SMALL BUSINESSES AND THE SELF-EMPLOYED

HC Deb 13 March 1975 vol 888 cc824-87

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

4.11 p.m.

Sir Keith Joseph (Leeds, North-East)

The Opposition, and, I suspect, many Labour Members, welcome the opportunity to speak for large numbers of their constituents who are connected with small businesses or are self-employed and are intensely anxious about the prospects that lie ahead for them, their businesses and their families.

We shall listen with care to what the Ministers who are to speak in this debate say, but they, though no doubt trying their hardest to do their job, are not responsible for the conditions affecting small business men and the self-employed. We shall be condemning today by our vote this evening the strategy, philosphy and policies of the Government as a whole, and it is senior members of the Government, not relatively junior members, who should be answering in the House today for the condition of small businesses and the self-employed.

We are considering a very important subject—nothing less than the prospects for the prosperity of the country and the solidity of our liberties. Prosperity depends upon national wealth creation. Liberty depends upon widespread dispersion of decision making and of money. Both wealth creation and the dispersion of funds and decision making are closely associated with small businesses and with the self-employed.

National wealth creation is not, as the Government always seem to think, simply a matter of workers producing goods. It involves the matching of supply to demand. It involves constantly improved techniques by which individual men and women can produce more output. There is no other way in which to increase our national prosperity, and at the heart of this process of national wealth creation is the entrepreneur, the risk taker, the decision maker who matches supply to demand. The entrepreneur appears in his most clear-cut form as the small business man or the single self-employed man. It is he who is the entrepreneur in essence, and it is he who is being most fiercely attacked by the Government policies.

The economy depends upon a network of small production and service units, shops, workshops, agencies, small factories and services. I do not think that hon. Members realise how many small firms serve the production, for instance, of a Rolls-Royce car. It involves no fewer than 4,500 sub-suppliers, and so it is with almost every product or service which we take for granted in our national life. They are all the joint result of a large number of firms and services, mostly small, complementing, supplementing, specialising and competing.

The convenience of our daily lives and the functioning of our economy depend upon a pulsing fabric of more or less vigorous enterprise, the self-employed and small businesses. The very seed bed of our economy is composed of medium and small businesses. Large industries which we take for granted started as the idea of one man or one woman. From the ranks of small businesses grow the giants of the future. That is why today's debate, which is of interest to millions outside the House, is about nothing less than the prospects for our prosperity, the prospects for alleviating poverty and the prospects for improving social services. They are all closely connected with prospects for the self-employed and for small businesses.

I do not know whether hon. Members are fully aware of the inventiveness of this sector of our economy. I am a layman, but I look with the greatest interest every day at what is called the technical page in the Financial Times which has been run for many years by Arthur Bennett and Ted Schoeters. It contains a list of new inventions and innovations, and a large proportion of those reported every day come from small businesses. It is they who are more productive than the country realises of innovation and invention. An economy too dependent upon large firms and large establishments could quickly grow stagnant and flabby.

The vitality of our economy, the vitality of the country as a whole, and the vitality of individual towns and cities depends not upon large establishments but upon the untidy undergrowth of small, constantly adaptive competing businesses. It is upon their vitality that the richness of the fabric of the economy depends, and if anyone is interested in a fascinating comparison of one town with another based upon a comparison of the presence or absence of small businesses I commend to him a remarkable book called "The Economy of Cities" by Jane Jacobs.

If small businesses are to be able to prosper, and if the country is to be able to prosper, the Government have to take them intensely seriously. Damage small businesses, and one damages national wealth—creation. Stunt small businesses, and one stunts national prosperity. No private wealth from small businesses, no widespread national wealth; no national wealth, no welfare. There is a direct link between the climate in which the Government of the day allow small businesses to operate and the resources that will be available to that Government a very few years later, if they survive, for all their other social and economic purposes.

I cannot help but draw attention to the fact that only six Government supporters are on the benches opposite. They are the only Labour Members who have taken the trouble to come to listen to this debate on a subject of interest to tens of millions of people. What a contrast there is between the Labour benches and the number of hon. Members present on the Opposition side.

I hope that no one, even among the obsessively collectivist Labour supporters on the benches opposite, imagines that the contribution of the small business can be replaced by nationalised industries. In industry, when nobody owns nobody cares, and the essence of small businesses is that all those involved in them care intensely.

I wish, after that introduction which is more than half of what I am going to say, I could turn to the party record and point out that the Conservatives have an infinitely better record than the Labour Party in looking after small businesses. But in fact neither party has distinguished itself on this subject. To the Labour Party belongs the credit for having set up the Bolton Committee—a very sensible initiative—and to the Conservative Party belongs the credit for having put into action most of the recommendations of the Bolton Report. Let us take credit where credit is due.

The Bolton Report concluded that small businesses and the self-employed depend essentially upon the economic climate. It reported that at the time when it was studying the subject small businesses and the self-employed saw the climate created by the Government as at best indifferent and, in essence, as hostile to their interests. It reported that the interests of small businesses had been neglected by successive Governments. It urged in its recommendations that Governments of the future should seek to understand small businesses and the self-employed and should create for them an encouraging climate.

At the heart of those recommendations was one that tax should be cut and that small businesses should be enabled to retain more profit as the principal source for the financing of their expansion.

Successive Governments have imposed a whole series of burdens upon small businesses and the self-employed—administrative, statutory and fiscal burdens. Small businesses and the self-employed, already staggering under VAT, being unpaid tax collectors, and under the impact of rising rates and of a whole series of well meant but in aggregate overwhelmingly burdensome statutory obligations, now on top of all that have to suffer the nightmare of inflation, the nightmare of high taxation, and the nightmare, in combination with these, of price controls.

The people of whom we speak today have the honourable purpose of independence, a desire to prosper for themselves and for their families, and a desire to transmit what they achieve to the generation that follows them. If any of these motivations is destroyed, the seed bed of our future is damaged.

Let us recognise in this debate that at best the talent that fertilises the small business has an international market, that those who create small businesses from which the giants of the future will come can very well go to another country. They can carry their abilities elsewhere, or they can just not take the trouble. Be he a small shopkeeper or a taxi driver, be he a man providing a service, be he a man setting up a small workshop, he can, if the burden upon him becomes too great, withdraw his attitude of helpfulness and vitality and transfer to the status of an employed man, thereby impoverishing his clients and the community.

Mr. Ivor Clemitson (Luton, East)

Is the right hon. Gentleman suggesting that the ability and talent of entrepreneurship is transmitted by heredity?

Sir K. Joseph

No, certainly not. The competitive process ensures that where the second generation has not the talent it is rapidly vanquished. It is not for nothing that the folk wisdom has it "From clogs to clogs in three generations". I do not contend that entrepreneurship is transmitted by heredity.

This country is lucky to have several firms—Pilkingtons, Sainsbury, Marks and Spencer leap to one's mind—where the enterprise, effort and good will have survived from generation to generation. We cannot tell for how long they will continue. If they do not continue, perhaps it will be because other companies have attracted those qualities; or perhaps one day the co-operative will display the entrepreneurship we have come to admire. If so, good luck to competition. I only wish that the co-operatives, which were invented in this country—they are a splendid invention—had kept the vitality of their founders and were offering competition to the best of our private enterprise firms. Nothing would be better for the country.

Dr. Colin Phipps (Dudley, West)

Does not what the right hon. Gentleman has just said negate his argument that the hereditary principle is essential in preserving talent and entrepreneurial activities?

Sir K. Joseph

No. It is the hereditary motive which is so essential. This is one of the ingredients of the hard work and the risk taking that lies behind the small business out of which will come the future industries which our successors will take for granted—just as we take for granted whole industries which were conceived in the brain of an unusual man or woman at the very beginning.

Among the self-employed and small business people today there are intense depression and anxiety bordering upon despair. The Government have added to the misery and the nightmare of inflation. On top of the cash squeeze, price controls, high rates, negative profit—that is, a loss in real terms—the Government have added gratuitously, and almost unaware of the damage they are doing, the hideous concept of the capital transfer tax, coupled with the capital gains tax, all shortly to be reinforced by a wealth tax.

Mr. Paul Dean (Somerset, North)

Before my right hon. Friend leaves the philosophy, will he include the professions, including doctors and consultants, who feel that their freedom to practise their skills and to look after their clients or their patients in the way they think best is relevant to the philosophical argument that he is advancing?

Sir K. Joseph

Yes. The doctors and members of other professions are, to the extent that they are self—employed—some are not self-employed—and even to the extent that they are not self-employed, at the very heart of this discussion.

I should have liked to have kept my contribution to the debate, to the general principles, but I must for a moment glance at one aspect of the current complex of miseries that is relevant to small businesses. I refer to the credit position.

