application of selective employment tax to the building and construction industry. Whatever arguments can be marshalled in support of applying S.E.T. to the building industry, they cannot be marshalled in support of applying it to apprentices in that industry. Therefore, what I said about the industry as a whole doubly applies to apprentices.

After 7th July, selective employment tax is to be applied to apprentices over 18 years of age at the rate of 40s. a week and under 18 years of age at the rate of 24s. a week. Only yesterday an employer's representative argued that S.E.T. should be removed as it applies to apprentices, but suggested that it should apply to all the workers employed by public industries. I do not go along with that. Nothing which is gained by way of S.E.T. in the publicly-owned industries should make up for the amount lost by not applying it to apprentices. I do not wish to give the impression that I support views of the kind expressed by one of the employer's representatives.

To apply S.E.T. to apprentices is wrong in principle, because the training of apprentices is important to the future not only of our country, but of the construction and building industries and other industries. Many apprentices begin their training in the building industry and then go into other industries. Some of those other industries are not in a position to give training to apprentices—for example, in maintenance—which can be given in the building industry. It is therefore important that we should recognise the importance of apprentices to the future of our country and industry.

Yesterday, the hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) said that the Chancellor of the Exchequer did not reply to the points which I had made because he believed that my right hon. Friend did not have an answer to them. The position as I understand it is that the Chancellor believed that we would have a full-dress debate on the whole question of the building industry and that the points would be replied to then. Unfortunately, many of the Amendments—some put down by hon. Members opposite and some by myself—which would have given us the opportunity of a debate on the whole question of the application of the tax to the building industry, and especially the point of labour-only contracting, have not been selected. I do not criticise the Chair for that. Therefore, we can have a full dress debate only on the Question, "That the Clause stand part of the Bill."

Mr. R. Chichester-Clark (Londonderry)

Does not the hon. Member agree that it is disgraceful that the Government have so tightly drawn the Money Resolution that a debate on the building industry in this context is virtually impossible? This is an industry employing something like one-seventh of our total work force. Is it not disgraceful that we cannot debate it?

Mr. Heffer

I would not use the term "disgraceful". I would say that it was unfortunate, which is not quite the same thing, although the point is well taken. I hope, however, that we will have a debate on the Question, "That the Clause stand part of the Bill", so that the points which would have been raised concerning labour-only can be raised then.

It is true that some extremely good training is given in some of the very big firms in the building industry, but in the main it is the medium and smaller firms in the industry which carry out the training. The larger firm is the exception which proves this rule.

This is important when we consider the selective employment tax, because the larger firm is able to absorb S.E.T. much more easily than the smaller firm. There are many ways in which this can be done. First, the larger firm can use methods of productivity and new methods with machinery which cannot be applied in the smaller firms. Secondly, the larger firm can probably employ a first-class accountant who is able to find ways and means of absorbing some of the S.E.T. Again, this does not apply to the medium and smaller firms. It is not possible for them to absorb it in the same way as a larger firm is able to do.

The Amendment is an important one for a number of reasons, which I will outline. First, payment of S.E.T. on apprentices must discourage the smaller firms from employing them. This, in turn, affects considerably the future development of the building and construction industries. It means that potential skill is lost to the country, and lost for ever. It is all very well to say that we should have adult training schemes—I accept that we should have more adult training schemes—hut an adult who trains for six months in a Government training centre or in the Forces can do only a certain type of work. For example, he could not do the work that would be required in the construction of this Chamber. One would need a skilled apprentice to do that type of work. I spent seven years as an apprentice and I know what it means to be properly trained as a joiner in my craft. It is clear, therefore, that skill would be lost to us if we had a situation in which the smaller firms could not take on apprentices.

Secondly, the period of apprenticeship gives precisely the training that is required. If apprenticeship is a period of training, the output of the young person who is being trained obviously cannot be as great as that of the fully-skilled craftsman. Even during the last two years, when the output has been much higher and has almost reached the level of that of a fully-skilled craftsman, it has never quite reached the level of a highly-skilled craftsman who has completed his training and who may have been working at his craft for many years.

The third point to be taken into consideration is that S.E.T. has meant the growth of labour-only. Let me explain what I mean, because I was asked yesterday what I meant by "labour-only" and why I was so concerned about it. If I were in the Treasury I would see that labour-only was stopped right now, because I think that a considerable amount of money is lost as a result of labour-only. One of my hon. Friends yesterday was given a figure of something like £75 million as being lost.

It is not only that. Labour-only means that a certain number of workers do certain jobs. They take work on what is known as the lump. Not only do many of them not pay S.E.T., but there are all sorts of tax evasions. There is insurance evasion. There is a whole series of evasions. Let us remember also that labour-only gangs do not have apprentices, who would slow down the work. They do not have time to be interested in helping to teach a young man how to do a job. This, therefore, is a third and very important reason why we should consider abolishing S.E.T. for apprentices.

Mr. Peter Archer (Rowley Regis and Tipton)

Would my hon. Friend agree that a further argument against labour-only subcontractors is that all too often no one is responsible for safety?

Mr. Heffer

Of course, I agree entirely.

I should like to refer to some evidence from the Phelps Brown Report precisely on the question of the labour-only gang. I quote from paragraph 376, at page 136: Witnesses who have assessed its other effects very variously have agreed that it is inimical to the traditional form of training for the crafts through apprenticeship: men whose aim is to complete a given task as quickly as possible do not want to carry a learner in their team, or to interrupt their own work in order to instruct him. Incidentally, I commend the Phelps Brown Report to all hon. Members who have not read it. It is a very important Report and it is time that some of its recommendations were carried out by the Government.

The total number of operatives in the construction industry is 1,436,000. That figure was given by the Department of Employment and Productivity on 7th May, 1969, so that it is about as up-to-date a figure as one could get. The figure for apprentices for September, 1967, which is the most recent available, is 103,492, including apprentices working for local authorities and direct labour. If apprentices working for public authorities are included, the figure is approximately 130,000 apprentices in the industry as a whole. The Phelps Brown Report says that that means nearly 10 per cent. of the operative labour force and just under one-fifth of the numbers employed in the main apprenticeship trades.

7.0 p.m.

