SURTAX RATES FOR 1972–73

HC Deb 11 April 1973 vol 854 cc1345-89

Question proposed, That the clause stand part of the Bill.

4.30 p.m.

Mr. Brian Walden (Birmingham, All Saints)

Regrettably, although the Opposition want to make progress as much as do the Government, we cannot let Clause 10 go through without some comment upon it.

The scheme that will be implemented this year was legislated for in 1971 and the rates were fixed in 1972. The system becomes operative from 1st April 1973. It therefore had all the classic marks of what the House is increasingly being persuaded is the right way to do things—namely, that this was a long-term well-planned tax change.

I want to say this for it. I have no objection to the fact that it established a unified tax system. I believe that was right, with one provison which I shall make later. Indeed, my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) never disguised the fact that he had himself wished to produce a unified tax system. For reasons which I confess I do not know and for that matter nor, I suspect, do the Government Front Bench, given the way that these things are done, quite properly, in the Treasury, my right hon. Friend explained to us that a technical reason prevented him from bringing about this change. What that technical reason may be I do not know, because I have been very careful not to ask him and, rightly, it cannot be a subject of debate in the House.

I therefore accept the unified system as a good thing, but I make one proviso. If we are to have these fundamental tax changes, something might have been done about the plateau between the entrance into the tax system and the £5,000-a-year limit, because the common rate at varying levels in that amount is probably a nonsense. There ought possibly to be a greater refinement and differentiation. But that is not the principal point to which I wish to speak on Clause 10.

There is no way of getting out of the case—and I intend to examine briefly the ways in which the Government have tried to get out of the case—that a significant concession is being given here to the better-off. The Labour Party in any year at any time would be opposed to that and would be particularly opposed to its being done at a time when the Government are operating a prices and incomes policy.

First, I wish to attempt to get rid of of what may be confusions existing between the two sides. The £300 million is not being "taken back", if that phrase worries hon. Members opposite; it is being forgone by lessening the stiffness of the progression above £5,000 a year on earned income and by granting concessions to investment income. I therefore accept at once that part of the £300 million will be going to people whom one does not normally regard in any meaningful sense as rich.

Nevertheless, there is no way in which the Government can explain away, for instance, the following facts. I try never to bore the House with statistics, and I promise to quote only one. Under this system, the tax burden of a married couple with a £15,000-a-year investment income—not an extravagent sum for a whole category of people by any means —will be reduced from the former level by £1,482. In other words, there will be a retention increase for that couple of 29 per cent.

Mr. John Hall (Wycombe)

Will the hon. Member remind the House of the level from which that reduction was made?

Mr. Walden

I will take up that point in a moment when I come to the equations of what happens in West Germany. It was reduced from a very high level of tax as, indeed, could truthfully be said to be the case in the reduction from 90 to 75 per cent. on earned income. These are high levels, but then the sums of money involved are very considerable.

One has to consider philosophically whether one wants significant disparities of wealth at any time. As a philosophic belief, the Labour Party does not. Least of all does it want a married couple with a £15,000-a-year investment income to have its retention increased by 29 per cent. at a time when hospital workers have to take £1 plus 4 per cent.

This seems to us to be entirely the wrong way to secure compliance in a policy which, as I have said before and I repeat, I wish to see succeed, namely, the Government's counter-inflation policy.

Mr. J. Bruce-Gardyne (South Angus)

rose—

The Chairman

Does the hon. Gentleman appreciate that these rates are for one year only and that we should therefore discuss them in the light of that fact?

Mr. Walden

Yes, Sir Robert, I understand that. The surtax rates for 1972–73 obviously go wider than that, but I will endeavour to confine my remarks to the ruling you have made, and I will give way to the hon. Member for South Angus (Mr. Bruce-Gardyne) in a moment.

It is undeniable that although part of this £300 million forgoing of income goes to people whom one does not normally regard as rich, the greater part of it and the substantial benefit from it goes to the people in this country who least need the money and who least need to make sacrifices.

I ought at this point to give way to the hon. Member for South Angus after which I will examine the reasons why I believe the Government did this and why I intend to try to show that they have become increasingly embarrassed about what they are doing.

Mr. Bruce-Gardyne

I am grateful to the hon. Member for giving way.

He promised us a feast of relative statistics which I say, in all sincerity, we look forward to hearing. In the course of giving these statistics, will the hon. Gentleman show us the relative position before the change introduced in the clause now under discussion of an elderly retired married couple such as he has referred to, living wholly on an investment income of £15,000 a year, and that of a similar married couple living on the proceeds of a top hat pension scheme, and the relative tax treatment of those two couples?

Mr. Walden

My hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) has promised to get me exactly that figure. But the hon. Member for South Angus will not think me to be joking when I say that I am a little sceptical of the old, the widows and the orphans. They tend to bulk very large. Whenever the Tory Party is handing out substantial sums of money to the rich, we always hear about the widows and the orphans and the retired—all the cripples of capitalist society. The hon. Member knows as well as I do who will mostly benefit from this concession. Should there be any doubt on the subject, let me repeat what the original argument was.

One must bear in mind the climate of opinion in 1971. The Government did not then have a prices and incomes policy, they did not then foresee a borrowing requirement or a rate of inflation of the size that they now have. The argument then was, "Competion will solve all our problems, we must give more incentives to"—in the immortal phrase of the right hon. Lady the Member for Finchley (Mrs. Thatcher)—" the pace-setters". This was a pace-setters' incentive and it was advocated as such. The Tory Party then made no bones about it. This was meant to be a concession to better-off executives—not only executives, but principally—in order to induce them to turn out a good economic performance for this country.

Apart from the fact that I regard that as psychological twaddle, it has never been established as being correct or true and I do not believe it to be the reason that executives actually do their jobs in the way they do. However, leaving that aside, that was the argument.

As I have so often said to the House or to various committees, as usual, the Government's taxation arrangements are entirely "out of synch" with their demand management. Increasingly, they have become embarrassed about that argument. If one compares the word of the Chancellor in his Budget Statement this year with the words that he used when he originally brought forward this idea, one will notice that an apologetic note has crept in.

Of course, in the case of the Chancellor, of whom I am very fond, an apologetic note always takes the form of a counter-attack. The wicked flee when no man pursueth". He gave us a great lecture about how other countries have lower rates of taxes and that therefore it did not fall to the Labour Party to criticise anything that the present Government were doing, about which I have only one thing to say: if there are to be these naive and ludicrous comparisons with foreign countries, we must take into account the entire social industrial system that they operate, their wage rates, their rates of benefit, their holidays, the disparities that exist in their society—and I leave out of account the factor that I would regard as most significant, namely, their history. Let us not worry ourselves with that.

If we are to have German examples quoted, as the Chancellor quoted them in his Budget Statement, we should be told what the average German earns, how many German workers are unemployed, what the German worker receives in social benefit and in holidays, what his employer's contribution is and what the German Treasury's contribution is to all the things that finance his social wage. Then, I suggest, we shall have a picture painted which significantly modifies what it is that the Chancellor wishes us to misunderstand.

What I think he wants us to assume is that Germany is a country in which there are greater disparities, less egali-tarianism, than is the case in this country. That is at least a questionable proposition. Nor do we ever hear anything about the advanced countries of Scandinavia, among the most civilised, the most decent, the most peaceful in the world, from which one could produce an argument which would show that by no means is it necessary to reduce taxation on the rich in order to produce the sort of society that can efficiently conduct its affairs.

I want to try to conclude now, because I do not want the discussion to go on too long—not because I think that it is not important but because I think that the points of view of the two parties have been expressed so frequently that con- stantly to reiterate one adds no strength to it.

4.45 p.m.

I want to turn finally to counter-inflation policy. Whatever the hon. Gentleman may think, fiscally speaking, in vacuo, this change is bound to do nothing but harm in our circumstances. The sense that that may be so has crept into the Chief Secretary's own remarks. The Chief Secretary has now come up with a dodge—I categorise it exactly as such—which has entirely convinced, among others, his hon. and learned Friend the Member for Dover (Mr. Peter Rees). What the Chief Secretary said— by the way, it is absolutely true—was, "Does not the Labour Party grasp the fact that, as a result of the changes that are being made, surtax payers will actually pay more in the next three years than they have previously paid?" This has so inflamed the imagination of the hon. and learned Member for Dover that he recently gave us a speech about the terrible burdens which will fall upon surtax payers as a result of what the Government were doing, with a strong plea that some further mitigation should be given.

Mr. Peter Rees (Dover)

Of course the hon. Gentleman will have his fun, but perhaps he will not take it too far. I was not complaining about the great burdens which would fall on surtax payers, although there are burdens. Speaking in the context of his speech, I was merely trying to demonstrate that the position of surtax payers is not quite so rosy at this moment as he would have us believe. After all, the hon. Gentleman is making the point that, at this moment, it is wrong to give them any concessions at all. I just wanted to redress the balance. While one admires his debating skill, perhaps the hon. Gentleman will come down a little and face the facts squarely.

The Chairman

Before the hon. Member resumes his speech, it would be as well if I again reiterated that we should keep to the terms of the clause and not talk about concessions. I am afraid that, if hon. Members interject, that will only encourage the hon. Member perhaps to go wider than in his heart he wishes to do. I hope that we can now hear all about surtax in connection with the next year.

Mr. Walden

I think that I can safely do that, Sir Robert, in terms of 1972–73, without straying out of order, and still answer the hon. and learned Member very quickly. I am a surtax payer myself and I am well aware of what he has said. Of course it is true. It is the implication of that remark that is untrue. What one is supposed to understand from the remark that surtax payers have to pay more in the next three years is that somehow they have not been given the concession at all, that they are actually worse off.

