HC Deb 10 June 1975 vol 893 cc337-63

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

Mr. Cope

I do not wish to go into the whole principle of the clause, but there is one point, which is appropriate to be raised in Committee, concerning the appointed day.

I appreciate that the Treasury will not be able to give us a specific day, and that the clause provides for the day to be appointed by order. Owing to the wording of the clause, in the period between the passing of the Act and the appointed day, whenever that is, no one can apply for one of the old "lump" certificates, and no one can be issued with a "lump" certificate if he has not applied for it before. This means that if there is to be any length of time between the passing of this Act and the appointed day there will be difficulties for those few people who, not having applied or having been issued with an old certificate, will not be able to apply under the new provisions.

I think that we should consider whether, on Report, the words "the passing of this Act" in line 14 ought not to read "the appointed day", so as to solve this problem by merging the two into one, thereby ensuring that there is no gap between the two periods.

Mr. Ridley

I cannot bring such a brief and presumably uncritical view to the clause as did my hon. Friend the Member for Gloucestershire, South (Mr. Cope). This and the following clauses set about stopping tax abuse, but the clause has implications for the system known as the "lump sum contract" which is common in the building industry and is becoming common in other walks of life and industry. I am concerned that in our desire to stop tax evasion we should be seen to be inimical to the system known as the "lump". I certainly am not.

I am glad that these clauses acknowledge that all tax abuses do not take place within the City. I imagine that there is some "lump" activity within the City. But hon. Gentlemen who suggested that this clause be taken on the Floor of the Chamber did so because they had a dislike of the "lump". However, having come to the point, they do not appear to have turned up to press upon the Committee the reasons why they support the clauses and want to see the "lump" damaged.

Tax evasion is very widespread. The revenue lost by devices such as the "lump" among those who are on relatively modest incomes exceeds by many hundreds of times the yield of devices which we seek to stop up by complicated clauses in Finance Bill after Finance Bill. I sometimes think that we would do better to spend more time in seeking to collect the tax which is blatantly avoided by ordinary working people in terms of collecting revenue. At least I must give a grudging welcome to these clauses, as that is their objective. However, I do not think that I can go any further than to commend the objective of stopping up a tax loophole.

I see two defects in the clauses. The first is a matter of principle. It is totally wrong to require one citizen to be the tax collector on behalf of another with whom he has no relationship other than contractual. Our society has accepted that if people employ others they can be made responsible for collecting the tax on their behalf. Even where a person sells something, he can be made responsible for collecting the tax on behalf of the Revenue through value added tax. But that every time we enter into a contract, however small, we should be expected to pay the Revenue tax on behalf of the contract, which is the basis of these clauses, seems to be going a bit far.

One of my constituents, a builder, let a subcontract to a "lump" concern. He failed to make sure that he had a certificate or to deduct the tax from the payment. He was taken to court by the Revenue, quitely rightly under the law. Finally, he was fined and that bankrupted him. His omission to collect tax on behalf of the Revenue was his financial undoing. It seems a terrible state of affairs that that kind of thing should be allowed to take place. Under the revised anti-"lump" clauses the situation will be much worse.

My second objection, which is not so much a matter of principle as of administration, is that it will be extremely difficult to collect this money from private individuals who have their houses painted or have work done on their properties and are not large and registered businesses in the sense that builders are. There must be countless occasions when people have work done on their farms, houses, factories or wherever it may be in Circumstances in which somebody comes along and says "Yes, I will do the plastering, the painting or the bricklaying. Give me £500 in notes and I will appear at 10 o'clock tonight and by breakfast-time the work will be done." According to the clause, the employer ought to deduct 35 per cent. and give it to the Revenue.

What will the bricklayers and plasterers say? They will say "This is subject to your not deducting 35 per cent. or telling the Revenue about this little transaction. It is all fair and between friends within these four walls." Indeed, it is the building of the four walls which is the concern of the clauses.

The clauses will provide an added incentive to tax evasion by both the employer and the employee. It will be impossible to check on the many breaches of these clauses that will take place. To that extent, this seems to be another example of building into our tax law heavier penalties and stricter and stiffer rules on those who have consciences and honour and seek to obey the law on all occasions while letting those who do not have the same respect for the law get away with it time and again. That is dividing the nation into two groups—those who scrupulously pay their taxes and those who indulge in evasion.

I know that the Treasury has tried for many years to find ways of stopping evasion, but it cannot succeed in those areas where groups of workers are determined to outstrip fellow workers by setting up these little cells of private enterprise, whether one-, two-, six- or ten-man bands. That is the only way to operate in a tax environment which is so unfriendly to private enterprise that there is an incentive to continue by evading taxes of this kind. The activity engaged in by such groups is so laudable that it does not seem right to confuse it with tax evasion and to present it as something despicable and to be disliked.

There is one rule in Parliament which I have learned to follow in the past few years—namely, that whatever makes the hon. Member for Liverpool, Walton (Mr. Heffer) fume is, prima facie, a good thing.

Mr. John Biffen (Oswestry)

No.

Mr. Ridley

I hope that my hon. Friend will speak for himself. I wish the hon. Gentleman were here to fume and to come trumpeting into the Chtamber telling us of the evil and wickedness of the "lump"—as I have heard him do on so many occasions—and suggesting that the "lump" is somehow purely and simply a way of avoiding taxes. He confuses, in all he says on this subject, the two issues of the avoidance of tax and the fact that workers are prepared to form co-operatives, whether large or small, to run their own businesses and to contract on their own behalf, and furthermore to contract out of trade union membership. What the hon. Gentleman really dislikes—I hate having to make a speech about him in his absence, but that is his fault, not mine—is the evasion of the trade union's grip upon workers.

