Commons Sitting of 20 April 1972

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]

HON. MEMBERS FOR MID-ULSTER AND FERMANAGH AND SOUTH TYRONE
Mr. Speaker: I have to inform the House that I have received a letter dated17th April, 1972, from the Resident Magistrate of Enniskillen in the following terms:
"I have to inform you that Miss Bernadette Devlin, M.P., of Rathbeg, Cookstown was convicted in her absence at Enniskillen Petty Sessions on 17th inst. of the offence set out below and was sentenced to six months imprisonment."
The letter goes on to set out the offence in detail and concludes with the words:
"A warrant of commitment was issued on the 17th April, 1972."
I have also to inform the House that I have received a further letter of the same date from the Resident Magistrate of Enniskillen in the following terms:
"I have to inform you that Mr. Frank McManus, M.P., of 58 Belmore Street, Enniskillen was convicted in his absence at Enniskillen Petty Sesions on 17th inst. of the offences set out below and was sentenced to six months imprisonment on each charge, the sentences to run concurrently."
The letter goes on to list the offences in detail and concludes with the words:
"A warrant of commitment was issued on the 17th April, 1972."
I will cause the whole text of both letters to be printed in the Official Report.
Following are the texts:
Petty Sessions Office,
Courthouse,
Enniskillen.
17th April. 1972.
Dear Sir,
I have to inform you that Miss Bernadette Devlin, M.P., of Rathbeg, Cookstown was convicted in her absence at Enniskillen Petty
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Sessions on 17th inst. of the offence set out below and was sentenced to six months imprisonment.
The offence was as follows:—
That defendant on the 13th February, 1972 at Kilmacormick, Enniskillen in the County of Fermanagh, knowingly took part in a public procession held in contravention of an order, dated 7th February, 1972, made by the Minister of Home Affairs for Northern Ireland, under Section 2(2) of the Public Order Act (Northern Ireland) 1951, to the effect that the holding of all public processions in any public highway, road or street in Northern Ireland is prohibited for the period commencing on 8th February, 1972 and ending on 8th February, 1973, contrary to Sections 2(4) and 5(2) of the said Act.
A warrant of commitment was issued on the 17th April, 1972.
Yours faithfully,
T. D. H. McC. Elliott, Resident Magistrate.
The Rt. Hon. Selwyn Lloyd, C.H., C.B.E., T.D.,
Q.C., M.P.,
Speaker of the House of Commons,
Westminster,
London, S.W.I.
Petty Sessions Office,
Courthouse,
Enniskillen.
17th April, 1972
Dear Sir.
I have to inform you that Mr. Frank McManus, M.P., of 58 Belmore Street, Enniskillen, was convicted in his absence at Enniskillen Petty Sessions on 17th inst., of the offences set out below and was sentenced to six months imprisonment on each charge, the sentences to run concurrently.
The offences were as follows:

(1) That defendant on the 13th February, 1972 at Kilmacormick, Enniskillen in the County of Fermanagh, knowingly took part in a public procession held in contravention of an Order, dated 7th February, 1972, made by the Minister of Home Affairs for Northern Ireland, under Section 2(2) of the Public Order Act (Northern Ireland) 1951, to the effect that the holding of all public processions in any public highway, road or street in Northern Ireland is prohibited for the period commencing on 8th February, 1972 and ending on 8th February, 1973, contrary to Sections 2(4) and 5(2) of the said Act.

(2) That defendant on the 13th February 1972 at Kilmacormick, Enniskillen in the County of Fermanagh, did organise a public procession held in contravention of an order, dated 7th February, 1972, made by the Minister of Home Affairs for Northern Ire land, under Section2(2) of the Public Order Act (Northern Ireland) 1951 as amended to the effect, that the holding of all public processions in any public highway, road or street in Northern Ireland is prohibited for the period commencing on 8th February, 1972 and ending on8th February, 1973, contrary to Sections 2(3) and 5(2) of the said Act.

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(3) That defendant on the 13th February, 1972 at Kilmacormick, Enniskillen in the County of Fermanagh, did assist in organising a public procession held in contravention of an order, dated 7th February, 1972 made by the Minister of Home Affairs for Northern Ireland, under Section 2(2) of the Public Order Act (Northern Ireland) 1951 as amended to the effect that the holding of all public processions in any public highway, road or street, in Northern Ireland is prohibited for the period commencing on 8th February, 1972 and ending on 8th February, 1973, contrary to Sections 2(3) and 5(2) of the said Act.

A warrant of commitment was issued on the 17th April 1972.
Yours faithfully,
T. D. H. McC. Elliott,
Resident Magistrate.
The Rt. Hon. Selwyn Lloyd, C.H., C.B.E., T.D., Q.C., M.P.,
Speaker of the House of Commons,
Westminster,
London, S.W.I.

ORAL ANSWERS TO QUESTIONS
  DEFENCE

    British Honduras
    Dr. Gilbertasked the Minister of State for Defence if he will give the strength of Her Majesty's Forces in British Honduras at 1st January, 1972, and at the latest available date; and if he will make a statement.
    The Minister of State for Defence (Lord Balniel): On 1st January, 1972, the garrison in British Honduras amounted to some 250 personnel. It has now been increased to about 600 personnel.
    Dr. Gilbert: Will the right hon. Gentleman confirm the report in today's Guardian that Britain agreed today to reduce its military forces in British Honduras and to allow the operation to be supervised by an observer of the Organisation of American States? If this is so, by what amount are the forces to be reduced and will the Minister give an assurance that there will be no more of the posturings of a couple of months ago which brought the British Government to the humiliating position of having to withdraw troops from one of their own dependencies under international supervision?
    Lord Balniel: I am not sure that I accept all the premises of the hon. Gentleman's supplementary question. Basically the broad issue is a matter for my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs. I confirm that the Government have offered to arrange for a representative of the OAS to visit British Honduras and see for himself that the suggestion which has been made that we have deployed large offensive forces in British Honduras is unfounded. We are hopeful, if this offer is accepted, that it will in due course be possible to return to diplomatic means of solving the issue.
    Mr. Scott-Hopkins:Will my right hon. Friend confirm that British Honduras is one of the best training areas and that there are training exercises going on and troops out there, my son amongst them?
    Lord Balniel: This is an area where infantry training is done, but the prime responsibility of the troops is of course the protection of the territorial integrity of British Honduras.

    Beira Patrol
    Mr. Juddasked the Minister of State for Defence how many men, ships and aircraft are now involved in the Beira Patrol.
    Mr. Biggs-Davisonasked the Minister of State for Defence whether he will make a statement about recent interceptions of ships by the Beira patrol; and what is its present strength of men-of-war and aircraft.
    The Under-Secretary of State for Defence for the Royal Navy (Mr. Peter Kirk):It is not the practice to give details of operational deployments, but the way the Beira patrol operates has varied to meet changing circumstances. The only interception this year was that of the Portuguese Tanker "Sao Mamede" on 17th March.
    Mr. Judd: Does the Minister agree that, contrary to the cynicism of some, the Beira patrol has achieved its objective in stopping the flow of oil through the Beira pipeline? Does he not agree that, if the Pearce Commission finds that the proposed settlement on Rhodesia is unacceptable to the majority of people in Rhodesia, we must now give a categorical

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    assurance that we will maintain the patrol, if necessary extend it and bring all possible pressure to bear on Portugal and South Africa to stop by other means sabotage of the sanctions policy?
    Mr. Kirk: I agree with the first part of the hon. Gentleman's supplementary question and have frequently said so. On the second part I refer to the hon. Gentleman to the answers given by my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs on 27th March.
    Mr. Fell:Although I understand that for security reasons the Minister cannot give the actual answer to my question, will he nevertheless promise that if he were able to answer "Nil" he would give us the answer, and will he be able to give that answer in about four or five months' time?
    Mr. Kirk:That also is probably a matter for my right hon. Friend the Secretary of State for Foreign and Common wealth Affairs.
    Mr. Fernyhough:Will the right hon. Gentleman assure us that as long as there are nations which are prepared to disregard the United Nations resolution on Rhodesia, the Beira patrol will be maintained to prevent blockade-breaking?
    Mr. Kirk:That is certainly a matter for my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs.
    Mr. Bruce-Gardyneasked the Minister of State for Defence what arrangements have been made for resiting the Royal Air Force Shackletons which have been operating in support of the Beira patrol following their withdrawal from the Malagasy Republic.
    Mr. Kirk:None, Sir. However, I am satisfied that the obligation which was imposed by Security Council Resolution 221 can still be fulfilled.
    Mr. Bruce-Gardyne: I am grateful for the first part of my hon. Friend's reply. Is he satisfied that, without this aerial support, the Beira patrol will be able satisfactorily to offer a proper salute to supplies of Rhodesian chrome and other materials, which British companies alone are not allowed to buy, as they pass out
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    of Beira towards United States ports and other destinations throughout the world?
    Sir G. Nabarro: A splendid supplementary question!
    Mr. Kirk: I am satisfied that the Beira patrol will be able to carry out the task assigned to it, which is to prevent oil entering the Port of Beira.

    Linesman
    Mr. Leslie Huckfieldasked the Minister of State for Defence whether he will list the contractors supplying both hardware and software for the Linesman system of air defence radar.
    The Under-Secretary of State for Defence for the Royal Air Force (Lord Lambton):The principal contractors supplying both hardware and software are the Plessey Co. Ltd., the Marconi Co. Ltd., and Elliott Bros. (London) Ltd.
    The principal contractors supplying hardware only are Plessey Radar Ltd., Plessey Telecommunications Ltd. and Ferranti Ltd.
    As the list of other contractors is rather long, I will, with permission, circulate it in the OFFICIAL REPORT.
    Mr. Huckfield:I am grateful for that reply. Is it not true that Plessey has been unable to complete the software part of the contract and has had to subcontract? Has not the cost of continuing this hardware contract with Plessey become so high that it would be cheaper to begin again with Honeywell or Univac and to use their hardware system throughout?
    Lord Lambton:I do not think Plessey is as unhappy with the state of affairs as is the hon. Gentleman, and it is going forward with the contract.
    Mr. Dalyell: What representations has the Department had from Univac?
    Lord Lambton: If the hon. Gentleman puts down a Question on that matter, I will answer it.
    Following is the information:
    Other contracts for hardware and engineering services, etc., have been placed with:

    Multiplex Designs Ltd., Sidcup
    Mr. Bishopasked the Minister of State for Defence what action has been taken on the complaint made by the Technical and Supervisory Section of the Amalgamated Union of Engineering workers, on 7th February, 1972, of a breach of the Fair Wages Resolution by Multiplex Designs Limited, Marlow House, Station Road, Sidcup, Kent.
    Mr. Ashtonasked the Minister of State for Defence how many orders have been placed with Multiplex Designs Limited, Marlow House, Station Road, Sidcup, Kent, since the complaint was made by the Technical and Supervisory Section of the Amalgamated Union of Engineering Workers of breach of the Fair Wages Resolution.
    Mr. Lamondasked the Minister of State for Defence what reply was sent to the complaint made by the Technical and Supervisory Section of the Amalgamated Union of Engineering Workers to the Ministry of Defence regarding the breach of the Fair Wages Resolution by Multiplex Designs Limited, Marlow House, Station Road, Sidcup, Kent.
    Mr. Boothasked the Minister of State for Defence whether it is his policy to place orders with Multiplex Designs Limited, Marlow House, Station Road, Sidcup, Kent, pending a decision on the complaint, made by the Technical and Supervisory Section of the Amalgamated Union of Engineering Workers, of breach of the Fair Wages Resolution.
    The Minister of State for Defence Procurement (Mr. Ian Gilmour): Multiplex Designs Limited was invited to comment on the complaints of the Amalgamated Union of Engineering Workers and its explanations were conveyed to the union. The AUEW said that it was not satisfied with the firm's comments. The matter has therefore been
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    referred to the Department of Employment, as provided for in the Fair Wages Resolution.
    No new orders have been placed with the firm since receipt of the complaint. However, since at this stage a breach of the Fair Wages Resolution has not been established, there are no grounds for withholding orders.
    Mr. Bishop:Is the hon. Gentleman aware that my hon. Friends and I are raising this matter with the knowledge of the hon. Member who represents the constituency concerned and as members of the union affected? Is he further aware that the fair wages clause which is part of this Ministry of Defence contract involves items such as holiday entitlement, the payment of fair wages agreed nationally and locally, and also trade union membership? Has not procrastination by the Ministry worsened the situation, which is now being dealt with rather late?
    Mr. Gilmour:I am aware of the factors mentioned by the hon. Gentleman, but there has been no procrastination by my Ministry. It is best not to comment further until the matter is resolved.
    Mr. Ashton: Is the hon. Gentleman aware that clause 4 of the Fair Wages Resolution provides that workpeople shall have freedom to join a union? Does he appreciate that at this firm the first worker who sought to do so was sacked and that when eight more tried to follow his example they too were sacked? What does the hon. Gentleman intend to do about the situation in regard to defence contracts?
    Mr. Gilmour:I am aware about the first matter mentioned by the hon. Gentleman, but the other matters are in dispute. I prefer not to comment until the facts have definitely been established by the Department of Employment.
    Mr. Lamond: How can the hon. Gentleman say so smoothly in his answer that there has been no procrastination in his Department? This matter was raised with him on 4th February and four weeks later, following a reminder from the AUEW, a letter was written to the firm. But the matter has still not been resolved. The Minister told us today that it is now the concern of the Industrial Arbitration Board, which I sincerely hope

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    has been asked to examine the matter because there are members of the union who have been unemployed now for four months. [Hon. Members: "Speech."] Is this not in marked contrast to the Government's 24-hour ultimatum to the railway workers? It would appear that when our memebers are concerned a period of four months is not considered to be procrastination.
    Mr. Gilmour: I was pleased to hear the hon. Gentleman say that he thought my answer was smooth. I do not agree with him that there has been any procrastination. We had to identify the complaint, and when something is referred to the Department of Employment it is as well that both sides should be heard and the matter properly investigated.
    Mr. Booth: Since 10 weeks have elapsed since an official complaint of breach of the Fair Wages Resolution was notified to the Ministry of Defence and the Department of Employment, and since men have been put out of work as a result of this firm's activities, will the hon. Gentleman give an undertaking that no more orders will be placed with the firm until the complaint has been properly investigated? Should not this matter have been referred to the Industrial Arbitration Board? Since this has not happened, the Minister surely cannot say that he has taken all the proper steps which should have been taken in such a serious breach as this. How can the hon. Gentleman say that a breach has not been established when the firm is paying less than the minimum established two years ago for doing the job?
    Mr. Gilmour: I repeat that it has not yet been established that a breach has taken place. If the facts as outlined by the union are true, a breach has taken place. But my right hon. Friend the Secretary of State for Employment will first conciliate, and if that fails he will refer the matter to the Industrial Arbitration Board. In the meantime no new orders will be placed with the firm.

    Northern Ireland
    Mr. Duffyasked the Minister of State for Defence what plans he now has to make an official visit to Northern Ireland; and if he will make a statement.
    Lord Balniel: I plan to visit the Army in Northern Ireland again next month.
    Mr. Duffy:In view of the recent statement by the Prime Minister and the welcome desire to look to the future rather than the past, and bearing in mind the recent fresh and striking departure in policy, will not the Minister agree that a vital condition for a sane solution of the Whitelaw mission is a low-key approach by troops in future and preferably a withdrawal or growing detachment from sensitive areas? Does the right hon. Gentleman acknowledge that an early visit by him to Northern Ireland might be interpreted in some quarters—and one hopes in all quarters—as a recognition by him of these facts and as an earnest of his own good and positive intentions?
    Lord Balniel:I visit the Army in Northern Ireland when I consider it to be in the public interest to do so, but I regard it as important to restore and maintain law and order and to avoid inter-communal stress and disorder. At the same time the security forces are aware of the extreme importance of encouraging this in the community and are working with great courage to restore peace and to persuade those who seek to further violence to cease this mode of operation. This is taken into account in the orders available to the Army.
    Mr. Stratton Mills:Before my hon. Friend carries out his visit, could he investigate a report that Martin Meehan, the I.R.A. leader, was observed by the Army entering a house in the Marrowbone area of Belfast on Saturday, but the Army was unable to get clearance in time to apprehend him?
    Lord Balniel: I will look into the matter raised by my hon. Friend.
    Mr. Stallard: Will the hon. Gentleman accept that the aim of most of us who have an interest in the Six Counties is to create an atmosphere in which peace can be restored? Will he on his visit have discussions with Army commanders in the Six Counties to see whether it is possible to withdraw troops from Catholic areas to relieve some of the pressure in those areas in an attempt to restore peace there?
    Lord Balniel:I agree that it is the wish of most hon. Members in this House that peace should be restored, but we have first to recognise that we cannot leave areas subject to the tender mercies of gunmen. We cannot have areas in which law and order does not exist and the rules are laid down by gunmen. That is quite unacceptable.
    Mr. Goodhart:Is my hon. Friend aware that many of us are disturbed that many IRA members seem to be able to visit the Bogside and Creggan with impunity while my right hon. Friend and other British Ministers have not been able to enter that area? Is he further aware that although we recognise the need at times for the Armed Forces in Northern Ireland to maintain a low profile, many of us are disturbed at the continuing tolerance and, indeed, subsidisation of no-go areas?
    Lord Balniel:The Army will continue to act, as appropriate in its opinion and in the opinion of the responsible Minister, to counter terrorism with determination and as actively and effectively as it can.
    Mr. Croninasked the Minister of State for Defence if he will make a statement on the progress of the operations of the British Army in Ulster.
    Lord Balniel: The Army continues energetically to counter violence and terrorism.
    Mr. Cronin:Will the noble Lord reassure the House that no intensive operations will take place in the no-go areas until Roman Catholic support for the IRA has been greatly reduced by the political initiative? Will he also bear in mind that no circumstances, or hardly any circumstances, should ever again justify 13 people being shot dead in a British city.
    Lord Balniel: It would be wrong for me to anticipate operational moves made by the Army. However, as I have already said, the broad purpose of the Army has not changed. It is to restore law and order and to prevent inter-communal strife, which the Army will continue to do. Concerning the events in Londonderry, I have nothing to add to the report made by the Lord Chief Justice.
    Mr. McMaster:In view of the continued shootings and bombings in Northern Ireland and, most recently, the horrible murder of Corporal James Elliott and the use of his body as a booby trap, will the Minister urge the Army to do all it can to tighten control on the Border between the North and South of Ireland?
    Lord Balniel:The murder to which my hon. Friend referred was peculiarly squalid and aroused the revulsion, I should think, of all humane persons. I have explained on several occasions that whereas there are some steps we can effectively take to hinder the movement of terrorists across the Border, the complete closure of the Border would demand large forces and that is not regarded as practicable.
    Mr. Hattersley: Reverting to the supplementary question of my hon. Friend the Member for Loughborough (Mr. Cronin), may I remind the right hon. Gentleman of paragraphs 33 and 34 of the report of the Lord Chief Justice which imply that military operations must take into account the importance of ensuring the safety of civilians, many of them innocent civilians, who might be caught in crossfire if precipitate action were taken? May we have the Minister's assurance that future military operations will take account of that suggestion?
    Lord Balniel: They always have.
    Mr. Kilfedder:Will my right hon. Friend tell the House when he expects the destruction of the bestial IRA terrorists who are waging this terrible campaign in Northern Ireland? Will he also explain how the Army will reply to IRA gunfire when it is directed from behind women and children?
    Lord Balniel: It is extraordinarily unwise for any Minister, when the Army is engaged in military operations, to forecast a date when those operations will be concluded. I am certain that it is the wish of the vast majority of the population in Northern Ireland that terrorism, gunfire, murder and all the horrors which exist should be ended at the earliest possible moment. The whole House is aware of the immense difficulties facing the Army in dealing with urban guerrilla warfare. I think the

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    House recognises that the Army has conducted its operations with skill and restraint.
    Mr. Simon Mahon:Is the Minister aware that Catholics in both this country and Ireland hate and deplore the violence just as much as he and other hon. Members? Is he further aware that it is only by the cessation of these atrocities and violence by the IRA that we can have a just and lasting peace? We all understand that. However, may I ask the right hon. Gentleman to take notice of the plea made by my hon. Friend and other hon. Members to keep Army activity, in view of what happened in Derry, in the lowest possible key bearing in mind the safety of British troops?
    Lord Balniel: I will, of course, take account of the point which the hon. Gentleman has made. However, he will appreciate that there still remains a considerable volume of violence in Northern Ireland. For instance, in the last five days alone there have been 200 shooting incidents, not just 200 rounds fired. It depends not only on the military but, as the hon. Member said, upon the community at large to bring this considerable volume of violence to an end.
    Mr. McMasterasked the Minister of State for Defence what urban areas in Northern Ireland are not being regularly patrolled by foot and mobile units, respectively.
    Lord Balniel:Apart from the Creggan and Bogside areas of Londonderry there are no areas in Northern Ireland which are not regularly patrolled by foot or mobile units as and when the need arises.
    Mr. McMaster: Will my right hon. Friend make a careful study of the opening paragraph of the Widgery Report which sets out the failure of the policy over the past two years in the Creggan and the Bogside to lead to the terrorists giving up their activities? As murders, shooting in the back of the knee, tarring and feathering, and so on, are continuing in these areas, will my right hon. Friend ensure that the rule of law is restored by the Army since the police, having been disarmed as a result of the recommendations of the Hunt Report and the intervention of Sir Arthur Young, are unable to go into these areas to do it themselves?
    Lord Balniel:The comparatively low level of activity in the Creggan and Bogside, which is of long standing, is in no way a new development. However, it reflects the desire of the Army to co-operate as far as possible with those who are working to reduce violence in those areas. We are anxious not to frustrate the chances of those who, with immense courage, are trying to eliminate violence in those areas.
    Mr. Paget:How does one eliminate violence with the I.R.A. when it is precisely dedicated to it? How on earth does one restore order in Northern Ireland while, with our tacit consent, fortified areas are maintained, like Saracen castles, from which it operates?
    Lord Balniel:The Army will take what steps are necessary to go after the gunmen and terrorists. I do not believe that terrorism of this kind can be dealt with solely by barricades and bullets. It must have the co-operation of the mass of the population concerned.
    Mr. Winterton:Will my right hon. Friend tell the House what steps the Army is taking to prevent terrorist leaders making official visits to these no-go areas in Northern Ireland?
    Lord Balniel: I have already answered that question.
    Mr. Hattersley:May I revert to an earlier question? I am sure the Minister shares my view of the importance of safeguarding the interests and lives of the innocent civilian population. In a previous answer, the Minister said categorically that the Army had always taken that view. Paragraph 34 of the Widgery Report says categorically that to these people the dangers were under-estimated. I have no wish to recriminate, but may we be assured that in future operations the interests of the civilian population will be regarded as of paramount importance?
    Lord Balniel:The interests of the civilian population are of the utmost importance. Equally the report pointed out the fact that the casualties would not have occurred if that illegal march had not taken place. One is equally bound to say that those who participate in illegal marches which are likely to result in violence are taking a very grave risk upon themselves.
    Sir G. Nabarroasked the Minister of State for Defence how many British troops were in Ulster on 15thApril, 1972, or the most recent convenient date, and how this figure compares with 1st January, 1970, 1st January, 1971, and 1st January, 1972.
    The Under-Secretary of State for Defence for the Army (Mr. Geoffrey Johnson Smith): The total number of Regular troops amounted to some 8,100 on 1st January, 1970, 7,600 on 1st January, 1971, 14,300 on 1st January, 1972, and 14,600 on 1st April, 1972. In addition the total strength of the Ulster Defence Regiment amounted to some 4,000 on 1st January, 1971, 6,700 on 1st January, 1972, and 8,200 on 1st April, 1972.
    Sir G. Nabarro:Having regard to the increase in the number of Armed Forces in Northern Ireland and the continued depletion of BAOR, would my hon. Friend and his colleagues at the Ministry of Defence reconsider their earlier reply to me, refusing to raise six additional infantry battalions by bringing up to battalion strength those famous regiments of the line at present confined to company strength?
    Mr. Johnson Smith: I well appreciate my hon. Friend's enthusiasm for the Army. I hope he will not think me churlish if I give him a similar reply and reject his request. After all, we are embarked on expanding four of the six representative companies and raising four battalions of infantry to help in meeting the demands placed on the Army in meeting the situation in Northern Ireland. Although units go from BAOR to Northern Ireland, we ought to keep this in perspective. Out of a total of 55,000 troops, approximately 5,000 are redeployed from BAOR to Northern Ireland in an infantry rôle.
    Mr. Ridsdale:Is there not a considerable over-stretch at present in the infantry capability of the Army? Will my hon. Friend consider raising these battalions to help, among other things, the unemployment problem?
    Mr. Johnson Smith: I do not think we ought to look to recruiting to solve the unemployment problem. People join the Army because they want to, and that
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    is the best motivation; not because they are unemployed. But we have tried and are trying to meet the views of my hon. Friend, as I say, by expanding four new battalions of infantry.

    Ghanaian Frigate
    Sir G. Nabarroasked the Minister of State for Defence what is the outcome of his survey of the ex-Ghanaian frigate lying in the Clyde; and whether he will now make a statement on her disposal.
    Mr. Kirk:Now that arrangements to transfer ownership of the ship to Her Majesty's Government have been completed, she has been towed from the Clyde to Her Majesty's Dockyard, Portsmouth, for a survey to establish her state and value. A decision on her future will be taken when the results of the survey are available in a few months' time.
    Sir G. Nabarro:Does my hon. Friend realise that it is now five years since I began asking Questions about this ship—this gin-palace, as it has been called—provided by British funds at the same time as the Ghanaian double bed for Nkrumah? Could we not have an expeditious settlement of this matter to prevent British funds being tied up unnecessarily in this vessel?
    Mr. Kirk: I am not certain which Minister is responsible for double beds. Certainly I am not. Since this ship has come into the ownership of Her Majesty's Government we are moving as fast as possible to establish what her condition is.

    Tenanted Property (Compensation)
    Mr. Woodnuttasked the Minister of State for Defence if he will increase the amount of compensation offered to Mr. Sidney E. Melleney in respect of property at 80 Percy Road, Hampton, until lately occupied by the Army, in view of the condition in which the property was left on the termination of the tenancy.
    Mr. G. Johnson Smith: No, Sir. The offer has already been increased since I last wrote to my hon. Friend about this case and there are no grounds to justify any further increase. The condition of the property when we terminated the tenancy has been fully taken into account. In the

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    interest of reaching a settlement Mr. Melleney has already received a generous offer, which he has rejected.
    Mr. Woodnutt: Does not my hon. Friend realise that this appears to be a case where the officers responsible refuse to admit that the NCO and his wife who occupied the property left it in a dirty, disgraceful and neglected condition? Is my hon. Friend aware that the claim is a modest £309? As the Army has already lifted its original bid by £75 twice, which shows second and third thoughts, whatever the rights and wrongs of the case, would not it be cheaper to meet the claim in full?
    Mr. Johnson Smith: As my hon. Friend has said, we have made serious efforts to meet the demands of his constituent. Unless there are fresh arguments that my hon. Friend or his constituent can adduce, we must let the third offer stand. I think we have been very fair to him.
    Mr. Woodnutt: In view of the unsatisfactory nature of those replies. Mr. Speaker, I beg to give notice that I shall seek an early opportunity to raise the matter on the Adjournment.

    Air Training Corps
    Mr. Adleyasked the Minister of State for Defence what proposals he has to reorganise the Air Training Corps.
    Lord Lambton:There are no plans for any major reorganisation of the Air Training Corps, which is providing a most valuable service. However, as a contribution to the continued search for economy, it is proposed to reduce the number of wing headquarters by selected amalgamations. This will not involve any reduction in the number of squadrons or facilities which are available to cadets.
    Mr. Adley: I am grateful to my hon. Friend for that reply. Is he aware of the growing disquiet in Bristol at rumours that the unit based there is to be moved? Can he assure us that a city of the size of Bristol will continue to be a base headquarters for one of these units?
    Lord Lambton: The Bristol wing is the smallest in the South and West of England Region. The Gloucester wing is the smallest adjacent wing with which it could be amalgamated. This amalgama-
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    tion will make practically no difference to the life of cadets.

    Women (Employment)
    Mr. William Hamiltonasked the Minister of State for Defence what is the highest post held in his Department by a woman; how many women are in posts higher than that of assistant secretary; and from which posts are women excluded.
    Lord Balniel: The highest post held by a woman in the Ministry of Defence is at assistant secretary level. The type of posts from which women have been excluded in the past, and the reasons, were given in my reply to the hon. Member for Newark (Mr. Bishop) on 10th March, 1971.—[Vol. 813, c. 128–30.]
    Mr. Hamilton: Can the right hon. Gentleman say how many of the categories from which women were excluded, according to an answer given to my hon. Friend the Member for Wood Green (Mrs. Joyce Butler) on 22nd February last year, where it was indicated that 12 categories of work within the Defence Department excluded women, including civilian instructors, chief instructors reproduction class grade A, whatever they may be, are now open to women and how many of the assistant secretaries to whom the right hon. Gentleman has referred are women?
    Lord Balniel:I cannot answer that point specifically. I can assure the hon. Gentleman that women are only excluded from certain posts in the Ministry of Defence if by generally accepted standards it is impractical for them to carry out the work. The House will be gratified to learn that I am announcing today by a Written Answer the pay award for the Services. This carries equal pay for women a further step forward.
    Mr. Selwyn Gummer: Does my right hon. Friend agree that there is disquiet at the lead being given by Government Departments in the equal employment of women? Will he look at this matter more carefully, in general if not in specifics, to see that women are not excluded from any jobs other than those which they are unable to carry out through physical incapacity?
    Lord Balniel:It is not only a matter of physical incapacity. The Government are anxious that women should be employed in all categories in which it is appropriate that they should be employed. However my hon. Friend will appreciate that there are certain environments in defence where it is not appropriate that women should be employed.

    Space Research
    Mr. Dalyellasked the Minister of State for Defence what representations he has had from the British Aircraft Corporation on the financing of the military requirement, in relation to a space tug and sortie module; and if he will make a statement.
    Mr. Ian Gilmour: None, Sir.
    Mr. Dalyell:Either the Department is quibbling or it is not telling the truth. The Department knows that Mr. Handel Davies of the British Aircraft Corporation has made representations. What percentage of the £250,000 that has been earmarked for the study is likely to go to the British Aircraft Corporation?
    Mr. Gilmour: The Department is not quibbling and it is not not telling the truth. The proportion of any money devoted to studies awaits a Cabinet decision on these matters.
    Mr. Dalyell:On a point of order, Mr. Speaker. In view of the unsatisfactory nature of those replies, I beg to give notice that I shall seek an early opportunity to raise the matter on the Adjournment.

    Gurkhas
    Mr. Scott-Hopkinsasked the Minister of State for Defence whether he will assign battalions of the Gurkha Brigade to duty with the British Army of the Rhine.
    Mr. G. Johnson Smith: No, Sir.
    Mr. Scott-Hopkins: Will my hon. Friend clarify the position of the Gurkha battalion which is over here? If those troops are excluded from serving in BAOR because of treaty obligations, will my hon. Friend do his best to renegotiate them? Is he aware that a great deal of extra recruiting could be done from Nepal and that it would be a good idea if we could increase the Gurkha Brigade
    736
    by having an extra battalion since that could release our troops to serve in Northern Ireland, for instance?
    Mr. Johnson Smith:The Gurkhas are deployed in the United Kingdom to help relieve the strain on British-based units. They are most helpful in that respect. As for their serving in Germany, the ideal tour is four years. So long a tour by a Gurkha unit would entail a considerable number of problems, including serious logistic ones. As regards our commitments elsewhere, the number of Gurkha battalions is five. I do not think that our commitments outside Europe, certainly in the Far East, call for more.
    Mr. Hattersley: Will the hon. Gentleman arrange for us to have an early statement about the status of the agreement between ourselves and Nepal, about which it is readily implied there remains a good deal of ambiguity? Will he confirm that the Gurkha battalion here is doing more than ceremonial duties and that while we know the Gurkhas perform them with spectacular distinction, many people think they are best at something other than that?
    Mr. Johnson Smith: They have been doing something more besides. A good example is the School of Infantry, where they have been very valuable in providing an "enemy", which helps the training of other infantry units. As for the first part of the hon. Gentleman's question, that is a matter for my right hon. Friend the Foreign and Commonwealth Secretary.

    Malta
    Mr. Wallasked the Minister of State for Defence if he will make a statement on the future of British forces in Malta.
    Lord Balniel: We plan to deploy to Malta broadly the same pattern of forces as before the withdrawal started. Detailed timings will depend on operational and logistic considerations; but we expect the bulk of our forces and their families to have returned by September.
    Mr. Wall: As Mr. Mintoff originally asked for £30 million and finally received only about half, what guarantee has my right hon. Friend that the new defence agreement will not be denounced in the next year or two as the last one was?
    Lord Balniel: Only the guarantee that when two sovereign States entered into a treaty arrangement that treaty will be adhered to.
    nMr. Driberg: Since the cost of withdrawal and return has been stated officially in another place to have been £6 million, and since that is a futile waste of money, would not it have saved time and trouble to have added that sum to the amount provided for Malta under the agreement?
    Lord Balniel: I am sure the hon. Gentleman would be the last person to insist that British forces should have remained in Malta against the wishes of the Maltese Government.

    Jaguar Aircraft
    Mr. Warrenasked the Minister of State for Defence what representations he has received from the French Government regarding alterations to the numbers of Anglo-French Jaguar aircraft required by the French Navy; and if he will give an assurance that there will be no change in the volume and value of the work allocated to Great Britain in this programme.
    Mr. Ian Gilmour: The French Government have made no such representations.
    Mr. Warren: Has my hon. Friend's attention been drawn to the widespread publicity given in the French and British technical Press to impending cancellations of this French naval order? In view of the disquiet which this has aroused, will he approach the French Government and ask them to make a formal public declaration of their continued support for the order?
    Mr. Gilmour: There is no doubt about the French Government's general support for the Jaguar order. However, the exact number they require is a matter for them. I remind my hon. Friend that production arrangements for the Jaguar are aimed at ensuring that work is shared in proportion to requirements. If, therefore, French requirements were significantly reduced, steps would be taken to correct the balance of work.
    Mr. Dalyell: How is the Department now defining the word "representa-
    738
    tions"? Is it excluding such things as letters and talks with officials?
    Mr. Gilmour: No. My hon. Friend asked me what representations had been received from the French Government and I replied "None".
    Rear-Admiral Morgan-Giles: Is it not ironic that British factories should be manufacturing fixed-wing aircraft for the French Navy, but none for the Royal Navy?
    Mr. Gilmour: I do not think so, no.

    RAF Aircraft (Accidents)
    Mr. Michael McNair-Wilsonasked the Minister of State for Defence what was the accident rate per 100,000 flying hours for Royal Air Force aircraft between 1962 and 1971.
    Lord Lambton: It is not the practice to publish information of this kind.
    Mr. McNair-Wilson: Is my hon. Friend aware that between 1962 and 1971 529 military aircraft were destroyed or severely damaged and that 440 RAF aircrew lost their lives? Does he consider that the accident rate is now of such an order that continuing official secrecy is doing more harm than frankness? Will he also tell the House whether flight data recorders are being installed in front line military aicraft.
    Lord Lambton: I think my hon. Friend is being a little pessimistic. It is true that there was a small upward movement last year, but over the years there has been a downward trend in accidents. No Defence Minister could possibly be satisfied as long as there are accidents. Everything possible is being done to minimise them. My hon. Friend's point about flight data recorders is another matter.

    French Trawler (Arrest)
    Mr. George Cunninghamasked the Minister of State for Defence whether the Government of France obtained the agreement of the British Government before the French naval vessel "L' Agile" entered the Port of Fishguard, following the arrest of the French trawler "Athos" for illegal fishing in British waters.
    Mr. Kirk: Long-standing arrangements exist between the United Kingdom and

    739
    France under which agreement at governmental level is not required for visits of naval vessels where there are no ceremonial or other special features. On the United Kingdom side the detailed operation of the arrangements is the responsibility of the Ministry of Defence.
    Mr. Cunningham: Is it not a highly unusual practice for a foreign State to send one of its warships into a British port following the arrest of a merchant vessel and the trial of its captain in that British port? Has the Under-Secretary observed that the captain of the French ship said that, though unusual, this practice might have to become normal? Will he arrange with the Foreign Office that the French Government are told that whether it becomes normal will be a decision of the British Government and not of the French Government?
    Mr. Kirk: The drill for fishery protection vessels like "L'Agile" is for us to be given an outline programme in advance. We are supposed to be given 24 hours notice of a call. This call was rather unusual and unscheduled. [Interruption.] I hope that I may be allowed to reply without interruption. This was an unusual and unscheduled call. We are discussing with the French authorities the circumstances in which notification might be given in future. It is quite useful to have them there as they make very good expert witnesses before the court.

    V/STOL Aircraft
    Rear-Admiral Morgan-Gilesasked the Minister of State for Defence when he expects to complete his study of the relative effectiveness of designing a new V/STOL aircraft for use at sea, as compared with development of the capability of the existing Harrier.
    Mr. Wallasked the Minister of State for Defence if he will make a statement on the development of a super-Harrier for naval service.
    Mr. Ian Gilmour: I have nothing to add to what my hon. Friend the Undersecretary of State for Defence for the Royal Navy said on 10th April.—[Vol. 834, c. 866–7.]
    Rear-Admiral Morgan-Giles: Does my hon. Friend really appreciate the urgency that attaches to solving this question?
    740
    Does he also appreciate that without aircraft of this type and ships from which to fly them the Royal Navy will be quite unable to carry out its traditional and foremost task of protecting our overseas trade routes?
    Mr. Gilmour: We are well aware of the urgency of this matter but, as my hon. and gallant Friend knows, there are a number of conflicting matters which have to be taken into account, and conflicting projects, and there is no point in rushing this matter. It is very important to get it right.
    Mr. Wall: Will my hon. Friend explain why the makers of this aircraft maintain that it is suitable for maritime purposes and the Government maintain the opposite? What modifications need to be made to the existing Harrier, and how long would they take to make it suitable for naval operation?
    Mr. Gilmour: What we have said all along is that the operational capability of the Harrier—that is, its weapons and other systems—must be developed if it is to perform effectively as a fighting aircraft in a maritime rôle. As my hon. Friend knows, we are considering whether the present Harrier should be given a better performance, whether another aircraft should be designed or whether either aircraft is needed for the cruiser.
    Rear-Admiral Morgan-Giles: In view of the continually unsatisfactory nature of replies on this subject, I beg to give notice that I shall seek an early opportunity of raising the matter on the Adjournment.

  PRESIDENT POMPIDOU (MEETING)
  Mr. Skinnerasked the Prime Minister what plans he has for a further meeting with President Pompidou.
  The Secretary of State for the Home Department (Mr. Reginald Maudling): I have been asked to reply.
  My right hon. Friend looks forward to meeting the President at the European Summit Conference in Paris in October.
  Mr. Skinner: When the Prime Minister goes to meet the European board of directors in October, will the Home Secretary have a few words with the

  741
  French police about disembarkation difficulties, and, perhaps, consult my hon. Friend the Member for Feltham (Mr. Russell Kerr)? I am sure that the right hon. Gentleman does not wish to see the French use the guillotine.
  Mr. Maudling: I have enough problems, in my other capacity, about the police in this country. I should have thought on the whole that people who visit other countries should expect to conform to the laws of those countries.
  Mr. Maclennan: Before the Prime Minister goes to the summit conference, at which it has been given out that he intends to raise the subject of the further democratisation of European institutions, will he ensure that the House has an opportunity to debate and to consider in detail the Government's proposals for the democratisation of the European Parliament and its reactions to the Vedel Commission's report on the strengthening of the powers of the European Parliament?
  Mr. Maudling: Matters for debate in the House are for my right hon. Friend the Leader of the House. I am sure he will take note of the hon. Gentleman's suggestion.

  SPECIAL SCHOOLS (HANDICAPPED CHILDREN)
  Mr. William Hamiltonasked the Prime Minister if he will take steps to improve the co-ordination between the Department of Education and Science and the Scottish Office in respect of the placing of handicapped children in special schools.
  Mr. Maudling: I have been asked to reply.
  The Education Departments already work very closely together on this and all other matters of common interest.
  Mr. Hamilton: Does the right hon. Gentleman regard it as satisfactory that English education authorities, particularly in the North West, are sending their problem children to a private fee-paying school in my constituency at a cost to their ratepayers of £800 per year per child? It is a private school which has not been registered by the Scottish Education Department. Indeed, the
  742
  English Minister advised these English education authorities to withdraw their children because, on the basis of a report from the Scottish Education Department, the facilities at that school were considered unsatisfactory. Does not this show that there is a considerable lack of co-ordination and knowledge about the scale of the problem itself?
  Mr. Maudling: I do not think so. I have looked with care at this particular school. The position is not a difference in practice but a difference in law, in that in the English situation the Secretary of State's permission is necessary but that is not so in Scotland since the Act of 1969 passed by the previous Administration.
  Mr. Dormand: Is the right hon. Gentleman aware that the fundamental cause of the continuing troubles in this area of education is the basic lack of adequate provision for children with all types of handicap and that something ought to be done about it very quickly? Will the right hon. Gentleman advise his right hon. Friend the Secretary of State for Education and Science that she ought to get her priorities right and spend much more on this aspect of education and not, for example, give £2 million to the direct grant schools?
  Mr. Maudling: This problem is well recognised on both sides of the House. I think the hon. Gentleman will find that there has been an encouraging increase recently in the provision made by local education authorities. Clearly, however, a good deal more remains to be done.