In the long term, of course, that is complete piffle. What is actually being done is that surtax payers, like those on PAYE, are being requested to pay their tax—but in the long term they are, of course, securing a concession. Therefore, all the explanation that I read by the Chief Secretary—I heard it, but I also read it with great interest—is quite true. The Chief Secretary is not saying anything in the least false when he says that surtax payers will have to make more money available to the Treasury by paying off their back taxes in the next year and the succeeding years than has been the case in the past. But that does not affect the issue in the least.

The plain truth is that these rates still give a significant concession to the better-off members of the community. There is no way of arguing oneself out of that proposition. Now, for the last time in view of your desire to get on, Sir Robert, I give way to the hon. Member for Wycombe (Mr. John Hall).

Mr. John Hall

The hon. Gentleman was suggesting that it was wrong to make these concessions to surtax payers during a period when wage earners are being asked to accept restrictions on the amount of the increase they were allowed to have at any one time. That means that he was arguing that, as the money going into the pockets of the average worker was limited, there should not be a relief of this kind to surtax payers. In the short period about whioh the hon. Gentleman is talking, this is precisely what is happening. The surtax payer is paying out more, not less, in tax. In that respect the surtax payer is not better off than the working man in the period under review.

My earlier question to the hon. Gentleman concerned whether he would be kind enough to remind the Committee of the amount paid in tax before this proposed remission for the example he gave of a couple with £15,000 investment income.

Mr. Walden

Perhaps, Sir Robert, in view of your rulings, it would be easier if I wrote to the hon. Gentleman. I have been supplied with the necessary figures from table 18. I shall supply them to the hon. Gentleman. However, on the hon. Gentleman's substantive point, the House should not too readily assume that the ordinary man is quite that stupid. He always worries about freezes of dividends because he has got it into his head that the dividends stay in the company and that sooner or later they are paid to people. He will not grieve about the fact that in a given period surtax payers have to pay rather more of tax which they ought to be paying anyway. He will have grasped the fact that they are being given a concession. That will be the psychological impact during the counter-inflation period.

There is no guarantee that the glorious bonanza which the hon. Gentleman is obviously foreseeing for the future will come about. The Government may need to maintain a restraint on prices and incomes over a considerable period, so the argument may well fall in that respect, too. I could foresee a set of circumstances in which these concessions would become actual in terms of that particular year's income for the better off at the very time when the Government wanted a very tight policy in regard to monetary wages paid to the average man. But the fact remains that this is a concession to the better-off. It is, therefore, misplaced and out of line with the kind of restraint which the Government are now trying to apply.

If these tax changes had not been devised so long in advance, if the Government, in December 1972 for example, were first thinking of their Budget, they would not have made a concession of this kind because the Chancellor would have felt and would certainly have been advised, that this was an unwise change to make in a period when one is enforcing wage restraint by law. To us that seems a proposition entirely undeniable.

The arguments about the merit of the unified tax system are about how preferable it is to have a very gradual rather than a sharper progression, how valuable to this nation are executives, and how important it is to assist people who are making savings by not taking too much of those savings in tax. Valid though those arguments may be, none of them affects the fact that this is an exceedingly mistimed change which is bound to harm the Government's counter-inflation policy and which, in the view of the Labour Party, does not have the merit of social justice. When we are asked questions about where we would find the money for this, that and the other, the Opposition can say emphatically that this is £300 million worth of income that in no circumstances in any year could we have forgone. For that reason, the Opposition will divide the House against the clause.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

We always much admire the hon. Member for Birmingham, All Saints (Mr. Brian Walden) when he speaks with his fluency and conviction. But I did not find his speech today quite as convincing as many I have heard from him. Admittedly, I must excuse him because you, Sir Robert, would have brought him to task had he gone at all wide. The hon. Gentleman was treading a narrow path on surtax rates. He was not, therefore, able to mention capital wealth or inflation.

I would have expected the hon. Gentleman to say that the possession of capital was perhaps the biggest way whereby people insulated themselves from the problems of modern-day life and maintained their standard of living. But equally, the effects of inflation are very important when considering this question of surtax. One must take into account when considering investment income just what ravages inflation can cause. For example, if someone invests money in Government stocks at present, he may well get a 10 per cent to 10½ per cent. yield, which would go to make up his surtaxable income. But if inflation is running at 7 per cent. or 8 per cent., as it was last year and may well this year, and if in addition to that he is paying 50 per cent. or 70 per cent. tax, possibly, he is making a loss on the investment in Government securities which might amount to 3 per cent., 4 per cent. or 5 per cent. loss on capital.

In considering whether tax rates are too high, the hon. Gentleman, to be fair, must take into account things of that sort. I know that the Treasury Bench may say that inflation has been brought to a halt by the counter-inflation policy. But I do not think that hon. Gentlemen would feel that. It is certainly true that without the ability to make fortuitous capital gains and to survive the capital gains tax, all people who are living on capital or investment income are progressively getting steadily worse off. Inflation is probably the biggest wealth tax, especially combined with capital gains tax and the high rates of surtax which have prevailed and will still prevail after the rates in the Bill have been adopted. That effect, a force greater than those in the Finance Bill, is the great leveller, with the exception of those bright sparks and spirits who are able to make great fortunes by some means or another.

I am not an egalitarian. I recognise that the hon. Gentleman is an egalitarian. He argues from a Socialist point of view. But even if I were tempted to share some of his egalitarianism, I would ask him to moderate the zeal with which he put his case. It seems that in this age we must also take account of the circumstances in which people live and earn their livings. It is not fair, either, to compare, as is done so often, the hourly rate paid to a working man with the gross annual salary paid to a surtax payer and to draw conclusions of gross inequality from them. It is easy to say that a docker earns £2 an hour whereas a Member of Parliament earns £4,500 a year. It sounds grossly unequal. But if the number of children is, perhaps, slightly different and if there are one or two expenses which a Member of Parliament must pay, they could end up with not far off the same net income.

Secondly, it is grossly unfair to assume that the expenses of a London docker are the same as those, for example, of a Member of Parliament. I do not mean the chargeable expenses but the real expenses of the job that he has to do, the clothes that he has to wear, the entertaining he has to do and the sort of place in which he has to live. If we compare various categories of workers in this analytical way, we have to begin to feed into the analysis something more of the true expenses of the work that is being done.

Mr. John Horam (Gateshead, West)

While the hon. Member is dealing in comparisons, does he think that a docker, for example, or a Member of Parliament, or even someone earning rather more than a Member of Parliament—let us say an executive on £7,000 a year—should all be paying the same income tax rate, as they are now in the vast majority of cases?

[Miss HARVIE ANDERSON in the Chair]

5.0 p.m.

Mr. Ridley

I do not believe there ever will be ultimate justice in these things. We never will find the perfect formula. I was trying to put the egalitarian argument slightly more fairly than did the hon. Member for All Saints.

In our society boredom will be a problem as leisure increases. More and more the problem will arise of people believing that the fulfilment of life is to knock off early and either go to Barcelona or sit at home and watch the television, or some activity of that sort. There has to be room within the tax system for a person to say that, if he can earn more, he will do more. He must be able to say that he could enjoy himself more, be able to contribute to some charity he is keen on, or take part in some activity which will cost him money but which is for the benefit of the social and cultural life as well as for his own life.

There has to be room in the tax system for people who may be earning quite substantial sums, like £10,000 a year, to feel that it is worth engaging in extra paid activity in order to earn more and that the marginal increase in their net income will not be so small as not to make the effort worth while. That is another criterion which should enter into the view of members of the Socialist Party in deciding on their own egalitarian criteria. I do not think that under the arrangements proposed by my right hon. Friend this could be faulted.

I want to take the hon. Member for All Saints to task on one other ground. He said that it did not matter what the comparisons were in Germany or the United States for the rates of tax on higher incomes. He said that the whole climate and economic existence in these countries should be taken into account before one element such as tax was singled out. That is, of course, exactly what the best brains have done, are doing and will continue to do. They do not bother to wait for us to change our tax laws—they just go. If there is one thing which I believe is insular and old fashioned in the Labour Party's attitude on this matter it is that it would prefer to ignore the attractions of other countries' tax regimes and let our most ambitious and striving people leave these shores rather than concede its old-fashioned egalitarian dogma and accept that there has to be some elasticity in incomes.

Where I think the hon. Member was on the strongest ground was when he talked about the Counter-Inflation Bill and the area we are entering where government is beginning to take views about what every citizen should earn. Of course, if we are to take a view about what the gross earnings of hospital workers, coal miners, Members of Parliament or company directors should be, equally we must take a view about what the after-tax earnings must be. It follows that the more Government control is entrenched on prices and wages, and the more comparability studies are undertaken and tables written about various occupations, and the more fairness is considered, the more one is forced to take views about net incomes, and that means incomes after surtax.

So I part company with the hon. Member there and say that this is probably a reason for avoiding going down that road. Once we take a view about what the net income after tax should be of someone who is a high earner, we may be right in egalitarian terms and in terms of unfairness, but we may be wrong because that high earner will hop the country and go somewhere else. The truth is that we live in a world where there is not only competition from industrial goods which are imported and exported but competition from employers all over the world who are enticing the best brains out of this country with better remuneration, and whose Governments fix tax rates to be attractive to them.

I think that the Government have it about right. The difficult side of this whole question concerns capital and wealth, but we cannot discuss that now, and I do not want to. But I think that the Government have taken cognisance in regard to taxes and incomes of the need to retain the best people in this country. They have taken cognisance of the need for people to be able to earn substantial extras by substantial extra work. They have not by any means given much help to the rich, because inflation is eating into that wealth in the vast majority of cases. It is wrong for the Opposition to keep beating this drum, to keep trying to stir up envy as if there were no difference between the remuneration of, perhaps, a London docker and a Member of Parliament and as if it were their target that there should not be. It is not.

The hon. Member for All Saints said that he did not want to see all these rates equal. For him to suggest, as he has, that we are widening the gap and making gross inequalities in our society is false and is not helpful to his own professed wish of making the counter-inflation policy work, even though I may not share that wish.

