ALTERATION OF PERSONAL RELIEFS

HC Deb 10 June 1975 vol 893 cc244-317

3.41 p.m.

Sir Geoffrey Howe (Surrey, East)

I beg to move Amendment No. 69, in page 18, line 37, at end insert— '(c) after subsection (1) there shall be added the following subsection:— (1A) If the claimant is liable to Class 2 and Class 4 contributions under the Social Security Act 1973, the deduction to be allowed under this section shall be increased by an amount equal to income tax at the standard rate on that part of his contributions which corresponds to the contribution payable by an employer in respect of an employed earner."'.

The Chairman

With this we may also discuss the following amendments:

No. 59, in page 18, line 37, at end insert— '(c) at the end of paragraph (b) of subsection (1) there shall be added the following:— except that in the case of a claimant liable to Class 2 and Class 4 contributions under the Social Security Act 1973, this deduction shall be increased by an amount equal to income tax at the standard rate on that part of his contributions which corresponds to the contribution payable by an employer in respect of an employed earner.'.

No. 68, in page 18, line 37, at end insert— '(c) at the end of paragraph (a) of subsection (1) there shall be added the following:— except that in the case of a claimant liable to Class 2 and Class 4 contributions under the Social Security Act 1973, the deduction shall be increased by an amount equal to income tax at the standard rate on that part of his contributions which corresponds to the contribution payable by an employer in respect of an employed earner."'.

Sir G. Howe

This group of amendments gives the Committee an opportunity to discuss certain policies of the Government which have caused widespread resentment throughout the country amongst the many people who are self-employed and work for themselves and, hopefully, an opportunity to do something to correct the injustice from which these people now suffer. I refer to the large and increasingly intolerable burdens that the Government have been heaping, in a way that can only be described as vindictive, on all those who work for themselves and make up the self-employed.

The Committee ought to acknowledge that the self-employed represent an important section of our community—about 2 million people—and, what is more, a dynamic section from whose endeavours new businesses, jobs and prosperity can, and often do, grow, even in these hard times.

The entire concept of individual enterprise does not, and never will, fit easily into the kind of Socialist society to which this Government are committed. That is why the self-employed—those who run the small businesses of this country and employ about 6 million people or a quarter of our work force—are, and feel themselves to be, facing a combination of burdens which they regard as profoundly unfair: hugely increased local government business rates, increased income and corporation taxes, high interest rates, capital transfer tax and the prospect of a wealth tax. They also see a particular injustice in the decision by the Government to extract from them, in the form of national insurance contributions, a further £21 million, apparently for no benefit whatsoever.

In the many debates that we have had on this subject, both sides of the Committee have recognised—I have always made this clear—that improvements in pensions have to be paid for. So have improvements in other social benefits. Each class in the community must pay its fair share for those improvements. Even so, we must recognise that the self-employed are not eligible for unemployment benefit, industrial injury benefit, redundancy payments, graduated pensions or earnings-related benefits of various kinds.

In order to pay for the whole structure of social security benefits, with pensions taking the lion's share, the Conservative Government designed and introduced the principle of earnings-related contributions to the basic cost. We proposed, as was right, that the self-employed should play their part in paying those earnings-related contributions. The proposals that we put forward, which were placed on the statute book in the Social Security Act 1973, were, as we believed, fair and sensible. They were new. They would have aroused some misunderstanding and anxiety even if they had come into force in that form, but they represented our best judgment of what was a fair and sensible way of distributing the burden of paying for improved benefits.

We proposed that the self-employed above a certain income limit should pay a contribution related to their earnings at the rate of 5 per cent. on a specified band. This Government have made a substantial swingeing increase in that percentage rate of contribution by raising it from 5 per cent. to 8 per cent. The important point for the purpose of this debate is that that contribution is not tax-deductible. No part of the 8 per cent. contribution payable by the self-employed can be offset against tax liability.

The effect on the figures now on the statute book is that every self-employed person with an income at or above £69 a week will be obliged to pay for this year a lump sum of £160 on top of his Schedule D liability—in other words, on top of his liability to pay income tax. As no tax relief is available, in order to raise the £160 each self-employed with an income above that figure will have to find an extra £238 out of taxed income simply to maintain the cash value of his income without making any allowance for inflation. That represents a significantly increased burden upon that which would have arisen under our proposals.

It is no wonder that the news of this impost has given rise to a blaze of anger throughout the country, and it is no wonder that the National Federation of Self-Employed sprang into existence. It was largely because of this proposal. I was acquainted early with the sense of anger felt by the self-employed because I had the privilege of speaking at the inaugural meeting of the NFSE in Manchester on 6th October last year.

This burden, against which we are now complaining and about which we propose some relief if the Committee accepts our amendments, will fall upon everyone who works on his own account and earns more than a modest weekly sum in this great and diverse army of self-employed people—from barbers to bookbinders, from shopkeepers to solicitors, from doctors to dentists, from writers to window cleaners, from pharmacists to farmers. Incidentally, all these people, who have effectively been excluded from the negotiation of the social contract, have had no powerful union to represent them during the last two or three difficult years.

The self-employed notice a sharp contrast between the burdens that they will have to bear and the burdens which will fall on employed people who, for the most part, are represented by parties to the social contract. The contributions of most employed people during the current year will in many cases have gone down. However, for the self-employed they will almost always have gone up sharply. If we compare the position of an employed person and a self-employed person earning £60 a week, the liability of the employed person will have increased by 6.8 per cent. and for the self-employed person it will have gone up by 138.7 per cent.—about 20 times as much.

Therefore, the self-employed, rightly, feel themselves to have been heavily penalised and regard the change, as it is now taking place, as grossly unfair. It is for that reason that the Conservative Party in Parliament and outside has opposed and challenged the changes proposed by the Government at every stage. On four separate occasions we have challenged in Parliament the proposals, and sought to defeat them. On at least one occasion in another place we have mounted a similar challenge, and in the other place the challenge was indeed, as the whole Committee will remember, successful, because it secured the support not just of the Conservative Opposition and of Members of other parties, but of Members of the Labour Party, including such distinguished spokesmen as Lord George-Brown and Lord Houghton. Baroness Burton described the changes then being made as an attack on a section of the community that was unable to fight back.

However, the Government, notwithstanding their defeat at the hands of their own supporters, among others, in another place, came back to this House adamant in their determination, and used their majority on 11th December last year to reverse the decision and to restore the impost that they were seeking to impose.

I wish to make it clear that we are not seeking special treatment for the self-employed. We are asking only that they should be given a fair deal. It is to that that this amendment is directed.

The Committee will remember that until 1965 contributions by the self-employed as well as by employed people were tax-deductible. In 1965 under the last Labour administration that position was changed. The employer's contribution remained tax-deductible, but the employee's contribution and the self-employed person's contribution ceased to be deductible from income tax liability. That represented a substantial change to the disadvantage of the self-employed compared with an alternative—an employer employing people directly. If we assume a tax rate of, for the sake of argument, 50 per cent., the position is that the employer's contribution in respect of a person whom he employs at a figure of 7½ per cent. is reduced to 3¾. per cent.; but the self-employed have to find the whole of their 8 per cent. contribution out of their taxed income.

Many self-employed people have to bear a dual burden because they are themselves employers. They pay an employer's contribution in respect of their own employees, and they pay their own self-employed contribution. It is particularly galling for people in that position to see that one is deductible from tax liability and the other is not.

The feature about which we complain has, we would contend, an important and unfair effect upon the position of those who are self-employed. It was discussed by the hon. Member for Islington, South and Finsbury (Mr. Cunningham) in the Standing Committee on the Social Security Amendment Bill on 19th November last year. The hon. Gentleman put the example of a case where national insurance contributions go up by £1 in a situation where tax is deductible at the rate of 50 per cent. He compared the position of an employer-employee establishment with that of a self-employed establishment. He spelt it out—and I am grateful to him for his example—as follows.

If the price of the service or goods being sold by those two establishments is raised to take account of the £1 increase in national insurance liability, in the case of the employer-employee establishment the tax-deductible costs go up from £100 to £101 and the prices go up from £110 to £111, so that the taxable profits remain the same at £10 and the post-tax profit remains the same at £5. However, in the self-employed establishment the tax-deductible costs remain at £100 because the extra £1 national insurance contribution cannot be counted as tax deductible. Even if prices are raised by £ 1 to £111 to offset the increased contribution, the taxable profit goes up to £11. If we take away tax at 50 per cent., the post-tax profit is £5.50; if we deduct from that the national insurance contribution, the net post-tax profit is £4.50 rather than £5.

It is clear from that example that the self-employed establishment can cope with the additional liability of an increase in National Insurance contribution only by raising its prices by £2 instead of by £1. As the hon. Member for Islington, South and Finsbury pointed out, this poses a severe competitive disadvantage for the self-employed and is grossly unfair.

Our amendments—and it is Amendment No. 69 which is in the most appropriate form—would have the following effect to meet that situation. They would give the self-employed person tax relief on a portion of his contribution, a portion calculated by the fraction of 8.5/14 of the total contributions payable by the self-employed person. There is no need to set any limit to the relief because that is set by the limits of liability to contribute under the Social Security Act. But the amendments, if accepted, would have the effect of restoring broad and simple justice to the position.

This proposal should commend itself to the entire Committee, indeed to anyone with common sense and sensibility in his approach to this problem.

During the Report stage of the Social Security Amendment Bill the hon. Member for Islington, South and Finsbury said that the first argument advanced in that debate: …with which I agree completely, is that the self-employed are disadvantaged by comparison with the employed person in that they do not receive tax relief in respect of any part of their contribution. I have said before, I am prepared to say again, and I am ready to vote accordingly, that that should be corrected. However, it cannot be corrected in this Bill.…But at some time it should be corrected."—[Official Report, 11th December 1974; Vol. 883, c. 662.] The opportunity presents itself today. I look for his support and for the support of others of his hon. Friends, because the self-employed are as significant and as vital figures in their constituencies as they are in our own.

Mr. Nicholas Winterton (Macclesfield)

Although I entirely agree with the excellent arguments which my right hon. and learned Friend has produced to the Committee, would he direct his argument, before he completes moving the amendment, to the position of the self-employed who work alone? When they fall ill or fall on hard times their income drops to nil, or considerably. They are not entitled to unemployment benefit. Surely these factors should feature strongly in the argument which my right hon. and learned Friend is putting forward.

Sir G. Howe

I am grateful to my hon. Friend. During the opening part of my speech I pointed out that the self-employed do not receive unemployment benefit, nor do they receive earnings-related sickness benefit. That is one of the reasons why they feel so unfairly treated by the present provisions. It is only right to point out that the rate of contribution which they pay is adjusted to a significant extent to take account of that.

The point to which I am addressing myself is the point made by the hon. Member for Islington, South and Finsbury; namely, that the contributions of the self-employed are not tax-deductible in the same way as the contributions of the employed are. We in the Conservative Party do not intend to allow this issue to rest. We have established, as my hon. Friend the Member for Sutton Coldfield (Mr. Fowler) announced on 19th May, a watchdog group to guard the interests of the self-employed. That group is under the chairmanship of my hon. Friend the Member for Somerset, North (Mr. Dean), and it will have as one of its main tasks the examination of the ways in which the present burden of national insurance contributions on the self-employed can be reduced.

We gave a pledge in our manifesto at the last General Election that we would take steps to remedy the present injustice. My hon. Friend the Member for Sutton Coldfield, in a speech to the National Federation of Self-Employed in March of this year, said that A new Conservative Government would not be content to see the provisions of the Labour Government's Act remaining on the statute book. We will take steps to ensure that the burden of improved pensions is fairly shared. Above all we will end the undoubted discrimination against the self-employed. I am happy to renew that pledge now. I hope that the Committee will take this opportunity of doing at least something to fulfil it by supporting the amendment.

4 p.m.

Mr. George Cunningham (Islington, South and Finsbury)

I am flattered, I suppose, to feel that my remarks in Committee and on Report on the Social Security Amendment Act have assisted the Opposition in doing the homework which until then they had so clearly failed to do on the relationship between tax deductibility of contributions to the National Insurance Fund and the proper level of contributions. It would be fair to say that until that point in the discussion on the Social Security Amendment Act last year the Opposition had not referred to this point of tax deductibility except by a few sentences on the Floor of the House and the Committee. What they have now done is to latch on to an aspect of the subject to which they previously gave very little attention.

I said previously that I certainly think it was a mistake in 1965 to remove tax deductibility for contributions to the National Insurance Fund, whether those be contributions of the self-employed or of anyone else. But, in fairness to the Government of the time, there was a quid pro quo provided in the form of a £20 increase in the personal allowance for all contributors, which at that time was, give or take a few pounds, a reasonable quid pro quo to provide for the loss of tax relief.

The argument, however, that such a fixed addition to the personal allowance is a suitable means of compensating for the absence of tax deductibility no longer applies, because the amount which people are contributing will now be not a fixed amount but one varying very greatly according to earnings, and therefore, the tax relief ought similarly to vary according to earnings.

I would, therefore, welcome a reversion to our previous system, under which not only the employer's contribution but the employee's contribution and the self-employed contribution were all deductible for taxation purposes.

If that were as far as the argument needed to go, we could stop there and accept the point in principle, putting up against it only those arguments of practicability and administration, and the cost of administration, which quite naturally have to be advanced on these occasions. But there is another side to the argument, which the right hon. and learned Member for Surrey, East (Sir G. Howe) referred to only most obliquely and briefly in the closing minute or two of his remarks. The truth is that the self-employed contributor gets in return for his contribution benefits in excess of those for which he is paying. There is no one in the House of Commons who has looked into the matter who does not agree with that as a statement of fact.

People may decide that the self-employed are such a worthy group in the community and that their economic activities are of such value to the country that they ought to be subsidised in this manner or in some other. But let them come out frankly and say that what they are proposing is a subsidy and that what they want is that the self-employed should obtain their pension—because that is the main element in the outgoings of the National Insurance Fund—at something less than the cost it takes to provide.

It is commonly said that self-employed people are entitled to benefits which represent about 85 per cent. or 90 per cent. of the outgoings of the National Insurance Fund. I think that 85 per cent. is nearer the mark than is 90 per cent. Therefore, I shall take the figure of 85 per cent., in relation to unemployment benefit and the earnings related benefits. The one or two other little benefits to which the self-employed are not entitled constitute only, in each year, less than 15 per cent. of the outgoings of the fund.

Therefore, a self-employed contributor ought to pay into the fund or to have paid into the fund for him a contribution which equals 85 per cent. of the contribution paid into the fund for and on behalf of an employee. We all know that the amount of money paid into the fund on behalf of an employee is a total of 14 per cent. of his earnings—5½ per cent. paid directly by himself and 8½ per cent. by his employer. As 85 per cent. of 14 per cent. is about 12 per cent., the proper contribution for the self-employed to make to the fund for the benefits to which they are entitled is therefore about 12 per cent.

Most self-employed people will be required to pay and are required to pay now under the legislation as it stands, 8 per cent. of their earnings. The only self-employed contributors who will pay more than that will be those with incomes of less than £1,600 a year. Here is a genuine absurdity. The self-employed people with the lowest incomes will be paying the highest percentage contribution.

This is not the forum in which to debate at length that anomaly or to correct it. I have suggested a way in which it could be corrected, quite easily—by treating the standard fixed payment of £2.41 as an advance upon a contribution to be expressed as 8 per cent. of total earnings. But that can be looked at in another quarter.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

Does not the hon. Gentleman agree that another anomaly is that many people who have self-employed earnings from several sources, or who have employed earnings and self-employed earnings at the same time, will be asked to make interest-free loans to the Government, as well as in many cases exceeding the 8 per cent. which he has mentioned?

Mr. Cunningham

I do not think that I agree with that. I should have thought that self-employed people, both in respect of national insurance contributions and in respect of their tax, are normally in the opposite position, of having interest-free loans from the Government, in that they are required to account for what they owe only at a much later stage than are those who are subject to pay-as-you-earn, in respect of either taxation or National Insurance contributions.

Leaving aside those self-employed people with incomes of less than £1,600 a year, the situation, therefore, is that self-employed contributors will be paying 8 per cent. for benefits which, as far as can be actuarially calculated, ought to demand a contribution of 12 per cent.

If self-employed people were being asked to pay the proper full amount equivalent to the benefits to which they are entitled, certainly it would be right that they should receive relief in respect of that proportion of the 12 per cent. which was equivalent to the employer's contribution. But as long as we are giving them a one-third reduction in the gross amount which they are required to pay, it would be to add anomaly to anomaly to give at the same time the tax relief which is normally given to employers only.