The expanding small business—after all, it is on the wealth of the expanding small business that the future depends— often goes through a stage of over-trading. It is important that we as a country find ways without subsidy by which a small business can obtain credit to finance stock and debtors during that period of expansion.

I must add as a rider that the capital transfer tax will encourage small business. men to keep cash outside the business in order to have some money with which to meet the tax on transfer. Leaving that aside for the moment in the hope that one day either the Government will repent or we shall sooner rather than later repeal the tax, I come to the point that we need to try to find some way in which small businesses can improve their credit arrangements.

The credit for a small business during a period of expansion is not an ideal subject for the banking mechanism. It is a bit long term. I note with admiration the efforts of, for instance, Barclays Bank to provide a much-improved service for the small business.

I note, too, that other countries cherish their small business sector far more care- fully than we do. Other countries take seriously the philosophy which I have attempted to articulate and make special arrangements for small businesses. We should try to learn from them. There are initiatives in Holland, Sweden and America. In America, the Small Business Investment Corporation deserves our close study. I hope that we shall hear that the Government are studying what we can learn from other countries.

Against the background that I have been describing, even at the time of Bolton the number of our small businesses per million of the population was far less than in comparable industrial countries. It was far less than in America, for instance. Since Bolton, there must have been a steep decline.

The birth rate of small businesses is far less than the death rate. That was true at the time of Bolton. In the terrible climate since Bolton it must have got worse. So small businesses are not replacing themselves. Therefore, we should do our best to learn from countries which nurture and foster the health of their small business sector better than we do.

Mr. Stanley Newens (Harlow)

Does not the right hon. Gentleman agree that the decline can be attributed to a considerable degree to the activities of big business—for instance, in property speculation, resulting in high rents? It has been made more difficult for small business men to obtain premises as a result of take-over bids. It is not fair to put the blame to some extent in the court of big business?

Sir K. Joseph

The hon. Gentleman is stressing one part of a valuable truth. Both major political parties have supported comprehensive redevelopments and have sought to sweep away—as I did when I was Housing Minister—whole untidy tangles of small premises in centres of towns. But in so doing we have impoverished the life of those towns and have damaged small businesses. If the hon. Gentleman reads the books "Death and Life of Great American Cities" and "The Economy of Cities" by Jane Jacobs, he will see that they are an attack not on property development but on town planning concepts to which property developers have responded. We must balance the benefits of town planning in our system with the damage it causes.

We are discussing not only economic issues but the social contribution of small business men and the self-employed. They are an independent breed of people who are admirable in themselves. They enrich our society. Their industrial relations, because on a small scale, are generally much warmer than is the case in larger concerns. There is a perception of a common interest between small business men and their workers which is infinitely valuable to our national life. The small business man, unlike an executive in a large company, is often rooted in the community. He or she contributes to social and charitable life; they are able to sit on the bench and are able to initiate cultural and political activities. That is a most valuable contribution to our society.

The small business man and the self-employed person are decentralised, and that again is a great advantage to our society. There is a dispersal of funds which underwrite our political, social and cultural liberties. There is a close link between economic, social, cultural and political liberties, and at the heart of that link is the small business man and the self-employed.

Dr. Alan Glyn (Windsor and Maidenhead)

My right hon. Friend gave an illustration involving Rolls-Royce. Has he any idea of the number of people involved either directly or indirectly in smaller businesses as a proportion of the whole countrywide activity? I believe from that point of view the situation is too little understood.

Sir K. Joseph

I am grateful to my hon. Friend for asking me that question. I think it is true to say that over a third of the labour force in this country is employed in small businesses or is self-employed. I give that answer using the Bolton definition.

I was saying that the self-employed are a valuable and also a vulnerable sector of our community. They have as much right to be considered as any other group in our society. They choose to be self-employed for their own reasons, but we all benefit. They are valuable because of their sturdiness, independence and hard work.

The freedom to be self-employed is an aspect of liberty and we should sustain it. They are vulnerable, however, because of the cumulative impact of inflation, taxation, contributions, rates and price controls. The small businesses and the self-employed are the seed beds of liberty, vitally, inventiveness, prosperity. They are vital to our future.

The present Government have inflicted wanton damage on their prospects. I must confess that no Government have given small businesses the encouraging climate recommended by Bolton. But the present Government have totally underestimated their importance, their driving force and their vulnerability.

The new burdens, including capital transfer tax on top of all other taxes and menaces, are destructive to the point of malice to them and to the national interest. By damaging small businesses and the self-employed the Government are damaging all the people of this country—not least the poor and the weak and those who depend on the social services. This is why I hope my right hon. and hon. Friends will vote on this issue this evening.

4.35 p.m.

The Under-Secretary of State for Industry (Mr. Gregor Mackenzie)

This is the second time in recent months that the House has had the opportunity to discuss small businesses. We almost had a similar opportunity last Friday—and I was sorry to see that opportunity missed —and this subject was well aired in the other place. I must point out that in the last three or four months we have had rather more discussion of the subject of small businesses than we had in the previous four or five years.

I hope that this debate will be conducted in a reasonable, sensible and logical manner. I hope that we shall not experience the situation which I faced in the 1940s as a young Labour candidate. In those days housewives leagues appeared only during periods of Labour Government. They disappeared completely when Conservative Government were elected.

The right hon. Member for Leeds, North-East (Sir K. Joseph) conceded that these problems had been faced by Governments of both political complexions over the years, and I believe that we must get down to the job of looking thoroughly at the situation. However, I was a little disappointed to hear him suggest that some Labour Members were hell bent on destroying small businesses. That is not my point of view and I know that it is not the point of view of my right hon. and hon. Friends. Many of us—including my hon. Friend the Minister of State, Treasury, and myself—have had some experience of these matters. We are very conscious of our great responsibility in ensuring that small firms grow and flourish. I agree with the right hon. Gentleman that they make a most valuable contribution to the well being of our community, both economically and socially. Small businesses provide good jobs, often steady jobs and jobs of continuing interest.

Mr. F. A. Burden (Gillingham)

We all accept that the hon. Gentleman is concerned about small businesses. We hope that he will convey that concern to members of the Cabinet and, indeed, will influence them in their thinking. It appears that they do not have the same concern for small businesses as does the Minister.

Mr. Mackenzie

I assure the hon. Member for Gillingham (Mr. Burden), of whose interests in this subject I am well aware, that my colleagues in Government discuss this topic at considerable length. Perhaps I can do no better than to quote the words of my right hon. Friend the Prime Minister, speaking on television. My right hon. Friend said: We want to help not only small firms, many of whom have been very hard hit by inflation and the liquidity problem, but also want to see the privately owned area within the mixed economy enterprising, alert and profitable. I think that will help to dissipate some of the uncertainty caused by too much public debate. That, in a nutshell, sums up our attitude to small firms.

Despite what the right hon. Gentleman said, I have rather less sympathy with the people who elect to classify themselves as "self-employed" because they see personal advantage in it and then cry out when some of their "perks" are taken away. I am not now speaking of the small shopkeeper or the professional man but of all those who operate, for example, within the "lump" in the construction industry and their ilk. I make this point to illus- trate how dangerous it is to generalise about the self-employed.

I recognise that there are problems in running a small business. Many of the problems no doubt will be identified by other contributors to the debate. I hope to mention some of those problems, but in this wide-ranging debate the House will not expect me to anticipate all the points. Furthermore, I have the advantage of having present throughout the debate my hon. Friend the Minister of State, Treasury, who will deal with the matters which come within his purview.

Mr. Maurice Macmillan (Farnham)

I am sure the Minister does not want to mislead the House or malign an important section of the community. Therefore, I hope he is not implying that all workers who are self-employed within the construction industry are the target for his wrath under the collective title of the "lump".

Mr. Mackenzie

I am not attacking people who are self-employed in the construction industry but people who operate in that rather odd way that is described as the "lump". I suggest that they are not doing this country a great service.

I return to the point that I was making. I shall not deal with all the points that no doubt will be raised. I am sure that Conservative Members would not expect me to do so. I say quite frankly, as did the right hon. Member for Leeds, North-East that not all the difficulties that we now face suddenly arose in the course of the past year. The right hon. Gentleman acknowledged that there had perhaps been neglect during his days and suggested that perhaps there had been neglect during my days. That was why my right hon. Friend the Secretary of State for the Environment, when he was President of the Board of Trade, set up the Bolton. Committee. The right hon. Gentleman's administration set up the Small Firms Division. That is a division which is constantly working in this area.

The right hon. Gentleman indicated that the main issue facing businesses in general, be they large or small, is inflation. I am sure that the right hon. Gentleman would not expect from me in a 10 or 15 minute speech a major contribution on inflation. However, I think that we are all conscious of the fact that inflation has hit businesses in general. I hope that the right hon. Gentleman will recognise that in the worldwide situation that we are facing, the Government, and the Chancellor of the Exchequer in particular, are doing everything possible to cope with this difficult problem.