Mr. John Cronin (Loughborough):

I should like to make a few brief points in support of the admirable speech by my hon. Friend the Member for Birmingham, All Saints (Mr. Brian Walden). I support everything he says. I am a little puzzled by what the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) said about inflation being a severe tax on wealthy people. My impression concerning property and industrial equity shares, which form the major part of the wealth of wealthy people, is that during the recent period of severe inflation there has been a steady increase in their capital. [Interruption.] I take the point made by the hon. Member for South Angus (Mr. Bruce-Gardyne) that over the last year there has been a retrogression of the stock market. Over the years, however, wealthy people have steadily become very much wealthier. They are seeing their capital increase enormously and as a result the increased inequality in this country is causing general discontent.

One of our greatest troubles is the big difference between the wealthy—those who have, and those who have not or have not enough. In giving a concession of £300 million to those who are so much better off, not only are the Government increasing the inequality and creating something of a social blot but, as my hon. Friend the Member for All Saints pointed out, it is an act of reckless tactlessness to give it just at the time when the incomes of industrial workers, civil servants and those in the lower income groups are frozen.

Most of us on both sides of the Committee are of the opinion, for instance, that the hospital workers are a particularly deserving case. All my professional colleagues in the hospitals think that they are being very shabbily treated. How can hospital workers, for example, be expected to accept the burden of a wage freeze and a reduction of their standard of living when they see that the Government are at the same time handing over £300 million to people who are very much better off? That is an extraordinarily tactless and foolish thing to do and it must greatly damage the Government's effort to obtain more co-operation from those who work in industry.

The hon. Member for Cirencester and Tewkesbury painted a rather lugubrious picture of the disincentive effect of high taxation on people who are at the spearhead of our industrial and technological effort. He talked about such people emigrating. I do not think it has been suggested before that emigration is due to taxation. I know of nobody in my profession who has emigrated to avoid taxation. I agree that wealthy men sometimes impose on themselves exile abroad for the purpose of retaining more of their money and for avoiding taxation. That seems to be a strange form of masochism. Such men exile themselves and give up the pleasures of living in Britain. They choose to live in unattractive places so as to retain a greater part of their more than adequate possessions.

Mr. Percy Grieve (Solihull)

Does not the hon. Gentleman appreciate that the pressure on retired people living on investment incomes, because of the fall in their standard of living on retirement, has been such that a great many have gone to live abroad?

Mr. Cronin

I am merely suggesting that people who live abroad are subjecting themselves to an inconvenience which seems to be out of all proportion to their tax gains.

Mr. Horam

That is precisely the point. Many people who go to live abroad do so when their energies are declining and when they have less to give to the economy. They go when they have made their pile. Good riddance to them.

Mr. Cronin

My hon. Friend has made a useful point. It has been suggested by the hon. Member for Cirencester and Tewkesbury that our taxation system drives abroad those who help to maintain Britain's progress in exports and industrial technology. As my hon. Friend the Member for Gateshead, West (Mr. Horam) has said, it is retired people who seem to go abroad.

Mr. Grieve

Does not the hon. Gentleman appreciate that if such people take their capital abroad, this country is deprived of its use?

Mr. Cronin

Surely there should be stricter rules about exporting capital in those circumstances. Anyway, I say good luck to the people who retire and wish to go abroad to live in a sunny climate.

I am concerned about incentives. This factor is laboured excessively by Members on the Government side. It can be argued that increased taxation reduces the incentive to work, but there are arguments to the contrary. One of the most authoritative examinations of our taxation system was carried out by a Royal Commission which published its report during the late 1950s. I well remember having the report in my hands when making a speech on a Finance Bill at that time. In any event, the position has not changed enormously since 1955.

5.15 p.m.

In its report the Royal Commission made it clear that there was no evidence that increased taxation was a disincentive to do more and better work. There are two sides of the argument I can understand that a man who has to pay more tax may decide to do less work, but that does not apply to most people. A man who has to pay more tax surely has an incentive to work even harder so that he can get his maximum income after he has paid tax.

We have heard the Secretary of State for Education and Science make a moving plea in favour of those who make an im- portant contribution to technology, industry and the export drive. I happen to be a director of a successful electronics company which exports 70 per cent. of its products. I frequently see young men working hard in their laboratories producing better electronic equipment. I frequently meet young executives who spend much of their time abroad selling the company's goods. They scarcely see their families. Sometimes they work 16 hours a day. Such people make the maximum possible effort to increase exports and to increase our technological supremacy. Britain is supreme in many areas of technology.

I have never heard the young fellows whom I have met grumbling and saying "I shall not do any more work because I shall have to pay more tax." They are working hard all the time to get better jobs and a better income. They do not slacken in their efforts because they feel that they will lose more in tax. Conservative Members should appreciate that there are many people who work hard in science, engineering and commerce not merely for money but for job satisfaction. Of course, Conservative Members think always in terms of money. An incredible amount of avarice comes into their political thinking. I accept that being a Conservative hon. Member may mean that one has a limited job satisfaction.

Mr. Brian Walden

Especially these days.

Mr. Cronin

Indeed. However, there are many people who think in terms of job satisfaction, of increasing their status and regarding the people with whom they work as a team and being engaged in a team effort. Such people have no real disincentive because of increased taxation.

Many Conservative Members tend to exaggerate the importance of private expenditure. They feel that a person should retain as much money as possible and should be able to spend it himself. [HON. MEMBERS: "Yes."] I am glad to hear that the point I am making has support. Members on the Government side live in the days of Gladstone, who in the 1860s said that he would like to leave people's money to fructify in their pockets.

We hear from the Government curious examples of retentive avarice. They do not appreciate that public expenditure is equally helpful to the person who is being substantially taxed.

I agree that a worker who is paying a large amount of income tax would much prefer to retain more money himself so that he could have a second television set, a deep freeze or better furniture. I suggest, however, that such a man should feel a sense of pride when he sees a new and better school being built in his neighbourhood, when he sees his local hospital being provided with better facilities and public services being improved.

Those are matters about which people should be proud. They should not be concerned only to keep their money in their pockets. We must inculcate more of a corporate sense of public spending. I think that that sense is increasing gradually.

I strongly support the speech of my hon. Friend the Member for All Saints. I believe that Clause 10 as drafted not only perpetuates inequality but is most recklessly foolish at a time when the Government are expecting the workers to moderate their wage claims.

Mr. Bruce-Gardyne

I could not resist interjecting during the speech of the hon. Member for Loughborough (Mr. Cronin)—from, I regret to say, a sedentary position—a wish that he would examine the conditions of his own profession when he talked about illusions which he believes we on this side have about the impact of high levels of taxation on the propensity of people who have a contribution to make to our community to live abroad.

I interjected because of my experience over the years of the Labour Government—and I am bound to say that it is not an experience that has entirely evaporated over the years with the present Government. At least once a year I learn of a further case of a member of the medical profession who is leaving general practice or the hospital service in my constituency to practise abroad, usually in Canada or the United States and occasionally in Australia.

These are not people who are retiring and are going to spend their declining years abroad when they no longer have a contribution to make. They are often quite young men at the height of their professional powers and they are going abroad, in numerous instances as I have discovered, and clearly in a large majority of cases, because they find that they are able to enjoy a much more attractive tax system in Canada, the United States or Australia than they have experienced in this country. That is the reason why they go abroad and I am amazed that the hon. Member, coming from that profession, has not come into contact more with cases of this kind.

Mr. Cronin

I take the hon. Member's point, but he must realise that in the majority of cases young doctors and consultants who go abroad do so on account of dissatisfaction with the conditions of the National Health Service, and that is based largely on the fact that not enough money is spent by the Government on the National Health Service.

Mr. Bruce-Gardyne

I do not mean that the tax issue is always the prime motive, but in my experience of contact with numerous doctors in this category from my constituency who have gone abroad I have found that tax was an important factor in virtually every case. I am amazed that the hon. Member, coming from the medical profession, should not have come across that himself.

Mr. Horam

Will the hon. Member tell us how many of these people come back?

Mr. Bruce-Gardyne

I regret to say that none of those who were practising in my constituency has come back, although I know that some doctors do.

I want to turn now to the speech by the hon. Member for Birmingham, All Saints (Mr. Brian Walden). I always feel that he is incapable of making a bad speech, and sometimes one feels that the worse the cause the better his speech. I sometimes speculate on the thought that he would have made a splendid job of defending the Massacre of the Innocents. He would no doubt have announced that Herod was worried about the population explosion, and would have done so charmingly.

Today, however, I thought that the hon. Member was labouring a bit— if that is the right word to use—though, like my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), I thought that he was on his strongest ground when he was talking about the interface, if I may use the popular and fashionable jargon, between this clause and the investment income surcharge, which is the substance of our discussion, and the prices and incomes policy. He made great play with the interpretation which would be put upon the passage of the clause by those who were caught in the vicious claws of phase 2 or phase 3 of the prices and incomes policy.

On that part of the hon. Gentleman's argument I think that we cannot entirely ignore the logic behind what he was saying. I read the other day of a claim that incomes policies must be based on attempts to redistribute incomes in favour of the lower paid. That was a sentiment that the hon. Gentleman might well have uttered this afternoon. We hear it frequently uttered from the Opposition benches.

The dramatic thing about this statement was that it did not come from the Government benches but was apparently from a gentleman we have chosen to appoint as deputy chairman of the Pay Board. So we might say that this is a voice which is emerging from within the bowels of Whitehall. He is called Mr. Derek Robinson, and his appointment should have attracted a good deal more attention than it has in the light of evidence he gave to the first Wilberforce Commission on the electricity supply workers' dispute. However, I thought I heard you cough, Miss Harvie Anderson, and I had better go no further in that direction, except to say that we hear these sort of noises emanating now from the bowels of Whitehall.

