EXCEPTIONS FROM SECTION 26 (Hansard, 7 July 1971)

§ Mr. R. Chichester-Clark (Londonderry)
I beg to move Amendment No. 31, in page 27, line 33, at end insert: (10) Before making any regulations under sections 26 or 27 of this Act, the Board shall consult with such persons or organisations as appear to them to be representative of employers and trade unions in the construction industry. This is an important Amendment. I think I can earn the gratitude of the Committee by disposing of my side of the argument within a couple of minutes, although I felt rather less than grateful after being kept waiting until a quarter to One last night to move the Amendment only to find that my Front Bench had packed their bags and fled.
This Amendment is self-explanatory, and deals with practical matters concern- 1368 ing both sides of the building industry. My hon. Friend the Financial Secretary should try to give us some of the assurances implicit in the questions which the Amendment asks.

§ Mr. Patrick Jenkin
I express the apologies of myself and my hon. Friends that my hon. Friend the Member for Londonderry (Mr. Chichester-Clark) had to sit here last night and was not able to move his Amendment. However, he has been able to do so this afternoon and I welcome the commendably brief way in which he did it. The Amendment deals with "the lump", charging to tax those self-employed sub-contractors in the building industry, where there has been a good deal of evasion in recent years. The Amendment would require the Board of Inland Revenue to consult representatives of both sides of the construction industry before making regulations necessary to implement the legislation contained in the Bill. As I am sure my hon. Friend knows from his great experience of these matters, it is the normal custom to consult interests directly affected before regulations on administrative matters are finalised, even where there is no requirement spelt out in the legislation.
The Inland Revenue has already assured the National Federation of Building Trades Employers and the Federation of Civil Engineering Contractors that it will show them and other appropriate bodies copies of the draft regulations before they are laid. The Amendment refers to the trade unions and here again I can say that although by definition the trade unions have no direct interest in the legislation, since employees are not concerned—we are here concerned with 1369 so-called sub-contractors—it is the intention of the Board of Inland Revenue to let the trade unions see the draft regulations as a matter of courtesy.
I urge the House not to insist on the inclusion in the legislation of an obligation to consult in those circumstances. There are many other instances, in the Income Tax Acts and other legislation, where Governments as a normal course will consult without there being any statutory obligation. If we begin to insert into the legislation an obligation to consult it would cast doubt on whether it is appropriate to consult in the other cases. I hope that my hon. Friend, having heard the undertakings I have been able to give on behalf of the Inland Revenue, will feel it unnecessary to press the Amendment.

§ Mr. Eric S. Heffer (Liverpool, Walton)
I am sorry that the hon. Member for Londonderry (Mr. Chichester-Clark) did not develop his case further, because when I looked at the debates which took place on "the lump" in Committee it seemed that they were very unsatisfactory. The problem is not really being dealt within the Bill. Here we are attempting to close a loophole in terms of taxation, but we are not tackling the matter from the point of view of the National Insurance contributions and other aspects which are equally as important.
The Financial Secretary has dodged the issue of "the lump". In the last Parliament the Labour Government had a very clear policy on this issue and presented a Bill which was supported by hon. Members opposite.

§ Mr. Chichester-Clark
It is true that i did not express condemnation of that Bill, but I criticised it and said that in certain circumstances I would withdraw support from it. If I were to go any further—and I think that I have already gone too far, as probably the hon. Gentleman has done—I should be out of order because the question whether "the lump" has been effectively dealt with in the Finance Bill cannot arise on this Amendment.

§ Mr. Heffer
Whether or not the hon. Gentleman thinks that it cannot arise on this Amendment, we are essentially dealing with this point. The Financial Secre- 1370 tary said that the question of "the lump" was being dealt with. We are here concerned with sub-contracting; that is what it is all about. It is no good the hon. Gentleman saying that although he supported the Labour Government's Bill he was critical of it. It is one thing to be critical of a Bill; it is another thing to be in opposition to it. If we are in opposition to a Bill, we vote against the Second Reading and Third Reading.

§ Mr. Chichester-Clark
At the time. I had introduced a Bill which would have been infinitely more preferable.