Mr. Wyn Roberts (Conway)

No.

Mr. Mackenzie

The hon. Member for Conway (Mr. Roberts) says "No". I shall be delighted in the course of the debate to hear his answers. I am sure that his right hon. Friend the Member for Leeds, North-East will also be delighted to hear them. There are those of us who may perhaps too modestly claim that we are not certain of all the answers. If the hon. Gentleman has them all I shall be delighted to hear them.

Mr. Roberts

Surely the whole burden of my right hon. Friend's criticism of the Government was that they are exacerbating the position of the self-employed and small businesses, given that they are already suffering from inflation. For example, there is the increase in the insurance contribution that is to be made by the self-employed. A self-employed man on £50 a week will find that his insurance contribution will increase by 98 per cent. but the contribution of the employed person will decrease as from April of this year.

Mr. Mackenzie

But inflation is nothing new. It was a matter that was very much in the minds of the right hon. Gentleman and his hon. Friends. They did not manage to curb inflation or to stop it any more than did any other civilised country in Western Europe. It is within the will of this Government to do all that they can to sort out the problem as best they can.

The right hon. Gentleman also raised another important matter that hits small firms hard—namely, the whole question of local government rates. I spent most of my representational life as a local councillor. I have always been very conscious of the burden of local authority rates on small firms. We are well aware of the difficulties that face everyone as a result of this year's rate increases. They are, as the right hon. Gentleman pointed out, the direct result of inflation.

Undoubtedly the system needs to be reformed. It is worth pointing out to Conservative Members that when they were in power they neither curbed inflation nor did they set about reforming the local rating system. By contrast this administration has set up the Layfield Committee to consider local taxation. Further, we have provided more generous rate support. For the first time we have allowed people, such as small shopkeepers, who live on their premises to benefit from an appropriate part of the reliefs which in the past have been available only to domestic ratepayers.

Mr. Jim Marshall (Leicester, South)

My hon. Friend has mentioned the effect of rates on non-domestic ratepayers. Does he agree that one of the conclusions of the Labour Party's report to the Layfield Committee was that rates on non-domestic ratepayers, such as small business men and the self-employed, are in effect an indirect tax on the consumer?

Mr. Mackenzie

Yes, I take that point. Such points will be made to the committee.

Mr. Robert Boscawen (Wells) rose—

Mr. Mackenzie

No. If I keep giving way, the many hon. Members who want to make only a short contribution will have no time.

During the debate which we had in December a number of hon. Members referred to the relationship between large companies and their suppliers. As has been pointed out already, this is a matter about which we are all very conscious. Critics of Government sometimes forget that the damage done to small firms is often done by their larger brethren. I am constantly bombarded by complaints about the way in which large firms squeeze their small suppliers and customers by delaying payments and making what appear to small business men to be arbitrary and detrimental changes in the terms of business.

My right hon. Friend the Secretary of State for Industry has appealed to the CBI to draw the attention of its members to the damage which these policies can do to the small firms sector. It is worth remembering that the small firms are an integral part of our industrial fabric. We have pointed out that if they are squeezed too hard it is the big battalions which may also be the longterm sufferers.

In our debate in December the hon. Member for Basingstoke (Mr. Mitchell), when the issue of writing to the CBI was raised, suggested that perhaps we in Government should raise the matter with the nationalised industries and our own public Departments. I have considered the matter and I am satisfied that in broad general terms most of those industries behave very well. Nevertheless, we have taken the opportunity of writing to all the chairmen of the nationalised industries and of drawing this matter to the attention of all Government Departments.

Mr. David Mitchell (Basingstoke)

As the Minister has mentioned that matter, I must tell him that I have a constituent who has a firm that is in grave financial difficulties. The largest sum owed to my constituent—namely £2,197—is owed by the Paymaster-General.

Mr. Mackenzie

I cannot answer that point straight away. If the hon. Gentleman's constituent is owed that sum by the Paymaster-General, it strikes me that he is something more than the small business man I have in mind. I suggest to Conservative Members that if they have any influence with some of our large enterprises they can perhaps help by backing my right hon. Friend the Secretary of State for Industry in the approach that he has made to the CBI. If we can persuade the large companies that the prompt payment of bills is an old-fashioned business virtue, that will go a long way to ease us out of our current liquidity problems in the small firms sector.

The Industry Bill is a matter of great controversy. I do not propose to deal with it at great length. Suffice it to say that I believe that the planning agreements, which lie at the core of the Bill, will be of considerable benefit to small firms. For a long time they have been subjected to various pressures as a result of the lurches which large enterprises have enjoyed. If they can see the planning agreement system in operation I believe it will help to give them some sort of guidance for the future.

I also hear a great deal about the difficulty which small firms have in obtaining money from commercial sources. The right hon. Gentleman also mentioned this matter. Suggestions have been made from the most unlikely quarters that the Government should step in. This is a matter that we are considering carefully. There is little concrete evidence that the banks and the financial institutions are failing to do their jobs. Indeed, I believe that within the limits of financial prudence the clearing banks are generally going out of their way to help the small companies. Where they cannot do so, the reason is usually not unwillingness but the unsound nature of the proposition.

The right hon. Gentleman said that he hoped that we within the Government were looking at how other countries help small firms. I can assure him that at this moment we are carrying out quite detailed studies of schemes which are operated in Europe and in North America. Clearly there are lessons to be learned, but I must tell the right hon. Gentleman that from what I have seen so far some of the schemes look less attractive when seen in the context of the financial and industrial environment in which they apply as compared with the position in Britain. Where they are most attractive, they often serve the same purpose as the help which is available in the assisted areas of this country.

In our White Paper on the Regeneration of British Industry we recognised the particular problems of small firms and said that we were looking at the need to help them with their liquidity problems, I assure the House that this matter is still under active consideration. But we cannot ignore the recommendation of the Bolton Committee, that openly discriminatory policies in favour of small firms are not the answer. In all our policies we are seeking to avoid unintentional cases of discrimination against them, but we must be careful to avoid treating them as something special simply on account of their size.

In these difficult times all sections of the community must bear their fair and proper share of the burden. When the Prime Minister, in answer to a Question in this House last May, announced that I had a broad responsibility for the interests of small firms, I saw it as my duty to ensure that they did not carry more than their fair share of the burden. I assure the right hon. Gentleman that I have maintained the closest contact with my colleagues on all aspects of policy formation.

Sir K. Joseph

Is the hon. Gentleman solemnly taking responsibility for having talked to his senior colleagues about the effect of capital transfer tax on small businesses? Has he discussed with them the Employment Protection Bill? If so, while I respect him personally, I suggest that he is not being effective in drawing to the attention of his senior colleagues the damage that this legislation will do to small businesses.

Mr. Mackenzie

I assure the right hon. Gentleman that all these matters are drawn to the attention of my senior colleagues. My hon. Friend the Minister of State, Treasury will deal with capital transfer tax at a later stage. Indeed, I believe that concessions were made to small business men. We may have to wait for some time for the Employment Protection Bill. However, as I said, all these matters are drawn to the attention of my right hon. and hon. Friends.

Some of the difficulties facing small firms arise from their lack of management expertise and the specialist facilities which larger firms can afford. This was recognised by Bolton. I pay tribute to the Conservative administration—I hate having to do this, but I paid tribute to them in December and I do it again—for introducing the network of Small Firms Information Centres which seek to help business men find solutions to their problems. These Small Firms Information Centres are proving most valuable to all small firms throughout the country. We have continued the publicity about them. Indeed, they are flourishing now. We have had about 90,000 inquiries so far. About a quarter of those inquiries are from people who are thinking of starting up new businesses.

We have recently engaged consultants to carry out a thorough survey of customer reaction to the service to find out whether changes are needed to make it even more effective. I believe that this is a valuable way of helping small firms to succeed. We hope that the service will grow in future.

As I said in my opening comments, I do not under-estimate the problems facing all enterprises at this time. They are real and reflect the difficulties facing the whole nation. The Government are determined to solve those difficulties so that we can forge ahead. I believe that time will show that many of the fears about the consequences of our policies are groundless and that small business men have been done a disservice by their would-be champions who cry wolf every time any new policies are introduced.

Hon. Members opposite must bear in mind that, although factors outside the control of this country have played a major part in our economic problems, their policies during the last four years were not particularly helpful to the small firms sector. Before becoming a Minister I had close contact with small firms and received many complaints about shortages, and so on, especially in the latter part of 1973. Indeed, the introduction of the three-day working week damaged many small firms. These difficulties have been with us for a very long time. The Government are determined to ensure that small businesses of every kind are able to play their important part in the life of Britain.