It is not a dilemma which concerns me particularly because I do not believe it is given to Governments to devise an elaborate scenario for prices and incomes based on the concept of fairness which will appeal equally to the docker and the High Court judge. I do not think that it can be done by this Government, and it certainly was not done by the last Government. Nor can it be done by any Government. As far as I am concerned, the dilemma to which the hon. Gentleman drew attention is a dilemma to which my hon. Friends on the Front Bench will no doubt address themselves. I do not think that it is a dilemma with which those of us who have expressed substantial reservations about the curious gymnastics of the prices and incomes policy from the back benches need concern ourselves very much this afternoon.

Instead, I want to raise three arguments which I do not think have been advanced very far and were certainly not advanced by the hon. Gentleman in support of Clause 10. They follow a rising order of importance. First, the argument that we used to advocate, and which I hope we still advocate, in favour of a more equitable treatment of investment income is that it was and is desirable for the more efficient working of the economy that public companies should be encouraged to distribute a higher proportion of their income so that their investment requirements could be obtained in the market, where they would be judged on their performance. This has always seemed to be a powerful argument—one of the most powerful, in my view—behind the new system of corporation tax which is also incorporated in the Finance Bill. But one of the ways in which public companies can be encouraged to go in for larger distributions and a wider degree of submission of their records to the judgment of the market is to make investment income less onerous in the hands of the recipient. That is not the least of the arguments in favour of the way in which the investment income surcharge is to be introduced.

5.30 p.m.

The second argument—and I state the arguments in rising order of importance —concerns the respective treatment of different sources of income, from different forms of saving, according to the type of asset from which it comes. That was the point on which I interrupted the hon. Member for All Saints. There is no logical reason why we should tax a retired couple whose income comes from an occupational pension scheme or from investing savings on totally different scales.

The hon. Gentleman referred us to the Red Book but he was discreet enough not to mention the figures. I shall give him the figures, which are highly relevant to the clause. A married couple with an income of £15,000 a year—the figure the hon. Gentleman took—arising exclusively from a top hat pension scheme from which the husband is the beneficiary would have a tax liability in the financial year 1973–74 amounting to £6,375 on that sum. A similar couple with an income of £15,000 arising exclusively from investments would have a tax liability amounting to £8,546. I can see no logical reason for that differentiation.

Mr. Brian Walden

May I suggest one to the hon. Gentleman? When the recipient of the pension dies, the pension dies with him, but the investment income is not rubbed out on the death of the person concerned. It passes on to someone else. Therefore, there is every logical reason for maintaining a differential.

Mr. Bruce-Gardyne

The hon. Gentleman has heard of estate duty. We do not need to pursue that argument further. The fact is that those two married couples are treated in a totally different way under our tax system for no logical reason.

Mr. Joel Barnett (Heywood and Royton)

The hon. Gentleman is not comparing like with like. What is received from the top hat pension is not wholly income; it is partly capital and partly income. That is why the man in the pension scheme is paying less tax.

Mr. Bruce-Gardyne

The hon. Gentleman cannot get away with that. The man is paying less tax because the income is treated as earned income and not investment income, like all forms of pension income. That glaringly exposes the illogicality of the present system.

The hon. Member for All Saints treated us to an elegant disposition, as only he can, about the tremendous fringe benefits enjoyed by the German worker that are not enjoyed by the British worker. In my view the largest fringe benefit enjoyed by the German worker is that of operating in a society which has most effectively of all advanced industrial countries since the war operated a free market economy. If we could follow that example our employees might enjoy similar fringe benefits and similar advances of income.

What the hon. Gentleman overlooks is that we have now moved within the walls of the European Community. If we are to apply to investment income in this country a tax régime vastly more onerous than that which is applied to investment income in other parts of the European Community, we shall unavoidably face an egress of capital to those parts of the Community where the tax régime is more favourable and less discriminatory against investment income.

Under the rules of the European Community, when once we apply them in full, as pray God we very soon will, we shall quite rightly not be able to prevent egress of capital along those lines. That is an overriding reason why we must make sure that our system of taxation for investment income is much more closely related to the more sensible régimes that have applied over the years within the territories of our fellow members of the European Community.

For all those reasons, I strongly support the clause.

Mr. Horam

I am glad that I caught your eye, Miss Harvie Anderson, because someone who is not a surtax payer should speak in this debate.

Mr. Bruce-Gardyne

I am not.

Mr. Horam

The hon. Member for South Angus (Mr. Bruce-Gardyne) believes in inequality and yet he is not a surtax payer. What a tragedy!

I want to speak on behalf of the vast legion of non-surtax payers, who include the hon. Gentleman and me. I hope that he avoids being a surtax payer by a very small amount. [Interruption.] I note that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is not a surtax payer either. Splendid!

Mr. Ridley

I wondered whether there was any hon. Member present who was not a surtax payer. Why does the Labour Party feel steamed up about the subject? Only six Opposition Members have been able to bring themselves to the debate, and three of them are on the Front Bench. The subject interests only three back benchers.

Mr. Horam

There are some rather important local government elections going on. I imagine that that has something to do with the sparse attendance on both sides. I do not think that the Government would have a big majority if there were a Division now. Perhaps more professional interests are represented on the Government benches. I do not know how many Conservative Members present have an interest in accountancy or taxation.

One of the things that always strikes me about surtax is how little is collected. For example, the estimates for 1972–73 suggest that surtax payers will fork out only about £350 million in surtax. That may seem a rather healthy sum, but when we compare it with the total of income tax—no less than an estimated £6,600 million—we see how relatively little the tax bites.

The main reason is that there is a vast industry devoted to relieving high income earners of their liability to income tax and surtax. I think it has been said that only fools and idiots pay estate duty. It is also true that only fools and idiots and the atrociously well-paid pay surtax. I am afraid that I must include in that some of my hon. Friends on the Front Bench.

Mr. Brian Walden

All of them.

Mr. Horam

I should not call them fools. They are outrageously honest and declare everything—

Mr. Joel Barnett

Of course.

Mr. Horam

I think my hon. Friends would concede that there is a vast body of accountants and tax specialists whose main object in life is to relieve high income earners of their liability to surtax and possibly avoid that dreadful cut-off where they begin to pay at a higher rate.

Let us take the man earning £8,500 a year as an example. That may not seem a great deal to hon. Members present, though perhaps it does to the hon. Member for South Angus, who may not earn that amount, to judge by what he has revealed. Certainly I do not earn that sum. It is a great deal to the vast majority of my constituents and, I imagine, to the vast majority of constituents of all hon. Members here. If they could get £8,500 a year they would rest content for life.

A man on £8,500 knows that if he is to avoid surtax he must get his personal allowances up to about £3,500, assuming all his income is earned. He will then pay tax only at the standard rate of 30p in the pound. If he is married with three children, his personal allowances are £1,470. Suppose that he has a large house. His tax accountant will tell him to take out a large mortgage. If he has an endowment mortgage of £15,000 his tax liabilities are reduced by about £1,400. That brings his personal allowances to about £2,800 or £2,900. If he is in a pension scheme, similar to the one in which Members of Parliament partake, to which he makes a contribution of £200 or £300 a year, which qualifies for tax relief, that will bring his allowances to over £3,000.

Suppose that the man is self-employed and has personal expenses which he can offset against tax. It is easy to add on a fairly handsome sum in personal expenses, perhaps another £200 or £300. He may have a small overdraft on which, as a result of a recent Finance Act, the interest is allowable. In that way it is easy for a person earning £8,500 a year to get personal allowance in excess of £3,500 and totally escape surtax.

Mr. A. E. Cooper (Ilford, South)

Will the hon. Gentleman give us some more suppositions and tell us how that man could avoid paying income tax?

Mr. Horam

I cannot do that. I am speaking specifically of a man earning £8,500 or £9,000 a year, which is what I regard as a high income, as would most of our constituents. One cannot argue that there is any equity when a man earning £1,000 or £1,500 is paying 30p in the pound and a man earning £8,500 is paying 30p in the pound.

The Secretary of State for Employment, as he now is, said in a debate on a similar clause two years ago: … on the whole those who have the largest income should pay higher rates of tax and contributions towards communal expenditure."—[OFFICIAL REPORT, 11th May 1971; Vol. 817, c. 331.] That is the general proposition that the Opposition are arguing. If the right hon. Gentleman accepts that, I do not see how he can accept that people earning £8,500 a year should pay the same rate of tax as those earning £1,000 a year.

That was why I intervened in the speech of the hon. Member for Ciren-cester and Tewkesbury when he said that we should not talk about gross salaries, whether of people earning £1,000 or £20,000, but should talk about aftertax salaries. It cannot be right that people with such huge disparities in income should be paying the same rate of tax.

It is not therefore surprising that our tax system as a whole is not merely not progressive and not proportional but is regressive. According to the Central Statistical Office, total taxes as a percentage of original income in 1971 worked out at 35 per cent. for people earning between £800 and £986 a year, declining to 32 per cent. for those earning over £3,750. Even if we add cash benefits— which are of greater benefit to a person on less than £1,000 than to a person on more than £3,000 or £4,000—the figures still work out at 32 per cent. total tax as a percentage of original income with cash benefit for those at the bottom end of the income scale as well as 32 per cent. for those earning more.

5.45 p.m.

We have heard much about international comparisons of marginal tax rates. We hear about the 90 per cent. as it was and the 75 per cent. as it is now. We hear about the German rate of 50 per cent., now 60 per cent. as a result of the 10 per cent. surcharge on surtax. These are not important comparisons. What is important is the effective tax rate paid by people on relatively high incomes in different countries, what they actually pay as a result of the personal allowance system and the marginal rate of taxation. There is little to be said for the present system.