The hon. Member for Walton and I were both in the building industry, so we know how these matters work. He has experience of trying to unionise workers in the building industry. He sees this, quite rightly, as do others who hate the "lump", as the major evasion of the monopoly power of organised unions.

Why is it that people want to engage in the "lump", leaving aside tax evasion purposes and assuming that that is stopped up either by past legislation or these clauses? The only motive can be that it is more lucrative to engage in lump sum contracting than to be employed by a reputable contractor with all his overheads, union membership, membership of the federation and all the trammels that surround the private enterprise world that has got caught in the web of Whitehall.

8.30 p.m.

Therefore, prima facie, it proves that to opt out of the union and the establishment—the mould in which the private sector has become set—will be more lucrative to the employees. To those who say that trade unions are the cause of wage increases and that Britain suffers from inflation generated by militant trade unions demanding high wages, I answer "Why do workers seek to evade unions, form little firms and groups in order to pursue their own interests through lump sum contracting, and why do they find this more profitable?" It is more profitable because they know that rewards are matched to the work they put in. They know that if they work 12 hours a day they will get commensurate rewards. The added bonus of tax avoidance is present. I should not like it to be there and I do not think that anyone should avoid paying taxes, but it is not the real reason.

The real reason is that they are their own masters. They are able to connect reward with work and they are able to avoid the restrictions and restrictive practices placed upon them by unions. Here is the living proof that the effect of trade unions is to hold wages down in this country—something which I have for long maintained and which more and more workers are beginning to realise.

In this clause we should not seek to make it more difficult to form co-operatives. Here I am, perhaps, in the unwonted but not unwanted posture of defending co-operatives against an oppressive Labour Government who seek in these clauses to quash them. These are examples of co-operatives. They are primitive examples of private enterprise cells. I say "primitive" simply because they do not at their behest have large sums of capital.

The tools of the plasterer or the bricklayer are his capital and these in relation to labour are but a small proportion of the cost of the subcontract. Therefore, we want to see the development of more such co-operatives which can, to a greater and greater extent, command capital resources which they would hold, presumably, in equal shares. That, for the benefit of Labour Members, is the origin of the word "share". They would become shareholders and this would be entirely in accord with what my hon. Friend's at least in the past, have always believed in and what I still believe in.

Mr. Parkinson

Does my hon. Friend think that in due course something called a co-operative share exchange or market might gradually emerge, and that people might start to sell their shares in their co-operatives?

Mr. Ridley

Yes, I think it might. At the beginning it would have to be a black share market. Both the Labour Front Bench and my own Front Bench might say that this would be illegal. It would be deemed to be a thoroughly wicked activity, against the counter-inflation policy of the time, and, as such, it would require some liberating radicals such as my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) to break aside the shackles of officialdom and let this market flourish in the open.

I shall vote against the clause not because I am against stopping up tax loopholes but because it is time the Committee demonstrated in favour of the "lump". We should support the principles that underline it. If the Government want to stop tax evation devices, for which they will have my support, they should do so by collecting tax from the citizen rather than collecting it in a way which is arbitrary and unfair from those with whom the citizen does business.

I turn, in conclusion, to the tax evasion point. Because the "lump" has been made out to be something disgusting, almost sub-human and something which should shock the conscience of every decent Social Democrat on the Labour benches, it has been assumed that really rough methods of taxation—crude fiscal weapons—are justified in order to level it.

None of us in this Chamber, as individuals, would put up for a moment with the suggestions as to contract and taxation contained in Clauses 60, 61 and 62, but, then, we do not share the obloquy of those who are said to be members of the "lump". I suspect that this crude, unsophisticated and harsh way of seeking to collect tax is permissible only when the group of people who are avoiding tax are thought to be parasites on human society, so by elevating them into paragons I believe that these methods of taxation are not acceptable. The way to express that feeling is for me to express my dislike for this clause in the Lobby tonight with as many of my hon. Friends as will join me.

Mr. Parkinson

When my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) pointed out that he and the hon. Member for Liverpool, Walton (Mr. Heffer) had both been in the building industry, I had visions of my hon. Friend shovelling sand into the wheelbarrow of the hon. Member for Walton on some rather unlikely site on neutral ground somewhere between the North-East and Liverpool. Although I agreed with everything my hon. Friend said then, that was the only time when I thought he was pulling our legs.

Mr. Ridley

No. It is true.

Mr. Parkinson

I declare an interest in that I am involved in the building industry, but not in "the lump"—except as the chairman of a company which employs "lump" workers. It is extraordinary that in this debate, which was chosen by the Government and in which we all expected the hon. Member for Walton to be the starter, in which we expected to hear great attacks on "the lump" and lurid statistics about accidents caused by "the lump", none of the Government's supporters has appeared, and it has turned into an occasion on which we in this Chamber join in singing the praises of the self-employed and of the contribution which "the lump" makes to the British construction industry.

Mr. Ridley

It may be that Labour Members are waiting close to telephones connected to 10 Downing Street, which I am certain is where the hon. Member for Walton is.

Mr. Parkinson

That is an even less likely picture than the one my hon. Friend conjured up a few moments ago.

Many of us who had sympathy with the ideas of tightening up the tax system and making sure that tax is paid by self-employed building workers, recognising the fact that there needs to be a machinery for collecting this tax, have our doubts about this set of clauses. They are extremely swingeing. It seems to us that they are aimed at reinforcing the misconceptions of the Left. These clauses are to quite an extent—because they are far too swingeing to be necessary—just the Chancellor's little tit-bit for the Left in a Budget which did not perhaps contain as much for them as he would have liked to give them.