  CBI AND TUC (TALKS)
  Mr. Duffyasked the Prime Minister what plans he now has to have joint talks with the Confederation of British Industry and the Trades Union Congress.
  Mr. Maudling: I have been asked to reply.
  This will be for consideration after the next round of talks which my right hon. Friend will be holding with the CBI and the TUC separately. He will be meeting representatives of the TUC on 26th April.
  Mr. Duffy: Does the right hon. Gentleman agree that in the absence of a formal prices and incomes policy the Government, in their attempt to check inflation, are heavily dependent on the good will and co-operation on such bodies of collective bargaining as the TUC and the CBI? In view of the current application and consequences of past Tory legislation, does he think that the Government are entitled to expect—and, what is much less likely, to get—such good will and co-operation from the TUC?
  Mr. Maudling: I would have thought that everyone in Britain had a common interest in restraining inflation. Certainly the CBI has made a considerable effort with its price restraint policy. It is only fair to say that that policy of price restraint cannot be expected to continue unless restraint is also shown in wage demands.
  Mr. Kinsey: Has my right hon. Friend's attention been drawn to the statement on the tape by Sir Sydney Greene that the trade unions are law-abiding organisations which will have to work to find a formula? Does he agree that this is the most encouraging statement we have had, that it underlines the view which hon. Members on this side of the House have expressed and that it should encourage him to proceed with the suggestion that has been put to him?
  Mr. Maudling: I saw that statement on the tape today and I was glad to see it.
  Mr. Michael Foot: Returning to the Question, does not the right hon. Gentleman think that the most urgent matter for discussion with the CBI and the TUC, separately or together, is the still appallingly high unemployment figures published today? Is the right hon. Gentleman aware that, despite a most welcome slight reduction in the total, the most serious aspect of the figures is the fact that there is an actual increase in the numbers of wholly unemployed?
  Does he agree that it would be absolutely shocking, because these figures have persisted for so long, if we were to appear to be becoming familiar with and accepting them? These figures are intolerable. When do the Government propose to tell the House and the people what
  744
  effective measures they intend to take to deal with this problem?
  Mr. Maudling: The extensive changes made in the Budget and the vast amount of additional demand put into the economy will be very effective indeed. Clearly there is a close relationship between the level of unemployment and the level of inflation, as I have said in earlier answers.

  EUROPEAN INSTITUTIONS (OFFICES)
  Mr. St John-Stevasasked the Prime Minister whether he will make a statement of Government policy on the placing in London of the offices of European institutions.
  Mr. Maudling: I have been asked to reply.
  The siting of the offices of European institutions is a matter for agreement between the participating States, but in appropriate cases we should be glad to consider locations in London or elsewhere in this country.
  Mr. St. John-Stevas: I thank my right hon. Friend for that reply. As the only European institution which has a secretariat in London is the WEU, could not we invite a European institution to come here and would it not be appropriate to offer London as the permanent home for the European Parliament, England being the mother of Parliaments?
  Mr. Maudling: There is a lot in what my hon. Friend says. These are, of course, matters for mutual decision by all members of the organisation. However, we are very happy indeed to see European organisations established here and I assure my hon. Friend that we miss no opportunity of putting the suggestion forward.
  Mr. David Steel: Will the Deputy Prime Minister bear in mind that while we welcome the basing of European institutions in this country, the last place in which they should be established is London, in accordance with the Government's regional policies? Will he consider Edinburgh and points thereabouts as a suitable area?
  Mr. Maudling: I rather anticipated that supplementary question, as my main

  745
  answer showed. I agree that it would be fine if they wished to establish themselves in Scotland or other parts of the country. However, there are certain institutions which can come only to London and which, for technical reasons, must be alongside certain London institutions.
  Mr. Kinnock: If the worst should happen and we go into Europe, will the right hon. Gentleman consider using his influence to ensure that if institutions come to Britain they will go to South Wales—[Interruption.]—they will find there the best in Western civilisation—because of the regional policies which we shall be forced to accommodate if we become members of the EEC? Is the right hon. Gentleman aware, in other words, that this will be the only chance we shall have of bringing further jobs to South Wales?
  Mr. Maudling: I cannot accept the premise on which the second part of the hon. Gentleman's supplementary question was based, but if people like to establish themselves in South Wales, with all the charms and attractions of that area, I shall be delighted.

  INDUSTRIAL DEVELOPMENT (DEPARTMENTAL CO-ORDINATION)
  Mr. Joel Barnettasked the Prime Minister if he is satisfied with the co-ordination between the Departments of Trade and Industry and of Employment in respect of industrial development.
  Mr. Maudling: I have been asked to reply.
  Yes, Sir.
  Mr. Barnett: Because of the willingness of the Government to admit that they must reverse their policies, and because previous answers given by the Prime Minister have left companies which had been intending to go into development areas in doubt, may I ask the right hon. Gentleman to make it absolutely clear that even if they make losses in the initial years they will still receive the cash grants which the Government are now introducing?
  Mr. Maudling: That will have to be considered in the debate on the legisla-
  746
  tion authorising the introduction of that change.
  Mr. Redmond: Is my right hon. Friend aware that the industrial development committee of Bolton has passed a special resolution thanking the Secretary of State for Trade and Industry for giving us intermediate area status? Is he further aware that already there are appearances of a shortage of labour in certain industries and skills, in spite of the appalling general total of unemployment in the area?
  Mr. Maudling: I am glad to hear that from my hon. Friend.
  Mr. Charles R. Morris: Will the right hon. Gentleman draw the attention of the Prime Minister to the fact that a host of factories in my constituency and in the greater Manchester area generally have been subject to industrial dispute for a period of many weeks, that as a consequence the families of many of my constituents are suffering considerably and that there has been an absence of co-ordination between the Department of Employment and the Department of Trade and Industry in regard to this dispute? Will he urge the Prime Minister and the Secretary of State for Employment to take action to conciliate in this dispute?
  Mr. Maudling: I have noticed, as we all have, some of these actions in the Manchester area. We have also noticed from where they are being stimulated—[Interruption.] We all share the view that action of this type bears heavily on the families of those concerned.

  MINISTER FOR INDUSTRIAL DEVELOPMENT
  Mr. Carterasked the Prime Minister if he will make the Minister for Industrial Development a member of his Cabinet.
  Mr. Maudling: I have been asked to reply.
  No, Sir. My right hon. Friend the Minister for Industrial Development has been appointed to work under the broad direction of my right hon. Friend the Secretary of State for Trade and Industry, who is the member of the Cabinet responsible for industrial matters.
  Mr. Carter: In view of the unemployment figures which, when seasonally adjusted, show an actual increase, may I ask the right hon. Gentleman whether he does not feel that the new Minister should be given powers and status sufficient to deal with what is now very clearly a long-term problem?
  Mr. Maudling: The unemployment figures show an absolute decline though a seasonal increase. However, the hon. Gentleman did not mention that the number of unfilled vacancies, which is a most important figure, shows a better improvement than was seasonally to be expected. On the general question, responsibility within the Cabinet should rest on my right hon. Friend the Secretary of State for Trade and Industry.
  Mr. Kaufman: Will the right hon. Gentleman draw to the attention of the Minister for Industrial Development the fact that in greater Manchester this month, despite a small fall in the national unemployment figures, there has been a further rise of over 1,000 in the number of wholly unemployed, bringing the total to a new disastrous post-war record? Will he ask the Minister for Industrial Development to help by giving us the 10 per cent. plant and machinery grant and by extending the period for house improvement grants so that we have the full 24-month period?
  Mr. Maudling: I am sure that my right hon. Friend will pay close attention to the developments in the Manchester area which have been mentioned today.
  Mr. Awdry: Will my right hon. Friend once more try to explain to hon. Gentlemen opposite that one of the main reasons for the high unemployment total is the unreasonable level of wage demands made by the unions? [Hon. Members: "Shocking."]
  Mr. Maudling: I will certainly try, but I doubt whether I will succeed.
  Mr. Heffer: Will the right hon. Gentleman make it clear to his hon. Friend the Member for Chippenham (Mr. Awdry) that the areas with the lowest incomes are precisely the areas with the highest levels of unemployment? Although there may be some jobs in areas like Norfolk, in urban areas such as Liverpool and Glasgow the unemploy-
  748
  ment rates continue to increase. Does the right hon. Gentleman appreciate that drastic and urgent action by the Government is needed?
  Mr. Maudling: The unemployment rate certainly continues to be too high in industrial areas, but the massive effects of the Budget have yet to be seen in full.
  Mr. Douglas: Does the right hon. Gentleman accept that the Scottish unemployment figure today is abysmally high? How does he intend to obtain the co-ordination between the Minister for Industrial Development and the other Cabinet overlords which will be needed to reduce that figure?
  Mr. Maudling: I agree that unemployment in Scotland, as in many parts of the United Kingdom, is too high. But in the last 12 months my right hon. Friend the Chancellor of the Exchequer has put no less than £2,000 million of additional demand into the economy.
  Mr. Callaghan: If the Home Secretary accepts that high wages and high wage claims cause unemployment, can he say why the areas with the highest wages have the lowest unemployment and why other areas, like Scotland, the North-East and Wales, where wages tend to be lower, have the highest unemployment?
  Mr. Maudling: I have always said that the effects of cost inflation fall most heavily on those least able to defend themselves.

BUSINESS OF THE HOUSE
Mr. Michael Foot: May I ask the Leader of the House to state the business for next week?
The Lord President of the Council and Leader of the House of Commons (Mr. Robert Carr): The business for next week will be as follows:
MONDAY, 24TH APRIL. Progress on the Report stage of the Housing Finance Bill.
Motion on the Agricultural Investment (Variation of Rate of Grant) Order.
TUESDAY, 25TH APRIL and WEDNESDAY, 26TH APRIL. Further consideration in Committee on the European Communities Bill.

749
THURSDAY, 27TH APRIL. Supply (18th Allotted Day): Until about Seven o'clock, there will be a debate on the United Nations Conference on Trade and Development, and thereafter on Bangladesh; both debates will arise on a Motion for the Adjournment of the House.
Remaining stages of the Road Traffic (Foreign Vehicles) Bill [Lords].
Motion on the Eggs (Protection of Guarantees) Order.
FRIDAY, 28TH APRIL. Private Members' Bills.
MONDAY, 1ST MAY. Consideration of Private Members' Motions until 7 o'clock.
Afterwards, remaining stages of the Museums and Galleries Admission Charges Bill [Lords] and of the Consolidated Fund (No. 3) Bill.
Mr. Foot: We on this side of the House are extremely critical of the programme of business that the Leader of the House has put before us, since we believe it arises from the pressure of the superfluous legislation that the right hon. Gentleman is presenting to the House. For that reason my questions to him will be slightly longer than the House would wish, but I wish to put them none the less.
We cannot accept that the Committee stage of the Museums and Galleries Admission Charges Bill, which will be on Monday week—a Bill which is so strongly contested on this side of the House—should be confined to a half-day or a part of a day. We think there should be a full day. On that day the Vehicle and General discussion will take place. Does the Leader of the House accept that, although it is perfectly proper that there should be a debate on a Private Member's Motion, this is not a substitute for the Government providing time to discuss a major report which raises principles of some importance for the whole conduct of the affairs of the House? Some indication was given by the right hon. Gentleman's predecessor that the Government would provide such time.
As for Thursday's business, I thank the Leader of the House for agreeing to our representations that there should be debates on the United Nations Conference on Trade and Industry, on which we wish to criticise the Government's melancholy record, and on Bangladesh. But these debates will take place only
750
because of the representations from this side of the House.
We are also concerned that apparently no time is available in the Government programme for next week and shortly afterwards for dealing with the heavy unemployment figures announced today. We should have a debate on that subject.
The Government are making no provision for a debate on Statutory Instruments, which are pouring into the House more and more, and on which the obligations of the House are not being discharged. Will the right hon. Gentleman tell us how soon he can give us a full day to discuss how the House of Commons is not being allowed to discharge its obligations for debating Statutory Instruments? Finally—I am sure the right hon. Gentleman will understand this—it may be that, dependent on the situation at the beginning of the week, it would be appropriate for a debate on the railway situation, and we on this side would wish to have discussions about that. If it is considered desirable we would like to have a debate at the beginning of next week.
Mr. Carr: Any representations that the hon. Member for Ebbw Vale (Mr. Michael Foot) likes to make on the last matter will be considered in the usual way.
On the hon. Gentleman's more general points, I cannot accept his remarks about superfluous legislation. It is true that we have a heavy programme of legislation. It is very important legislation to which the Government are committed If it has taken somewhat longer than we had hoped and has, therefore, left less time than we would have liked for other things, the hon. Member and some of his hon. Friends should examine their own consciences about that.
In spite of this heavy programme we have managed next week to provide a Supply Day, about which we are glad, and which we wanted to do. But I think the hon. Member would admit, bearing in mind the number of Supply Days to which the Opposition are entitled, that they are well up to quota for this time of the year. They are not running behind. They have chosen to debate very important matters next week, and I certainly do not criticise their choice of priorities. We will do the best

751
we can to find time for the very important matters that he would like to see discussed, but the Government's business at this time of the year is pressing and it is the Government's job to get their business.
As for 1st May, I accept that a commitment has been made about the Vehicle and General debate. My hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke), who was fortunate in the Private Members' Ballot, has chosen this subject. We welcome this, but we should see how the debate goes and perhaps we can talk about it again if there is a strong feeling that the opportunity has not been sufficient to debate the matter.
I note what the hon. Member says about the Museums and Galleries Admission Charges Bill but we must see what progress we make when we come to it.
On Statutory Instruments, I agree that this is a real problem. It has been growing for some years. The hon. Member will recognise that, and he will know that there is a Joint Select Committee on the whole question of delegated legislation. We must await that Committee's report for a fundamental solution to the problem.
Sir Harmar Nicholls:On a point of order, Mr. Speaker. Can you help the House? There has been some suggestion of a debate on the railway dispute, but surely until the court's ruling has been accepted the matter is sub judice and cannot be debated?
Mr. Speaker: I propose to deal with that matter later.
Mr. Fletcher-Cooke: Reverting to the business of 1st May, there is a general feeling that three hours will not be enough even now for that debate. There are hon. Members on both sides who realise that the issue raises very serious and basic matters going to the depths of our public and commercial life. Would my right hon. Friend consider matching the three hours of Private Members' time with three hours of Government time immediately following and thus give a whole day for this important subject?
Mr. Carr: I do not think I can make a commitment at this juncture, but I will
752
consider the point which my hon. Friend has just made, bearing in mind the other things that have been said before. I am not making a commitment, but I will genuinely consider it.
Mr. Michael Foot: May I put to the right hon. Gentleman one question on the Statutory Instruments matter which we regard as being of great importance. The fact that there is a Committee examining the whole question does not remove from the Government the obligation to provide the time for such debates. It is impossible for that to happen if the time of the House is so occupied with legislation, as the Government propose. If the right hon. Gentleman thinks there has been any difficulty about the legislation now before the House, and particularly the European Communities Bill, we should be very happy to see him attending the Committee considering that Bill and seeing for himself what is happening.
Mr. Carr: I accept that there is a genuine problem over Prayers and so on. But the hon. Gentleman should admit that it is a long-standing problem. I remember that we had similar problems when we were in opposition. This is—I cannot make it otherwise—the time of the year when the pressure of Government legislation is, unfortunately perhaps, exceptionally heavy. But the legislation is part of our main programme. It is something to which we are committed, and it must take its proper place.
Mr. Sydney Chapman: Following the representations made to him by hon. Members on both sides last week, has my right hon. Friend any information to give us about the possibility of a debate at the earliest possible opportunity on the critically important questions of land prices, house prices and land for housing?
Mr. Carr: There will be an opportunity on the remaining stages of the Housing Finance Bill to discuss some of the important subjects connected with housing. As to the rest of the matter that my hon. Friend raises, we shall have to look at it when we have got through that stage, but that was one of the subjects I half expected to hear that the Opposition had chosen for next Thursday.
Mr. Stonehouse: The Opposition have granted half a Supply Day for a debate on Bangladesh, but has the attention of

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the Leader of the House been directed to Early-Day Motion No. 291, which has been signed by over half the backbench Members of the House?
[That this House urges Her Majesty's Government to use every possible influence within the United Nations and other international institutions to secure the early establishment of an international aid programme for Bangladesh on the lines of the Marshall Aid Plan for Europe after the Second World War.]
In view of the widespread concern on both sides, will the Leader of the House ask his right hon. Friend the Foreign and Commonwealth Secretary to make a statement about his intentions early next week, before we come to the debate?
Mr. Carr: I shall certainly discuss that with my right hon. Friend, who has heard what the right hon. Gentleman has just said. I have noted the widespread concern on both sides expressed in the Motion.
Dame Joan Vickers: As the Governernment agreed to take over the Guardianship of Infants Bill, may I ask when it is likely to come forward? I would have brought it forward myself as a Private Member's Bill if they had not given me the understanding that they would do so.
Mr. Carr: I can assure my hon. Friend that we are still anxious to introduce the Bill as soon as we can. I am sorry, but I cannot yet say exactly when that will be, but we are definitely still anxious to introduce it.
Mr. Prentice Mr. Prentice rose——
Mr. Speaker: Order. I hope that the members of the Opposition Front Bench will allow their back benchers a chance.
Mr. Faulds: Will the Leader of the House open his understanding to the fact that it is totally unacceptable that after the first business on Monday week, which is of cardinal importance, he should tuck into the second half of the day a matter of equal importance, the Museums and Galleries Admission Charges Bill? Will he reconsider the matter and give both these important questions a full day's debate?
Mr. Carr: I have already said in response to my hon. and learned Friend
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the Member for Darwen (Mr. Fletcher-Cooke) that I shall consider, without commitment, his request for more time for the Vehicle and General debate. If that were to happen, it would have consequential effects, but I shall look at it carefully.
Mr. Worsley: Would not my right hon. Friend accept that the Government have had considerable time to get their point of view clear on the Vehicle and General matter, and that it would be better to have one adequate debate than two debates, as he has suggested?
Mr. Carr: I take note of my hon. Friend's point of view.
Mr. Strauss: Will the Leader of the House bear in mind the need for a full day for the Report stage and Third Reading of the Museums and Galleries Admission Charges Bill, not only because the feeling in the whole educational and art world on this matter is as strong as ever, but because that feeling is shared by many hon. Members on his side of the House, in order that the Government should have ample time and opportunity to reconcile their Finance Bill, which will ease taxation by over £1,000 million, with a Bill which imposes a tax of £1 million on museum and gallery visitors?
Mr. Carr: I know that strong views about the matter are held by the right hon. Gentleman and many others. I will consider the question of time, but we must get on with the Bill.
Mr. Deedes: Since it is very unlikely that after the short debate on 1st May about Vehicle and General the Government will, in fact, be able to find an additional day, will my right hon. Friend bear in mind that, in view of public concern on the matter, the course suggested by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke), of extending the debate by three hours, commends itself strongly to a number of us?
Mr. Carr: I am conscious of the feelings that have been expressed, and I mean it when I say that I shall consider them very carefully. I hope my right hon. Friend will understand if I cannot make a commitment at this moment.
Mr. Carter: May I remind the Leader of the House that his predecessor gave

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a clear indication in writing to me that the Government would find time after Easter for a debate on the Vehicle and General subject? Therefore, does he not feel that there is a clear moral commitment on his part to meet that indication by the former Leader of the House?
Mr. Carr: I cannot go further than what I have said. My right hon. Friend the Secretary of State for Northern Ireland gave that commitment. I do not think he ever gave any commitment about how much time would be given. It so happened that my hon. and learned Friend the Member for Darwen, through his good fortune in the Ballot and his interest in the subject, has provided some time. But I have taken note of the feelings expressed by hon. Members on both sides that they would like more time than is provided for in the half day, and I shall carefully consider them.
Dame Irene Ward: The guides of London, a very important body, want a special Amendment to the Museums and Galleries Admission Charges Bill, and I have asked my noble Friend the Paymaster-General if he would consider what they want. I asked for a quick answer, which I have not received. If we are to have the final stages of the Bill next week, will my right hon. Friend please find out from my noble Friend when he will let me have a reply, so that I can table the Amendment which I want?
Mr. Carr: There have been other occasions when I have tried to help my hon. Friend to receive quicker replies than she was getting. I shall see whether I can help her again.
Dame Irene Ward: I am grateful to my right hon. Friend.
Mr. Loughlin: Reverting to the question of land and house prices, may I draw the right hon. Gentleman's attention to the Early-Day Motion in my name and the names of 100 of my hon. Friends—to which his hon. Friend the Member for Birmingham, Handsworth (Mr. Sydney Chapman) has not attached his name, incidentally?
[That this House views with the gravest concern the scandal of ever increasing land prices and the consequent increasing costs of houses; is appalled that a
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man earning up to £30 per week can no longer secure an adequate mortgage advance with which to purchase a house for himself in an increasing number of areas in Great Britain; and calls upon Her Majesty's Government to take immediate and drastic action to deal with this situation.]
Is the right hon. Gentleman aware that house prices are now rising by £6 a day? Is it not about time that the Government gave specific time for us to debate serious proposals for dealing with the situation? Would it not be better if the right hon. Gentleman gave us some time next week instead of dealing with some of the business on that week's programme?
Mr. Carr: I agree that it is a very important problem. No one would be better pleased than I if I could suddenly find an extra day next week, or any other week. I cannot accept the hon. Gentleman's contention that it is more important than getting on with the very important legislation that we have in hand. Monday's business is particularly directed towards alleviating the housing problem.
Mr. McMaster: In view of the suspension of Stormont, continuing and escalating violence in Northern Ireland, loss of life and damage to property, the Scarman and Widgery Reports, with which Northern Ireland Members have been able to deal only briefly at Question Time, and the fact that the Prime Minister says that he considers that Northern Ireland has full democratic rights when we cannot have adequate debates on legislation affecting Northern Ireland, does my right hon. Friend agree that a full debate on Northern Ireland is more than necessary? Would he further agree that this would help to lower the temperature there? Would he arrange an early debate on the affairs of Northern Ireland?
Mr. Carr: I have noted what my hon. Friend said. Obviously, I cannot find a day for this next week, but I will discuss the matter with my right hon. Friend.
Mr. Ross: Will the right hon. Gentleman consider something which is of concern to him personally? Does he recollect that he moved, and the House carried, an Allocation of Time Order regarding the Housing (Financial Provisions) (Scotland) Bill? Is he aware

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that since that happened the Government have introduced a new Money Resolution, foreshadowing three new subsidies in respect of part of the Bill on which the guillotine is to fall next Thursday? Is he further aware that no new Clauses or Amendments have yet been tabled? Does this not make a non-sense of the Business sub-Committee and is it not an abuse of the Allocation of Time Order? Will he tell the House what he proposes to do about this?
Mr. Carr: I am afraid that I am not as well informed as I would wish to be—[Hon. Members: "Oh."]—on this matter. I am not complaining, but the right hon. Gentleman did not manage to give me advance notice, and, therefore, I have not had the chance to look into what is a technical and detailed, although important, matter. I will look into it and speak to the right hon. Gentleman about it.
Mr. Urwin: May I revert to the vitally important question of housing and the necessity for an emergency debate on this wide-ranging subject? Does the right hon. Gentleman appreciate the deep feeling of frustration experienced on this side of the House, and no doubt opposite, because what is felt to be a serious matter cannot be dealt with here as a result of the Government's timetable? Does he further realise that this is a burning question, the most topical of the day, with thousands of young people being "rooked" day by day as a result of the rapid escalation in the cost of housing? Can he not find time to enable us to discuss this at an early date?
Mr. Carr: I recognise that this is an important subject, and I should like to find time for it if I could, but I cannot find time for it next week. This is a time of year when Government business is rather congested. This is not the first time it has happened. I cannot promise any time at this moment.
Mr. John Silkin: Is the right hon. Gentleman aware that between one business statement and another the cost of housing land in the South-East is rising by £250 an acre? While I appreciate what he says about a debate, can he ensure that his right hon. Friend the Secretary of State for the Environment comes to the House and makes a state-
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ment about what he proposes to do before the next business statement?
Mr. Carr: I will certainly discuss this matter with my right hon. Friend and see whether it is possible for him to make a statement.
Dr. Summerskill: Will the right hon. Gentleman provide Government time, and not leave it to be found from Supply, to debate the report of the Select Committee investigating private practice in the National Health Service in view of the highly controversial conclusions and recommendations in that report, which were controversial not only within the Committee but outside?
Mr. Carr: As with all Select Committee reports, there will be a special report in reply, and the House would be wise to await that special report before there is a debate. Time is provided for the debate of all Select Committee reports. The first stage is to get the special report in reply.
Mr. Palmer: Will the right hon. Gentleman say whether the House can be given time to debate the Vintner Report on nuclear reactor policy, which could greatly affect the industrial future of this country?
Mr. Carr: I realise that. I have some old interest in and slight knowledge of that subject and appreciate its importance. I am afraid that I cannot promise any time in the immediately foreseeable future.
Dr. Dickson Mabon: May I revert to the reply which the right hon. Gentleman gave to my right hon. Friend the Member for Kilmarnock (Mr. Ross) about the difficulties arising from the first guillotine Motion which the Leader of the House has moved on a Bill—and I hope that it will be the only one he moves as long as he is Leader? Does he realise that there are at least three major Amendments to be made and that no time has been allowed for that? Is he aware that unless he moves an Amendment to the guillotine Motion on Monday we shall have a guillotine on Thursday, which will be quite unfair? Does he appreciate that the guillotine will fall on Tuesday and finally on Thursday, and that he cannot say on this occasion "Not next week"? If this is not done on Monday,

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the Scottish Standing Committee will be denied the chance of debating matters arising from a Financial Resolution passed by this House on Monday of this week? Is this not a grave abuse of the procedure of the House, and ought the right hon. Gentleman not to accept in a reasonable way that the guillotine Motion requires to be amended? Will he do that on Monday?
Mr. Carr: I want to be reasonable about this. I have said that I will look into it and report on it, and I will do so.
Mr. Jay: Would not the best way of easing the problem of parliamentary time and dealing with rising house prices at one and the same time be for the Government to withdraw their Housing Finance Bill altogether?
Mr. Carr: I can imagine no single step which would be more disastrous for the Government to take if we want to get better housing.
Mrs. Renée Short: May I draw the attention of the Leader of the House to the fact that two reports have recently been debated in the other place—the James Report and the Rothschild Report—but no time has been found in this House to debate them yet? Both are far-reaching and contentious in their proposals. Can the right hon. Gentleman give an undertaking that there will be an opportunity to debate these reports in the near future?
Mr. Carr: I cannot give any definite undertaking at the moment. I realise that these are important subjects, but this is a problem which the House always has. There are far more important subjects than we ever have time to debate. But I will keep this in mind.

EARLY-DAY MOTION NO. 292
Mr. Spriggs: On a point of order, Mr. Speaker. I wish to raise a question relating to Early-Day Motion No. 292 which I submitted to the Table Office last night. I was told that the matter was sub judice. When I left the House, slightly before midnight last night, I was
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still under the impression that the matter was sub judice. Would you assist in advising me, hon. Members and the Table Office just how long an Early-Day Motion is sub judice after a court has given a decision?
Mr. Speaker: I did not appreciate that the hon. Gentleman was about to raise that particular point. I was prepared for another point about a Motion on the Order Paper, and, if I may, I will deal first of all with the point that I expected. [Laughter.]
There was a mistake on the Order Paper, not made within this building. I will see that the matter is put right.
With regard to the other matter, I do not think it was sub judice at the time the hon. Gentleman was talking about.

COMPLAINT OF PRIVILEGE
Mr. Speaker: I want now to rule on the question of privilege. Yesterday the hon. Member for Birmingham, Edgbaston (Mrs. Knight) laid a complaint of breach of privilege arising out of a report in yesterday's Daily Express which purported to describe the intentions of two hon. Members following sentences pronounced by a court of law.
It is not for me to say whether the intentions to which the Daily Express paragraph refers would constitute a contravention of the laws of privilege. My duty is to rule whether in my view the hon. Lady's complaint should be given precedence as a privilege issue over today's business.
In my opinion, having taken into account all the circumstances, I do not think the matter can be given that priority now.
Mrs. Knight: May I say that I am grateful to you, Mr. Speaker, for the ruling and appreciate that no breach of privilege, in fact, exists when a person claims privilege which does——
Mr. Speaker: Order. I am grateful to the hon. Lady for her appreciation but I do not think I can allow her at this stage to enter into any discussion of this or, indeed, of any hypothetical situation.

BRITISH RAILWAYS (DISPUTE)
Mr. Speaker: Yesterday there was a considerable exchange of views on how far the House should go when a matter was sub judice, and the right hon. Member for Cardiff, South-East (Mr. Callaghan) suggested that I should think the matter over and perhaps say something to the House today about it.
I do not think there is much I can usefully add to what I said yesterday. On 23rd July, 1963, the House agreed to a resolution dealing with references to matters sub judice which laid down, among other things, that:
"matters awaiting or under adjudication in a civil court … should not be referred to in any question to a Minister including a supplementary question, from the time the case has been set down for trial or otherwise brought before the court, as for example by notice of motion for an injunction".
The Industrial Court is a civil court, and the resolution clearly applies to proceedings before it.
But the resolution goes on to state that its provisions cease to have effect when the judgment has been given. In the present instance the judgment has been given; therefore, the matter is no longer sub judice.
Sir Elwyn Jones: Thank you for giving that guidance to the House, but may I put this matter for your appreciation, Mr. Speaker, and perhaps that of the House.
Does not the power of the Minister as an administrative act to initiate proceedings before the Industrial Court and, therefore, become a litigant himself create particular problems in regard to the application of the sub judice rule, and is it not proper that perhaps this matter should be referred to the Select Committee on Procedure for consideration?
Secondly, may I draw attention to one possibility which might in the meantime get round some of the difficulties that the House faced yesterday? Is it not the case that for the Minister to place in the Library of the House a copy of any application he might make to the Industrial Court as soon as practicable after he had submitted it to the court would not be a breach of the sub judice rule? If that had been done yesterday it would have resolved some of the difficulties that arose.
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Finally, may I for the guidance of the House put this matter to you, Mr. Speaker: that it would be perfectly proper for Questions to be directed to the Minister on the wisdom and expediency of any future application he might make to the Industrial Court? I submit that that would be perfectly proper and within the ruling.
Sir Harmar Nicholls: Whilst it might be perfectly proper according to the right hon. and learned Gentleman, I wonder whether it would be fair, for this reason. When a case is submitted to the court, not only is the application for what the Government want—in this case 21 days' cooling-off period—submitted but part of the argument in support of the application is attached to it. That would mean that there would be prior publicity for the argument of one side without equal publicity for the answer. I would think that the fair time for there to be publicity would be when the answer has been put in by the other side.
Mr. Arthur Lewis: On a point of order. May I refer to your remarks a moment ago about this rule, Mr. Speaker. You said, in fact, that whilst the matter is before the court it is sub judice; then you went on to say—I am speaking from memory—that of course a Member may not put a Question to a Minister or table a Motion. My hon. Friend the Member for St. Helens (Mr. Spriggs) made the point that he tried to table his Motion yesterday afternoon when it was agreed that the matter was sub judice. But—this is the vital point he is making—the order came through from the court in the early afternoon and the Table Office was still preventing his puting the Motion down—even though the court order had been given. It was not until midnight last night after he left the House that the Table Office gave way. Therefore, in fact, the Table Office was in contravention of the ruling that you have just given.
Mr. Alexander W. Lyon: Further to that point of order, Mr. Speaker. Is the House not in real difficulty about the 1963 resolution here, and do you not yourself have power as the Speaker to make a further ruling? I say that because since 1963 the law about the sub judice rule in relation to other citizens and, in particular, to comment

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by the Press has been expounded by the Court of Appeal to the effect that unless there is real danger of the court's position being affected by the comments there can be no breach of the sub judice rule. Therefore, there is a different situation for the earlier proceedings, which may be before a jury, and proceedings later, which may be before a Court of Appeal.
That contradiction clearly affects the situation in relation to the National Industrial Relations Court because there is no jury there and it is very unlikely that the court would be affected by any outside comment. Since the object of any proceeding in this House is to affect the mind of the Government and not the mind of the National Industrial Relations Court, is it not time that the whole sub judice rule of this House was reviewed so that it was just as lenient for the House as for the Press or any other citizen outside commenting on proceedings in court?
Mr. S. C. Silkin: On a point of order, Mr. Speaker. Is it not correct that the resolution of the House to which you referred when you gave your ruling is:
"subject always to the discretion of the Chair"
Is it not most important in a matter of this kind that the rights of Parliament, which are exercised through the Chair, should be asserted and re-asserted and should be paramount?
Mr. Atkinson: I have some trepidation in treading in this field of lawyers' landmines, Mr. Speaker, but I do not think that the answer that you have given to the House is a very satisfactory one, nor is your ruling acceptable to many of the industrial lads on this side of the House.
The point is that there is a discussion at the moment about law and order and the selectivity as regards where this should apply. There is also some criticism by members of the Cabinet, and Lord Hailsham in particular, implying that the employers are bringing the law into disrepute by their disregard particularly of industrial relations and, again particularly, in regard to people like Sir Arnold Weinstock who now reject the law and, therefore, do not apply it. But in this case your ruling has underlined the pre-cariousness of the whole position because
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you have not said that the sub judice rule applies here in the absence of a conclusion by the Industrial Court, which could mean that if we are dealing with a nationalised industry, as in this case, the court has every right to defer the decision for as long as it sees fit. What you are now saying is that the House of Commons is incapable of giving instructions to the Minister for Industry in order to take a decision with the chairman of the particular board in order to make greater resources available, or whatever the question may be.
Surely it is wrong to discriminate against the nationalised industries in particular by putting them in this position. If your ruling is to stand for ever more that the whole matter is sub judice and the House cannot discuss questions before the court in advance of a decision being made by the court, it gives a very unfair advantage indeed to Ministers representing the nationalised industries against the interests of the workers they employ.
Mr. Speaker: First, if it were decided by the House that this matter should go again for consideration by the Select Committee on Procedure. I should welcome that because, as has been said by more than one hon. Member, this is rather new ground in view of the Industrial Relations Act.
Secondly, if the Secretary of State were to take the course suggested by the right hon. and learned Member for West Ham, South (Sir Elwyn Jones) and put a copy of the Notice of Motion, or whatever it is, in the Library, I do not think that would be a breach of the sub judice rule. It is not a matter for me, but in my opinion it would be helpful.
Thirdly, in reply to what was said by the hon. Member for Tottenham (Mr. Atkinson), I would remind the House that if it does not accede or agree with a ruling of mine, it must say so, but I believe that I am much wiser to deal with each particular situation as it arises. Although it may sound arrogant to say so, I have no doubt that the action I took yesterday was right, because the hearing was at that time taking place before the court and the decision of the court was available later in the afternoon. In that situation, I think I was right to say that the matter

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was at the time sub judice. But I am not laying down any binding precedents. There is a discretion in the Chair, and I will deal with each situation as it arises in what I think to be the best interests of the House.
Mr. Callaghan: Further to that point of order, Mr. Speaker. None of us would want to come in collision with the Chair on a matter like this, nor would anyone wish to embarrass you. The Opposition would like to take up your suggestion, in support of that made by my right hon. and learned Friend the Member for West Ham, South (Sir Elwyn Jones), that there should be discussion on the matter. I hope that the Leader of the House will take this into account.
You are quite right in saying that we have disposed of the present case. It was disposed of in a few hours. But where a Minister is himself a litigant, he can remove a matter from the cockpit of Parliament, although it may involve most serious issues with which Parliament thinks it should concern itself, by making such an application. It could quite well arise that such an application might be before the court for several days. You would then be in the embarrassing position of saying that the House could not discuss the matter because it was sub judice. We should then be getting into tremendous confusion if economic and social disputes of great importance were removed from the arena of this House while the whole country was discussing them but we were denied that opportunity. I hope that the Leader of the House will be willing to enter into discussions with a view to referring this new problem to the Select Committee on Procedure for further consideration.
Mr. Heffer: Further to that point of order, Mr. Speaker. I support what my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said and I would like to make an additional point to underline it. Section 138 of the Industrial Relations Act deals with the emergency procedures. One of the important questions relates to what is referred to as the "national interest". There may well be a political argument as to what is considered the national interest. This is a matter which is not in the normal run of court procedures. In these circumstances, pending a final decision and discussion, I hope that you. Mr.
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Speaker, will take that point into consideration when dealing with each case on its merits.
Mr. Orme: Further to that point of order, Mr. Speaker. Will you also take into account that this issue is a highly contentious political and industrial issue, that the trade unions do not recognise the NIRC, are not attending it, and do not recognise this law, and that you have a responsibility to see—I say this with due respect—that views that are contrary to the NIRC and this law are represented in the House?
Mr. Speaker: I do not think that any of the matters raised by the hon. Member for Salford, West (Mr. Orme) are for me and I must not express an opinion about them.
With regard to the earlier points made, however, it is true that I have a certain discretion. It is a heavy burden to place upon the Chair in the situation which has arisen, and for that reason I would like some help from the Select Committee on Procedure as to how that discretion should be exercised.
Sir Robin Turton: Further to that point of order., Mr. Speaker. The right hon. Member for Cardiff, South-East (Mr. Callaghan) suggested that the matter should be referred to the Select Commit tee on Procedure. I am Chairman of the Committee and I would point out that there is no need for such a reference, since our terms of reference are sufficiently wide to review the ruling of our predecessors in 1962–63. Naturally, I cannot bind the Committee, but I can promise that I will put the matter before it at its meeting next week, with the suggestion that we should review this procedure.
Mr. Arthur Lewis: Further to that point of order, Mr. Speaker. I do not think that you attempted to deal with the point which I put to you. May I both repeat it and go, perhaps, into more detail? You said that you would deal with each case as it arose. My point was that yesterday, rightly so, the Table Office told my hon. Friend the Member for St. Helens (Mr. Spriggs) that he could not put a Motion down——
Mr. Speaker: Order. I was not given notice of this point. I would prefer it to

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be left where it is. I have promised to look into it. I have had no opportunity of investigating the facts in the case of the hon. Member for St. Helens (Mr. Spriggs). Once I have done so, perhaps I can write to the hon. Gentlemen.
Mr. Lewis: I am grateful to you, Mr. Speaker, for agreeing to give the matter consideration. I do not seek a reply now, but I should like to bring the case up to date. It is a vital point, as you will appreciate when you hear it. My hon. Friend wanted to put down a Motion yesterday, and it was out of order then because it dealt with a matter which was sub judice. That is clear. But—and this ties up with the point which you have made—once the court gave its decision the matter ceased to be sub judice. Now, here comes the point both on this case and on the general issue. [Hon. Members: "Hear, hear."] The object of a Motion is not to get it debated but to draw public attention to the matter contained in it. My hon. Friend wanted to get publicity, and good publicity, for the railwaymen, so yesterday afternoon he wanted to put down a Motion in order to obtain Press publicity. He was not able to do that. It was not until after midnight that he was informed that the Motion would be accepted, but by then it was too late for any publicity.
I do not say that this action was taken deliberately by the Table Office. [Laughter.] It is no laughing matter because this sort of thing can happen on any other issue. If a matter is to be held up until the Press has gone to bed, it can defeat the point one is making. I am in no way reflecting on the Table Office, but I ask that, when such issues arise, as soon as the sub judice ruling is lifted, the Table Office should inform the hon. Member concerned, whoever it may be, so that he can then get his Motion on the Order Paper and give it to the Press, which was the object of my hon. Friend the Member for St. Helens in this instance.
Mr. Speaker: I had understood the hon. Gentleman's point the first time and I have said that I will go into what happened. I am however rather interested by his idea of the purpose of a Motion on the Order Paper and perhaps the
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Leader of the House will have noted it as well.
The Lord President of the Council and Leader of the House of Commons (Mr. Robert Carr): Further to that point of order, Mr. Speaker. I very much welcome what was said by my right hon. Friend the Member for Thirsk and Malton (Sir Robin Turton), who is Chairman of the Select Committee on Procedure. I assure the House that it is not the wish of the Government that we should be any more restrictive about this than is genuinely necessary for the proper protection of the law and its processes.
Perhaps I can help on the facts. Some of the confusion we have heard about was caused by the fact that whereas the court's judgment was delivered relatively early yesterday evening, the court's order was not made available to the parties until almost midnight. There must obviously always be a short time-lag between the judge speaking in court, delivering his judgment, and the formal making of the order.
Mr. Frederick Lee: Further to that point of order, Mr. Speaker. May I submit a point which has not yet been covered? I support the idea that we should refer the matter to the Select Committee on Procedure. No matter how we now look at the terms of reference sent to the court by the Secretary of State for Employment, it is highly probable that the result from the court will condition industries which are not before the court at this moment. I can cite, for instance, in yesterday's terms of reference, issues which will concern other industries. If under the sub judice rules in this House we are forbidden to raise such issues until after the cause is decided, great industries will be conditioned by the ruling given by the court.
I support what my right hon. Friend was asking for—that we should look at our own rules of procedure to ensure that the practices of other industries, which at the moment are not before the court, are not brought into being by a ruling given in respect of an entirely different industry.
Mr. Speaker: These seem to me to be matters for the Select Committee when it considers the subject. We cannot have a kind of irregular debate on this matter now.
Mr. Spriggs: May I raise a point? May I speak for myself? I did not table the Motion to which we have been referring, on the sub judice matter, with the object of getting it into the Press. The object was to expose the ham-fisted handling of the railway dispute and the methods used in connection with it.
Mr. Speaker: Order. This is becoming an abuse. I must try to protect the business of the House which is the Second Reading of the Finance Bill.