I concede the case argued by the hon. Members for South Angus and for Ciren-cester and Tewkesbury that if one pays no regard to equality one need not take account of these arguments. But that is not a case that the Government can deploy, given the counter-inflationary policy they are pursuing. They have to pay regard to post-tax as well as pretax equity, and they clearly are not doing so in Clause 10, nor are they likely to do so in the future. We cannot conceive of any major changes if the Conservative Government remain in office.

What should we do about this? I have two suggestions. First, there should be tighter limits on allowances which can be set against tax. There is the good example of insurance premiums. One cannot set against income tax more premiums than would add up to one- sixth of the total taxable income. In that way a limit is set. But the Government have relaxed all the previous limits. There is now no restriction on the amount of allowable bank overdraft interest, and close companies are allowed to lend money at favourable rates to a far greater extent than previously.

Secondly, the point of entry to the surtax range should be set at a lower level. I should like to see the level set at £2,000 instead of £5,000, given all the allowances which bring the level higher. That would make the taxation system far more progressive.

Mr. Bruce-Gardyne

Clive Jenkins.

Mr. Horam

Let us forget him. We should pay more attention to my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) who may agree with what I am saying. If that were threatened, the Tories—as they have done to some extent today—would moan about incentives and savings. We would counter those moans with our views about equity.

People are increasingly becoming aware of the differentials in both pre-tax and post-tax incomes. The economic facts of life and the appeal for wage restraint which any Government, whether Conservative or Labour, have to make are producing a change in the climate of opinion about equality and tax avoidance at the surtax level. Whatever the hon. Members for South Angus and for Ciren-cester and Tewkesbury may think, the present Government, let alone any Labour Government, will have to pay some attention to this, or all their economic strategy will fail.

Mr. Peter Rees

The hon. Member for Gateshead, West (Mr. Horam) has given us his budget. We have also had the budget of the hon. Member for Bolsover (Mr. Skinner). I suspect that I would be out of order in commenting in detail on either of them. Apart from that, the speeches of Opposition Members have been mostly in the nature of a replay of last week's Second Reading debate.

In that debate the hon. Member for Birmingham, All Saints (Mr. Brian Walden) made a characteristically attractive speech in which he said in ringing tones, quoting his distinguished predecessor: What ransom will capital pay for the security that it enjoys?"—[OFFICIAL REPORT, 2nd April 1973; Vol. 854, c. 147.] It was a memorable phrase, and it stuck in my memory. What security does capital enjoy? Since Messrs. Glyn and Sutcliffe are compulsory reading for Opposition Members, one may ask that question, because the return on capital is shrinking in the Western world generally and certainly in this country. What security does capital enjoy and what ransom should it pay? By putting the question in that way the hon. Member dodges half the issue because we are not talking exclusively about investment income. We are also talking partially about earned income. He glossed over that.

Mr. Brian Walden

The hon. and learned Gentleman ought to be fair to my distinguished predecessor, Mr. Chamberlain. He did not, nor did I, refer to "capital". He referred, as did I, to "property". He asked "What ransom will property pay for the security that it enjoys?" There is a distinction.

Mr. Rees

There is. The hon. Gentleman, with his deep knowledge of taxation matters, will know that income from property as well as from capital is classed as unearned income and bears a more onerous rate of tax. I am seeking to draw the distinction between earned and unearned income and point to the different rates of tax on both.

Mr. Peter Trew (Dartford)

Would my hon. and learned Friend not agree that, with the widely publicised plans of the Labour Party for the public ownership of land, property enjoys even less security than capital?

Mr. Rees

There are various categories of industry which the Opposition have promised us they will take over when they return to power. I throw back at the hon. Gentleman the question: what security, and, therefore, what price should property pay?

The hon. Gentleman also took the point against us that we have referred to widows and orphans. It must come hard to him that in fiscal matters we espouse the cause of widows and orphans. When it comes to social security debates the Labour Members claim a monopoly of concern in this sad and perhaps neglected area. It is not a monopoly which we concede. The rôles are reversed in fiscal matters because the hon. Gentleman and his hon. Friends are apt to pull out that rather weather-beaten figure, the bachelor with £50,000 of unearned income. I am grateful that today we have been spared the intervention of such a person.

I return to the hon. Gentleman's proposition. What ransom shall property pay? How are we to judge this? Are we to judge it in absolute terms? If we approach it in that way we must start from a bed-rock of prejudice and emotion, and we must be frank about this. What proportion of a person's income should a Chancellor leave? Should it be 10 per cent., 20 per cent. or 30 per cent.? There are no criteria by which we can judge this except our own internal standards. I ask him to bear in mind the corrosive effect of inflation, which he appears to have underestimated or to have brushed aside. I apologise for inflicting a statistic upon the Committees, because I was conscious last week of having inflicted a great number of them upon the House. It was only in self-defence, because I anticipated what we might expect from the hon. Member for Oldham, West (Mr. Meacher). I am sorry that he is not present at the moment.

I want to give the Committee one statistic. A married man with two children and unearned income of £50,000 a year in 1950–51, the last year of the postwar Labour Government, was left £5,000 a year. In 1970–71 that fisure was £8,000 a year and in 1972–73 £9,000 a year. Taking account of the decline in the value of money, the adjustments which the Chancellor is introducing will barely, if at all, put that person back into the same real position as he occupied in 1950–51.

If we move from the absolute approach we are bound to do it in a comparative way. The hon. Member for All Saints, as we expected, referred to the Socialist Arcadias in Scandinavia. We all have our own favourites. A more realistic comparison, and one which the Committee will appreciate, is with our competitors in the Common Market. If we look at countries which have basically the same industrial structure and population as ourselves—France and Germany— people at every level of income retain a greater proportion than they do here.

Mr. Horam

That is not true.

Mr. Rees

It is not good enough for the hon. Member for All Saints to be taken in by his own arguments. He is too clever for that, but he was carried away by his own debating skill in saying that it is necessary to look at every facet of national life.

An exact comparison is not possible but the hon. Member was rash enough to say that we have an historical past. Let me remind him that Germany was devastated by defeats in two major wars and that the French have endured two, possibly three, revolutions. We have not been through those experiences. By that test we should, perhaps more conservatively, be leaving our taxpayers with a greater proportion of their incomes.

Mr. Brian Walden

Let me put this to the hon. and learned Member, because it may be a point which interests him, although it is not particularly partisan. He may be wrong in regarding those events as necessarily disastrous for economic performance. I noted with great interest that the Hudson Institute, when it made its predictions about France, specifically said that it was the traumas which French society had undergone which had produced its rate of capital accretion. It specifically said that our major disadvantage was that we had not gone through a similar trauma. I would suggest that perhaps it is not so easy as it looks.

Mr. Rees

The hon. Gentleman knows that that point neither strengthens his case nor weakens mine. It is interesting, and I would be happy to debate it with him later. I hope that this country will never have to pay the price which those countries have had to pay. I am glad that it has not had to do so. I take the hon. Member's point but it does not bear on my point, which is to do with the reference to the traditions and the historic past of various countries. The taxpayers of Germany and France have no reason to expect a better deal than our taxpayers and yet they get a better deal in terms of direct taxation.

The hon. Gentleman then says, "All right, ignore the comparative statistics". We shall not be able to ignore them, because, as my hon. Friend the Member for South Angus (Mr. Bruce Gardyne) has pointed out, with the free movement of capital and labour inside the Common Market we shall lose our best entrepreneurial talent upon which the success of our economy must ultimately depend. [Interruption.] The hon. Member for Gateshead, West is obviously not aware of the economic facts of life. He constructed an interesting budget, and no doubt some of his advice will filter through to the clients of his hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett). May we perhaps return to the central theme of the debate rather than deal with peripheral subjects?

The hon. Member for All Saints would say, if he were forced from the absolute or comparative approach that this is not the right moment. I ask him, in all honesty: when has it ever been the right moment for members of the Socialist Party? There have scarcely been any circumstances in which a Socialist Chancellor has cut direct taxation. There were minimal cuts between 1945 and 1951 but so minimal that they can be disregarded. We are forced to the conclusion that no moment is ever right for a Socialist Chancellor to cut direct taxation.

The hon. Member has overlooked one significant point. We are talking about the surtax rates for 1972–73, not the rates for 1973–74. In 1972–73, speaking from memory, centrally bargained wage rates went up by more than 10 per cent. Judged by this standard, it would not, in my view, be unjust for some relatively modest cuts to be made now in the rates of direct taxation.

The hon. Member for All Saints concluded by referring to "the ordinary man". I say with confidence that the ordinary man recognises that by slicing the problem, taking account of our competitors in the Common Market, we still bear a higher burden of direct taxation than they do. The ordinary man recognises that the tax rates put forward by the Chancellor of the Exchequer amount to a long-overdue measure of justice to those who have paid far too much tax for far too long.

6.0 p.m.

Mr. Tam Dalyell (West Lothian)

I shall not go in detail into the comparisons between this country and our Common Market partners put forward by the hon. and learned Member for Dover (Mr. Peter Rees), other than to say that if social security benefits, pension contributions and various welfare payments are taken into account the amount which the State in Western Germany takes from the individual is rather higher than the amount extracted in Britain. Therefore, in pursuing that argument there are many other things to be taken into account.

I wish to take this opportunity to put a question to the Chief Secretary. It concerns the mechanism of the collection of surtax, and, in particular, whether it is true that many of those responsible for the often rather complicated collection of surtax have had to be transferred to the organisation concerned with the collection of VAT. Has a crisis been created in the Inland Revenue because of the collection of VAT?

I should like to quote from an article in the Observer on 14th January this year: The Chancellor of the Exchequer, Mr. Anthony Barber, has been warned that there will be little defence against extensive cheating by traders when value added tax is introduced on 1st April. There is a serious shortage of staff to administer the switch-over from purchase tax. Although 5,000 new civil servants have been taken on, work is so seriously behind schedule that many existing Customs and Excise staff have also been switched to the new work. The article then quotes the words of Mr. John Macreadie, National Officer (Customs and Excise) of the Civil and Public Services Association: We have no way of completing the verification processes on purchase tax rebates. Quite simply, there is insufficient staff to ensure that traders are not overclaiming. If they do, many will get away with it. Can the Chief Secretary tell the Committee whether it is true that a number of Customs and Excise staff have been transferred to duties concerned with VAT? If so, has this transfer made work on surtax and estate duty matters—and all the allied highly skilled work that goes with those duties—more difficult?