We simply find it difficult to understand the paranoia which people such as the hon. Member for Walton have about self-employed workers in the building industry. "The lump" is a rather nasty expression which has been evolved to describe tens of thousands of honest craftsmen who make a major contribution to one of our most important industries. The offence which these people have committed is that they have decided that they would like to stand on their own two feet and work for themselves. They do not want to have anybody guaranteeing them a minimum wage. They are prepared to be paid what they are worth and they are prepared to work very hard for a very good income.

This seems to be offensive to Labour Members. They feel that people simply should not have that sort of instinct. So we have first of all, as a criticism from the other side, the fact that many people want "the lump". As my hon. Friend said, the workers would rather be paid by their merits, earn what people are prepared to pay them, and be judged by their results, than lean on the guaranteed minimum week, the statutory minimum wage, overtime and fiddled tax expenses. They simply prefer to work for themselves.

In the industry employers find this extremely useful. They can get a firm price for a particular job. As a result, they can give a firm price to the customer. The customer likes it. The customer gets the product at a price which he knows will be firm. The employer likes it because he knows that once he is given the job it is the man's responsibility to get it done for that price. The man likes the job because he knows that if he does it well and works hard he can made an income well above average.

There is no evidence of any kind that "the lump" causes an increase in accidents. That is another myth which the Left likes to put out about self-employed building, workers. Self-employed building workers take a great deal of care to make sure that they do not hurt themselves. They do not take risks because they know that there is nobody underwriting next week's wages if they have an accident. The position is exactly the reverse of the normal claims about "the lump". It suits the customer, it suits the builder, and it suits the men doing the work.

There is one group that it does not suit—UCATT, the building industry trade union, especially a tiny group, the organisers of that union. They resent "the lump" like mad because, as my hon. Friend said, members of the union are working on a site and seeing other men who are happier, earning more, and getting on with their job without interference. This is distasteful to the organisers of labour, especially in the building industry, so we have to go through this rigmarole of making a firm such as Wimpeys register because from time to time they are sub-contractors.

Forty thousand companies, including Wimpeys, will have to justify that they are viable commercial entities before being allowed to sub-contract to anybody. What a nonsensical suggestion it is. These are companies which have existed for decades and which employ thousands of people. They are companies with huge reserves and an impeccable record. They have to apply and prove to some bureaucrat that they are to be trusted before being allowed to sub-contract. This is the sort of price the Chancellor of the Exchequer is prepared to pay to reinforce the misconceptions of the Left.

I do not find this clause particularly objectionable. We ought in Committee upstairs to be able to do quite a lot to improve the schedule. What I do not like is the motivation behind this legislation—this idea that anybody who feels that he would rather be judged by his results and earn his living according to them is in some way to be regarded as an anti-social, untrustworthy person.

I accept that a tiny minority of self-employed building workers evade tax, and I am very happy for the Government to make arrangements to stop that from happening, but I warn the Government that any attempt to interfere with the self-employed building worker and with "the lump"—any such attempt should be resisted by all Members in this House—would be bad for the industry and bad for the customers of the industry. Anything which is, at the end of the day, had for the customers of the industry can only have very dubious effects on the livelihood of the employees working in that industry.

8.45 p.m.

Mr. Biffen

I think that all contributions to this debate have contained a toast to absent friends, and I should like to join with those of my honourable Friends who have deplored the green acres of the benches opposite in some bewiderment.

Presumably the question of sub-contracting in the construction industry was one which exercised a great deal of anxiety on the part of a number of hon. Members—and not merely the Left, because the opposition was quite well sustained throughout the various elements of the Labour Party, and I must confess that, if these clauses were some concession to the Left wing of the Labour Party, I have received no earnest representations from the CBI saying that these measures should be hotly contested. I have the suspicion that, among the moguls of the larger elements of the building industry, there is tacit acceptance that in the best of all possible worlds it may be that matters should be organised on large-scale units.

What my hon. Friends are probing is the possibility of the emergence in this country of a new form of self-employment. The clauses with which we are concerned deal only with the construction industry. But we should be unwise if we supposed that the practice of contract employment was confined merely to the construction industry. There is already burgeoning evidence that it happens, for example, in the provision of secretarial services, among draughtsmen and in respect of the transport services. I quote only three examples which have occurred to me at random as I have listened to this debate. But this clause concerns only the construction industry because it is in that industry that there has been the biggest and most sustained political pressure that measures should be taken of the kind embodied in Clause 60 and Clauses 61, 62 and 63.

It is fashionable to deplore the economic performance of this country. But those of the public at large, especially the commentators in the so-called quality Press, who spend much of their time berating our economic performance, would do well to spend a little time in the United States of America seeing with what success the building and construction unions in that country impose highly restrictive conditions upon the American economy. The contrast with what happens in the United Kingdom would be pre-eminently to our advantage. One reason why it would be to our advantage is the growth of self-employment in the construction industry.

My hon. Friends the Members for Cirencester and Tewkesbury (Mr. Ridley) and for Hertfordshire, South (Mr. Parkinson) are correct to say that what they question is the motivation for this clause. Of course, there can be no question of any Opposition Member condoning tax evasion. Of course, we are anxious to devise legislation which will secure as far as possible the equitable contribution of all to the national Exchequer. But the motivation behind this clause is not merely concerned with the tax abuses which have been related to "the lump". There is the fear that the growth in self-employment is imperilling a union stranglehold or a union dominance in a specific industry.