4.55 p.m.

Mr. John Loveridge (Upminster)

Successive Governments have placed burdens of regulation and taxation on small businesses. To those burdens have been added inherently political measures to which small business men must have regard in their planning. Many of those measures may of themselves be reasonable and sound. It is their cumulative effect which is so difficult for the business community to understand or to combat.

I should like to list some of the measures that have to be taken into account by business men—measures not inherently of a business nature. First. VAT has created much paper work, and surely the small businesses exemption limit should be increased, as it is already too small due to inflation. Secondly. threats of multiple capital taxation—capital gains tax, capital transfer tax, and the proposed wealth tax—all create uncertainty and confusion. Thirdly, there are the high top rates of individual taxation of 98 per cent. and of 83 per cent. on earned income.

These taxes have the effect of overloading the debt structure of a business, and they discourage self-financing in favour of borrowed money. That, in turn, makes expansion and investment less safe for any business and, therefore, makes it more difficult for business men to raise money for any new programmes of development. This is apart from the threat to survival of the medium and larger size businesses arising on death.

Fourthly, political decisions make exports difficult or impossible to countries such as Rhodesia, Spain or Chile, and these work through to the small component makers in the economy.

Mr. Clemitson:

Would the hon. Gentleman care to comment whether our membership of the EEC has added to these administrative and bureaucratic burdens on the small firm? I was contacted by a small firm in my constituency which manufactures hats which complained that, in relation to its imports and exports to and from the Common Market, it was being burdened with extra form filling and bureaucracy.

Mr. Loveridge

But not half so much as the in-again, out-again, come-again Finnegan policy which leaves small businesses uncertain whether we are to be in or out of Europe.

Mr. E. Fernyhough (Jarrow)

Will the hon. Gentleman give way?

Mr. Loveridge

I should like very much to enter into further debate with the right hon. Gentleman, but I promised to limit my time.

Fifth, there are Government deals with countries which have exceptionally cheap labour. For example, in the Press today there was a report of a case of subsidised competition of men's leather-uppered footwear from Czechoslovakia, Poland and Romania which comes in at half the price that the most efficient British firms, paying fair wages in this country, have to ask.

Sixth, there are often confused and complicated tariff arrangements with which firms have to cope.

Seventh, there are more Government-sponsored disparities over loans. How can a business man understand that it is right to give an enormous cheap loan to the Russians at perhaps half the rate of interest at which he can borrow money to improve the machinery in his factory in this country?

The eighth question is that of planning permission, often long delayed and causing grievous bottlenecks. The ninth is the industrial development certificates, which are often refused when for sound and sensible expansion. Firms are required to leave an area where they know that they can operate well and go to one where they know that they cannot. Tenth, there are the training board levies, which cause more problems.

Eleventh—the latest example—is the Press advertisement for the Price Commission, inviting the registration of small firms under complex regulations. Twelfth, is the Employment Protection Bill.

I am not advocating or denigrating any of these measures at the moment, but collectively they impose a burden of obligation with which smaller businesses, which do not have research staff, cannot cope. Solicitors and accountants often cannot answer simple questions on which business planning depends because of the complexity and uncertainty of the laws. Business men today spend far too much of their time talking about the effects of regulations and possible laws instead of getting on with their work.

It is true that successive Governments are responsible for this. The purpose of government is to make decisions; the purpose of Parliament is to talk about things; but the purpose of business is to get things done. It has been well said that no one wastes the time of those with something to do more than those with nothing to do. Let the Government, so far as they can, leave business men alone to get on with their jobs uninterrupted.

Government intervention is, of course, essential to secure fairness in trading, to bring security to consumers and for demand management. But when government tries to change the proper internal practices of business, it can only create confusion, even where the actions of government are most helpful—for example, with the 100 per cent. allowances for machinery purchases. These must be good when the taxation of personal earnings and profits is so high. They enable the replacement of old machinery. But in some cases surely it would be better to build up substantial sums of capital out of profits, to give a larger investment later at a more appropriate time. Surely it would be better just to let the firms make and save their profits for reinvestment.

Sometimes very simple solutions are the best. High profits lead to high investment, which in turn leads to high output, which in turn leads to high wages. On the other hand, low profits lead to low investment, which in turn leads to low output, which in turn leads to low wages. It is indeed as simple as that. There is no more to it than that.

Let the Government concentrate on macro-economics, but let the business community concentrate on how to do its own work that it understands. My message is: cut the endless Government measures which confuse all business planning and set business free so that our country as a whole may benefit from the prosperity of business.

5.4 p.m.

Mr. Ted Graham (Edmonton)

The debate so far has shown that there is no monopoly of care for the welfare of the small business and the small business man. Evidence can be, has been and will be produced during this debate to prove that the actions of Governments over the years can be cited by either side to castigate the other side. The small business man wants not charity or special consideration but a fair crack of the whip. At the same time, however, he will accept that it is difficult to make a case for special exceptions for other elements in the business community. We are making a case not for special exception for the small business man, I hope, but for equity and fair play. In any society, some will be unable to stand the pace and the heat, and this is especially true among small business men.

I was interested in the comments of the right hon. Member for Leeds, North-East (Sir K. Joseph), who almost regretted that the co-operative movement was not as strong as it once was. Would that the co-ops were stronger and could recapture some of the zest of their early years. If the movement gets stronger, it will do so by penetrating the business sector. This will inevitably mean that some elements in the business community will suffer. I do not think that the small business men will thank the right hon. Gentleman for making those encouraging noises to the co-operative movement.

But I have news for the right hon. Gentleman and the House: the co-operative movement, without his good will and aid, is getting stronger every day. I declare an interest because of my association with the movement. It is one of those unique organisations which comprise both big and small businesses. There are co-operative societies with more than 1 million members, with more than £100 million-worth of trade a year, and small societies with less than 1,000 members doing less than £500,000-worth of trade. But the movement has this unique difference—the capital which runs a co-operative society almost overwhelmingly comes from the community, as does its management. The management is not controlled, as in many other businesses, from afar.

While appreciating the problem of the small business man, we must recognise that there have been some significant changes which have assisted him in the past year—although I recognise that there have been problems. For instance, great stress has been laid not only on the cost but on the accessibility of credit. I agree that a number of banks, one of which is the Co-operative Bank, are doing what they can to assist smaller businesses. But we should remember that in mid-1973 the interest rate which affected all other credit facilities was 10 per cent. By the autumn of 1973 it had risen to 11 per cent., and when the Conservatives left office just over a year ago it was 13 per cent. In the past year it has dropped successively from 13½ to 11½ to 11¼ to 11 to 10¾ to 10½ per cent., until last week it was down to 10¼ per cent.

So among the welter of information that we should let the small business man know that we are conscious of, and besides hearing what he has to say, we should remind him of some other factors. I am not putting this forward as a benefit, but it needs to be taken into account. When this Government put through the Prices Bill and activated the Price Code, one of its major measures in an attempt to curb profits was the provision that all businesses must operate on gross margins 10 per cent. below what they had been. But it exempted businesses with turnover of £250,000 a year or less.

We can get into a long argument about what makes a business big or small; Bolton has something to say about what is a small business. But a retail business that takes £5,000 a week is of a fair size. It is not the corner shop or a chain. A business taking £5,000 a week through one shop is not the smallest of businesses. Yet special steps were taken by the Government to exempt such businesses from the operation of the Price Code.

Reference has been made to the reasons why businesses are going out of existence. We have all received information from the National Federation of the Self Employed. Bankruptcies appear to be on the increase, and some businesses have gone out of existence. Bolton reminded us of the many reasons for this. It appears that they do not go out of business because they have been forced out. The biggest reasons for going out of existence, according to Bolton, are problems of succession, problems where the management—

Mr. Loveridge

There is a reason for bankruptcies which appears obvious to many of us. Bankruptcies have been rising under this Government. Were they not also rising under the last years of the previous Socialist administration, before the Conservatives took office? Is there not a connection?

Mr. Graham

The hon. Gentleman suggests that bankruptcies in 1974 were ipso facto caused by factors peculiar and unique to 1974. That is nonsense. I believe that close scrutiny will show that a business which went bankrupt in 1974 did so because of an accumulation of problems in 1972, 1973 and 1974.

Mr. Loveridge

What about 1969 and 1970?

Mr. Graham

Nineteen sixty-nine and 1970 were the last two years of a Labour Government, whose period in office should have been extended. The electorate showed common sense in 1974 and gave us a further opportunity.

The problem of succession is one of the major reasons why small businesses have gone out of existence. The other reason is that a small business may perfectly properly decide to sell out to a bigger business, because there is something in it for it. I see nothing wrong with that argument.