§ Mr. Heffer
The hon. Gentleman cannot get away with that, because he introduced a Bill only to embarrass the Labour Government and to get them to speed up their Bill. I was in favour of getting the Bill through as quickly as possible. This underlines my point that now that the then Opposition are in Government they have totally abandoned the concept of a Bill, whether it was the Labour Government's Bill or the Bill introduced by the hon. Gentleman. The proposals in the Finance Bill do not adequately deal with the situation.
I wish to know why the Financial Secretary opposes the Amendment. I cannot see anything wrong with it. It seems reasonable to me. I do not know whether the hon. Gentleman thinks that saying that the regulations will be shown to the employers' federation and to the trade unions deals with the point. Showing them regulations does not necessarily mean consultation. It is possible to show somebody something and say, ''This is what we are doing" and then go ahead and do it irrespective of what he says. Is that what the hon. Gentleman is saying, or is he saying that he will allow the unions and the employers' federation to put forward their points of view and will take them into consideration before the regulations are introduced?

§ Mr. Patrick Jenkin
I can answer the hon. Gentleman's question with a categorical "Yes".

§ Mr. Heffer
Then I do not understand why the hon. Gentleman does not accept the Amendment, because it is not a bad idea to have it written into the Bill to make the point specific. However, I shall not pursue the matter except to say that these Amendments are inadequate to 1371 deal with the situation, and the hon. Member for Londonderry knows that as well as I do. He has raised the matter in this way because there is no alternative to dealing partially with the question of "the lump" and because there are all sorts of tax evasion as a result of "the lump".
I hope that the Government will not leave the matter as it is but that they will pursue it further and will introduce a comprehensive Bill dealing with the question of "the lump" and will eliminate this extremely bad practice in the building industry. It is time that "the lump" was eliminated from the industry. I realise that we cannot obtain complete satisfaction from the occupants of the Treasury Bench, because this is not their pigeon. They have wrongly been given the job. That is why the matter is being dealt with in a half-hearted way. It should be dealt with in a comprehensive Bill and "the lump" sub-contracting needs to be outlawed.

§ Mr. Raymond Gower (Barry)
I hardly think that the Finance Bill is an appropriate medium by which to accomplish the aims of the hon. Member for Liverpool, Walton (Mr. Heffer).

§ Mr. Heffer
I have just said that.

§ Mr. Gower
No. He said that this method was inadequate in the context of the Bill. I should have thought that this was a most inappropriate medium for putting in order what the hon. Gentleman regards as malpractices in the construction industry. A different medium is required for that purpose.

§ Mr. Charles Loughlin (Gloucestershire, West)
It is not we on this side of the House who say that this Bill will cure the problem of "the lump". It was said from the Government Front Bench that this was a method by which they would do it.

§ Mr. Gower
My point is that this is not an appropriate medium to accomplish the aim, but what we are discussing represents a useful part of that job in the context of this Bill, and I should have thought that it would be welcomed by the Opposition.
Ostensibly, what my hon. Friend the Member for Londonderry (Mr. 1372 Chichester-Clark) has proposed seems a good idea, but I think he will agree that if we specify the people to be consulted it may suggest that nobody else need be consulted. To that extent, my hon. Friend the Financial Secretary is on fairly solid ground. However, I wonder whether he could go a little further. I was not sure whether his undertaking extended as far as consultation. I imagine that we would not require the Amendment to be inserted in the Bill provided that what was done by the Revenue amounted to consultation.

§ Mr. Patrick Jenkin
With leave, I should like to respond to the further points which have been made.
I intervened in the speech of the hon. Member for Liverpool, Walton (Mr. Heffer) to give a categoric "Yes" to his question. I think that he accepted that I meant that there would be genuine consultation. I can reassure my hon. Friends on that point. There would be no point in the Inland Revenue or any other Government Department showing regulations in draft to trade associations and trade unions if it did not avail itself of the advice which it might receive on them. But consultation does not oblige a Government Department to comply with the advice it is given. However, that it should seek advice and take it into account with an open mind is usually accepted and is appropriate in this instance.
I reinforce the point made by my hon. Friend the Member for Barry (Mr. Gower) that if we specify matters in the Bill it tends not only to have a restrictive effect as to whom should be consulted—circumstances change and legislation must stand for a number of years—but also to cast doubt on the desirability of consulting in other instances when comparable provisions do not apply. I therefore reassert my earlier advice that, on the whole, it would be preferable not to include these Amendments in the Bill. I am grateful to my hon. Friend the Member for Londonderry (Mr. Chichester-Clark) for giving me the opportunity to state quite clearly that it is the intention of the Inland Revenue to consult the interests I have named.
The hon. Member for Walton mentioned National Insurance. His hon 1373 Friends raised this question, very properly and fully, in Committee on 14th June, and I would refer the hon. Gentleman to what I hope he will regard as a reassuring answer which I gave in col. 436–7. I should probably be straying beyond the rules of order if I were to say more about that now.
We believe that these Clauses will go a long way to cure the ills which have beset the building industry from the growth of bogus self-employed sub-contractors. We intend to watch this, and my hon. Friend the Under-Secretary of State for the Environment sat in Committee throughout the debates upstairs and listened to all the points made. The Government intend to watch the situation closely, and, if any further steps are necessary to cure what all sides have agreed is a thoroughly undesirable development in the building industry, we shall consider whether such steps should be taken. By tackling the tax evasion that has gone on through this method we shall be hitting at a peculiarly sensitive point and, if we can deal with this effectively, I believe that we shall succeed in making a considerable dent in this practice.