Indeed, that is the background to some of the scenes of the most extraordinary violence which took place in Shropshire a few years ago on the occasion of the building workers' dispute. I shall not, by a side wind, drag in my personal knowledge of what occurred in the Shropshire building dispute which has been the subject of the Shrewsbury trial and the imprisonment of the two supposed martyrs. However, part of the violence and the feelings that were released by that dispute were related to the substantial extent of non-unionised and "lump" working in the construction industry.

It is perfectly true that there are legitimate grounds for protecting working conditions in the construction industry both in respect of safety and of training. However, those are measures which could be wholly consistent with a wide degree of self-employment and contract working within the construction industry.

I suspect that the arguments about training are just one more aspect of a restrictive practice. Blue collar unions have only to turn to white collar and professional occupations to acquire a speedy apprenticeship of the way in which supposed training requirements can be a technique of restriction on entry.

It is one of the happier aspects of our industrial and commercial society that there has been a growing development of self-employment. This is the point of expanding freedom in the economy. This is the point one looks to for hope, rather than to the corridors of the Confederation of British Industry. In that sense we are happy to champion the new selfemployed—the building workers, those on the books of agencies providing secretarial services and the self-hire lorry drivers.

As my hon. Friends have said, nothing with our voices or in our votes must be construed as condoning tax evasion. However, on account of the configuration of union restraint and high levels of direct taxation, self-employment will flourish. That will be as inevitable as night follows day.

The more that this country is committed to levels of public spending which necessitate high levels of taxation, the more will society adjust itself in response to that situation in forms such as self-employment which has certainly proved far more attractive when it comes to defying effective taxation. The hon. Gentlemen on the Treasury Bench will once again be faced with the dilemma of resolving whether, in order to secure a more equitable incidence in the payment of taxation, they will be obliged to nudge taxation more in the direction of indirect taxes than income taxes.

Mr. Robert Edwards (Wolverhampton, South-East)

Will the hon. Gentleman explain the very high percentage of bankruptcies among the self-employed in the building industry, which is higher than in any other sector of our economy?

Mr. Biffen

And it always has been, because of the very cyclical nature of the building industry. The high incidence of bankruptcy has not come with the growing practice of "lump" labour. It has existed almost since the dawn of time in the building trade.

I believe that the Financial Secretary and I probably share an instinctive feeling that our balance of taxation between direct and indirect already loads quite enough on indirect taxation. Here I probably speak in a minority on this side of the Committee. On the whole, I do not wish to see taxation further loaded in the direction of indirect rather than direct. But if we have such high levels of public spending as we have now, there are almost inevitable consequences of the sort I have just described, which may force Treasury Ministers reluctantly further to load our taxation system in the direction of indirect because that is the only effective way in which they will be able to collect their revenues.

It seems to me that the message from this debate is, first, that the Government should look again at the overwhelming necessity for an early reduction in the totality of public spending, and, secondly, that they should move very warily with regard to taxing self-employment, because there are plenty of examples that this is an area of growth in the economy which carries a message of hope for the nation.

[Mr. GEORGE THOMAS in the Chair.]

The Financial Secretary to the Treasury (Dr. John Gilbert)

In replying to this short but at times impassioned debate, I should make it clear that no great new principle is involved in the clause or in Clauses Nos. 61 to 63, which go with it and which we shall discuss in detail upstairs. In 1971 the then Conservative Government introduced the special tax deduction scheme for the construction industry, and the principle of the 30 per cent. deduction started.

Mr. Ridley

The Minister must recognise that there can be a "lump" in politics as well as in building. Because one party or the other does something, it does not automatically commit all hon. Members to having been in full agreement at the time.

Dr. Gilbert

Far be it from me ever to attempt to commit the hon. Gentleman to agreeing with his hon. Friends on any issue. One recognises his hearty independence on this and many other matters, for which we salute him. All that I am saying—it is beyond controversy—is that we are not establishing any great new principle. It may well be that in 1971—I have not bothered to check—the principle was offensive to the hon. Gentleman, as it apparently is now. He may well have voted against it, or it may be that he has changed his mind since then. I do not seek to make a petty point, but I am saying that there is nothing new in what we are doing.

However, we are drastically tightening up the arrangements under the existing scheme, because they have manifestly proved inadequate to prevent tax evasion on a massive scale. There have also been faults of another sort, involving national insurance deductions and value added tax.

The main factors in the Government's scheme—to touch briefly on the other clauses to be taken upstairs—are that the existing tax certificates will be withdrawn at a date to be announced. The hon. Member for Gloucestershire, South (Mr. Cope) asked when the appointed day was likely to be. It will probably be around late spring next year. The hon. Member expressed some concern on the question whether there would be a blank period during which genuine subcontractors could not obtain certificates. When he looks in detail at the effect of subsection (2)(b) he will find that his fears on that score are laid to rest.

9.0 p.m.

In addition to the withdrawal of existing tax certificates it will become much more difficult to obtain one of the new certificates—one of the objections which hon. Gentlemen opposite have raised. An applicant will have to have a clean history for both tax and national insurance purposes over the previous three years, and also show that he is running a bona fide business. This was one of the matters which seemed to concern the hon. Member for Hertfordshire, South (Mr. Parkinson) who also, unfortunately, is not with us at the moment. I do not seek to make a point of that. The hon. Gentleman was good enough to apologise to me for the fact that he had to attend a dinner downstairs. Possibly to set the balance even, I ought to point out that my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) was upstairs in Committee on the Industry Bill until about 7.30 p.m. and I have no doubt that he has had to make dinner arrangements. I would not be surprised if he has found it necessary to sustain his ample frame and therefore has been unable to join us, for reasons similar to those which led to the hon. Member for Hertfordshire, South being unable to be with us.