Mr. Grieve

I know that the Committee is anxious to conclude the debate, and I shall be brief. I intervened in the speech of the hon. Member for Lough-borough (Mr. Cronin) to emphasise the problem which faces retired people who are living on investment income, and I should like now to enlarge on that comment.

Ever since the end of the war in almost every fiscal change we have seen until the present Government came into office investment income has been discriminated against. When Mr. Speaker was Chancellor of the Exchequer and introduced his 1961 Budget, the surtax threshold was raised from £2,000 to £5,000—but investment income was expressly excluded from that major concession. I understand why that was done at the time, but there has always been a measure of discrimination against investment income in the sense that there has been only earned income relief; nevertheless, the 1961 Budget marked a watershed in the treatment of investment income.

Furthermore, when my right hon. Friend the Chancellor of the Exchequer rightly announced that married women were for the first time to have the option of being taxed separately so that they might pay far less tax, the concession was granted in respect only of earned income and not in respect of their investment income. There are women who might find it cheaper to live in sin than to live in marriage, and I made this point in a speech during the Budget debate. I hope that in due course my right hon. Friend will remedy the situation.

The result of the discrimination against investment income has been to hit retired people very severely. This topic has been echoed in a number of speeches this afternoon, and I have seen the effects in case after case in my constituency. People have sold their businesses in the hope of living in reasonable comfort in their retirement, but those people, having worked hard all their lives, have found that their standard of living has been shatteringly reduced. Instead of living on earned income, they are living on what is termed "unearned income", although that so-called unearned income is the fruit of a lifetime's labour. Surely as a matter of principle and fairness, this is a situation of which the Committee cannot approve. It redounds greatly to the disadvantages not only of the individual but of the country as a whole. The system discourages people from saving money for their old age and encourages them to live in countries in which tax rates are very much lower.

My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne), and also my hon. and learned Friend the Member for Dover (Mr. Peter Rees) said that we were now moving to a time when capital movements within the European Community will be free. At the moment those who seek to live abroad are severely shackled in terms of the amount of capital which they are allowed to take with them. At the moment capital can be taken out of the country only in dribs and drabs. But the time is coming when somebody seeking to go from this country to live in say France, will be able to take his capital with him and invest it there, thereby avoiding British income tax on the income from that capital.

Unless we go a long way to mitigate the harsh burdens which we have imposed on the investment income I believe that this will lead to a substantial amount of capital moving abroad. It will go abroad to enable the owners of that capital to enjoy more of it in their lifetime, and they will also be able to leave more of their money to their descendants, because death duties in France are certainly lower than they are here and there is a lower level of direct taxation on income.

Reference has been made in the debate to the comparative figures in other European countries. The country which I know best is France, where both direct taxation of income and death duties are a good deal lower than they are in this country. I commend the concessions which have been made in respect of the issues we are now considering. I commend the clause to the Committee and hope that in future the Government will go a long way towards mitigating further the imposition on investment income.

Mr. Cooper

This debate seems to have been primarily about surtax. In the course of it we have seen demonstrated all the natural envy which emanates from members of the Opposition of anyone who is earning more than a pittance. In the view of the Labour Party, anyone in that position must be treated as an outcast.

As I have said many times in this House, the future prosperity of the country depends largely upon the drive, initiative and hard work of the young executive who is entering the surtax class. He and those like him are the people upon whom we have to rely. He is the man who is not concerned to join a union. He is not content to work from 8 until 5. On the contrary he is prepared to work 16. 17 and 18 hours a day and more or less destroy his family life by spending long weeks abroad. This is the type of man we should encourage. We rely upon his efforts for our future.

Instead, we limit a man in that position to £8,500 a year, as if that was a fanciful sum which would make him rich beyond the dreams of avarice. In spite of the views of the curious accountants with whom the hon. Member for Gateshead, West (Mr. Horam) appears to have become involved, £8,500 leaves the earner with not all that much on which to live if he is to achieve the standard which he is entitled to enjoy. There are many young men aged about 35 who have good positions in industry and are obliged to give up in direct taxation about 45 or 50 per cent. of their incomes—

Mr. Robert Sheldon (Ashton-under-Lyne)

Rubbish.

Mr. Cooper

It happens to be true. That is a common loss in income tax and surtax. Under the old system the top rate was 19s. 6d. in the £. Was that right? Do the Opposition think it fair that a man who is working very hard should get only sixpence in the £? Would they ask a Ford worker or anyone else who is a trade unionist to accept that state of affairs? Of course not. But simply because the man is the director of a company or of a group of companies, he is fair game.

Even today, with the reductions that we are accepting in this year's Finance Bill, the top rate of 75p in the £ is still exorbitant by any standards and higher than the rates demanded by our Common Market partners. I do not care what the Opposition say. Incentives are still vitally important. Young men must be able to see that by working hard they can make a go of life and do something for their children and their children's children. Is it wrong that at the end of their lives they should have some money in the bank, some share certificates or some property which they can leave to their children? Are they to be subject to swingeing rates of estate duty when all that they have tried to do during their working lives is to fulfil their obligations to their country? The Socialist Party says that a man in that position has earned too much in his life and that it must be clawed back, and so we have this swingeing level of estate duty.

I come back to unearned income. What are we talking about when we refer to "unearned income"? It is ridiculous. It may be that there are some people who happen to have won £500,000 on Littlewoods Pools, but they are few and far between. There are some who win the big money from Ernie. They too are few and far between. The bulk of savers and those who own shares in companies do so with money which has already been taxed. They do it out of the difference between their incomes and their expenditures. They may be saving to produce a retirement pension. In the view of the Labour Party they have been far too good citizens and should be made to walk about in hair shirts for the rest of their lives.

We have to face the fact that anyone who has money or resources is the enemy of the Labour Party and will be subjected to its envy, malice and hatred. On the other hand, we in the Conservative Party wish to encourage hard work because we know it is the only way by which the country can prosper.

6.15 p.m.

The Chief Secretary to the Treasury (Mr. Patrick Jenkin)

My hon. Friend the Member for Ilford, South (Mr. Cooper) opened his remarks by saying that this debate seemed to be about surtax. He must have been listening very attentively. The debate is about fixing the rates of surtax for 1972–73 at exactly the same rates as applied in the previous year, 1971–72, and it is right that we should have that fact clear from the outset. Although I shall be referring in passing to the new unified system of tax which has just come into effect, the debate is about the rates of surtax for the year which has just passed, and the clause is directed to them.

It had been my intention to refer to the characteristic speech of the hon. Member for Birmingham, All Saints (Mr. Brian Walden). However, I must agree with some of my hon. Friends who felt that today he was not up to his usual form. He was having to make bricks with some rather thin straw. However, I agreed with one or two of his remarks. He welcomed the change to the new unified system of tax, as well he might, because there is no doubt that the complications, not least for those who have to calculate surtax under the existing system, are almost incomprehensible. If one takes anyone who has an income which is partly earned and partly invest ment income and it is liable to surtax under our old system, I bet that of all the hon. Members present at the moment only my hon. and learned Friend the Member for Dover (Mr. Peter Rees) and the hon. Member for Heywood and Royton (Mr. Joel Barnett) could be relied upon to produce the right answer.

There is no doubt about the complications involved in determining the amount of an individual's income which is liable to surtax. He is entitled to deductions of the amount by which the total of the personal allowances due to him exceeds the basic single person's allowance, of any earned income relief deduction now due to him, which for 1972–73 was two-ninths of earned income up to £4,005, plus 15 per cent. of earned income in excess of £4,005, and, finally, of any allowance due by way of the special surtax "earnings allowance". I quote from my advisers' description of it: This allowance is due where the taxpayer's earned income, less the earned income relief deduction, would be above £2,000; the ' earnings allowance ' is equal to the excess (if any) of the earned income, after deducting earned income relief, over £2,000 subject to a maximum allowance of £2,000. It is for that reason that I venture to suggest that a large number of hon. Members would have been quite unable to work out their own surtax under the existing system.

We now have the new system where all is infinitely simpler. The hon. Member for All Saints wondered why his right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) had not introduced it, because he, too, would have liked to do it. He said that it was for some technical reasons. I agree with him that we do not know the reasons. The right hon. Gentleman always made it clear that it was the administrative problems which defeated him. Those of his hon. Friends who pressed this reform upon him were constantly told that it was administratively impossible.

The hon. Member for All Saints said that we would not have made these changes if we had not planned them long in advance. I should say to him that we would not have made any of these changes at all if we had not planned them long in advance. I suspect that the right hon. Member for Stechford felt unable to introduce this widely welcomed reform because he had been unable to plan it sufficiently far in advance.

The hon. Member for All Saints made some play with the single man on £15,000 a year and quoted the difference of tax in the liabilities for the year. I shall be coming later to the amount of tax that is paid in a year. When we talk about these high figures of income it is important to realise how few people are earning such sums compared with the total body of taxpayers. There are only 35,000 people, single and married, with incomes in excess of £15,000 a year.

The hon. Gentleman referred to a person with an investment income of £15,000 a year. There are only 2,000 people in the whole country out of 25 million taxpayers with investment incomes of that size. This has some consequence. It means that what we do with the incomes of those people is wholly marginal in relation to the yields to the Exchequer as a whole. Indeed, my hon. Friend the Minister of State, in a Writen Answer to my hon. Friend the Member for Eastleigh (Mr. David Price) on 3rd April last, gave some figures. If the whole of every income above £15,000 were taxed away— if there were a 100 per cent. tax on every pound above £15,000—the total additional yield to the Exchequer would be £30 million a year, which is equal to 02 per cent. of the total Exchequer revenue. So when we bandy about these high incomes we should remember that the direct effect on the economy and on the income of the Exchequer is minimal.