During the last few years the number of apprentices has been falling. The evidence for this is contained in the Phelps Brown Report on page 49, paragraph 130: On the other hand, figures of the number of apprentices employed published by the Ministry of Public Building and Works show a fall of 6 per cent. between 1965 and 1966; and a further fall of 7 per cent. between 1966 and 1967. This may reflect wastage as well as the somewhat reduced entry in 1966. The N.J.C.B.I. figures of registrations of apprentices approved under the Council's scheme show a sharp drop of 15 per cent. between 1966 and 1967; It was precisely during this period that S.E.T. was introduced.

The reasons given in the Report for the falling off are these. First, fewer boys are leaving school. Secondly, there was an increase in unemployment between 1966 and 1967 in the building and construction industries. Thirdly, there was a growth of labour-only, which is not conducive to training. The fourth reason, which is not included in the Phelps Brown Report, is the introduction of S.E.T.

Mr. Donald Williams (Dudley)

Will the hon. Gentleman also agree that the building industry has the highest rate of bankruptcy and closure in the country, as a result of which many apprentices are displaced and there is great difficulty in getting them back into employment because of the incidence of S.E.T.?

Mr. Heffer

I certainly agree that the industry has always suffered from bankruptcy. My criticism is that there are too many builders and it is about time that we had a publicly-owned building industry, which would be much better than the present chaotic situation. I am not now arguing for a publicly owned building industry; I am showing why there has been a reduction in the number of apprentices.

Sir Gerald Nabarro (Worcestershire, South)

The hon. Gentleman knows a lot about this industry. I hope to vote with him tonight, so I am encouraging him to vote with me. This "lump" business, that is, men going self-employed—are there many in the building industry and do they escape altogether from selective employment tax? Is the hon. Gentleman supporting apprentices going "lump"? That seems to me to be what he is advocating.

[Mr. HARRY GOURLAY in the Chair]

Mr. Heffer

I do not know where the hon. Gentleman has been hiding for the last ten minutes. My point is that labour-only has developed on a much more extensive scale precisely because of the introduction of S.E.T. and this upward trend has a very bad effect on apprenticeships. I do not understand why the hon. Gentleman has made that intervention.

Training in the building industry has improved, and serious efforts are being made to tackle the training of apprentices and adults. The previous Government established the Construction Industry Training Board in July, 1964 and we took it on. It may have been deathbed repentance, but we have developed it. I pay tribute to the Board for its fine work for the industry. Employers, trade unionists, educationists and assessors from Government Departments are represented on the Board. The Board imposed on the industry a 1 per cent. levy, which brought in about £14 million. On the reverse side, the building trade employers were entitled to grants to assist in training, and for this purpose £8 million was paid out. The levy has since been reduced. It is interesting that the 1 per cent. levy was imposed to help training, whereas the imposition of S.E.T. works completely against the concept of the training programme, the levy, the Board and everything that goes with it.

The Annual Report of the Board for last year says that there are a number of firms which do not consciously undertake any training. That goes to emphasise my earlier point that more firms will consciously refuse to undertake training because any assistance they get from the Board will be offset by the payment of S.E.T.

I have not gone into the broader sphere of the application of S.E.T. to the building industry in view of the narrowness of the Amendment, but other hon. Members may take the discussion further. We are faced with a difficult situation, because we are discussing this matter without the Reddaway Report. It would have been much beter to have had this discussion after the Report was published. I should have liked, in particular, an early report, perhaps part of the overall Report, on the building industry. I hope that efforts will be made to ask Professor Reddaway to get cracking on this Report, and perhaps we can have an interim report on the building industry.

Mr. Chichester-Clark

Is the hon. Gentleman aware that it is much more difficult than that? Professor Reddaway had the greatest difficulty in recruiting staff to help him in his inquiry into the building industry, so much so that the Ministry of Public Building and Works felt compelled to set up an inquiry of its own into the effect of S.E.T. on this industry?

Mr. Heffer

That underlines the difficulty of the situation. I say no more than that.

I do not intend to take this matter to a Division.

Sir G. Nabarro

Why not?

Mr. Heffer

Because I hope that the Minister will give me some assurances and make that unnecessary. I know that many hon. Gentlemen opposite are most anxious for a united front between myself and themselves on this matter. I should feel a lot happier if we could present a united front on many other issues, but unfortunately that does not happen, and I am therefore a little suspicious about some of their overtures at times like this.

I am not one of those who will not push things to a Division if necessary, because I am not bamboozled by the Whips or by anybody else. I hope that we shall get some tangible assurances from the Minister that something really is being done about the application of this tax to the building industry. In particular, I hope we can be assured that this tax will be lifted from apprentices at the earliest possible moment.

If we do not get those assurances, this tax will have the most serious effect on the industry in the next five or six years. The effect will not be immediate, but at the end of that time we shall find ourselves without the skilled craftsmen that our country and our industry need. I have worked in the building industry all my life, and I do not want to support something which could lead to a crisis in my industry in the next five or six years. I therefore ask the Minister to treat this, as I am treating it, in the most serious way, and I hope that we shall get some assurances this evening.

Mr. Michael Shaw (Scarborough and Whitby)

I shall speak briefly to the Amendment moved by the hon. Member for Liverpool, Walton (Mr. Haffer), because my Amendment is allied closely with it. I agree with much of what the hon. Gentleman said. I am only sorry that he seems to be paving the way for not fulfilling the import of much of what he said. I join the hon. Gentleman in hoping that the Minister will make some really positive concessions, and nobody will be more pleased than myself if that happens.

The hon. Member for Walton has, on many occasions, expressed his objection to S.E.T., particularly as it affects the construction industry, and he has allied his Amendment with those objections in general in dealing with the position of apprentices in that idustry.

My Amendment deals with apprentices of another sort—articled clerks in the professions. I draw the Committee's attention to the fact that many of the professions are becoming busier and busier directly as a result of Government legislation. I must disclose my own interest as a chartered accountant still in practice, although many of my partners rather doubt it at times. Nevertheless, I am still in practice, and I have an interest in this matter.

Year by year, as Finance Bills go by, more and more does the country become dependent on accountants, on solicitors, on estate agents, and on other professional bodies to deal with the complicated and ambiguous legislation passed through this House. The position—ironic on reflection—is that each year taxes go up, and each year the country is forced more to consult experts on how to deal with their affairs, and in so consulting them are forced to pay more and more indirectly by way of S.E.T. for the services of the clerks and staff of these offices.