I really do not feel, as the hon. Member for Hertfordshire, South seemed to feel, that it is going to be difficult for firms like Wimpey and other big building contractors to prove that they are bona fide in business. Obviously, it is a minor irritant, but clearly it is something that will be settled without any difficulty whatsoever.

Mr. Lawson

In view of the requirement of a three-year record, what is the position of new entrants into the industry who cannot provide a three-year record?

Dr. Gilbert

It will be better if we look into all these things when we get upstairs and deal with Clauses 61 to 63. All that Clause 60 does—I shall come to the details later—is to provide for the changeover date and permit the new conditions to have effect in respect of applications for certificates made after the Bill receives the Royal Assent. The deduction scheme will have to be extended to cover companies acting as subcontractors and agencies supplying construction workers. They will have to qualify for certificate if they are to avoid deduction—and, of course, there will also be substantial increases in fines for fraudulently obtaining or misusing certificates.

The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) commended the objectives of this part of the Bill in so far as they were dealing with tax evasion. I noticed that he slipped from evasion to avoidance, back to evasion, and then back to avoidance many times in his speech. He needs no instruction from me as to the significant difference between the two. Whatever Opposition Members may have felt about the motives that lie behind these clauses this is the principal cause for it, and it would be very dangerous to underestimate not only the sense of resentment that is engendered amongst honest members of the community at tax evasion but also the infection that it produces, that may lead to an undermining of fiscal morality generally in society. When people see one man getting away with it, and possibly boasting of doing so, people may think "If he can get away with it, why should not I?" I would hope that we would have the wholehearted support—I am sure we do—of all responsible Members of this House in anything that will lead to a reduction of tax evasion.

I take another point raised by the hon. Member for Cirencester and Tewkesbury. This clause is itself evidence of the fact that, whether or not he likes some of our other policies in the field of fiscal administration, we on the Government side of the Committee are not content to tighten up our system solely in respect of better-off members of society. We are also prepared to apply it quite rigidly among those who earn their living in the construction trade. The hon. Member for Cirencester and Tewkesbury referred to private householders. I can give him an assurance that the scheme does not apply to them. The rules apply only under Clause 61(1)(b) to a contractor in the construction industry which, according to subsection (3) covers merely people carrying on a construction business. A private householder or similar person could never be regarded as carrying on a construction business.

Mr. Ridley

The Financial Secretary said that it was important to prevent tax evasion. Does he not concede the enormous amount of tax evasion which takes place through so-called "moonlight" painters, and people who do repairs and alterations for private householders on a lump sum basis without paying tax? What is he to do to stop that sort of evasion?

Dr. Gilbert

If the hon. Member has evidence—[Interruption.] The hon. Member may laugh, but I can assure him that if he has evidence of particular cases we shall look at them. If he has evidence of widespread evasion in these matters they will fall to be considered. I can assure him that all Ministers in this Government—I should be surprised if this were not the case with Shadow Ministers, too—are prepared diligently to prevent any widespread abuse in terms of evasion wherever it is found.

That is the principle motive behind the clause. I recognise that Conservative Members see all sorts of different motives which do not exist, and I detected a touch of the paranoia that they affected to see among some of my hon. Friends. The true purpose of the clause is to reassure honest taxpayers that their less honest neighbours are not getting away with it—

Mr. Lawson

Come off it.

Dr. Gilbert

Of course it is. It is to see that those who have been getting away with illegal evasion for many years have life made much more difficult for them. It is also designed to protect the Revenue. I take much pleasure in commending the clause to the Committee.

Mr. Nott

This is the last clause of this Finance Bill that we shall be debating in Committee on the Floor of the House. Of course the Bill will return on Report and in the meantime we shall be continuing our debates for several weeks upstairs in Committee. I do not think, however, that that is good enough reason for the Financial Secretary to say that he will answer pertinent questions relating to the clause when we reach Standing Committee.

My hon. Friend the Member for Blaby (Mr. Lawson) asked what would happen in the case of a new entrant to the building industry. We should like to know the answer to that question. We are not seeking an immediate answer, but I am sure that as this is the Committee stage my hon. Friends would like to know the answer to a point that is relevant to the clause. If a new building firm is formed and it applies for a certificate, will it be granted one? It is as absurd for Wimpeys to have to apply for a certificate as it is wrong for a new firm to be denied one because it does not have a record in the files of the Inland Revenue.

As regards the suggestion that shadow Ministers—if that is what I am—might help in some way in policing the activities of those who do my hon. Friends' moonlighting—that is not our job. My hon. Friends were making the relevant point that one cannot get too far away from the facts of the situation. These are that everybody is under a legal obligation to file a tax return and, if he does not do so, the penalties are well known. We cannot pursue endlessly the line that everybody is by nature a tax-evader unless he proves himself otherwise. We cannot go too far down this road of requiring too many extensions to these deductions at source by those who are employing labour-only subcontractors.

It is ironic that this clause, which we are happy to have here in the Committee of the whole House, should have been chosen for debate not by us but by hon. Gentlemen opposite. It was not we who suggested that Clause 60 be debated on the Floor of the House. That proposal came from the Government benches because, as we thought, the Government were greatly interested in the problems of "the lump". But for reasons of which we are not aware, the Chamber has been virtually empty throughout the whole of this debate. There has not been a single Labour Member on the benches behind the Front Benches for about half the debate today. We are happy that that should be so, but we are surprised, since they asked that this be brought forward.