Mr. A. J. Beith (Berwick-upon-Tweed)

The hon. Member himself argued when we were discussing the measure lying at the back of this—the social security legislation—that the absence of tax relief made it more equitable to advance the proposals which he wanted to support and, indeed, did ultimately support. When can we hope to get out of this dilemma that on any future occasion when we discuss the social security contributions, the remaining tax injustices and anomalies will cast a shadow over our discussions?

Mr. Cunningham

I take the point that the two must go together, and that on each occasion we would not go for the one until the other had been dealt with, and so on. I am perfectly prepared to vote for tax relief on the contributions if, at the same time, we are deciding, but not necessarily executing, a change in the gross amount of the contributions. It would be normal for a Government announcing an intention in respect of one of those changes to announce an intention in respect of the other. I do not think we are in practice faced with a practical difficulty there. The two go together, and if the Opposition are prepared to say that they accept the case that the self-employed people ought to pay the full actuarial gross contribution, I am sure the Government would say that on that basis they would be perfectly happy to give the proper degree of tax relief. But the two must either go together or not at all.

There is only one qualification that I make to this. There are several other respects in which the actuarial calculation of what the self-employed draw out of the fund would produce a different figure from the calculation in respect of what employed people draw out of the fund. Once again, I do not know why I should do the Opposition's job for them. I have suggested to them avenues which they ought to explore. The self-employed lobby, which argues a lot but does not go into the facts very much, ought to explore them too.

It is unassailable that self-employed people retire later than employed people. I have a figure from the Department of Health and Social Security on this. Speaking from memory, I think it showed an average deferment of retirement of about a year and a half longer in the case of self-employed people than in the case of employees. That is a very important consideration. If the self-employed are drawing their pensions for a year and a half less of their pensionable age than are employees, that is a perfectly respectable basis for making an adjustment to the contribution which would otherwise be due from the self-employed, and there may be other respects in which one could justify a lower contribution. But, whatever it turned out to be, it would not be 8 per cent. It would be between 8 and 12 per cent. When we have done all that, and worked out what is the proper gross contribution for self-employed people to make to this fund, that will be the time, I suggest, at which to correct this partner anomaly of the absence of tax relief.

Finally, both these forms of relief are thrown upon the shoulders of employees. Because the self-employed do not pay the gross contribution which they ought to pay, the contribution which falls upon employees and their employers has to be that fractional amount higher. It is very small but it is notionally there. Similarly, if we were to reduce the taxation burden of self-employed contributors, that amount of taxation would be thrown on the shoulders of employees, and so at the same time, we would be duplicating the gross subsidy from employees to the self-employed which we already have, and that is not a duplication of anomaly for which I am prepared to vote.

4.15 p.m.

Mr. Charles Fletcher-Cooke (Darwen)

The hon. Member for Islington, South and Finsbury (Mr. Cunningham), in a fluent and knowledgeable speech, could be faulted, I think, on only two matters. First of all, I do not think he got the force of the intervention of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) who put to him that the self-employed person, who in future will pay two stamps a week—because he is both employed and selfemployed—will thereby be giving an interest-free loan to the fund, because he does not get back his contributions as an employee for a considerable amount of time. But that is rather on the periphery of the argument.

It seemed to me that his chief point came at the end of his excellent contribution. This 12 per cent. figure, which he adopts as being the figure that the self-employed should pay if they are to contribute the actuarial sum necessary for the benefits they receive, is a highly notional figure, founded on some very dubious calculations, and in particular upon the two matters that he mentioned, namely, that the benefits they receive are, even within those categories of benefits that they do receive, much less than those of the employee. This is owing very largely to the fact that they have to work harder and longer, and in sickness as well as in health. It is this that lies at the depth of the grievance felt by the self-employed. It is not taken into account, when these very complicated calculations are made, that the one-man business or the one-man profession has to be kept going even though the man ought to be in bed; that the one-man business or the one-man profession is kept going well over the age of 65, even though the one man would like to retire.

In all these matters, it is clear that the self-employed make far fewer demands pro rata than the employed upon the expensive services of the State. I quite agree with the hon. Member that this has not been sufficiently quantified, but I do not see why the self-employed should be blamed for that. I do not see why the self-employed should be penalised for that. This is a difficult calculation and one which only the State, and those who command the services of the State's statistical machine, could possibly do.

Until that is done, it seems to me that the self-employed are entitled to the sort of relief which these amendments suggest, because it is only in that rough way that they can get the justice which I think both he and I know they ought to have, one way or the other. I should like to see it done in the way that he suggested. It is too late to do it in this Finance Bill, but contributions, whether of the employed or the self-employed, ought to be tax deductible, as they always were up to 1965. The compensation for the loss of that right—it is not a privilege—namely, the £20 increase in the personal allowance is now derisory with the value of money as it is today. They have virtually no compensation at all, and until the whole system of tax allowance for contributions is corrected, I do not think we shall get this matter right.

I hope that the Minister of State, when he replies, will not again throw at us the argument, "You were going to do a bit of this—5 per cent. We have only increased the percentage. We have not in any way altered the principle. Therefore you are not entitled to criticise." There might have been some force in that argument in the previous times in which these encounters have taken place on the Social Security Bill, but as far as tax relief is concerned, it is surely by now an axiom of fiscal policy that one is entitled to use the tax weapon—God knows it is used frequently enough—to temper the wind to the shorn lamb, even at the expense of logic.

This is surely an occasion on which the Government should temper the wind to the shorn lamb. The self-employed are to accept an enormous increase in their burden. According to the hon. Member for Islington, South and Finsbury, it is not enough, but it is an enormous increase in burden over what they have previously borne. The Government should give them some relief by means of the fiscal weapon, since this is the only way in which it can be done in time to have any effect in the present circumstances. I do not know how much it would cost. I should be interested to hear. I cannot believe that it would cost all that much.

Unless the Chancellor of the Exchequer does something on these lines, there will be a great flight from the self-employed into the employed category. That may seem strange in a world in which we hear that "the lump" is growing. But in more respectable areas than "the lump" the reverse process is in operation. I know from my own profession the number of one-man and two-man solicitors' firms which are breaking up, with applications being made by self-employed solicitors either for Government service or service in one of the big corporations. I know the number of small solicitors' firms going out of action almost every day of the week. I dare say it is the same in accounting firms and in other professions. I am sure that the same is true of small one-man self-employed businesses.

Their burden is both financial and psychological. We have been into all that before over the National Insurance Bill and over VAT. The self-employed person running a business by himself has to fill up all the forms himself. He spends his Sundays doing it. He has to go on and on when he is not feeling up to the mark, because he cannot afford to take time off.

All this in mercy the Government should do, and do now. Having done it for this year, they should undertake to look at the 1965 alteration in the law to see whether the best, most logical and most universal way of dealing with the problem would not be to revert to the system whereby all national insurance contributions were expenses for the purpose of the Act.

Mr. John Tomlinson (Meriden)

I hesitate to intervene in the debate. However, one or two points need to be made which have not been made so far.

I was surprised to hear the right hon. and learned Member for Surrey, East (Sir G. Howe) open the debate in such a way. Having spoken extensively at the tail end of last week and over the weekend about the virtues of moderation, he began his remarks in moving a very serious amendment with some extremely immoderate comments which did no credit to his public speeches in recent days.

Suddenly the right hon. and learned Gentleman is blaming this Government for heaping on the self-employed many of the problems which he listed. He tried to blame this Government, for example, for the rate burdens falling on the self-employed. However, it was the Government of whom he was a loyal and devoted member who introduced local government reorganisation which was primarily responsible for many of these increased charges. The right hon. and learned Gentleman went on to list a number of other items which would increase the burden on the self-employed. However, he ought to recall the record of his own Government in inflicting many of these increased charges on the self-employed as a result of the actions which they took.

The right hon. and learned Gentleman spoke about the impact of inflation. If we want to argue about that, let us be clear about the beginning of the inflationary processes that we are experiencing today. It was when the money supply was allowed to get out of control under the previous administration. Before listing the burdens heaped upon the self-employed by this Government, the right hon. and learned Gentleman should go back to where it all began.

I come to the amendment. My hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) outlined in his admirable speech the relationship between contribution and the benefit which the self-employed get. In this amendment, we are invited to revert to the tax allowance system when what this Government are pursuing is how best to promote equity of benefits rather than trying to give a tax offset advantage.

The Committee should be reminded that the Department of Health and Social Security has a working party which I understand is looking seriously at possible ways of promoting equity of benefit, especially in relation to earnings-related benefits. I believe that the Committee would be ill-advised at this stage to adopt an amendment of this kind when there is a serious attempt being made to remedy the anomaly of the lack of earnings-related benefit in areas of benefit. A serious attempt is being made to overcome the problem. We should be building in a further anomaly if we accepted the amendment when we might be able to resolve the original cause.

The Government are seeking to promote equity of benefit in a way that previous Governments never did. This attempt to give an earnings-related benefit to the self-employed is a more serious approach to the problem than any previous Government have taken. I think that the Committee would be well advised to await the outcome of these investigations to see whether we can promote equity of benefit rather than perpetuate the anomalies by having tax advantages.

I hope that the Committee will reject the amendment on the basis that a serious attempt is being made to look at the discrimination which undoubtedly exists against many self-employed people who do not get equality of benefits from the contributions that they make.

Mr. J. Enoch Powell (Down, South)

I accept that there is a sound case which can be made to the effect that the percentage of the earnings-related contribution of a self-employed person has been fixed too high or, alternatively, as the hon. Member for Islington, South and Finsbury (Mr. Cunningham) suggested, fixed too low. I think that the exchanges so far have brought out the fact that at this stage the Committee lacks the full factual material in order to be able to decide where the point of equity in this matter lies.

However, that is not the subject that the amendment has brought before the Committee. If that were the question, we would not be and could not be dealing with it under this Bill. The right hon. and learned Member for Surrey, East (Sir G. Howe) tacitly admitted that he was proposing in a Finance Bill amendments designed to deal with a matter which could properly be dealt with only in a different kind of legislation, namely, that on social security. The result of attempting to do this in a Finance Bill is highly inequitable and illogical.

The amendment will have the effect of reducing the contribution of the self-employed contributor not by a flat rate percentage, which would be the natural way of remedying an inequity in the fixing of a percentage, but by a sum related to his top rate of taxation. If the amendment were accepted, the inequity, such as it is, imposed on the self-employed contributor would be minimised for the self-employed contributor with the largest income. But it would hardly be affected for the self-employed contributor with a small income. I cannot think that that is a proper approach to dealing with this problem.

I recognise, as the hon. Member for Islington, South and Finsbury reminded us, that in 1965 when these contributions ceased to be allowable against tax a quid pro quo was provided by the increase in the personal allowance. That was perfectly logical because the contributions had themselves previously been an allowance for tax. When they were then made taxable, it was the equitable counterpart of that to increase the personal allowance. But where as in this case we are arguing not that all the contributions should be allowable for tax but that one of the contributions has been fixed at too high a percentage, it is inevitably illogical to attempt to remedy that by the method of tax allowance.

4.30 p.m.

The hon. Member for Islington, South and Finsbury suggested that he had regretted the change which was made in 1965. On that matter I personally take the opposite point of view. Long ago the contributions under the National Insurance Scheme were regarded as genuine insurance contributions and the public were encouraged so to view them. But we have long moved out of that era. Indeed, the very principle of a graduated contribution is a repudiation of the insurance principle. Therefore, I believe that it is now generally recognised that the so-called insurance contributions are really taxes and that we should all do better—contributors and legislators—if we treated them as taxes, which is what they really are.

Mr. John Cope (Gloucestershire, South)

Does the right hon. Gentleman not also think the present position inequitable whereby an employed person's contributions paid by the employer are allowable for tax but the employer's own contributions as a self-employed person are not? Even the part he pays for his own employees is allowable, at higher rates if he is in higher rates of tax or at lower rates if he is in lower rates, in the way that the right hon. Gentleman suggested.

Mr. Powell

Perhaps I may respond to the intervention but not immediately. If the hon. Gentleman will permit me, I shall complete the observation I was making, and then add a brief appendix to my speach dealing with his point.

The change made in 1965 was correct, because it recognised all these contributions as what they really are, namely, taxes and not individual insurance premiums. There is nothing more absurd than tax relief on a tax. It was therefore logical and right in my view that these contributions should have ceased to be allowable for tax.

I shall now respond to the intervention by the hon. Member for Gloucestershire, South (Mr. Cope). The point he raised was the same as that raised by the right hon. and learned Member for Surrey, East, namely, that there is an inequity between, on the one hand, the employer being able to claim as a deduction from his profits before tax the cost, including the compulsory contribution of employing a person to help him make those profits, and, on the other hand, the tax paid by an individual, whether an employee or a self-employed person, towards his own social service benefits. The fallacy lies in equating these two processes. One might as well argue from the fact that the cost of materials or any other factor of production is for an employer allowable against tax.

There is no analogy between the allowance for tax, in the calculation of profit, of the cost of employing an employee and the allowance for tax which is now proposed, which is an allowance of part of personal tax which we all pay. Therefore we come back, even via the intervention, to the point which I believe cannot be remedied in the course of the Bill, nor a fortiori by these amendments, namely, the question whether the ratio between the employee's tax and the self-employed's tax is justly fixed. Maybe it is not; but I believe that the inequity, whatever it may be, will be magnified, and magnified not only as between the two classes of contributors but as between individuals in the same class, if we proceed by way of the proposed amendment.

[Mr. OSCAR MURTON in the Chair.]

Mr. David Mitchell (Basingstoke)

The debate this afternoon can be reviewed only against the background of the general attack on the small business man which has characterised the activities of this Government throughout their period in office. If we take small business men as a group and refer to them, as they have been referred to, as the seed corn of our future business activities, right at the heart—the very germ or beginning—are the self-employed.

People start as self-employed before they turn themselves into a small limited company. These people have been having a very difficult time, partly because of inflation. For example, a man running a village shop has to deal with inflation. He may have £2,000 or £4,000 worth of stock on his shelves. With inflation, in 12 months' time he will require another £400 or £800 worth of stock to carry the same number of lines. That is one example of the way in which inflation means that the self-employed or very small business man is under acute financial pressure at present. Therefore, it is particularly appalling to him to find that the burden of the increased cost of national insurance is unfairly shared between the various contributors.

We all knew, when the Government announced that they were to increase old-age pensions, that the increase would have to be paid for. I do not think that any of us would be right to argue with the proposition that it must be paid for. However, it should be paid for by all the contributors. The reason that so many people are angry about the present situation is that instead of sharing the burden fairly, the Government put an increased contribution on the employer, reduced the contribution for most employees, and at the same time put a savage increase on the contribution by the self-employed. There is a contrast in the way in which they have been handled. The savage increase was imposed on the self-employed at the same time as most employees have had a reduction in their contribution. There is an opportunity for the Government today to redress the wrong which was done in the National Insurance Act last year.

It has been said of every second marriage that it is the triumph of hope over experience". In debating this process again under the taxation element, rather than under the national insurance element, one is hoping, perhaps against experience, that the Government will give a fair deal to the self-employed.

I agree with my right hon. Friend the Member for Down, South (Mr. Powell) that this is not the ideal way in which to deal with this problem, but we do not live in an ideal world. We live in a world in which there is an opportunity for the Government to redress some of the damage they have done without the loss of face which would be involved if they were to go back and amend their own National Insurance Act, 1974.

The whole area of unfairness which is involved in this legislation is underlined by the fact that the money that the small business man or the self-employed man takes out of his business—the wages of his business—is also the return on his investments. In effect he is being asked to pay an extra 8 per cent. tax on the return on his investment as well as on his wages. The truth of the matter is that the self-employed draw less money than do the employed.

It may be true, as the hon. Member for Islington, South and Finsbury (Mr. Cunningham) mentioned in his interesting contribution during the Committee stage of the Social Security Bill, that statistically in terms of the proportion of benefit to which they are entitled, the self-employed ought not to have a deduction, but it is not the entitlement which is the important factor. The important factor is, how much do they draw and when do they utilise that entitlement? For example, the self-employed may be entitled to retire at the age of 65—for a woman at the age of 60—but how many do? How many continue working? We see the small business men, one after another, go on working until they die. They die in harness. That is true time after time of the small shop keeper, the man who sells wood, the man who does the newspaper round, the owner of the little sweet shop and so on. Many people engaged in small, generally service industries, make an important contribution to the economy, and time and time again they do not retire at normal retiring age.