The hon. Member for All Saints agreed that, speaking in the Budget debate, I was right to point out that as a result of the change to the new system and of the overlapping surtax, as we came to know it, a large number of surtax payers will be paying more tax not just this year but next year and the year after that than they paid last year.

I take as an example the man on £20,000 a year. Whereas in 1972–73, after the tax that he was due to pay to the Inland Revenue, he was left with an income of £9,378, if he takes the maximum advantage of spreading the overlapping surtax over three years, his income, after tax over the next three years, will be £8,375. That is almost exactly £1,000 less of net spending income over each of the next three years.

The hon. Gentleman, when he said that the change to the unified tax was out of kilter with the Government's general stance on prices and incomes and on the economy, could not have been more wrong if he was basing his case on those figures.

The hon. Member for West Lothian (Mr. Dalyell) asked a question which, with respect, was more about VAT than the Inland Revenue. I assure him that a number of officials from the Inland Revenue chose to go to the Customs and Excise in order to get in on VAT on the ground floor. We are happy that they should take advantage of this transfer and, in many cases, to better themselves. There is no question of the Inland Revenue collection or, indeed, the assessing services for surtax or for income tax being in any way put at risk as a result of those transfers. If we had not raised the threshold for surtax to £3,000 of surtaxable income, as we did last year, we would have had to recruit considerably more staff for the surtax office.

The hon. Member for Loughborough (Mr. Cronin) made some interesting points in his speech. I am sorry that he is not here to listen to my speech. He gave the Committee an emotional account of the way that young turks in the firm of which he is a director devote themselves to their work day and night 15 hours a day for the love of the job and for job satisfaction. The firm of which the hon. Gentleman is a director is Racal Electronics. During the debate I looked up some of the facts about that company. It is not only their inadequate incomes which stimulate these gentlemen to their flights of technological expertise. I discover from Moodies Services that employees of that company enjoy the benefit of outstanding share options on over 43,643 shares of 25p each at a value of £86.625p per share to be exercised before 31st December 1974. So it is not only job satisfaction that stimulates these people.

I welcome the fact that these chaps have their share options. It has no doubt been a major influence, has encouraged the company to increase its profits by over 42 per cent. last year, according to the chairman's review, and has well justified the increase in directors' remuneration over the last two years by some 50 per cent. So, when we hear about the absence of financial incentive and that people work for other things, I believe we are entitled to take it with a certain amount of electronic salt.

As the Opposition know, when they talked to their supporters at the last General Election and sought to justify the increased taxation that the Labour Government had imposed upon people by saying that they ought to be looking at the social income, the income spent by the Government on their behalf, they got a lot of dusty answers. All that is—I was going to say "nonsense", but that is perhaps too strong a word. All the words that we have heard about high taxes being necessary in order that we may enjoy a high standard of social living do not cut ice with ordinary people if the effect is to take away in tax what they regard as too high a share of their pay packets. There is no doubt that under the Labour Government when taxation rose sharply, particularly direct taxation, many of their erstwhile supporters complained bitterly.

We have heard a good deal about international comparisons. I take the point made by the hon. Member for All Saints that we need to look at the whole picture. This is not the debate in which to do that. Indeed, I should not have the time to do so. Nevertheless, I think that I can add one particularly representative figure—the marginal rate of tax on the extra pound, mark, franc, or whatever it may be that is earned at different levels of income. I concede that up to incomes in the lower reaches of surtax we are not now seriously out of line with our competitors. Apart from the one figure of £5,000, which the right hon. Member for Stechford quoted in a number of debates, we were out of line, but we are not now.

The tax reductions which have been made in the last two or three years put us in the middle of the spread until we get to the higher incomes. When we get to the higher incomes—after all, this is what the debate is about—we find that with the sole exception of Ireland, which nominally taxes all incomes above £6,000 a year at 80 per cent., when we get up to about £10,000 to £12,000 we begin to go out on a limb. There is no Common Market income tax rate of anything like our top rate of 90 per cent. on investment incomes above £20,000. Therefore, we are entitled to have regard to that sort of international comparison when we say that our rates of tax are certainly not too low. Indeed, many people would agree that they are too high.

[Captain WALTER ELLIOT in the Chair]

6.30 p.m.

I think that many would agree with my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) and my hon. and learned Friends the Members for Solihull (Mr. Grieve) and Dover (Mr. Peter Rees) when they say that even after these changes the rate of differentiation between investment and earned income is higher than in any competitor country. The change to the new unified system of tax, with the first £2,000 of investment income taxed at the earned rate, has done more than any other post-war provision to help those who are retired and living on modest incomes from investment.

For 1971–72, the first full year for which we were responsible, a retired married couple with an investment income of £2,000 a year paid nearly £600 in tax. Had the income been earned, the tax would have been £422. In 1973–74 a couple with that income, whether it is earned or from investment, will pay tax of £367.50. I think we can justifiably claim that that category of people has been helped considerably.

All the Opposition speeches during the debate have sought to argue that the Government have given a great boost to the wealthy and by comparison have ignored the lower-paid. I utterly refute that suggestion, and perhaps I may quote two or three more figures to illustrate my case. Here I take the net income of two-children families as they have moved over the two years from October 1970 to October 1972, the latest date for which figures are available.

I take into account changes in price levels, and tax rates, and the adjustment of incomes for family allowance, family income supplement and National Insurance contributions. I also take into account charges for school meals, welfare milk, prescription and dental charges, and so on. I take account of all the changes which have affected those families. Those with about half the average earnings figure for the country as a whole have increased their standard of living by 6.3 per cent. over the two years. If I take a figure of seven or eight times the average earnings of the country as a whole, I find that the standard of living has risen not by 6.3 per cent. but by 3.5 per cent.

Mr. Sheldon

If the hon. Gentleman is taking pride in the way in which income tax changes have benefited the less well off, why is it that he refuses to publish the Gini co-efficient which is probably the best indicator of the true position?

Mr. Jenkin

That is published every year in the Inland Revenue statistics. The point that I wish to make is that it is not mainly, let alone solely, by income tax changes that people are made better off. The improvement is made because the economy grows and because the growing resources which the economy produces are able to be used to raise standards of living. By adjusting social charges and tax rates, by lowering the rate of direct taxation, and particularly by raising allowances at the lower end of the scale we have made sure that out of the rising resources of the nation as a whole the standards of living of those at the lowest end of the income scale have risen appreciably faster than those of people higher up. If that is the test by which the Government are to be judged they are content to put their record before the people, and I believe that the people would back it.

The clause merely repeats for 1972–73 the surtax rates which were applicable in 1971–72. As such, the clause is essential, and I hope that the Committee will leave it as part of the Bill.

Mr. Brian WaMen

One thing that is certain is that the Government will not put their record before the public in the near future. I listened to the Chief Secretary in the earnest hope that he and I could reach common ground and that it would not be necessary to divide the Committee on the clause, but that does not seem to be possible.

I am sorry that the Chief Secretary felt—though he did not express it in this way—that I was not up to my usual form, but it is difficult for those who earn enough to pay surtax and, as the hon. Member for Ilford, South (Mr. Cooper) explained, ruin their family life by working 16 hours a day not to become dead tired in their desperate attempts to earn the increased sums in order to pay the amount to be demanded by the Chief Secretary in the next three years. But I stick to what I said earlier. I have been given a concession, as have all surtax payers, and it would ill befit anyone to try to pretend otherwise.

We have heard a lot of hogwash about how people will hop out of the country unless we provide them with the tax system they want. I liked Noel Coward because he was a witty man and made me laugh, but I think his attitude was deplorable. It was not our responsibility to devise a tax system which would keep him in the champagne that he wanted to drink. I took the view that if he must inconvenience himself by living somewhere else in order to have that standard of living, good riddance, and I maintain that point of view.

One might argue that Noel Coward was an exceptional case and that it would be terrible if we were to lose our best brains and talents; but that is not happening. What is the evidence on which the Chief Secretary bases his case? The Jones Report on the brain drain did not substantiate the claim that we lose a great deal of our talent because of our tax system, and I should hope not.

The hon. and learned Member for Dover (Mr. Peter Rees) referred to my question about what ransom property would be prepared to pay. When I quoted that—and I am certain that the same considerations applied when Chamberlain quoted it—I was not thinking only of tax rates. I was thinking, as the hon. and learned Gentleman should be thinking, of the enormous security enjoyed by people in this country. Ours is one of the most peaceful societies in the world, and one of the ways of keeping it like that is not to exacerbate class feeling, which is what the clause does.

The Chief Secretary said that we discovered at the last General Election that many of our supporters did not like paying tax. I have news for the hon. Gentleman. We discovered that a long time before the last election. Nobody ever likes paying tax. It is easy and glib to talk about tax cuts. That is why the Government keep on talking about them. If they think that in the long run they will be able to "con" the people who voted for them last time that they are doing better under the new system than

they were before, and that they will not be able to detect where the basic substantial benefit has gone, and that they will not realise that their increases in real income are nothing like the increases given to those at the top end of the scale, I urge them to make that appeal to the people at the earliest possible moment. The Chief Secretary says that there are not many people at the top end of the scale. That makes the matter worse, not better. If the Chief Secretary does not agree with that, I urge him to put it to the test.

For the moment all that we can do is to express dissatisfaction, and I therefore advise my right hon. and hon. Friends to divide the Committee.

Question put, That the clause stand part of the Bill: —

The Committee divided: Ayes 167, Noes 129.