BUSINESS OF THE HOUSE
Ordered,
That at this day's Sitting proceedings on the Motion standing on the Order Paper in the name of Mr. Chancellor of the Exchequer relating to the Committal of the Finance Bill shall not be subject to the provisions of Standing Order No. 40(3) and may be proceeded with, though opposed, for a period of three-quarters of an hour after Ten o'clock or after they have been entered upon, whichever is the later, and at the end of that period Mr. Speaker shall proceed to put any question necessary to dispose of those proceedings.—[Mr. Carr.]

ORDERS OF THE DAY

  FINANCE BILL
  Order for Second Reading read.
  4.24 p.m.
  The Chancellor of the Exchequer (Mr. Anthony Barber): I beg to move. That the Bill be now read a Second time.
  My first task is to congratulate the right hon. Member for Leeds, East (Mr. Healey) on becoming the principal spokesman on economic and financial affairs for the Opposition. The right hon. Gentleman held high office in the Labour Government. Both sides of the House know that he will present forcefully the views of his party. We welcome the right hon. Gentleman to our debates.
  It is in no sense a derogation from those sentiments nor any reflection on the right hon. Gentleman to add that with the departure from the Opposition Front Bench of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), the right hon. Member for Manchester, Cheetham (Mr. Harold Lever), and the hon. and learned Member for Lincoln (Mr. Taverne), the House and the country recognise that the Labour Party have lost three Front Bench spokesmen who are universally regarded as men of great ability in those matters for which they had responsibility. However, I think it will be generally agreed that they are not lost to the Front Bench for ever, because once we have joined the European Community I do not doubt that they will all be back again.
  Following the precedent of more recent years, I do not propose to go through every Clause in this long Bill, a fact for which hon. and right hon. Gentlemen on both sides of the House will no doubt be duly grateful. There will be time at the later stages for detailed scrutiny. Today I propose to concentrate on some of the main features of the Bill in the context of the aims which are set out in my Budget statement. There are three broad objectives.
  Our first objective is that as we set out on our European venture British industry should have every ecouragement to be efficient and forward-looking. To that

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  end the Bill contains the detailed provisions for the reform of corporation tax which will come into operation with effect from April next year. This change will get rid of the present discrimination between retained and distributed profits, which tends to misallocate resources.
  The Bill contains provisions to encourage approved share option schemes in order to stimulate management enterprise, and also, as a powerful stimulus to productive investment, it provides for free depreciation of plant and machinery and for a 40 per cent. initial allowance for industrial buildings—in both cases applicable throughout the whole country. In addition, there are the new regional investment incentives which will be the subject of separate legislation.
  The second objective is that the economy should grow at a sustained and faster rate and so bring a permanent improvement to both employment and living standards. Looking to the year immediately ahead, our aim is that output should grow at an annual rate of 5 per cent. between the second half of last year and the first half of next year. The House will recall that my Budget judgment was that, in order to achieve this, output in the first half of next year needed to be 2 per cent. higher than it would otherwise have been.
  This Bill therefore provides for the biggest increase in personal tax allowances ever made and for the reduction of the two top rates of purchase tax to 25 per cent. at a combined cost of £1,100 million in 1972–73 and nearly £1,400 million for a full year. The reductions in purchase tax have already brought down the price of goods in the shops and the reductions in income tax will be reflected in the pay packet in two or three weeks' time. In addition, there is a major increase in pensions and other benefits.
  Our third objective is to make further progress with the reform of taxation. Tax reform is not a narrow concept. It is not simply a matter of better rules and regulations. Our objective is to create a framework in which our economy can work more efficiently, in which industry can be more progressive and enterprising and in which the individual can be encouraged to work and to save. Our aim is to create a progressive society, a prosperous society, and a society with the
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  will and the means to help the poor, the elderly and those in need.
  Free depreciation, to take one example, is not simply a matter of changing the tax rules to help industry. It is an active policy to equip industry to face the challenge of Europe. The tax-credit system is not only a way of simplifying the administration of tax and social security it is a positive measure to help the poorer members of the community.
  Last year we made a start. We legislated on unification and published Green Papers on corporation tax and the value-added tax. This year we propose legislating on the corporation tax and on VAT. We have issued a Green Paper on an inheritance tax and we have promised a Green Paper on the tax-credit system. There is no slackening in the momentum. Two years ago we were one of the most heavily taxed communities in the western world, with one of the most complex tax systems. I think it fair to say that we have made great progress since then. There is obviously still further progress to be made, and we are determined to make it.
  In this matter of taxation reform, the Inland Revenue and the Customs and Excise are frequently caricatured as old hat, stick-in-the-mud departments, which have been fighting passionately to maintain their status quo but which have been subjected to change by an iron Chancellor. Nothing could be further from the truth. My Ministerial colleagues and I can testify that under the leadership of Sir Arnold France and Sir Louis Petch, the two Revenue Departments have tackled the reform of taxation with both dedication and enthusiasm.
  If, then, it is asked why even those reforms which are now universally applauded were not made in previous years, the explanation is two-fold, and it may be of some help to any prospective reforming Chancellors of the Exchequer who may be listening today if I state the two essentials.
  The first essential for the Revenue Departments is that the Chancellor of the day, after weighing up the inevitable problems which are inherent in change, should take clear and firm decisions, and that once those decisions have been taken there should be no back-tracking. The second and equally important essential

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  is that those clear and firm decisions should be taken at a stage which is sufficiently early to enable the Revenue Departments to deploy their unrivalled expertise to implement them.
  I turn to the provisions of the Bill. The proposals in the Bill fall into four main groups; first, the introduction of VAT and the abolition of purchase tax and SET; second, the changes in personal taxation, including the increase in the tax allowances, and the provision for the higher rates of personal taxation and the investment income surcharge for next year; third, the new reliefs for estate duty and capital gains tax; fourth, the reform of company taxation and the greatly improved capital allowances for investment in plant, machinery and buildings.
  I start with the value-added tax. Clauses 1 to 50 and Schedules 1 to 6 provide for the introduction of a value-added tax on 1st April, 1973. Clauses 53 and 113 provide for the abolition of purchase tax and selective employment tax after 31st March, 1973. I suspect that there will be few mourners at the funeral of SET.
  Subject to the power of variation provided in the Bill, VAT will be charged at the single standard rate of 10 per cent. on all supplies by taxable persons of goods and services other than those zero-rated under Schedule 4 of the Bill or exempted under Schedule 5.
  As hon. Members will be aware, suppliers of zero-rated items do not charge tax on their sales and are able to reclaim from Customs the tax incurred on their purchases. Exempt suppliers are effectively outside the scope of the tax: they do not charge tax, they need keep no VAT records, but they incur tax on their purchases without recovery from Customs.
  The principal zero-rated items are food—other than food subject to purchase tax and meals out—fuel, fares and the supply of new houses. Our objective has been to relieve from tax many items which are important in the expenditure of low-income families.
  Mr. Hugh Jenkins: The Minister of State was asked whether he would include the theatre among the zero-rated items, but he was unable to give a firm assurance on this. I under-
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  stood that he proposed to discuss the point with the Chancellor of the Exchequer. The Chancellor is well disposed towards the theatre, and I am sure that if an Amendment could be devised to apply zero-rating to the theatre the Chancellor would be well disposed towards it. Will he confirm this?
  Mr. Barber:I have a great deal to say; this is a very long Bill. There will be plenty of opportunity in Committee to discuss all these matters. It is much better and more convenient to leave it at that.
  Mr. Jenkins: The right hon. Gentleman does not deny it.
  Mr. Barber: Our objective has been to relieve from tax many items which are important in the expenditure of low-income families. In addition, zero-rating will also apply to books, newspapers and periodicals, newspaper advertisements and news services, water charges and some other items and, as was expected, to exports and to some services to exports.
  There will also be provision to relieve local authority expenditure from tax. The major exemptions will be for rents, health, education and postal services, financial transactions such as insurance and banking and small traders; that is to say, traders with a taxable turnover of less than £5,000 a year.
  I will digress at this point to make two general observations about the particular VAT that has been designed for the United Kingdom. We have deliberately designed the tax with the interests of low-income families in mind and, by zero-rating such items as food and fuel—that is to say, gas, electricity and coal—and bus fares and tram fares, and by relieving housing as far as practicable, we have set out to achieve that result.
  At the same time, there will be the benefit from the abolition of SET. I need hardly remind hon. and right hon. Members that both food and new housing have suffered from the burden of SET. I shall have something to say later about the effect of SET on housing. Of the total net yield from SET about 10 per cent. entered into the cost of food.
  Of course, it is still possible to point to items bought by low-income families

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  which have not been taxed in the past and which will be taxed under VAT, but that does not demonstrate that the change is regressive overall. There are in fact no grounds for such a view. The task we set ourselves with VAT was to devise a broadly-based tax which was also socially equitable overall and, by international standards, a tax which was simple in structure and therefore relatively easy to administer, and I think we can claim to have done that.
  Mr. Tam Dalyell: On a question of fact, if VAT is designed for low-income families, what is the Treasury estimate of the percentage increase that VAT will cause in the price of children's clothing.
  Mr. Barber: With great respect, the hon. Gentleman was, clearly, not listening to what I said. I said—because I wanted to put the point fairly—that of course it is possible to point to individual items bought by low-income families which hitherto have not been liable to tax but which will be liable to VAT. That in itself does not demonstrate that the change is overall a regressive change. There are no grounds for such a view, taking into account the changes we are making with regard to food and housing, for example, and the other matters which I have mentioned.
  My second general observation about VAT is this. My hon. Friend the then Minister of State referred during the Budget debate to the possibility of Amendments in Committee to exclude this or that specific item, and the hon. Member for West Lothian (Mr. Dalyell) referred to one particular proposal. Since the Green Paper on VAT was published last year, we have had time to consider and to consult on the coverage of VAT in great depth. Whatever views may be held about the principle of the tax, the overall structure of the tax shows that the preparation for VAT has been both intense and thorough. Nobody would pretend that there was any such careful preparation for SET. But, just because the VAT has been put together after prolonged deliberation, it has been possible to construct the tax as a consistent whole. It follows that, as far as the coverage of VAT is concerned, the consequence of further exceptional
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  treatment is likely to result not in the improvement of the tax but in the very opposite.
  Mr. Patrick Cormack: I hope that my right hon. Friend in saying that is not ruling out completely the consideration of any future concession.
  Mr. Barber: Whether or not any proposals for changes which are put down for discussion in Committee are considered is a matter for the Chair and not for me. In all honesty, after the very full consideration that we have given to this matter, in a way which has not been undertaken hitherto for any other new taxes which have been introduced, I thought it right to point out what I believe our general approach should be and what would be the consequences of diverging from that general approach.
  Mr. Denis Healey: This is a most important matter, and hon. Members will be very concerned about the Chancellor's view upon it. First, it is for the Chair to decide what Amendments are in order, and any Amendment to add to the number of commodities which are zero-rated would be in order as they would in any other similar Bill.
  But the Chancellor of the Exchequer is arguing that the Government will not accept any Amendments on the ground that there have been discussions with interested parties. With great respect to the right hon. Gentleman, it must be remembered that the most important party here is the House of Commons of the United Kingdom. If the right hon. Gentleman is concerned about the total yield of the tax, a concern which I quite understand, he has given himself the power in the Bill to increase the rate by up to 2½ per cent. Therefore, he has no excuse whatever for refusing in principle to consider variations in coverage.
  Mr. Barber: I do not wish to be discourteous to the right hon. Gentleman, but it is significant that in his very first intervention as shadow Chancellor of the Exchequer the point he has made is that it is possible to increase the rate of VAT. I can only say that I very much hope that it will not be necessary to do this. The right hon. Member said that it is for the Chair to decide which Amendments are selected and no

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  doubt many Amendments will be selected on this matter. He is also right to say, as I too acknowledge, that it is for the House of Commons and not for anybody outside—not for the Chancellor or for the Government but for the House of Commons—what it proposes to do about these various matters.
  The point I was making was that for the reasons I have given, in regard to the very important question of the coverage of VAT, the consequence of further exceptional treatment is likely to result, not in an improvement of the tax, but the very opposite. These are all matters which can be discussed—and no doubt many of them will be—in Committee.
  I should like to mention car tax for which provision is made in Clause 51 and Schedule 7. This will be introduced at the same time as the value-added tax, but will be charged at 10 per cent. of the wholesale value only. It is important to recognise that, taking VAT also into account, the taxation on cars on 1st April next, when the changes come into operation, will be slightly less than it is now after we have cut, in this Budget, the rate of purchase tax on cars from 30 to 25 per cent.—and, of course, considerably less than it was when we took office when the purchase tax on cars was 36⅔ per cent.
  I am conscious of the need, as I was before I made my Budget statement, for the motor industry to have a stable basis on which to plan the expansion of its output. This is why the car tax will not be subject to any regulator power. It will be distinguished in this respect from all other Customs and Excise revenue duties.
  Some hon. Members have wondered why other articles which might be regarded as luxuries have not been subjected to some additional charge. This shows a misunderstanding of our broad approach towards the simplification of indirect taxation. I would have liked to be able to introduce the same tax treatment for all consumer durables, but I was not able to go as far as that. As I explained in my Budget statement, there were revenue considerations which were overriding.
  The proposals I have announced for dealing with the problem of purchase
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  tax paid stocks on the transition to VAT were set out in paragraph 27(a) of the White Paper. They do not require legislation except to the limited degree which I shall mention in a moment. What I set out to do was to provide a reasonable measure of relief, but relief of a kind which would entail as little extra work as possible for all concerned. The arrangements have been widely recognised as constructive and helpful.
  The use of sale or return arrangements will ensure that a substantial range of goods which are listed in the White Paper will if unsold at the changeover not be liable to purchase tax, but only to VAT.
  The supply of goods under such arrangements is, as the House knows, already normal commercial practice in a number of trades, but registered purchase tax traders who, with the transitional problem in mind, intend to negotiate such arrangements with their customers, would be well advised to consult the Customs and Excise before putting them into operation. Clause 53 provides for the making of the necessary regulations which will be framed to accord as far as possible with the usual trade arrangements. This is highly desirable.
  For other goods, purchase tax will be ended by Treasury Order a short time before the introduction of VAT, so as to help traders to dispose of existing tax paid stocks and to restock ready for VAT. A similar solution will deal with the problem which would arise in the case of duty paid stocks of alcoholic drinks, tobacco, matches and mechancial lighters, if the duties on these goods are reduced when they become liable to VAT. Any such reductions would be made by order under the temporary powers provided by Clause 59.
  I turn to income tax——
  Sir Gerald Nabarro: Before my right hon. Friend turns to another subject, will he allow me to ask him two short questions on the abolition of purchase tax? Will he give the longest possible notice of his detailed intentions for the abolition of this tax to prevent dislocation among manufacturers in the supply and demand for their goods? Secondly, I am sure that my right hon. Friend realises that hon. Members have always had the prerogative of pleading for purchase tax

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  relief on Adjournment debates, and that the purchase tax rate and its scope could be changed by Statutory Instrument. In relation to VAT, does my right hon. Friend intend to deny to Members of the House of Commons the opportunity to make such changes and to cause any alteration in VAT to be subject only to Amendments to a Finance Bill?
  Mr. Barber: I should like to consider my hon. Friend's second point, and I shall do so. On his first point he is absolutely right. It is incumbent on the Government, and on myself in particular, to take all reasonable action to prevent the occurence of the sort of problems to which he refers, not only in respect of manufacturing industry but also in regard to the many wholesalers and retail traders. This matter has been very much in our minds. Inevitably when making a major change in the form of indirect taxation there will be some problems which it is extremely difficult to deal with in a wholly satisfactory manner. However, I assure my hon. Friend that I shall do everything I can to avoid the sort of dislocation to which he refers. Now that we have published our proposals I shall be ready to hear from any of my hon. Friends, or from any other hon. Member in the House, about proposals they have to smooth this transition—which is a major problem.
  Mr. John Gorst: Could my right hon. Friend confirm that if there is a change in VAT rate, upward to 12½ per cent. or downward to 7½ per cent., all the rates will change and that we shall not face a situation in which some rates will be at 7½ and some will remain at 12½ per cent. so that effectively there will be two rates of tax?
  Mr. Barber: This power to vary the rate in advance of the coming into operation of the tax next year is a once-for-all power. This will apply right across the board.
  I turn to income tax. It is fair to say that my proposals for raising the single and married persons' tax allowances by a higher amount than ever before have—not surprisingly—been generally welcomed. Some 2¾ million people who were otherwise liable to tax will, as a result of the change, be wholly exempt
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  and all those who remain liable will have their tax bills reduced by £1 a week.
  Mr. Michael Meacher: The right hon. Gentleman has many times mentioned a cut of £1 a week. Will he acknowledge that the man earning £1,000 a year with two children will get a tax cut of about 35p a week, whereas the man on £20,000 a year will get a tax cut of about £17. Therefore will he change his statement, since it is in accurate?
  Mr. Barber: I disagree entirely with the hon. Gentleman about his second example. As for his first example, I have always made it clear that everyone who still pays income tax, after the raising of the thresholds, will benefit to the extent of £1 a week. That is the case, and it has been made quite clear. All this has been commented on extensively, and it needs no further elaboration from me. I have no doubt that it will be discussed again when we debate these Clauses in Committee.
  Our proposals in the Bill are in line with the pledge that we made in our election manifesto to reduce the burden of taxation and to make
  "… progressive and substantial reductions in income tax."
  Clause 63 provides for the single person's allowance to be raised to £460 and the married couples to £600. It also makes corresponding alterations in the allowances which will be due when the unified system of taxation comes into effect next year. The single person's allowance will then become £595 and the married allowance £775. It is one of the great advantages of the new unified tax system over the existing system that these figures will then represent the actual minimum income at which those concerned will become liable to tax.
  The other changes in the personal reliefs have attracted rather less attention. But they are very important and they should not be overlooked. The income limits for both age exemption and small income relief are to be raised. I shall not weary the House with the figures. The details are in Clause 63. These changes ensure that those who are entitled to these reliefs will benefit as a result of the increase in the personal allowances.

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  I am sure that hon. Members on all sides of the House, recollecting the debate that we had last year, will welcome the decision to fix this year the rates of unified tax which are to apply for 1973–74. These rates will still be provisional, because they can be varied in next year's Finance Bill. Nevertheless, by taking action this year we shall greatly assist those who have to prepare for the change to the new system.
  The rates are set out in full in the table in Clause 64. Tax at the basic rate will be charged on the first £5,000 of income—that is, after deducting the taxpayer's personal allowances—and, as I foreshadowed last year, this basic rate will be 30 per cent. This is broadly equivalent to the present standard rate of income tax less earned income relief, which is 30·14 per cent. The tax rates on slices of income above £5,000 a year will rise by steps until a maximum of 75 per cent. is reached for those with incomes over £20,000.
  The starting point for the investment income surcharge and the rate of surcharge are also fixed in Clause 64. As hon. Members will know, it is an essential feature of the new system that the first slice of investment income should be taxed at earned income rates. The first £2,000 of investment income will qualify for this treatment. The rate of surcharge on investment income above this amount will be 15 per cent. My hon. Friend the then Financial Secretary explained why these figures have been decided on in his speech during the Budget debate. I shall not go over that ground again.
  The hon. Member for Heywood and Royton (Mr. Joel Barnett) attacked these proposals as regressive. To my mind, this is completely misconceived. To the extent that they benefit those with investment income, in my view they are a much needed corrective to the present gross imbalance in the impact of taxation as between earned income and investment income.
  After all, in these matters there is no absolute method of measuring or judging what is fair and what is not. But when one is constructing, as we are, a radically new tax structure and system, the sensible course is to produce a logical, coherent and straightforward system of rates. This is what we are doing.
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  To argue, as some hon. Members opposite sometimes appear to do, that any change from the existing incidence of taxation is inevitably unfair is to condemn the British taxpayer for ever to remain imprisoned in the maze of haphazard decisions of the past and to remain imprisoned in the jungle of an incoherent and in many cases wholly illogical tax system. That is a conclusion which we on these benches reject.
  During our forthcoming debates, we can argue about the new scales of tax. I have no doubt that arguments will take place. But it is inherently more likely than not that a logical and straightforward scale is fair and just and that any so-called "benefits" to certain taxpayers merely underline the excessive burdens that they have been carrying under the existing complicated system.
  At this stage, I should like to bring together the measures in the Budget and in this Bill which are designed to promote a higher level of personal saving for the longer term. If we are to achieve and sustain a faster rate of economic growth we must invest a higher proportion of our national income. In the long run it is essential that this should be financed by a higher proportion of personal saving.
  First, there is the exemption from the investment income surcharge of the first £2.000 of investment income. This means for anyone in the country who is in the process of building up a modest accumulation of capital that the income from his savings is taxed in exactly the same way as earned income—[Interruption.] I realise that the Labour Party is opposed to these proposals, and we shall argue them out in Committee. At the moment, I am explaining the consequences of them. In future, for the overwhelming majority, the income from savings which are so essential to build up a widely spread property-owning democracy and to build up the wealth of the nation will be taxed in exactly the same way as earned income and will no longer be penalised.
  Secondly, there are the changes in estate duty, to which I shall refer in a moment. I have no doubt that the previous burden of estate duty has had a discouraging effect on savings. It has been one among admittedly many factors

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  which in the post-war era have helped to spread a feeling that there is little point in saving and building up wealth for the future.
  Thirdly, there is the important change that we are making in the taxation of unit and investment trusts. This is just one more development in the promotion of a "capital owning democracy", which we on this side believe is both advantageous for the individual citizen and good for the nation as a whole.
  Mr. Ray Carter: Can the right hon. Gentleman explain precisely what he means by a "modest level of capital"?
  Mr. Barber: If the hon. Gentleman and his colleagues are really saying that they believe in all the circumstances that it is inequitable, apart from the economic consequences, to relieve investment income up to £2,000 a year entirely from discrimination between earned and investment income, most people in the country will disagree with him. The very fact that there will be many people who will not have investment income of that degree does not establish that what we propose is inequitable. I believe that this is the right way to proceed.
  The House will not expect me at this stage to go into the details of the provisions relating to Estate Duty. They are set out in Clauses 111 and 112 of the Finance Bill. However, I should like to take this opportunity to deal with one point which was raised in the Budget debate by Mr. Boyd-Carpenter, the then right hon. Member for Kingston-upon-Thames.
  He suggests it is anomalous to set a limit of £15,000 on the amount that can be left free of estate duty for widows while exempting charitable bequests up to £50,000. The answer is that we have had to approach the limits for these two reliefs from quite different points of view.
  We shall be giving further consideration to the whole question of bequests to widows and widowers in connection with the wide range of discussions we hope will be prompted by the Green Paper on a possible inheritance tax. But I came to the conclusion that it was right to take some action straight away. In considering what could be done here I
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  had to bear in mind that if a limit of £15,000 had not been set, the cost of the relief would have been unacceptably high.
  The result of the change is that an estate of up to £30,000 can now pass to the widow wholly free of estate duty. There will be considerable reductions in the burden further up the scale; if an estate of £50,000 is left wholly to the widow, there will now be only £6,000 to pay compared with £15,500 under the old law. This is a considerable measure of relief and will be widely thought to be fair.
  The relief for charitable bequests is designed to encourage the flow of funds to charities. The cost of this concession is modest, and in deciding whether or not there should be a limit and what the limit should be I was not constrained primarily by considerations of cost. The reason for the limit is, quite simply, that, without it, there would be serious risks of abuse. I came to the conclusion that a limit of £50,000 would be appropriate to deal with this.
  I should next say a word about the capital gains of authorised unit and investment trusts. As the law stands, these are charged at 30 per cent., and the net gains are apportioned to the unit holders and shareholders so as to reduce their own capital gains liability.
  There can be no doubt that this arrangement puts the investor of modest means at a disadvantage if he invests through the trusts instead of on his own behalf, since the rate appropriate to his own capitals gains may be much lower—15 per cent. for a basic rate taxpayer after this year. Moreover, the apportionment arrangements are cumbersome and in many cases almost completely perplexing.
  Sir G. Nabarro: And time wasting.
  Mr. Barber: And time wasting, as my hon. Friend says.
  Under Clause 88, the effective rate of tax on the gains of the trusts will therefore be reduced in effect to 15 per cent. from 1st April this year.
  Clause 107 then provides for a non-repayable tax credit of 15 per cent. to be set against the unitholder's or shareholder's gain on the disposal of units or ordinary shares in the trust. If his personal capital gains tax rate is 30

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  per cent., he will therefore pay 15 per cent. net after allowance of the credit, so that the full tax will have been collected in two stages—15 per cent. from the trust and 15 per cent. from him. If his personal capital gains tax is calculated on the alternative basis under which half the gain is exempt and the other half is charged at his income tax rate, the basic rate taxpayer after this year will have nothing to pay.
  The new system will therefore be fair to the trusts and to those who invest through them. It will also enable the cumbersome system of apportionments to be discarded, and this will be a welcome simplification.
  A large part of the Finance Bill—indeed, more than a third of it—is taken up with the reform of corporation tax. This is a very large Finance Bill and I apologise to the House for speaking at some length. I will be as brief as I can, but I think it is very important at this initial stage, before we come on to the Committee stage—I shall not be referring to many proposals in the Bill—to deal with some of the main proposals which will be helpful to later debates.
  I can spare the House an exposition of the details of the Bill at this stage, because we explained its principal features during the Budget debates, and since then we have issued a White Paper with the Finance Bill which gives not only a general account of the new system, but deals with the individual Clauses.
  I shall therefore confine what I have to say to more general comments. For the benefit of those who have no great appetite for Finance Bill reading, I commend Clauses 79 to 82, which set out the essence of the new structure and introduce its basic concepts.
  The change we have introduced gives effect to views about the shape of company taxation which we have held ever since 1965. Right from the beginning, from those early debates on the new corporation tax in 1965, we made it clear that in our view dynamic growth could not be secured by encouraging companies to sit on their funds. That merely led to the survival of the fattest, as we put it then. Nothing has happened to cause us to change our views on this matter.
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  As I made clear both this year and last, our original preference was for a two-rate system of corporation tax, because we thought that that would be the easiest to introduce and, indeed, under stand. But we also made it plain that we felt strongly that, where possible, major tax changes should take place only after full and careful public sonsultation. It was for this reason that a Select Committee was appointed. As the House knows, we were happy to accept the proposals which it made in this particular regard.
  There will, if course, be those who, harking back to the economic arguments which were advanced in 1965, may assert that the change we are making may affect adversely the level of industrial investment because it removes the disincentive to distribute. The answer to this is threefold.
  First, we are introducing a dramatically improved system of direct incentives to invest. [Interuption.] If right hon. and hon. Gentlemen opposite do not think after all these years of pressure on them and on previous Conservative Governments that the introduction of free depreciation is not a—[Hon. Members: "Grants."]—I am talking about the whole country—the introduction of free depreciation is a dramatically improvde system of direct incentives, all I can say is that they are wholly out of line with the thinking of management in this country.
  Clause 65 of the Bill gives free depreciation on investment in plant and machinery and, as I have explained in my Budget statement, there are the additional regional incentives which will be provided for in a separate Industry Bill which is to be introduced by my right hon. Friend the Secretary of State for Trade and Industry. This means that overall we can claim with justifiable pride that we have the most favourable system of incentives for investment ever known in this country.
  Second, looking at the generality of larger companies, the case for the change is, in essence, that, by removing the present discrimination between retained and distributive profits, it will take away impediments to the raising of new equity capital, promote the better allocation of investment resources and encourage a tauter and more efficient company sector. In this way it will play its part in gaering up our economy to meet next year the

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  challenges and opportunities of the Common Market.
  Finally, I have accepted that special treatment is needed for the small company which is peculiarly dependent on its retained profits to finance the investment it needs for expansion and development.
  I cannot emphasise too strongly that, as a result of my proposals on this point, small companies—that is to say, 90 per cent. of all the companies in this country—will not only benefit from the corporation tax change in respect of their distributions, but will, at the illustrative rates I used in my Budget speech, pay no more tax on their retained profits than they do now.
  Mr. Joel Barnett: They are no worse off than now.
  Mr. Barber: The hon. Gentleman intervenes to say that they are no worse off than now, but they are five percentage points better off than they were when his Government were in office. All we had year after year when the Labour Government were in office were increases in taxation. Quite apart from these changes which we are making this year, since we have been in government in the last two years, we have at least reduced corporation tax on two successive occasions, and this has been welcomed.
  I remind the House that the rate is five percentage points lower than when we took office. Taken together with the relaxations for close companies in both last year's and this year's Budget, this means a very considerable easement of the position as we found it for these companies.
  Mr. Joel Barnett: Will the right hon. Gentleman confirm that close companies with the highest profits will pay 25 per cent. more in corporation tax?
  Mr. Barber: I certainly do not propose to confirm that. [Interruption.] If the hon. Gentleman wants to bandy about figures he will get an answer, but in Committee. I do not propose to confirm or deny figures like that off the cuff. [Hon. Members: "Answer."] Do hon. Gentlemen opposite want me to speak for another two hours answering such questions? This is a very long Finance Bill
  788
  and I am trying to cover as many of the important points as I can.
  Mr. Barnett Mr. Barnett rose——
  Mr. Barber: I will not give way. Nor do I intend to be stimulated by the hon. Gentleman into answering questions about figures such as the one he asked me.
  I can sum up in this way the main decisions which will be of particular advantage to small companies. First, we are giving special relief to small companies from the new rate of corporation tax. This will benefit about 350,000 companies. As I have said, that is more than 90 per cent. of all companies.
  Second, we are getting rid of a vast amount of the burden and administrative complication of the Labour Government's legislation on close companies. As a result of last year's Budget and this year's Budget, some 80 per cent. of the trading companies which suffered from this excessive work burden will now be very considerably relieved.
  Third, on the new value added tax, we are exempting all traders whose taxable turnover does not exceed £5,000 a years. This is a considerably higher exemption level than in other European countries.
  Finally, there are the two other tax changes which, as the Bolton Committee on small busineseses pointed out, are of immense importance to small companies. These are the reduction of estate duty and the reallowance of interest. Even with the special relief which does exist there is no doubt that the increasingly heavy burden of estate duty has discouraged the building-up of family businesses. I will quote one short passage from the Bolton Report:
  "My Committee wish to emphasise again that what is needed is a taxation policy which will restore initiative, encourage entrepreneurial activity and improve the liquidity position of small businesses. We believe that continued reduction in taxation of personal incomes and of estates would be most likely to achieve this result."
  The Government have gone a very long way to meet that request.
  I come to the provisions governing share options. If the House passes the Motion on the Order Paper concerning the split of the Bill for debate on the Floor of the House and upstairs, this matter will be debated in Committee of

  789
  the whole House. I will, therefore, say only that apart from the familiar arguments for and against the proposed treatment of share options, it is one of the facts of commercial and industrial life today that there is an increasing international market for able and experienced executives in industry. And in a situation where United States corporations, for instance, are in a position to offer share options and British companies are not, the American corporations are able to offer much more attractive incentives to good executives.
  The provisions of this Bill modify the 1966 legislation, which charged to income tax and surtax all gains from share options given by a company to its employees or directors. In making the change in this Bill, it is necessary to bear in mind that the grant of options over unreasonably large blocks of shares or on exceptionally favourable terms can militate against the interests of the general body of shareholders and may be little more than tax avoidance arrangements.
  We have, therefore, thought it right to remove the 1966 charge on gains from share options only where they are granted under schemes which are approved by the Inland Revenue as meeting certain conditions.
  These conditions are set out in Schedule 12. Schemes will have to be adopted by the ordinary shareholders and will be open only to full-time directors and employees. The options must not run for more than seven years and must be for the acquisition of shares which are generally available.
  The price at which the shares may be acquired must not be less than the market value of the shares when the option is granted, and the scheme must not permit the grant of options to any individual to exceed stated limits related to his salary. Where these and other conditions are satisfied, gains on the exercise after 5th April, 1972, of the options will be chargeable only to capital gains tax. There are also provisions governing share incentive schemes.
  Formal approval of schemes will be possible only after they have been adopted by the companies' ordinary shareholders. Once the Finance Bill has become law, however, the Inland Revenue will be ready to discuss draft schemes
  790
  with companies' advisers, in much the same way as they have done during the last few years, with a view to giving provisional approval in appropriate cases.
  The legislation is complicated, but companies which wish to introduce straightforward schemes should have no difficulty in obtaining approval and I hope full use will be made of the opportunity of assisting employees to acquire shares in their companies.
  Clause 71 provides for the restoration of relief from income tax for payments of annual interest and interest on bank overdrafts, subject to disallowance of the first £35 of interest paid by an individual. I explained the reasons for this threshold in my Budget statement.
  As a practical matter, some such threshold is essential. The threshold does not apply to loans, as distinct from overdrafts, for the purchase or improvement of houses or land or for the purchase of plant or machinery to be used in the business of a partnership or employment.
  The size of the reductions in taxation which I have made in this year's Budget, and which are reflected in this Bill, took some people by surprise. I would not have been in a position to make tax cuts of such magnitude if we had not made substantial progress during the past year in reducing the rate of price and cost inflation.
  A number of factors have contributed to this. There has been a much greater recognition of the severe economic and social damage which was being caused by the headlong pace of pay increases a year ago. The more moderate increase in prices has helped to bring about more moderate pay settlements.
  But there was one particular development which played a major part in this progress. That was the initiative taken by the CBI on prices. Indeed, it is no exaggeration to say that without that initiative, and the encouraging response it achieved both in the undertakings given and in action, I would not have been in a position to make such large tax cuts in the Budget without incurring unacceptable risks both in terms of inflation and of the balance of payments.
  The present scheme is due to end in July, but talks are already going on with the objective of an extension for a

  791
  further period. I recognise that the price restraint of the past year has not been achieved without problems for many companies, especially when they have been under the pressure of excessive pay claims. On the other hand, the containment of prices has enabled me, both last July and in the recent Budget, to introduce measures designed to run the economy at a higher level of activity than would otherwise have been possible, and this development has had, and will increasingly have, a favourable effect on companies' profits.
  Looking ahead to a possible extension of the scheme, it is right and proper that managements should consider the direct and more obvious consequences for their profits. But I am sure that they will also bear in mind that if the scheme were not renewed the prospects for success in the battle against inflation would be reduced, and there would consequently not be such a good chance of achieving a high rate of sustainable growth, on which the longer-term financial performance of companies crucially depends.
  What is more, if the private sector were not prepared to continue with price restraint, the nationalised industries could not continue with the limitation on price increases which they have observed, and this would obviously have important implications for industrial costs.
  When, therefore, company managements are considering the effects of a further period of price restraint, I hope they will bear in mind that the alternative could well be less, not more, financially attractive to them, certainly in the longer term.
  Having said this, I must emphasise that policies of price restraint in both the public and private sectors must be accompanied by greater moderation of pay claims and settlements if they are to achieve the result we all want. I do not believe that trade unionists are any less concerned than government and managements to achieve a further lowering of the rate of inflation, for this is so obviously in their own interests.
  There is one important area where inflation has been particularly severe, and that is the cost of housing. Hon. Members will recall that in last year's Finance Act we abolished the stamp duty on
  792
  mortgages. A greater relief to purchasers of new housing—and so to the price of housing generally—will come from the reform of indirect taxation in this Bill. When we took office SET added £120 to the price of an average council house. Already we have cut that by half. Next year, with the complete abolition of SET, the other half will go, and under VAT new construction will be zero-rated.
  My right hon. Friend the Secretary of State for the Environment has been considering what further measures are now required to bring forward land for early housing development in accordance with good planning and in accordance with positive regional planning strategies, and he will be making a statement on his conclusions in the near future.
  In the meantime there is one change which we can make in this Bill and which will help those who are buying their own homes.
  The House will be aware that at present property other than stocks or shares worth not more than £5,500 is exempt from the 1 per cent. stamp duty; between £5,500 and £7,000 the charge is ½ per cent. I propose during the Committee stage to table a new Clause which will increase the exemption limit from £5,500 to £10,000, and provide that the band charged at the reduced rate of ½ per cent. will run from £10,000 up to £15,000. These changes will take effect from 1st August, which is the normal date for stamp duty changes. This will mean that at current prices about 96 per cent. of house purchases will be entirely exempt from stamp duty. I am sure that this proposal will be universally welcomed—especially by young married couples.
  Mr. Dalyell: What is the cost?
  Mr. Barber: The cost will be £33 million in a full year, and £21 million in 1972–73.
  Mrs. Renée Short: The right hon. Gentleman has said that house building is to be exempt from VAT, or zero-rated. Will he say why architects, quantity surveyors and other consultants used by building firms are to have their services subjected to VAT, and why the lawyers who will be negotiating the mortgages will also be subject to VAT?
  Mr. Barber: I do not know whether the hon. Lady knows this, but before I announced the proposals in the Budget we had the very fullest discussions with the professions about these particular matters. We came to the conclusion—for reasons which can be deployed in Committee but which need full explanation—that this was the appropriate answer. We have looked at this matter extremely carefully. I am pleased that the hon. Lady acknowledges the fact that the change from SET to a zero rating for new houses under VAT will be a very substantial help with this general matter.
  In my speech winding up the Budget debate I claimed that the Budget provides the biggest tax incentives for investment and for modernisation that we have ever had in this country. I claimed also that we have made the largest reductions in income tax, and also in purchase tax, that have ever been made.
  As is so often the way in this House just before 10 o'clock, that part of my speech was perhaps somewhat inaudible. Nevertheless, these claims have not been disputed, and had time and audibility permitted I could have made further claims which I believe are equally indisputable.
  It is not too much, I believe, to claim, that the tax reforms in this Bill—even before the new tax credit system-amount to the most radical reform of the tax system this century.
  At the same time the changes in social benefits and taxation that we have announced benefit both those at work and those who have retired. They benefit all income taxpayers and they provide important help to families with children below the tax level.
  As we prepare for entry into the Common Market we have—to quote the Economist—
  "the most intensive system of investment incentives of any country in the world".
  And we are giving what is the biggest ever encouragement to personal saving which is so vital if over the years ahead we are to expand the wealth both of the nation and of its citizens.
  For regional development there is now the largest margin of preference for investment that we have ever had in our history. And for employment, there is the biggest stimulus to demand ever given in any Budget.
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  Finally, and most important of all, our whole strategy is now geared to a faster and sustained rate of growth of national prosperity than has been achieved by this country within living memory. This Bill provides the detailed legislative authority to make that strategy possible, and I commend it to the House.
  5.25 p.m.
  Mr. Denis Healey: First, I must thank the Chancellor for his congratulations to myself. I assure him that I shall do my best to fulfil the prediction he made about the way in which I shall treat my responsibility. I thank him also for his words about my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) and those other colleagues who retired with him. All of us would agree that they have made a great contribution to the life of this House and of the nation. One thing I regret about my present appointment is the circumstances which led to it taking place at this time.
  I feel that I should ask for the indulgence normally granted to a maiden speaker. But I fear that I cannot, on this occasion, guarantee to maintain the uncontroversial style which is the price paid for that type of indulgence—particularly on a day when we have had the announcement, for the fourth month in succession, of over 1 million persons unemployed in this country. I found it quite astonishing that the Chancellor, in a speech which lasted for over an hour, did not once use the word "unemployment", and did not refer to unemployment at any point or indicate how the measures he is proposing that the House should adopt would affect that problem.
  I recognise that I have an immense amount to learn in my new responsibility. I have never been a business man or a banker. I am bound to confess, however, that the record of business men and bankers as Chancellors has not been an excessively brilliant record. I am not an economist, but I am far from convinced that that, too, is not an advantage. It always seems to me that economics is a branch of that pseudo science, psychology, which for a time acquired a certain respectability by using numbers, but I am glad to say that it is very much losing that reputation today.
  This is, perhaps, the first period in a century or two since Adam Smith that

  795
  economists have been showing a certain humility when they make comments and predictions about what is happening. Almost all of the generalisations which all of us took for granted 10 years ago about the economy of the nation, and, indeed, of all industrial nations, are now seen not to hold water. We have stagnation with inflation, and large-scale unemployment with soaring wage demands. The standard remedies no longer work. Chancellors press the button and nothing happens.
  Perhaps it is worth asking, at the beginning of the discussion of the Bill, why that should be so. I am sure that the reason is that real men and women are very different from the abstract concept of the rational economic man on whom economists base most of their predictions. Human beings are immensely complex, capable of extremes of idealism and self-interest. Many prefer leisure to an extra £5 a week. Some prefer to live on a low wage among their friends than to move 200 miles and earn a higher wage. Many people, I think most, regard dignity and status as more important than money. Many, I am glad to say, are prepared to make sacrifices of their personal interests for the sake of their comrades in the factory or in the union, or for the sake of the older people or the younger people, rather than to exploit the strength of their bargaining power for personal interest alone.
  But I am sure that the key to the new situation in which we find ourselves is that the whole population in the industrialised countries today is better educated and looks further ahead than ever before. People now make their own calculation about the future before they take decisions which affect our economic life. The working man who sees unemployment and expects it to continue, once he has satisfied his basic needs, may save a good deal of the rest of his money rather than spend it. This is certainly one of the reasons why attempts to stimulate the economy both in Britain and the United States by tax reliefs have been far less successful than treasuries and economists believe. Similarly, the business man with a generation of stop-go behind him will refuse to invest the money given him in tax reliefs unless he
  796
  is satisfied that when the new plant is producing the goods the market will be there to buy them.
  This again is why, in spite of repeated efforts by the Chancellor to stimulate investment by various types of incentive, the lack of confidence in his ability to manage the economy means that investment remains at an all-time low. The structure of industrial society all over the world is now on the edge of a technological revolution and demands far more central control by government if the changes which are inevitable are not to dislocate the whole fabric of society. In this new and rather unfamiliar situation it is confidence in the Government's ability to manage the economy which is the key to any hope of progress. In Britain that confidence has collapsed, as much among industry as among labour, over the last two years of the Government's rule.
  This is not surprising, because the Chancellor has got it wrong every time. He has already produced three Budgets or mini-Budgets before this. We warned him again and again that the measures he proposed were either harmful, irrelevant or inadequate. He denied it. But none of the objectives he set himself on these three previous occasions was achieved. Those objectives were precisely the same as the objectives he set himself this afternoon, namely to achieve a forward-looking industry and faster and sustained growth.
  What is the record? Take unemployment, where we have had the worst April figures today for over 30 years. Over 1 million are out of work in the United Kingdom for the fourth consecutive month. The seasonally corrected number of wholly unemployed persons in this country is up again by 4,000. In great Britain as a whole there are five men for every vacancy and in Scotland there are 17 men seeking to fill every vacancy. This is overwhelmingly the central economic problem facing the country, and it received not one word of comment from the Chancellor this afternoon. Unemployment in Britain today is by far the biggest single cause of avoidable human misery and suffering. It is also the biggest single cause of social inequality and its consequences spread far beyond those directly concerned through being unemployed.