Mr. George Cunningham

As I was the person who suggested that the Opposition might pick up this point, may I try to prevent them running too hard with it? Until April this year it was a tremendously valuable point. As from April, it is not quite so valuable, because those who defer their retirement will receive an increased pension, the increase being nearer to that which is actuarially proper than has been given in the past. It is still not enough. It should be a 10 per cent. per annum increase, and it will be only 6 per cent. per annum, but the person who defers his retirement will get back a goad part of the value of that deferment in the form of an increased pension when he takes it.

Mr. Mitchell

I should not like the hon. Gentleman to think that he had inspired the notes for my speech, when the matter was drawn to my attention by a number of my constituents and not by the hon. Gentleman.

There are other factors besides that of retirement age. There is entitlement to sickness benefit. But the self-employed do not go sick. They go on working when they do not feel well, though they could easily go to their doctor, and probably would have done so as employees. The doctor might take a patient's temperature and say "You have 'flu. Go to bed and stay there for a week. Come back in a week's time, and if you are all right I shall send you back to work." But the self-employed go on working in those conditions. The small shopkeeper cannot suddenly say "I shall put up the shutters today because I am not feeling well." Customers rely on the small man for the milk round, the newspaper round, or whatever it may be. Many self-employed people cannot even take a holiday.

It is a question not of what proportion of the benefits the self-employed are actuarially entitled to but of what proportion they draw, and they draw substantially less. Therefore, their contributions should be less. We cannot make their contributions less under the Bill. What we can and should do is to save the Government's face on the national insurance side and make the contributions allowable against tax, which would give some saving to the self-employed.

Sir Geoffrey Howe

Perhaps I may take this opportunity to make clear the effective relief proposed in the amendment, because I may have misled the Committee with the figure I gave previously. The effective relief will be in relation to 8.5/14. I am not sure that I gave the correct fraction earlier. That is the effective relief in terms of the figures under the 1974 Act. I hope that this intervention may enable the figure to be corrected if I inadvertently misled the Committee in my speech.

Mr. Mitchell

I am grateful to my right hon. and learned Friend for that clarification. I was going to suggest that the amendment, which he moved so ably, was very meagre, very temperate. I am constantly astonished by my right hon. and learned Friend's moderation, shown not only in speeches at the weekend but in his amendments. I should have much preferred to see the whole of the contribution of the self-employed allowed for tax. That would have restored the position. [Interruption.] An hon. Member speaking from a sedentary position refers to public expenditure. I find it fascinating that the Government are spending money to encourage the arts, the crafts and rural industries, but at the same time are clobbering them by taking the money hack in this way. It beats cockfighting to have this complete contradiction of Government operations in this area.

Mr. Tomlinson rose—

4.45 p.m.

Mr. Mitchell

I have given way three times, and I think that I should now complete my speech. I am sure that the hon. Gentleman will be able to enter the debate later.

The self-employed, more than any other small businessmen, suffer from the overhead of Government interference, of having to do Government work for which they are not paid. If they had a trade union they would never have been saddled with their present situation, in which they have to work out PAYE and value added tax for the Government without payment. If they happen to be on two rates of VAT, they have a nightmare of work. They have to put in extra work over the weekends and often on Sundays to deal with this Government overhead.

In addition to all the other arguments, the Minister should take into account that if he accepts the amendment it will be one small step towards giving the self-employed a small contribution towards the high expenditure they incur in providing free services to his Department.

Mr. John Pardoe (Cornwall, North)

It is a great good fortune that my support for this modest amendment has managed to withstand the storm of Conservative speeches so far. Otherwise, I would undoubtedly have changed my mind. Rarely have I heard poorer arguments for the extremely strong case that the self-employed probably, but not certainly, have. I say "probably" and not "certainly", because, as the right hon. Member for Down, South (Mr. Powell) said, no one in the Chamber has the foggiest idea whether their case is strong. The self-employed do not know either, because we do not have the actuarial figures, and we shall not have them for a long time, if ever.

We had a curious speech from the right hon. and learned Member for Surrey, East (Sir G. Howe), speaking from the Conservative Front Bench. I took it to be a past or future circular to the self-employed from Conservative Central Office. He announced—and it was a very odd thing to announce in a parliamentary debate—that he had set up a watchdog group of Conservative Members of Parliament to look after the interests of the self-employed. I have long been a member of a watchdog group looking after the interests of the self-employed—the whole Liberal Party. It is to encourage sectionalism to set up bodies of this sort, the right hon. and learned Gentleman announced. It does not further the aims of any group to announce the setting up of such a body in that way.

The whole matter of the self-employed insurance benefits is much more complicated than some politicians seem to think, though this was conceded by the right hon. Member for Down, South. It might be helpful to quote from an entirely non-political source, the notes in the British Tax Review, which says: Much publicity has been given to the view that the earnings-related part of the contributions of the self-employed is a weapon aimed at their destruction by the present Government. It must be pointed out that the new scheme was introduced by the last Government. The present one increased the rates of contribution across the board. The change is one of degree, not principle. That is the general point that should be made.

The problem is that we do not know whether the case being advanced on behalf of the self-employed is actuarially a proper case, because the Government Actuary has admitted not only that he does not know quite how many millions of people are involved but that he does not know the cost of the benefits likely to accrue to them.

It is as well to be sure exactly what Parliament is asking the self employed to pay. It is not a general levy of 8 per cent. right across their earnings. It is 8 per cent. of the excess over £1,600, up to a maximum of £3,600. Therefore the most that could be paid is £160, or 4.44 per cent. That is not an astronomical amount at certain levels of income. There are substantial differences between the proportion that will be paid by one self-employed person and that paid by another.

I agree with the right hon. Member for Down, South on one point. I am delighted to have his support on this point, which I have argued several times in insurance debates in the House. We are in this mess because we stick to the ludicrous fiction of insurance. To the average man, and certainly to me, the word "insurance" implies that there is some relation between what is paid and what is received. In this case there is no relation. There is no actuarial relation to the benefits to which I would be entitled, let alone to what I would actually receive, if I were self-employed. We should abandon the insurance fiction and finance the whole national insurance expenditure out of taxation and make an honest man of the system. The right hon. Gentleman has indicated that we do not know what the cost of self-employed benefits are, and this simplification makes it possible, for instance, for the Federation of the Self-Employed to say in a circular, This would have resulted in a fairer splitting of the total cost Neither they nor we can say what "fair" means in that context, which is the problem that we face.

What do self-employed benefits cost and how much should be charged for them? No one is prepared to tell us. That is the whole point of the difficulty. Frankly, unless the Government Actuary can come to our aid—and I very much doubt whether he can—the only two ways out of the difficulty would seem to be either that the self-employed are to go on receiving benefit through a national insurance scheme or that we should have a separate fund for the self-employed. At least we could then produce an annual accounting, making clear how much had been paid in and how much had gone out and, working on an annual-pay-as-you-go basis, we could say that "That is what it costs and this is what is paid in, so that there is nothing unfair about it". If we found that they had not paid enough, we should have to tell them that they had to pay more.

Alternatively, the self-employed could opt out of the national insurance scheme completely. They cannot do so under present legislation, but it is something that they might well start talking to the Government about. Since there is such great feeling among their members about the unfairness of what they are asked to pay, perhaps they should investigate the possibility of opting out of the scheme altogether and providing themselves with some kind of private insurance. However, in the light of experience of national insurance over the last 30 years or so they would probably get a raw deal, with the rate of inflation that I, for one, expect to see in the country, if they were to try to get from any private scheme the benefits they receive under the national insurance scheme.

I consider that this amendment, despite the endeavour of the Conservative Party to persuade me not to vote for it, is a very modest one which will go some way to meet the considerable grievance felt by the self-employed. For that reason support it.

Mr. Dafydd Wigley (Caernarvon)

This debate has reflected the dichotomy that there is on this question of national insurance, in that it has grown from an insurance scheme to something that is approaching an element of taxation. At the moment we are half way between the two processes, and it would be for the benefit of everyone, and certainly for Finance Bill discussions, if this trend were to continue and we were to see the development of either integrated taxation which is to look after raising revenue for these matters or at least a self-employment tax explicitly described as a tax and not as insurance.

In this debate so far we have talked very much about some technicalities. We have talked about an actuarial basis and whether it should be 8 per cent. or 12 per cent. These are figures of which we have very little knowledge enabling us to judge whether one set or another is right. We have had arguments also whether one side of the House or the other were responsible for this tremendous increase in cost falling on the self-employed. It has been acknowledged by hon. Members opposite that that increase has taken place even though there may be argument over where it originated.

I should like to take a more pragmatic line. As it is acknowledged by both sides that there has been a tremendous rise in the cost falling on the self-employed, and since at this time, with ever-increasing unemployment, it must be in the general interest to stimulate as much self-employment as possible, in addition to stimulating as much employment for employees as possible, we should use every means at our disposal to encourage this result rather than the opposite.

At this time it may not be possible to take what would be the idealistically right step to help the self-employed in line with the practice of Finance Bills. I should have thought it necessary to look at two or three elements, one being the fact that a threshold of £1,600, set 12 or 18 months ago when the concept was developed, has changed in value today. I would have thought it necessary to think in terms of a reversion to something that was acceptable before 65, whether or not as part of an insurance or a taxation concept, on the pragmatic basis of helping these people in the only possible way at this time, through this Finance Bill.

I should like to take up a point made by the hon. and learned Member for Surrey, East (Sir G. Howe), who opened the debate, and to look at a point made by the right hon. Member for Down, South (Mr. Powell). A question arose whether we are discussing a value of 7.5 over 12 or 8.5 over 14. The right hon. Member for Down, South said that this would be worth much more for people at the higher end of the scale. As I read this amendment, reference is made to the increase being an amount equal to income tax at the standard rate, in which case would there not be a cut-off at the standard rate, so that whereas there may be discrepancy for those from zero up to the standard rate, there is not an inequality beyond the standard rate.

I represent an area where the self-employed represent a very large part of the work force. Not only are they self-employed but very often they are self-employed and not also employing other persons. They suffer an additional work load falling on them by such matters as VAT, from whichever Government, and therefore they are the people suffering most. They are the people most likely at this time to be throwing everything in the air and asking, "Is it worth it?" at a time when unemployment in my area is running at 14 per cent. for men. If we are to overcome unemployment we need to create more jobs, whether for the self-employed or for employees. Therefore, on a purely pragmatic basis I urge the Committee to support this amendment as being at least a step towards encouraging people to become self-employed.

Mr. Peter Rees (Dover and Deal)

This debate has uncovered a small part of a considerable problem—the problem of the self-employed in a period of rapid inflation, a period of increasing administrative complexity and a period of low profitability. It is a problem of which this Government seem sublimely unaware. This Government are very close—some would think too close—to the major unions but they are not yet receptive to the justified anxieties of the self-employed. It may well be that they will soon have to listen to the insistent, justified clamour of the Federation of the Self-Employed.

One of the complaints of the self-employed is the increase in their national insurance contribution. This amendment—and I congratulate my hon. and learned Friend the Member for Surrey, East (Sir G. Howe), who moved it—is designed to provide some relief, perhaps not an exact measure, perhaps not precisely symmetrical relief in this field. The right hon. Member for Down, South (Mr. Powell), with his remorseless logic, has attempted to assert that there is nothing more absurd than a tax relief for a tax.

Mr. Eric S. Heffer (Liverpool, Walton)

On a point of order. I should like to apologise to the hon. and learned Member for Dover and Deal (Mr. Rees), but this is a matter of great concern to the House and perhaps it will mean that you, Mr. Murton, will have to ask Mr. Speaker to come to the Chamber.

At this moment the Standing Committee on the Industry Bill is in a state of suspension because all the members of that Committee have walked out, on the basis that a statement was made in the House yesterday by the Secretary of State for Industry—and there is no personal criticism of him at all—that there would be a White Paper. We have demanded that there must be given to us, as members of the Committee, the fullest information of what is likely to be in that White Paper.

Hon. Members on this side of the Committee are particularly concerned because they know that we are working under a guillotine and that there are to be meetings outside this House with interested bodies such as the Confederation of British Industry and the Trades Union Congress, and that amendments may be put forward which may never reach the Floor of the House because they could be carried with the guillotine.

On that basis, we believe that this is a very serious inroad into the rights of hon. Members. On that basis we should like Mr. Speaker to be asked to come to the Chamber and to give us a ruling as to what the position is now. We should like to be told whether we are likely to get a statement so that we may proceed with the work of the Committee in the proper parliamentary way and consider all the amendments which have been tabled. This is a matter of the greatest importance and, Mr. Murton, we should like your assistance and guidance in dealing with it.

5.0 p.m.

The First Deputy Chairman

I have listened to what the hon. Gentleman said. His remarks are a matter not for the occupant of the Chair of this Committee but for the Chairman of the Standing Committee.

Mr. Heffer

Further to that point of order, Mr. Murton. Where else can we go? This is the Chamber of the House of Commons. It so happens that a Committee is meeting here at the moment. I am asking the Chairman of this Committee whether he is prepared to ask Mr. Speaker to come to the Chamber.

The First Deputy Chairman

I must make my ruling quite clear. The House is in Committee on the Finance Bill. The matter about which the hon. Gentleman complains should be dealt with by the Chair in the Standing Committee in question.

Mr. Heffer

Obviously we do not want to hold up the work of this Committee. We shall make our representations to Mr. Speaker direct.

Mr. Peter Rees

The intervention by the hon. Member for Liverpool, Walton (Mr. Heffer) demonstrates that industry as a whole is in as much confusion and distress as are the self-employed, but perhaps it would be out of order if I were to divert to that theme. Instead I shall try to confine my remarks to the plight of the self-employed.

Before that interruption I was saying that the right hon. Member for Down South, with his characteristic and remorseless logic, had endeavoured to assert that nothing was more absurd than tax relief for a tax. In the days when he was at the Treasury there was a relief for profits tax for companies against the income tax which those companies had to pay, but perhaps that situation was corrected during the right hon. Gentleman's tenure of office as Financial Secretary. There are respectable precedents for tax relief for a tax.

This is perhaps a slightly technical way of looking at the amendment. I remind the right hon. Gentleman that in personal taxation matters there is tax relief for premiums designed to secure retirement benefits for the self-employed, and I commend these to the Minister. I suggest that he has a further look at them since the limits are far too restrictively drawn in the light of current rates of inflation. The employee obtains part of his pension from contributions which are not derived from his taxed income, and this amendment is designed to put the self-employed on the same basis.

The hon. Member for Islington, South and Finsbury (Mr. Cunningham) has with his usual assiduity led us into the field of actuarial calculations, and I shall not attempt to follow him there. In the whole field of social security benefits the self-employed are possibly, if not certainly, in a worse position than those who are employed. There is not only the question of later retirement to which my hon. Friend the Member for Basingstoke (Mr. Mitchell) drew attention. There is the question of unemployment benefit when his business languishes, the question of when he chooses to enjoy the benefits of his business and the small but annoying anomaly that when he travels on the Continent he is not entitled to the same reciprocal benefits as is the employed person.

I have asked one of the Treasury Ministers for a breakdown of social security benefits as between the employed and the self-employed, and he has told me that they are not available. I suggest that it is time to take a deeper look at this matter, and as an interim measure of relief I hope that the Minister will be able to accept this modest amendment which is designed to achieve a rough measure of justice in a very difficult field.

The Minister of State, Treasury (Mr. Robert Sheldon)

We have had an interesting debate, but it is a pity that such a high degree of immoderation should have been displayed in the assertions of many hon. Members on a question as important as this. The intention of the amendment, as I understand it, is that there should be tax relief for the self-employed for the part of their national insurance contributions which corresponds to the employer's share of an employee's total insurance contribution. There is in the amendment a technical defect with which we need not be concerned because what really matters is the substance of the amendment. I only mention the defect because it was drawn to my attention and it was felt right that the fact should go on the record.

Perhaps I should explain the relationship between the Government and the self-employed as I and the Treasury see it. I spent a large part of my previous existence before becoming a Minister as a self-employed person, and self-employment is undoubtedly one of the most valuable ways in which ideas, entrepreneurs and managers can get launched. Through it the determined and the individualist can find a particular niche which might not be available in ordinary employment. I am reminded of the comment of the original Ferranti, the electronics engineer, who is reputed to have said, "If you are tall, good looking and clever all you need is luck". If, like him, "You are short and Italian you have to have 51 per cent.". We know full well the rôle of the individualist and how in so many cases they have been able to achieve success by their own independence. There are many examples of this. Of course, self-employment provides a road to the top as well as a way of life for a wide range of people and their abilities.