§ Mr. Heffer
Would not the hon. Gentleman agree that an even better way of underlining the points he has made would be to accept the Amendment of my hon. and learned Friend the Member for Lincoln (Mr. Taverne) to the effect that there should be a register of such subcontractors to make it easier to deal with the matter?

§ Mr. Jenkin
The Government considered this most closely but came to the conclusion that this would undoubtedly have led to a cumbrous and bureaucratic procedure. After the most careful consideration, we felt that a register was not the best way of doing it. I do not rule it out for all time. It may be that we shall be driven to it if we find that the measures we have taken so far, the measures which my right hon. Friend the Secretary of State for Social Services is contemplating in relation to National Insurance and other measures which are open to us do not deal with the problem. We may then have to reconsider the question of a register, but we shall do so with the greatest possible reluctance.

§ Mr. Costain
Does my hon. Friend appreciate that "the lump" grew at a more rapid rate when S.E.T. was introduced, and the halving of S.E.T. will help to reduce it?

§ Mr. Jenkin
I entirely accept my hon. Friend's point, but I equally accept the point made by the hon. Member for Walton in an intervention in a speech I made in the Budget debate when he said that "the lump" existed before the introduction of S.E.T., although there is not the slightest doubt that S.E.T. has exacerbated the problem.
Having heard the explanations and assurances which I have given, I hope that my hon. Friend will feel it right to withdraw the Amendment.

§ Mr. Loughlin
I am surprised at the turn of events in this debate. The Amendments are so narrowly drawn that I did not realise—perhaps because of my inexperience—that we could talk about the lump and relate the Clause to it. I should be abusing your tolerance, Mr. Deputy Speaker, if I were to develop the case that has been presented by the Financial Secretary.
It is true that the hon. Member for Londonderry (Mr. Chichester-Clark) attempted at all stages to qualify his support for the Bill presented by the Labour Government, but I remind him that there was agreement between both sides of the Committee to get the Bill through in four sittings. That indicates at least some measure of approval and support for the Bill.
On the intervention made by the hon. Member for Folkestone and Hythe (Mr. Costain), all the evidence that was submitted to the Phelps Brown Committee was collated before the introduction of S.E.T. The problem was acute before the Phelps Brown Committee sat, but it was accelerated by the introduction of S.E.T.
This provision will not touch "the lump". I am delighted that the Financial Secretary has said that if the Government find it does not touch it they are prepared to reconsider the position and introduce legislation to deal with "the lump". I take it that this is an official promise. It is on the record, and I hope that the promise will be carried out. This Clause will not deal with "the lump", and if the 1375 Government take steps to deal with it I shall be highly delighted.

§ Mr. Jenkin
If I may intervene, I did not go on record as saying that. The hon. Member and I can both examine the record tomorrow. I said that we should be prepared to consider it to see whether further steps would be necessary. I gave no undertaking to take any specific action.

§ Mr. Loughlin
I shall be interested to see HANSARD tomorrow. At least I have given the hon. Gentleman the opportunity, if he inadvertently said something which he should not have said, to correct it. I am sorry that his promise is not stronger than it appears to be.

§ Mr. Chichester-Clark
I find the speeches of the hon. Member for Gloucestershire, West (Mr. Loughlin) somewhat of an acquired taste, and my process of acqusition has not gone very far this afternoon. What he said was not very helpful to the case.
I am much appeased by what my hon. Friend the Financial Secretary said and I am pleased that something is being done to tackle this problem. My hon. Friend the Member for Folkestone and Hythe (Mr. Costain) and I were pioneers in this subject. Until we introduced a Bill to get something done, we could not get the Labour Government to do anything. With those few observations, and welcoming what my hon. Friend said, I beg to ask leave to withdraw the Amendment.