Division No. 105.]	AYES	[6.39 p.m.
Astor, John	Gray, Hamish	Maxwell-Hyslo R. J.
Atkins, Humphrey	Green, Alan	Mills, Stratton (Belfast, N.)
Awdry, Daniel	Grieve, Percy	Mitchell,Lt.-Col.C.(Aberdeenshlre,W)
Baker, W. H. K. (Banff)	Griffiths, Eldon (Bury St. Edmunds)	Mitchell, David (Basingstoke)
Bell, Ranald	Grylls, Michael	Moate, Roger
Bennett, Sir Frederic (Torquay)	Gurden, Harold	Molyneaux, James
Benyon, W.	Hall, John (Wycombe)	Money, Ernle
Biffen John	Hamilton, Michael (Salisbury)	Monks, Mrs. Connie
Biggs-Davison John	Hannam, John (Exeter)	Monro, Hector
Boardman, Tom (Leicester. S.W.)	Harrison, Brian (Maldon)	Montgomery, Fergus
Boscawen, Hn. Robert	Harrison, Col. Sir Harwood (Eye)	Morgan, Gerai[...] (Denbigh)
Bowden, Andrew	Haselhurst, Alan	Morrison, Charles
Brinton, Sir Tatton	Havers, Sir Micheal	Mudd, David
Brocklebank-Fowler, Christopher	Hawkins, Paul	Neave Airey
Bruce-Gardyne, J	Hicks, Robert	Normanton Tom,
Bryan, Sir Paul	Higgins, Terence L	Nott, John
Burden F. A.	Hiley, JosePh	Onslow, Cranley
Chapman, Sydney	Hill, John E. B (Norfolk, S)	Oppenheim, Mrs. Sally
Churchill, W S.	Hill, S. James A. (Southampton.Test)	Owen, Idris (StockPort, N.)
Clark, William (Surrey, E.)	Holt, Miss Mary	Page, Rt. Hn. Graham (Crosby)
Clarke Kenneth (Rushcliffe)	Hornby, Richard	Page, John (Harrow, W.)
Clegg, Walter	Hornsby-Smith, Rt. Hn. Dame Particia	Peyton, Rt. Hn. John
	Howell, David (Guildford)	Powell, Rt. Hn. J. Enoch
Clockeram, Eric	Hunt, John	Proudfoot, Wilfred
Cooke, Robert	Hutchison, Micheal Clark	Pym, Rt. Hn. Francis
Coombs, Derek	Iremonger, T. L.	Quennell, Miss J. M.
Cooper, A. E.	James, David	Raison, Timothy
Corfield, Rt. Hn. Sir Frederick	Jenkin, Patrick (Woodford)	Ramsden, Rt. Hn. James
Costain, A. P.	Kellett-Bowman, Mrs. Elaine	Redmond, Robert
Crowder, F. P.	King, Evelyn (Dorset, S.)	Rees, Peter (Dover)
d'Avigdor-Goldsmid, Maj. Gen. Jack	King, Tom (Bridgwater)	Rees-Davies W. R.
Drayson, G. B.	Kinsey J. R.	Renton, Rt. Hn. Sir David
du Cann, Rt. Hn. Edward	Knight Mrs. Jill	Rhys Wllliams, Sir Brandon
Elliott, R. W. (N'c'tle-upon-Tyne.N.)	Knox, David	Ridley, Hn. Nicholas
Emery, Peter	Langford-Holt, Sir John	Ridsdale, Julian
Eyre, Reginald	Le Marchant, Spencer	Rippon, Rt. Hn. Geoffrey
Farr, John	Lloyd, Ian (P'tsm'th, Langstone)	Roberts, Michael (Cardiff, N.)
Fenner, Mrs. Peggy	Longden, Sir Gilbert	Rodgers, Sir John (Sevenoaks)
Finsberg, Geoffrey (Hampstead)	Loveridge, John	Rutsell, Sir Ronald
Fisher, Nigel (Surbiton)	Luce, R. N.	Scott-Hpkins, James
Fookes, Miss Janet	McCrindle, R. A.	Shaw, Michael (Sc'b'gh & Whitby)
Fortescue, Tim	McLaren, Martin	Shelton, William (Clapham)
Fowler, Norman	Maclean, Sir Fitzroy	Simeons, Charles
Fox, Marcus	McMaster, Stanley	Sinclair, Sir George
Goodhart, Philip	McNair-Wllson, Michael	Skeet, T. H. H.
Goodhew, Victor	Marten, Neil	Speed, Keith
Gower, Raymond	Mather, Caro	Spence, John
Grant, Anthony (Harrow, C.)	Mawby, Ray
Sproat, Iain	Thomas, John Stradling (Monmouth)	White, Roger (Gravesend)
Stanbrook, Ivor	Thompson, Sir Richard (Croydon, S.)	Wilkinson, John
Stewart-Smith, Geoffrey (Belper)	Tilney, John	Wolrige-Gordon, Patrick
Stokes, John	Trew, Peter	Wylie, Rt. Hn. N. R.
Tapsell, Peter	Tugendhat, Christopher	Younger, Hn. George
Taylor,Edward M.(G'gow,Cathcart)	Turton, Rt. Hn. Sir Robin
Taylor, Frank (Moss Side)	Walder, David (Clitheroe)
Tebbit, Norman	Walters, Dennis	TELLERS FOR THE AYES:
Temple, John M.	Ward, Dame Irene	Mr. Michael Jopling and
Thatcher, Rt. Hn. Mrs. Margaret	Weatherill, Bernard	Mr. Oscar Murton.
NOES
Atkinson, Norman	Hamling, William	Oram, Bert
Barnett, Guy (Greenwich)	Hannan, William (G'gow, Maryhill)	Oswald, Thomas
Barnett, Joel (Heywood and Royton)	Harper, Joseph	Owen, Dr. David (Plymouth, Sutton)
Bidwell, Sydney	Harrison, Walter (Wakefield)	Padley, Walter
Blenkinsop, Arthur	Hattersley, Roy	Paget, R. T.
Booth, Albert	Healey, Rt. Hn. Denis	Pannell, Rt. Hn. Charles
Broughton, Sir Alfred	Hooson, Emlyn	Pardoe, John
Brown, Hugh D. (G'gow, Provan)	Horam, John	Parker, John (Dagenham)
Brown, Ronald (Shoreditch & F'bury)	Houghton, Rt. Hn. Douglas	Peart, Rt. Hn. Fred
Buchanan, Richard (G'gow, Sp'burn)	Hughes, Robert (Aberdeen, N.)	Pendry, Tom
Callaghan, Rt. Hn. James	Janner, Greville	Prentice, Rt. Hn. Reg.
Campbell, I. (Dunbartonshire, W.)	Jenkins, Rt. Hn. Roy (Stechford)	Probert, Arthur
Clark, David (Colne Valley)	John, Brynmor	Reed, D. (Sedgefield)
Cohen Stanley	Johnson, Walter (Derby, S.)	Roberts,Rt.Hn.Goronwy(Caernarvon)
Coleman Donald	Jones, Dan (Burnley)	Roderick, Caerwyn E.(Brc'n&R'dnor)
Corbet, Mrs. Freda	Jones, Gwynoro (Carmarthen)	Rodgers, William (Stockton-on-Tees),
Cox Thomas (Wandsworth, C.)	Jones, T. Alec (Rhondda, W.)	Sheldon, Robert (Ashton-under-Lyne)
Crosland Rt Hn. Anthony	Kaufman, Gerald	Short,Rt.Hn.Edward (N'c'tle-u-Tyne)
Dalyell, Tam	Kelley, Richard	Sillars, James
	Kinnock, Neil	Silverman, Julius
Davies, Denzil (Llanelly)	Lawson, George	Smith John (Lanarkshire, N.)
Davis, Terry (Bromsgrove)	Lee, Rt. Hn. Frederick	Steel, David
Deakins, Eric	Lestor, Miss Joan	Stewart, Donald (Western Isles)
Delargy, Hugh	Lomas, Kenneth	Stoddart, David (Swindon)
Dell, Rt. Hn. Edmund	Loughlin, Charles	Strang, Gavin
Dempsey James	Lyons, Edward (Bradford, E.)	Summerskill, Hn. Dr. Shirley
Doig, Peter	Mabon, Dr. J. Dickson	Taverne, Dick
Duffy, A E. P.	McGuire, Michael.	Tinn, James
Eadie, Alex	Machin, George	Torney, Tom
Edelman, Maurice	Mackenzie, Gregor	Urwin, T. W.
Ellis, Tom	Mackintosh, John P.	Varley, Eric G.
Ewing, Harry	McMillan, Tom (Glasgow, C.)	Walden, Brian (B'm'ham, All Saints}
Faulds, Andrew	Mahon, Simon (Bootle)	Walker, Harold (Doncaster)
Fernyhough, Rt. Hn. E.	Marquand, David	Wallace, George
Fitch, Alan (Wigan)	Marshall, Dr. Edmund	Weitzman, David
Foot, Michael	Mason, Rt. Hn. Roy	Wells William (Walsall, N.)
Ford, Ben	Mayhew, Christopher	Williams, Alan (Swansea, W.)
Freeson, Reginald	Mellish, Rt. Hn. Robert	Williams, W. T. (Warrington)
Galpern, Sir Myer	Mendelson, John	Wilson, Rt. Hn. Harold (Huyton)
Gilbert, Dr. John	Mikardo, Ian	Woof, Robert
Grant, George (Morpeth)	Millan, Bruce
Grant, John D. (Islington, E.)	Miller, Dr. M. S.	TELLERS FOR THE NOES:
Grimond, Rt. Hn. J.	Mitchell, R. C. (S'hampton, Itchen)
Hamilton, James (Bothwell)	Morris, Alfred (Wythenshawe)	Mr.Ernest Armstrong and
Hamilton, William (Fife, W.)	Murray, Ronald King	Mr. Michael Cocks.

Question accordingly agreed to.

Clause 10 ordered to stand part of the Bill.