The Class 4 contributions of the self-employed are to be calculated on the basis of 8 per cent. of the assessed profits lying in the band between £1,600 and £3.600. The maximum extra contribution is, therefore, £160 which will be administered by the Inland Revenue with the tax on business profits.

I do not want to get involved in "yahboo" politics because that is not particularly helpful, but what we are proposing is not all that dissimilar from the Conservative scheme. That involved uprating for inflation, and we all know what that means. What we are proposing obviously derives front that scheme. The excess of antagonism by Conservative Members is, therefore, very hard to understand, except in terms of the political pressure which is being exerted from certain people within the Conservative Party. This seems to fit in with the setting up of the so-called "watchdog group". I am not sure what this group will watch over in this canine manner, but we look forward to seeing what it does in due course.

The 8 per cent. contribution has been described as a tax on the self-employed. Of course, we all know—and this has emerged during our debate—that it is no more of a tax than the 8½ per cent. tax on the employers and the 5½ per cent. tax on employees. The top and bottom of it all is that social security benefits, and in particular the retirement pension, have to be paid for. This is a very large element in the social security benefit. It has to be paid for largely by contributions, and the whole question that we should be concerning ourselves with, the question which was referred to by my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham), is what is a fair and reasonable contribution for the self-employed. That is what we are talking about. There is no dogma, there are no politics: nothing but what is a fair and reasonable contribution for the self-employed to make.

If we had all the figures available the matter would be very simple. In the way that has been described, we would just consult these figures, see what the self-employed were getting and be able to provide a fairly precise relationship between contributions and benefits and make a much better approximation to relief. Unfortunately we cannot have these, and I shall come to the reasons for that in a moment.

These national insurance contributions have to be made by each individual to the State for the benefits he is going to receive. The self-employed get the benefits, they get very direct benefits, and it is very hard to see why they should get tax relief on the payments which they make before they derive those benefits. The employee also provides money for the benefits he receives, and it is very hard to see why he should be entitled to tax relief on the benefits he is going to get. As for the employer, he is in a rather different situation. He is not getting any benefits. By law, he has to pay part of these contributions in order to run his office; it is a business expense and it is wholly and exclusively paid for the running of his business, and is so allowable.

I view it with suspicion always when people ask for extra tax reliefs of any kind—and we shall be going over this in a number of ways in our further debates on the Finance Bill—because the cardinal fact about all tax relief is that those who earn the most gain the most. No matter what the system by which we are trying to operate a progressive method of providing taxation and benefits, this is not the best way in which to handle these matters. I understand the way in which the proposers of this amendment have tried to overcome that by talking about a standard rate, which does not, however, fit in with the unified tax system, but, nevertheless, the general principle remains.

Mr. Nigel Lawson (Blaby)

This general principle is a very important one. If the Minister is saying that no relief is possible because those who earn the most gain the most he is saying that there is no possibility under a Government of which he is a member of there ever being a reduction in the rate of income tax.

Mr. Sheldon

That is not what I am saying at all. I would have thought it pretty obvious that if we try to give relief by means of income tax we give most to those who have most. There are certain situations in which that is what one intends to do, but there are other situations in which that is a byproduct of one's other intentions. I am only drawing the attention of the Committee to what I regard as a fairly obvious point.

Mr. Peter Rees

Does the hon. Gentleman's evident distaste for personal tax relief possibly lead him now to reconsider his position on negative income tax?

Mr. Sheldon

Negative income tax is something I should have been very happy to have seen had it dealt with the wide range of benefits that could be fitted in if another system were devised.

Mr. William Clark (Croydon. South) rose—

Mr. Sheldon

Before the hon. Gentleman seeks to turn this debate into one on tax credits, let me say that the main argument against the tax credit system was the element that these were only a few of those benefits that could be paid under the tax credit system, which was the point I particularly did not like.

5.15 p.m.

Mr. William Clark

As Chairman of the Select Committee of which the hon. Gentleman was a distinguished member and put in a minority report, I would remind him that in that report he did not indicate that the reason he did not agree with the tax credit system was that it did not cover all the possible allowances. He will recall that in the main report, which the Conservative Government would have implemented had we won the General Election, the principal point was that this was a start and that eventually more and more of the benefits could be phased in. It is no good the Minister shaking his head. He knows this is perfectly true.

Mr. Sheldon

The hon. Gentleman knows perfectly well that we debated this furiously for six months. We did not con- vince him and he did not convince us, and the argument continues, but I do not think it should continue in this particular forum.

If one looks at the actual benefits of the self-employed the thing that strikes one most forcefully is that to the ordinary employee only 70 per cent. of the benefits in terms of total payments comes through the retirement pension, while the proportion that goes to the self-employed is over three-quarters. More than three-quarters of the benefits going to the self-employed lie in the retirement pension, and this is the factor that makes it so very difficult to obtain any system that does not deal with this particular issue.

Mr. Pardoe

In order that the Committee may not be misled could the hon. Gentleman clarify his meaning? He is talking about nearly 75 per cent. of the benefits going to the self-employed. I think he means 75 per cent. of what the self-employed would be entitled to if they were to claim it, not the cost of the benefits the self-employed actually receive, because he does not know what that is.

Mr. Sheldon

The hon. Gentleman is obviously right, but this three-quarters of the benefits to which the self-employed are entitled actually consists of the retirement pension.

I now come to the point made repeatedly by my hon. Friend the Member for Islington, South and Finsbury in a very fine speech on the difficulty of getting the figures relating to the self-employed in isolation. It is going to be very difficult ever to overcome this inherent difficulty, which lies in the fact that, despite the common assumption that the self-employed are self-employed all their lives, in fact very many of them start life not self-employed and later become self-employed. There are relatively few, who from the moment they leave school until the day of their retirement, are self-employed. It is going to be extraordinarily difficult to obtain the actuarial figures because of this inherent complication.

Having said that, and having noted the argument used by my hon. Friend the Member for Islington, South and Finsbury about the factor of early retirement and the importance of that because of the changes in the scheme, I would say that the benefits to which they are entitled are about 90 per cent. of those which the employees obtain. If one multiplies the 90 per cent. by the 14 per cent. one comes to the 12½ per cent. or 12 per cent. that has been mentioned. This is really what we are talking about: what should be the relationship between the national insurance contributions of the employee and that of the self-employed?

A week or two ago I was in the constituency of the hon. Member for St. Ives (Mr. Nott) and I noticed one or two window stickers for the self-employed. One I saw was in a shop very similar to that of a chain store a few doors down. One was a multiple shop and one looked to me as if it was owned by a self-employed person. I tried to compare the two shops. They both had three or four people in them. In one there was a manager; in the other there was somebody who seemed to me to be a self-employed person. In the case of the manager, he would be paying 5½ per cent. of his salary and his employer would be paying 8½ per cent. making 14 per cent. The self-employed person would be paying 8 per cent. The charge on the manager would be about 10 per cent., taking into account corporation tax at 52 per cent.

The question we have to ask ourselves is whether that 8 per cent. should, as a result of the amendment, be reduced to 5.2 per cent. Is that the right relationship? I do not believe that it is, bearing in mind the benefits available for the self-employed person.

My right hon. Friend the Secretary of State for Social Services has announced an inquiry into national insurance and the self-employed. It is hoped that an interim report will be available by about the autumn. Meanwhile, the present contribution rates are believed to be reasonable and fair, and I ask the Committee to reject the amendment.

Mr. John Nott (St. Ives)

When I reread the excellent debate on the Social Security Amendment Bill on 26th November 1974 which dealt with the general subject of contributions by the self-employed, I was struck by a quotation which was made by my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith). He reminded us that it was said of Sir Robert Peel in the matter of the Corn Laws: He has convinced others. How comes it that he has failed to convince himself?"—[Official Report, 26th November, 1974; Vol. 882, c. 328.] When I re-read that quotation I thought of a more topical example—the Secretary of State for Industry. How was it that he could so convince the country that we should remain a member of the Community when he so signally failed to convince himself?

Perhaps the quotation more aptly applies to what was said by the hon. Member for Islington, South and Finsbury (Mr. Cunningham). When the Social Security Amendment Bill was proceeding through the House he convinced many of his hon. Friends—and he may have convinced one or two of my hon. Friends—that the way to handle the discrepancy between contributions and benefits was by means of tax relief. He argued in Committee against reducing the percentage to 5 per cent. Now he says that he would be prepared to go back to the pre-1965 position, but he does not like what we propose in our amendment. The words he used on 11th December 1974 cannot bear that interpretation. He said: the self-employed are disadvantaged by comparison with the employed person in that they do not receive tax relief in respect of any part of their contribution."—[OFFICIAL REPORT, 11th December 1974; Vol. 882, c. 662.] He was making a clear distinction between the employed person and the self-employed person, and pre-1965 the relief was surely available for all contributions.

Again, when the Bill came back to the House—which it did because Lord George-Brown and many other senior and highly respected members of the Labour Party had agreed that the scale of the increase for the self-employed was entirely outside the laws of equity—the hon. Member for Islington, South and Finsbury said: Therefore, the self-employed person should not get tax relief on the notional equivalent of the employee's contribution but should get tax relief on the notional equivalent of the employer's contribution.—[OFFICIAL REPORT, 26th November 1974; Vol. 882, c. 326.]

Mr, George Cunningham

If he is paying it.

Mr. Nott

We all appreciate the difficulty of the hon. Gentleman's position, but the interpretation which one puts on those remarks can only allow us to feel that he meant all along that he was happy to go back to pre-1965 but not to go along with what we propose today.

Mr. Cunningham

I am touched by those generous references to my remarks, but I should like to get this perfectly straight. I made clear all along that what I wanted was for the gross amount of the self-employed contribution to be raised above 8 per cent., to 12 per cent. or thereabouts, and, as part of that, for tax relief to be available on that part of the 12 per cent. which represented the equivalent of the employer's contribution, and that no one of those things should be done without the other being done.

Mr. Nott

As I was not a member of the Committee I must confess that I have not read every word the hon. Gentleman said in Committee and I would not wish to claim that in these remarks he was saying something less than the whole of what he wanted to say. If he were coupling his remarks always with the point that he would be prepared to see this tax relief only if it were combined with a contribution higher than 8 per cent., I accept what he says, but on rereading those remarks I cannot see that he coupled them with the suggestion that the contribution should go higher.

The right hon. Member for Down, South (Mr. Powell) made an interesting intervention, but I am not quite sure that he had the amendment right. If he says that a national insurance contribution is a tax, I wholly agree with him. The new national insurance contribution is in the nature of a progressive tax because it is earnings related. Any tax relief in a progressive tax system will obviously benefit the better-off rather than the worse-off. For a person receiving tax relief, the more tax he pays the more benefit he will receive in a progressive system. But our amendment, contrary to what the right hon. Gentleman implies, is not to give relief at the higher rates of tax, although the right hon. Gentleman said that it would give relief at the higher marginal rate. The proposal is that there should be an amendment purely of the basic rate of 35 per cent. just as the employer's contribution would be at the basic rate of corporation tax of 52 per cent.

We are talking here primarily about sole traders and Schedule D taxpayers. If we were to give any relief it could only be relief based on Schedule D. I have to repeat what my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) said. There are many tax reliefs on the statute book, and if we are seeking to help the self-employed this is the only way we can do so. As he said—and I put this rhetorically because these are complicated matters—it is surely right that the employee benefits f the employer's contribution which is relieved from tax. Therefore, it is not unreasonable that we should put forward tax relief of the type proposed in the amendment.

The hon. Member for Cornwall, North (Mr. Pardoe) on every debate on every amendment casts unjustified aspersions upon the attitude of every party but his own. His curious habit, after casting those aspersions about the Labour Party or the Conservative Party, is to follow in almost the next sentence by appealing for an end to sectionalism. The two go almost side by side. I cannot remember—and I am trying to be generous to the hon. Gentleman who is not quite a neighbour but nearly so—any idea, any constructive project, any attempt at reconciling interests which has ever taken place in the House of Commons which the hon. Gentleman does not claim in the course of his speech to stem originally from himself.

Mr. Pardoe

Absolutely right.

Mr. Nott

Shall I say that the hon. Gentleman's modesty is not always prominent in our debates. If any agreement is possible amongst the parties in the House of Commons, I am afraid that the hon. Gentleman is always in the vanguard to destroy it. Today he ended his remarks by saying, "In spite of what the Conservative Party has done to persuade me not to vote for the amendment, I shall do so." That is precisely the attitude that the hon. Gentleman adopts in all our debates.

5.30 p.m.

In the Minister's reply we have seen the Labour Party clothed in its freshly laundered garb of seeking to be reasonable and of seeking to reconcile interests. It was pleasant to hear the Minister of State say certain things. However, I fear that by the end of the week we shall need a bit of relaundering. Anyhow, the Minister of State expressed his point of view in moderate language.

This would not be an expensive amendment. I think that it must seem overwhelmingly fair to all responsible men and not just to Lord George-Brown in another place and to other members of the Labour Party such as Baroness Burton and Lord Houghton, who was until recently the Chairman of the Parliamentary Labour Party. If it seems fair to them, why does it seem so unfair to Labour Members? After all, Lord Houghton was a repected Member of Parliament.

One argument that has been raised this afternoon has been about the relative size of the contributions to the National Insurance Fund. As my hon. and learned friend the Member for Darwen (Mr. Fletcher-Cooke) said, an assessment of true costs and benefits—and I emphasise the word "true"—could not ignore the fact that the self-employed generally make fewer demands on the State than the employed. The self-employed make no contribution for sickness and they receive no benefit from the fund in that respect, but their services are available to the community in sickness and in health.

Mr. George Cunningham

The self-employed get sickness benefit.

Mr. Nott

I apologise, I had in mind a number of other benefits to which references was made by hon. and learned Friends. I should have been more precise and have referred to earnings related sickness benefit.

My hon. Friend the Member for Basingstoke (Mr. Mitchell) raised some wider questions. I was glad to hear the Minister of State support the argument that our society would be poorer, duller and a less happy place without our small firms and farms. He was kind enough to say that he had spent some time in my constituency a short while ago. He must realise that the major proportion of the high level of unemployment in that part of the world, and in many other areas, is attributable directly to the redundancies occurring among people who run their own small firms.

I do not wish to go into the whole question of rates, capital transfer tax and everything else, but the community must understand how it is that a self-employed man is full of fury at the fact that he is having to pay an extra £238 this year in pre-tax terms for no extra benefits. It must appear to the self-employed man that he is being greatly exploited. If the hon. Member for Islington, South and Finsbury were asked suddenly in one year to give up the additional amount of £238 for no extra benefit, and if he had not spent all his days and nights ploughing his way through actuarial reports on these matters, which I understand he does, I am sure that he would be very angry.

We must be seriously concerned about the difficulties which small firms are facing. Their difficulties are severe and it is against that background that the Conservative Party feels strongly about the amendment. The big battalions of the CBI and the TUC will have to learn that it is not primarily big business which is the ultimate bastion of liberty and freedom but the small man. The small man may be working in a large firm, but it will not be the large bureaucracies, whether in business or in trade associations, that will maintain the real freedoms and liberties of this country in the last resort. Those elements will be maintained by individuals and by small business men.

The Minister of State said that those who earn the most gain the most. He said that as if it were some truism that had never occurred to anyone before. Is he suggesting that those who earn the most should gain the least? The people who earn the most clearly earn it by their own efforts. It is also clear that those who earn the most pay the most. It follows that those who pay the most will receive the most by means of tax relief. That must be the case.

Mr. George Cunningham

No.

Mr. Nott

The justification for the amendment is the unfairness that we be-lieve prevails as regards the proportion of benefit to contribution. However, I rest our case with the amendment and with the tax relief that we are seeking, given the size and the suddenness of the increase which has arisen. Let me repeat the situation once again. I refer to the facts which my right hon. and learned Friend the Member for Surrey, East has mentioned. The increases are of such a size that it is impossible for the self-employed not to imagine that the Government are deliberately out to discriminate against them. As regards the £40-a-week man, his contribution has increased by 58 per cent. from February 1974 to April 1975, whereas the £40-a-week man who is employed has seen his contribution fall by 8 per cent. The contribution of the £50-a-week man who is employed has increased by nearly 5 per cent. whereas the self-employed man earning that amount has seen his contribution increased by 98 per cent. Finally, the contribution of the £60-a-week employee has increased by 6.8 per cent. whereas the self-employed man's contribution has increased by 138.7 per cent. It is the scale and the suddeness of the increase which has no foundation in equity.