We are dealing tonight with, on the one hand, apprentices, and on the other with articled clerks, boys and girls—nay, very often men and women—in training for services which are vital for the future well-being of this country. To get back to the original purpose of S.E.T., is it really suggested that it is the desire of the Government to encourage young men and women not to become, for example accountants, but to go directly into industry? The whole tenor of the Government's legislation shows a greater and greater need for them, and therefore the need for greater encouragement to people to take up these various professions.

In effect what the hon. Member for Walton and myself are saying is that this tax, in so far as it affects apprentices and articled clerks, or indeed anyone in training, is a tax on knowledge and on training. It is therefore a tax on the future of the country. I believe that on this ground it is a tax utterly to be condemned, because, whilst it is true that in the construction industry, and in the professions particularly, all the bodies concerned are doing their best to improve training in theory, and also in practice, theoretical training is all right, but it only gets one so far; theory is important and must be learned at university or wherever it may be—theory without experience can be very dangerous indeed. Experience is absolutely vital, and I believe that those employers who undertake to train people, in whatever industry or profession it may be, should not be mulcted by this selective poll tax in the way that they are now.

I hope that if we do not get positive and satisfactory assurances from the Minister tonight we shall join in opposing the present state of affairs by voting for these Amendments.

Mr. W. S. Hilton (Bethnal Green)

At the outset I want to make it clear that I would much rather you were chairing a discussion on another Amendment, Mr. Gourlay—the Amendment put down by certain Opposition Members which would provide that only self-employed people should pay selective employment tax. That Amendment has not been called, and I do not intend to start a discussion on it, but apart from the significance that it has for the training of apprentices it would have relieved the gloom in the Committee to have had an Amendment called in respect of which hon. Members on both sides could join triumphantly to force increased revenue on a reluctant Chancellor. It would mean about £30 million a year from the construction industry alone.

One of my concerns in respect of S.E.T. and training is that there appears to be no recognition on the part of the Treasury that training in our industry is not done basically at schools or colleges; we still require many operatives in order to teach apprentices. Therefore, any great move of operative strength to labour only sub-contracting decreases the total number of men available to train apprentices. It is therefore not possible to talk cogently about apprentice training without referring to S.E.T. and its effect in driving a number of men into labour only sub-contracting in the construction industry.

I remember a discussion in the last Budget, when S.E.T. was similarly increased, when the Chief Secretary said that he did not believe that that tax or other inducements would encourage men to become labour only sub-contractors, because the industry had a high accident rate and men making that move would not be protected by insurances or legal representation by the trade unions. My concern arises from the fact that the Committee does not realise the great attraction there is for people to become labour only sub-contractors.

It is not simply a matter of avoiding the 48s. 6d. payment. Besides S.E.T. there is the cost of the National Health Insurance stamp, the industrial training levy, insurances and all the other overheads, which mean that for one man there is a payment of £5 or £6 a week. For the operative it means that the National Health Insurance contribution is not required, besides his tax payment, and altogether it can mean a difference of £9 or £10 a week to him. That applies not only in the construction industry but in almost any other industry. My hon. Friend will agree that labour only sub-contracting is now making a serious inroad into engineering. This is the picture against which we must judge the impact of the tax upon training.

When a Government increase poll taxes of this kind in respect of certain industries they are putting a high premium on good employers. It is as simple as that. If one is a good employer one is penalised to the extent of £5 or £6 a week per operative. The construction industry is a highly casual industry, not only in respect of the portion of a month during which a man is employed but also because a man may work for only three or four days in a certain week because he has not joined the firm until the Tuesday or the Wednesday. The overheads created by this poll tax amount to a considerable sum in respect of the other three or four days in the week.

The first thing that the Treasury should do is to regard seriously the attraction of this tax, plus other inducements, in making people take up labour only subcontracting. Treasury Ministers and others have argued against this point of view. They have said that there is no danger that a man will go to the labour only sub-contracting side of the industry, and therefore will not train apprentices. They have admitted that there has been a genuine reduction in the labour force in the construction industry. In other words, they say, there has been a move towards efficiency through the introduction of S.E.T.

My figures in respect of the number of operatives are slightly different from those of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) because he dealt with the total number of people employed in the industry and I am speaking of operatives who are normally engaged in training apprentices—not managerial or technical staff. In 1966, when the tax was introduced, there were 1,102,000 operatives in the construction industry. Last year there were 1,027,000 men. In other words, there was a drop of 75,000 men. That is claimed as something of a victory for the objectives of the tax. The statistics show that there are now 250,000 men in labour only sub-contracting. I submit that the introduction of S.E.T. has not driven men out of the industry in terms of improved economy and efficiency; it has merely driven them into an evasion of tax and, in consequence, to an evasion of the things that are vital to the very make up of the industry.

The Chancellor must seriously consider any tax which not only aims at raising revenue but, as a direct consequence, seriously affects the basic make up of the industry. If we were to exempt employers from paying the tax if they trained apprentices it would cost about £5 million a year to the Treasury. At present the number of men evading taxation by being self-employed, in relation to S.E.T. alone, must represent a loss of at least £30 million a year.

My hon. Friend the Member for Walton said that the other day an Answer was given in the House to the effect that the right figure was £75 million. That figure relates to self-employment right across the board of British industry. Up to now we have thought that self-employment and labour-only subcontracting was the major danger in the construction industry; we now find that the total amount is £75 million, or three times the evasion in the construction industry alone. The inference is that self-employment is now creeping into other industries.

The ratio varies according to the trade, but in the construction industry it is between four and six operatives to each apprentice. That was the ratio in my father's day. The 250,000 men who are in the labour only sub-contracting part of the industry are not training even one apprentice between them—never mind any question of an apprentice being trained by a small gang. Even more important, they are not paying the industrial training levy. The small and medium-sized employers who have apprentices are paying. This problem should be considered by the Chancellor and my hon. Friend in this light.

The Government's basic mistake was to lump the construction industry together with the service industries and to take S.E.T. from both. Anyone who knows anything about the industry must realise that construction is completely different from service industries and is more like manufacturing. Its national machinery, its industrial relations policies and its apprentice training methods are those of manufacturing and not those of services. As soon as it is put into the bracket of distribution and service, all these anomalies arise. Employers are faced with the training of apprentices. If an employer puts a boy on block release training courses a month or three months, any S.E.T. that he pays is not a tax on the services which he gets from the boy but a tax on education and training for replacement of manpower in the construction industry.

7.30 p.m.