I am glad to see that the hon. Member for Liverpool, Walton (Mr. Heffer) has come into the Chamber because I was a little concerned that in his absence his name has figured fairly prominently in these debates.

Mr. Heffer

I had in fact heard this, but in view of the fact that I have been in Committee upstairs practically the whole day I imagined that I was entitled to eat in the meantime. That is why I have not been in this Chamber except to make a protest at something that went on in the Committee upstairs. I think it is quite unfair for hon. Members to refer to other hon. Members when the former know damned well that the latter are in other Committees upstairs.

Mr. Nott

It is not any of my business. If the hon. Gentleman wants to eat his dinner instead of attending a debate on "the lump", that is up to him. However, since the hon. Gentleman has always played such a prominent part in these debates we felt that he might have wished to defer his dinner and to participate.

Mr. Heffer

This particular clause does not abolish "the lump". It is a Finance Bill matter. If it were going to abolish "the lump", which I want to see, I would certainly not miss the debate. But I am quite certain that this matter can be left in the capable hands of my hon. Friends. The hon. Gentleman need not waste his time trying to knock political spots off me because it will not work.

Mr. Nott

I am very pleased that the hon. Member for Walton is prepared to leave this matter in the hands of the Ministers of his own Government because his last appearance in this Committee was totally irrelevant to our proceedings. He came down to protest at the way his own Ministers—

The Chairman

Order. Perhaps the hon. Gentleman will return to the Question, "That Clause 60 stand part of the Bill".

Mr. Nott

If I may say so, Mr. Thomas—

Mr. Ridley

As one who is on the same Committee as the hon. Member for Walton (Mr. Heffer) and who has forgone eating his dinner in order to talk about "the lump", I think I might be entitled to ask my hon. Friend whether he thinks that it would be a good idea if I were to make my speech again for the benefit of the hon. Member for Walton, because he should know that this debate has taken a very strong turn in favour of "the lump" and that, far from proposing that it be abolished, the Committee is proposing that everything possible be done to improve the chances of "the lump" flourishing and thriving in the future.

9.15 p.m.

Mr. Nott

I am most grateful for the way in which my hon. Friend has attended the debate. It is not for me to say which hon. Member is right to defer his dinner and which is right to attend the debate. I am grateful for my hon. Friend's intervention.

I am delighted that the hon. Member for Walton has returned because I was getting a little concerned about the parliamentary point that he was being so constantly referred to in his absence. I am glad that he has come back because when he bravely resigned from the Government he said that he did so to enable him to devote some of his time to the Shrewsbury pickets. I remember well what he said, and the question of the Shrewsbury pickets has arisen—

The Chairman

Order. I must ask the hon. Member for St. Ives (Mr. Nott) to remember that the same rule applies to the Front Bench as applies to the back benches. He must speak to the subject before the Committee.

Mr. Nott

With respect, Mr. Thomas, I am not going to debate the Shrewsbury pickets, but the matter is strictly relevant to the clause. My hon. Friend the Member for Oswestry (Mr. Biffen) referred to the events in 1972, and these were relevant to some of the claims made by the trade unions who wanted a change in the existing arrangements for labour-only sub-contractors. It is relevant to what we have been discussing. My hon. Friend raised the point, but I will leave it, Mr. Thomas, as you wish me to do so.

The hon. Member for Walton is, I believe, a carpenter by trade. I hope he will forgive me if I quote from a well-known poem which is relevant to the debate.

Mr. Heffer

I am a carpenter and joiner.

Mr. Nott

I am delighted to hear that. I quote from a well-known poem known as "The Walrus and the Carpenter" which is particularly relevant to the debate: The Walrus and the Carpenter Were walking close at hand; They wept like anything to see Such quantities of sand; This was connected with the construction industry. The poem continues: 'If this were only cleared away' They said, 'it would be grand!' 'If seven maids with seven mops Swept it for half a year, At this point they considered calling in contracting firms to give them a hand: Do you suppose,' the Walrus said, 'That they could get it clear?' 'I doubt it,' said the Carpenter. And shed a bitter tear. Then they called in the oysters—the subcontractors: But four young Oysters hurried up, All eager for the treat: Their coats were brushed, their faces washed, Their shoes were clean and neat— Just like the self-employed, the labour-only sub-contractors. I issue a warning to all labour-only sub-contractors to keep away from the hon. Member for Walton, because the final sentence of that well-known poem runs as follows: 'O Oysters,' said the Carpenter, 'You've had a pleasant run! Shall we be trotting home again?' But answer came there none— And this was scarcely odd, because They'd eaten every one. That is precisely the situation that is occurring between the self-employed in the building industry and many of the trade unions represented by the hon. Gentleman which wish to destroy self-employment in that industry, and that is greatly to be regretted.

My hon. Friends the Members for Cirencester and Tewkesbury (Mr. Ridley), Oswestry and Hertfordshire, South (Mr. Parkinson) all referred to the wider issues raised by the clause. We absolutely oppose any evasion of taxes which are rightly due. Intervention by the Government may be necessary to place some curbs on gangs of unscrupulous labour-only sub-contractors who are not abiding by the necessary regulations which are for the protection of the consumer. Of course we accept that, but there is nothing wrong in labour-only sub-contracting. In most developed countries it is on the increase.

In the United States whole factories are now depending on self-employed men performing many services and much of the work on goods which are passing through the production process.