In the amendment we are seeking not to change the contributions to the National Insurance Fund but to go some

little way to put back the size of the increase which has been heaped upon the self-employed since the Labour Government came to office. This is no small matter concerning merely one or two people. If I take the Bolton Committee's definition of small firms—that definition is as good as any other—it seems that there are anything up to 1¼ million small family-owned firm in this country, without including agriculture. They employ approximately 6 million people and they are responsible for 20 per cent. of our gross national product.

In the new environment in which we have all been living since last Thursday I believe that more consideration needs to be given to equity amongst society generally. That does not mean that the self-employed man earning £50 a week should pay a contribution that has nearly doubled in size. I do not think that that can be fair.

I ask my hon. Friends to divide on this amendment. I am sorry that the Government will not accept it.

Question put, That the amendment be made:—

The Committee divided: Ayes 199, Noes 224.

Division No. 222.]	AYES	[5.40 p.m.
Adley, Robert	Critchley, Julian	Havers, Sir Michael
Arnold, Tom	Crowder, F. P.	Hawkins, Paul
Atkins, Rt Hon H. (Spelthorne)	Dean, Paul (N Somerset)	Hayhoe, Barney
Awdry, Daniel	Dodsworth, Geoffrey	Henderson, Douglas
Bain, Mrs Margaret	Durant, Tony	Hicks, Robert
Beith, A. J.	Dykes, Hugh	Holland, Philip
Bell, Ronald	Edwards, Nicholas (Pembroke)	Hooson, Emlyn
Benyon, W. L.	Evans, Gwynfor (Carmarthen)	Hordern, Peter
Berry, Hon Anthony	Ewing, Mrs Winifred (Moray)	Howe, Rt Hon Sir Geoffrey
Biffen, John	Eyre, Reginald	Howell, David (Guildford)
Biggs-Davison, John	Fairbairn, Nicholas	Howell, Ralph (North Norfolk)
Blaker, Peter	Fell, Anthony	Hunt, John
Boscawen, Hon Robert	Fletcher, Alex (Edinburgh N)	Hutchison, Michael Clark
Bowden, A. (Brighton, Kemptown)	Fletcher-Cooke, Charles	Irvine, Bryant Godman (Rye)
Braine, Sir Bernard	Fookes, Miss Janet	James, David
Brittan, Leon	Fowler, Norman (Sutton C'f'd)	Jenkin, Rt Hon P (Wanst'd&W'df'd)
Brotherton, Michael	Fry, Peter	Kaberry, Sir Donald
Brown, Sir Edward (Bath)	Gardiner, George (Reigate)	Kershaw, Anthony
Bryan, Sir Paul	Glyn, Dr Alan	Kimball, Marcus
Buchanan-Smith, Alick	Goodhart, Philip	King, Tom (Bridgwater)
Budgen, Nick	Goodhew, Victor	Kitson, Sir Timothy
Bulmer, Esmond	Goodlad, Alastair	Knight, Mrs Jill
Burden, F. A.	Gow, Ian (Eastbourne)	Knox, David
Butler, Adam (Bosworth)	Gower, Sir Raymond (Barry)	Lamont, Norman
Carlisle, Mark	Grant, Anthony (Harrow C)	Langford-Holt, Sir John
Chalker, Mrs Lynda	Gray, Hamish	Latham, Michael (Melton)
Channon, Paul	Grieve, Percy	Lawrence, Ivan
Clark, William (Croydon S)	Griffiths, Eldon	Lawson, Nigel
Clarke, Kenneth (Rushcliffe)	Grimond, Rt Hon J.	Lloyd, Ian
Clegg, Walter	Grylls, Michael	Loveridge, John
Cockcroft, John	Hall-Davis, A. G. F.	Luce, Richard
Cooke, Robert (Bristol W)	Hamilton, Michael (Salisbury)	MacCormick, Iain
Cope, John	Hannam, John	McCrindle, Robert
Cordle, John H.	Harrison, Col Sir Harwood (Eye)	Macfarlane, Neil
Costain, A. P.	Harvie Anderson, Rt Hon Miss	MacGregor, John
Crawford, Douglas	Hastings, Stephen	McNair-Wilson, M. (Newbury)
Madel, David	Penhaligon, David	Stewart, Ian (Hitchin)
Marshall, Michael (Arundel)	Percival, Ian	Stokes, John
Mates, Michael	Pink, R. Bonner	Stradling, Thomas, J.
Mather, Carol	Rathbone, Tim	Tapsell, Peter
Maudling, Rt Hon Reginald	Rees, Peter (Dover & Deal)	Taylor, R. (Croydon NW)
Maxwell-Hyslop, Robin	Rees-Davies, W. R.	Taylor, Teddy (Cathcart)
Mayhew, Patrick	Renton, Rt Hon Sir D. (Hunts)	Tebbit, Norman
Meyer, Sir Anthony	Rhys Williams, Sir Brandon	Thatcher, Rt Hon Margaret
Miller, Hal (Bromsgrove)	Ridley, Hon Nicholas	Thomas, Dafydd (Merioneth)
Mills, Peter	Rifkind, Malcolm	Thompson, George
Miscampbell, Norman	Roberts, Michael (Cardiff NW)	Townsend, Cyril D.
Mitchell, David (Basingstoke)	Roberts, Wyn (Conway)	Tugendhat, Christopher
Moate, Roger	Rodgers, Sir John (Sevenoaks)	Vaughan, Dr Gerard
Monro, Hector	Ross, Stephen (Isle of Wight)	Viggers, Peter
Moore, John (Croydon C)	Rossi, Hugh (Hornsey)	Wainwright, Richard (Colne V)
Morgan-Giles, Rear-Admiral	Sainsbury, Tim	Wakeham, John
Morrison, Charles (Devizes)	St. John-Stevas, Norman	Walker, Rt Hon P. (Worcester)
Morrison, Hon Peter (Chester)	Scott-Hopkins, James	Walker-Smith, Rt Hon Sir Derek
Mudd, David	Shaw, Giles (Pudsey)	Wall, Patrick
Neave, Airey	Shaw, Michael (Scarborough)	Watt, Hamish
Neubert, Michael	Shepherd, Colin	Weatherill, Bernard
Newton, Tony	Silvester, Fred	Welsh, Andrew
Normanton, Tom	Sims, Roger	Whitelaw, Rt Hon William
Nott, John	Sinclair, Sir George	Wiggin, Jerry
Onslow, Cranley	Skeet, T. H. H.	Wigley, Dafydd
Oppenheim, Mrs Sally	Smith, Cyril (Rochdale)	Wilson, Gordon (Dundee S)
Osborn, John	Speed, Keith	Winterton, Nicholas
Page, John (Harrow West)	Spicer, Michael (S Worcester)
Page, Rt Hon R. Graham (Crosby)	Sproat, Iain	TELLERS FOR THE AYES:
Pardoe, John	Stainton, Keith	Mr. Spencer le Marchant and
Parkinson, Cecil	Steel, David (Roxburgh)	Mr. Russell Fairgrieve
Pattie, Geoffrey	Stewart, Donald (Western Isles)
NOES
Allaun, Frank	de Freitas, Rt Hon Sir Geoffrey	Hunter, Adam
Anderson, Donald	Dell, Rt Hon Edmund	Irving, Rt Hon S. (Dartford)
Archer, Peter	Dempsey, James	Jackson, Colin (Brighouse)
Armstrong, Ernest	Doig, Peter	Jackson, Miss Margaret (Lincoln)
Ashton, Joe	Douglas-Mann, Bruce	Janner, Greville
Atkins, Ronald (Preston N)	Duffy, A. E. P.	Jay, Rt Hon Douglas
Atkinson, Norman	Dunlop, John	Jenkins, Hugh (Putney)
Bagier, Gordon A. T.	Dunnett, Jack	John, Brynmor
Barnett, Guy (Greenwich)	Dunwcody, Mrs Gwyneth	Johnson, James (Hull West)
Barnett, Rt Hon Joel (Heywood)	Eadie, Alex	Jones, Alec (Rhondda)
Bates, Alf	Edge, Geoff	Jones, Barry (East Flint)
Bidwell, Sydney	Edwards, Robert (Wolv SE)	Jones, Dan (Burnley)
Bishop, E. S.	Ellis, Tom (Wrexham)	Judd, Frank
Blenkinsop, Arthur	English, Michael	Kerr, Russell
Boardman, H.	Evans, Fred (Caerphilly)	Kilroy-Silk, Robert
Body, Richard	Evans, Ioan (Aberdare)	Lamborn, Harry
Booth, Albert	Evans, John (Newton)	Lamond, James
Bottomley, Rt Hon Arthur	Ewing, Harry (Stirling)	Lestor, Miss Joan (Eton & Slough)
Bray, Dr Jeremy	Fernyhough, Rt Hon E.	Lewis, Arthur (Newham N)
Brown, Hugh D. (Provan)	Flannery, Martin	Lewis, Ron (Carlisle)
Brown, Robert C. (Newcastle W)	Fletcher, Ted (Darlington)	Lipton, Marcus
Buchan, Norman	Ford, Ben	Lomas, Kenneth
Butler, Mrs Joyce (Wood Green)	Forrester, John	Loyden, Eddie
Callaghan, Jim (Middleton & P)	Fowler, Gerald (The Wrekin)	Lyons, Edward (Bradford W)
Campbell, Ian	Fraser, John (Lambeth, N'w'd)	McCusker, H.
Canavan, Dennis	Garrett, John (Norwich S)	McElhone, Frank
Carter-Jones, Lewis	George, Bruce	MacFarquhar, Roderick
Cartwright, John	Gilbert, Dr John	Mackenzie, Gregor
Clemitson, Ivor	Golding, John	Mackintosh, John P.
Cocks, Michael (Bristol S)	Gould, Bryan	McMillan, Tom (Glasgow C)
Cohen, Stanley	Gourlay, Harry	McNamara, Kevin
Coleman, Donald	Graham, Ted	Madden, Max
Cook, Robin F. (Edin C)	Grant, George (Morpeth)	Mahon, Simon
Corbett, Robin	Grocott, Bruce	Mallalieu, J. P. W.
Cox, Thomas (Tooting)	Hamilton, James (Bothwell)	Marks, Kenneth
Craigen, J. M. (Maryhill)	Hamilton, W. W. (Central Fife)	Marshall, Dr Edmund (Goole)
Crawshaw, Richard	Harper, Joseph	Marshall, Jim (Leicester S)
Cronin, John	Harrison, Walter (Wakefield)	Maynard, Miss Joan
Crosland, Rt Hon Anthony	Hatton, Frank	Meacher, Michael
Cryer, Bob	Hayman, Mrs Helene	Mellish, Rt Hon Robert
Cunningham, G. (Islington S)	Heffer, Eric S.	Mendelson, John
Cunningham, Dr J. (Whiteh)	Hooley, Frank	Millan, Bruce
Dalyell, Tam	Horam, John	Molyneaux, James
Davidson, Arthur	Hoyle, Doug (Nelson)	Morris, Alfred (Wythenshawe)
Davies, Bryan (Enfield N)	Huckfield, Les	Murray, Rt Hon Ronald King
Davies, Denzil (Llanelli)	Hughes, Rt Hon C. (Anglesey)	Newens, Stanley
Davies, Ifor (Gower)	Hughes, Mark (Durham)	Noble, Mike
Davis, Clinton (Hackney C)	Hughes, Robert (Aberdeen, N)	Oakes, Gordon
Deakins, Eric	Hughes, Roy (Newport)	Ogden, Eric
O'Halloran, Michael	Sandelson, Neville	Urwin, T. W.
O'Malley, Rt Hon Brian	Sedgemore, Brian	Wainwright, Edwin (Dearne V)
Orbach, Maurice	Selby, Harry	Walker, Harold (Doncaster)
Ovenden, John	Sheldon, Robert (Ashton-u-Lyne)	Walker, Terry (Kingswood)
Palmer, Arthur	Short, Rt Hon E. (Newcastle C)	Ward, Michael
Park, George	Silkin, Rt Hon John (Deptford)	Watkins, David
Parry, Robert	Silkin, Rt Hon S. C. (Dulwich)	Weitzman, David
Pavitt, Laurie	Silverman, Julius	Wellbeloved, James
Perry, Ernest	Skinner, Dennis	White, Frank R. (Bury)
Powell, Rt Hon J. Enoch	Small, William	White, James (Pollok)
Prescott, John	Smith, John (N Lanarkshire)	Whitehead, Phillip
Price, C. (Lewisham W)	Spearing, Nigel	Whitlock. William
Price, William (Rugby)	Spriggs, Leslie	Willey, Rt Hon Frederick
Richardson, Miss Jo	Stallard, A. W.	Williams, Alan (Swansea W)
Roberts, Albert (Normanton)	Stewart, Rt Hon M. (Fulham)	Williams, Alan Lee (Hornch'ch)
Roberts, Gwilym (Cannock)	Stoddart, David	Williams, Rt Hon Shirley (Hertford)
Robertson, John (Paisley)	Stott, Roger	Williams, W. T. (Warrington)
Roderick, Caerwyn	Strang, Gavin	Wilson, Alexander (Hamilton)
Rodgers, George (Chorley)	Summerskill, Hon Dr Shirley	Wilson, William (Coventry SE)
Rodgers, William (Stockton)	Taylor, Mrs Ann (Bolton W)	Wise, Mrs Audrey
Rooker, J. W.	Thomas, Jeffrey (Abertillery)	Woodall, Alec
Roper, John	Thomas, Ron (Bristol NW)	Woof, Robert
Rose, Paul B.	Tierney, Sydney	Wrigglesworth, Ian
Ross, Rt Hon W. (Kilmarnock)	Tomlinson, John
Ross, William (Londonderry)	Tomney, Frank	TELLERS FOR THE NOES:
Rowlands, Ted	Torney, Tom	Mr. James A. Dunn and
Ryman, John	Tuck, Raphael	Mr. John Ellis.

Question accordingly negatived.

Mr. Tony Newton (Braintree)

I beg to move Amendment No. 63, in page 19, line 3, at end insert: '(2A) In section 16 of the Taxes Act (dependent relative) for the references to £100 there shall be substituted references to £140 and for the reference to £145 there shall be substituted a reference to £200.'. In a sense this amendment is a follow-up to a number of amendments moved by myself and a number of my hon. Friends on 10th June 1974. It is also a follow-up to an amendment which I moved before the Recess, during previous discussions on the Finance Bill, and which was designed to help widows.

To my mind, at least, the group covered by this amendment—those, especially single women, looking after elderly dependent relatives—form a special case which deserves special consideration by the Committee.

It may be helpful if I remind the Committee of the background to this amendment and the discussions we had on similar matters last year. There are five additional special personal allowances. There is one for relatives taking charge of an unmarried person's younger brother or sister; there is the additional relief for widows and others in respect of children—we have been talking a great deal about that recently in connection with the problem of the single-parent family; there is the allowance for those helping to support dependent relatives, which is covered by this amendment; there is also the daughter's services allowance, and another allowance for blind persons.

Last year some of us proposed a series of amendments, some of which were designed to create a more uniform level of these special personal allowances and others of which were designed to increase each of them individually in various ways and to various extents. Since then the pressure which we put on the with regard to the matter last year has paid off in some important respects. There have been two increases in the additional relief for widows and others, in respect of children, which apply to single-parent families—one in last year's Finance Bill and one in the present Bill. The present Bill proposes an increase in the allowance for blind persons.

It would be churlish of me not to recognise and welcome what has been achieved and proposed by Ministers in respect of these two important allowances, for which we pressed hard last year.

If the Minister of State is to reply to the debate he will take on the task which the Chief Secretary had last year. I therefore remind the Minister of State of what the Chief Secretary said last year about these allowances. Exactly one year ago today he resisted our proposals for a general increase in these allowances on the ground that the whole problem needed much more coherent consideration than we were able to give to it. On that occasion the Chief Secretary said: It is right to say that the system of allowances is ramshackle. These so-called secondary allowances have grown up over the years and there is a clear need to examine them."—[Official Report, 10th June 1974; Vol. 874, c. 1311.] Later he referred to the whole system as being "rough justice". He developed his resistance to our proposals on the ground that because the system was ramshackle and provided rough justice he could not increase some of the allowances or iron out the obvious differences between them, and that it needed some much more carefully considered and prepared approach to the problem.