  797
  Unemployment of 1 million means a toss for the nation in potential wealth and welfare which could be as high as £3,000 million a year—over £3 a week per household. The men and women who are unemployed are also consumers and are failing to contribute as they might to the spending power of the nation, which is intended to stimulate the economy. We face therefore a vicious circle. The object should be to abolish unemployment or to reduce it to a tolerable level. But once unemployment reaches 1 million it is impossible to find a way of doing so quickly without incurring a rate of inflation which is liable to wreck the whole fabric of the economy. Any Government who have allowed unemployment to reach its present level and maintain it are not only committing a moral crime against the nation but are responsible for any economic catastrophe. We have a spare capacity in manufacturing industries at the moment of 10 per cent. Even the Treasury admits that there is a gap of 3 per cent. in our productive capacity at the moment, and many independent economists believe that the gap is a good deal higher. Even if the Chancellor achieves the objective he set himself in the Budget and Finance Bill we cannot look forward to any significant fall in unemployment over the coming year.
  Let us look at the record at the other end of the scale on investment. Investment is a major key—not the only one—to growth and to removing unemployment. Ever since the war we have run steadily behind our European partners in our rate of investment and we have tended to get less return in productivity for the investment we have made than many of them. During the last 12 months the growth in our gross national product was only 1 per cent. The growth in industrial production was only ½ per cent., and manufacturing production actually fell. In the last 12 months there was a decline in every major sector of industry except chemicals, and the news of chemicals today is by no means encouraging.
  Production in this country was declining faster in the second half of the last 12 months than in the first half in spite of three Budgets by the Chancellor, each of which he confidently predicted, as he predicted this afternoon, would produce a total turn-round in the trend of our
  798
  economy. The sale of machine tools is probably the best token of the tendency of the economy to improve its productivity, the best index of our industrial future. Demand for them fell by 37 per cent. last year. In a rather mournful article this morning the Financial Times had only one crumb of comfort to offer. It said that the state of the machine tool industry was so low that there was nowhere for it to go but up.
  The Chancellor's main theme this afternoon in his discussion of our industrial problems was investment. Investment fell in real terms 8 per cent. last year and according to the survey carried out by the Department of Trade and Industry it is likely to fall about 3 per cent. during the current year. In cash terms, as distinct from real terms, investment last year, according to this week's figures, went up by only 0·6 per cent. and yet trading profits went up 12·3 per cent. in cash terms and undistributed profits, after tax and dividends, went up 23·7 per cent. I ask the Chancellor, does he believe, with the figures published by Government Departments in the last few days, that the key to investment is simply to increase profits? Surely the effects of the record of the last year show that this is not the answer, and if there is an answer it must lie elsewhere.
  Tax cuts are not the answer. The Chancellor again boasted this afternoon of the enormous tax cuts which he has made, particularly for business, in the last 18 months, and it is precisely during this period that investment has fallen more heavily than at any time since the war. There is no sign whatever that the prospect of entry into the Common Market is changing the intentions of business.
  Mr. J. Bruce-Gardyne Mr. J. Bruce-Gardyne (South Angus) rose——
  Mr. Healey: I will give way in a moment.
  What is very striking to those of us who have read the page upon page of advertisements signed by leading industrialists recommending entry into the Common Market and saying how it would stimulate the economy and investment is that none of them is putting his money where his mouth is. The situation is gloomy in the extreme. If the Chancellor wants to make industry more efficient

  799
  and forward-looking he will have to behave very differently from the way in which he behaved in his last three Budgets. There is no sign whatever of that sustained and faster growth which he confidently predicted as a result of his three previous Budgets. Why should there be any confidence in his prediction that we shall get faster growth as a result of this Bill?
  As a nation, we now face a strike of the capitalist class, which is infinitely more damaging to our national welfare than any go-slow on the railways, but the Government have produced no Industrial Relations Act to deal with members of that class.
  Mr. Bruce-Gardyne:I cannot help feeling that the right hon. Gentleman is trying to suggest that the time lag between any policy activity and its result in the economy is far shorter than the evidence suggests it is. Surely the truth is that during the last years of Labour Government there was a catastrophic decline in corporate profitability, and that the pay-off in terms of the decline in investment followed after the present Government had taken office. There is bound to be a time lag between the build-up in profitability and the investment that will follow from it.
  Mr. Healey: That is a very ingenious explanation, but let me make two points. First, the Chancellor certainly disagrees with the hon. Gentleman, because when he presented his July mini-Budget last year he confidently predicted that we should see the results in terms of a fall in unemployment and in increase in investment in September. If there were any truth in what the hon. Gentleman is saying, why did not his right hon. Friends produce two years ago the incentives they are producing today? They had every opportunity to do so. The plain fact is that the hon. Gentleman is trying to find an ex post facto justification for a continuous failure by the Government to produce measures which would carry out the predictions the Chancellor made when he presented them to the House.
  The Chancellor had something to say about prices. They are still roaring up, though not so fast as they were 12 months ago. However, the Minister of
  800
  Agriculture, Fisheries and Food told us on Monday that food prices went up by nearly 12 per cent. in the past 12 months. Overall, prices went up by 8·2 per cent. last year as against a rise in earnings of only 8·7 per cent. I do not believe there has been one 12-month period previously since the Second World War when the gap between prices and earnings over the year was as small as it was during the past 12 months. The gap is so small that for the working class as a whole the past 12 months produced almost no improvement in their standard of life. That means that for large sections of the working class there must have been a fall—for some a very large fall—in living standards.
  House prices are the most dramatic example, and I am very glad the Chancellor referred to them. We on this side welcome what he proposes to introduce into the Bill to extend the relief stamp duty. But relief of stamp duty is only a drop in the ocean compared with the rise in prices. In the country as a whole house prices rose by 30 per cent. last year, and in the London area they rose by 60 per cent. The reason was not the irresponsibility of the workers, of trade unionists, but the irresponsibility of property companies and speculators in land. The central problem is that the percentage of the cost of a house attributable to the land on which it is built has risen from 5 per cent. before the war to 25 per cent. today. All of us on both sides look forward with avid interest to the proposals the Chancellor has promised that his right hon. Friend the Secretary of State for the Environment will present to us for dealing with the problems in the near future.
  Since the present Government took office the only bright piece of news on the economic horizon has been the balance of payments. The main reason for our staggering balance of payments record has been industrial stagnation at home and a change in the world terms of trade, which has been very much to the advantage of this country. But even this gleam is fading now. The figures of our visible trade balance of recent months have been disturbing in the extreme. I was astonished that the right hon. Gentleman made no reference to this, as Chancellor of the Exchequer, responsible for the country's economic future. We had a gap of £33 million on visible trade in

  801
  February and of £80 million in March. Some of that £80 million is attributable to the coal strike, and some to the jumbo jets which always fly over the horizon when Government's have particularly bad trade figures. I seem to recall that happening on a previous occasion.
  Most of the commentators and economists who have studied those figures believe that the gap in our visible trade in March, after taking account of those factors, must have been over £30 million. That means that even if it does not get worse we shall have a gap on visible trade this year of about £400 million, which, after we have taken into account the steady surplus on our invisible exports, as we hope we can, will put our overall surplus this year to a quarter of what it was last year. I wish the Chancellor had said something about this and had explained why he thinks the trade balance is going wrong. I hope the Financial Secretary will say something about it when he winds up.
  I cannot help feeling that perhaps one reason for the gap at this time is the concentration in the Chancellor's last measures on relief for consumer durables. I noticed the other day that car imports increased by 25 per cent. between the last two quarters for which figures are available. The relaxations on hire-purchase control also led to a flood of Japanese, Italian and German refrigerators, television sets and so on. Against this background, I am not surprised the Chancellor has told the world that he has left his hands free to devalue the pound when the new burdens imposed by entry to the Common Market begin to fall on us during 1973.
  Mr. Christopher Tugendhat: The right hon. Gentleman will have noticed that recent figures show that one of the difficulties in our balance of payments is that the cost of goods produced in this country for export has risen much much more rapidly than the cost of our imports. Since he is talking in such a broad sense. I am sure he would wish to put in his speech a plea for wage restraint in those circumstances, since it is so relevant to the balance of payments, which concerns him.
  Mr. Healey: I am grateful to the hon. Gentleman. I shall have something to
  802
  say about that towards the end of my speech. At this stage it is better that we get down to the contents of the Bill in detail.
  We must ask ourselves why the Government's record has been so appalling. It is only when we have answered that question that we can form a judgment whether the Bill will do any better than the earlier measures taken by the Chancellor to improve the situation.
  I readily admit that there are some factors in the new economic situation in Britain, as in Western Europe and the United States, which still baffle all the experts. Many of those factors arise from the fact that the whole of the Western world is moving out of the Industrial Revolution into a technological revolution. Its; social consequences are as important in their effect on the economy as its direct economic consequences.
  The extraordinary thing is that, faced with this totally new situation, the Government, instead of producing an economic policy appropriate to the computer age, are moving back to the age of the spinning jenny of the early Industrial Revolution. The Chancellor's whole policy until today has been the economics of Mr. Gradgrind and Mr. Samuel Smiles. His basic principle, chat of the Prime Minister and the Secretary of State for Trade and Industry, repeatedly stated in the House—and we had many echoes of it this afternoon—is to take the Government out of the central control of the economy wherever possible, except perhaps with wages where the Government have secretly attempted continuously to intervene, and to leave the jungle war of free competition, ensuring that only the fittest survive. We have heard this from the Prime Minister, the Chancellor and almost every leading Minister, the philosophy of the lame duck.
  That policy did not work and cannot work in any democratic society because the people will not let it work. That is why Mr. Gradgrind and Samuel Smiles are no longer with us. This policy of the lame duck went down on the Clyde, in Derby and in Belfast. We now have investment grants back, we have the Industrial Reorganisation Corporation back under another name. The Government are still spinning somersaults on every

  803
  aspect of their economic dogma and these somersaults, incidentally, are totally ignored by the vast bulk of Press and television commentators. What is disturbing is that though the Government have half abandoned the lame duck philosophy, the philosophy of the marketplace, they so far have found nothing whatever to put in its place.
  Let me take some of the points the Chancellor made about his reforms of taxation, particularly corporation tax. The CBI has pointed out to the Chancellor in the last few days that the change in corporation tax next year will slow down investment this year because companies will wait to offset their expenditure against the50 per cent. tax rate introduced next year as against the 40 per cent. rate this year. The CBI is already asking him to reconsider his idea.
  The Chancellor's defence of his decision to introduce the imputation system for corporation tax convinced none of us on this side and I doubt very much whether it convinced many of his hon. and right hon. Friends. What he seemed to be arguing was that because he had introduced certain other measures to stimulate investment, such as the restoration of investment grants which he had previously cancelled, he could afford to allow companies to distribute more of their profits because the fall in investment would be taken up by these other measures. But we had an 8 per cent. fall in investment last year and to maintain investment at its present rate is not good enough.
  The Chancellor seems to believe that if he distributes the profits more widely it will create new incentives and somehow or other investment will increase. The experience of this country, America, Germany, Japan and France, all the leading industrial countries, is that industrial investment comes as to about 94 per cent. out of retained profits and only 5·8 per cent. out of new capital issues. I hope that the Financial Secretary will deal with this point because the Chancellor did not even refer to it in his last speech and the lame and contradictory explanation which he gave us this afternoon will certainly have created grave misgivings among all those who care about the future of our economy.
  804
  That was all the Chancellor had to say about improving the economic state of the country. Nearly all the other measures he introduced were basically a reflection of the class prejudice of the party he represents. There is no question whatever about that, and the Chancellor admitted that it basically represents a transfer from the poor to the rich, from those who work for their living to those who do not, but live on investment income. It all adds up to a deliberate attempt to divide the nation when the overwhelming need is to unite it. I am not clear whether his motive is some sort of social or economic dogma or simply an honourable desire to pay back the big companies for the services they rendered to the Tory Party at the last election. In either case the result is the same, it is a brutal and provocative affront to all those on the shop floor whose co-operation the nation needs.
  If the Chancellor had £1,200 million to give away this year why did he not start by restoring school meals and milk, and removing dental and prescription charges, the imposition of which was so bitterly resented by the majority of people? He did not do that. He cut the tax on unearned income by nearly half; he imposed investment surcharge only on investment in excess of £2,000; he has taken 4½ million of the richest 5·7 million people in the country out of investment surcharge altogether. The level at which the relief on unearned income begins is 30 per cent. higher than the average earned income of the ordinary man. The results are more anomalies which must shame even the Chancellor.
  A married couple with £15,000 a year investment income receive a present from the Chancellor of £1,500 next year. A married couple who earns £15,000 get only £324 next year and they have to pay surtax simultaneously on two years when they get this relief. Consider the relief on loan interests about which the Chancellor had a good deal to say. This was so disgraceful that it embarrassed even his warmest supporters in the Presss by its shamelessness. Let me quote the Daily Telegraph:
  "Mr. Barber is as aware as the next man that he has made this piece of the tax mechanism even more arbitrary than before. To those, especially on his own side of the House, who felt his Budget measures were too egalitarian, Mr. Barber can point to his discrimination

  805
  against the hire-purchasing masses, who get no relief, whereas the minority in a position to negotiate substantial loans are exceptionally favoured."
  What is the effect of the proposal to exempt loan interest? It is concentrated wholly on the rich and excludes the average man borrowing up to £400 to £500 on which he has £35 a year to pay in interest. It is aimed basically at helping people earning over £8,000 a year and the only excuse he can find for it is that it may encourage some people to invest productively. There is nothing in the proposals to ensure that this is how the borrowed money will be used.
  Under his proposals a person can borrow for anything and the richer the person is the lower the effective rate of interest will be. A man can borrow money to buy shares exclusivly to make a capital gain, or to buy old pictures or antiques, again to sell a year or two later for a capital gain. There is no benefit whatever to the economy but very great benefit to the man concerned, according to his wealth. In addition we have the proposal to allow companies to pay executives with share options on which they will pay only capital gains and not income tax. We shall be discussing that on the Floor of the House in a few weeks so I will not say more now.
  This part of the Budget is a tax dodgers' charter. All the loopholes closed by the Labour Government are being prised open. There is another massive cut in surtax after the massive cuts which the Chancellor has already made in a previous Budget. To compensate for cutting surtax on the rich the Chancellor is imposing surtax on a wider band of people at the lowest end of our income scale, those whose poverty entitles them to means-tested benefits such as the family incomes supplement, free school meals, rent and rate rebates, exemption from dental and optical charges, and so on. For such people a wage increase offers no protection against rising prices since what they gain in wages they lose in benefits.
  I hope hon. Members opposite have read an excellent article by my hon. Friend the Member for Oldham, West (Mr. Michael Meacher) who points out that a surface miner with three children aged 7, 9 and 11—and if the chief Secretary disagrees perhaps he will give us his figures precisely at the end of the
  806
  afternoon—who was earning £22·50 last year was actually worse off immediately after the Wilberforce increase of £5 because of tax, inflation and loss of benefits. And this Budget simply makes him 10 pence better off out of the whole £5 increase in wage—an increase which was bitterly fought by this Government and in such a way as to make our current industrial problems on the railways an inevitable consequence.
  How can you ask ordinary men and women to exercise restraint in wage demands against a background of a Budget of this staggering unfairness? Of course, what the Chancellor can say is what he said this afternoon: "All right, but I am a Conservative and that is what party politics in Britain are about. This is where I think we should draw the line between the rich and the poor. But I have given £1 a week to everyone who pays full income tax and that should reduce wage claims and bring big benefits to the economy by releasing £960 million this year and £1,200 million next year".
  The question we must ask ourselves is how much of that £1 the worker will keep after the price increases which are actually being planned by the Government at this very moment to come into effect before the end of the next financial year. From October people will be paying up to 35p towards the new pensions scheme and the average worker will be paying5p. In October a rent increase of £1 will be imposed on everybody who is not actually in poverty. According to the best estimates, rates are going up this year by about 11 per cent. overall, and the Chancellor is as conscious as any of us of the terrifying trend in house prices. The Daily Telegraph suggested the other day—and I believe it is right—that you cannot get a 90 per cent. mortgage in the London area unless you are earning £60 a week—put this against the welcome but ultimately insignificant concession offered on the Stamp Duty.
  Other prices are still roaring up. Next year we shall face an entirely new range of price increases through the common agricultural policy, which begins to operate in January, and the VAT, which begins to operate in April. I do not want to turn this into a debate on the Common Market—Heaven forfend; we have spent much time on that and there is much time still to be spent—and I know there

  807
  are differing estimates of the precise amount by which food prices will rise. The Government claims 20p a week each year until completion in 1978. We all know that outside experts believe that prices will rise by about 50 per cent. a week each year.
  Mr. Cormack: Could the hon. Gentleman repeat those figures? Did he say 50 per cent?
  Mr. Healey: I meant 50p, not "per cent.". I said 50p and that is the higher estimate. Some people put it very much higher, for example Professor Kaldor, but I think 50p is more like it and it is certainly more than the 20p which the Government claim.
  What is worse still about the common agricultural policy is that that, too, falls very much harder on the poor than on the rich. I am sure many hon. Members will have read if not the full study at least the summary of the study by the Trade Policy and Research Centre which shows that when the common agricultural policy is fully operative households earning under £1,850 a year, the vast majority, will be £500 million worse off—all the households together, that is. To take the two cases it mentions, a single old-age pensioner will be paying £16 a year more for his food and families in the poverty group will be paying £33 a year more for their food, but people earning over £5,500 ayear will actually be paying £8 a year less for their food as a result of the changes imposed by the common agricultural policy. And this starts—I agree it only starts—in eight months' time on 1st January, while in this Budget the Chancellor has made no provision whatever to help the people who are going to be affected, although we had the assurance from Ministers in early debates that measures would be taken for those who were affected unfairly and adversely by these new increases.
  The value-added tax imposes even more serious burdens. I believe that the Home Secretary was right when he was Chancellor in saying that VAT is a bad tax if we have an efficient purchase tax, as we have in this country, and I believe that Mr. Gordon Richardson was right when he argued this in detail in a report for the Conservative Government. I am glad to see that the Government have
  808
  enough confidence in his judgment to make him Chairman of the new Industrial Development Executive. This is a bad tax for a country which has an effective sales tax, as we have in purchase tax. The Government were under no obligation whatever under the Rome Treaties to introduce this tax until 1978. In practice, as we know, Italy is still three years late in introducing the tax, after 14 years as a member of the Common Market, and is suffering no penalty. But the Chancellor has decided to introduce this tax at a stroke next year.
  Sir G. Nabarro: Quite right too.
  Mr. Healey: The hon. Member says, "Quite right too", but he is too experienced in these matters to take the same view as the Chancellor, that it is not a regressive tax. He knows it is a regressive tax and that is why he supports it.
  Let me give the Chancellor some examples. Because you have a 10 per cent. single rate of tax—if that is what the rate will be when we come to it, and I will come to that in a moment—instead of four rates of purchase tax, it means that the average housewife will pay 10 per cent. more for her children's clothes, whereas the wealthy widow will pay 16 per cent. less for her fur coat. If the Financial Secretary can offer alternative figures to these, which were obtained by me yesterday from a leading British store, I should be very glad to hear them later.
  Sir G. Nabarro: That is a very biased and discriminatory kind of argument. Children invariably have Brownie cameras and under the Labour Government the purchase tax on a Brownie camera was 55 per cent. My right hon. Friend brings it down to 10 per cent.
  Mr. Healey: I make no apology for discrimination, but I believe in discriminating in favour of the weak and the poor, not the rich and the strong.
  This new tax—and the Chancellor knows this better than anyone—is appallingly expensive to administer. The NED study suggested that it would require 6,000 to 8,000 additional civil servants, and this from a Government one of whose main promises before the election was to cut the number of civil servants. Worse still, it will force industry across the board to employ about 50,000 extra clerks. This is the estimate

  809
  quoted in an interesting article in The Times this morning.
  The Chief Secretary to the Treasury (Mr. Patrick Jenkin): I am intrigued by the right hon. Gentleman's figure of 50,000 extra clerks in industry. He will appreciate that this was a non-attributed remark in The Times article. I believe in fact that it is attributable to someone who is trying to sell business machinery.
  Mr. Healey: If the hon. Gentleman has a better estimate, perhaps he will give it. He knows perfectly well that the incidence of VAT on firms and individuals in this country is almost infinitely higher than the incidence of purchase tax. He knows that it is collected and rebated at many stages throughout the whole process. The Government would not need 6,000 to 8,000 additional civil servants if that were not the case. If the Government need that additional number of civil servants in order to operate the tax, nothing is more certain than that firms—many of them very small businesses—and individuals affected will have an enormous additional administrative load of paper work.
  It is inconceivable that even this Government would have introduced such a clumsy tax just to achieve the current yield of purchase tax and selective employment tax. They mean to increase the rate as time goes on. They are giving themselves power in the Bill to make the rate 12½ per cent. even before the tax comes into operation, to go up to 15 per cent. in 1974 and up to 18 per cent. in 1975. They propose to take power to do this simply by Statutory Instrument, debated at the fag-end of a busy day in this House, and the amount of money involved is some £350 million in additional taxation if the right hon. Gentleman chooses to go up by 2½ per cent. in the rate, which is three times as much as the amount which the Government can increase taxation at the moment under the purchase tax regulator.
  Mr. Barber: Will the right hon. Gentleman say, having looked through the Bill, whether there are any comparable powers to reduce the tax, and if so what are the series of figures coming down?
  Mr. Healey: The figures are exactly the same coming down. If the right hon.
  810
  Gentleman can give an assurance that he does not propose to increase the tax but to reduce it, we shall be happy and relieved to hear it.
  I must remind the right hon. Gentleman, in case he has forgotten, that the rate of 10 per cent. is least of any country in the Common Market. He is proposing to join an organisation which has already set itself the aim of harmonising the rates of VAT across the board. There is no case for anyone in the Common Market adopting VAT at all unless the object is to have a single rate or set of rates across the board. The only purpose of introducing a single tax is to have a single rate and thereby to reduce tax discrimination which may fall on goods exchanged across national frontiers.
  If it were made as a debating point, then what the right hon. Gentleman said in reply to my intervention in his speech was rather poor. I said that if the Chancellor wants to take some further commodities out of VAT he has given himself the power to increase VAT up to 2½ per cent. before it comes into force. I did not say, nor would I ever say, that this is the way the Opposition would propose to deal with it, because we believe that a single rate of VAT is highly regressive and discriminates against the poor. We believe that if one needs to raise the amount proposed there are other ways, as the right hon. Gentleman will find when he sees our Amendments. For example, one might well decide to take children's clothing out of VAT and to find the money by increasing surtax. I see no reason why the Chancellor should not take some such step—except, of course, the political prejudices which have inspired the whole Budget.
  Again, there is no provision in the Bill to help those hit mercilessly by this new tax next year, as they will be also by the common agricultural policy. The whole new section of the community is to be pitchforked into the poverty trap if the Government are to make available some increases in pensions or some increases in some other form of means-tested benefit. The fact is that this £1,200 million of tax "give-away"—the tax bonanza which the newspapers wrote about a few weeks ago—will be wiped

  811
  out for most people before it is received. It is not a present; it is simply a limited compensation for the deductions the Government had already planned in the real spending power and standard of living of our people.
  As a consequence, the stimulus the Budget gives to the economy—one of the additional reasons which the right hon. Gentleman gave of disbelief—will be far less than he expects. I ask him to tell us what is his estimate of the additional demand which will come to the economy from these tax reliefs. I suggest that it will be well under half over the year as a whole of the total amount of tax remitted. If he has another estimate, let him give it to us so that we have some opportunity of deciding whether the Budget does anything to meet our basic economic problems.
  I come back to my central theme. This Bill widens still further the gap between the rich and the poor in the country and particularly between the very rich and the very poor. It does nothing for the average man, whether he be a factory worker or a young executive. It destroys any possibility of establishing an appropriate climate for wage restraint. It is totally inadequate in its effect on our central problems, human, political, economic and social, and above all, unemployment, to which the Chancellor, on this day of all days, chose not to refer at all in his speech.
  Even if the Budget achieves the objectives set by the Chancellor—and it is no more likely to do that than any of the other Budgets he has presented to the House—there is no guarantee that it will reduce unemployment by more than a fraction over the next 12 months. That fraction will be largely made up of the 60,000 extra bureaucrats needed tooperate VAT. [Interruption.] I am talking not just of bureaucrats in the Government but of bureaucrats in business as well. The only cut in unemployment will come from the additional number of people required by the Government and industry to operate VAT—and, of course, from the golden hoard of tax consultants who will also garner a golden harvest.
  The Bill is deeply divisive of our society and harmful, inadequate or
  812
  irrelevant in its effect on our economy. That is why we shall be voting against it tonight.
  6.19 p.m.
  Mr. W. R. Rees-Davies: There are many matters in this lengthy and complex Bill to which one could allude, but I shall deal with only one, because I can do so only on Second Reading, since the Bill will go upstairs to Committee where a number of us may not be present. This is the question of the tax on the betting differential between on and off course. I give notice that I shall table an Amendment on this matter, supported by a number of my hon. Friends and commanding also a large measure of support from hon. Members opposite. The Amendment will lay a differential of tax. It will provide that on course the bets will attract a tax of 1 per cent. whilst the present tax of 6 per cent. will remain off course. I do this with the support of every racing person in the country and every association which has any interest in the racing world. The bookmakers, the Totalisator and everybody associated recognises that this is an essential if we are to save the racing industry of this country.
  So far as the Totalisator Board is concerned, if the Chancellor had acceded to the request of the deputation which I led to him last year and had introduced this change last year, I very much doubt whether we should have needed the Totalisator Bill this year. Had it been done, the losses at present being created by the Totalisator Board of approximately £250,000 a year would have already been swept aside by the advantages which would accrue to the Board by the improvement of a tax of that kind.
  There are two stages to this. It is very important that the Treasury should recognise that. The first stage is to decide in broad principle, shall it go down to 1 per cent., or 6 per cent. to 2 per cent., or 6 per cent. only down to, say, 4 per cent.
  The reason why it is not desired to omit any tax on the course—I think that my hon. Friend the Financial Secretary is dealing with this aspect of it—is that it is necessary to keep a careful supervision over this matter on course. It is therefore right to keep some tax on course if only to enable one to secure complete and

  813
  effective supervision over the finances of this tax.
  It will then have a substantial differential. All those associated with racing—whether they come from the Jockey Club, the Racecourse Association, the ordinary run of persons, from the book-making fraternity or the Totalisator—recognise that if we are to get people to go racing, to spend money to go on course, there must be a substantial differential which would attract the racegoer to go and enjoy the sport. Basically it is only those who go there who provide the money for the prize money, which enables the racing industry to continue. All those who sit and watch television or remain at home are making no contribution. Those who go pay approximately £3 or £4 a day for their day's pleasure.
  In the event of the tax being reduced from 6 per cent. to 1 per cent., the average punter on the course will be able to say that if he has two winners in the afternoon it will cover the amount it would cost him to attend on that day. Thus there is a genuine incentive to participate in the sport on the course and to enjoy its benefits. The loss to the Treasury is virtually minimal. Nearly £70 million is taken from bookmakers in off-course tax at 6 per cent. The totalisator has a turnover of only some £25 million. The bookmakers and their associates have a turnover of about £900 million. About £3½ to £4 million is the tax on course. The notional loss to revenue would amount to £2½ to £3 million on course. By attracting the people on to the course they will very greatly help the Totalisator to become financially viable and therefore save the Government from the danger of its becoming bankrupt, and they will do a great deal for the industry, which in any event would have to be done by the Levy Board.
  One hopes that those concerned in this case—which is now well understood by the Department of Customs and Excise—and those who advise them, who are people in Government Departments, who fully understand the position of the betting and gaming tax, will appreciate the arguments and recognise that what we asked for in this field is in order tomaintain this industry, which last year sold £3½ million-worth of bloodstock for export. It has a genuine and proper
  814
  export trade. That yields more than the tax which is obtained on course. The true figure is a good deal higher than that.
  This is an appeal to ensure the viability of the operation of what has become far more valuable to the Treasury than they ever believed possible. When the tax was introduced I remember Treasury Ministers saying that they thought they might get £20million from this tax. They got over three times as much. It is solid and it will continue. If we are to maintain the continuance of the tax—and here is a pure Treasury argument—to give them what they need, it is essential that we have a strong on-course betting market properly maintained. I assure Ministers, from my not inconsiderable experience in this field, that the on-course market is weakening. It is being maintained by two or three big bookmakers who are making money off course and who are seeking to sustain the situation on course.
  If this differential is granted by the Government in Committee—the 6 per cent. to 1 per cent., or 6 per cent. down to 2 per cent.; and it will need at least 6 per cent. to 2 per cent. to give the necessary differential—they can then go on to consider a separate matter, which will receive the support of the bookmakers notwithstanding that it is against their interests: namely, for the moneys collected off course, and on course to attract a different rate of tax.
  If this Amendment is granted by the Government in Committee, then on Report one could consider whether the on-course rate for the Totalisator in respect of all its bets could be paid at 4 per cent., and off-course at 6 per cent. If that is done there will be no difficulty in ensuring the viability of the Tote and the continuance of this profession.
  I said that I would deal with one subject. I adhere to that promise. I shall take the opportunity later to debate the value-added tax and the fine arts questions, which we shall have abundant opportunity to do at a later stage.
  6.27 p.m.
  Mr. Kenneth Lomas: I am sure the hon. Member for the Isle of Thanet (Mr. Rees-Davies) will forgive me if I do not follow him to the races. He has made a very pertinent point deserving of consideration.

  815
  I have given a promise that I shall not exceed 10 minutes, and I intend to adhere to that. In view of that it is not my intention to range over all the economic problems and the economic state of the nation today.
  I am glad to be the first on this side of the House to congratulate heartily my right hon. Friend the Member for Leeds, East (Mr. Healey), who is now the Shadow Chancellor, on a powerful and forceful speech. I offer him my very sincere congratulations.
  I was very distressed to hear the Chancellor in his opening remarks appear to say that he has had so much consultation on the value-added tax that he had more or less made up his mind already. He does not seem to be prepared to give way on any Amendments that may be put to him. I hope that that is not so, because no Chancellor is Mr. Perfect, and the present incumbent is certainly not that. He has been wrong before and could well be wrong again.
  It is right and proper that some of the things which perhaps could well be taken up in Committee should be ventilated this afternoon because for various reasons it may not be possible for me to speak to Amendments I may put down. I should like to refer to the Budget Statement of the Chancellor on 21st March, when, talking about the value-added tax, he said:
  "… these definitions of luxuries and essentials devised in the main 30 years ago have little relevance today. It makes no sense that for example, television sets, electric, gas or paraffin heaters are taxed at 30 per cent. while items such as Persian carpets or the latest Paris fashions should be taxed at a mere 11¼ per cent. And I am sure hon. Members opposite will be hard put to explain why, to take two pertinent examples, boats should be exempt from purchase tax while pipes are taxed at 45 per cent.!"—[Official Report, 21st March, 1972; Vol. 833, c. 1377, 1378.]
  Equally, it makes no sense to refuse zero rating of certain items of food and non-alcoholic drinks and to continue this rather stupid system. It makes no sense that soft drinks, fruit juices and potato crisps should be subjected to the 10 per cent. VAT, when asparagus, smoked salmon and caviar escape it.
  The Chancellor later said that value-added tax had been designed with the
  816
  interest of the lower income family in mind. I cannot believe that because, by the very nature of the Bill and the legislalation which the right hon. Gentleman intends to introduce on VAT, it means that many items, such as soft drinks, crisps and ice-cream, which feature prominently in the purchasing pattern of the lower-income groups, will be taxed, while luxury foods will not.
  It also seems to enter the realms of phantasy that glucose drinks can be taxed, while powdered glucose, from which any individual could make such drinks, is not; that tinned pineapple is free of tax, while bottled pineapple juice is taxed; that grapefruit juice and orange juice are taxed, while the fruit from which they are made, and from which any individual could extract the juice, escapes the tax.
  I am making a constituency point, which I do unashamedly, because in my constituency of Huddersfield, West I have a long-established and well-known firm of soft drink manufacturers, Benjamin Shaw and Sons Ltd. of Willow Lane, and it has a branch in the Colne Valley. I am glad that that constituency is now represented by a Labour Member. It was previously represented by a Liberal, and I am surprised that there is not one Liberal present to listen to this debate.
  I have a great deal of sympathy with the views expressed not only by Benjamin Shaw Ltd. but by the Soft Drink Manufacturers and that section of the Food Manufacturers Federation which is affected. Their view is that the new VAT arrangement, far from simplifying the tax structure and reducing inequalities of this kind, will only help to perpetuate them. I ask the Treasury to look at this again before the Committee stage and, if possible, to bring forward suitable Amendments.
  It was confidently expected that the transition from purchase tax to VAT would see an end to the discriminatory form of taxation from which soft drinks have suffered since purchase tax was imposed upon them in 1962. Neither the industry nor the consuming public will ever understand why soft drinks were subject to purchase tax, while tea, coffee and other non-alcoholic drinks, such as milk-based products, were not.