Therefore, I suggest that my hon. Friend should rectify the anomaly. If we are told that that is not possible, I would ask why it was possible to exempt agriculture. S.E.T. was introduced to sort out the sheep from the goats—manufacturing from services. Nobody can tell me that, in agriculture, they are manufacturing turnips for valuable export, while in the construction industry, in erecting a major building at London Airport, we were acting for home consumption. That is the sort of ridiculous impasse into which we get through the Standard Industrial Classification and the treatment of the construction industry. We want some cogent reply, some understanding of the problem and some assurance that something will be done.

Mr. Chichester-Clark

Like the hon. Member for Bethnal Green (Mr. Hilton), I wish that we were discussing another Amendment. I find myself going over what I said earlier. How deplorable it is that the Government have so tightly drawn the Money Resolution that we cannot discuss the construction industry in general terms. This is disgraceful especially when we are dealing with an industry employing a seventh of the work force of the country and paying—on my calculation—about 24 per cent. of the total yield from this tax.

Mr. Hilton

Not only are we the largest employing industry, but our employees are almost exclusively male, so we have to pay 100 per cent. tax on every employee.

Mr. Chichester-Clark

That is quite right. One wonders why the Money Resolution was drawn so tightly. I cannot help thinking of the time when Cobden was attacking the Corn Laws so strenuously and while he was speaking Peele turned to his Home Secretary, Graham, I think, and said, "You must answer this, for I cannot". One wonders whether the Government have not concluded that they cannot answer the argument and so are trying to avoid debate. One also wonders whether there is any example of a major tax which has been virtually doubled in all its rates within three years of its introduction.

The effect on the construction industry is particularly severe. We are now discussing an Amendment dealing with apprentices. If apprentices are being laid off or not taken on, this is because something has happened to the industry. The effect is severe, because the tax is paid without refund or premium except for some industrialised building systems which get a refund and, in development areas, attract a premium.

I agree with much of what the hon. Member for Liverpool, Walton (Mr. Heffer) said yesterday and today. He established that the tax raises £135 million from the construction industry. On one well-known occasion, I think, on 17th November, 1967, the Treasury was asked the yield of the tax from this industry and could not answer—

Mr. Heffer

It will actually be between £152 million and £155 million yield after 7th July.

Mr. Chichester-Clark

This is difficult to establish: the Government could not say, when asked, what the yield was. It is only recently—I think on 3rd April this year—that their statistical services improved sufficiently to show that £220 million had been raised from the industry, which is a useless extra cost on all construction work senselessly put on ratepayers and taxpayers.

One knows only too well what the Under-Secretary will say in answer to this debate. We have had the same answer from one Minister or another every year. He will tell us all about the great increases in productivity in the industry which S.E.T. has brought about. The Chief Secretary, as recently as 6th May, had the effrontery—

The Under-Secretary of State for Employment and Productivity (Mr. Roy Hattersley)

Before the hon. Gentleman anticipates my reply any further, may I assure him that I shall say none of these things? I shall give only a reply which is relevant to the Amendment.

Mr. Chichester-Clark

I should have thought that that was a matter for you, Mr. Gourlay, and that the Under-Secretary should not give you advice on these matters.

The Deputy Chairman (Mr. Harry Gourlay)

Order. I was about to intervene in the hon. Member's speech. I was allowing him to make some general remarks about the tax, but he must relate his speech now to the Amendment.

Mr. Chichester-Clark

In that case, I shall have to say, as I said before, that this is an absolutely disgraceful situation. The Money Resolution has been deliberately designed to exclude discussion of the construction industry in relation to this tax. It has been virtually impossible to frame an Amendment which is in order. I am not criticising the Chair, but for some reason—one knows that they cannot be given—those Amendments which would have led to a proper, useful and necessary discussion of the industry have not been called. This is very unfortunate in such a large employing industry. I shall make this protest year after year until we get a proper discussion of these matters. With that, I shall now leave my remarks as they are.

The Under-Secretary of State for Employment and Productivity (Mr. Roy Hattersley)

The strength of the case made by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) rests on a series of propositions—not simply that selective employment tax is detrimental to training in the building industry, but, first, that it is crucially detrimental; second, that it is detrimental in a way that cannot be counteracted by other means; and, third, that any supposed reductions in the number of apprentices in the industry would be reversed were S.E.T. abolished for that category of workpeople.

I shall try to deal with each of these contentions, because no one would think it worthy of discussion were he simply saying that any manpower tax which is levied on the employer for each workman in his employ in itself marginally, but perhaps no more than marginally, deters the employment of any category of work persons, including apprentices. That must be true of any tax and equally of National Insurance contributions. But for my hon. Friend's case to be as strong as he believes, one must add to that the three subsidiary contentions I have outlined. These subsidiary contentions do not accord with the facts if they are carefully examined.

Before I do that I should tell the House that the Amendment would produce a net cost to revenue of £10 million. Before my hon. Friend rises to tell me that the importance of the matter is not the cost but the merits of the case, I assure him that I agree with what he must be thinking; that if the needs warrant it, the £10 million should not stand in our way. However, an examination of the facts does not warrant this sort of loss, and I say that for four reasons.

First, as my hon. Friend dealt at length, and properly so, with the problems of labour-only sub-contracting as it affects apprenticeships, he will know—I cannot go into this at length—and stay in order—that it is at least a matter of debate as to how much the introduction of S.E.T. has accelerated the increase in labour-only sub-contracting. I am able to say no more than that and remain in order. My hon. Friend will also know that it is a matter of debate as to whether that acceleration has been caused by other matters as well as S.E.T., such as National Insurance contributions, the Training Board levy, arrangements for safety and other provisions of the law.

However, one can say almost categorically that whatever effect S.E.T. has had on the increase of labour-only subcontracting—and, therefore, through labour-only sub-constracting, on the number of apprentices recruited to the industry—it has not had a crucially reducing effect. I say that with some confidence in view of what was said in the Phelps Brown Report. My hon. Friend quoted certain passages from that document, including some extracts from paragraph 131. The final sentence of that paragraph reads: It does not therefore appear"— I will not weary the House with the reasoning which justified the use of the word "therefore"— that there is a close relationship between labour-only and recruitment of apprentices. I am prepared to stand by that judgment.

Mr. Speed

Is it not true that that Report came out in July, 1968, before the massive increase in S.E.T. in September, 1968 and before the increase which we are discussing? Does not this mean that what the hon. Gentleman is saying is already a little old hat and that the situation has deteriorated since then?