I wonder whether the hon. Member for Walton, and others who feel like him, can explain why it is that they are so keen on developing worker co-operatives in industry on the one hand and yet, on the other, seem to be antagonistic to the idea of men working for themselves and providing their own skills in particular industries. What, in the last resort, is the fundamental difference between the development of worker co-operatives in industry—something which I am not against—and men in the building and haulage industries, for example, selling their skills in a similar kind of way? May be in some other debate we may be enlightened on that point.

We believe that we should encourage men to be more independent. We should encourage them to start up their own businesses and to sell their skills on a free market. I welcome the move of taxpayers from Schedule E to Schedule D. That is something that I believe we should welcome. There is no reason for our setting our sights against this development because it is more difficult for the Revenue to collect the tax.

Mr. George Cunningham

The hon. Gentleman did not think that when he was in the Treasury.

Mr. Nott

I most certainly did. I have never changed my position on this matter. In building operations—probably Labour Members know much more about the industry than I do in many respects—specialisation and mobility are important. I understand that the labour-only subcontracting arrangements probably go back to the days of the building of the canals in the eighteenth century. That is from where the term "navvy" stems—namely, navigators.

Mr. Heffer

The hon. Gentleman refers to the self-employed labour-only sub-contractors and their skills, but is he not aware that this is precisely one of the arguments with which we are concerned? The labour-only sub-contracting gangs do not take on apprentices. They do not train young people in their skills. If there is a tremendous growth of labour-only sub-contracting there will be no apprentices coming forward except, perhaps, through Government training centres or through local authorities. That is one of the arguments, and there are many others. I could speak about "the lump" at great length but I do not intend to do so tonight. The whole question of the training of young people for skills is knocked on the head by labour-only subcontracting. If it continues to grow I warn the hon. Gentleman and the Committee that in 10 years we shall not have the skilled people in the building industry that we shall require.

Mr. Nott

Surely the number of subcontractors in the industry will move up and down with the building cycle. I would very much anticipate that labour-only sub-contracting is sharply on the decrease at present. Clearly that must be the position. When the hon. Gentleman says that one of the arguments against this proposition is that apprenticeships are affected, I must point out to him that when labour-only sub-contracting was at its height—namely, in 1973—the number of people going into apprenticeships in the building industry was probably greater than ever before.

Mr. Heffer

No.

Mr. Nott

I have in front of me a document from the National Federation of Building Trades Employers. It says specifically that the federation recognises that one of the criticisms of "the lump" is that it is inimical to the recruitment and proper training of entrants to the industry…". But it goes on to say that in 1973 self-employment was at a high level—I am sure the hon. Gentleman would agree with that—and that the recruitment of apprentices reached the highest figure for many years. Many of the accusations that are made by the trade union movement do not stand up to examination.

Mr. Heffer rose—

Mr. Nott

I shall let the hon. Gentleman interrupt in a moment. He is an expert in these matters.

The second point made by the trade unions is that such work tends to increase industrial accidents. I do not know where the figures come from to support that. In the same document I am told that there is simply no evidence to support the criticism that self-employment leads to higher accidents. It is necessary in every industry, particularly the building industry, to improve the procedures so that accidents do not take place, but it is no use hon. Members making these claims unless they can be substantiated.

Of course we are against evasion and we wish to prevent it, but we do not want to bring about any decline in self-employment because we believe that it should be encouraged. I conclude by saying that we are in favour of a man selling his own skills, using his own tools and becoming his own employer—in other words working for himself.

In a previous Government I stood at the Government Dispatch Box and wound up noisy debates when the hon. Member for Walton and his hon. Friends were protesting at the situation and wanted the law strengthened in this respect. The Government have come forward with these laws, but many of my hon. Friends—and I agree with them—feel that in the last resort the motivation behind Clause 60 is not directed at the question of evasion. I was told by those who know the industry when I was putting forward the ministerial view not more than two years ago that as soon as the Inland Revenue caught up with the certificates, many charges would be brought in the courts, and that is what happened When people saw the severe sanctions which were being imposed, it was thought that abuses would stop. There was a difficult period which I remember very well—a period when there was no evidence that the Inland Revenue would catch up with these people.

But that period is now ended. I believe that Clause 60—and I personally will not be voting against it—has behind it as much the motivation to drive out of business more and more labour-only subcontractors as to tighten up the situation regarding the evasion of tax. We do not agree with that. We want to see labour-only sub-contractors, as long as they are reputable and doing a good job, prospering. That is the basic division that lies between us on the two sides of the Committee.

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

Question accordingly agreed to.

The Committee divided: Ayes 189, Noes 28.

