§ 1. Mr. Norman Lamontasked the Secretary of State for Foreign and Commonwealth Affairs whether he will examine the remuneration and tax-free allowances payable to Foreign Office employees in the light of the remuneration available in the private sector.
§ The Minister of State for Foreign and Commonwealth Affairs (Mr. David Ennals)The pay is the same as that of equivalent grades in the Home Civil Service and is adjusted in the same way. It is set by comparison with what is paid outside for comparable work. Allowances are kept under constant review in the light of all the relevant circumstances, including the economic situation in this country.
We are at present considering how we can reduce expenditure on our overseas work. We are reviewing the cost of entertainment and the most effective form it might take; we have already decided to make a 10 per cent. cut in entertainment allowances for the coming financial year.
§ Mr. LamontMay I thank the Minister for the information he has already given me and assure him that nobody on this side wishes to conduct a witch hunt against the Foreign Office? However, he said the allowances were comparable to those in private industry. Will he therefore explain why, for tax purposes, they are treated differently from similar allowances in private industry? Is he aware that a senior diplomat—with a salary of £15,000 a year—who has four children can receive education allowances adding to his gross salary the equivalent of another £20,000 a year? Does he not agree that this puts these people in a totally unreal world, insulated from the economic pressures affecting the rest of the community?
§ Mr. EnnalsOverseas allowances are tax-free because they represent a compensation for the extra cost of having to 1367 live abroad and are covered by Section 369 of the Income and Corporation Taxes Act 1970. I am sure hon. Members recognise that the education of children of members of the diplomatic service raises special problems. Diplomats spend most of their working lives in the service overseas and it is essential that there should be some continuity of education for their children. It is recognised that the State system does not provide much opportunity for boarding education.
§ Mr. BidwellDesirable as it is to have vigilance in these matters in Government Departments, does my right hon. Friend not agree that the tax avoidance industry is thriving, especially in the private sector and among many people to whose businesses the hon. Member for Kingston-upon-Thames (Mr. Lamont) gives diligent attention, including the fringe banks he was on about on television the other night? Does my right hon. Friend agree that we have to be vigilant on these matters, but that we should not make it appear that we are gunning particularly for civil servants?
§ Mr. EnnalsI am not conducting a witch hunt on either side of the House, but my hon. Friend has a point. There is very careful checking of expenses and allowances in the diplomatic service and, since we have a system of inspections and accounting, both sides of the House should recognise that the danger of avoidance is absolutely minimised.
§ Mr. MaudlingThis is a difficult situation. Is the right hon. Gentleman aware that we have a diplomatic service of which we are entitled to be proud, and that I think it is still the best in the world? When the present arrangements were made they were fully justified, but is the right hon. Gentleman aware that many people in comparable posts in business and the professions feel that in changing circumstances, because of inflation and tax rates, they are facing difficulties and hardships that are not necessarily being faced by some members of the diplomatic service, who have this insulation against the changing world? There is that difference between the diplomatic service and the world outside. Will the right hon. Gentleman consider the matter in that spirit?
§ Mr. EnnalsYes, I shall consider this problem. I said in my original answer 1368 that we were looking at the question of reducing allowances, though not beyond the bounds of reason. The service must still properly fulfil its tasks abroad, in the country's interests, especially with export promotion, the collection of information and the rest of its responsibilities. We are examining carefully ways in which reductions in expenditure can be made, because of the present economic situation.