Mr. Hattersley

It was kind of the hon. Gentleman not to remind my hon. Friend the Member for Liverpool, Walton of the outdated character of the Phelps Brown Report when my hon. Friend was quoting from it in favour of the Amendment. However, it was equally kind of him to remind me that he believes it to be outdated when I am quoting from it in opposition to the Amendment.

I intend to say something about the future. The only point I am seeking to make at present is that the only analysis of labour-only sub-contracting which is at our disposal—the Phelps Brown Report which is a comparatively recent document to which the Government are committed and on which they intend to act—draws the conclusion that it would be wrong to assume that as labour-only subcontracting increases, so the number of apprentices falls. I stand by that contention.

How, then, since that is not the contradictory factor, do we account for the figures which my hon. Friend the Member for Liverpool, Walton gave when introducing the Amendment; a gross fall in the number of apprenticeships in the industry—a crude figure of the reduction in the number of boys who have been taking up apprenticeships?

As my hon. Friend the Member for Liverpool, Walton said, the principal cause of this phenomenon is to be found in the same paragraph 131 of the Phelps Brown Report. It is the simple fact—there is a special fact, too, concerning this industry—applying to all industries during the period which my hon. Friend discussed. During that period the number of boys leaving school fell. Indeed, the number of boys, in crude terms, going into apprenticeships in industry as a whole fell for every industry during that period.

Mr. Heffer

If one studies the Phelps Brown Report one finds many qualifying phrases like "It is not clear" and "Therefore it does not appear". There are no clear categorical statements saying that there is not a definite relationship between labour-only and this trend. If one reads further into the Phelps Brown Report—about, for example, the question of training—one finds this comment on page 136. It is true that in our survey there tended to be less apprentices per firm among firms using labour-only than among other firms, but the difference was not particularly marked, and of course there are many other factors affecting the situation. I would take that to be definite evidence that labour-only leads to a reduction in apprenticeship training. I suggest that there is no question about it, despite what my hon. Friend has said.

7.45 p.m.

Mr. Hattersley

I am surprised if my hon. Friend is normally prepared to accept evidence offered in such a tentative form; indeed, evidence offered in a purely negative form. I would have thought that he would have wished to have substantiated his general conclusion on apprenticeships with the passage which I quoted and which, I am sure, hon. Members will wish to bear in mind.

Be that as it may, I offer my hon. Friend some precise facts about the level of apprenticeships in the industry. When he quoted the gross figures I think that he was not quoting figures which give the best picture of the apprenticeship position. I offer two sets of figures. The first concerns the number of boys obtaining apprenticeships in the industry between 1963 and 1968. There was certainly a decline in gross terms, of about 4 per cent., but the industry as a whole was contracting, certainly towards the end of that period. It was, incidentally, declining at a rate so fast that it could not be attributed entirely, or in the main, to the increase in labour-only subcontracting.

But while during that period the number of apprenticeships was being reduced, as was the total manpower of the industry, the percentage of new entrants into the industry who were taking up apprenticeships was increasing. In fact, in 1963 rather more than 63 per cent. of all young men going into the industry took up apprenticeships. By 1968 more than 72 per cent. of all young men going into the industry took up apprenticeships.

That increase of 10 per cent. in the level of apprentices as a proportion of new entrants into the industry is indicative of the improved and improving training standards in the industry, as in most industries since 1964. This is in no small measure the result of the work of the Construction Industry Training Board to which my hon. Friend the Member for Walton referred in complimentary terms. The Board's endeavours have been extremely succesful, not only in increasing the quantity of training in the industry but in improving the quality of it.

I give my hon. Friend an absolute assurance that it is neither the Board's intention nor mine nor that of my right hon. Friend that its efforts should be so geared that adult retrainees or adult trainees should take the place of apprentices trained in something like the traditional manner, and I emphasise that latter remark.

My hon. Friend did less than credit to the many men who spend time in Government training centres and who then go on to take a period of related experience outside to become craftsmen of a high calibre. The Board understands that while we need to improve the techniques of apprenticeships and change some of the attitudes towards training in the industry, the majority of craftsmen employed in the foreseeable future must be recruited and trained in something like the traditional way.

The figures I quoted—the increasing proportion of young men going into the industry and taking apprenticeships—shows the success which the Board has had in bringing that situation about and the fact that it has not been prevented from doing that altogether necessary job by external means, and by S.E.T. in particular.

My hon. Friend the Member for Liverpool, Walton and my hon. Friend the Member for Bethnal Green (Mr. Hilton) went on to conclude, and rightly so, that an employer required to pay a sum for each apprentice on his books would naturally be reluctant to take on additional apprentices if he was obtaining from them very little productive work. It was specifically my hon. Friend the Member for Bethnal Green who asked me to consider the position of an employer who, while reconciled to making his S.E.T. contributions for an employee engaged in a productive activity, would be more than reluctant to do so if one of his employees was constantly not available for work or was involved in a job which had no genuine direct productive content. I am sure that my hon. Friend the Member for Walton will confirm that throughout their apprenticeships very many building industry apprentices make a very substantial contribution to productive work.

My hon. Friend told us that his apprenticeship lasted seven years. There is no training authority or anyone with practical training experience—and I suspect that that includes my hon. Friend—who genuinely believes that the techniques of learning alone take seven years. Much of the time is spent in productive activity, though there are training activities where this general rule does not apply.

We accepted at the beginning of the selective employment tax that there was a conceivable situation in which a young man would need to go, would want to go, and would be capable of going for some extended period of off-the-job training but that his employer would be reluctant to send him on the course because, although producing nothing to the firm, he would be a charge against selective employment tax. For that reason, my right hon. Friend the then Chancellor of the Exchequer agreed with the industrial training boards to make specific refunds of selective employment tax to young men who were going on three types of courses.

The first type consisted of apprentices undergoing full-time, off-the-job training or education. The second concerned those involved in works-based sandwich courses; that is to say, students undergoing a period of theoretical instruction. The third consisted of students undergoing a university course as part of sandwich arrangements. Those young men were clearly not a productive element to the firm or a legitimate charge for selective employment tax.

That being so, we thought then, and we confirm our continued belief, that that concession should be made. But our examination of the figures and of the level of training in the industry as a whole does not suggest that, at the moment, any further concession can be justified on any of the criteria I have laid down, or by any of the evidence presented today.