The other factor which reduces the number of small businesses is the changing pattern in consumer demand—the mobility of the shopping public, the establishment of the hypermarkets and the supermarkets. I do not claim that big business is better, but many small businesses voluntarily go out of existence in that way.

The Minister referred to a debate in the other place on 5th March. The Earl of Gowrie, when talking of the dangers to the small man, said: Because I feel that these policies are almost literally lethal, I must try to clarify dangers in the Conservative position as well. In recent decades there has been a tendency for my political Party to become associated in the public mind with a 'big business' ethic of hard selling, high consumption, and easy credit. He then said: In practical terms, the business ethic weighs heavily on the self-employed; the supermarket heavily on the corner grocer. He went on to say: There are, too, the little local difficulties of resale price maintenance and value added tax".—[Official Report, House of Lords, 5th March 1975: Vol. 357, c. 1258–9.] The abolition of resale price maintenance by the Conservatives did more harm to the small business man than any other measure in the 1960s.

I turn now to the value added tax. We have heard a great deal from the Opposition about the punitive nature of the capital transfer tax. It will greatly affect the small business man. However, the great gripe of the small business man is the weight and volume of work which he now has to do in connection with VAT, as we see in the letter from the National Federation of the Self Employed, representing these unpaid tax collectors. VAT was introduced by the Conservatives. We must be fair and realistic.

I hope that my hon. Friend the Minister will take careful note that for many small business men the introduction of a multi-rate of VAT is likely to be extremely burdensome. I hope that it is still possible to reconsider the cost of bringing in new machinery and a great deal of documentation, not only to the co-operative movement and big business but to small businesses, especially pharmacies and chemists. They are very upset at the prospect.

The record of the Labour Government on small businesses, certainly by comparison with the Conservative Party is fair and credible.

Mr. Deputy Speaker (Sir Myer Galpern)

In a short debate of this kind it is all the more imperative for hon. Members to be as brief as possible. Practically everyone who is in the Chamber at present is anxious to take part in the debate which must finish at 7 o'clock. There is no question but that we can accommodate everyone if hon. Members will be reasonable and show some fairness towards each other. Interventions lengthen speeches, because the hon. Member on his feet has to add to his remarks by replying to the hon. Member who intervened. It would be helpful if we could keep interventions to the minimum.

5.16 p.m.

Mr. John Gorst (Hendon, North)

I want to make only two points. The first is to draw attention to a somewhat curious phenomenon. Despite the gravity of our present economic situation, and despite the fall in the value of money, consumer spending, far from diminishing, appears to be on the increase. Those whom one might have expected to be the hardest-hit by these circumstances seem to be not just spending more and more but spending on inessentials.

The reason is that all incentive for thrift, the expansion of businesses and self-reliance is rapidly being eroded and is disappearing. I should like to interpose a personal illustration. My mother was a refugee in 1917 from the Russian Revolution. Her philosophy was formed, when a child, in what might be described as a disintegrating society. It was her philosophy—and I hope that she will not mind my saying that it still is—that we should live for today, because tomorrow will take care of itself.

But if the good people of today do not have foresight for tomorrow there are evil men who will exploit the barren void that they leave. The Dark Ages after the collapse of the Roman Empire, the rise of the Nazis and the emergence of Stalin all show that this is true.

The kind of people who can normally be expected to be building up reserves of wealth for investment, expansion and saving have now concluded that none of it is worth while, that one might as well spend now and let the future look after itself. That is the attitude that seems to be abroad today. In other words, our social agriculturists, those who farm for tomorrow and not just for today, are saying to themselves "Let's eat the seed corn before it is confiscated from our barns and warehouses." All history has shown, from ancient Egypt through to modern times, that that is an early symptom of national disintegration.

I come to my second point, which leads directly from the first. Modern attitudes and economists have managed to obscure an essential truth which ought to underlie our whole approach to the special situation of the self-employed and small businesses. It is that wealth is the result of work that has not been dissipated but has been stored. It is, indeed, the seed corn. The purpose for which the storage takes place is to provide sustenance for the present, protection for lean years, and, above all, the creation of new resources for the future.

Those are basic human incentives, but there is another that is of abiding value wherever democracy counts. It is that the storage and creation of wealth are the essential concomitants of liberty, personal freedom and independence. Take away a man's personal wealth, however modest that affluence may be, even if it is merely hard-earned life savings, and one reduces him to a slave of the State, however benevolent or evil the State may be.

Those who would redistribute wealth believe that they are transferring independence to those who have been denied it. They are mistaken. The very process merely transfers the liberty of one set of individuals, most of whom have earned it through years of hard work, initiative and perhaps risky enterprise, to a bureaucracy.

Dr. Phipps rose—

Mr. Gorst

I shall not give way, because I have promised the Chair that I shall be brief.

That bureaucracy, if it does not squander the wealth, certainly cannot hand it over to a single deprived individual.

Mr. Deputy Speaker

Order. I appreciate the cut of the back of the hon. Gentleman's jacket, but I should like to see whether he has a two-button or a three-button front to it. I should be grateful if he would address the Chair.

Mr. Gorst

I apologise, Mr. Deputy Speaker.

The debate is also about a justifiable resentment felt by many people in many sections of our community, a resentment based on past disillusion, present anger and future fear. Those fears are justified by the history of recent events. The Government have been warned. They must take account of them. My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) said that where nobody owns, nobody cares. I would add that where nobody keeps anything, nobody will work to create anything.

5.23 p.m.

Dr. Colin Phipps (Dudley, West)

The Opposition, in a number of speeches, have created an incredible philosophical meringue. There has been talk of inheritance, thrift and prudence. The hon. Member for Hendon, North (Mr. Gorst) talked of slaves, as if to suggest that those people who worked under an outright free enterprise system in this country in the last century were in some ways better off than their descendants today, as if their individual freedoms were better than they are today in a mixed economy. If the hon. Gentleman asked the great bulk of the population whether they would prefer to return to the days for which he seems to have such a hankering, he would find that he was in a small minority.

There has been thrust at us, not merely in this debate but in a whole series of debates this Session, principally on the capital transfer tax but also on other issues, such as the question of inheritance. It should be made quite clear that there is a distinction between a parent's natural desire to do the best he can for his offspring, to protect them from illness, to clothe, feed and educate them. But that is very different from the right of the offspring to inherit wealth or power accumulated by their parents. We on this side of the House have never said that it is not the duty of a parent to look after his offspring, to give them better conditions and better education. But we believe that we are doing just that for all the population. That is one of the reasons why there is a Labour Party, and why we are in power.

We recognise that fundamental right. We do not recognise any moral or social right of a person to inherit money when he has done nothing to help create it, and when many such people are totally unable to continue to hold it or are unsuitable to do so.

Mr. Peter Rost (Derbyshire, South-East)

Does the hon. Gentleman want to confiscate it?

Dr. Phipps

I hope that by the use of the capital transfer tax, by taking into the hands of the State money that would otherwise be inherited, we may be able to relieve certain of the earners and creators of wealth from taxation. The whole trouble of our society is that we have always taxed the creators of wealth much more than the inheritors. Over many years birth has been more important than merit. We on this side of the House believe that merit is more important than birth. We shall tax inheritance in the hope that as a result we shall be able to tax the creators and earners of wealth less.

I am amazed that the Conservative Party, which is supposed to stand for free enterprise, merit and the individual's having the fullest possible opportunity to succeed, should subscribe to a system —the system of inheritance—which directly mitigates against the opportunity of the individual to succeed. It prevents him from succeeding, because it puts wealth and power into the hands of those who have been born to them, rather than those who merit them, and it keeps them there.

It is also important to make it clear that we on this side of the House care deeply for small business men and small businesses. Conservative Members are wrong to suggest that the small business man is not related to the things which we are doing, because the small business man's prosperity depends almost entirely upon the prosperity of the bulk of the working population.

The people who spend money in the local shops are the working people who live in the neighbourhood. Every time a trade union succeeds in obtaining a rise for its workers—I am not here to discuss whether that rise is justified—the money is spent in the shops and businesses of the people we are discussing. Therefore, when we on this side of the House look after the working population, we are also looking after the small business man and the shopkeeper.

I end on a serious and positive note. Small businesses have great difficulties which stem largely from a lack of management skills on the part of most people in them. A man who may be particularly good at his job may well lack management skills. For example, a carpenter may begin a carpentry business of his own. When he is a one-man outfit it is easy for him to charge. He knows his overheads, and his cash flow is a simple process. The business may well expand, because his overheads are low and he can under-cut the competition, but he may not have sufficient expertise in cash control to realise that his overheads are eating into his profits. We then see the well-known small-business cycle of small businesses beginning, flourishing, and then becoming bankrupt because of their very success.