To be fair, under considerable pressure from both sides, the Chief Secretary modified that attitude later in the debate when he said that he would at least examine all these allowances during the consideration of the Bill, and especially the question of the additional personal allowances.

I always fall over backwards to be as fair as I can to the Chief Secretary. His reconsideration of the additional personal allowances for widows and others, including that for single-parent families, produced an amendment later in the consideration of the Bill. But we obtained nothing else. The other allowances were not adjusted.

On Report, on 17th July 1974, the grounds of resistance had changed. Clearly the objection to a piecemeal attack could no longer be advanced, because the Chief Secretary had himself adopted a piecemeal method of attack by changing one of the allowances. The argument was then put forward that it was administratively impossible, because of difficulties for the Inland Revenue, to change anything other than that one allowance at that time. Everything else was resisted on administrative grounds, including the allowance for blind persons, which is only now to be increased.

It is clear that the Minister of State—who has had this task wished upon him by the Chief Secretary—cannot reply using the arguments which his right hon. Friend advanced last year. Any objection to a piecemeal approach has clearly disappeared entirely, because two of the allowances have been increased on a piecemeal basis. If the additional personal allowance and the blind persons' allowances can be increased, there is no reason why increases cannot be considered for other allowances. My amendment seeks to increase one of them.

Similarly, although the argument against the amendment could be founded on administrative reasons at this stage, that is only because the Government must have taken a decision not to increase this allowance. Had the Government decided to include it in the original Budget proposals, there would have been no administrative problem on top of the other tasks for the Inland Revenue which flowed from the Budget proposals.

At the least we are entitled to ask that the Minister of State should not rely on either of these arguments but should acknowledge that a definite decision was taken not to help people which benefit from dependent relative allowances, and give clear reasons for having taken that decision.

This amendment is designed to help those who have taken on, or had wished on them, the task of caring for elderly or infirm relatives, such as a mother or mother-in-law. In addition to the allowance payable to people generally who are doing this, there is an extra allowance for single women looking after dependent relatives. In general, the allowance is £100, but for single women it is £145. My amendment seeks to preserve the difference between the allowances payable to single women and others—the Minister may wish to argue about that matter later. The amendment increases the figure from £100 to £140 in the one case and from £145 to £200 in the case of the single woman looking after a dependent relative.

6.0 p.m.

I do not pretend that this is an indexing amendment or anything of a subtle or sophisticated kind. I have not calculated the exact rise in the cost of living since the allowances were last increased and applied it to the figures. But it is some years since the allowances were increased, and no one can deny that we have rapid inflation. It would be difficult to suggest that the problem facing people in this situation has become any less difficult. Therefore, I suggest that it is time that we looked at the matter again on the basis of the figures in the amendment or, if the Minister of State has better figures to substitute, on the basis of his better figures.

I find it difficult to see what arguments—we shall no doubt learn in a few minutes—the Minister of State can deploy against this proposition. For example, I do not see how he can argue, as the Chief Secretary did to some extent last year, that the problem has been taken care of, because the Chancellor increased the allowance for all single people in the Budget. Clearly that does not meet the point. This is a special problem which demanded a special allowance in the past and cannot therefore be met by a generalised allowance now. It does not seem good enough to rely on what the Chancellor has done for the general body of taxpayers.

Similarly, it cannot readily be said that this proposal will primarily benefit those who are very well off. In fact, part of the provision is a fairly strict—indeed, perhaps over-strict, though I have not sought to change it in the amendment—limitation on the income which can be received by the dependent person before the allowance is lost. It does not go to the millionaire son looking after his millionaire mother. In that sense it does not seem that the Minister can apply the standard argument that we would be helping the wealthiest the most.

It cannot be said that this proposal would be helping the undeserving. Most of us have recently paid particular attention to the problems of single people, especially those who are looking after children. Most of the arguments which apply to children apply equally to very old people who often are not in receipt of any great income and therefore cannot look after themselves and have special requirements of various kinds. We cannot have the category to whom I am now referring separated in some way as being less deserving than the groups to which the Government have paid attention in the last year or so.

There is possibly the argument that an allowance which gives special benefit to single women rather than to single men who might be in a comparable situation is a bit odd in this day and age. I am more than willing to listen to an argument that that anomaly should be removed and that the whole allowance should go to the higher level.

We are all keen to see greater equality of treatment, whether under the Sex Discrimination Bill or in some other way, but however keen we may be to see the world change in terms of social attitudes we still have to deal with the world as it is. I guess that there are many more single women experiencing difficulty in this situation than other categories. Therefore, I think that for the moment it is reasonable to go on treating them specially in this way on purely practical grounds.

I suspect that when all is said and done the Minister will have relatively little to rely on except the cost. I have not got detailed and definite figures, but from figures given to me in Parliamentary Answers at this time last year, I judge the total cost of the amendment to be £15 million, or something of that order, Of that, I suggest that about £4 million or £5 million relates to the increase specifically proposed in the amendment for single women supporting dependent relatives. I accept that in present circumstances and with our great worries about the balance between the Government's expenditure and income, £15 million may be a large sum to advocate in a fairly casual way, but the £4 million or £5 million needed to help single women is not so large. If I had put down the slightly more modest amendment that I put down last year, the allowance would be raised to about half way between where it now is and what I am proposing, and the cost would be about £2 million or £21½million on last year's figures. But even that would be a useful and much needed gesture showing the Government's concern for this group of people.

I do not want to press the Minister too hard and, from my point of view, too irresponsibly at this time, but I hope that at least he will indicate a willingness to consider that special aspect of the problem—the single woman with a dependent relative. If he does not accept my increase from £145 to £200, I ask him to think about some smaller figure which would minimise the cost still further.

I believe that there is a strong case for a special allowance, and I refer particularly to the single woman aspect. I think that I am right in saying that this special allowance was introduced by the Foreign Secretary, then Chancellor of the Exchequer, in the late 1960s, and it has been consistently supported strongly by hon. Members on both sides of the Committee. For example, last year my hon. Friend the Member for Worthing (Mr. Higgins) spoke strongly in support of this proposition from the Opposition Front Bench. The former Member for Woolwich, West, the late William Hamling, whose absence from our debates we shall sorely miss, also gave us some support on this matter in the debate last year. There is a wide measure of agreement about these social problems and many people would welcome it if the Minister indicated some movement on this front in replying to this short debate.

I accept that the problem of the single-parent family is difficult, but there is the great danger that in these tax matters we shall fall into the trap of moving from fashion to fashion. The single woman with a dependent relative was the fashion of the 1960s. The single-parent family has become the fashionable concern of the 1970s. Both are genuine concerns, and I share them. I wholeheartedly support and welcome what has been done for the single-parent family—and especially the woman with children—but I cannot see any good reason why the Government should not, this year, extend some measure of additional help to the other group about which I have been talking, especially the single woman with a dependent elderly relative.

Mr. Robert Sheldon

The hon. Member for Braintree (Mr. Newton) in his concluding remarks, said that there was a fashion in sympathy. I accept the purpose of what he was saying then. From time to time some social work is carried out which brings to light anomalies and deficiencies of which we were not aware. We are grateful for the understanding that we get about many of these problems, and we need to react to them. We might in certain circumstances over-react, but I take the point made by the hon. Gentleman.

The intention behind the amendment is to increase from £145 to £200 the allowance for single women supporting dependent relatives and the maximum allowance for other claimants from £100 to £140.

The hon. Gentleman went into the question of the cost. As usual on these matters, he is very near the figure that we have produced. Our estimate is that the cost would be £13 million for 197576 and £16 million for a full year. I compliment the hon. Gentleman on his research into these matters.

The most important part of what the hon. Gentleman said concerned single women and the sympathy that they obviously evoke from all of us in the way that some—more in the past than at present, but still continuing—have devoted their lives to the care and maintenance of parents and have frequently sacrificed their marriages into the bargain.

This was much more the situation years ago than it is now, I am glad to say, but we still have cases of this kind. It is right that we should be aware of them and as understanding as possible. We know now, from the differences that exist in the way people behave, that single men also have this problem, to an increasing extent. It used to be the province of the daughter to do this kind of work, but it is now less so. Due to smaller families it is frequently a son who has to bear this kind of burden, and also couples.

The situation is therefore not quite the same as that which existed some years ago. Then we had to take account of the problems caused by the lower earnings of single women. Only recently has there been a determined move to put this right. One of the main purposes of this allowance was to take into account the fact that if a single woman were supporting a dependent relative, she was supporting that relative on an income that was likely to be lower than that of a man placed in the same situation. There is still some-think in this argument. We must not forget that although we have passed legislation we are still a long way from equality of earnings. However, the gap is diminishing and we hope that it will continue to diminish. Therefore, although there is a case for an allowance, a case has not been made out for increasing it.

I understand the case for increases in the secondary allowances, in view of the time that has elapsed since many of them were last changed. The dependent relative allowance, except where the claimant is a single woman, was last increased in 1960. Consequently, over the years there has been a greater tendency for secondary allowances to fall behind the value that they had when they were last fixed. By contrast, primary allowances are increased more frequently, although, as we heard in recent debates there is no natural linkage with prices or any other factors.

Over the years, Chancellors have taken the view that the preferable course is to concentrate attention on the single and married allowances and the child tax allowances. In this way, either the tax thresholds in general or the tax thresholds for those with families are increased over a broad sphere. Any general increase in tax thresholds benefits those who are entitled to one of the secondary allowances as well as those who are not. This is a better way to use the resources available.

I note the compliments that the hon. Member for Braintree paid in respect of the two increases in the additional allowances for single-parent families.

The case for the general dependent relative allowance is lessening. The great majority of those who are looked after as dependants qualify for the State pension. The State retirement pension for the single person is £11.60, and it is shortly to be increased. This is a pension that most dependent relatives are qualified to receive. Naturally, attention has been focused on assisting the person for whom the younger taxpayer is providing. This has been continuing, and this is where the greatest attention should be directed.

Therefore, there is a case for these allowances, but the case has not been made out for increasing them. I ask the Committee to reject the amendment.

6.15 p.m.

Mr. David Howell (Guildford)

The Committee will be grateful to my hon. Friend the Member for Braintree (Mr. Newton) for raising this matter and for putting the case lucidly.

The Minister of State has addressed himself seriously to a section of the community which attracts all our sympathies. There is nothing more debilitating and difficult for an elderly single person, perhaps, for an elderly lady than to find that she has a still older relative—perhaps her mother, mother-in-law or fatherin-law—who has increasingly to be looked after, dressed and undressed and given all the attentions demanded. This is a harsh and torturing way of life, and it is one that attracts our sympathies. We need to look carefully at any propositions for making it easier in any of the variety of ways that are at the dis- posal of Parliament and the Government, whether through the social security system or through tax allowances.

Although the Minister of State made a serious speech presenting the points as they struck him, I was surprised to hear him say that the case is now decreasing because the benefits accruing to infirm, dependent relatives are increasing. That is not quite such a valid case as he made out. We are dealing with allowances that were fixed a long time ago. As the Minister said, the £100 deduction for dependent relatives was fixed in 1960. Although we do not want to get into arguments about indexing, it makes nonsense of his point that there is not a valid case for increasing these allowances when we compare the sum of £100 in 1960 with the same figure now.

The £145 deduction from total income, which my hon. Friend the Member for Braintree would like to increase to £200, was set out in the Finance Act 1971 and was fixed in that year at that level. I do not know what has been the total inflation rate since the 1971 Finance Act—I do not have that at my fingertips—but I do know that in the past year currency has depreciated by about a quarter. Therefore, one way and another the value of that allowance has shrunk mightily.

We shall have to press the Minister of State again on his argument that, on the one hand, there is a valid case for special allowances but, on the other, there is not a valid case for increasing them and adjusting them to modern, sadly depreciated values of the pound and of the incomes against which these deductions would be made. The Minister is not on very secure ground and the case he has put is not a substantial one.

The Minister has said that the cost would be £16 million. Conservative Members have taken the view—and we shall take it throughout the Committee—that we should not put forward proposals which would weaken still further what many people believe to be the crumbling deficit situation that the Government face and the enormous public sector borrowing requirement that they have generated over and above the deficit. Indeed, in other debates we have argued, and we shall continue to argue, that any proposals we put forward can and must be offset by tax changes elsewhere. That applies particularly to our arguments on the high rate of value added tax. Therefore, we recognise that £16 million is, in the delicate balance of the Government's somewhat shaky finances, a substantial sum.

If I were getting on in years and struggling to look after someone even older, facing the sort of difficulties I have described, I would have reason for feeling a little bitter that we could not find the £16 million, or the lesser sum for single women, when I compared that with the millions of pounds which we let run through our fingers in Parliament through Bills such as that which we were discussing to look after someone even older, food, postal services, or railways.

Mr. Newton

There was one point on which I meant to interrupt the Minister but on which perhaps I may interrupt my hon. Friend. I do not think that we have yet had the figure for the cost of the single women part of the amendment as opposed to the total cost of the amendment. However, I see now that the Minister does not have that figure with him, and I apologise.

Mr. Howell

We shall clearly not get that figure this evening. However, as my hon. Friend was so accurate in his figure of £15 million, although the Minister says it is £16 million, my hon. Friend's estimate of £5 million was probably just as accurate. Perhaps we are talking of £5 million or £6 million.

Mr. Lawson

Does not my hon. Friend agree that the true costs may be even less, because those who are looking after elderly relatives are saving the taxpayer considerable sums which otherwise would have to be paid out in various other benefits to these elderly persons if they were not looked after in this way?

Mr. Howell

My hon. Friend is making a good case. The devotion which the younger or middle-aged generation show to their elderly relatives, their refusal to allow a change in the arrangements, whereby they would go into a home or something like that, and their insistence in looking after them, is very commendable and obviously saves additional burdens on public resources, so the net cost level might be even lower.

Mr. George Cunningham

Does not the hon. Gentlemen agree, however—I am sorry if this point has been made when I was not in the Chamber—that there is a means by which a person can obtain tax relief on any expenditure he has in respect of a dependent relative, namely, by taking out a deed of covenant in favour of that relative? Then the amount of income which can be covered and is, therefore, tax deductible for this purpose, is not limited to £100 in respect of a normal case and £140 is respect of any special case. There is a means of getting the tax relief.

Mr. Howell

I am not so sure that the deed of covenant approach is, first, as easy or as simple for some of those about whom we are talking or, second, that it necessarily meets the case I am talking about.

I agree with the Minister that we must approach this problem from a number of angles. There are a number of ways in which we can bring relief to people who have to look after elderly people who are living in their homes—have to care for them and have to incur the expense and drudgery of doing so. In better times than the times this nation is in now, I would argue vigorously that this is one of the ways that we should use, as well as any other ways which can be devised. We are in very bad times, when every penny counts and the kitty is empty, but many millions of pounds are pouring out into other areas of public spending which many people would feel have a lower claim on our sympathy and a lower priority than what we are discussing.

We do not intend to press this amendment; we merely wish to register our view that if this time of stringency, of our economic retrenchment, were not quite so much at the top of the agenda, we should consider this a very important priority indeed. Even now we recognise the feelings of those who would claim that this is a more important priority than some of the other expenditure being so cavalierly incurred by the Government. We recognise the contribution of my hon. Friend the Member for Braintree on this matter. We have put a marker on the vital importance of this sector and of those who would have benefited by the amendment if it had been carried. We leave the matter there. In view of what I have said, perhaps my hon. Friend will say something about his attitude to the amendment.

Mr. Newton

I want to make only two brief comments. First, I endorse very strongly what has been said by my hon. Friend the Member for Guildford (Mr. Howell) about the internal inconsistency of the Minister of State's reply. One cannot really argue, at one and the same time, that there remains a valid social case for these allowances, even if they affect diminishing numbers, and that it is right to leave them undisturbed for 15 years—or for four or five years, according to the part of the allowance one is considering—at a time of very rapid inflation, which on present form is halving the value of money about every four years. If there is a useful social purpose to be performed by these allowances, to allow them to drop in value at the kind of pace represented by present inflation seems to be a policy which the Minister can scarcely defend.