I assure the hon. Member for Meriden (Mr. Speed) that the Government will keep very closely under review the situation to which he has drawn attention. Clearly, if the selective employment tax has a marginal effect, when it is increased the effect is less marginal. The hon. Gentleman will know, as will my hon. Friend the Member for Walton, the devotion of this Government to industrial training and education. With that general principle in mind, we undertake to keep the position under review but, at the moment, I cannot advise the Committee to agree to the Amendment.

Mr. Ian MacArthur (Perth and East Perthshire)

Before the Minister sits down, will he not refer to the Amendment seeking to alter the effect of selective employment tax in relation to articled clerks, which Amendment was supported by a powerful argument exposing the wretchedness of the tax in this connection?

Mr. Hattersley

The figures I gave concerned the Amendment which was moved, but the general rules and the general criteria are equally applicable to both Amendments. As the hon. Gentleman asked me to confirm it, I ask the Committee to reject both Amendments.

Mr. Speed

On a point of order, Mr. Gourlay. I should like your advice. A number of us have tried by our Amendments to widen the scope of the discussion of the incidence of the selective employment tax in the construction industry. We represent many builders and construction people. We find the situation quite impossible. Of course, we do not seek to criticise you or the Chair, but could you guide us how, on a future occasion, we may be able to discuss the tax in relation to the industry and yet keep the discussion within the confines of the Finance Bill?

Mr. Heffer

I do not want to say that in view of any assurance I have had from the Minister—

The Deputy Chairman

Order. I thought that the hon. Member for Liverpool, Walton (Mr. Heffer) was seeking to make a further point of order. If he is not, perhaps I may be allowed to deal with the point of order raised by the hon. Member for Meriden (Mr. Speed). That point of order related to the selection of Amendments. The Chair has not selected the Amendments referred to, so that it would not be in order to debate them now. I am afraid that I cannot help the hon. Gentleman to widen the debate in that way.

Mr. Heffer

I am very disappointed by the Minister's reply, and have had no real assurance that anything will be done. This debate is on a very narrow problem. I should have liked the debate to have been much wider and to have involved, in particular, the whole question of labour-only sub-contracting. My difficulty is that I could press the Amendment to a Division, but it is not a particularly responsible attitude merely to waste the time of the Committee—[HON. MEMBERS: "No."] In the circumstances, I feel that I shall have to ask leave to withdraw the Amendment, but I do so, and I want this to be known, extremely reluctantly. The hon. Member for Meriden (Mr. Speed) has referred to the difficulty there is in having a full-scale discussion on the whole subject of the construction and building industry. On that basis, Mr. Gourley, I beg to ask leave to withdraw the Amendment.

Hon. Members

No.

Mr. Chichester-Clark

On a point of order, Mr. Gourley. In view of what

has just been said by the hon. Member for Liverpool, Walton (Mr. Heffer), that he had had to employ what was virtually a device to try to get a discussion of the selective employment tax and the building industry, and in view of my hon. Friends' representations, would you, on this occasion, make an exception by telling us why some of the Amendments on the wider point are not in order?

The Deputy Chairman

The Chair is not under any obligation to disclose its reasons for selecting or not selecting Amendments.

Question put, That the Amendment be made:—

The Committee divided: Ayes 214, Noes 250.