I feel that there is a very real need for help to small businesses on the question of management. I should like to make a comparison with the scheme run for small farms. It is called, I believe, the small farm scheme. It is run by the Agricultural Development and Advisory Service, and under it small farmers, who agree to certain provisions, are helped by the ADAS to keep their books and to understand their cash flow position and credit position. This scheme has been a very great success in enabling small farmers to manage their businesses better.

I appreciate that it would be a very major task to make such a system available to all small businesses. However, I believe that as a Government we must try to set up a system whereby the managerial problems of small businesses can be reduced and, in particular, education in the management of small businesses can be improved. There may even be a case for looking to teaching at schools in this respect. This matter must be improved, otherwise we shall be in a situation in which genuinely small businesses—I am thinking of the one, two or three-person business and not, say, a 50-person business—every time we introduce new taxation or other problems for them will find themselves in great difficulties in coping with their problems.

In conclusion, I ask my right hon. Friends on the Government Front Bench to look into the whole question of improving the management efficiency of small businesses.

5.31 p.m.

Mr. Maurice Macmillan (Farnham)

The hon. Member for Dudley, West (Dr. Phipps) has developed a rather curious concept of helping inefficient small businesses and clobbering the successful. My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) referred to the ô of small businesses in innovation and the creation of wealth, and to the value of continuity and investment in the future. My hon. Friend the Member for Hendon, North (Mr. Gorst) developed that point when he attacked the efforts of the present Government to prevent the creation of new wealth and the spread of wealth and to destroy the principle of being able to pass investment on to a succeeding generation.

I take up a point made by the hon. Member for Dudley, West. I do not think that my right hon. Friend was saying that anyone has a right to inherit. What my right hon. Friend was saying, I think, is that if a man who is successful in building up a business is taxed very heavily on his earnings and his savings, and the Government take his wealth away from him if he leaves it to his children or if he gives it to them before he dies, all that the Government are doing is saying that it is not worth saving or investing in the future. They are saying "You cannot take it with you. You cannot give it away, so you had better spend it."

That is the point that my right hon. Friend was making—not any point of principle about rights, but a point of practice about what those on whom the future of this country is likely to depend may well do, if right hon. and hon. Members on the Government side of the House prevent them doing what they would far prefer to do—that is, use their talents in a socially useful way by building and developing for the future.

I turn briefly to the one aspect of this particular point which the capital transfer tax has affected very sharply—that is, the spread of ownership. Let us not forget that the justification for this savage attack on businesses, on private businesses and family businesses in particular, is to redistribute wealth. Yet there is one aspect of the capital transfer tax that does the very reverse. It prevents or hinders the owners of wealth from redistributing it to employees in a particular company when that company has grown to a point at which such redistribution becomes possible.

Small businesses do sometimes grow even without the help of the Government —and with the "incompetent" management that led, for example, the late Lord Marks from a stall in Manchester to a chain all over the country. They grow, and not only in the retail trade but also in manufacturing and other aspects of our industrial life. When they grow they sometimes wish to go public or to make a share placing and get some institution or other to take up some of their shares. One might think that that would be an admirable opportunity for the Government, with their views about the redistribution of wealth, to encourage the existing shareholders in an unquoted company, the owners of a partnership or the proprietors of a business, when making a placing with a financial institution or selling shares to the public, to give or transfer them to their employees, either individually or collectively through a trust. But no. Now, of course, that attracts capital transfer tax.

We have elaborate provisions in the schedules to the Finance Act—I have forgotten whether it is yet an Act or is still a Bill—to exempt from some provisions of the new taxation trusts on behalf of employees. But they do not exempt such payments into such a trust. The legislation does not exempt transfer from a private company, partnership or business of part of the shares to a trust set up on behalf of the employees. For example, if a company were making a placing of, say, 30 per cent. or 40 per cent. of its shares and wished to put 20 per cent. or 30 per cent.—whatever figure one cares to name—in trust for its employees, that transfer would be a gift from the existing shareholders and would be subject to capital transfer tax, as I read the legislation.

There is a similar disadvantage on distributions to individuals from trusts on behalf of employees. The way in which that is phrased in the particular schedule prevents the distribution from a trust which may be set up by a company, private or public, for the very purpose of spreading the ownership of its shares among the people who work for it.

There are many ways of spreading share ownership and many forms of share ownership schemes. Some of them involve the setting up of a trust for a limited period, and after that period has ended —whether it is defined by years, or targets of success, or turnover, or profit levels of the company—the beneficiaries of those trusts become owners of the shares concerned.

I am asking the Minister to consider very carefully whether he expects us to accept that his Government's views really mean to redistribute wealth with the difficulties of the present legislation on capital transfer; or whether they will make changes to help spread the ownership of wealth among those who the hon. Member for Dudley, West said helped to cerate it—to help earners become owners. That is an ideal to which we of the create it—to help earners become owners. which he and his colleagues, year by year, make harder and harder to attain.

5.38 p.m.

Mr. Gwynfor Evans (Carmarthen)

More and more people in more and more activities are questioning the cult of bigness, whether it be in States, in local government, in schools or universities, or in industry or commerce. The virtues of the small entity are being discovered now anew, and voices of such prophets as Leopold Kohr and Schumacher are being heeded with growing sympathy.

If the pressures of the big State in our technological society and of big business are to be withstood by people, there must be radical decentralisation in a pluralist order, in which small enterprise can flourish and in which the autonomous person can stand on his own two feet in the face of the State.

However, although an awareness of the value of the small entity grows as people are increasingly crushed by the big Governments—whether they be Labour or Conservative—this has not brought encouragement to the small business enterprise. On the contrary, the small enterprise is discouraged by having thrown on it an intolerable burden of work and of rates and taxes. VAT, as we have heard this afternoon, was imposed by the Conservative Government —and that, we can note, with a view to membership of the Common Market. The small shopkeeper, the guest house or hotel keeper and the garage keeper were shamelessly compelled to act as the State's agent in collecting taxes.

The extra burden imposed on people whose hours are already far too long, almost unbearably long, is certainly excessive. A small garage owner in my district, who is open seven days a week, spends 24 hours each week on VAT because in his case it is divided into four different categories. Small firms have no staff to do this work. If they employ accountants the cost can be crippling.

Self-employed people face a stiff increase in national insurance contributions. If a shopkeeper with a wife and two children earns £2,000 a year, he will pay £50 a year more in tax and social security payments than the ordinary employed man on the same wage. The benefits he would get are smaller. To this must be added the effect of the capital transfer tax.

While we welcome the Government's concessions to small firms, small farms and small businesses, the position is still perilous. In Wales 52 per cent. of farms within the 50–150 acre group are owneroccupied—a much higher proportion than in England. Even at the reduced rate, where is the farmer to find the money to pay both capital gains tax and capital transfer tax?

In 1972–73 Welsh farmers had an average annual income of £1,602, £261 less than the average male income for all jobs in the United Kingdom. Where are they to find the money to pay these taxes?

The last and most onerous burden is the rates—general rates, sewerage rates and water rates. To illustrate the situation I shall give three examples from Carmarthen. The first is a guest house which last year paid £160 in general rates and £9 in water rates, a total of £169. This year it is paying £268 in general rates and £50 in water rates, a total of £318. The second example is that of a small hotel which last year paid total rates of £4,050 and this year is paying £11,850. The third example is a small shop which last year paid £962 in general rates and £46 in water rates, a total of £1,008. This year it is paying £1,455 in general rates, approximately £363 in sewerage rates and approximately £168 in water rates, making a total of £1,978. The rates for the small garage to which I referred increased by 800 per cent. between 1972 and 1975. It is calculated that next year the average increase in Welsh rates will be 51 per cent. compared with an average rise in England and Wales of 25 per cent. How can the small business bear this crushing burden?

It is essential that local authorities have the power to raise some of their own taxes in a more flexible system that suits the potential of the area. For example, there could be a tax on caravans and second homes in my area. However, this is a matter for the Layfield Committee, as is the consideration that must be given to transferring from local authorities the cost of teachers' salaries, which comprise such a large slice of their budget. It is essential that this is carried out without further encroachment on the autonomy of local education committees and educational policy. The universities have shown that dependence on the central Exchequer need not of necessity destroy local autonomy.

5.44 p.m.

Mr. Ivor Clemitson (Luton, East)

It has frequently been said that the Government are attempting in some way to destroy small businesses. The tale of woe has been told many time in debates on the Finance Bill. So great have been the cries of lamentation, especially about the effects of the capital transfer tax, that we might be forgiven for thinking that the prophecy of St. James has at last been fulfilled when he said: Go to now, ye rich men, weep and howl for your miseries that shall come upon you. I am not suggesting that that day has come.