  817
  It should be recognised that soft drinks are consumed in millions of homes each day. They are part of the working-class budget, and they are part of the daily diet of many people. From time to time they are even consumed in great quantities in the Strangers' Bar in the House of Commons. They are drunk for their refreshment value, for their health value and for their nutritional value, and they are an increasing element in the weekly grocery purchases of all people of all classes.
  If the Chancellor is right in what he said, namely, that he is looking after the lower-income group—which I cannot accept—why is it that, with so many luxury foods free of tax, the youngsters' humble squash drink is taxed? To select a narrow range of food that is consumed in virtually every home must push up prices and the cost of living for those who, in the main, are least able to afford it.
  But there is another side of the coin, and this affects industry. In 1962, when purchase tax was first imposed by a Conservative Government, there were 750 firms engaged in the manufacture of soft drinks. Since then, 300 firms have gone out of business and capital investment has been at a low ebb for many years, mainly because the return on capital has been so low. If the Government have any intention—which I very much doubt—of seeking to contain or reduce the ever-increasing cost of living or, indeed, of brightening the lives of the less-well-off sections of the community, and if they wish to stimulate capital investment, they will sweep away these anomalies whereby some food is taxed and other food is not. What is required—and I beg the Chancellor to see what he can do about this—is to ensure that all food is zero-rated. What I have said about soft drinks applies equally to potato crisps. I am not asking for soft drinks to be considered as a special case. What I am saying is that they should be treated and subject to the same tax rates as other items of food.
  I hope that the Chancellor will look at this problem again. I have deliberately chosen this narrow matter because I know that many hon. Members on this side of the House are prepared to range over the whole of the economy. What I
  818
  have said had to be said, and I intend to return to it in Committee, but I hope that before then the Government will have had second thoughts.
  6.36 p.m.
  Sir Gerald Nabarro: I should be churlish, indeed, if I did not warmly congratulate my right hon. Friend the Chancellor of the Exchequer on bringing in the Budget of my dreams. A reduction of taxation of £1,200 million in a year would have boggled the imagination in the days of a Labour Government, particularly on the Friday afternoon when the Chancellor of the Exchequer of the day, the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), came to the House and increased taxes by £924 million, at a stroke.
  Myright hon. Friend has apologised to me for absenting himself and not listening to my speech this afternoon because of urgent business elsewhere. In his Budget speech he epitomised the tag that I have used at successive elections since 1950 that the Socialist Party is the party of increased and increasing taxation—the Tory Party is the party of reduced and reducing taxation.
  Mrs. Renée Short: For some.
  Sir G. Nabarro: Since 18th June, 1970, a total of £3,000 million has come off taxes, and I am proud of my right hon. Friend.
  In my judgment there are two important criticisms of my right hon. Friend's Budget statement. I give them both very shortly, and I shall return to them by moving Amendments in Committee.
  The first is that the discrimination against fuel oil as an alternative to bituminous coal for domestic fuel should have been removed. You will remember, Mr. Speaker, that it was put on by the Chancellor of the Exchequer, Mr. Selwyn Lloyd in 1961. It was then perpetuated by his successor, my right hon. Friend the Member for Barnet (Mr. Maudling), in 1962, who proclaimed quite bluntly and with candour that it was intended as a protective measure for the coal industry.
  Coal and fuel oil—especially in view of our discoveries of fuel oil in the North Sea and natural gas—should be allowed to compete on equal terms. As we do

  819
  not tax bituminous coal in any way whatever, and we are even exempting it entirely from VAT, we should not continue the tax on the major competitive fuel, which is fuel oil.
  Secondly, I am rather sad that more has not been done in the income tax sphere for elderly people. There are large numbers of income taxpayers among men over 65 years and women over 60 years and married couples over 65 years who, on account of the aggregation of the improved prospective State pension rates respectively of £6·75 for a single pensioner and £10·90 for a married couple, which, when added to only very modest earnings and perhaps occupational pensions—for three-quarters of all pensioners today have other sources of incomes—can readily find themselves with an aggregate income of more than £634 in the case of a single pensioner, and £929 in the case of a married couple, both of which are the thresholds as they are usually called, for the payment of income tax. In any event, I deprecate the use of these irregular figures. Why £634? Why £929? Why not round up the figure to £1,000 for a married couple and £675 for a single pensioner? I shall move to that effect in Committee.
  I now turn briefly and only in matters of broad principle to the introduction of value-added tax. I suppose it is notorious that I am opposed in principle to Britain's entry into the EEC. I am deeply involved in VAT and wrote about it in detail almost as the first Member of the House of Commons, before Richardson had been widely debated. I support VAT for two reasons which both conform precisely to my fiscal philosophy in the matter of indirect taxation.
  In times of peace when there is adequate manufacturing capacity for goods of all descriptions and for attendant services, it is in my judgment wholly wrong to discriminate in the rates of indirect taxation applicable to those goods and services. All manufactures in time of peace and plenty contribute to twin desiderata. First, they employ our people. Second, they contribute to exports. I have always deprecated purchase tax because of its hugely discriminatory character.
  There is demonstrated here a fundamental difference between the Labour
  820
  Party and the Tory Party. The Labour Party believes in endeavouring to categorise all goods and services in such a way as to place a swingeing tax on items that it deems according to its socialist views to be luxury items and to scale down the rates of tax on those items which it believes are of an essential and welfare character as, for example, children's clothing.
  I believe that approach to be wholly wrong for the reasons I have stated. In 1951 when the Labour Party left office there were seven rates of purchase tax, from 5 per cent. at the bottom to 100 per cent. at the top. Because of this wide range of rates countless anomalies and incongruities crept into the purchase tax system. These caused me, in 1958—in those good old days when one was not confined to one miserable Question a day on the Order Paper but could put down three Questions to one Minister every Tuesday and every Thursday—to table on each 1st January 100 Questions on purchase tax to the Chancellor of the Exchequer over three months ahead to run up to the Budget. Every Question was designed to illustrate a reckless anomaly created by bureaucrats in the fastnesses of the Treasury, none of which could be altered save by the weapon of ridicule.
  Successive Tory Chancellors of the Exchequer behaved very well in their reactions. They took slow and faltering steps in my direction between 1958 and 1962. In 1964 the number of rates of purchase tax had come down from seven to three, from a top rate of 100 per cent. to 25 per cent., and to a bottom rate of 5 per cent., so that the span of rates was between 5 and 25 per cent. in 1964 instead of between 5 and 100 per cent. in 1951. Had the Tories not lost the 1964 election, we should have introduced a single rate of purchase tax which I had hoped would be at 10 per cent. spread over a much wider base. That is what we are doing today with VAT, which is essentially a form of sales or turnover tax.
  It will be argued, in detail, in Committee and I shall take part in the arguments with relish, whether particular articles should be taxed at a different rate. I shall resist all arguments for discriminatory treatment, because I believe that the VAT ought to be applied

  821
  to all services and all manufactured goods and, were I the Chancellor, I should apply it to food, fuel, transport and to everything else, because the greater the range the lower the rate. It is impossible to eliminate entirely from food prices the VAT element.
  The hon. Member for Huddersfield, West (Mr. Lomas) made a splendid speech and I warmly support him. I should like all those convenience foods to be zero-rated for VAT, so long as we adhere to the principle of not subjecting food generally to VAT. It makes no sense to me to say that all food shall be zero-rated except convenience foods. What are the convenience foods? They are soft drinks, ice cream, sweets and confectionery on which purchase tax was put in 1961, again by the Conservative Chancellor Mr. Selwyn Lloyd, but the hon. Gentleman forgot to mention that in 1969 the right hon. Member for Birmingham, Stechford as Chancellor extended this and put purchase tax on potato crisps, roasted peanuts, and pet food all of which caused an outcry at the time. Today all these convenience foodstuffs attract purchase tax at 18 per cent. It will lead to the extraordinary situation that luxurious foods, which shall go unnamed, will escape VAT altogether, save only for the small element of tax in respect of certain distributive processes, whereas convenience foods which formerly attracted purchase tax at 18 per cent. will be subject to VAT at 10 per cent.
  Mr. Patrick Jenkin:I hope that my hon. Friend will not misunderstand the point that one of the supreme advantages of VAT, as, for instance, against SET, is that zero-rated means genuinely zero-rated and all the VAT, whether in the distributive or the manufacturing process, which has been paid on the goods up to the final retail sale can be repaid to the final seller. With respect, my hon. Friend is wrong in suggesting that food and other goods and services that are zero-rated cannot effectively be relieved of the burden of tax.
  Sir G. Nabarro: We shall have to agree to disagree. I will argue it in detail in Committee. The VAT will indubitably enter into the price of certain foodstuffs in respect of the distribution processes.
  The Financial Secretary to the Treasury (Mr. Terence Higgins)The Financial Secretary to the Treasury (Mr. Terence Higgins) rose——
  Sir G. Nabarro: I do not want to give way now. That is my view and I will argue it in Committee.
  Mr. Peter Blaker: Nonsense.
  Sir G. Nabarro: It is not nonsense any more than was the response "Nonsense" which was given to me when I raised the soft drinks question in 1961. I remind the House of the claim by H.M. Customs and Excise against the Savoy Hotel for the payment of purchase tax on fresh orange juice sold to clients patronising the hotels and restaurants owned by the Savoy. That case was fought up to the High Court, and cost tens of thousands of pounds until Mr. Justice Sachs finally ruled on 10th March, 1966 that an orange pressée was not a soft drink.
  Only a few months ago in another place after many years of expensive litigation natural bottled blackcurrant juice, "Ribena", was deemed to be a soft drink, whereas Beechams, the manufacturers, had claimed over many years that it was a natural fruit juice product and had not gone through any manufacturing stages.
  These matters will arise again with VAT unless we say that all food is to be zero-rated, including convenience foods. I do not believe the Government would lose very much by taking these convenience foods right out of the range of VAT altogether. We shall argue all these matters in Committee.
  I should prefer to go forward with a system in which we took all foodstuffs right out of tax, unless and until there is harmonisation of VAT in this country with that in continental countries. In every EEC country VAT is applicable to food, as was clearly stated in a written parliamentary answer on 30th June, 1971. Until we adopt such a system, we should zero-rate all foodstuffs, including the convenience foodstuffs which I have named. Save for these few comments, I welcome the Budget and the Finance Bill which implements it, and I hope that the Bill will have a successful passage through the House.
  6.50 p.m.
  Mrs. Renée Short: The right hon. Gentleman the Chancellor of the Exchequer will be very disappointed when he realises that

  823
  he has missed a scintillating and rumbustious speech by the hon. Member for Worcestershire, South (Sir G. Nabarro). When the hon. Gentleman said that this was the Budget of his dreams, we must all remember that he is one of the better-heeled Members of the House. That states the case and shows why hon. Members on this side of the House are so opposed to so much of this Budget.
  What working people have come to understand very clearly is that galloping inflation—which overtakes all the income tax reductions, pensions increases and all the other benefits doled out to those in the poorer-off sections of the community—represents a huge invisible tax. They are the section of the community which have to pay so much to meet inflation. We here are in a better position to meet inflation than are large sections of the community.
  We frequently hear about the iniquities of Labour Chancellors who have taxed the community at such a high level, but it should be pointed out that in the financial year which was completed when the Budget was introduced the Chancellor collected about £16,800 million in taxes whereas in the last full year of Labour Government the Chancellor collected about £14,700 million in taxes. People have paid more in taxes under the present Government—and will pay a lot more when we allow for the fall in the value of money since this Government came into office—than they did in the Labour Government's last year of office. This, together with the fact that there has been virtually no growth in the economy since the Conservatives came to power, means a real and drastic reduction in the standard of living of ordinary people.
  To add to their difficulties, local authority rates will be considerably increased this year. The diabolical Housing Finance Bill, which is now being steam rollered through the House, will raise tenants' rents by about two-thirds. We must add to this the 16 per cent. increase in food prices which only two days ago the Minister of Agriculture told me had occurred since the Tory Government came to office. All this adds up to a considerable erosion in the living standards and income of ordinary people.
  824
  Next year we shall have the additional burden of VAT. I agree with the hon. Member for Worcestershire, South on the need to remove food from VAT altogether, including the foods which were mentioned by my hon. Friend the Member for Huddersfield, West (Mr. Lomas).
  There is no doubt about why we have to have VAT. It is part of the price of entry into the Common Market. Nobody can deny the effect it will have on prices. The Government have stood by and have allowed food prices and other prices to increase at a rapid rate since June, 1970. They believe that the higher prices go now, the less will be the impact when we finally go into the Common Market and have to impose VAT on a whole range of goods which are not now taxed. People have got wise to this and that is why they are so opposed to our entry into the EEC. The National Economic Development Office has recently estimated that the imposition of VAT and its full implementation when we go into the Common Market will push up the cost of living by another 2½ per cent. or 3 per cent. per year.
  The Chancellor said with great self-righteousness that there will be no tax on food, apart from the excepted items set out in Schedule 4 of the Finance Bill. We know that in the Common Market countries VAT covers food. So far Italy has stood out and is fighting a battle with the Commission on this point. Once we go into the Common Market, I wonder how long it will be before the Chancellor is told that we must get into line with our partners and put VAT on all food items.
  Perhaps in the Government's reply later tonight we shall be given a firm undertaking that, whatever may be the pressure from the Common Market countries, neither this Chancellor nor his successors—if we are so unfortunate as to have any more Tory Chancellors—will impose VAT on food items. The Chancellor is taking in the Bill the power to change the range of value-added tax at 2½ per cent. either way. He said in reply to an intervention by my right hon. Friend the Member for Leeds, East (Mr. Healey) that, unless there is some changed thinking in the Treasury, this will be done right across the board. This means that in every future Budget the

  825
  Chancellor can impose a 2½ per cent. increase in VAT right across the board.
  The complexity of operation of the tax has already been described by my right hon. Friend and that is alarming. Many medium-sized businesses and large firms will be affected.
  Mr. Patrick Jenkin:Perhaps I could correct one point on which there is obviously a misunderstanding. The 2½ percentage points either way is once and for all, because the Chancellor has indicated a 10 per cent. rate a year in advance and must allow himself some flexibility. Thereafter, the regulator power is much less.
  Mrs. Short: I am obliged to the hon. Gentleman, but this is still subject to the proviso of the system which may apply if and when we go into the Common Market, in order to bring us into line with other countries and with what they decide to do. We cannot dodge this problem. At some stages it will be possible for VAT to be claimed back, but the poor consumer cannot claim anything back. The buck stops with the consumer, who will be left to pay additional VAT on a large range of goods. There will be many thousands more collection points for VAT than exist now for the collection of purchase tax. I understand that there are about 65,000 collection points for purchase tax. It has been estimated that there may be as many as 2 million for value-added tax, all of which will add to the cost of implementing the scheme.
  With 6,000 or so more civil servants to run it instead of the 1,800 who at present administer purchase tax, it is not surprising that the Richardson Committee came out against it in 1964. The Conservative Party made a great deal of mileage during the lifetime of the Labour Government from 1964 to 1970 over the need to reduce the number of civil servants. Perhaps it is not strange that we do not hear about that now.
  I find it odd that the Chancellor of the Exchequer is prepared to carry out the tax reductions in certain luxury items which have been mentioned when goods and items which are bought by lower-paid people will have to meet the 10 per cent. tax. I have in mind such items as household goods of many kinds, children's clothing, and many others.
  826
  What is more, ice-cream, lollies, fruit squashes, sweets and chocolate biscuits which are bought for children all will carry the tax. Some of them are bought occasionally by pensioners as a special weekly treat. They, too, will have to meet the tax. If an old lady has a pet dog or cat or budgerigar, she will have to pay tax on the dog food, cat food or bird seed that she buys. This is just one factor which indicates that the poorer sections of the community have been overlooked completely in this Budget.
  Part of the price of entry into the Common Market is that we have to conform to Article 99 of the Treaty of Rome which says that we have to harmonise all our indirect taxation. This is the most important indirect tax that we have. A report by the Trade Policy Research Centre shows that under the deficiency payments for agriculture which were operated by the LabourGovernment a considerable amount of income was transferred from poor households to rich ones. It was estimated at about £67 million. It went from households with incomes of £1,850 or less to those earning more. Under the common agricultural policy which we are bound to operate once we are in the Common Market, if we go in, it is estimated that the net transfer will rise by £437 million to £504 million, of which no less than £254 million will go to households earning more than £1,850 a year.
  In other words, the largest extra cost of the common agricultural policy will fall on households with incomes of between £18 and £23 a week and with four children. This, again, is a measure of the unfairness of this Budget. It means that they will be paying about an extra £1 a week or £52 a year. That will take up very rapidly any help given to such families under the Budget by reductions in income tax. That means miners, railway men and many municipal workers who earn between £18 and £23 a week. By contract, a household with anly two adults and in come between £3,770 and £5,500 a year will bear an additional cost of less than £13 a year as a result of the common agricultural policy.
  It has been estimated that incomes will have to rise to meet these additional

  827
  costs after entry into the Common Market by 1·5 per cent. faster if there is to be no reduction in the per capita food consumption up to 1978. That means that either the Government and employers have to pay more to working people or working people have to eat less. The report suggests that 4 per cent. less per capita would have to be eaten to meet higher food prices. This will mean a very considerable reduction in the standard of living of ordinary families in this country.
  One asks repeatedly what the Government intend to do to help lower-paid workers when we go into the Common Market. It will be no use right hon. and hon. Gentlemen opposite complaining, as they do all the time, that the wicked working people are always making unrealistic and unfair wage claims If the trade unions face this kind of increase in their cost of living and a corresponding reduction in their standard of living, what do right hon. and hon. Gentlemen opposite expect them to do? Do they expect them to sit back and face this reduction in their standard of living without righting back? Of course they are not prepared to do that.
  We on this side of the House will vote against this Second Reading gladly. We shall be putting down a large number of Amendments for consideration in Committee. I hope that we may even be able to persuade the Chancellor of the Exchequer to see sense and to realise that he must introduce some justice before this Bill completes all its stages.
  7.6 p.m.
  Mr. Martin McLaren: We have listened to a gloomy account by a Cassandra in the form of the hon. Member for Wolverhampton, North-East (Mrs. Renée Short). People will find it difficult to recognise in the England of today the depressing picture that she has painted——
  Mrs. Renée Short: Time will show.
  Mr. McLaren:I prefer to speak on a much more cheerful note. We have had a good Budget and, therefore, today we have had a good Finance Bill. People are pleased with it, not disappointed by it——
  Mrs. Short: Which people?
  Mr. McLaren: All the people.
  Mrs. Short: The railwaymen? The miners?
  Mr. McLaren: A few weeks before the Budget——
  Mrs. Short: The hon. Gentleman does not answer.
  Mr. McLaren:—I was bold enough to write to my right hon. Friend the Chancellor of the Exchequer advancing several suggestions of measures that I hoped he would take. Naturally I was very pleased when I listened to his Budget speech and discovered that he had decided to do nearly the whole lot. I do not say that it was because of my suggestions, but it was pleasing to me that his thoughts and my own were running on identical lines.
  My right hon. Friend has done a great deal in the past two years. He has done it in two ways. First, he has reduced taxation, allowing more money, in the time-honoured Gladstonian phrase, to fructify in the pockets of the people. Secondly, he has been a leading reformer in the taxation structure. When he has done so much in various directions, it is ungracious to cavil or complain that he has not done more. He will do more in the third and fourth Budgets in the lifetime of this Parliament.
  I want to deal with the effects of inflation on the taxpayer. Inflation drives people inexorably into the higher tax brackets. I am glad that my right hon. Friend has recognised this problem by raising allowances and taking very many people out of liability for income tax.
  I am rather sorry that nothing has been done to protect the taxpayer from paying capital gains tax on paper gains which are illusory because they are caused by inflation. The Treasury likes to treat us on the footing that the value of the £ remains constant. But we all know that that is an illusion. There should be an arrangement by which the amount of capital gains tax depends on the length of time an investment has been filled.
  In terms of estate duty, to some extent, in Clause 111 my right hon. Friend has recognised the effects of inflation by reducing the steepness of the scale.
  I come next to stamp duty. The main point that I intended to make in this

  829
  short speech was to ask the Chancellor to raise the threshhold of stamp duty on house purchase. He has stolen my thunder, he has shot my fox, and spoilt my speech. I am, of course, delighted to hear what he said. It will be warmly welcomed by those intending to buy houses in these days of rising house prices. It will be a great help to young married couples and will assist the movement towards homeownership as opposed to the renting of houses.
  The other item of stamp duty we should look at is the duty on the purchase of Stock Exchange securities. If we wish to become a share-owning democracy in addition to a home-owning democracy, we should do nothing to make it harder for people to save and to apply their savings to owning shares. Therefore, I should like to see this duty abolished. It would be of great assistance to savings and to the idea of the capital-owning democracy. I fail to see why people should have to pay tax when they buy securities. There is no such duty in New York, which is the other leading stock exchange market.
  So, when we look at the reform of the Stamp Act, 1891, we can take pleasure that we have already made some substantial strides. We have abolished the duty on receipts, on cheques, last year on mortgages, and on agreements. In Clause 115 there is a small improvement in that we have abolished the duty on bank notes.
  What is left? There are two main sources of revenue derived from tax: first, under the heading of conveyances, and, secondly, under the heading of share transfers. The Chancellor has told us this afternoon that he is whittling away the duty on conveyances.
  When we consider the long history of stamp duties we perhaps feel like the man who goes to prune a tree in his garden. He sees a dead branch and cuts it off. He sees another dead branch and he cuts that off. He begins to warm to the work. He takes off his coat, goes to find another larger saw, and eventually decides that the best thing he can do is to cut down the whole tree. That is how I feel about the Stamp Act, 1891. Before today it was producing only £100 million, and after today, according to what the Chancellor has told us, it will be producing less than £70 million.
  830
  I suggest that it is better to rely for revenue on the main sources—namely, income tax, corporation tax, value-added tax and the customs—and to streamline our system by closing down what I should describe as the branch lines. The stamp duty is such a branch line—an archaic tax on documents. I encourage the Chancellor, this year or perhaps next year, to rid us of it root and branch.
  Those are some of my thoughts arising out of the effects of inflation on the taxpayer. I end by again congratulating my right hon. Friend the Chancellor and his team on the many good things they have proposed and the many good deeds they intend to do.
  7.15 p.m.
  Mr. Michael Meacher: The Chancellor frankly admitted in winding up the Budget debate that he had made a mistake in omitting any mention of the Government's policies towards the lower paid. Frankly, I believe that, as a man who would have had to make bricks without straw, he made the right decision from his point of view. However, he decided to rectify the omission by a series of highly selective quotations and allegations which were either wrong or downright misleading.
  Before I come to these points—I have given the Chancellor full warning that I propose to make this point—I want to put the treatment of the low paid into perspective. Although there are some morsels for them in the Bill, I believe that their choiceness in the Chancellor's priorities can be properly measured only in the light of the handouts which he has felt able to afford for other groups.
  It has been said many times, both today and during the Budget debates, that it is the rich who have been singled out for special gratification. This can be said on three main grounds, and I want to raise some new points.
  The first is the very high level at which the investment surcharge has been pitched. The Chancellor said that he was cutting the tax on unearned income by £300 million. He did not add that he was cutting the tax on unearned income by almost half.
  The Minister of State, Treasury, in an Oral Answer on 16th February, 1971, stated that the tax on interest and dividend payments amounted to £723 million.

  831
  This level of investment surcharge means that over two and a quarter million persons with unearned income between £1,000 and £2,000 a year, who are very far from the poor widows and the retired about whom the Chancellor spoke so disingenuously, have been entirely removed from the present investment surcharge and will be subject to a higher rate of tax than the £25 a week wage-earner. Of course, the one and a quarter million persons with unearned income in excess of £2,000 a year, who include many of the rich and all the very rich, have been given a tasty little aperitif before we come of the main course in the Bill. This is the reintroduction of tax relief on personal loans.
  The small value that the Treasury places on this concession, which was unexpected even in the City—namely, £7 million a year—entirely conceals its real meaning. It hides the huge size of the loan superstructure which will be built over it, the large capital gains ramifications which may be expected to flow from it, and the artful way in which this concession has been virtually limited to the rich.
  For those with high incomes or sizeable capital or both as security against large loans, the significance of this bonanza can best be judged by looking at the situation at the time this concession was removed in the 1969 Budget. At that time the cost to the Treasury was £35 million, but from this loan interest was running at about £70 million a year, and the total of personal borrowing, excluding borrowing for house purchase, amounted to about £850 million. On the basis of that precedent, we can expect that this small tax concession of £7 million a year is likely to conceal a total of personal borrowing in excess of £200 million a year.
  It is also worth asking where this huge sum will go. Although no doubt, on the basis of past precedents, much of it will go to the payment of private school fees or the purchase of life insurance premiums, there can be no doubt that the great majority of it will wind up in the purchase of equities. If, as many informed observers expect, the Stock Market peaks above the 600 mark, this will probably mean a gross capital gain for the lucky borrowers of £30 million
  832
  to £40 million all told—not a bad hors d'oeuvre—with still more to come.
  Who will rake off this gain? The concession is so fixed as to benefit disproportionately the rich. The man at the top end marginal rate who takes out a £10,000 loan will have his net interest cut to 2½ per cent. If he has more than £2,000 a year investment income, as he probably will have, then he is almost certainly going to have an actual tax rate of only 1⅓ per cent. I need hardly say——
  Mr. Patrick Jenkin: The hon. Gentleman spoke of the man's "tax rate". His tax rate would be over 90 per cent.
  Mr. Meacher: I was, of course, referring to the interest rate on his personal loan. Persons on very high incomes have an enormous advantage in taking out loans, and the way that the Budget has been arranged has the effect of reducing the interest rate for such people.
  At a time of 5 per cent. to 7 per cent. inflation, this is borrowing at less than nil cost. The people who will almost exclusively get this very pleasant facility are those at the medium or above surtax level. It is nice to think that at least a few thousand people will be able to keep the wolf from the door.
  Less tangible but perhaps equally important is the Chancellor's determination, while unleashing the energies of the people, to make sure that the energies of the tax fiddlers are not left out. His whole ethos appears to be that tax avoidance is a well-understood peccadillo that should be tolerated, indeed encouraged, so long as it does not go to extremes and get out of hand, because then it gets publicity and brings the whole exercise into disrepute. The message is "As long as you sin only moderately, the Chancellor will connive". Stripping aside the civil service-ese of his speech, the right hon. Gentleman has said that himself.
  Regarding Labours 1965 close company rules, which were designed to prevent tax avoidance, the right hon. Gentleman intends, he says, to keep them only to the extent that "significant sums" of revenue are at stake. Having exempted four-fifths of companies, which were previously liable to shortfall directives, from this check, it is clear that the Chancellor is prepared to allow the bloodletting to go a long way before significant revenue is reached.

  833
  The same point can be made about that other hoary old favourite, short-dated gilts, as a means of transmuting higher-taxed income into lower-taxed or usually non-taxed capital gains. This will be blocked, says the Chancellor, but only when the taxpayer pays interest exceeding £2,000 a year. It is difficult to believe that this will provide our sophisticated tax consultancy boys with much trouble.
  Given this largesse and these priorities, it is hardly surprising that the gains to the poor are merely the leavings after the more ample repast of the already well-sated. In defence of a less than thread bare record, the Chancellor, in winding up, artfully extracted some highly selective quotations from the pre-Budget memorandum from the Child Poverty Action Group entitled "One Nation: the Conservatives' record since June, 1970", about the Labour Government's record at a time of economic crisis. The right hon. Gentleman did not add that that document went on to say:
  "Since the Conservative Government took office, families with children actually became worse off. After allowing for increased school meal charges and the loss of free milk, net income rose less than prices. It is worth noting that even with earnings in the bottom 10 per cent., a two-child family would not have been eligible for family income supplement. In comparison with the substantial in creases in net income enjoyed by the highest paid, these net losses are altogether at odds with the Prime Minister's pledge."
  In all fairness, the Chancellor might have added that part of the statement as well.
  What is more, the Chancellor goes on from straining the truth to utterly distorting it. He made this incredible statement about his new tax reliefs:
  "The result of this is that while all taxpayers above the new tax threshold will benefit from the Budget by £1 a week, almost all families below the new threshold will also benefit by £1 a wek".—[OFFICIAL REPORT, 27th March, 1972; Vol. 834, c. 161.]
  The right hon. Gentleman must know that that statement is both inaccurate and tendentious. I made this point earlier in an intervention, but I was not able to develop it. Consider, first, those above the tax threshold. The low-paid, £1,000 a year family man with two children under 11 will now be better off by 35p per week, and not by £1. I am using figures taken directly from the Financial Statement. The so-called affluent car worker on
  834
  £2,500 a year, after having 40p per week extra National Insurance contributions stopped from his wage, will gain 60p per week and not £1, and he is among the highest paid manual workers.
  On the other hand, the £20,000 a year executive—again, these figures are clear from the Financial Statement—finds him self with a cool extra £10 a week. He is that much better off, and if 10 per cent. of his income comes from unearned sources, as it is likely to do, his whopping tax gift rises to over £15 a week.
  I hope the Chancellor will admit frankly that the facts about these high, regressive income tax and surtax concessions are wholly misrepresented by his statement about all taxpayers above the new tax threshold benefiting from the Budget by £1 a week.
  Second, those below the new tax threshold——
  Mr. Patrick Jenkin: I do not understand the hon. Gentleman's figures. He intervened in my right hon. Friend's speech and spoke about a £20,000 a year man with two children over 11 but not over 16. The difference between 1971–72 and 1972–73 is £52·31 and every taxpayer gets exactly the same benefit from the allowance.
  Mr. Meacher:On page 31, in table 18, of the Financial Statement it is made clear that the charge to income tax and surtax for the £20,000 a year man with two children in that age bracket will drop from £10,302 in 1971–72 to £9,819 in 1973–74.
  Mr. Patrick Jenkin: Over two years.
  Mr. Meacher: Yes, but we are talking about the full effects of the tax changes. The fact that a change occurs over two years is neither here nor there, and the points I have made are clearly stated in the Financial Statement.
  I was coming to those below the tax threshold. There are perhaps 2 million to 3 million households below this point of tax liability, yet the Chancellor has said that because the maximum entitlement to FIS has been increased by £1 per week, almost all families below the new threshold will also benefit by £1 a week.
  The right hon. Gentleman must know—at least, he should know—that the

  835
  number of families in receipt of £4 per week in FIS who will get the £1 increase is less than 10,000. It is certainly nowhere near 2 million to 3 million. I hope, therefore, that the right hon. Gentleman will frankly acknowledge that his statement was wholly false and that the truth is that such huge gains have been showered on the wealthy few that the morsels that fall from the rich man's table are relatively trivial and marginal in size.
  As a result, the Chancellor has lost an unprecedented reflationary opportunity to surmount the poverty wage problem, a problem which may now prove incurable. Indeed, we will probably not have in future years economic conditions like those we have had this year.
  The rise in the tax threshold, large though it is, is still not nearly large enough to reduce poverty surtax, for all the Chancellor's pretentions to this end. Within two years fixed drag may bring all, or at least most, of the 2¾ million low paid removed from tax back into the tax net.
  The lowest-paid mineworkers who screwed £5 out of Wilberforce, only to find themselves 15p worse off, are now better off by the princely sum of l0p per week. This lesson will not be lost in the present dispute. That is the measure of the Chancellor's gratuity to the lower paid.
  Worse still, by raising personal allowances and leaving the child tax allowances untouched, the right hon. Gentleman has given no assistance to the low-paid households by size of families, and by leaving family allowances out of the general benefit review, he has made sure that no comprehensive help is given to the poorest families who are beneath the tax threshold.
  These are not the priorities of "one nation", as the Prime Minister promised before the election. They are not the priorities of justice. If anyone previously had any doubts that the Conservative Party represented sectarian interests of business and wealth, he can have no such doubts now.
  7.30 p.m.
  Mr. Piers Dixon: When the hon. Member for Oldham, West (Mr. Meacher) warned us that he had already
  836
  warned my right hon. Friend the Chancellor about some of the remarks he would make, I was full of apprehension and excitement; but, in the event, the hon. Member's speech was remarkably restrained, at any rate by the standards to which we have become accustomed from him.
  There will be many examples of special pleading during the next few weeks on the subject of value-added tax. I, at any rate, shall be guilty of no special pleading for any particular interest or commodity. The only special pleading in which I shall indulge will be in encouragement to my right hon. and hon. Friends on the Front Bench further to restrict the various examples of exemption and zero-rating that they are proposing.
  I view the extra car tax as, in effect, a supplementary value-added tax. It is not in form but it is in effect. I see no reason why motorcars should be charged at more than the standard 10 per cent. any more than why certain other commodities and services should be charged at less.
  I was glad to hear from my right hon. Friend that he would be giving a small time limit—I think he referred to a "short time"—for the problem of tax-paid stocks early next year. It seems that what we need is not only a suitable time between the period when purchase tax comes to an end and the period when value-added tax starts, but also a very considerable time interval between the point when the Government state their precise intentions and the point when the purchase tax period comes to an end.
  There has been considerable discussion today about the efficacy of the corporation tax systems, under the Labour Government and under the Conservative Government, and of their relevance to the tendency to invest. I followed the arguments of the right hon. Member for Leeds, East (Mr. Healey) with great attention. It seems to me that business men do not invest because there happens to be a lot of money lying around in their companies—or, if that is a motive for their investment, it certainly ought not to be—but rather, intelligent business men who want to do the best for themselves and for their shareholders invest in the expectation of profits. That is the true significance, in a conceptual context.

  837
  of the change from the existing Labour-inspired method of corporation tax and the change to the Conservative method.
  Mr. Healey:In that case, will the hon. Gentleman explain why investment fell by 8 per cent. last year, although profits rose faster than at any time over a long period, 123 per cent. overall, and 28·7 per cent. for undistributed profits after tax and dividends?
  Mr. Piers Dixon: The right hon. Gentleman will accuse me of falling back on the ex post facto argument he mentioned before, but it is reasonable to give the two systems a certain amount of time to see which one works better. We do not know whether the Conservative system will work; it must merely be a theoretical exercise. What the right hon. Gentleman knows perfectly well is that the Labour system has not worked. In purely empirical terms, investment was extremely low under the Labour Government, as much as, I admit, it has been under the Conservative Government.
  I followed the approach of the hon. Lady the Member for Wolverhampton, North-East (Mrs. Renée Short) with great attention. I do not agree with what she said, but I agree with one point which she made, and that should be recognised on both sides of the House—that the changes in taxation are a preliminary to our entering the Common Market. But hon. Members should not exaggerate the immediacy of the Common Market implications. Long before we reach fiscal harmonisation, the Common Market will wish to achieve monetary harmonisation. Gradually the band within which parity rates can fluctuate will narrow, until it is reduced to nil and there is a single currency.
  I would not expect to see fiscal harmonisation in any great degree until monetary harmonisation is achieved. The first base on which there will be fiscal harmonisation will be in corporation tax. The changes in corporation tax which we are introducing are designed, to a certain extent, to fit into the types of corporation tax which have become prevalent and accepted on the Continent.
  As for value-added tax, I did not entirely go along with either the right hon. Member for Leeds, East or the hon. Lady the Member for Wolverhampton,
  838
  North-East. It will be many years before the rate of value-added tax will have to conform throughout the countries of the Common Market. The respect in which we shall have to conform will be not in the rate but in the base, and it seems to be absolutely conclusive that we shall eventually have to pay value-added tax on food and other commodities. I consider that to be, in the eventual analysis, a good thing, although I know that my right hon. and hon. Friends on the Front Bench do not necessarily agree with that. But, by definition, we have agreed to pay a certain proportion of value-added tax to the common European budget, and if we can fiddle the base it makes nonsense of our commitment under the Treaty. So, the base is in effect fixed, but the actual rate will be decided by the House of Commons for many years to come.
  But when the right hon. Member for Leeds, East complained that the rate of value-added tax in Common Market countries was altogether higher than it is proposed that it should be in this country, he gave only one side of the argument. I think that he would be the first to agree that, although indirect taxation in continental Europe is higher than it is in Britain, direct taxation is lower. I would not be in the slightest disturbed if the rate of value-added tax rose from the proposed level of 10 per cent. to, perhaps, 12 or 15 per cent., because this would give us a wonderful opportunity of reducing the rate of direct taxation.
  7.38 p.m.
  Mr. A. E. P. Duffy: The hon. Member for Truro (Mr. Dixon), in his opening remarks, recognised that in a debate of this kind there would inevitably be much special pleading. He disclaimed any intention of undertaking that himself, and he honoured that promise. That made me feel that I must make the same disclaimer. I hope that I may be permitted later to say something on behalf of commercial interests in my city, Sheffield, which are concerned about the operation of value-added tax. Otherwise, I hope that the House will accept that my concern is entirely for the structure and the content of the Budget.
  Many hon. Members must feel the same and must have felt this way for some years, because there has scarcely been

  839
  a year since 1965 without a Finance Bill which has not made important changes in the British tax code, and this year's Bill is no exception. The effect on both individual tax and corporation tax policies will be profound. It is a formidable document. First, the Chancellor has set out his proposed law on value-added tax, and I shall speak about that initially.
  We see certainly so far as our country is concerned that there will be a degree of harmonisation here as elsewhere but at the moment it is substantially in the form already published in the White Paper. We are now beginning to get a fairly clear idea as to its scope and its range although, of course, much detail has yet to come. The Chancellor can fairly claim at this stage, as he reminded us this afternoon, that he is trying to combine simplicity with an attempt to minimise any regressive effects VAT may have. These are two aspects of VAT which we should all wish to see the Chancellor pursue.
  The first question I want to raise is whether he will achieve these twin objectives and, if he does, given what the hon. Member has just said about the eventual, perhaps inexorable, harmonisation, will he be able to preserve them? The first, simplicity, is undoubtedly desirable on administrative grounds. The European experience has shown that a multiple-rate structure increases the Government's administrative costs by anything between 50 and 80 per cent. compared with a single-rate system. On the other hand the Chancellor must not seek administrative convenience at the cost of equity and social justice.
  But even a single-rate value-added tax will not be a cheap tax for government, industry or commerce, as my right hon. Friend the Member for Leeds, East (Mr. Healey) insisted. I hope that at this stage I shall be permitted to follow all my hon. Friends who have so far spoken on these benches, some of them necessarily in my right hon. Friend's absence, to congratulate him on what we are all agreed was a very promising maiden speech. It was much more than that because it was a heartening speech. It was a powerful delivery—a word which is often used on these occasions, but a word which fits not merely my right hon. Friend's reputation but also his physical
  840
  stature. I think we shall find in subsequent exchanges in the months to come that although we, as he certainly does, lament the departure of other of our hon. and right hon. Friends from the Front Bench, our Front Bench will be none the poorer for that and I know that they would recognise that.
  It will not be a cheap tax. The Customs and Excise is expected to take on another 6,000 to 8,000 people. Given the present complement of 18,000 and the present civil service salary levels, this will eventually constitute quite a sizeable burden—I am told at first it will be about £16 million. We have also been told by my hon. Friend the Member for Wolverhampton, North-East (Mrs. Renée Short)—and unsympathetic though she was to the tax I do not think any hon. Member can gainsay her point—that collection points will be many and they will be multiplied. She thought they would jump from 70,000 at present covered by the Customs and Excise to 2 million and even if we settled on 1½ million—and I cannot see it being less than that—with all that implies not only for policing the tax with all the extra paper work, this is a prospect which must daunt all of us.
  Yet industry and commerce could be faced with VAT costs even in excess of those of the Government. There are likely to be two or three times the numbers involved at present to deal with the VAT in the business sphere compared with the Government and this proliferation of paper work, record keeping and accounting will not be confined to the medium or large firms. I am glad to be able to speak for the first time for those on whom the VAT will have the biggest impact—the small person in business, the small trader and small retailer. Those who will be excluded simply because they have a turnover of less than £5,000 a year can draw no comfort from this. It will be no help to more than 10 per cent. of them.
  I want to question this widespread belief that there is to be total exemption for that category. I cannot see how at least 90 per cent. can avoid paying for it. How can they if they are to claim on input tax, because then they will have to register? I have checked with the small traders in my constituency and with their accountants over the last few weeks and I find that a small trader

  841
  commonly believed to be exempt might well be liable to the extent of £6 or £7 a week in input tax. How can he be indifferent to that amount, and yet how can he claim unless he registers?
  But then we come to the question of record keeping, and this would apply in the most part to those, one supposes, who have never kept records. They are not the only people, but at this level there is no record-keeping at all that would be acceptable to the Customs and Excise. VAT is likely to present the most acute problems to the small man whether he is in business or not. It will not be easy for them to keep records, especially those which would be required for returns or claims on the difference between inputs and outputs. Will they always succeed, for example, in getting those bills for expenditure they quite properly incur wholly and exclusively in the performance of their work—for example, from taxi drivers. This is one of many such problems we shall be airing in Committee.
  I want to say a brief word about one matter which has been aired already on three occasions so far in our debate this afternoon, although I hope that I shall avoid repetition. I have been asked to do so by many retailers and many of them are of considerable consequence to the business life and to the distributive trade in Sheffield. I am thinking of the transitional problem regarding stocks. I want to do this in spite of the Chancellor's assurance because I was expecting him to say what he did. When retailers have written to me I have already replied in a similar vein to them. I have tried to assure them along the lines of this assurance this afternoon, about, for example, the possible practice or device of sale and return.
  In Sheffield many retailers feel that such a suggestion, already given off the record by the Government, for alleviating the problem, which centres generally around sale-or-return arrangements, will be very unsatisfactory. They feel that the financing of such arrangements would lead to additional obligations. Nor do they regard the purchase tax holiday as a satisfactory solution. They think that it is bround to provide an opportunity for cheap-jack competition by some competitors who might be so inclined and that it will leave the shopping public in con-
  842
  fusion. On the other hand, we all realise that it will be difficult to make constructive suggestions for arrangements that will not be vulnerable to misuse.
  Mr. Higgins:Would the hon. Gentleman spell out in a little more detail what he meant by financing the problem of sale or return?
  Mr. Duffy: Sale or return presupposes a common stock, a common value, a common category, a common practice, a common trade, a common custom. The Sheffield retailers insist that there is a great variety and that it will not be as easy to practise sale or return, or to seek refuge in it, as is held in some quarters. Some durable items will be a good deal more difficult to handle in this way than others. Yet many retailers in Sheffield representing different trades and different items subscribe to this concern, presumably because it has come out of the Chamber of Commerce. I must not take up too much time, so if the Minister is interested, perhaps he would accept a letter from me. I know that the retailers would be grateful for his consideration of the matter, but they recognise the difficulties.
  I should now like to make some brief remarks about Part III, because I do not want to concern myself entirely with VAT. I understand what the Chancellor is trying to do in cutting taxation. However, I still wonder whether he is doing it in the most sensible way. The arguments of my hon. Friend the Member for Oldham, West (Mr. Meacher) carry a considerable weight, and I hope that on grounds of equity the Government will consider them. I hope they will not think it enough to increase pensions and supplementary benefits, or even to increase personal tax allowances, which account for the greater part of the Chancellor's package in money terms. The cuts in the rate of purchase tax are not in themselves enough, though I realise that they are made not only as the preliminary to the switch to VAT but also because of the Chancellor's anxiety to moderate price increases. They do have value.
  I also realise that the introduction of free depreciation has given industry what it has been long asking for. The taxing of small companies, 90 per cent. of the total, at special rates, and the easing of

  843
  restrictions on close companies may lessen some of their special difficulties. But, as my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) reminded the Chancellor, the position is complex, and we shall hear much more about the matter in Committee.
  Last year the Chancellor announced the reform of corporation tax to remove discrimination against dividends, the unification of income tax and surtax and the replacement of purchase tax and SET by VAT. The process of reform continues this year, notably in the allowance of interest against tax and the reversal of the 1966 legislation against share option schemes. But, as the right hon. Gentleman acknowledged this afternoon, these are controversial measures that will undoubtedly be challenged in Committee.
  The Bill, in short, is a virtual encyclopædia of taxation proposals. It will take the British economy a considerable time to assimilate all the changes they portend. In this sense, the impact of the Bill may be somewhat slow to appear. Its underlying purpose is obvious. It is meant to arouse the enthusiasm of British industrialists for the challenge of the Common Market and so a long view, perhaps as far ahead as 1978,is taken. But clearly the Chancellor has also been conditioned in his thinking in the short term by high unemployment and to a large extent by the present balance of payments position. His aim is to increase the rate of growth of the economy from 3 per cent. to 5 per cent. and so bring down unemployment and establish permanently a more rapid rate of expansion.
  After the forecasting failures of the past, none of us can be sure what the precise effect of such a large stimulus will be, but the cut in income tax is more likely to be spent than saved, and the same is true of the increase in pensions, while lower rates of purchase tax will increase demand for some consumer goods. Meanwhile, on the face of it, industrialists have all the investment incentives they need.
  The question is, will the economy respond? There remains the question of strategy, of underlying purpose, and the possible economic impact of the Bill. There is in particular the danger that it may work against the efforts the Govern-
  844
  ment have made and are still making. I have in mind in particular the need to reduce unemployment, first, and, secondly, to relieve inflationary pressures. Those are my final two points, to which I now turn.
  We have been told that unemployment is marginally down overall, I have already taken the trouble to investigate the position in the borough of Sheffield and the adjacent employment area of Rotherham, and I am happy to be able to say that that overall reduction is reflected in both Sheffield and Rotherham. But unemployment is still at such a high level in both as to continue to cause concern. That is how it has been treated in the local Press tonight. Further progress may depend less on stimulation of demand than on encouragement of investment.
  The hon. Member for Bristol, North-West (Mr. McLaren) thought that the number of Budgets for which the Chancellor had been responsible was a matter for congratulation, but in some ways it seems to some of us that the Budget must be seen in a different light, as being not so much a matter for congratulation. We see the Chancellor now in the rôle of a gambler. He can surely have nothing else now; this must be his last throw. If he does not succeed in stimulating investment now, he never will. He has tried pretty well everything that could have been mustered in orthodox terms. What remains?
  It is something which no Chancellor can provide, something which only a Government in its totality must provide, and especially the Prime Minister. I am thinking of leadership. I am thinking of the responsibility for the general climate. No one else has that responsibility. I wonder whether that is what businessmen are looking for more than anything else. It is easy to wrap the matter up in words that have been used so often in this Chamber during the past year or two, like "confidence". But I do not want to use that word tonight, except perhaps by way of explanation.
  I can explain a little more by going on to my second point, the related problem of inflation. It seems to me that the risk that demand inflation may reinforce the cost inflation is genuine, especially since the money supply is to be allowed to grow without a ceiling

  845
  by the extent thought necessary. Since the Government still have no formal prices and incomes policy they must talk to the major parties to the bargaining process like the TUC and CBI. They are highly dependent on the good will and co-operation of both. There was a time when hon. Members on both sides thought they would get it from both, but after the events of this week—the application and possible consequences of the Tory legislation of a year ago, the Industrial Relations Act, the souring of industrial relations, and therefore the climate in industry, which soon spills over into society—can anyone say with any confidence that the Government will get that good will and co-operation, without which they will not reduce inflation? Perhaps without it they will not even get the investment they need, because although industrialists may want to give it, if they do not see co-operation from the other side of industry they may not do so.
  Are the Government entitled to that good will and co-operation from the TUC? Will they get it, given the events of today and goodness knows what events may lie ahead?
  8.0 p.m.
  Mr. John Gorst: I will not detain the House long because I wish to confine myself to a couple of points on the subject of value-added tax. I regard this Budget not merely as fair and intelligent but as realistic insofar as it deals with the problems of the moment and also as visionary insofar as it caters for the future.
  The first of the two points on value-added tax relates to aspects of hiring and rental agreements. At the moment when value-added tax comes into operation, rental or hiring agreements will start to attract 10 per cent. VAT. I am thinking particularly of the television industry, an industry in which I have spent more than half of my working life and which, in the days when I was working in it, was comparatively small, in rental terms, but which has now grown to an immense industry with something like 10 million out of 18 million sets on rental as opposed to outright purchase.
  At that moment the rental being paid by the ordinary person will have in it an element which takes account of pur-
  846
  chase tax paid on the set. In addition, at the moment of VAT there will come a 10 per cent. surcharge which is quite unfair and which will lead to double taxation unless some form of exemption is made for this side of the business. It is extremely doubtful whether it would be possible for the value-added tax to be passed on to the customer, bearing in mind that the new sets will be available in the shops at a cheaper price because They will no longer be bearing the purchase tax element.
  Secondly, it is unrealistic to expect the industry, prosperous as it may be now, to be able to absorb this cost. The most recent turnover figures show that the industry has been selling at the rate of about £464 million a year but its profits have been of the order of £46 million, which means that almost exactly 10 per cent. of turnover is profit. If the industry has to absorb a 10 per cent. increase in its costs it will clearly be in an extremely vulnerable position unless some change is made.
  I draw my right hon. Friend's attention to the fundamental principle of VAT staled in Clause 47:
  "Tax shall not be charged on any supply or importation taking place before 1st April 1973."
  Clearly, if purchase tax has been paid on all these sets, there will have been some form of charge levied on them. I hope that this point can be looked at. I am sure that it does not apply only to television sets. It may well apply to car hiring on long-term agreements and any other item of household equipment, such as a house or internal telephone system.
  If my right hon. Friend will not make any change, can he give an assurance that long-term rental agreements can be broken by consumers if as a result of VAT they find that they cannot afford the extra 10 per cent. for something which, with the best will in the world, they had not anticipated when they took out the rental agreement and committed themselves on a long-term basis? The solution should be that rental agreements in force before VAT comes into operation should be excluded. I urge my right hon. Friend to give consideration to doing that and treating them in exactly the same way as a hire-purchase agreement entered into before the introduction of VAT.