I accept much of what the Minister said about the way in which, as the world changes, the original justification for some of these allowances will change. But it seems to me that the Minister can get around the problems that that creates for him by making sure that the qualifying income limits for the person being looked after are kept below some appropriate figure—presumably the normal level of national insurance pension. Then one would be concentrating the help on the group which reflect the era that the Minister argues is disappearing—those who have special needs which the existing system is not meeting as it is meeting them for a growing number of people. The thing would phase itself out as the social pattern changed. Meanwhile, one would be continuing to meet the social need, which the Minister recognised.

Like my hon. Friend, I do not think that it would be right to press this matter to a vote. At this stage the appropriate thing to do, without withdrawing anything I have said about my concern on this matter, is to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[MrS. LENA JEGER in the Chair.]

Mr. Lawson

I beg to move Amendment No. 53, in page 19, line 8, at end add: '(4) In section 10 of the Taxes Act (Children) for any reference to £115 there shall be substituted a reference to £240'. This amendment is very similar to an amendment which was very ably moved by my hon. Friend the Member for Norfolk. South (Mr. MacGregor) on this very day last year. I am glad to see him present today. I hope that he will take part in this debate.

The point of the amendment is that under the Income Tax Acts, the law as it now stands provides that if a child has an income, for every pound of income over £115 a year the parent loses £1 of the child allowance in respect of that child, until eventually, if the income rises sufficiently, the child allowance is extinguished altogether. By the amendment I seek to raise that limit to £240.

This is a very modest amendment. No doubt the Minister of State will tell us what he estimates would be the cost of it. My estimate is that it cannot he more than £5 million. I base that on the fact that when the Chief Secretary replied to my hon. Friend last year, he gave the cost as in the range of £3½ million to £4 million a year. The rate of inflation, even under the present Government, has not been so great that the cost this year could be more than £5 million. I can put that £5 million in its context—if it is £5 million—by saying that the present Government are spending public money at a rate of £1 million every 10 minutes, so at the very worst this would be less than an hour's expenditure spread over a whole year.

The child's income limit was introduced originally in 1920. I shall not weary the Committee by going right back to 1920. However, in 1952–53 it was set at £85. At that time—and there is logic in this—it was the same as the child allowance. In 1957–58 it was raised to £100, which again was the same as the child allowance for a child of 11 years of age or under. In 1963–64 it was raised to £115, which again was the figure to which the child allowance was then raised. Since then something very strange has happened. The child allowance has progressively increased, so that it is now £240 for a child of 11 or under, but the child's income limit has remained stuck at the 1963–64 level of £115.

6.30 p.m.

In a Written Answer a short time ago the Minister of State, I think in reply to my hon. Friend the Member for Beeston (Mr. Lester), said that if the 1963–64 child's income limit had kept pace with inflation it would now be about £275. Since the child allowance is actually only £240, this shows the extent to which the child allowance has failed to keep pace with inflation. But for the child's income limit it has not changed at all, and is now worth very much less. This is a modest amendment, inasmuch as what is proposed is that, as heretofore, it should be the same as the child allowance, namely, £240.

The present meagre income limit is causing very great hardship and very great ill-feeling, among admittedly a minority of the population, but they should not be disregarded on that account. In particular, it affects students who try to earn a little money in the vacation. What happens is that for every pound they earn over the £115 limit, they are in effect—if they are good enough to make good the loss which the parent suffers through being deprived of that amount of the child allowances—being taxed straight away at the marignal rate of the top slice of the parent's income—at the very least 35 per cent.—for every pound over £115. This is very steep and thoroughly inequitable.

The inequity is at its highest in the case of students who are on sandwich courses. I have had representation in particular from constituents whose children are in that position. The student on a sandwich course has to work as part of the course. It is an integral part of it. By virtue of the student doing this, and having an income, the parent is losing the child allowance progressively, and a very considerable burden arises as a result.

I happen to believe that probably, given the state of our economy, we are too generous in our treatment of students. Probably we should look seriously at the question of student grants with a view to turning them partially into student loans. I am convinced that we should not have this harsh discrimination, however, against these students who are either on a sandwich course or wish to work to help their parents who are often not very wealthy. It is not equitable to single out for harsh treatment those students who earn money by working during the vacations.

It is not merely university students, nor incidentally, is this a party political point. I was very struck, in the Second Reading debate on this Finance (No. 2) Bill by the speech from the hon. Member for Thornaby (Mr. Wrigglesworth), when he drew attention to this very real hardship and very real inequity, and asked the Chancellor of the Exchequer to do something about it. He quoted a statement from one of his constituents which referred to the hardship in rather vivid and apt language. This constituent wrote to the hon. Member and said that the ordinary children's paper rounds and weekend jobs are being sacrificed on the altar of fiscal drag."—[Official Report, 8th May 1975; Vol. 891, c. 1713.] This sort of figure, £115 in a year, is what might be earned for a paper round. Probably much more than that could be earned for a paper round. It really is extremely harsh to keep the limit at that level. One wonders why it is being kept at that level.

In this connection it is interesting to consider what the Chief Secretary to the Treasury said in answer to my hon. Friend the Member for Norfolk, South in the debate in June last year on the 1974 Finance Bill. The Chief Secretary was not concerned about the earned income of the child. He fully conceded the point as far as earned income was concerned. What he was worried about was investment income, although he fully conceded the trivial cost involved. He suggested in particular the case of a grandparent making a covenant to a child under which the child would have an investment income.

This aspect must be considered, but there are a number of points arising in respect of investment income. First of all, one is talking about a very small investment income. This amendment is only related to the difference between £115 and £240. If there are big investment incomes over £240, the excess over £240 will not be affected at all by this proposed amendment. The £115 is the sort of income that nowadays might be expected on a capital of £1,000. It is not a vast capital sum at all. The proposed limit of £240 is the sort of income that might today be expected very roughly on a capital sum of £2,000. This £2,000 capital which a child might have is the same as the amount at which it originally stood in 1963–64, assuming that the £115 then represented a yield of something like 5 per cent.—although because of the subsequent rate of inflation, was then worth a great deal more than it is now. So it could be argued that this amendment is over-modest as it is not really a full return to the situation in 1963–64.

The reason for the Chief Secretary being worried about investment income was that, as he said at the time, the law was about to be changed concerning children's investment income. He said that the Government were about to bring back aggregation, and that this would he done in the second budget of 1974, so that it was foolish before then to start making any changes affecting a child's investment income when other changes of a different kind were to be made in a few months' time. But the second Budget of 1974 came and went, and there was no aggregation. The Finance (No. 1) Bill of 1975 came, and again there was no aggregation in it. It was understood that it was coming in the current Finance (No. 2) Bill, but again there was no aggregation. One cannot go on waiting and waiting to see what the Government intend to do about aggregation. This excuse for postponement is not a valid one. The Government must look at the issues on their own merits.

Although the Government have not stated why they have postponed aggregation, there is a very good reason why they should have done so. In the intervening period they have introduced the capital transfer tax. This links up with the present amendment in more than one way. In the first instance, under the capital transfer tax, on the capital itself there is no aggregation between the parent and the child for if the parent gives money to the child, however young the child may be, that is a taxable, chargeable, capital transfer. They are regarded as separate individuals for capital purposes. Therefore it would be wholly illogical if they were regarded as one for the purposes of income arising from the capital. One cannot logically have non-aggregation, and therefore liability to capital transfer tax, on capital, and non-aggregation when it comes to the income from that capital.

But it affects the situation also in another way. The Chief Secretary was very worried about gifts of capital to children, whether by covenant or in other ways, which would enable them to have an investment income and would result in less tax being paid. This will now be deterred by the capital transfer tax, which was not in force at the time of our debate a year ago. My hon. Friend perscipiently pointed this out at the time. Perhaps I may quote from the Second Reading debate last year because my hon. Friend put the point specifically to the Chief Secretary that once the capital transfer tax was in force this would deal with the problem. It would deter the transfers about which the Chief Secretary was so concerned and, if some did take place, a tax liability would arise from the capital transfer and the Revenue would still get its money.

The Chief Secretary then said: I take the point that if the grandparent was caught by the gift tax that might dissuade him from making any transfers. Therefore, that again might be the occasion for increasing the allowance."—[Official Report, 10th June 1974; Vol. 874, c. 1288.] The capital transfer tax is on the statute book. The grandparent is caught. Therefore, by the Chief Secretary's own admission, this is now the time for increasing the allowance. I beg the Minister of State to be consistent with what his close friend and colleague the Chief Secretary said in our debate a year ago. The Chief Secretary said then that this would be the occasion to increase the allowance. Now that the events which the right hon. Gentleman discussed then have come to pass, the Minister of State ought to feel honour bound to accept this amendment.

I hope that the hon. Gentleman will accept this very modest amendment and that the Opposition will not need to press it to a Division. On all sides of this House, the cogency and force of the amendment have been agreed both on Second Reading and in our debates last year. Moreover, its cost would be even smaller than the cost of the previous amendment that we debated.

6.45 p.m.

Mr. Ronald Bell (Beaconsfield)

I support the amendment, and I regret that I missed the first two minutes of the speech of my hon. Friend the Member for Blaby (Mr. Lawson), who was called earlier than I expected. This is an amendment which can be justified on the ground of inflation alone and the change of the value in money.

I hope that the Minister of State will not offer Treasury reasons for rejecting it, because it is now a matter of manifest justice. A Member of Parliament is probably well served by his post in judging a matter of this kind. When an hon. Member begins to find his constituents complaining that something is unjust he knows that the time has been reached when the legislature should look again at its arrangements. I find—and it is understandable—that someone, a student, can earn £115 very quickly nowadays.

I am sure that my hon. Friend the Member for Blaby made out a very good case for the generality of his amendment, which would include unearned income as well as earned income. I am especially concerned, however, with earned income. If it should be the case that the Government, as symbolised in the person of the Minister of State, find it disagreeable to meet the whole of my hon. Friend's case, let me remind them that we are, after all, in Committee and that there will be an opportunity on Report for the Government themselves to propose an amendment limited to earned income. That would not worry me greatly, although I think that a logical and just case can be made out for the whole of the amendment. In relation to earned income there can be no defence against the argument of my hon. Friend the Member for Blaby.

If £115 was right when it was the sum specified, a larger sum must be right now. In the computation for grant to a junior member of a university vacation earnings are not counted, and it seems very odd that, though a junior member of a university may earn more than £115 in his vacation and that is not counted as income diminishing his local authority grant, his earning more than £115 increases the burden on his parents in that he ceases pro tanto to be a dependent child. Equally, of course, if he is over 18 years of age, as students nearly always are, there is no aggregation of the earned income, and so the earnings are not subject to income tax. Therefore, this provision in our legislation appears to be something of an anomaly in relation to earned income and, as I say, on the sole ground of the change in the value of money an increase would be appropriate.

I ask the Minister of State to give careful consideration to this amendment. If he cannot accept it now let the Treasury mull it over and move an amendment at a later stage to deal with the earned income of children, whether or not they are over the age of 18, so as to bring this provision up to date and to make it conform to the other tax provisions relating to the earnings of children.

Mr. John MacGregor (Norfolk, South)

I support the amendment, and I thank my hon. Friend the Member for Blaby (Mr. Lawson) for bringing it forward since, as he said, I moved a similar amendment on this very day last year. My remarks will be brief, because my hon. Friend has covered most of the points.

Were I not becoming cynical about our debates on Finance Bills I should have expected the Government to be in honour bound to accept this amendment. I believe that we have a cast-iron case in proposing it. My hon. Friend the Member for Blaby made one quotation from the reply of the Chief Secretary to our debate last year. Perhaps I might make one further quotation. A little earlier in that same speech, the right hon. Gentleman said: I should like to see the allowance increased because it has been well overtaken by inflation over the years …"—[Official Report, 10th June 1974; Vol. 874, c. 1287.] The right hon. Gentleman went on to mention two problems to which my hon. Friend the Member for Blaby referred—capital transfer tax and aggregation. However, in both these we have had since then significant developments which mean that the right hon. Gentleman's arguments against us last year no longer apply.

Before coming to those developments perhaps I might make two other remarks. If I heard my hon. Friend the Member for Blaby aright, he said that on an indexed basis the figure today should be £275 compared with what it was in 1963–64. At this time last year, in order to frame my own amendment, I tabled a similar Question to that referred to by my hon. Friend, and I was told that the appropriate figure at that time was £215. Thus we see the importance of indexation in these matters. Between 1963–64 and 1973–74, the figure rose from £115 to £215. Between last year and this, it should have risen to £275.

That was one of our first indexation debates on a Finance Bill, and I remember saying that we were perhaps ahead of public opinion and, I hoped, were leading it. Judging from the number of indexation debates on tax allowances and thresholds that we have had since then, not only has the argument grown here in this Chamber but public opinion appears to be following us.

Before coming to the arguments of the Chief Secretary last year, the other main points that I wish to bring out relate to earned income and student earnings. I wish to add two other matters to those already raised on this score.

Many parents are putting the point to me that they are severely disadvantaged by this limit of £115 since it is very easy for a student to earn that sort of figure in the summer vacation without working all that many weeks. I believe that unless we raise this limit we shall find, as in so many other tax measures, that we are providing an incentive to fiscal immorality and that many earnings will not be declared for tax. That is unwelcome.

The second point I wish to raise in relation to student earnings is that keeping the limit where it is, coupled with the fact that parents above a certain level of means have to contribute significantly to the cost of keeping children at university, because with the application of the parental means test they do not get grant, leads to certain groups being hit in every way. They are being forced to pay the total, or a very high proportion, of the cost of university education for their children. They find that if their children try to earn during the summer in order to alleviate the burden on their parents their tax allowances are similarly reduced. Many parents may pay a high rate of tax and the marginal rate of tax on the child's earnings is very high. Because of inflation, the refusal to raise the allowance, and the impact of the parental means test at a not particularly high level of income, this group is being heavily hit.

I turn to the two significant developments. The first is the capital transfer tax, which my hon. Friend the Member for Blaby has dealt with very well. He made the point that the Chief Secretary last year said that having got that on the statute book this might be an occasion for increasing the allowance. It is not necessary to add much to that remark.

I wish to deal briefly with aggregation, because the Chief Secretary spent some time dealing with it last year. To put that forward as a reason for not increasing the allowance now is irrelevant, first because we now have no idea when that particular proposal will come on to the statute book. Meanwhile, this injustice, which the Chief Secretary last year accepted, is continuing.

Secondly it is irrelevant because it would be perfectly possible to deal with the problem when the aggregation of children's income comes forward, if it does. It would be possible to introduce it for investment income by some special measure in the set of proposals put forward on aggregation of investment income. One assumes that it would not be the intention of the Government to apply a limit of this sort on earned income if aggregation were introduced, because if that were done the parents would again be hit both ways. They would find that the highest rate of tax that they would pay would apply to the earned income of their children and at the same time their allowances would be reduced. I assume that it would not be the intention of the Government, if aggregation were introduced, to apply this limitation to earned income. Therefore, it would only apply to investment income. It would be perfectly easy to deal with that when the proposals were introduced.

The two arguments put forward last year no longer have force, because of the changes that have taken place since. Therefore, I hope that the Minister of State will be able to remove my cynicism on this occasion.

Mr. Sheldon

I am always interested in removing cynicism. I have always taken the view that time spent in the House tended towards the increase not of cynicism, but of understanding. Cynicism may be an early growth, but it does not normally last long and I hope that that will prove to be true of the cynicism felt by the hon. Member for Norfolk, South (Mr. MacGregor).

The income tax child allowance has three rates—£240 for a child under 11 years; £275 for a child between 11 and 16 years; and £305 for a child over 16 years. What the hon. Member for Blaby (Mr. Lawson) said at the outset of his speech was quite right: if the child's income is less than £115, the tax allowances are available in full. For every £1 of that child's income greater than £115, £1 is withdrawn from the child's allowance.

The amendment moved by the hon. Member for Blaby seeks to increase the child's income limit from £115 to £240. The child allowance that exists at present is for the dependent child. Therefore, it is right that it should be withdrawn gradually either in the way that is enshrined under present tax law or in some other way. It must be generally agreed that it must be withdrawn in that way as the dependency of the chill diminishes. The removal of that allowance is on the pound for pound basis.

It must be remembered that the child's income before the allowance is wholly lost goes up whenever the allowance is increased. I shall express that in another way which might make the point clearer. My explanation is based on figures that can be calculated by anybody. The allowance is not entirely lost until the child's income reaches the level of £355 for a child under 11 years; £390 for a child from 11 to 16 years; and £420 for a child older than 16 years. Up to those levels there is still some benefit for the child from the child allowance.