I do not wish to become involved in the argument about capital transfer tax and self-employed contributions, although during the debate on the Finance Bill it struck me as odd that the Chief Secretary to the Treasury did not subscribe to the idea that small is beautiful. I subscribe to the idea that small is indeed beautiful. I also subscribe to the idea that "small" is important in terms of the number of people employed in small concerns.

Hon. Members have raised the question of the number of people employed in small businesses. The figure is difficult to calculate. In a Written Answer last Monday I was told that over 14½ million people are employed in units of less than 500. Of course many of those units are sub-units of larger concerns. Even taking that into account, a high proportion of the work force in this country is employed in small businessses and companies.

The importance of small businesses as employers is common ground between all hon. Members. I hope that it is also common ground that there is great virtue in retaining and encouraging elements in our economic, social and industrial life which are small and humanitarian. To destroy the small, either out of malicious intent or out of some inadvertence, would be quite inexcusable. Yet that is precisely what Conservative Members are accusing the Government of doing, only they tend to put more emphasis on the malice than on the inadvertence. They are saying that the Government's actions will result in one of two things. Either small businesses will go out of business and millions of people, according to the large advertisements in the newspapers, will be thrown out of work, or small businesses will be gobbled up by the big battalions.

The Government's proposals on capital transfer tax are not half as swingeing as Conservative Members would have us believe. That is not the point I wish to make. There is a third way. I spent part of yesterday morning at a conference listening to two people speak of their experiences. One was a man who had inherited a business. Because he is a man of high moral principle he decided that he could not continue as the sole owner of the business and simply transfer it to his children. He decided not to "give" the business to the employees but to "transfer" the ownership to all the people working in his enterprise. [Interruption.] It is now a commonly-owned enterprise and an extremely successful one. [An HON. MEMBER: "They cannot believe it."] Perhaps not, but that is the case. He is a man of high Christian principles. So was the second man who spoke. By his mid-30s he had been offered the managing directorship of a considerable company in this country but he turned it down to become involved in a small, common-ownership enterprise.

Mr. Alan Clark (Plymouth, Sutton)

If Christian principles afford an exemption from liability to capital transfer tax, this is good news. The hon. Member will find, however, that transferring a business to a large number of workpeople carries exactly the same liability to pay tax as if the business had been transferred to that person's children.

Mr. Clemitson

I am not making that point. I am talking about the motives from which these people operated. This man did not want the business to be transferred to his children. He did not believe that that was a particularly high motive. He had a much higher motive in transferring ownership of the business to all the people, himself included. who worked in it.

The other man I have mentioned was a managerial "whizz-kid" of considerable talent and experience. I found the speeches of these people extremely moving and inspiring, although they would not thank me for quoting them or saying that about them.

There is this third way of making the people working in the company the joint owners. This is the way of common ownership, or co-operative ownership.

We have heard a great deal lately about manifesto commitments. There is an old and basic commitment in the Labour movement which stands behind any manifesto on which we have fought an election. That is the commitment to common ownership. The appropriate form of that common ownership may well be nationalisation for some industries. There are other smaller and more local forms. Common ownership of small businesses is one of the most important of those forms. Such ownership does not guarantee commercial success, although it so happens that the common ownership firms of which I have heard have generally had an excellent commercial record.

Common ownership in no way isolates them from the cold wind of economic recession. It does not solve the human problems. What it does is to provide a framework in which people can grow and develop and work at their relationships with one another. Such a framework is essential. Without it there would be conflict which would be destructive or which would simply be suppressed. Without it human freedom—we have heard much of this—cannot be truly exercised. Neither can democracy develop. Like the setting up of a comprehensive system of education, it is the first step in a long journey.

I know that many Conservative Members have small businesses. I ask them seriously to consider the experiences of the men I have quoted. To the Government I make the plea that they do all in their power to encourage common ownership, to transform the small so that it becomes even more beautiful. The idea of co-operation is as old as the hills. Like all good ideas, it has to wait for the time when it can come into its own. I believe that that time is rapidly approaching. We should do all in our power to give it every possible encouragement.

Several Hon. Members rose—

Mr. Deputy Speaker

May I again appeal to hon. Members to make speeches of roughly five minutes duration? Time is getting short.

5.55 p.m.

Mr. David Penhaligon (Truro)

We must thank the Opposition for giving us the chance to discuss this subject. We all know of the pressure which has brought this debate to the Floor of the House. It results from the growth of the self-employed protesters who have formed their own union to protect their interests. I say "The best of luck to them." In one respect at least these people have been effective, in that they have woken up the Conservative Party which, they felt, had been their protector over the years but which has deserted them recently.

Rightly or wrongly this section of our community feels persecuted. It is fed up with form filling. It does not understand the national insurance scheme and thinks that it has been cheated. It does not understand the rates situation. It certainly does know that it is feeling the full economic pressures current in our society. This is true of shopkeepers, farmers, or people involved in the building industry. I represent a rural but semi-urban constituency, and I know how important this section of the population is in such a constituency.

It is difficult to elicit relative percentages of self-employed. The 1971 census suggests that, for the groups I could identify, the Truro constituency, which is typical of many in this situation, has about 10.5 per cent. of the population in that category while the national average is 4.7. We all know that the figures are higher than this, but where I could identify this sector those were the figures suggested. Those are low-wage areas and exemplify the pressures on rural life today.

These people form an important section of society and deserve our protection. They have written letters to me in substantial numbers recently, complaining, among other things, about VAT. I believe that there is a case for some form of tax allowances for the small, self-employed person to help him overcome his VAT difficulties. The medium-size firm employs an accountant and charges those services against tax. The large company employs a network of accountants, the cost of which is legitimately charged as an expense of running the business. The individual who does the work himself gets no such benefit for his efforts.

It is time that the £5,000 exemption on VAT was changed, at least brought up to date to take inflation into account. We Liberals were disappointed that our amendment to the Finance Bill, an amendment which would have had this effect, was never called. We have a Liberal newsletter called "VAT News No. 5". This deals with the new, super-simplified VAT scheme. Simplified or not, it extends to 94 pages. Such complications present difficulties for the man working on his own.

We have introduced a marginal tax rate of 41 per cent. on an income of £30 to £31 per week for the small self-employed person. I spoke and voted against this. This 8 per cent. rate on the national insurance contribution is unfair. The whole scheme is ludicrous. We do not buy stamps to pay for defence or for education and we certainly do not buy stamps to pay for our roads. It has been said that on the day a person claims his pension he will have paid for only about 60 per cent. of the benefit. This, it is said, is the main benefit we get from our contributions. As a man gets older the figures for his pension get worse. It is time the whole thing was scrapped and the money collected by way of more normal forms of income tax. In this way there would be a fairer spread of the tax burden. Perhaps a payroll tax on companies would assist. If we are to maintain the present system there is a case at least for permitting some of the national insurance contributions to be charged against income tax.

On rates, I make no great comment about the reforms of local government, but it was not the Labour Party that pushed them through but the Conservatives. Perhaps I may say a brief word in defence of local councillors. It was not they who reorganised local government or reorganised planning to the ludicrous state it has now reached. Local councillors do not have the power to put forward reforms which are so desperately required. The reorganisation of local government should have gone hand in hand with a Layfield-type investigation, and this should have been done in 1971 or 1972. When the blame is to be handed out for the present rates problem that faces small businesses—and not only small businesses—it is only right that those who are complaining about the rates should know where the blame rests. All the public relations exercises on Private Members' Bills, and we all know how much effect they will have, will not overcome the tremendous problems which have been caused.

Whether these small business men are persecuted or not they are feeling the full draught of the economic pressures and difficulties. They feel that they are carrying an unfair burden, and it is up to the Government to try to overcome some of these difficulties. These people make up an extremely important part of our economy, and without their initiative and enthusiasm—and it is enthusiasm we miss in so many sections of our economy—the country would be a much worse place.

6.2 p.m.

Mr. Michael Mates (Petersfield)

I wish to speak not about the general principles expressed in the debate but, briefly, about the effect on my constituency of the Government's treatment of the self employed and the small business man. I do so because I believe we are at a crossroads. If we do not hear the cries of anguish coming to us, a fundamental part of our way of life will die, and, once dead, nothing will resurrect it. The whole future of individual business enterprise, and therefore individuality itself, is at stake.

Communities like the one I represent—the small towns of Petersfield and Alton and their surrounding countryside and villages —depend on these small businesses for their very lifeblood. If that is true of East Hampshire, how much more is it the case in some of the remote parts of Scotland and Wales? Village life is based upon the small family store and the small local concerns, and when they close the whole community feels the effect. Four hundred such concerns are currently failing every month, and they are not replaced. Each failure means one more journey to town and one less source of local employment. Those who are concerned about urban deprivation will soon find the corollary in the villages. As the small businesses move out, the chain stores move in, and the vice of centralisation and depersonalisation takes a firmer grip. Anyone who does not believe this need only look at the postbag that I and, no doubt, many other hon. Members receive.