  847
  The second point I want to raise concerns the zero rating of newspapers. By singling out one medium, the newspaper industry, and giving it preferential treatment over its competitors, be they radio, television, the hoardings or cinema, there will be a tendency to distort the media and the manner of the message advertisers will be putting across to those they want to reach. It is easy to imagine a newspaper space salesman going into the office of a potential advertiser and saying "Use newspapers rather than radio, television or whatever because it will cost you 10 per cent. less."
  It may be that my hon. Friend will reply that the reason we have singled out the Press is because there is such an important element of classified advertising placed by ordinary men and women who have something to sell or to rent. These people are not running a business, they cannot claim the cost and they would not easily be able to absorb a 10 per cent. increase. The fact is that all newspaper advertisements whether or not they are classified, will be included in this zero rating and it will distort the media. I am not trying to do down the Press or write up the Press or any other medium. If the Press is to be zero rated then all the other media should be. If the other media cannot be, or should not be, then I would argue that the Press ought not to be zero rated. There ought to be fair treatment for all the media.
  I turn to the omissions from the Bill. It is unfortunate that at least two or three of my hon. Friends on the Front Bench who in Opposition in 1969 were keenly interested in making certain changes in the 1969 Finance Act brought in by the Labour Government, and who made passionately eloquent speeches on the subject in Committee, should now find themselves unable, for the second year, to make reasonable amendments which I have every reason to suppose the previous Government would have made had they been in office, which, thank Heaven, they are not. I am referring to the gaming machine licence duty in which I must immediately declare an interest as an adviser to that industry. It is a great shame that a small opportunity could not have been found among these 122 Clauses to put right the penal situation affecting that admittedly small but important industry for those
  848
  who enjoy a seaside holiday in this country.
  It is a shame that special treatment could not have been given to one category of old-age pensioner. I am not talking about the pensioner who has been retired for five or 10 years, but the old old-age pensioner, the person in his or her 80s who has been retired for so long that maybe much of their household equipment and personal effects require replacement. They have not for many years been able to spend a great deal on these items, yet they find themselves after a long period of time having to incur expenses which probably were last incurred during the period before their retirement. I believe that this is an area to which we all ought to be giving very special consideration and very special treatment.
  Sir G. Nabarro: Will my hon. Friend, therefore, support my Amendment in Committee to raise the threshold of the age relief from £929 to £1,000 for a couple and from £634 to £675 for a single pensioner to help with this very purpose?
  Mr. Gorst: I should have the utmost delight in supporting my hon. Friend's Amendment if I were indeed to be supporting him in the Standing Committee.
  May I conclude by saying that I regard this as a modernising, reforming Finance Bill, progressive in its outlook, well prepared and, I believe, the subject of more diligent homework than almost any Finance Bill within living recollection, and to that extent I am absolutely delighted to give it support.
  8.11 p.m.
  Mr. Dick Douglas: I do not propose to follow the hon. Member for Hendon, North(Mr. Gorst) in his very special pleading.
  We have heard some interesting speeches this afternoon. Perhaps the most interesting from the point of view of the individuals on these benches was that made by our new leading spokesman on financial matters. It is an indication of the strength and depth of understanding of these matters on these benches that my right hon. Friend carried out his new duties with such distinction and that when he was interrupted by right hon. and hon. Gentlemen opposite was able to reply

  849
  fully to them. That is not to say that I do not regret some of the changes that have been made in Front Bench spokesmen. We have a superfluity of talent in the Labour Party but that does not mean that we can waste it.
  I propose to look at the Finance Bill briefly from the point of view of the new taxes that are proposed. The major new tax is the value-added tax. I should perhaps declare an interest because I am a Labour and Co-operative Member of Parliament, therefore my interest in the value-added tax is related to its effect on the consumer in this country and on the retail organisations. I therefore welcome the proposals to zero-rate food, and here I would not agree with the hon. Member for Worcestershire, South (Sir G. Nabarro) who argued the case that food should be included in the tax and should not receive exemption in any form whatsoever. The proposals of the Government to zero-rate food are, I think, the result of deep, long and continual consultations with people in the trade and of pressure from hon. and right hon. Gentlemen on both sides of the House.
  While some of my hon. Friends may have deep forebodings as to what may happen should we have to harmonise not only the structure but the rate of the tax in the eventuality of our entering the European Economic Community, I do not share them, because I think the Community might very well look at the form and structure of the tax we have introduced and go our way. I suggest this because the structure of a tax cannot be looked at just in relation to simplicity: it must be looked at in the totality of the tax system. I think that the way the Government have done this—without praising them too much—has reduced the regressive nature of the tax, although not completely eliminated it, because the overall pattern of the tax system has to be considered.
  My hon. Friend the Member for Old-ham, West (Mr. Meacher) indicated in his remarks that this has been done at a time of very high unemployment and social difficulty in the country and the Government have had an opportunity to readjust the lax system with the surpluses available to them; but the Government have indeed missed the opportunity to reduce the regressive nature of the tax system as a whole and, if they have
  850
  done anything, have increased the regressive nature of that system. They have not reduced the inequity in the system as a whole because if, as the Government have done, one gives an indication that for large amounts of income one intends virtually to reduce the distinction interms of tax between earned and unearned income, that increases the inequity of the system. One is giving the impression that the only thing that is worth investing in is money itself, and that is what has been happening over the whole period of this Government's existence.
  People have not been willing to invest in plant and equipment but have looked for the relatively fast buck by investing in the monetary system. They have not been willing to embark on fixed assets but have embarked on the holding of assets in the form of paper. It is all in terms of short-term stock exchange booms and land booms, in the form of land changing hands. Nothing is happening in real terms but because a few pieces of paper change hands and some capital gains are made or unearned income is acquired, the individuals who are capable of cornering these markets are better off and those who work by hand and brain are not reaping the same benefits.
  The Chancellor in his remarks today—and my right hon. Friend the Member for Leeds, East speaking for the first time this afternoon as finance spokesman, indicated this—did not mention unemployment at all and it would be invidious for me not to look at the unemployment figures and try to nail the lie that what has been happening in terms of shake-up has been the result of high and exorbitant wage demands on the part of the workers. In Scottish terms we now have 151,861 people unemployed—7·1 per cent. of all employees. For male unemployment, the figure in percentage terms is 9·3 per cent. Here we have a situation in which Government spokesmen find extreme difficulty in arguing that wage or earning rates are higher in Scotland than in the rest of the United Kingdom. They also find a great deal of difficulty in arguing that the need for investment in Scotland is lower than in other areas of the United Kingdom. Their argument, in relation to their fiscal policy, their overall economic strategy.

  851
  is that we have to heat up the rest of the United Kingdom before some of the heat of economic activity is generated in areas like Scotland, the North, Wales and Northern Ireland.
  I ask the Chancellor this: with the best regional incentives, with the best incentives, it is claimed, in the whole of Europe, or indeed the whole of the world for the attraction of industry, when is the vital spark of investment going to appear in the Scottish economy? We have missions in Germany trying to attract German direct investment into Scotland. If these regional incentives are so good, can we have some indication that German and other European industrialists are flocking to Scotland? The labour is there. If these investment incentives are so attractive, why are foreign investors and, indeed, Scottish investors not undertaking the necessary investment to mop up this large and undignified pool of unemployment—undignified not because of the men and women themselves but because it is a slight on the Government and the House of Commons that it continues.
  There are some things that I welcome in the Bill. I welcome the distinction in Clause 91 in relation to the tax position of co-operative societies. This is a useful venture, although I want to examine it much more closely in Committee. I also welcome the aids given in similar Clauses to small businesses, but I am not sure how effective they will be. I want to know how the Government see all this linking up with the strategy in terms of the new responsibilities of the Minister for Industrial Development. What link up do they see in regional terms for small businesses getting services, such as advice bureaux, and so on, whereby they can take advantage of the tax concessions, if they be such, involved in the Bill?
  There are some things in the Bill which completely bemuse me, particularly the relief given for interest payments on personal loans and, again, the increase offered in terms of the higher threshold for estate duty payments. I do not see their relevance to the economic situation. However, as I have said, we shall examine all the Clauses diligently both on the Floor of the House in Committee and in Committee upstairs.
  This is a bemusing Bill. It indicates that the Chancellor and his colleagues are
  852
  engrossed in manipulating the tax system. Changes in the tax system are necessary. Some of those embodied in the Bill are desirable. But we have to have a change in the Government's attitude towards economic management as a whole. They have sapped the confidence of industry in investment. It will take a long time for that confidence to be restored.
  I believe that this is the Chancellor's last throw. He has given, as hon. Members opposite like to boast, £3,000 million away in tax. But he has reduced the options open to him. Possibilities emerge if he gets it wrong because there is no fail-safe in his overall economic strategy if we run into balance of payments difficulties again. If we have some form of industrial difficulties in the future, he has no room to negotiate on things like incomes policy. He has destroyed the confidence of the trade unions. This is his last throw. While I welcome certain elements in the Bill, I am wary about the overall consequences and the Government's economic strategy.
  8.25 p.m.
  Mr. Ian Percival: I speak as an enthusiastic admirer of what my right hon. Friend the Chancellor of the Exchequer and his colleagues have already done and what they propose to do in the Bill—to restructure our whole tax system and to make it fairer and reduce the burden of taxation. The Bill is a very big one, containing many different measures of considerable substance, and it arouses our admiration. Some people, especially hon. Members opposite, seem to have overlooked the fact that the best way to help the least fortunate in society is by building a prosperous State. I believe that the Bill will contribute to that. It is imaginative, far seeing and far reaching.
  I speak also as an admirer of the value-added tax and of the particular system which has been devised in this instance and set out in Part I of the Bill. Nevertheless, the whole of the rest of my observations will be entirely critical because I want to confine myself to Clauses 30 to 40. My purpose is to impress upon the House in general and the Government in particular that the powers taken in these Clauses will not do. They are far, far too great. They place far too much power over the individual in the hands

  853
  of the Executive. I give one or two examples. Under Clause 32,
  "The Commissioner may, as a condition of allowing or repaying any input tax to any person, require the production of … such security … as appears to them appropriate."
  There is, as far as I know, no equivalent provision in any fiscal legislation. The Clause also requires that, as a condition of a specified person continuing to supply goods or services, he must deposit security for the tax which may be due. Again, I know of no similar provision in any fiscal legislation.
  To continue to supply goods in breach of these conditions is a criminal offence. Not the least alarming feature of these Clauses is the indefinite number of additional offences they will add to our criminal law—offences which attract penalties usually of the order of £1,000 or three times value of the tax evaded, whichever is the greater.
  The powers of entry and search are, I believe, far greater than have ever been given in any legislation of which I know. In this case there is no requirement that the authorised person has to produce proof of authority or carry a direction upon him authorising him to do what he is doing.
  One goes through these provisions. Though the citizen is allowed an appeal he cannot pursue it unless and until he has deposited the whole of the tax due on the assessment against which he is appealing, an assessment which may be an estimated assessment. I know of no such powers, no such prohibition, restriction or inhibition on the right of appeal as that.
  What has happened is that somebody has said, "It would be useful if we could have every conceivable power which we can think of for the purpose of collecting this tax". It might be that to have these tremendous powers might enable those responsible for the collection of the tax to collect some tax which they would not have otherwise been able to correct. The price paid for that in these provisions is far too high in a country which still proclaims that the individual freedom and liberty of the subject, not least of the subject in his own home, is what it is all about. That is the basis of our democratic society.
  These powers are understandable in the collection of customs where one is
  854
  try to catch smugglers. They have been carried forward perhaps into purchase tax, which was given to the Customs and Excise to collect. Now they are being carried forward into this tax, and added to very substantially, overlooking the fact that this is a tax of a different nature from a customs duty, and a tax which will be collectable from a vastly increased number than that affected by purchase tax.
  I have tried to cram into a few minutes some instance; of the Draconian nature of the powers contained in this Clause. I ask the House to look most carefully at them before agreeing to give those powers to any Department of the Executive. I ask my right hon. and hon. Friends on the Front Bench to have another and careful look at them.
  8.33 p.m.
  Mr. Eric Deakins: I should like to comment on the remarks of the hon. and learned Gentleman the Member for Southport (Mr. Percival). He said that this was a far-reaching Bill, although he went on to criticise it. He also criticised the extra offences that are being created. The more far-reaching one makes a system of taxation—we are told that VAT is to be a very broadly-based tax indeed—the more difficulty there will be for the taxpayer in his dealings with the Inland Revenue, because there are more points at which the Inland Revenue in its tax collection system may be in conflict with the interests of the taxpayer.
  We have the fairest system of tax collection in the world, bar none. In spite of the opinion of some of my hon. Friends, we have remarkably little tax evasion, although we have in this country a great deal of legitimate but nevertheless unjust tax avoidance.
  I want to confine my remarks to two subjects, the share option concessions and the value-added tax. I should like to ask the Financial Secretary for the evidence that since 1965 there has been an extra drain of executives and directors from this country as a result of our not having had the share option concessions now introduced. Second, I ask what consideration was given by the Government, in introducing these concessions, to their effect on the efficiency of British industry.
  It might be claimed that there was some justification for those concessions if

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  we were going to make our industry more efficient. We all know more people want to do that. The share option schemes will be most valuable in those companies which are most successful and which are already paying their executives and directors very high salaries.
  Will not this extra concession lead to a drain not out of the country but from the less successful companies to the more successful companies? We need to ensure that we have the managerial talent to bring up from a state of relative inefficiency to a state of strong competitive efficiency our less efficient companies rather than our already efficient companies. I should have thought that this would not help our economic efficiency.
  The third point concerning share option schemes is that of social justice. This sort of scheme will reward those executives and directors who are most successful. The path to success in the past 15 years in British industry has been mainly one of takeovers, closures and redundancies. I think that it is going too far to give extra awards to those who manage to make bigger and bigger profits by closing down uneconomic units without any regard to the social costs involved in terms of consequent unemployment.
  I disagree with the Chancellor's assessment that VAT is a socially equitable tax or, rather, that it is not socially inequitable. Any extra form of taxation which is indirect must be socially regressive if it taxes those goods and services which are not now taxed and in particular those which have not been covered by purchase tax, which was originally designed as a tax on luxury.
  What the ordinary person is most interested in is food, transport, fuel and power, education, clothing, housing and health. The Government may say that in one form or another they will relieve most of those goods and services from the impact of VAT. We shall have more chance in Committee of examining that claim in detail, but I wonder whether, at this stage, the Minister can tell us what criteria the Government used in determining which of those services should be zero rated, and which should be exempt, because there is a considerable difference between the two forms of VAT in those circumstances. Why is it that education and health are exempt,
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  and not zero rated, whereas food, transport, fuel and power are zero rated?
  On education in particular, which is our fastest growing social service, certainly in terms of expenditure—and very necessary expenditure at that, as everyone agrees—the position about educational materials is not clear. It is uncertain whether they come under Group 3 of Schedule 4, or Group 6 of Schedule 5. This may be a Committee point, but we shall be interested to hear the answer to it. We must make sure, at all costs, that no VAT in any form has any impact on the costs of the education service.
  Furthermore, it is not clear from the wording of Schedules 4 and 5 that the whole of education will be exempt. I am sure that that is the Government's intention, but the wording of the appropriate Group is so tightly drawn that, on the face of it, it seems to exclude education in polytechnics, evening institutes and technical colleges. I hope that we may have some assurance about that.
  Of the other goods and services that I have mentioned, clothing has been referred to by a number of my right hon. and hon. Friends and one does not need to be labour the point save to say that this, like food, is a major item of consumer expenditure, particularly among people with very little money left over after meeting the elementary costs of living.
  My final point is to come back to the comment made by the Chief Secretary to the hon. Member for Worcestershire, South (Sir G. Nabarro) about food and distribution costs. Is it clear that all costs which have an impact on food prices will be exempt from VAT, by whatever means the Government consider appropriate?
  In the case of pre-packaged food—not convenience foods and subject to purchase tax—will the cost of pre-packaging be excluded? Is it clear that all distribution costs will be excluded? Furthermore, is it clear that all inward transport costs—not distribution costs—will not be affected by VAT? Those services are a considerable proportion of the costs in the food manufacturing industry. They are of great interest to consumers and to all Members of the House. We want a clear assurance that there will be no increase whatsoever in the price of food as a

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  result of the introduction of VAT. If the Government can give that assurance, we on this side of the House would welcome it, although we condemn many other provisions of this socially inequitable tax which will raise the cost of living for the ordinary person by far more than the combination of purchase tax and SET could ever have done.
  8.40 p.m
  Mr. Patrick Cormack: Although I am tempted to follow the interesting speech of the hon Member for Walthamstow, West (Mr. Deakins) I want to be brief as several hon. Members still wish to speak, so I shall be specific and confine my remarks to the fine arts.
  Before coming to my main subject, I should like to say how very much the concessions given in the Budget and embodied in the Finance Bill with regard to charitable bequests and capital gains tax as they affect benefactions and public institutions are appreciated. There is one anomaly, to which I beg my hon. Friend the Financial Secretary to pay particular attention, and that is the way in which the National Art-Collections Fund will be limited to exemption from duty or bequests of £50,000, when it should be on a par with the great national institutions.
  I want to talk about VAT as it affects the fine arts, I do not share the apprehensions of many hon. Gentlemen opposite about the tax in general. I think it is probably a good tax, and I admire the sensitivity and thoroughness with which my hon. Friends have had their consultations over the last year and decided which articles should be exempted or zero-rated. But in the fine arts there is a blind spot. I am not trying to plead a special case for a particular trade or group. I am trying to highlight something which is to me fundamental to the national interest both from an economic and a cultural point of view.
  There are few areas in which we can say with complete truth that Britain leads the world, but Britain does in the fine arts. London is the centre of the fine art market. It is to London that people come when they wish to buy, and, more important, it is to London that people come when they wish to sell. Last year we had the example of the great Dodge Collection of Chicago. It was not sold in
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  America or Europe, it came to London to Christies', where it fetched record sums. Each year this market brings in invisible exports a considerable amount of foreign currency into the country. This market would be substantially damaged if the proposals contained in the Bill came into law. And not only would our invisible exports be damaged, but we should be increasing the one form of exports that it has been the deliberate policy of succesive Governments to discourage over the last 30 years—the export of works of art.
  What will happen if the proposals become law is that the Metropolitan Museum of Art in New York will be able to buy at a 10 per cent. discount as against the National Gallery, London. I could multiply this example many times and I hope that my hon. Friend will take this point to heart.
  When one comes to the generalities of the subject, and talks about the quality of life, as we are always doing, quite rightly, these days, one sees that the Government have taken proper note of books and music in their proposals for VAT, but the case for works of art is no less strong on purely cultural grounds.
  Hitherto there has been absolutely no direct fiscal discrimination against British collectors, with the consequence that the collecting of works of art has been widely spread so that the possibility of later acquisition by public collections by means of benefactions has been facilitated and enhanced. In this way the public owe a great debt to that British genius of collecting which has proved itself over the last several centuries. This will be in jeopardy if the Bill goes through as it stands for there will be an enormously inflationary effect on paintings and antiques generally.
  I urge my hon. Friend to bear in mind that we are not here dealing with ordinary goods. There is no final purchaser. There is no value-added element as there is in many of the products of which we have spoken. We cannot compare an exquisite water colour or a Chippendale chair with a washing machine. On those goods where there is a final sale VAT is logical. Once the thing has been sold its value immediately depreciates, whereas with works of art there is no final point of sale. These things increase in

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  value over the years and we shall do a great disservice to the collecting instinct and the quality of life if we allow these proposals in the Bill to become law.
  I have tried to be brief for the simple reason that I know that my hon. Friend the Member for Ipswich (Mr. Money) is most anxious to take part in the debate. I urge my right hon. and hon. Friends to bear in mind that here is a real threat to Britain's position as the centre of the art world, a real threat to collecting in general. I ask them to pay heed to what we say and to make the necessary Amendments in Committee.
  8.46 p.m.
  Mr. John D. Grant: I, too, will be very brief, not only in the interests of the hon. Member for Ipswich (Mr. Money) but also because my hon. Friend the Member for West Lothian (Mr. Dalyell) wishes to make a brief contribution.
  First, I wish to express my incredulity at the failure of the Chancellor of the Exchequer to deal with the central economic issue that is before us, namely the level of unemployment. It is against these unemployment figures that we must view the Budget and the Finance Bill in their potential effect on the level of unemployment.
  A constant theme of the Chancellor's remarks over a long period has been the fact that the wage demands of wicked trade unionists have had such an inflationary effect that they have led to higher unemployment. That same right hon. Gentleman was not so long ago boasting that the rate of increase in wages and prices had been substantially halted. One might have expected this to have been reflected in the unemployment figures, but that has not happened.
  The Chancellor has demonstrated his flair for the feelings of ordinary people with his recent speech about the railway dispute. I suppose it must be taken as representing part of his aim to encourage British industry on the path of economic righteousness which was the central aim of his Budget proposals. In fact, that speech did untold harm.
  It is worth looking at what the incentives in the Budget and the Finance Bill will mean for working people. These are the sort of incentives which are
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  supposed to be designed to help avoid the series of damaging industrial crises which have been the hallmark of this Government since they came to office. We have heard about the £1 a week which the hon. Gentleman says the average industrial worker will receive as a result of the tax cuts. Even that figure appears to be under attack. And the right hon. Gentleman does not draw attention to increases in national insurance contributions and other increases resulting from this Government's policies—for instance, those which will flow from the Housing Finance Bill.
  Let us look at how a worker will benefit from the provisions of the Bill. A railway man can now look forward to enjoying the benefit of paying a good deal less tax on his investment income, he will be helped with his surtax, and presumably the British Railways Board might even consider including him in any stock option scheme. This might be one way of breaking the present deadlock on the railways. That same railway man would be wise to extend his borrowing now that his tax allowance on loans is to be restored. One might say that speculators from the ticket office to the footplate are in for a real bonanza.
  I shall raise only one other point and it concerns the value-added tax. It is a point which I hope the Government will take very seriously. Thousands of small traders will be affected by the tax who have never experienced anything of the kind before. It is a highly complicated and a highly complex tax. This Bill has been drafted in highly technical jargon, as was the White Paper on VAT. I shall be surprised if many of those of whom I speak are able to understand it. So many Bills which are considered in this House appear to be worded deliberately to baffle the layman. They succeed in baffling some hon. Members as well.
  The Industrial Relations Act has been described as a lawyer's paradise. With respect to my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett), I regard this Bill as an accountant's paradise. It may be that the slogan arising from it will be not that every home should have one but that every corner shop should have one. Will not the Treasury consider coming down from Cloud Nine for once and publishing a child's guide to VAT? I hope that that

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  will be done, not after these proposals have gone through this House but while it is still possible for people to make effective representations. That might be a worth-while contribution to the open Government to which the Chancellor of the Exchequer and his colleagues are theoretically committed.
  8.52 p.m.
  Mr. Ernle Money: I am grateful to the generosity of my hon. Friend the Member for Cannock (Mr. Cormack) and the hon. Member for Islington, East (Mr. John D. Grant) for the opportunity to address the House briefly.
  I want to echo the concern expressed by my hon. Friend the Member for Cannock, and for exactly the same reasons. I do so not on emotive grounds or because the art trade is in some way mixed up with culture, but because it is very important in the national interest from the financial and economic point of view.
  I ask my right hon. Friend to bear in mind the volatility of this market. It has not always been here. Before the war it was divided between Paris, Berlin, New York, and other capital cities. It came here after the war because of a fortunate combination of circumstances. We had available not only the expertise but a free market. It was an unrestricted market in financial terms. In addition, we had no purchase tax and a low level of commission charges. It is a market which has been nurtured carefully over the years. We had, for example, the steps taken to encourage the developments which came from previous Chancellors of the Exchequer; the removal of the embargo on the import of works of art in 1949, allowing bulk shipments to be made to London and payment to be made in the currency of the country from which they came; and the major step forward urged for so long by that great dealer, the late Oscar Johnson, who persuaded the Government in 1954 to relax exchange control restrictions so that British dealers were able to acquire works of art abroad for re-sale anywhere through the medium of British firms.
  In these circumstances, I ask my right hon. Friend to bear in mind, first of all, that if VAT is to be implemented in its present form services to foreign clients
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  by dealers or auctioneers will, except in the small group of traders or "authorities" comprised in Schedule 4, Group 8 of the White Paper, not be zero rated. Since these services are one of the chief sources of foreign exchange earned by the art trade, they should be recognised as such and zero rated.
  Secondly, many overseas customers prefer to take their purchases with them direct from the shop or sale room. It is estimated that 67 per cent. of works sold in London salerooms are in lots of less than £100. There is a real risk that that kind of trade, which is essentially the one earning the money rather than the bigger works, will be affected seriously by the imposition of VAT.
  I put those points now to the Government. There are many others on which I shall write to my right hon. Friend. The real issue is whether we shall not be giving enormous comfort and help to our American and Swiss rivals in this field, to the extent that they will be laughing all the way to the bank if VAT is imposed on the British fine art trade.
  8.55 p.m.
  Mr. Tam Dalyell: I am grateful to my hon. Friend the Member for Islington, East (Mr. John D. Grant) for his generosity in cutting short his speech and, indeed, to the hon. Member for Ipswich (Mr. Money).
  I will use such time as I have to ask certain factual questions of the Treasury relating to how it comes to its decisions and the evidence that it is adducing for certain assertions.
  First, on the question of the administration of the value-added tax. I do not know whether my right hon. Friend the Member for Leeds, East (Mr. Healey) was right in quoting 50,000 or 60,000 extra civil servants. Perhaps it is an exaggeration, but we should be told. Presumably the Treasury has made some estimate. Our objection is that we are not told at this point in time what estimates the Treasury has made. I should be shocked to hear that the Treasury has made no estimate. Perhaps the Financial Secretary will interrupt and put me right about this matter. Has any calculation been made of the number of civil servants who would be involved in the excution of the value-added tax.
  Mr. Higgins:We had a number of exchanges on this matter at Question Time last week.
  Mr. Dalyell:Will the hon. Gentleman give me an answer in numbers?
  Mr. Higgins: I refer the hon. Gentleman to the answers which I gave last week.
  Mr. Dalyell: As I recollect, they were somewhat evasive answers. This is a cat and mouse game. If the Financial Secretary is forthcoming he can help us again. A direct question was asked about what would be involved on the issue of children's clothing. In a civilised way, I asked the Chancellor what calculation had been made. This was not a pejorative question; it was simply an inquiry as to the fact. If it is argued that the Budget is geared to the needs of low income groups being looked after, it is legitimate to ask about children's clothing. By what percentage, in the estimate of the Treasury, will it rise? Has the Financial Secretary got these facts. This is deplorable.
  Mr. Higgins:We cannot have an impromptu Question Time halfway through the debate. On the points the hon. Gentleman asked me about earlier, we have had a number of exchanges. I have given definite answer on that subject. If he has a specific question on this subject and he puts it down, I will answer it. I dealt with his first point in the Budget debates.
  Mr. Dalyell: The hon. Gentleman's memory is not any less good than I thought it was. This really is wriggling. The Chancellor chose this ground. He was asked a factual question and he refused to give any kind of answer. This is what bothers us about the way the Treasury comes to its decision. I am not one to sneer at the Treasury civil servants. They are some of the cleverest people in the country. But how do they reach their decisions? We are entitled to ask certain factual questions. I can only deduce that it is not the fault of the civil servants, but the incompetence of the Ministers, or that the Ministers are unwilling to reveal the whole package, which is even more objectionable.
  At some time I should like the Treasury Ministers to define the word
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  "modest". We are told that there will be a modest flow to charity. What on earth does that mean? Instead of using vague adjectives, the Treasury should quantify exactly what it is saying.
  I am glad the Chancellor has come in, because I should like to repeat my objections to him.
  Mr. Joel Barnett: We all object to him.
  Mr. Dalyell: The Chancellor has to think about the way in which these debates are conducted. In a very civilised manner, I have asked certain factual questions. I asked what the percentage rise in children's clothing would be, and I was rebuked for lengthening the Chancellor's speech. That is no kind of answer. If the Government claim that they are looking after the needs of low income groups, it is a fairly obvious question to ask. It is not a recondite or esoteric question. It is a simple question which concerns millions of housewives. I should be shocked to be told that no percentage estimate has been made of the rising costs of children's clothes. As the Chancellor is present, I ask him whether I am wrong. He sits there like a Sphinx. I have the greatest suspicion that I am not so wrong.
  As a Scot, I am puzzled to know why suddenly, out of the blue, there is a bias against charter flights and a different treatment of scheduled flights. My hon. Friend the Member for East Stirlingshire (Mr. Douglas) and those of us from the North have every right to be concerned about this. I see my hon. Friend the Member for Aberdeen, North (Mr. Robert Hughes) in his place. Our constituents are far more dependent than Londoners on charter flights. On what basis is there discrimination against those who use charter flights as distinct from scheduled services?
  I repeat, in the presence of the Chancellor, a point made admirably by my hon. Friend the Member for Walthamstow, West (Mr. Deakins) about stock options. The Chancellor said that we must have these because international companies operate this way and that unless we act likewise British companies will be at a disadvantage. The right hon. Gentleman will be aware that many multi-national companies behave in Britain as do British companies. In

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  other words, when they are in Rome they behave like the Romans.
  Is the explanation given by the right hon. Gentleman the real reason for bringing in this highly regressive scheme of stock options? If his reason is the only argument for this change, then it is highly egregious. Is there any evidence for the assertion that British-based companies get less good managements because they do not have the stock options available to multi-national companies? This was not adduced in any of the evidence offered to those concerned with the brain-drain.
  My major complaint against the Chancellor and the Government is that time and again they make assertions without producing evidence to support them. I give notice that, politely and gently, I shall throughout the Committee stage go on and on asking for the evidence on which their assertions are based.
  9.3 p.m.
  Mr. Joel Barnett: I feel that I should begin by declaring my interest in the narrow financial sense, as it were, because it is in this narrow sense that I might gain considerably from this Finance Bill.
  On the other hand, I hope that I shall not be considered unduly altruistic if I both speak and vote against the Measure, for in the wider interests of the small number who will benefit most, I believe that those wider interests would be better served by a very much fairer Bill.
  The only justification for perpetuating, indeed increasing, the wide difference in the level of real incomes—it is not a justification that I could accept because of what it does to the very fabric of our society—might be that it provides incentives which in turn provide the national wealth from which all can benefit. That is the usual argument. It was used today by the Chancellor, along with a denial that the Bill and its financial measures were unfair. Although I appreciate why the Chancellor should deny that they are unfair, this is surely one of the point that hon. Gentlemen opposite make; that they seek to help those at the higher end of the income scale.
  I wish briefly to examine a few of the Bill's measures from the point of view of fairness, and then, if we can see that they are not fair, examine whether
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  they achieve some of the major economic advantages, by way of incentives, to which the Chancellor referred.
  As one who for many years had been advocating a unified tax system together with my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), I welcomed the simplification. But I have never argued that it would have more than a marginal effect in tax terms. It is true that workers will know that their real rate of tax will be 30 per cent. rather than the 50 per cent. or more that many at present think it to be.
  We have all heard the arguments that workers will, therefore, work harder, do more overtime and so on. But the facts do not prove it. The hours of overtime worked in the United Kingdom are as high as and in many cases higher than in countries with lower marginal rates of tax. Out of 21 OECD countries, only in Yugoslavia are more hours worked on average. Depite this, and without the evidence, it is possible that there may be more overtime worked. But the state of unemployment in this country today is catastophic. As my right hon. Friend the Member for Leeds, East (Mr. Healey) said it is rather surprising that the Chancellor did not see fit, in opening the debate, to say anything about a level of unemployment of over 1 million, nearly two years after the present Government took office. That is the present situation.
  In these circumstances, is it the remedy to introduce a tax system one of the virtues of which may be to increase the amount of overtime worked? Is that the sort of society that the Chancellor is trying to create—more overtime rather than more leisure? Has the Chancellor stopped to ask whether that is the best way to increase productivity? There is a great deal of evidence to indicate that more overtime is more likely to decrease productivity than to increase it.
  The effect on workers of what has been done in the unified tax system is to remove an illusion. But the real benefit from that unified tax system, where there is no illusion, is that £300 million will almost entirely go to those with £5,000 a year and more, and to those with investment income. The usual economic case is that this will encourage initiative. That has never been proved in the past

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  and the Chancellor did not attempt to prove it today.
  What about the case on fairness? I said that almost all of the £300 million would go to those with incomes of over £5,000 a year, and to those with investment incomes. During the Budget debate, the Chief Secretary intervened to say that the 30·14 per cent. standard rate, which now comes down to 30 per cent., would mean that £45 million to £50 million would go to people other than the group I have mentioned. The Chief Secretary has since been kind enough to write to me to say that he got that wrong and that it is only £28 million. I do not know why he bothered to intervene in that debate, because even if it had been the bigger figure, the case is still made. The £28 million is spread right across the board to 20·57 million taxpayers, and that figure takes into account married couples as one. Most of that will go to those at the top end of the scale with most income, whereas the other £272 million will go to 255,000 people with more than £5,000 a year. For those with investment income, the largest amount will go, naturally, to the very smallest number with the maximum amount of capital. One begins to understand the measure of Conservaive tax philosophy, the measure of their fairness.
  I thought that my hon. Friend the Member for Oldham, West (Mr. Meacher) was unduly modest in his claims when he said that this would be going largely to the wealthy, because with this £300 million, it is not "largely" to the wealthy; it is almost entirely to the wealthy.
  Then one comes to estate duty. There is some welcome relief to those with capital under £30,000 and the Chancellor has proudly boasted that two-thirds of the £143 million relief in a full year will go to widows, to those at the threshold and to charities. Incidentally, we shall want to look very closely at the definition of "charities". It was rather interesting that the Chancellor today said that he did not make it a higher figure because of the abuses. We want to examine what he meant by that. What he did not say was that if two-thirds goes in this direction, one-third must go somewhere else and one-third, or nearly £50 million, will go
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  largely to the small number of very large estates. This is therefore yet another example of Conservative fair taxation policy. If it is not fair, is there some economic purpose for it?
  The usual case is that it is a valuable incentive to allow a man to keep what he has earned. This is a nonsense because in the case of large estates the money is not earned but is inherited by carefully devised trusts or accumulated through large and skilfully manipulated property and share deals. It emphasises the difference between us. I do not accept as a valid definition of earnings that which the Chancellor seems to accept. An accumulation of millions in these days of inflation contrasts very much with the case of a worker who, if he got a 20 per cent. wage increase, would find it difficult to accumulate £100 in a lifetime in real earnings.
  We come to the new corporation tax, which is another example of Conservative tax philosophy. I am not surprised that it has been widely welcomed in the City, although I think the City is rather short-sighted, particularly in the case of close companies. What is carefully hidden under the title of reform is the combination of incentive to pay higher dividends while the Chancellor reduces the tax on those dividends. As always in a Conservative tax philosophy, equity takes a back seat. Again, if the new corporation tax is not fair, is there an economic case for it?
  Among the major arguments presented by the Chancellor for the new corporation tax is that the old tax impedes the raising of capital and lessens the pressure on efficiency. Again this is stated as a bald fact with no evidence being presented to the House. If one could prove that the positive encouragement of dividends would make companies more efficient, one would have to consider such a step, although not combined with a reduction in the tax on those dividends.
  But there has been no evidence to the House. The Chancellor has not proved it, and all the evidence is entirely to the contrary. In the 1950s the 100 fastest-growing companies, with regular access to the market, also retained the highest proportions of their profits. In 1968 the fastest-growing companies also had the

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  highest retention. This does not mean that all the high retainers also have the fastest growth but it shows that high retention is necessary to get high growth. But with the new corporation tax, the Chancellor is to penalise this type of company.
  Before making such a major change with all the upheaval that is involved, one would have expected a credible case to be made, but none is made. One is left with the obvious conclusion that it is credible only in the context of a Conservative tax philosophy which seeks to prove that there is no difference between, on the one hand, unearned income derived from investment savings and only to a small extent from real earnings, and on the other hand, income earned the hard way which leaves very little room for savings.
  There is one major disincentive. A 50 per cent. rate of corporation tax next year with a 100 per cent. depreciation—which is not free depreciation—means that plant bought this year, will, in terms of relief, be worth £40 for every £100and next year it will be worth £50 for every £100. This is not an incentive to purchase new plant but an incentive to defer purchase of new plant. The Chancellor has made it clear yet again today that, arrogantly, he is not prepared to accept Amendments to the value-added tax. I hope that I am wrong about that. In any case, I hope that at least he will accept an Amendment either to make this truly free depreciation of preferably 125 per cent., which would make it the same as next year. It would be even better if he would make it higher than 125 per cent. in a year when we desperately need increased investment.
  I turn to the major new tax, the value-added tax. The Government have made it clear that they consider it such a wonderful new tax that they would have introduced it whatever happened over our entry into the Common Market. Why are they so fond of this wonderful new tax? There are four major reasons why we would expect a Government to be keen on a tax: that it has economic advantages; that it is easier to administer; that it removes anomalies; and that it is fairer.
  What are the economic advantages? Exports do not bear purchase tax today,
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  so it has no advantage there. That it is a buoyant revenue-raiser, as was said in the Budget debate, is only another way of saying that with inflation a widely-based consumption tax will automatically increase revenue. I had thought it was the Government's intention to reduce inflation, but that is by the way, as it clearly will not happen. In any case, there was nothing to prevent the Government from widening the scope of purchase tax, so in that sense there are no economic advantages.
  As for the effect on prices, with the car tax collecting another £100 million, the tax is altogether about £100 million more than a combination of SET and purchase tax. But we all know that a reduction of SET will, to put it mildly, have only a marginal effect on prices. We have evidence of that because of what happened when the Government took off the first half. But a replacement by VAT will have a very serious effect on prices.
  All the economic arguments of the Richardson Committee Report in 1964 are as valid today as they were then. Not one of the arguments presented in that Report has even been answered. The arguments certainly were not answered by the Chancellor today. That Report made the case that the tax would impede growth and investment and harm the balance of payments. That was even when it was being proposed as a possible replacement for profits tax, which is not the case today.
  I assume that the Government accept that they have no case on the question of administration, because they agree that between 6,000 and 8,000 additional civil servants will be needed, and the cost to 1½ million to 2 million registered firms in equipment and staff will be colossal. My right hon. Friend referred to an article saying that another 50,000 clerks might be needed, and that the figure could be even higher. The Chief Secretary intervened to try to make a clever point about salesmen selling equipment. He was unable to tell us exactly what extra staff will be required, for the very good reason that he does not know. But we know that companies will need a considerable increase in staff to cope with the new tax.
  I remember very well when we debated SET the arguments of Conservative