Division No. 224.] AYES [9.28 p.m.
Allaun, Frank Fernyhough, Rt Hon E. Oakes, Gordon
Anderson, Donald Fletcher, Ted (Darlington) O'Malley, Rt Hon Brian
Archer, Peter Ford, Ben Ovenden, John
Armstrong, Ernest Forrester, John Palmer, Arthur
Atkins, Ronald (Preston N) Fowler, Gerald (The Wrekin) Pardoe, John
Atkinson, Norman Freeson, Reginald Park, George
Bagier, Gordon A. T. George, Bruce Pavitt, Laurie
Barnett, Guy (Greenwich) Gilbert, Dr John Penhaligon, David
Barnett, Rt Hon Joel (Heywood) Golding, John Price, William (Rugby)
Bates, Alt Gould, Bryan Roberts, Albert (Normanton)
Beith, A. J. Gourlay, Harry Roberts, Gwilym (Cannock)
Bidwell, Sydney Graham, Ted Robertson, John (Paisley)
Bishop, E. S. Grant, George (Morpeth) Roderick, Caerwyn
Blenkinsop, Arthur Grant, John (Islington C) Rodgers, George (Chorley)
Boardman, H. Grocott, Bruce Roper, John
Booth, Albert Hamilton, James (Bothwell) Ross, Stephen (Isle of Wight)
Boothroyd, Miss Betty Hamilton, W. W. (Central Fife) Ross, Rt Hon W. (Kilmarnock)
Bottomley, Rt Hon Arthur Harper, Joseph Rowlands, Ted
Bray, Dr Jeremy Harrison, Walter (Wakefield) Sandelson, Neville
Brown, Hugh D. (Provan) Hayman, Mrs Helene Selby, Harry
Brown, Robert C. (Newcastle W) Heffer, Eric S. Sheldon, Robert (Ashton-u-Lyne)
Buchan, Norman Hooley, Frank Silkin, Rt Hon John (Deptford)
Callaghan, Jim (Middleton & P) Hooson, Emlyn Silverman, Julius
Campbell, Ian Howells, Geraint (Cardigan) Small, William
Canavan, Dennis Hoyle, Doug (Nelson) Smith, Cyril (Rochdale)
Carmichael, Neil Huckfield, Les Smith, John (N Lanarkshire)
Carter-Jones, Lewis Hughes, Rt Hon C. (Anglesey) Spearing, Nigel
Cartwright, John Hughes, Mark (Durham) Spriggs, Leslie
Clemitson, Ivor Hughes, Robert (Aberdeen, N) Steel, David (Roxburgh)
Cocks, Michael (Bristol S) Hughes, Roy (Newport) Stewart, Rt Hon M. (Fulham)
Conlan, Bernard Hunter, Adam Stott, Roger
Cook, Robin F. (Edin C) Irving, Rt Hon S. (Dartford) Taylor, Mrs Ann (Bolton W)
Corbett, Robin Janner, Greville Thomas, Dafydd (Merioneth)
Cox, Thomas (Tooting) John, Brynmor Thomas, Ron (Bristol NW)
Craigen, J. M. (Maryhill) Johnson, James (Hull West) Thompson, George
Crawford, Douglas Jones, Alec (Rhondda) Thorpe, Rt Hon Jeremy (N Devon)
Crawshaw, Richard Jones, Barry (East Flint) Tierney, Sydney
Cronin, John Jones, Dan (Burnley) Tomlinson, John
Cryer, Bob Judd, Frank Urwin, T. W.
Cunningham, G. (Islington S) Kerr, Russell Wainwright, Edwin (Dearne V)
Cunningham, Dr J. (Whiteh) Kilroy-Silk, Robert Wainwright, Richard (Colne V)
Davidson, Arthur Kinnock, Neil Walker, Harold (Doncaster)
Davies, Bryan (Enfield N) Lamborn, Harry Walker, Terry (Kingswood)
Davies, Denzil (Llanelli) Lamond, James Watkins, David
Davies, Ifor (Gower) Lee, John Watt, Hamish
Davis, Clinton (Hackney C) Lestor, Miss Joan (Eton & Slough) Wellbeloved, James
Dempsey, James Lewis, Ron (Carlisle) Welsh, Andrew
Doig, Peter Lomas, Kenneth White, Frank R. (Bury)
Dormand, J. D. Loyden, Eddie White, James (Pollok)
Douglas-Mann, Bruce Luard, Evan Whitehead, Phillip
Duffy, A. E. P. Lyons, Edward (Bradford W) Whitlock, William
Dunn, James A. McElhone, Frank Wigley, Dafydd
Dunnett, Jack MacFarquhar, Roderick Williams, Alan (Swansea W)
Dunwoody, Mrs Gwyneth Mackenzie, Gregor Wilson, Alexander (Hamilton)
Eadie, Alex Mackintosh, John P. Wilson, Gordon (Dundee E)
Edge, Geoff McMillan, Tom (Glasgow C) Wilson, William (Coventry SE)
Edwards, Robert (Wolv SE) McNamara, Kevin Woodall, Alec
Ellis, John (Brigg & Scun) Marks, Kenneth Woof, Robert
Ellis, Tom (Wrexham) Marshall, Dr Edmund (Goole) Wrigglesworth, Ian
Evans, Fred (Caerphilly) Marshall, Jim (Leicester S)
Evans, Gwynfor (Carmarthen) Maynard, Miss Joan TELLERS FOR THE AYES:
Evans, Ioan (Aberdare) Millan, Bruce Mr. David Stoddart and
Evans, John (Newton) Murray, Rt Hon Ronald King Miss Margeret Jackson.
Ewing, Harry (Stirling) Newens, Stanley
Ewing, Mrs Winifred (Moray) Noble, Mike
NOES
Benyon, W. L. Howell, Ralph (North Norfolk) Rees-Davies, W. R.
Bitten, John Knight, Mrs Jill Roberts, Wyn (Conway)
Boscawen, Hon Robert Latham, Michael (Melton) Rossi, Hugh (Hornsey)
Brotherton, Michael Lawrence, Ivan Townsend, Cyril D.
Budgen, Nick Macfarlane, Neil Wiggin, Jerry
Clegg, Walter Miller, Hal (Bromsgrove) Winterton, Nicholas
Come, John Mitchell, David (Basingstoke)
Costain, A. P. Monro, Hector TELLERS FOR THE NOES:
Durant, Tony Mudd, David Mr. Nicholas Ridley and
Goodhew, Victor Newton, Tony Mr. Nigel Cawson.
Gower, Sir Raymond (Barry) Normanton, Tom

Clause 60 ordered to stand part of the Bill.

Bill (Clauses 5, 17, 23, 25, 28, 49 and 60) reported, with amendments; to lie upon the Table.