Division No. 227.]	AYES	[7.58 p.m.
Alison, Michael (Barkston Ash)	Digby, Simon Wingfield	Johnson Smith, G. (E. Grinstead)
Allason, James (Hemel Hempstead)	Dodds-Parker, Douglas	Jones, Arthur (Northants, S.)
Amery, Rt. Hn. Julian	Doughty, Charles	Jopling, Michael
Atkins, Humphrey (M't'n & M'd'n)	Drayson, G. B.	Kaberry, Sir Donald
Awdry, Daniel	du Cann, Rt. Hn. Edward	Kerby, Capt. Henry
Baker, Kenneth (Acton)	Eden, Sir John	Kershaw, Anthony
Baker, W. H. K. (Banff)	Elliot, Capt. Walter (Carshalton)	King, Evelyn (Dorset, S.)
Balniel, Lord	Elliott, R. W. (N'c'tle-upon-Tyne, N.)	Kirk, Peter
Barber, Rt. Hn. Anthony	Emery, Peter	Knight, Mrs. Jill
Batsford, Brian	Errington, Sir Eric	Lambton, viscount
Beamish, Col. Sir Tufton	Ewing, Mrs. Winifred	Lancaster, Col. C. G.
Bell, Ronald	Eyre, Reginald	Lane, David
Bennett, Dr. Reginald (Gos. & Fhm)	Farr, John	Legge-Bourke, Sir Harry
Berry, Hn. Anthony	Fortescue, Tim	Lewis, Kenneth (Rutland)
Bessell, Peter	Foster, Sir John	Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)
Biffen, John	Galbraith, Hn. T. G.	Lloyd, Ian (P'tsm'th, Langstone)
Biggs-Davison, John	Gilmour, Ian (Norfolk, C.)	Lloyd, Rr. Hn. Selwyn (Wirral)
Birch, Rt. Hn. Nigel	Glover, Sir Douglas	Longden, Gilbert
Blaker, Peter	Glyn, Sir Richard	Lubbock, Eric
Boardman, Tom (Leicester, S. W.)	Godbar, Rt. Hn. J. B.	McAdden, Sir Stephen
Body, Richard	Goodhart, Philip	MacArthur, Ian
Boyle, Rt. Hn. Sir Edward	Goodhew, Victor	Maclean, Sir Fitzroy
Braine, Bernard	Gower, Raymond	Macleod, Rt. Hn. Iain
Brewis, John	Grant-Ferris, R.	McMaster, Stanley
Brinton, Sir Tatton	Gresham Cooke, R.	Macmillan, Maurice (Farnham)
Bromley-Davenport, Lt.-Col. Sir Walter	Grieve, Percy	McNair-Wilson, Michael (W'stow, E.)
Brown, Sir Edward (Bath)	Grimond, Rt. Hn. J.	McNair-Wilson, Patrick (New Forest)
Bruce-Gardyne, J.	Gurden, Harold	Maddan, Martin
Buchanan-Smith, Alick (Angus, N & M)	Hall, John (Wycombe)	Maginnis, John E.
Buck, Antony (Colchester)	Hall-Davis, A. G. F.	Marples, Rt. Hn. Ernest
Bullus, Sir Eric	Hamilton, Lord (Fermanagh)	Marten, Neil
Burden, F. A.	Hamilton, Michael (Salisbury)	Maude, Angus
Campbell, B. (Oldham, W.)	Harris, Frederic (Croydon, N. W.)	Maxwell-Hyslop, R. J.
Campbell, Gordon (Moray & Nairn)	Harris, Reader (Heston)	Maydon, Lt.-Cmdr. S. L. C.
Channon, H. P. G.	Harrison, Brian (Maldon)	Mills, Peter (Torrington)
Chichester-Clark, R.	Harrison, Col. Sir Harwood (Eye)	Mills, Stratton (Belfast, N.)
Clark, Henry	Harvey, Sir Arthur Vere	Miscampbell, Norman
Clegg, Walter	Harvie Anderson, Miss	Mitchell, David (Basingstoke)
Cooke, Robert	Hastings, Stephen	Monro, Hector
Cordle, John	Hawkins, Paul	More, Jasper
Corfield, F. V.	Hay, John	Morgan-Giles, Rear-Adm.
Costain, A. P.	Hesoltine, Michael	Morrison, Charles (Devizes)
Craddock, Sir Beresford (Spelthorne)	Higgins, Terrence L.	Munro-Lucas-Tooth, Sir Hugh
Crouch, David	Hiley, Joseph	Murton, Oscar
Crowder, F. P.	Hill, J. E. B.	Nabarro, Sir Gerald
Cunningham, Sir Knox	Hogg, Rt. Hn. Quintin	Neave, Airey
Currie, G. B. H.	Holland, Philip	Noble, Rt. Hn. Michael
Dalkeith, Earl of	Hordern, Peter	Nott, John
Dance, James	Hunt, John	Onslow, Cranley
d'Avisdor-Goldsmid, Sir Henry	Hutchison, Michael Clark	Orr, Capt. L. P. S.
Dean, Paul	Iremonger, T. L.	Osborn, John (Hallam)
Deedee, Rt. Hn. W. F. (Ashford)	Jenkin, Patrick (Woodford)	Osborne, Sir Cyril (Louth)
Page, Graham (Crosby)	Scott, Nicholas	Vickers, Dame Joan
Peel, John	Scott-Hopkins, James	Waddington, David
Percival, Ian	Sharples, Richard	Walker, Peter (Worcester)
Peyton, John	Shaw, Michael (Sc'b'sh & Whitby)	Walker-Smith, Rt. Hn. Sir Derek
Pink, R. Bonner	Silvester, Frederick	Wall, Patrick
Pounder, Rafton	Sinclair, Sir George	Walters, Dennis
Price, David (Eastleigh)	Smith, Dudley (W'wick & L'mington)	Ward, Dame Irene
Prior, J. M. L.	Smith, John (London & W'minster)	Wells, John (Maidstone)
Pym, Francis	Speed, Keith	Wiggin, A. W.
Quennell, Miss J. M.	Stainton, Keith	Williams, Donald (Dudley)
Ramsden, Rt. Hn. James	Steel, David (Roxburgh)	Wilson, Geoffrey (Truro)
Rawlinson, Rt. Hn. Sir Peter	Stodart, Anthony	Wood, Rt. Hn. Richard
Rees-Davies, W. R.	Stoddart-Scott, Col. Sir M.	Woodnutt, Mark
Renton, Rt. Hn. Sir David	Summers, Sir Spencer	Worsley, Marcus
Rhys Williams, Sir Brandon	Tapsell, Peter	Wright, Esmond
Ridley, Hn. Nicholas	Taylor, Sir Charles (Eastbourne)	Younger, Hn. George
Ridsdale, Julian	Taylor, Edward M. (G'gow, Cathcart)
Rossi, Hugh (Hornsey)	Temple, John M.	TELLERS FOR THE AYES:
Royle, Anthony	Thatcher, Mrs. Margaret	Mr. Timothy Kitson and
Russell, Sir Ronald	Thorpe, Rt. Hn. Jeremy	Mr. Bernard Weatherill.
Sandys, Rt. Hn. D.	Turton, Rt. Hn. R. H.
NOES
Albu, Austen	Eadie, Alex	Jenkins, Hugh (Putney)
Allaun, Frank (Salford, E.)	Edelman, Maurice	Jenkins, Rt. Hn. Roy (Stechford)
Alldritt, Walter	Edwards, Robert (Bilston)	Johnson, Carol (Lewisham, S.)
Anderson, Donald	Ellis, John	Johnson, James (K'ston-on-Hull, W.)
Archer, Peter	English, Michael	Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Ashley, Jack	Ennals, David	Jones, J. Idwal (Wrexham)
Ashton, Joe (Bassetlaw)	Ensor, David	Jones, T. Alec (Rhondda, West)
Atkins, Ronald (Preston, N.)	Evans, Ioan L. (Birm'h'm, Yardley)	Kelley, Richard
Atkinson, Norman (Tottenham)	Faulds, Andrew	Kerr, Russell (Feltham)
Bacon, Rt. Hn. Alice	Fernyhough, E.	Lawson, George
Bagier, Gordon A. T.	Finch, Harold	Leadbitter, Ted
Barnett, Joel	Fitch, Alan (Wigan)	Lee, Rt. Hn. Frederick (Newton)
Beaney, Alan	Fitt, Gerard (Belfast, W.)	Lee, John (Reading)
Bence, Cyril	Fletcher, Rt. Hn. Sir Eric (Islington, E.)	Lestor, Miss Joan
Benn, Rt. Hn. Anthony Wedgwood	Fletcher, Raymond (Ilkeston)	Lever, Harold (Cheetham)
Bidwell, Sydney	Fletcher, Ted (Darlington)	Lever, L. M. (Ardwick)
Binns, John	Foley, Maurice	Lewis, Arthur (W. Ham, N.)
Bishop, E. S.	Foot, Rt. Hn. Sir Dingle (Ipswich)	Lewis, Ron (Carlisle)
Blackburn, F.	Foot, Michael (Ebbw Vale)	Lomas, Kenneth
Blenkinsop, Arthur	Ford, Ben	Loughlin, Charles
Booth, Albert	Forrester, John	Luard, Evan
Boston, Terence	Fowler, Gerry	Lyon, Alexander W. (York)
Bottomley, Rt. Hn. Arthur	Fraser, John (Norwood)	Lyons, Edward (Bradford, E.)
Boyden, James	Freeson, Reginald	Mabon, Dr. J. Dickson
Bradley, Tom	Galpern, Sir Myer	MacColl, James
Bray, Dr. Jeremy	Gardner, Tony	Macdonald, A. H.
Brooks, Edwin	Garrett, W. E.	McGuire, Michael
Brown, Rt. Hn. George (Belper)	Gordon Walher, Rt. Hn. P. c.	McKay, Mrs. Margaret
Brown, Hugh D. (G'gow, Provan)	Gray, Dr. Hugh (Yarmouth)	Mackenzie, Gregor (Rutherglen)
Brown, Bob (N'c'tle-upon-Tyne, W.)	Greenwood, Rt. Hn. Anthony	Mackie, John
Brown, R. W. (Shoreditch & F'bury)	Grey, Charles (Durham)	Mackintosh, John P.
Buchan, Norman	Griffiths, David (Rother Valley)	Maclennan, Robert
Buchanan, Richard (G'gow, Sp'burn)	Griffiths, Eddie (Brightside)	McMillan, Tom (Glasgow, C.)
Butler, Herbert (Hackney, C.)	Griffiths, Rt. Hn. James (Llanelly)	McNamara, J. Kevin
Callaghan, Rt. Hn. James	Griffiths, WIN (Exchange)	MacPherson, Malcolm
Cant, R. B.	Gunter, Rt. Hn. R. J.	Mallalieu, E. L. (Brigg)
Carmichael, Neil	Hamilton, James (Bothwell)	Mallalieu, J. P. W. (Huddersfield, E.)
Castle, Rt. Hn. Barbara	Hamilton, William (Fife, W.)	Manuel, Archie
Chapman, Donald	Hannan, William	Mapp, Charles
Coe, Denis	Harper, Joseph	Marks, Kenneth
Coleman, Donald	Harrison, Walter (Wakefield)	Marquand, David
Corbet, Mrs. Freda	Hattereley, Roy	Marsh, Rt. Hn. Richard
Crawshaw, Richard	Hazell, Bert	Mason, Rt. Hn. Roy
Crosland, Rt. Hn. Anthony	Healey, Rt. Hn. Denis	Mellish, Rt. Hn. Robert
Darling, Rt. Hn. George	Herbison, Rt. Hn. Margaret	Mendelson, John
Davidson, Arthur (Accrington)	Hobden, Dennis	Mikardo, Ian
Davies, G. Elfed (Rhondda, E.)	Hooley, Frank	Millan, Bruoe
Davies, Dr. Ernest (Stretford)	Houghton, Rt. Hn. Douglas	Miller, Dr. M. S.
Davres, Ifor (Gower)	Howell, Denis (Small Heath)	Milne, Edward (Blyth)
de Freitas, Rt. Hn. Sir Geoffrey	Howie, W.	Molloy, William
Delargy, Hugh	Hoy, James	Morgan, Elystan (Cardiganshire)
Dell, Edmund	Huckfield, Leslie	Morris, Charles R. (Openshaw)
Dempsey, James	Hughes, Rt. Hn. Cledwyn (Anglesey)	Morris, John (Aberavon)
Diamond, Rt. Hn. John	Hughes, Hector (Aberdeen, N.)	Moyle, Roland
Dickens, James	Hunter, Adam	Mulley, Rt. Hn. Frederick
Dobson, Ray	Janner, Sir Barnett	Murray, Albert
Doig, Peter	Jay, Rt. Hn. Douglas	Neal, Harold
Dunnett, Jack	Jeger, George (Goole)	Noel-Baker, Rt. Hn. Philip
Dun woody, Mrs. Gwyneth (Exeter)	Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)	Oakes, Gordon