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  Members about how stupid it was to pay a tax and then reclaim it. Now every firm in the land will be paying the tax and then setting it off against the tax it collects, whereas the SET rebate applied only to manufacturing companies. Now not only do we have 20 million taxpayers, but the Government have created 2 million more unpaid tax collectors.
  It has been said that the one redeeming feature of the tax is that it reduces anomalies. It is true that one rate plus a zero rate is beter than two rates. But I must disillusion hon. Members who think there will be no anomalies in the tax. My hon. Friend the Member for Huddersfield, West (Mr. Lomas) spoke of some, and I should like to refer to just a few.
  Take the simple case of a fish-and-chip shop. If a person takes them out of the shop they are free of tax but if he eats them on the premises they are subject to tax. I wonder how many chips he has to eat on the way out before they become liable to VAT. He will not have to stop for a chat on the way out. Alternatively, there are drugs. Those on prescription are currently free of tax but there are many of the cheaper drugs which people buy from the chemist instead of going to the doctor. If they do that in future they will have to pay VAT.
  Caravans are free of VAT provided they cannot be used on the roads. Aircraft are free of VAT but, according to Group 9 in the Fourth Schedule, providing they are not used for pleasure. It is almost certainly true that for the taxpayer coughing up part of the £1,000 million for research on Concorde it will be no pleasure, but in the terms of the Bill it will need to have been designed not to give pleasure. I suppose it is just possible that that was the intention. If a person travels by plane the fare will be free of VAT provided that it is a scheduled flight. Millions seeking the sun in charter flights on package holidays will presumably have to pay VAT. We should certainly like an explanation of that.
  Food will be free from the tax and the Bill tells us that food includes drink. We now have that in writing—but I must warn hon. Members that it is not all
  872
  drink that is exempt. True, water is tax free, but only provided that it is not distilled or bottled. I think I have shown from the few examples I have given that there is plenty in this new tax for the hon. Member for Worcestershire, South (Sir G. Nabarro).
  The only argument left is on equity, and I do not believe that even the Chancellor's best friend could accuse him of introducing a tax on equity grounds. As my hon. Friend the Member for Walthamstow, West (Mr. Deakins) pointed out, he has done nothing of the sort. It could have been worse. For a Chancellor who has taxed everything in sight, and some things that are not, to claim as a virtue that he is not taxing food, fuel and a number of other items which were not taxed before anyway certainly exposes the weakness of the case, especially when the single rate of which he boasts ensures that a baby's coat is taxed at the same rate as a mink coat.
  It is true that it is not administratively as bad as it might have been but I believe, as I always have believed, that this remains an administrative monstrosity. As my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) said, the problems of this tax have not yet been appreciated. It will be a nightmare to firms and tax officials alike.
  With one rate and a minimum number of exemptions and zero rating, there will be additional burdens for the lower paid and for the average paid because the net effect of the other measures inside and outside the Budget will do nothing to relieve the burden falling on those groups.
  As my hon. Friends for East Stirlingshire (Mr. Douglas) and Oldham, West have said, perhaps the most blatant hand-out is on loan interest. The Chancellor virtually admits it. As he could not give this relief to the lower paid through hire-purchase interest, he has disallowed the first £35, equivalent to perhaps 7 per cent. of £500—not even enough for a night out for a big surtax spender. That sort of man will be interested in borrowing £500,000 rather than £500. The Chancellor has shown that he knows about this in at least on respect because in Clause 72 he has closed one loophole. It has taken him 10 subsections to do it and to prevent

  873
  the big surtax-payer from getting away with definite gain without risk of buying short-dated gilts. He is still left £2,000 of loan interest allowable, equivalent to 8 per cent. on £25,000. It will not be the workers who take advantage of that kind if incentive. As for the really big boys I doubt whether the Chancellor with his experience believes that one Clause dealing with one known tax avoidance scheme will go far to prevent the artificial transactions, as he rightly called them, which will be found in increasing numbers. While the trade unions which he freely castigates may not be able to use these schemes, he should not be surprised if they are aware of them.
  Coming to another scheme, the capital gains relief on unit trusts, this clearly will not be for widows and orphans, as the Chancellor would have us believe. Margaret Stone put it well in The Times of 8th April:
  "In this post-Budget pre-Finance Bill period one thing at least doesn't require any clarification: unit trusts are clearly a very good investment for the wealthier investor."
  The right hon. Gentleman the Secretary of State for Trade and Industry once said that in our regional policy we had been trying to put cream in our coffee by spraying a jugful of cream around the room in the dark—a very graphic phrase. But the Chancellor has not been spraying it around. He has been putting small dollops of cream in a few cups, and not in the dark, as my right hon. Friend correctly says. In other cases we could at least try to prove economic justification; in this there is none at all.
  Again, as some of my hon. Friends have pointed out, in stock options the argument is that this would be a vital incentive to the young executive. In practice, it would be a useful increase in real income, and there is not a shred of evidence that such a man would work harder or that he would be less likely to emigrate. As the Jones Report on the brain drain pointed out very clearly, there were no tax reasons for that. But even if it could be proved that there were, it would be foolish to ignore the industrial relations consequences on groups of workers who are sternly told that they ought to accept 12 per cent. in the national interest.
  At the outset I said that the justification for unfair taxes, which I certainly
  874
  would find unacceptable, could only be that we could prove that they would increase the total national wealth, from which all would benefit. The policies are certainly unfair, as I think I have shown; also they will not achieve the objective claimed. But even if the incentives had some marginal effect, they never could compensate for the serious consequences of widening the gap between those who own capital and those who work. Workers may not read the Financial Times, but they are aware of the rich pickings for the few that the Chancellor is giving in this Finance Bill.
  It is no use the Chancellor deploring militancy when the man who gets £1 a week immediately has it taken a way from him by the Chancellor's ministerial colleagues and when these same workers see so much more being given. As my hon. Friend the Member for Oldham, West pointed out, again very modesty, it is £10 per week, and indeed more, in tax relief. Indeed, to a man with £20,000 a year with just 10 per cent. of it in investment income, it is nearer £800 a year.
  It is the Chancellor himself, through this Bill and his measures, who is giving the biggest possible boost to militancy in this country. It is no use piously asking workers to accept 12 per cent., no matter how valid is the economic case for even less, when these groups of workers see the Government giving vastly more than 12 per cent. to land and property speculators. There was a very interesting cartoon in The Times on Tuesday—it the might have been more appropriate for the Morning Star—which showed two tycoons walking down an empty railway track, and one saying to the other, "All for a mere £8 million. One gazumping property developer could make more than that in a morning".
  In these circumstances nobody should be surprised at militancy; he should be surprised that there is not more. There is, of course, much wrong with our society, but it is not the kind of wrong that this Government would have us believe. The vast majority of the people of this country are not bloody-minded, they are not seeking confrontation with either the Government or employers.
  The view that they are seeking confrontation has led this Government into

  875
  the major error of trying to divide the trade unions from the rest of the country. Most workers want peace and co-operation but they also want a fair share of the national wealth. Workers will not indefinitely staysilent and watch a Conservative Government use their tax philosophy to create an unfair society. This is the lesson to be learnt from trade union militancy. The Budget has shown that the Government have not learnt that lesson. They are taking us along the road to disaster. I therefore ask my right hon. and hon. Friends to join me in voting against a Bill which puts the Conservative Party's policy into effect.
  9.30 p.m.
  The Chief Secretary to the Treasury (Mr. Patrick Jenkin): I begin by adding my voice to the welcome given to the right hon. Member for Leeds, East (Mr. Healey) who has joined our finance debates. If the collection of economic quotations from the right hon. Gentleman that is held by the Conservative Research Department is any guide to the wisdom we can expect to drop from his lips, we shall have to go unrewarded. Apart from one article in a rather ancient edition of Socialist Commentary, I have been quite unable to trace anything at all of what he has said about finance. We enjoyed his speech today, especially his animadversions on economists. He is a journalist and I am a lawyer and I think that we can both afford to be beastly to the economists, although I must be careful about my hon. Friend the Financial Secretary to the Treasury.
  A great many points have been raised in the debate and I will try to answer as many as possible. We will have a full Committee stage and many of the details can be probed there.
  The right hon. Gentleman asked me about the balance of payments. The balance of payments remained in surplus in the first quarter of the year, despite the distortions caused to the March figures by the coal strike and other special factors. Indeed, if the effect of the coal strike is excluded, the surplus was very substantial. Furthermore, the fact that during this period sterling remained in strong demand in the foreign exchange markets suggests that the underlying balance of payments position is regarded as sound.
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  Over the next 12 months, we expect to continue to earn a satisfactory current surplus, although not as high as last year's, as imports will rise with the rise in domestic activity following the measures we have taken to boost demand. Therefore, as my right hon. Friend said in his Budget statement, further visible trade deficitsare likely but there is no reason to expect them to be on the scale of last month's, and they will be more than offset by our earnings on invisible account.
  A number of hon. Members raised the question of unemployment. I do not propose to give a forecast of how soon or how quickly the figures will begin to fall, but there are now some encouraging signs. In the last four months of 1971, the monthly average rise, seasonally adjusted—all the figures I am giving are seasonally adjusted—was about19,000. In the first four months of this year, the monthly average rise was about 9,000 and the provisional figure for April is 4,000. Even before the Budget, therefore, unemployment was starting to level off.
  Moreover, on the other side of the coin, the trend in unfilled vacancies is encouraging. In April, there has again been a rise more than would be justified on seasonally normal factors, and this is the fourth consecutive month in which there has been a rise in unfilled vacancies. As the massive Budget stimulus takes effect, we can expect this trend to intensify.
  The hon. Member for Heywood and Royton (Mr. Joel Barnett) and others spoke about the question of investment and made the suggestion which, I think, they derived from an article in the Economist, to the effect that investment may be postponed from this year to next because it would then get capital allowance at a higher rate under the imputation system.
  That argument, which is based on a crude comparison of tax rates, has a plausible ring about it. I believe it is substantially a myth. It is not my experience that businessmen decide their investment programmes in that way. Increasingly firms make vigorous appraisals of the present value on a discounted cash flow calculation of their proposed expenditures and of profits likely to result. The tax relief is a fact. This is one of

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  the reasons why we have introduced "free depreciation" this year. That is only one element in the calculations.
  The use of discounted cash flow techniques goes a long way to offset the apparent margin of advantage. Investment is aimed at profits. Profits today are more valuable than profits tomorrow. Any businessman who plays around with deferring his investment would risk burning his fingers. He might lose his share of the market. He might find himself left behind in the queue for new plant. I recognise that there may be some postponement at the fringe. But I find it hard to believe that industry as a whole would behave so shortsightedly. [An Hon. Member: "They have for the last few years."] With respect, they have not When it was the other way round—the increase in investment grants from the party opposite—there was no evidence that that led to any overall increase in the total amount of investment. It led to a small measure of bunching at the end of the period, followed immediately by a trough just afterwards.
  Could I turn to the point made by my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies). This is not a matter in the Bill. He warned us he was going to move an Amendment. I took the most careful note of what he said about the differential between on-course and off-course betting tax. We shall examine his arguments. We shall return to this at the Committee stage.
  The hon. Member for Heywood and Royton made an attack on the stock option proposals. He sought to argue that these were nothing but a concession to the rich. The hon. Gentleman has not followed the Bill. He has not understood what we are doing.
  I do not regard stock options or the share incentive schemes as objectionable. They can play a part in making British industry more enterprising and more competitive and help to instil into management the entrepreneurial spark which industry so badly needs.
  I was encouraged in taking this view by the reaction of the hon. and learned Member for Lincoln (Mr. Taverne), speaking in Committee last year in the course of a short debate on stock options and the share incentive schemes.
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  Although the hon. and learned Member does not now sit on the Front Bench—that we regret—he was then speaking as a finance spokesman for his party. Referring to my right hon. Friend the Secretary of State for Employment, he said:
  "I do not disagree with much of what the Chief Secretary has said. To be frank, I was not entirely happy about the course which the law has taken in the past. It was clearly unsatisfactory that schemes of the kind referred to should spring up to avoid the law. On the other hand it would have been repressive to have oppressed them—so that the line advocated by the Chief Secretary is one that I do not find unacceptable."—[Official Report, Standing Committee H, 21st June, 1971; c. 939.]
  We start on both sides of the House, I imagine, from the standpoint that the schemes have merits and should not be suppressed. It was the intention and the achievement of the 1966 legislation to suppress them.
  We must have regard to what has happened since 1966. During these years several hundred companies have succeeded in avoiding that legislation by introducing share incentive schemes. The Bill takes a twofold approach to the problem. First we are extending the income tax charge to share incentive schemes which do not comply with the proposed conditions of approval so that they are on all fours, as near as may be, with share option schemes. Second we are establishing for both types of scheme a code of inland revenue approval. As my right hon. Friend the Chancellor said in his Budget statement, this follows many of the guidelines established by other bodies as being reasonable in all the circumstances.
  That seems to me—and I should have thought to most hon. Members on both sides of the House—a very fair and balanced approach. Few measures of anti-avoidance overkill cause more dismay in industry than the legislation banning stock options. Few measures of avoidance over-kill cause more dismay in industry than the legislation banning stock options, and what we are doing is to put that right.
  It has been the theme of speakers from the benches opposite—and the hon. Member for Heywood and Royton was no exception—that the Government in general and the Bill in particular have

  879
  neglected the interests of the poorest in our community. I find that argument difficult to accept. Indeed, when one sees just how much the Government have done for the poorest sections of the population it is perhaps regrettable that the charge should be seriously made.
  From the moment that we came to office we decided that one of our highest priorities should be to bring about a rapid improvement in the financial position of the poorest groups. Pensions are now to be reviewed annually, and when this year's 12½ per cent. increase in pensions and other benefits takes effect in October—this is something that hon. Gentlemen opposite were not able to do—the pension will have increased by no less than one-third since we came to office—well ahead of any likely increase in prices.
  At the same time, the increased contributions to pay for that have been made in a way which has imposed no extra burden at all on those earning £18 a week or less. Selective help has been given to elderly non-pensioners by the new old-persons' pension. There is the new age addition for 1¼ million pensiners over 80. There is the new age related widow's pension, with the 3-year marriage test abolished. On the family incomes supplement, already 75,000 families are receiving a maximum benefit of up to £5 a week. There are the new invalidity pensions and the invalidity allowance for the long-term sick. The higher benefit rates previously paid only to the children of widows now go to invalidity and retirement pensioners. There are higher limits for the earnings rule for the working wives of invalidity pensioners. The earnings rule has been substantially relaxed for retirement pensioners. There are higher pension increments for those who defer their retirement. The new constant attendant allowance for the severely disabled is helping 75,000 families, and its extension to a much wider category of the disabled will help many more. There have been improvements in the invalid vehicle service. All that represents a massive new deal for the disadvantaged.
  The right hon. Member for Leeds, East incautiously referred to the article in The Guardian of 20th March by the hon. Member for Oldham, West (Mr.
  880
  Meacher), in which he purported to show that a miner with children was worse off after Wilberfore than before. That is utter nonsense. A straightforward way of making a comparison would have been to have included, on the one hand, the November, 1970, take-home pay, and on the other the post-Wilberforce take-home pay, backdated to November, and set those two opposite each other. Instead of doing that the hon. Gentleman started with gross pay—not take-home pay—took the gross Wilberforce increase, made a number of adjustments to it, and ended with something that he called the new net wage.
  It was neither net, nor a true wage, and he compared it with the old gross wage. It is hardly surprising that he came to the wrong conclusion. If the hon. Gentleman had compared the net take-home pay after Wilberforce with what it had been a year before he would have found that, after taking into account all changes in money value, there was a significant increase in pay in real terms, and that was before the changes in the Budget.
  In addition, the hon. Gentleman managed to disregard altogether the 1971 increase in the child tax allowances, and some people might think that it was highly misleading to include the school meals charge, because the miner taken as an example would not have been entitled to exemption in November, 1970, or November, 1971. With all due humility I strongly advise the right hon. Member for Leeds, East, who comes fresh to these matters, to treat his hon. Friend's figurings with a good deal of caution.
  Mr. Meacher: The Financial Secretary has made two main points. The first was about the inclusion of the loss of free school meals. That was included because free school meals, if they were being taken up, would have been lost, and four out of five families get this means-tested benefit. For the sake of moderation I deliberately excluded all the other means-tested benefits which these families might have been getting but which they would have lost at arbitrary points as a result of this rise.
  The main point which the Chief Secretary made was that the figure on which I calculated the effects of the £5 increase was gross. Certainly it was gross. If I

  881
  had taken the net figure the effect of the £5 increase being given net would have been to produce a correspondingly lower figure and exactly the same final result of the man being 15p worse off.
  Mr. Jenkin: All I can say is that the hon. Gentleman sounds even less convincing now than he did earlier.
  The truth of the matter is that the tax changes of both this year and last year have been of major help to those at the lowest end of the scale. We have given priority to raising the tax threshold. The threshold for the single man or woman has been raised by £3·34 a week. For the married couple, both of whom are earning——
  Mrs. Renée Short Mrs. Renée Short rose——
  Mr. Speaker: Order. The hon. Gentleman is not giving way, so the hon. Lady must resume her seat.
  Mr. Jenkin: I am coming to the hon. Lady in a moment. The threshold for the married couple entitled to age exemption has been raised by £3·63 a week, and for a couple with two young children the threshold has been raised by £5·31 a week. The Finance Bill frees altogether from liability 2¾ million who would have paid tax, and families below the tax threshold will in general benefit by £1 a week from the extra FIS payments from the start of this month. The number who will benefit from that is very much nearer to the 75,000 I mentioned earlier than to the 10,000 mentioned by the hon. Member for Oldham, West.
  Both major parties which have held office since the war have made improvementsin the social services, and I am sure it has been the aim of both major parties to seek to shelter the poorest from the rigours of the tax system. Yet I say without hesitation that this record of improved social security and of tax relief at the lowest end of the scale is without parallel. It does not stop there. The Labour Party massively increased purchase tax across the board and also introduced SET in a way which imposed taxation on food and housing. We, on the other hand, have twice reduced purchase tax and, in designing the VAT, have seen to it that it shall not be regressive. Food, fuel, fares and new housing will be zero-rated, rents will be exempt, and in this way we can claim
  882
  that we are protecting the least fortunate members of society.
  In future we look to the new tax credit scheme announced by my right hon. Friend in his Budget statement. As he said this afternoon, this is not merely a way of simplifying PAYE and saving manpower costs, although it does that; we aim, too, to provide valuable benefits for lower-paid workers and many retirement pensioners without individual means-testing. I utterly reject the argument that we have neglected the poor.
  Mrs. Renée Short: Will the hon. Gentleman give way on this point?
  Mr. Jenkin: I am just coming to the hon. Lady. Perhaps I may be allowed to continue because I shall refer to the point she made about VAT and the Common Market.
  Mrs. Renée Short: I was not going to refer to that.
  Mr. Jenkin: The hon. Lady referred to it at some length this afternoon, so perhaps I may reply to her. When I dealt with the Financial Resolution to the European Communities Bill I described in some detail how the various pieces of Community and United Kingdom legislation would dovetail, and I do not want to repeat all that tonight in the context of the VAT Clauses of this Bill. Perhaps it is enough to say that it is this Bill, which, if it is passed, will charge VAT on the people of this country and that when it is law two further essential stages will be necessary before the VAT begins under the Finance Regulations to take effect. First there must be a unanimous Community decision about the uniform assessment basis of VAT. If that decision requires any change to the United Kingdom VAT, further United Kingdom legislation will have to be approved by the House. It cannot be done under the European Communities Bill or under the Finance Bill.
  The right hon. Gentleman and other hon. Members raised the matter of staffing. During the Budget debate my hon. Friend the Financial Secretary said that 6,000 more staff would be needed to administer VAT than were currently involved in the collection of purchase tax. The Government are convinced that the price is well worth it to secure the advantages of a much fairer system of

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  indirect taxation. There will be a certain offsetting saving of some 500 staff in the Department of Employment and in other Departments as a result of the ending of SET.
  On the Inland Revenue side there will be a saving of over 500 staff as a result of the increase in number of exemptions from surtax limits and other savings, and there will be similar savings next year. From 1974 to 1975 there will be savings of over 1,000 staff resulting from unification, but in the longer term the figures will be dwarfed by an eventual saving of 10,000 to 15,000. By the time our tax reform programme is complete, staff savings on collecting tax could well run into five figures. If the right hon. Gentleman moves his Amendment for a multi-rate scheme he will add massively to staffing requirements.
  The right hon. Gentleman asked about the needs of traders. Some of the figures, in view of their source, are highly coloured but the Customs officials have been talking to firms on the Continent and have asked how much staff they would save if they did not have to deal with VAT. The answer was virtually none at all. The answer is that once the tax is in being it can be operated with virtually no additions to their manpower. They take it in their stride.
  Mr. Healey: But is it not the case that many Continental countries introduced VAT to replace extremely expensive and difficult-to-administer forms of sale tax, cascade tax, and so on, and that the experience of Continental firms is no guide to the experience of British firms since in Britain 1¼ million firms will be involved in value-added tax as against 74,000 involved in purchase tax at present?
  Mr. Jenkin: The right hon. Gentleman is right that there will be many more registered traders, but that is not the point. The point is how much additional work will be imposed in the end, and the answer is that it will be relatively small.
  The Labour Party has made clear that it dislikes the VAT and all its works. That is its view and it is entitled to it. This surely must mean that right hon. and hon. Gentlemen opposite are pre-
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  pared to stand up and defend the retention of the illogical complex set of taxes which VAT seeks to replace. We have heard no word as to any hint of the reforms which they would rather see.
  I do not need to weary the House with a long catalogue of the follies of SET. It was a wildly unpopular tax whatever its structure may have been in 1966. The whole concept was wrong. Great manufacturing companies had to shift blocks of their staff around to avoid paying a tax which it was never intended that they should pay. To raise £500 million they had to raise £2,000 million and pay back £1,500 million. And there has been a forced loan to the Government as high as £200 million at any one time. Selective Employment Tax was a tax which was intended to help assist manufacturing industry. It became an oppressive burden.
  Purchase tax has been a better tax than SET but will have few mourners. History is littered with attempts by the legislature to tailor tax to prejudices. Purchase tax was not the least successful, but coverage has always been limited. Although large areas of consumer expenditure of goods were free of purchase tax, it is hard to discern any coherent social purpose. The ownership of yachts and caravans does not figure largely in the budgets of the poor, yet they are tax free, while ordinary domestic equipment such as cleaners, heaters and furniture are charged.
  One hon. Gentleman made a plea for consideration of some of the marginal problems which will be faced with any tax that will not have a 100 per cent. coverage. We must face this, and recognise it.
  The problems of VAT are as nothing to the ridiculous nonsenses that we have had to put up with over the years in the case of purchase tax. Why should ladies stockings be charged at the lowest rate but a liquid to imitate ladies stockings at the top rate? Why should a pottery piggy bank be top-rated but if painted with the words "razor blades" be at a lower rate? Why should bird cage novelties be at a high rate but bird cage fittings be free of tax? Why should cutlery be at the bottom rate but light bulbs at a high rate? Why should toilet soap be taxed at a high rate and toilet paper be exempt? Why should children's toys be

  885
  taxed much more heavily than children's sweets? I could go on.
  It is not only a matter of these distinctions being senseless to the consumer. It is the impact on industry and the constant shifts and changes which have perhaps most damaging consequences. Purchase tax was far too narrowly based. It not only distorted consumer choice; when it was changed for reasons of economic management, the impact hit far too narrow a range of industry. It is this tax which those who oppose this Bill would have us retain.
  Value-added tax is not based solely on the Common Market argument, though those who support the Common Market must accept it. The case for VAT rests upon its superior virtues as an indirect tax over those it will replace. The Daily Express cannot be claimed to be amongst the most notable champions of our entry into the Common Market. Yet in a feature article on VAT last December it concluded that it
  "… would have one overwhelming benefit. It could end once and for all the pernicious unpredictability of purchase tax."
  VAT will be a much better tax.
  The welcome that my right hon. Friend's proposals have had from those who will operate the tax have been most encouraging. Perhaps I might read one quotation from the body which represents more retail traders than any other group.
  I refer to the Retail Consortium, which said on Budget night:
  "The Retail Consortium welcomes the comparative simplicity of the VAT system chosen by the Chancellor and the non-inflationary level of the rate he has selected. The Consortium welcomes the fact that the Chancellor as taken account of the representations which it has made to him about the potential loss facing retailers holding tax-paid stocks. The Consortium welcomes the reductions in purchase tax which will benefit the public and will smooth the way for a change to VAT.''
  I believe that that is perhaps the best accolade for the system of consultation upon which my right hon. Friend embarked last year. What a contrast it is to the hullabaloo which greeted SET when it was introduced bythe right hon. Member for Cardiff, South-East (Mr. Callaghan) in 1966.
  The value-added tax is the modern, sophisticated tax for a modern industrial nation. Once it has settled down, it will represent a vastly better system of indirect taxation than that which it replaces.
  One hon. Member suggested that VAT was the heart of the Finance Bill. Those hon. Members who go into the Division Lobby against the Bill will be declaring their opposition to what is perhaps the most significant element in the modernisation of our tax code. I ask the House to give the Bill a Second Reading.
  Question put, That the Bill be now read a Second time:—
  The House divided: Ayes 292. Noes 258.

  Division No. 137.]

  AYES

  [9.59 p.m.

  Adley, Robert

  Brocklebank-Fowler, Christopher

  d'Avigdor-Goldsmid, Sir Henry

  Alison, Michael (Barkston Arsh)

  Brown, Sir Edward (Bath)

  Dean, Paul

  Allason, James (Hemel Hempstead)

  Bruce-Gardyne, J.

  Deedes, Rt. Hn. W. F.

  Amery, Rt. Hn. Julian

  Bryan, Paul

  Digby, Simon Wingfield

  Astor, John

  Buchanan-Smith, Alick (Angua,N & M)

  Dixon, Piers

  Atkins, Humphrey

  Buck, Antony

  Drayson, G. B.

  Awdry, Daniel

  Bullus, Sir Eric

  du Cann, Rt. Hn. Edward

  Baker, Kenneth (St. Marylebone)

  Burden, F. A.

  Dykes, Hugh

  Balniel, Lord

  Butler, Adam (Bosworth)

  Eden, Sir John

  Barber, Rt. Hn. Anthony

  Campbell, Rt.Hn.G.(Moray & Nairn)

  Edwards, Nicholas (Pembroke)

  Batsford, Brian

  Carlisle, Mark

  Elliot, Capt. Walter (Carshalton)

  Beamish, Col. Sir Tufton

  Carr, Rt. Hn. Robert

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

  Bell, Ronald

  Chapman, Sydney

  Emery, Peter

  Bennett, Sir Frederic (Torquay)

  Chataway, Rt. Hn. Christopher

  Eyre, Reginald

  Bennett, Dr. Reginald (Gosport)

  Chichester-Clark, R.

  Farr, John

  Benyon, W.

  Churchill, W. S.

  Fell, Anthony

  Berry, Hn. Anthony

  Clark, William (Surrey, E.)

  Fenner, Mrs. Peggy

  Biffen, John

  Clarke Kenneth (Rushclifle)

  Fidler, Michael

  Biggs-Davison, John

  Cockeram, Eric

  Finsberg, Geoffrey (Hampstead)

  Blaker, Peter

  Cooke, Robert

  Fisher, Nigel (Surbiton)

  Boardman, Tom (Leicester, S.W.)

  Coombs, Derek

  Fletcher-Cooke, Charles

  Body, Richard

  Cooper, A. E.

  Fookes, Miss Janet

  Boscawen, Robert

  Corfield, Rt. Hn. Frederick

  Fortescue, Tim

  Bossom, Sir Clive

  Cormack, Patrick

  Foster, Sir John

  Bowden, Andrew

  Costain, A. P.

  Fowler, Norman

  Braine, Bernard

  Critchley, Julian

  Fox, Marcus

  Bray, Ronald

  Crouch, David

  Fraser, Rt.Hn.Hugh (St'fford & Stone)

  Brewis, John

  Crowder, F. P.

  Fry, Peter

  Brinton, Sir Tatton

  Davies, Rt. Hn. John (Knutsford)

  Galbraith, Hn. T. G.

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

  Rossi, Hugh (Hornsey)

  Gardner, Edward

  Longden, Gilbert

  Rost, Peter

  Gibson-Watt, David

  Loveridge, John

  Royle, Anthony

  Gilmour, Ian (Norfolk, C.)

  Luce, R. N.

  Russell, Sir Ronald

  Gilmour, Sir John (Fife, E.)

  McAdden, Sir Stephen

  St. John-Stevas, Norman

  Glyn, Dr. Alan

  MacArthur, Ian

  Sandys, Rt. Hn. D.

  Godber, Rt. Hn. J. B.

  McCrindle, R. A.

  Scott, Nicholas

  Goodhart, Philip

  McLaren, Martin

  Scott-Hopkins, James

  Goodhew, Victor

  Maclean, Sir Fitzroy

  Sharples, Richard

  Gorst, John

  McMaster, Stanley

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

  Gower, Harry

  Macmillan, Maurice (Farnham

  Shelton, William (Clapham)

  Grant, Anthony (Harrow, C.)

  McNair-Wilson, Michael

  Simeons, Charles

  Gray, Hamish

  McNair-Wilson, Patrick (NewForest)

  Sinclair, Sir George

  Green, Alan

  Maddan, Martin

  Skeet, T. H. H.

  Grieve, Percy

  Madel, David

  Smith, Dudley (W'wick & L'mington)

  Griffiths, Eldon (Bury St. Edmunds)

  Marples, Rt. Hn. Ernest

  Soref, Harold

  Grimond, Rt. Hn. J.

  Marten, Neil

  Speed, Keith

  Grylls, Michael

  Mather, Carol

  Spence, John

  Gummer, Selwyn

  Maude, Angus

  Sproat, Iain

  Gurden, Harold

  Maudling, Rt. Hn. Reginald

  Stainton, Keith

  Hall, Miss Joan (Keighley)

  Mawby, Ray

  Stanbrook, Ivor

  Hall, John (Wycombe)

  Maxwell-Hyslop, R. J.

  Steel, David

  Hamilton, Michael (Salisbury)

  Meyer, Sir Anthony

  Stewart-Smith, Geoffrey (Belper)

  Hannam, John (Exeter)

  Mills, Peter (Torrington)

  Stodart, Anthony (Edinburgh, W.)

  Harrison, Col. Sir Harwood (Eye)

  Mitchell, Lt.-Col.C. (Aberdeenshire,W)

  Stoddart-Scott, Col. Sir M.

  Haselhurst, Alan

  Mitchell, David (Basingstoke)

  Stokes, John

  Hastings, Stephen

  Moate, Roger

  Stuttaford, Dr. Tom

  Havers, Michael

  Money, Ernle

  Sutcliffe, John

  Hawkins, Paul

  Montgomery, Fergus

  Taylor, Sir Charles (Eastbourne)

  Hayhoe, Barney

  More, Jasper

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

  Heseltine, Michael

  Morgan, Geraint (Denbigh)

  Taylor, Frank (Moss Side)

  Hicks, Robert

  Morgan-Giles, Rear-Adm.

  Taylor, Robert (Croydon, N.W.)

  Higgins, Terence L.

  Morrison, Charles

  Tebbit, Norman

  Hiley, Joseph

  Mudd, David

  Temple, John M.

  Hill, James (Southampton, Test)

  Murton, Oscar

  Thatcher, Rt. Hn. Mrs. Margaret

  Hill, John E. B. (Norfolk, S.)

  Nabarro, Sir Gerald

  Thomas, John Stradling (Monmouth)

  Holland, Philip

  Neave, Airey

  Thomas, Rt. Hn. Peter (Hendon, S.)

  Holt, Miss Mary

  Nicholls, Sir Harmar

  Thompson, Sir Richard (Croydon, S.)

  Hordern, Peter

  Noble, Rt. Hn. Michael

  Tilney, John

  Hornby, Richard

  Normanton, Tom

  Trafford, Dr. Anthony

  Howe, Hn. Sir Geoffrey (Reigate)

  Nott, John

  Trew, Peter

  Howell, David (Guildford)

  Onslow, Cranley

  Tugendhat, Christopher

  Howell, Ralph (Norfolk, N.)

  Oppenheim, Mrs. Sally

  Turton, Rt. Hn. Sir Robin

  Hunt, John

  Osborn, John

  Vaughan, Dr. Gerard

  Iremonger, T. L.

  Owen, Idris (Stockport, N.)

  Vickers, Dame Joan

  Irvine, Bryant Godman (Rye)

  Page, Graham (Crosby)

  Waddington, David

  James, David

  Page, John (Harrow, W.)

  Walder, David (Clitheroe)

  Jenkin, Patrick (Woodford)

  Parkinson, Cecil

  Walker, Rt. Hn. Peter (Worcester)

  Jennings, J. C. (Burton)

  Peel, John

  Walker-Smith, Rt. Hn. Sir Derek

  Jessel, Toby

  Percival, Ian

  Wall, Patrick

  Johnson Smith, G. (E. Grinstead)

  Peyton, Rt. Hn. John

  Ward, Dame Irene

  Jones, Arthur (Northants, S.)

  Pike, Miss Mervyn

  Warren, Kenneth

  Jopling, Michael

  Pink, R. Bonner

  Wells, John (Maidstone)

  Joseph, Rt. Hn. Sir Keith

  Powell, Rt. Hn. J. Enoch

  White, Roger (Gravesend)

  Kellett-Bowman, Mrs. Elaine

  Price, David (Eastleigh)

  Whitelaw, Rt. Hn. William

  Kershaw, Anthony

  Prior, Rt. Hn. J. M. L.

  Wiggin, Jerry

  Kilfedder, James

  Proudfoot, Wilfred

  Wilkinson, John

  Kimball, Marcus

  Pym, Rt. Hn. Francis

  Winterton, Nicholas

  King, Evelyn (Dorset, S.)

  Quennell, Miss J. M.

  Wolrige-Gordon, Patrick

  King, Tom (Bridgwater)

  Raison, Timothy

  Woodhouse, Hn. Christopher

  Kinsey, J. R.

  Ramsden, Rt. Hn. James

  Woodnutt, Mark

  Kirk, Peter

  Rawlinson, Rt. Hn. Sir Peter

  Worsley, Marcus

  Knight, Mrs. Jill

  Redmond, Robert

  Wylie, Rt. Hn. N. R.

  Knox, David

  Reed, Laurance (Bolton, E.)

  Lambton, Antony

  Rees, Peter (Dover)

  TELLERS FOR THE AYES:

  Lane, David

  Rees-Davies, W. R.

  Mr. Bernard Weatherill and

  Langford-Holt, Sir John

  Renton, Rt. Hn. Sir David

  Mr. Walter Clegg.

  Legge-Bourke, Sir Harry

  Rhys Williams, Sir Brandon

  Le Marchant, Spencer

  Ridley, Hn. Nicholas

  Lewis, Kenneth (Rutland)

  Ridsdale, Julian

  Lloyd, Rt.Hn.Geoffrey (Sut'nC'dfield)

  Rippon, Rt. Hn. Geoffrey

  Roberts, Wyn (Conway)

  NOES

  Abse, Leo

  Barnes, Michael

  Bottomley, Rt. Hn. Arthur

  Albu, Austen

  Barnett, Guy (Greenwich)

  Boyden, James (Bishop Auckland)

  Allaun, Frank (Salford, E.)

  Barnett, Joel (Heywood and Royton)

  Bradley, Tom

  Archer, Peter (Rowley Regis)

  Beaney, Alan

  Broughton, Sir Alfred

  Armstrong, Ernest

  Benn, Rt. Hn. Anthony Wedgwood

  Buchan, Norman

  Ashley, Jack

  Bennett, James (Glasgow, Bridgeton)

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

  Ashton, Joe

  Bidwell, Sydney

  Butler, Mrs. Joyce (Wood Green)

  Atkinson, Norman

  Bishop, E. S.

  Callaghan, Rt. Hn. James

  Bagier, Gordon A. T.

  Blenkinsop, Arthur

  Campbell, I. (Dunbartonshire, W.)

  888

  889

  Cant, R. B.

  Huckfield, Leslie

  Padley, Walter

  Carmichael, Neil

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Paget, R. T.

  Carter, Ray (Birmingh'm, Northfield)

  Hughes, Mark (Durham)

  Palmer, Arthur

  Carter-Jones, Lewis (Eccles)

  Hughes, Robert (Aberdeen, N.)

  Pannell, Rt. Hn. Charles

  Castle, Rt. Hn. Barbara

  Hughes, Roy (Newport)

  Parry, Robert (Liverpool, Exchange)

  Clark, David (Colne Valley)

  Hunter, Adam

  Pavitt, Laurie

  Cocks, Michael (Bristol, S.)

  Irvine, Rt.Hn.SirArthur (Edge Hill)

  Pendry, Tom

  Cohen, Stanley

  Janner, Greville

  Pentland, Norman

  Coleman, Donald

  Jay, Rt. Hn. Douglas

  Perry, Ernest G.

  Concannon, J. D.

  Jeger, Mrs. Lena

  Prentice, Rt. Hn. Reg.

  Conlan, Bernard

  Jenkins, Hugh (Putney)

  Prescott, John

  Corbet, Mrs. Freda

  Jenkins, Rt. Hn. Roy (Stechford)

  Price, J. T. (Westhoughton)

  Cox, Thomas (Wandsworth, C.)

  Johnson, Carol (Lewisham, S.)

  Price, William (Rugby)

  Cronin, John

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

  Probert, Arthur

  Crosland, Rt. Hn. Anthony

  Johnson, Walter (Derby, S.)

  Reed, D. (Sedgefield)

  Crosaman, Rt. Hn. Richard

  Jones, Barry (Flint, E.)

  Rees, Merlyn (Leeds, S.)

  Cunningham, G. (Islington, S.W.)

  Jones, Dan (Burnley)

  Rhodes, Geoffrey

  Cunningham, Dr. J. A. (Whitehaven)

  Jones, Rt.Hn.SirElwyn (W.Ham,S.)

  Richard, Ivor

  Dalyell, Tam

  Jones, Gwynoro (Carmarthen)

  Roberts, Albert (Normanton)

  Davidson, Arthur

  Jones, T. Alec (Rhondda, W.)

  Robertson, John (Paisley)

  Davies, Denzil (Llanelly)

  Kaufman, Gerald

  Roderick, Caerwyn E. (Br'c'n & R'dnor)

  Davies, Ifor (Gower)

  Kelley, Richard

  Rodgers, William (Stockton-on-Tees)

  Davis, Clinton (Hackney, C.)

  Kerr, Russell

  Roper, John

  Davis, Terry (Bromsgrove)

  Kinnock, Nell

  Rose, Paul B.

  Deakins, Eric

  Lambie, David

  Ross, Rt. Hn. William (Kilmarnock)

  de Freitas, Rt. Hn. Sir Geoffrey

  Lamond, James

  Rowlands, Edward

  Delargy, H. J.

  Latham, Arthur

  Sandelson, Neville

  Dell, Rt. Hn. Edmund

  Lawson, George

  Sheldon, Robert (Ashton-under-Lyne)

  Doig, Peter

  Leadbitter, Ted

  Shore, Rt. Hn. Peter (Stepney)

  Dormand, J. D.

  Lee, Rt. Hn. Frederick

  Short, Rt.Hn.Edward (N'c'tle-u-Tyne)

  Douglas, Dick (Stirlingshire, E.)

  Lever, Rt. Hn. Harold

  Short, Mrs. Renée (W'hampton, N.E.)

  Douglas-Mann, Bruce

  Lewis, Arthur (W. Ham, N.)

  Silkin, Rt. Hn. John (Deptford)

  Driberg, Tom

  Lewis, Ron (Carlisle)

  Silkin, Hn. S. C. (Dulwich)

  Duffy, A. E. P.

  Lipton, Marcus

  Sillars, James

  Dunn, James A.