I shall express the point in another way in order to bring to bear on this matter as many views as I can. The first £355, £390 and £420 of the child's income, depending on age, is wholly exempted from tax. Even in these days those are not trivial sums and allowances are still available within these limits.

The increase in the limit sought is for both earned and unearned income. I should like to put the bon. Member for Blaby right on the matter of cost. The cost will be £12 million for the full year and £10 million for 1975–76.

Mr. Lawson

I intervene to correct an error I made, but to correct it in a way that the Minister does not imagine. I said that the Chief Secretary last year used the figure of £3½ million to £4½ million. I was speaking from memory. The Chief Secretary in fact said that it would be £3 million in a full year … and about £2½ million in 1974–75."—[Official Report, 10th June 1974; Vol. 874, c. 1287.] How on earth can the Minister of State tell us that the cost of the amendment has gone up from £3 million last year to £12 million this year?

Mr. Sheldon

I should like to look at the question that elicited that answer to see what differences there might be in the question and answer. These are the figures that I have. I shall repeat them. They are £12 million in a full year and £10 million in 1975–76. This assumes about 160,000 taxpayers being affected.

Mr. Ronald Bell

Has the Minister of State a division of that figure into the cost of the concession for earned income and unearned income?

Mr. Sheldon

I regret that I do not have that break down before me.

I turn to the substance of the arguments put by the hon. Member for Blaby, the hon. Member for Norfolk, South and the hon. and learned Member for Beaconsfield (Mr. Bell). I understand very well that there is a case—I have read the debates that took place in Standing Committee—for moving in the direction of the amendment when the parent-child aggregation has been brought back, so that any changes will affect only the child's earned income, given that child allowances will in any event begin to disappear in 1977. But there is something to be said for leaving things unchanged until the whole system alters.

Here I reply to the hon. Member for Norfolk, South. It certainly is our intention to proceed with legislation on aggregation. One of the problems if we try to make these changes in advance of aggregation is that of avoidance concerning unearned income, which was discussed in the debates upstairs on the previous Bill. We see the case for increasing the child's income limit when we bring about the changes that we intend to make.

The child's tax allowances have a limited life. We shall be seeing the passage of the Child Benefit Bill. Both the child tax allowances and the family allowances are to be replaced by the new child benefit scheme. These matters will need to be taken into account. Obviously we shall be considering the views that have been expressed. There is a need to consider them in the light of the new system that is to replace the present one. We accept that the case has been made for a further look at this once we get the new scheme into operation.

7.0 p.m.

Mr. Lawson

I have been extremely disappointed by the Minister of State's reply. He was far less forthcoming than the Chief Secretary was in dealing with the similar amendment last a year ago. I do not want to be unkind, but it seems to me that he was perhaps not as well briefed as he might have been. In the first instance, he referred to the earlier discussions on the previous amendment upstairs, when in fact we had that amendment, like this, on the Floor of the House and not upstairs in Committee.

Secondly, the Minister quoted a cost of £12 million, when last year we were given by the Chief Secretary, a senior Minister at the Treasury, the figure of £3 million. The hon. Gentleman said that he would have to see whether it was a different question. It was slightly different. The amendment then was to put up the child allowance by £100, from £115 to £215. This year, because of inflation, it is to put it up by £225, from £115 to £240. This difference of £25 cannot possibly mean a fourfold difference in cost. It cannot possibly be right that an increase of 25 per cent. would make an increase in the cost of 300 per cent. Therefore, the Minister of State has unfortunately on this occasion been badly briefed and has not been able to give us the help that he might otherwise have been able to give.

This is a hard case, which, as my hon. Friend the Member for Norfolk, South (Mr. MacGregor) and my hon. and learned Friend the Member for Beaconsfield (Mr. Bell) have described, is causing a considerable sense of injustice and grievance among the parents—not particularly well-off—of children at university and other places of higher and further education, in particular, those children on sandwich courses. I am sorry that the Minister made no reference to the point about sandwich courses. The children on such courses are particularly hard hit.

I do not want to detain the Committee any longer, but in view of the wholly unsatisfactory nature of the Minister's reply I must press the amendment to a Division and ask my hon. Friends to support me.

Mr. Ronald Bell

I, too, am most disappointed by the Minister's answer. One has not often heard a less satisfactory answer to a debate. I felt that the Minister virtually read without alteration the brief supplied by the Treasury, and that not a word was changed by the debate.

If the Minister wants justification for the urgency and importance of the amendment he will find it in his own figure of £12 million as its cost, compared with the cost of £3 million for an only slightly smaller increase than a year ago. The reason can only be that the higher scales of tax have come down to apply to many people with much lower real earnings, because of inflation, and therefore the cost in money has gone up, because many people with more modest incomes are disadvantaged by this system. That is something to which the Minister has not addressed his mind.

I can see no reason why, because the Government have it in mind to introduce a new system of allowances for children in perhaps two or three years' time, an amendment to this effect should not be accepted now to provide for the situation in the next two or three years. What is the difficulty? It will not prejudice the changes which are brought about later. It will avoid injustice to many parents during the next two or three years. I find it surprising that the Minister did not have a word to say about that. I hope that the amendment will be pressed to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 169, Noes 193.

Division No. 223.]	AYES	[7.07 p.m.
Adley, Robert	Harvie Anderson, Rt Hon Miss	Parkinson, Cecil
Arnold, Tom	Hastings, Stephen	Pattie, Geoffrey
Awdry, Daniel	Hawkins, Paul	Penhaligon, David
Bain, Mrs Margaret	Henderson, Douglas	Percival, Ian
Beith, A. J.	Hicks, Robert	Pink, R. Bonner
Bell, Ronald	Holland, Philip	Powell, Rt Hon J. Enoch
Benyon, W. L.	Hooson, Emlyn	Prior, Rt Hon James
Berry, Hon Anthony	Hordern, Peter	Rathbone, Tim
Biffen, John	Howe, Rt Hon Sir Geoffrey	Rees, Peter (Dover & Deal)
Blaker, Peter	Howell, David (Guildford)	Renton, Rt Hon Sir D. (Hunts)
Boscawen, Hon Robert	Howell, Ralph (North Norfolk)	Ridley, Hon Nicholas
Bowden, A. (Brighton, Kemptown)	Hunt, John	Rifkind, Malcolm
Brittan, Leon	Hutchison, Michael Clark	Roberts, Wyn (Conway)
Brotherton, Michael	Irvine, Bryant Godman (Rye)	Ross, Stephen (Isle of Wight)
Brown, Sir Edward (Bath)	James, David	Rossi, Hugh (Hornsey)
Bryan, Sir Paul	Jenkin, Rt Hon P (Wanst'd&W'df'd)	Sainsbury, Tim
Buchanan-Smith, Alick	Kaberry, Sir Donald	Scott-Hopkins, James
Budgen, Nick	Kershaw, Anthony	Shaw, Giles (Pudsey)
Bulmer, Esmond	Knight, Mrs Jill	Shepherd, Colin
Burden, F. A.	Knox, David	Silvester, Fred
Butler, Adam (Bosworth)	Lamont, Norman	Sims, Roger
Carlisle, Mark	Langford-Holt, Sir John	Sinclair, Sir George
Chalker, Mrs Lynda	Latham, Michael (Melton)	Skeet, T. H. H.
Clark, William (Croydon S)	Lawrence, Ivan	Smith, Cyril (Rochdale)
Clarke, Kenneth (Rushcliffe)	Lawson, Nigel	Speed, Keith
Clegg, Walter	Le Marchant, Spencer	Spicer, Michael (S Worcester)
Cooke, Robert (Bristol W)	Lloyd, Ian	Sproat, Iain
Cope, John	Loveridge, John	Stainton, Keith
Cordle, John H.	MacCormick, Iain	Steel, David (Roxburgh)
Costain, A. P.	McCrindle, Robert	Stewart, Donald (Western Isles)
Crawford, Douglas	McCusker, H.	Stewart, Ian (Hitchin)
Critchley, Julian	Macfarlane, Neil	Stokes, John
Crowder, F. P.	MacGregor, John	Stradling, Thomas, J.
Dean, Paul (N Somerset)	McNair-Wilson, M. (Newbury)	Taylor, R. (Croydon NW)
Dunlop, John	Madel, David	Taylor, Teddy (Cathcart)
Durant, Tony	Marshall, Michael (Arundel)	Tebbit, Norman
Edwards, Nicholas (Pembroke)	Mates, Michael	Thomas, Dafydd (Merioneth)
Ewing, Mrs Winifred (Moray)	Maxwell-Hyslop, Robin	Thompson, George
Fairbairn, Nicholas	Meyer, Sir Anthony	Townsend, Cyril D.
Fletcher, Alex (Edinburgh N)	Miller, Hal (Bromsgrove)	Tugendhat, Christopher
Fletcher-Cooke, Charles	Mills, Peter	Viggers, Peter
Fookes, Miss Janet	Miscampbell, Norman	Wainwright, Richard (Colne V)
Fowler, Norman (Sutton C'f'd)	Mitchell, David (Basingstoke)	Wakeham, John
Gardiner, George (Reigate)	Moate, Roger	Walker-Smith, Rt Hon Sir Derek
Gardner, Edward (S Fylde)	Molyneaux, James	Wall, Patrick
Glyn, Dr Alan	Monro, Hector	Watt, Hamish
Goodhart, Philip	Moore, John (Croydon C)	Weatherill, Bernard
Goodhew, Victor	Morgan-Giles, Rear-Admiral	Welsh, Andrew
Gow, Ian (Eastbourne)	Morrison, Charles (Devizes)	Whitelaw, Rt Hon William
Gower, Sir Raymond (Barry)	Mudd, David	Wiggin, Jerry
Grant, Anthony (Harrow C)	Neubert, Michael	Wigley, Dafydd
Gray, Hamish	Newton, Tony	Wilson, Gordon (Dundee E)
Grimond, Rt Hon J.	Normanton, Tom	Winterton, Nicholas
Grylls, Michael	Nott, John
Hall-Davis, A. G. F.	Osborn, John	TELLERS FOR THE AYES:
Hamilton, Michael (Salisbury)	Page, John (Harrow West)	Mr. Russell Fairgreave and
Hannam, John	Page, Rt Hon R. Graham (Crosby)	Mr. Michael Roberts.
Harrison, Col Sir Harwood (Eye)	Pardoe, John
NOES
Allaun, Frank	Bray, Dr Jeremy	Craigen, J. M. (Maryhill)
Anderson, Donald	Brown, Hugh D. (Provan)	Crawshaw, Richard
Archer, Peter	Brown Robert C. (Newcastle W)	Cronin, John
Armstrong, Ernest	Buchan, Norman	Cryer, Bob
Ashton, Joe	Buchanan-Smith, Alick	Cunningham, G. (Islington S)
Atkins, Ronald (Preston N)	Butler, Mrs Joyce (Wood Green)	Cunningham, Dr J. (Whiteh)
Atkinson, Norman	Callaghan, Jim (Middleton & P)	Dalyell, Tarn
Bagier, Gordon A. T.	Campbell, Ian	Davidson, Arthur
Barnett, Guy (Greenwich)	Canavan, Dennis	Davies, Bryan (Enfield N)
Barnett, Rt Hon Joel (Heywood)	Carter-Jones, Lewis	Davies, Denzil (Llanelli)
Bates, Alt	Cartwright, John	Davies, Ifor (Gower)
Bidwell, Sydney	Clemitson, Ivor	Davis, Clinton (Hackney C)
Bishop, E. S.	Cocks, Michael (Bristol S)	de Freitas, Rt Hon Sir Geoffrey
Blenkinsop, Arthur	Cohen, Stanley	Dell, Rt Hon Edmund
Boardman, H.	Cook, Robin F. (Edin C)	Dempsey, James
Booth, Albert	Corbett, Robin	Doig, Peter
Bottomley, Rt Hon Arthur	Cox, Thomas (Tooting)	Dormand, J. D.
Douglas-Mann, Bruce	Kelley, Richard	Rodgers, George (Chorley)
Duffy, A. E. P.	Kerr, Russell	Rodgers, William (Stockton)
Dunn, James A.	Kilroy-Sllk, Robert	Rooker, J. W.
Dunnett, Jack	Klnnock, Neil	Roper, John
Dunwoody, Mrs Gwyneth	Lamborn, Harry	Rose, Paul B.
Eadie, Alex	Lamond, James	Ross, Rt Hon W. (Kilmarnock)
Edge, Geoff	Lee,John	Rowlands, Ted
Ellis, Tom (Wrexham)	Lestor, Miss Joan (Eton & Slough)	Sandelson, Neville
Evans, Fred (Caerphilly)	Lewis, Arthur (Newham N)	Selby, Harry
Evans, Ioan (Aberdare)	Lewis, Ron (Carlisle)	Sheldon, Robert (Ashton-u-Lyne)
Evans, John (Newton)	Lomas, Kenneth	Silkin, Rt Hon John (Depttord)
Ewing, Harry (Stirling)	Loyden, Eddie	Silverman, Julius
Fernyhough, Rt Hon E.	Luard, Evan	Skinner, Dennis
Flannery, Martin	Lyons, Edward (Bradford W)	Small, William
Fletcher, Ted (Darlington)	McElhone, Frank	Smith, John (N Lanarkshire)
Ford, Ben	MacFarquhar, Roderick	Spearing, Nigel
Forrester, John	Mackenzie, Gregor	Spriggs, Leslie
Fowler, Gerald (The Wrekin)	Mackintosh, John P.	Stallard, A. W.
George, Bruce	McMillan, Tom (Glasgow C)	Stewart, Rt Hon M. (Fulham)
Gilbert, Dr John	McNamara, Kevin	Stott, Roger
Golding, John	Madden, Max	Strang, Gavin
Gould, Bryan	Mahon, Simon	Summerskill, Hon Dr Shirley
Gouriay, Harry	Mallalieu, J. P. W.	Taylor, Mrs Ann (Bolton W)
Grant, George (Morpeth)	Marks, Kenneth	Thomas, Jeffrey (Abertillery)
Grant, John (Islington C)	Marshall, Dr Edmund (Goole)	Thomas, Ron (Bristol NW)
Grocott, Bruce	Marshall, Jim (Leicester S)	Tierney, Sydney
Hamilton, James (Bothwell)	Maynard, Miss Joan	Tomlinson, John
Hamilton, W. W. (Central Fife)	Meacher, Michael	Tuck, Raphael
Harper, Joseph	Mellish, Rt Hon Robert	Walker, Harold (Doncaster)
Harrison, Walter (Wakefield)	Mendelson, John	Walker, Terry (Kingswood)
Hayman, Mrs Helene	Millan, Bruce	Watkins, David
Heffer, Eric S.	Murray, Rt Hon Ronald King	Weitzman, David
Hooley, Frank	Newens, Stanley	Wellbeloved, James
Horam, John	Noble, Mike	White, Frank R. (Bury)
Hoyle, Doug (Nelson)	Oakes, Gordon	White, James (Pollok)
Huckfield, Les	Ogden, Eric	Whitehead, Phillip
Hughes, Rt Hon C. (Anglesey)	O'Halloran, Michael	Whitlock, William
Hughes, Mark (Durham)	O'Malley, Rt Hon Brian	Willey, Rt Hon Frederick
Hughes, Robert (Aberdeen, N)	Ovenden, John	Williams, Alan Lee (Hornch'ch)
Hunter, Adam	Perk, George	Wilson, Alexander (Hamilton)
Irving, Rt Hon S. (Dartford)	Parry, Robert	Wilson, William (Coventry SE)
Jackson, Miss Margaret (Lincoin)	Pavitt, Laurie	Wise, Mrs Audrey
Janner, Greville	Perry, Ernest	Woodall, Alec
John, Brynmor	Price, C. (Lewisham W)	Woof, Robert
Johnson, James (Hull West)	Price, William (Rugby)	Wrigglesworth, Ian
Jones, Alec (Rhondda)	Roberts, Albert (Normanton)
Jones, Barry (East Flint)	Roberts, Gwilym (Cannock)	TELLERS FOR THE NOES
Jones, Dan (Burnley)	Robertson, John (Paisley)	Mr. John Ellis and
Judd, Frank	Roderick, Caerwyn	Mr. David Stoddart

Question accordingly negatived.

Clause 28 ordered to stand part of the Bill.