Ogden, Eric	Robertson, John (Paisley)	Tuck, Raphael
Oram, Albert E.	Robinson, Rt. Hn. Kenneth (St. P'c'as)	Urwin, T. W.
Orbach, Maurice	Rodgers, William (Stockton)	Varley, Eric G.
Orme, Stanley	Roebuck, Roy	Wainwright, Edwin (Dearne Valley)
Oswald, Thomas	Rogers, George (Kensington, N.)	Walker, Harold (Doncaster)
Owen, Will (Morpeth)	Ryan, John	Wallace, George
Padley, Walter	Shaw, Arnold (Ilford, S.)	Watkins, David (Consett)
Page, Derek (King's Lynn)	Sheldon, Robert	Watkins, Tudor (Brecon & Radnor)
Pannell, Rt. Hn. Charles	Shinwell, Rt. Hn. E.	Wellbeloved, James
Parker, John (Dagenham)	Shore, Rt. Hn. Peter (Stepney)	White, Mrs. Eirene
Parkin, Ben (Paddington, N.)	Short, Mrs. Renée (W'hampton, N. E.)	Whitlock, William
Parkin, Brian (Bedford)	Silkin, Rt. Hn. John (Deptford)	Wilkins, W. A.
Pavitt, Laurence	Silkin, Hn. S. C. (Dulwich)	Willey, Rt. Hn. Frederick
Pearson, Arthur (Pontypridd)	Skeffington, Arthur	Williams, Alan Lee (Hornchurch)
Peart, Rt. Hn. Fred	Slater, Joseph	Williams, Clifford (Abertillery)
Pentand, Norman	Small, William	Williams, Mrs. Shirley (Hitchin)
	Spriggs, Leslie	Williams, W. T. (Warrington)
Perry, George H. (Nottingham, S.)	Steele, Thomas (Dunbartonshire, W.)	Willis, Rt. Hn. George
Prentice, Rt. Hn. R. E.	Strauss, Rt. Hn. G. R.	Wilson, William (Coventry, S.)
Price, Thomas (Westhoughton)	Summerskill, Hn. Dr. Shirley	Winnick, David
Probert, Arthur	Swain, Thomas	Woof, Robert
Rankin, John	Taverne, Dick	Wyatt, Woodrow
Rees, Merlyn	Thomas, Rt. Hn. George
Roberts, Albert (Normanton)	Thomson, Rt. Hn, George	TELLERS FOR THE NOES:
Roberts, Rt. Hn, Goronwy	Tinn, James	Mr. John McCann and
Roberts, Gwilym (Bedfordshire, S.)	Tomney, Frank	Mr. Neil McBride.

Clause ordered to stand part of the Bill.