  Lomas, Kenneth

  Skinner, Dennis

  Dunnett, Jack

  Loughlin, Charles

  Small, William

  Eadie, Alex

  Lyon, Alexander W. (York)

  Smith, John (Lanarkshire, N.)

  Edelman, Maurice

  Mabon, Dr. J. Dickson

  Spearing, Nigel

  Edwards, Robert (Bilston)

  McBride, Neil

  Spriggs, Leslie

  Edwards, William (Merioneth)

  McCartney, Hugh

  Stallard, A. W.

  Ellis, Tom

  McElhone, Frank

  Stewart, Donald (Western Isles)

  English, Michael

  McGuire, Michael

  Stoddart, David (Swindon)

  Evans, Fred

  Mackenzie, Gregor

  Stonehouse, Rt. Hn. John

  Ewing, Henry

  Mackie, John

  Strang, Gavin

  Faulds, Andrew

  Mackintosh, John P.

  Strauss, Rt. Hn. G. R.

  Fernyhough, Rt. Hn. E.

  Maclennan, Robert

  Summerskill, Hn. Dr. Shirley

  Fisher, Mrs. Doris(B'ham, Ladywood)

  McMillan, Tom (Glasgow, C.)

  Swain, Thomas

  Fitch, Alan (Wigan)

  McNamara, J. Kevin

  Taverne, Dick

  Fletcher, Raymond (Ilkeston)

  Mahon, Simon (Bootle)

  Thomas, Jeffrey (Abertillery)

  Fletcher, Ted (Darlington)

  Mallalieu, J. P. W. (Huddersfield, E.)

  Thomson, Rt.Hn. G. (Dundee, E.)

  Foley, Maurice

  Marks, Kenneth

  Tinn, James

  Foot, Michael

  Marquand. David

  Tomney, Frank

  Ford, Ben

  Marsden, F.

  Torney, Tom

  Forrester, John

  Marshall. Dr. Edmund

  Tuck, Raphael

  Fraser, John (Norwood)

  Mason, Rt. Hn. Roy

  Urwin, T. W.

  Freeson, Reginald

  Mayhew, Christopher

  Verley, Eric G.

  Garrett, W. E.

  Meacher, Michael

  Wainwright, Edwin

  Gilbert, Dr. John

  Mellish, Rt. Hn. Robert

  Walden, Brian (B'm'ham, All Saints)

  Ginsburg, David (Dewsbury)

  Mendelson, John

  Walker, Harold (Doncaster)

  Gordon Walker, Rt. Hn. P. C.

  Mikardo, Ian

  Wallace, George

  Gourlay, Harry

  Millan, Bruce

  Watkins, David

  Grant, George (Morpeth)

  Miller, Dr. M. S.

  Weitzman, David

  Grant, John D. (Islington, E.)

  Milne, Edward

  Wellbeloved, James

  Griffiths, Eddie (Brightside)

  Molloy, William

  Wells, William (Walsall, N.)

  Griffiths, Will (Exchange)

  Morgan, Elyatan (Cardiganshire)

  White, James (Glasgow, Pollok)

  Hamilton, James (Bothwell)

  Morris, Alfred (Wythenshawe)

  Whitehead, Phillip

  Hamilton, William (Fife, W.)

  Morris, Charles R. (Openshaw)

  Whitlock, William

  Hamling, William

  Morris, Rt. Hn. John (Aberavon)

  Willey, Rt. Hn. Frederick

  Hannan, William (G'gow, Maryhill)

  Moyle, Roland

  Williams, Alan (Swansea, W.)

  Hardy, Peter

  Mulley, Rt. Hn. Frederick

  Williams, Mrs. Shirley (Hitchin)

  Harrison, Walter (Wakefield)

  Murray, Ronald King

  Williams, W. T. (Warrington)

  Hart, Rt. Hn. Judith

  Ogden, Eric

  Wilson, Alexander (Hamilton)

  Hattersley, Roy

  O'Halloran, Michael

  Wilson, William (Coventry, S.)

  Healey, Rt. Hn. Denis

  O'Malley, Brian

  Woof, Robert

  Heffer, Erie S.

  Oram, Bert

  Horam, John

  Orbach, Maurice

  TELLERS FOR THE NOES:

  Houghton, Rt. Hn. Douglas

  Orme, Stanley

  Mr. Joseph Harper and

  Howell Denis (Small Heath)

  Oswald, Thomas

  Mr. John Golding.

  Owen, Dr. David (Plymouth, Sutton)

  Question accordingly agreed to.
  Bill read a Second time.

  BUSINESS OF THE HOUSE
  Ordered,
  That the Betting and Gaming Duties Bill [Lords] may be proceeded with at this day's Sitting, though opposed, until any hour.—[Mr. Murton.]

FINANCE BILL
Motion made, and Question proposed,
That Clauses 1, 9, 12, 63, 64, 71, 73, 110, and 112 and Schedule 4 of the Finance Bill be committed to a Committee of the whole House.—[Mr. Barber.]
Question put and agreed to.
Ordered,
That the remainder of the Bill be committed to a Standing Committee:
That, when the provisions of the Bill considered, respectively, by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill has been reported as a whole to the House from the Standing Committee.—[Mr. Barber.]
10.15 p.m.
Dame Irene Ward: May I ask my right hon. Friend the Chancellor of the Exchequer what will happen
892
to the new Clauses? Will they be taken on the Floor of the House or will they go to the Standing Committee? I am interested in a lot of the new Clauses but I do not want to go upstairs. I should like to talk on a number of them, but they do not appear to be mentioned in the Motion. If I can be told what will happen to them I will be satisfied to agree to the Motion.
Mr. Barber:The new Clauses will be taken in Committee upstairs, but they will be taken in this Chamber on Report as well. So they will be considered upstairs and downstairs—[Laughter.] If my hon. Friend the Member for Tynemouth (Dame Irene Ward) has any further problems, I shall be happy at any time to take her upstairs.
Dame Irene Ward:Will the same new Clauses be taken downstairs and upstairs, or will the Clauses be different? A lot depends on this.
Mr. Speaker:This is not a matter for the Chancellor. Selection of new Clauses on Report will be a matter for me.
Committee tomorrow.

CONSOLIDATED FUND (No. 3) BILL
Order for Second Reading read.
Motion made, and Question proposed, That the Bill be now read a Second time.
10.19 p.m.
Dr. J. Dickson Mabon: The Bill and the Estimates which support it suggest that we should vote some £300 million on the refinancing of fixed rate export lending out of a total under subsection (e) of £311 million. As I understand the statement by the right hon. Gentleman the Member for—[Interruption.]
Mr. Speaker: Order. Will right hon. and hon. Members kindly withdraw from the Chamber more quietly.
Dr. Mabon: We have had a statement from the Minister for Trade but we are entitled to a bit more explanation. My right hon. Friend the Member for Bristol, South-East (Mr. Benn) asked the Minister several questions at the time of his statement on 15th March. I do not know whether the Minister has all the annotations before him but he may remember the questions. In reply he promised to develop them in debate.
In the first instance, he recognised that this is part of the effort of the Government—a very welcome effort—to give shipbuilding its proper place in the economy of the United Kingdom. Shipbuilding will no longer be regarded as a free enterprise industry completely unprotected and unhelped in international markets. I welcome this because we are up against very formidable opposition, principally from our competitors from Japan.
I should like to know first just how the £300 million, a very large sum, fits into the general jigsaw which is the Government policy on shipuilding. It is very difficult to keep in order on these matters, because so many other factors influencing the question, but we cannot vote £300 million at nearly half past ten on a Thursday night, when we are all anxious to return to our constituencies without knowing how it fits into the general pattern of what the Government are doing.
894
I am not inviting the Minister for Trade to defend propositions which we shall have in later legislation. I do not want to tempt him, and I know he would not respond anyway, to go into the problems of UCS or anything like that. But what is the Government's thinking on the matter? I understand that the money is strictly related to a very short, two-year period. Do the Government really envisage that at the end of that time nothing will happen, that the credit system will suddenly be extinguished, or that it will be tapered off. We all know that the building of a ship is not confined to two years. The process of taking the order, building the ship and delivering it takes much longer than two years.
We have the statements by the Secretary of State for Trade and Industry on inflation-proof contracts. The Minister might touch on that. I should like to know the Government's intentions after we have spent the money, and I should like to know about other matters, such as whether this kind of credit is equal to the kind of credit available in other countries.
Today I was with a number of people in the industry who are not strictly shipbuilders but who supply the industry. They wonder how they are affected by the credits in relation to their supplies to the industry. For example, they are supplying some of the ships being built in UCS under the liquidator. Seventy per cent. of the innards of a ship come from firms not strictly recipients of the money. They are very concerned about how they are to be paid in relation to ships ordered now and supplied now under the export credit guarantee system. We wonder, for example, whether they will be beneficiaries, under the general strategy for shipbuilding, of all the proposals made by the Secretary of State for Trade and Industry for the shipbuilding industry.
I am anxious for the Minister to place the proposition in the context of all that we shall do for shipbuilding in the present Session, to see exactly how it fits into the quite proper treatment of shipbuilding as an economic advantage to Great Britain.

895
I represent a constituency which builds ships profitably. No one can accuse us of not building ships well and ata profit, without labour difficulties. We have done very well in that regard, so I am not pleading a special case of industrial difficulty. We are very proud of what we have done. People have said to me that shipbuilding is finished in the United Kingdom, that we should write it off because it costs us so much, that we should abandon it and let the free forces of the market deploy themselves, so that we get the right kind of shipbuilding industry, if any, in the United Kingdom. Fortunately, the Government have rejected that. They have said, "We want a shipbuilding industry in Great Britain." It is interesting to note that recently the EEC Commissioners re-examined their shipbuilding policy and decided that the Community of Ten, as it is to become, wants a shipbuilding industry.
I will not go into what the French or the Dutch do. I am interested simply in what the Community will do and what we are trying to do just before we are admitted to the Community. This money will carry us forward until 1974. By that time we will I hope, have been in the Community for 12 or 15 months. Will we carry on some kind of variant of our present credit system as part of Community policy? Are we to advocate some other mechanism to make shipbuilding an intrinsic part of the economy, not just of Great Britain but of the Community? It is in that spirit that I rise to question the Supplementary Estimate.
I am not at all hostile towards it. The Government are to be congratulated on what is a substantial conversion, not so much to credits as to matters ancillary to what we are now discussing. In that spirit I invite the right hon. Gentleman to tell us a little more because the industry is anxiously awaiting more definitive news of what is to happen to Government assistance over the next12 to 24 months in the critical time before we accede to the Treaty of Rome, join the EEC and take in shipbuilding as a thriving industry fully able to match international competition, particularly from the Far East.
10.27 p.m.
The Minister for Trade (Mr. Michael Noble): I thank the hon. Member for Greenock (Dr. Dickson Mabon) for raising this point and hope that he does not feel that I am in any way being discourteous to the House in not making a long speech on this Bill. My constituency adjoins the hon. Gentleman's although it is separated by a length of water, and I fully appreciate the importance in his constituency of an efficient shipbuilding operation for which I have a great deal of admiration.
My problem in answering his questions fully is simply that I think what he is referring to is the arrangement for home shipbuilding which is carried out under other powers and on a different Vote and therefore quite outside the scope of this Bill. He need not worry about this situation. As for shipbuilding for export, which is part of the operations at the successful yard represented by the hon. Gentleman, the situation is not likely to change, because the arrangements agreed with all the OECD countries are that the export credit guarantees for shipbuilding should be carried out at a flat rate of 7 per cent. irrespective of whether we enter the Common Market.
We are not therefore at any competitive disadvantage with the countries concerned. I share his view that shipbuilding is exceedingly important in our part of Scotland and to the United Kingdom as a whole. The shipping industry is to some extent dependent on the shipbuilding industry. This is a valuable asset. I can assure the hon. Gentleman that there is nothing in the Bill which will in any way affect our competitive position or our shipbuilding industry. He said that we were passing the Bill, which appears to be using £300 million, and I can tell him that this is to some extent illusory. It is using £300 million but it is money that was in the expenditure anyway and we are merely transferring it from what was Bank of England expenditure to ECGD for reasons, which I am sure the hon. Gentleman has studied, which I gave in my statement to the House a few weeks ago. This is a purely procedural matter. We have the greatest interest in maintaining a strong shipbuilding industry. There is nothing in the Bill which will affect what the hon. Gentleman and I want in this regard.
Dr. Dickson Mabon:Does this affect the revolving shipbuilding credit? In the questions and answers to which I referred, the hon. Member for Dorset, West (Mr. Wingfield Digby) asked how much of the revolving shipbuilding credit was outstanding, and the right hon. Gentleman promised that he would give a figure later on. I hope he now has that figure.
Mr. Noble: I have not got the figure but this does not affect it.
Question put and agreed to.
Bill accordingly read a Second time and committed to a Committee of the whole House.
Committee tomorrow.

IMMUNITIES AND PRIVILEGES
10.31 p.m.
The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Anthony Kershaw): I beg to move,
That the International Institute for the Management of Technology (Immunities and Privileges) Order, 1972, a draft of which was laid before this House on 22nd March, be approved.
Mr. Deputy Speaker (Sir Robert Grant-Ferris): With this Motion it would be convenient to discuss at the same time the other Government Motion,
That the Interim Commission for the International Trade Organization (Immunities and Privileges) Order, 1972, a draft of which was laid before this House on 22nd March, be approved.
Mr. Kershaw: The first order will confer the legal capacities of a body corporate on the Institute. Her Majesty's Government will be required to do this by Article 4 of the Convention on the Establishment of the Institute, which was signed in Paris on 6th October, 1971. It will enable the Government to ratify the Convention.
The Institute, which will be situated in Milan, is an international organisation of a rather novel kind, in that its membership may include, in addition to Governments, private non-Governmental bodies. The Chairman is Sir John Chadwick, recently our ambassador to the OECD, and a number of persons well known to hon. Members, such as Mr. Peter Cussick, of the United States, have been actively associated with the foundation of the Institute.
898
This is a useful development in view of the clear interest of large industrial concerns in an Institute whose principal object is to provide
"… advanced training of managers and teachers and facilities for associated research and the management of technological innovations."
The Institute is not, of course, in any sense a commercial organisation and is expressly debarred from making any pecuniary profit.
The second order, dealing with the Interim Commission for the International Trade Commission, will confer exemption from income tax upon officers of the Commission in respect of emoluments received by them as such. The Commission provides the Secretariat for the General Agreement on Tariffs and Trade, and although GATT is not a specialised agency of the United Nations its officials are accorded a similar status in Geneva. There are many precedents for confering this limited tax exemption from international officials. The effect of the order will be to exempt from our income tax the few officers who are resident here but work for the ICITO in Geneva. They are interpreters, translators and English-language secretaries.
There has been an anomaly in that these same people working also for the other United Nations agencies in Geneva, such as the World Health Organisation, the International Labour Office and others, pay no tax on their salaries which they earn from their exactly comparable employment with those agencies. We undertook in the United Nations to bring our practice into line with that of other countries, members of GATT, and the order enables us to do so.
In conclusion, I emphasise that despite their rather long titles the orders do not confer immunity from our courts. The orders will have an effect strictly limited to the purposes which I have described, but they and the agreements which they implement form part of our increasing co-operation with other countries in seeking international solutions to problems of common concern.
10.35 p.m.
Mr. Philip Good hart: I rise briefly to welcome the order giving international recognition to the International Institute for the Management of Technology. It is a pleasant irony that

899
the formation of the Institute was first dreamed of at a conference which was held at Deauville six or seven years ago at which the technological gap between America and Europe was discussed. The joint chairmen of that conference were an old friend of many hon. Members, Senator Portman of France and the Under-Secretary of State who has moved the Motion. I suppose the odds against the chairman of that founding conference standing at the Dispatch Box to propose the order giving international recognition to the institute would require to be worked out by one of the computers at the International Institute, but they must certainly be many million to one.
This is to be a specifically European project. The British Government have subscribed to it 140,000 European monetary agreement units, which is a long way of saying 140,000 dollars. The British firms that have contributed to it include Guest, Keen and Nettlefold, Tube Investment and Joseph Lucas. The German Government have contributed even more than we have, and so have the French. The Japanese Techno-Economic Society has subscribed 10,000 European monetary agreement units to the institute. As the Institute is sited in Milan, it is not surprising that the Italian Government have contributed heavily and that such leading Italian firms as E.N.I., Fiat, Pirelli and Olivetti have also subscribed heavily.
This is a specifically European institute, but it is probably right to say that it would never have got started had it not been for the drive and enthusiasm of an American, Mr. Peter Cussick. I was glad to hear the Under-Secretary of State pay tribute to him.
The Institute's courses and seminars will start this summer. The international staff are first-class, but I suspect that the main value of the courses will come from the mixing up of the students drawn from the ranks of middle management from many countries in Western Europe. I wish the Institute well and I welcome the introduction of the order.
10.40 p.m.
Mr. S. C. Silkin: I always take pleasure in dealing with orders such as these in the presence of the Under-
900
Secretary of State, for I always feel that there is a complete meeting of minds on them. They are certainly a closed book to me. However, since the hon. Member for Beckenham (Mr. Goodhart) has now enlightened me considerably about one of them, I should like to add the Opposition's welcome to the first order which I understand will enable us to ratify the Convention.
The Minister has given some explanation about the other order which refers to the so-called Interim Commission for the International Trade Organisation, members of which are the permanent staff of the General Agreement on Tariffs and Trade. I believe that the Interim Commission was set up as long ago as 1948, so it has been interim for a very long time. I am informed that by virtue of their status as members of the Interim Commission of this non-existent United Nations Specialised Agency, the officials of GATT enjoy the privileges and immunities of an international organisation.
Now, some 24 years later, we are, as I understand it, taking steps to provide exemption for those who live in the United Kingdom and I assume that, apart from the few officers and employees who have been mentioned, this would also apply to pensioners who are resident in this country.
The way in which this is done is, I gather, by an exchange of notes, in the course of which our permanent representative wrote saying that he had the honour to inform the officer concerned
"… that the Government of the United Kingdom are prepared to accord to officials of the Commission exemption from taxation on the salaries and emoluments paid to them by the Commission."
He added:
"If the foregoing proposal is acceptable to the Commission, I have the honour to propose that this note, together with your reply, will be an agreement …".
Not surprisingly, it was found to be acceptable. I only wish I had received a similar document addressed to me by those responsible for my income tax.
Perhaps we could be told why this arrangement has lasted for some 24 years without this order becoming necessary on an earlier occasion. Does it apply to both employees and pensioners?
10.43 p.m.
Mr. Kershaw: With the leave of the House, may I say this in regard to pensioners. I take it that this order does apply to them and, if I am wrong, I shall let the hon. and learned Gentleman know.
As he will know, the Interim Commission was established by a resolution of the United Nations on trade and employment—the Havana Charter organisation as it was called. The idea was that the International Trade Organisation should come into being, but owing to the then opposition in the United States that organisation never came into being, but the secretariat was kept in operation to service GATT. That is what it has been doing.
I understand that there has been no necessity to undertake the resolution of this order before because the number involved is very small and no representations were made, but certain matters have recently come to light—and we have had representations from GATT in Geneva—that a number of people have been put in a difficult position. Therefore, we have decided that it is necessary to do this. The amount of income tax the Chancellor of the Exchequer will have to forgo is about £1,000 a year, so I do not think it will be difficult for us to ride it.
Question put and agreed to.
Resolved,
That the International Institute for the Management of Technology (Immunities and Privileges) Order 1972, a draft of which was laid before this House on 22nd March, be approved.
Resolved,
That the Interim Commission for the International Trade Organization (Immunities and Privileges) Order 1972, a draft of which was laid before this House on 22nd March, be approved.

BETTING AND GAMING DUTIES BILL [Lords]
Considered in Committee.
[Mr. E. L. MALLALIEU in the Chair]
Clauses 1 to 21 ordered to stand part of the Bill.

Clause 22

  CRITERIA FOR DETERMINING DUTY ON ORDINARY LICENCES
  10.45 p.m.
  Mr. S. C. Silkin: I beg to move Amendment No. 1, in page 15. line 25, after 'it', insert
  'is a penny machine or if it'.
  I am certain that I need not remind the Solicitor-General of the argument that I deployed on Second Reading, in which I raised a doubt whether the Clause was true consolidation in that it appeared to substitute a higher rate of tax for a penny machine for the lower rate which it appeared to attract under the previous law.
  After listening to my argument and doing me the courtesy of saying that he thought that he understood the point, the hon. and learned Gentleman went on to say that he did not accept it but that he would see that it was examined. Since then, I have heard nothing further. Whether it has been examined, is still being examined or has yet to be examined, I know not. Not having heard. I thought it desirable to table an Amendment which seemed to meet the point which was troubling me. No doubt the hon. and learned Gentleman will be able to tell the Committee whether the Amendment is necessary to make this a true consolidation Measure and, if not, why not.
  The Solicitor-General (Sir Geoffrey Howe): The uninformed observer of the scene might well wonder what kind of examination I was being required to pass if he were to study and brood over the seven words of the Amendment. I gather that the candidate is required to answer all the questions posed by the hon. and learned Member for Dulwich (Mr. S. C. Silkin), and he is right to say that the

  903
  only question is whether the Bill reproduces the old law. The answer is that it does.
  I proceed to answer the next question, which is why it does. I agree that on Second Reading the hon. and learned Member for Dulwich gave an accurate analysis of the law as it will emerge from the Bill. The question is whether that is different from the old law as it is today.
  I take for convenience the state of the old law at 1st September 1971, for reasons which will appear. The provisions contained in Clause 22(5) are taken directly from Section 5(5) of the Finance Act, 1969. Those are the provisions for the two levels of duty.
  The provisions in Clause 27(2), which define a coin as meaning lawful currency, are taken from Section 5(15) of the Finance Act, 1969. Of course, in 1969 the old penny was lawful currency.
  The provisions in Clause 27(2) defining this fascinating object, described as a penny machine, are taken from Section 3(4) of the Finance Act, 1970. A penny machine in both provisions, the old and the new, is a machine which accommodates the new penny, the new halfpenny and the old penny.
  Section 1(3) of the Decimal Currency Act, 1969, provided that the old penny should not be legal tender at the end of the transitional period. The hon. and learned Gentleman referred to that last time. As a result of Statutory Instrument No. 1123 of 1971, to which he also referred last time, the transitional period ran out on 31st August last year, and on that day the old penny ceased to be legal tender.
  The state of the law which the hon. and learned Gentleman analysed as emerging from the Bill is the state which the law had reached on 31st August last year, because at that time the old penny ceased to be legal tender. Therefore, the position became as described by him. Theoretically, from then on a penny machine using old pennies became dutiable at the higher rate. Therefore, the Bill reproduces that slightly odd situation. It gives rise to no practical difficulty, because there are not many penny machines still playable, if that is the right word to apply to a penny machine, by the
  904
  insertion of an old penny. However, the Customs and Excise has continued to treat those which remain as lower rate machines, or as penny machines as formerly defined in Section 3 of the Finance Act, 1970.
  I assure the Committee that there is no intention of changing that practice.No evil consequences follow from the state of the law as it was, as it is, or as it will be, to the doubtless fascinated citizens who still own, operate, and play with penny machines which accept only old pennies. On that basis, I invite the Committee toreject the Amendment.
  Mr. S. C. Silkin: I was fascinated by the Solicitor-General's explanation which, to my surprise, I succeeded in following. I gather that the nigger in the woodpile was the transitional order rather than the consolidation Measure. That is the explanation of the difficulty. That transitional order changed the law from what it was before, but I understand that the Revenue will treat the position as though it had not changed the law for this purpose, so that, notwithstanding the consolidation Measure, we shall be proceeding in accordance with the law as it was before the transitional order.
  On that assurance from the Solicitor-General, I am only too happy to withdraw the Amendment. I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Clause 22 ordered to stand part of the Bill.
  Clauses 23 to 30 ordered to stand part of the Bill.
  Schedules 1 to 7 agreed to.
  Bill reported, without Amendment.
  Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Sanding Order No. 56 (Third Reading), and agreed to.
  Bill accordingly read the Third time and passed, without Amendment.

  PARLIAMENTARY QUESTIONS
  Ordered,
  That Mr. Peter Mills, Mr. Cranley Onslow, and Mr. Secretary Whitelaw be discharged from the Select Committee on Parliamentary Questions and that Mr. Paul Bryan, Mr. Robert Carr, and Sir Ronald Russell be added to the Committee.—[Mr. Murton.]

  ADJOURNMENT
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Murton.]

  PUBLIC BOARDS (WOMEN)
  10.57 p.m.
  Mr. E. S. Bishop: Nearly 20 million women live in Great Britain and they comprise the majority, 52 per cent. of our population. Yet on the great national and local public bodies of a commercial nature—the nationalised boards, in other words—they play an infinitesimally small rôle, largely because they are denied the opportunity by Her Majesty's Government and Ministers who are answerable to this House and to the nation.
  Of the 49 nationalised boards, there are 44 on which there is not one woman, and they include the boards running the railways, the bus services, the airways, coal, gas, and electricity and other services with which millions of women are concerned as workers or consumers. Only five boards have a woman member.
  In replies to the 100 Questions I have tabled to Ministers I have been told that such appointments are made on the basis of qualification and suitability. That suggests that Her Majesty's Government think that women do not warrant more than five seats, while 422 positions are filled by men. That is the basis of my charge.
  One may well ask who are these extraordinary women so able to fulfil this rôle? They are Mrs. Alison Munro, C.B.E., who sits on the board of British European Airways; Mrs. M M. Joliffe, on the South-Eastern Area Electricity Board; Lady Carew Pole, O.B.E., on the South-Western Area Electricity Board; Mrs. I. O. Stewart, Scotland Area Gas Board; and Mrs. Jane Symonds, Commonwealth Development Corporation. These are the five women who have the confidence of this Government in the matter of running these boards.
  I feel that the Prime Minister should have been here to answer this debate—although I welcome the Minister who is here for the occasion—because in the Conservative Manifesto there was a declaration:
  906
  "Women are treated by the law, in some respects, as having inferior rights to men, we will amend the law to remove this discrimination."
  If the Prime Minister claims that there is no sex discrimination in the appointments to public boards, he ought equally to recognise the need for urgent and massive action by every Department to reshape our educational and career services, to blast open all the doors to occupations and professions and to work for a radical change of outlook on factors which tend to discriminate against, debase and devalue our fellow human beings.
  As I represent the Sherwood Forest area in the House, the sword I am about to use to protect the Maid Marions of Britain is the cutting edge of Command Paper No. 4876, entitled "A list of members of public boards of a commercial character as at 1st January 1972". The other weapon I shall use is a blunt instrument called Whitakers 1972 Yearbook, which lists men and women on other public boards, and with just as great a lack of balance. I shall also be assisted by the replies of Ministers to the many Questions I have asked.
  Do the Government think that of all the women in Britain—let us remember that women are in the majority—only five are fit to serve on these boards which cater for the domestic and other needs of women as well as of men? When he next addresses a conference of women, will the Prime Minister tell the truth about what he thinks about them, for in the past year there have been 129 appointments or re-appointments to these boards, and only one was a woman, and she was a re-appointment.
  Would not the Railways Board be helped at this time by the good sense of a woman? Why is no member of the fair sex helping to run the National Bus Company? There is no woman on either the Gas Council or the Electricity Council, only two women on the 12 area electricity boards, and only one woman on one of the 12 area gas boards. That is all—for services of which the majority of consumers must be women.
  In the area of my constituency in the East Midlands, Newark, Nottinghamshire, there are about 1½ million consumers of electricity, but only 12 of the

  907
  67 members of the Electricity Consultative Committee are women.
  On the non-commercial boards there are very few women. Eighteen men, but no women, serve on the Court of the Bank of England, despite the fact that in homes up and down the country millions of women act as chancellors of the exchequer. Seven men and only one woman serve on the Commission on Industrial Relations, which is so vital in dealing with human relations at this time. Twelve men, but no women, serve on the National Building Agency, even though women have a natural interest in housing and homes. Even the Knitting, Lace and Net Industry Board, the Chairman of which I met last night, a board which is concerned with an industry in which two-thirds of the employees are women, has only one woman among its 22 members.
  Why do the Government get into huddles about industrial disputes which are claimed to be losing the country thousands of working days when for many years the immense working potential of millions of women and girls has been ignored, exploited or squandered through being regarded as of secondary importance? This is not only an economic loss but also a denial of basic human rights.
  The public, Parliament and the Press must get their priorities right. The Press, particularly the popular Press, newspapers such as the Daily Mirror and the Sun, ought to stop indulging in the daily nonsense and pictures about Pussy Cat Clubs, Bunny Girls and Playboy Clubs, which tend to distort the image of our womenfolk. It is about time that there was as much publicity about women's brains as the Press gives us about their backsides. The country—both men and women—would be all the better for it. Mrs. Greer's observations are not always germane.
  I understand that in making appointments the Government have what I would call the ghost of a "statutory woman". If only they would exorcise the statutory woman and if only they were able to see with clear, unbiased and undiscriminating eyes the enormous potential for our womenfolk, we would be the better for it. The Government need not only to see; they need vision.
  908
  However, there is one gleam of light in the darkness. A few days ago my noble Friend, Lady White, of another place, was appointed Deputy Chairman of the Metrication Board. I recall the hoo-ha which occurred when she was appointed Minister of State at the Foreign Office, where she found that there were no facilities for women. I believe that a bathroom had to be adapted for the purpose. It is still used as an excuse by industries, including some nationalised industries, that the lack of toilet facilities would involve expense. This is discriminating against human rights.
  How do I expect that the Government will reply to the debate? The Under-secretary will probably declare that people are appointed to boards not according to their sex but on merit and that the Government choose the best and most suitable people for the job. If he does that it means that woman do not have much to offer when it comes to running industry in which millions of women have a stake as workers and consumers. He willsay that women have the same chance of appointment as men but that for various reasons they are not quite good enough. Why is there such a shortage when the number of women on public boards could be increased by drawing on the pool of women, albeit the pool is too limited. There are, for instance, 6,700 women magistrates, and the women on our councils represent 12 per cent. of those people who serve on local authorities. There are far too few women in any case but they are, nevertheless, able women. What about the women working in local government and education? Many women's organisations—including business and professional women's organisations, women's institutes, the Association of Head Mistresses—could provide a list of women on whom the Government could draw. I am quite sure that the number could be increased enormously to give women a reasonable chance to participate.
  Fifty-six per cent. of all our lecturers and teachers are women, although only 44 of them are apparently fit to be professors compared with 3,281 men. All these sources could provide enough women to restock the nationalised and other public boards. I may be told that the Women's National Commission is in the process of compiling a register of

  909
  women prepared to serve on public committees for submission to the Civil Service register. But willingness to serve is not the only criteria for the Government have shown that they think that very few women are suitable to serve.
  I may be reminded of the reply from the Home Secretary last October to my Question on how many proposals in the Conservative publication "Fair Deal for the Fair Sex" had been carried out. A list was then given in the OFFICIAL REPORT. Some of the proposals were carried out at the initiative of the Government and some at the initiative of private Members, including myself. But one swallow does not make a summer, and in many other ways I have been campaigning about jury service, tax reform and on educational changes to try to bring about an improvement.
  I hope that the Under-Secretary will give some assurances tonight that the Government are thinking about the problem. I want to draw the Government's attention to the policy suggestions put out by the National Joint Committee of Working Women's Organisations. It says that the Government should have a policy to provide equal education opportunities for boys and girls; to encourage girls into wider job opportunities; to provide more effective re-entry training facilities for women; to provide better vocational guidance services and a special service for women re-entering employment on the basis of the report by Nancy Seear, now Baroness Seear; and to discourage the growth of private employment agencies. Certainly the "temp" situation needs looking into in view of the harm which can be caused to some girls involved.
  The Government should also have a policy to provide better job opportunities for part-time employment for men and women with domestic responsibilities who, as a consequence of which, are unable to partake in full-time work and wish to continue their careers. Local authorities and parent-teachers associations should assist in this direction.
  I am delighted with the Anti Discrimination Bill. It has now had a Second Reading in the House of Lords and will be put to a Select Committee of the Lords. I hope that detailed evidence will be given to the Select Commit-
  910
  tee which will highlight some of the discrimination which goes on and I hope that the Government will follow it up with some action.
  We possibly need some legislation to do that.
  If coloured people were the majority in this country, as women are numerically, and only five coloured people sat on the boards of nationalised bodies, with 422 white members, there would rightly be urgent action to right the wrongs, or the Government would not last five minutes. As I have said before, with men winging their way to the moon there is no reason why women should not have their place in the sun. This can be achieved.
  Although in this speech I have spoken mostly about the need to give women equal opportunity, I feel deeply that discrimination and lack of opportunity in both sexes is wrong, because it debases and devalues men and women, who are regarded as equal in the eyes of our Creator, and who are protected, or should be, by the aims of the United Nations and the Human Rights Charters.
  I was very pleased only a few hours ago to meet the Rev. Joyce Bennett, one of the two women priests ordained by the Bishop of Hong Kong in the Anglican Church. This indicates the tide flowing in favour of change in the Churches, and recognises the contribution which, without any hindrance of theological objections, allows women to witness to their faith in the fullest way. The Archbishop of Canterbury—as well as the Prime Minister and the heads of other organisations and institutions—has an opportunity to give women a leading rôle in very responsible jobs. It would be a very good example and encouragement to the whole nation. We hope that this will set the pace.
  The Government must give a lead, because the ambitions of women who want to do more work useful to the community, and more satisfying to themselves, depend on the lead the Government, the House and the leading institutions can give. We want women to have the same right as men to develop all their potential to their own satisfaction and to the good of the community in which they live.
  11.12 p.m.
  The Under-Secretary of State for the Home Department (Mr. David Lane): The House will be grateful to the hon. Member for Newark (Mr. Bishop) for giving it the opportunity to debate this subject briefly tonight. I congratulate the hon. Gentleman on the tenacity and determination with which he has pursued the matter over recent months, which I have been admiring hitherto from the touch-line. I wish that some of his reasonableness would wash off onto those who are too often strident and irrational when they discuss the problems of discrimination in this and other fields of our national life. I shall try to respond to his points and arguments in the spirit in which he made them.
  I am grateful to the hon. Gentleman for giving me notice of the general line of argument he would advance. I do not dissent from it, except from his implied criticism that the situation is all the fault of the present Government, but we shall return to that.
  I assure the hon. Gentleman that the many constructive suggestions he has made, apart from the comments that I can briefly respond to now, will be carefully considered by other Departments—the Department of Education and Science and the Department of Employment in particular.
  I want to make it clear straight away that the Government are not satisfied with the present situation. We want wider opportunities for women generally, and in particular we would very much like to see more women qualified and prepared to serve on public boards. Let me, therefore, draw the attention of the House to two immediate steps that are being taken. The first is on the broader problem of career opportunities, which is very relevant to the subject of the debate. My right hon. Friend the Secretary of State for Employment is putting in hand a detailed study of the problems met by women in securing equal treatment with their men colleagues in matters of employment and training. I doubt whether the announcement which the former Minister of State, Home Office, my noble Friend, Lord Windlesham, made to this effect in the recent debate in another place on the Anti-Discrimination Bill has been widely enough understood as the
  912
  important step forward that it certainly is.
  The study will be concerned to determine the specific areas in which overt or concealed discrimination occurs. Obviously, it will have to be both wide-ranging and thorough and when its results are known they will be of the utmost value in deciding what is the best way of dealing with the problem of discrimination where it exists. To anyone anxious to see an end to discriminatory practices, as this Government certainly is, it must be obvious that such a study is an indispensable preliminary to any kind of effective action, whether or not that eventually includes legislation. This is an important initiative on the part of the Government and the study will be pressed forward with urgency.
  Secondly, it is essential in the meantime that the Government should make the utmost practical use of the talents and experience already available among women. We must, as soon as we can, dispel the impression that is bound to be given by the small proportion of women members on public boards, to which the hon. Member has drawn attention. For this reason, as he rather expected, we have arranged with the Womens National Commission to obtain from its constituent organisations the names of women who are in its opinion qualifiedor suited by experience for a wide range of public appointments and who would be willing to undertake them. This information will be made available to all Departments and, while it would be wrong to expect immediate or dramatic results, I am confident that the information will be used, and to increasingly beneficial effect.
  Having made those two points, may I turn in more detail to the arguments and statistics the hon. Gentleman mentioned. It is true that with some important exceptions the number of women so far serving on public boards and the like is regrettably small. Where it is clear that particular interests are best represented by women, or where women are involved in a problem in a special way, I suggest that the record is good. For example, half of the 18 members of the Committee on Nursing are women, as are 5 of the 13 members of the Finer Committee which is looking at the problems of one-parent families. No less

  913
  than 10 of the 15 members of the Committee on abortion, including my eminent namesake, its chairman, are women.
  I am old-fashioned enough to think that whatever welcome advances women make on other fronts they will always have a special capacity and commonsense in representing people's everyday experiences and problems. Here is where I part company from the tone of the hon. Member. It has been the consistent policy not only of this Government but of their predecessors, followed in every Government Department, that in inviting people to serve on public boards and councils, tribunals and Commissions the primary consideration should be to choose people best suited by experience and qualification. I certainly do not accept that the small number of women on public boards is any indication of discrimination against women or of any feeling that women have not got, as the hon. Member was saying, a great deal to offer.
  The reasons why more women do not become members of these public bodies are complex. An important reason is that membership of many of these bodies is regulated by statutory requirements. For example, the Transport Act, 1962, requires that members of the British Railways Board, the British Transport Docks Board and the British Waterways Board shall be appointed from among persons who appear to the Minister, and this is the standard phrase:
  "… to have had wide experience of, and to have shown capacity in, transport, industrial, commercial or financial matters, administration, applied science, or the organisation of workers …"
  The Transport Act, 1968, passed by the last Government, lays down similar qualifications for members of the boards of the National Freight Corporation, the National Bus Company and the Scottish Transport Group. Similar qualifications are required for members of boards and councils in the electricity industry, the gas industry, the steel industry and in atomic energy.
  We must admit that the fairly stringent qualifications necessary by statute for membership of boards such as those I have mentioned so far are not of a sort likely to be possessed by very many women. It is possible for women to have such qualifications, and a number do, but, at least up to now, it has not been
  914
  a large number. I must remind the hon. Gentleman and the House that these qualifications for membership of public boards are laid down in legislation which has been approved by Parliament, and on many occasions the House has made clear that the important factor in the appointment of members to public boards is the potential members' qualifications and proved ability, and not their sex.
  Having said that, however, I can see no easy solution to the difficulties, though I am confident that the two measures which I mentioned at the outset will help considerably.
  Across the whole field of employment—this is closely relevant to the matter of qualifications for public boards—we want to see more women rising to the senior positions in commerce, industry, the professions and the public service, from which are filled the important appointments which we are considering tonight. Further back than that, we must try to impress upon young people of both sexes, and on their parents—since the problem often lies there—that, despite the many difficulties, it is worthwhile to choose and plan a career and persevere in the education and training necessary to achieve success in it.
  I am the first to admit the special difficulties facing girls in this respect. They know that there is prejudice among some employers, and, of course, they know also that, however rewarding their career may be, most of them will want to interrupt it in order to bring up and care for children.
  There is a variety of ways, as the hon. Gentleman knows—through vocational training courses, industrial training grants and so on—by which this latter problem is being tackled. I ought to stress at this point that women are equally eligible with men for training under the Government's vocational training scheme. The number of women training under it has risen significantly in the past few years, and my right hon. Friend the Secretary of State for Employment, hopes that this increase will continue.
  On another aspect of the matter, the Government has recognised its own responsibility—the hon. Gentleman asked that the Government should take a lead—as a major employer of women to set an example to commerce, to industry,

  915
  and, if I may dare say it, to the professions. No one in the position into which I have recently found myself put could doubt that. But there is a lot more to this than simply ensuring equality of pay and conditions. What counts is equality of opportunity, and this requires the specific study of ways in which women can be helped to combine a career in the public service with responsibilities at home.
  I strongly commend to the House and to people outside the Management Paper on this matter published by the Civil Service Department last October. That document is an example to employers in general of what can be achieved by a thorough, concerned and systematic study of the issues.
  I should have liked to spend more time following up some of the specific points which the hon. Gentleman raised. As I said earlier, I assure him that we shall consider them carefully in working out our Government strategy for improving what we admit is an unsatisfactory situation.
  I am certain that in the House there is no major difference of opinion about
  916
  the principles that we have been discussing tonight. It is a long legacy of prejudice from which women have been suffering and which, unfortunately, has too often had an effect on their own attitudes and aspirations. This situation needs to be changed.
  It is a big challenge not only to the Government, but to all of us. There may be many different opinions on the best way in which to meet it, but the Government for its part believes that the coming study will analyse the problem in such a way that truly practical remedies will emerge of a kind which command the general agreement of both the House and the country.
  We as a Government are fully aware that one of the greatest assets the country possesses is the brains and talents of its people, and we are convinced that it would be morally, socially and economically wrong if we did not take the fullest advantage of the abilities of all our people, both men and women.
  Question put and agreed to.
  Adjourned accordingly at twenty-six minutes past Eleven o'clock