The self-employed man and the small business man are individualists. They stubbornly refuse to conform to half-baked theories of State control and the desire for security above all else. This type of man is an enterpreneur, a creator of wealth not only by his toil but by his enterprise and ideas. While others are squabbling over their share of the cake he is making the cake larger. The wealth that he creates—or what is left of it by the taxman—is private wealth, but it is wealth that benefits the whole community. It is a cohesive and civilising force that binds people together, a force that requires self-discipline, though that may sound a strange word in some parts of the House.

Slapping on penal rates of taxation and contributions is not giving justice to the self-employed and the small business men, and I suspect that the Government knew that. I suspect that they calculated that it could be hushed up or fudged and that they would get credit for keeping down the contributions of the employed more than the employed could reasonably have hoped. Amongst the many letters that I have had on this subject was one from a group of the parish priests of the 11 parishes in the Bishops Waltham Deanery, and of all people surely there is least justification for penalising the Church. I have had many letters from confectioners, tobacconists, newsagents, nursery school headmasters, veterinary surgeons—the list is endless and it shows how widely these grievances cut right across all aspects of our society.

Here we come to the nub of the problem. The Government have abdicated their responsibility for protecting the weaker and they have abandoned those most admirable people who struggle on because they value their independence, dignity and ability to fend for themselves. They do not fit into an easily regimented pattern. They are the artists and musicians—often the most creative members of our society.

I do not say that all the self-employed are badly off, but they are such an immensely varied group of people that it is wrong to collect them together and tax them without consideration for what they do. It is almost like sticking a needle into every fifth name in the telephone directory and putting an extra tax on those selected.

I have more to say but I want to be brief and to give other hon. Members a chance to speak. I have been in this House only for six months but I have noticed that every time the Minister comes to the Dispatch Box he talks about the past and about the faults of the last Government. He talks about everything but what is to be done for the future. May we tonight hear from him not whose fault it was, because I am certain that both sides are to blame, but what he is going to do about what has become an unfair and intolerable burden for the small business men and the self-employed in this country.

6.7 p.m.

Mr. George Rodgers (Chorley)

This debate is founded on a fallacy. It is founded on the astonishing assumption that the Conservative Party is the party that has some special sympathy with and understanding for the plight of the small business man and the self-employed. That is utter nonsense, and there is no evidence to support that contention. It became apparent during the last Conservative Government that a multitude of small traders were going out of business or were at great risk because of the activities of the take-over merchants and the asset strippers. A great number of businesses were absorbed or dissolved under that activity, and the purpose of the operation was not to provide greater efficiency or a better service but simply to maintain or increase price levels and to concentrate profit into a more restricted area. That is how small businesses were put at risk under the last Government.

I accept that at one time private enterprise was abrasive and aggresive and that the captains of industry took great risks with capital. Perhaps to some extent the ordinary citizen eventually benefited from the spin off of these activities. But this buccaneering has long since gone. Today capitalism is cannibalistic. It devours competition, and to associate capitalism with entreprise these days is to practise deception.

The position now is that wealth and power are accumulated not by competition but by the creation of private monopolies which are accountable neither to the customer nor to the country.

Mr. John Stokes (Halesowen and Stourbridge)

What about the nationalised industries?

Mr. Rodgers

The nationalised industries are certainly accountable to this House, and that is more than one can say for private organisations. So far from stimulating competition, the modern capitalist aims to ensnare and extinguish any thrusting competition and the rôle of the Conservative Party in this is to protect and preserve the system. The Conservatives seek to preserve what is obsolete and inefficient.

That is understandable, because their income is drawn from this system. That is how they manage to maintain themselves as a political party. It is clearly absurd that the party that is dependent on financial support from the giants of industry and commerce should express anxiety about small businesses.

The recently established Federation of the Self Employed is an interesting development. I do not doubt the integrity of most of the people who have enrolled under its banner. The great danger is that there will be yet another take-over bid. The independence of the association is already at risk. It is under siege by the Tory Party, and that is one reason for the debate today. The Tory Party is desperately anxious to win friends and influence people.

Many of us recall the existence of the famous Housewives' League, which was taken over by the Tory Party when it was sinking fast and used for electoral purposes. What happened to the Housewives' League? It became defunct because it had served its purposes. I remind the self-employed that the new association is in the position of the lady who went for a ride on a tiger and ended up inside it. They should beware of the company they keep and should look long and hard at those who are attempting to bewitch them by the debate today. The Conservative Party may shed crocodile tears on their behalf, but it also possesses crocodile teeth and, given the opportunity, will gobble up the organisation completely.

By the nature of their calling the self-employed include a wide variety of individuals who have little in common. Amongst the self-employed are the small shopkeeper and the private tradesman but there is also the pop star and the financial wheeler-dealer. It will be interesting to see who most influences the policy of the new organisation, because so many of different beliefs sail under the same flag.

It is crystal clear that a huge area of our economy is administered by small business people and administered very efficiently. I have never believed that "big is best". The lunatic variations in local government boundaries have demonstrated that it is not. Many services are superior simply because they operate close to the customer and have an intimate understanding of local circumstances.

There is great scope for a wider contribution at this end of the economy. I should like to see an extended involvement by local authorities. The surveyors and solicitors at the town hall could provide a cheaper and more efficient service for people who purchase their own homes. There are many other ways in which municipal enterprise could be a stimulant to the rate fund rather than a drag on it.

There is growing recognition of the success of co-operative ownership, and throughout the country workers are co- operating and proving that the work force has the capacity to run its own industry efficiently and competitively. The National Enterprise Board is not designed solely to assist the giants of industry. Many small enterprises will be well pleased when the Department of Industry sets out its full stall.

Many of us have a genuine respect and affection for those engaged in small business. I warn small business men that the party that represents the monolithic corporations can offer naught for their comfort. Small business is directly dependent upon the prosperity of the broad community. The small shopkeeper is the first to feel the crunch at times of industrial stress. The three-day week was the death knell for many small traders. A party or Government that invites industrial conflict and confrontation is the natural enemy of the small business man and the self-employed.

Several Hon. Members rose—

Mr. Deputy Speaker

Order. I know that the hon. Member for Argyll (Mr. MacCormick) will speak for only five minutes.

6.15 p.m.

Mr. Iain MacCormick (Argyll)

It is ironic that the Under-Secretary of State should appear to claim some merit for so many discussions having taken place on the self-employed under the Labour Government. The reason for the extent of the discussion is clear. The self-employed among our population are suffering as they have never suffered before. However, I am not here to lambast the Labour Government. I am not here to apportion blame between the Labour Party for its Social Security Act and capital transfer tax, on the one hand, and the Conservative Party and the introduction of VAT, on the other. We must try to be more positive.

One of the most interesting speeches this afternoon was that made by the hon. Member for Truro (Mr. Penhaligon) who had gone to the trouble of looking through the 1971 sample census forms to find out the size of the problem in his constituency. I have done the same. I am surprised to find that more than 16 per cent. of the working population of Argyll are self-employed. When one adds to that 16 per cent. all the people they employ, the element of self-employed in my constituency becomes substantial.

I gained the impression from the speech made by the hon. Member for Cannock (Mr. Roberts) that there are still hon. Members on the Labour side who tend to think of class. I assure him that the self-employed in my constituency do not form any social class. Far from it, they form a broad cross-section of the population.

During the last few weeks I have spoken on this problem at non-political meetings throughout Argyll. At the largest meeting, which was held in Oban, whose population is only 6,000, more than 300 people attended the meeting. That is the measure of the depth of feeling amongst all self-employed people of all classes—to use the sort of expression that Labour speakers have tended to use in the past.

Mr. Clemitson

I never mentioned the word.

Mr. MacCormick

The implication was clearly there.

I wish to develop one aspect raised by my hon. Friend the Member for Hendon, North (Mr. Gorst), who spoke of the importance to the self-employed of the concept of investment. I believe this to be a vitally important matter which should not escape the attention of hon. Members. Whether people work on their own account as farmers or builders, they are building up their enterprise and investing funds which would otherwise be dissipated in a profligate life.

I conclude by asking hon. Members of all parties to think of positive measures to improve the position of the self-employed.

6.18 p.m.

Mr. Russell Fairgrieve (Aberdeenshire, West)

I wish merely to say a few words about the position of small businesses, which are a vital part of our industrial sector. From that sector will come the entrepreneurs and those who win exports for us in future. Scotland has perhaps a higher proportion of such businesses than has the rest of the United Kingdom.

It has been fashionable in recent times on both sides of the House to talk as though we had our political thinking wrong and had made mistakes. I think that some of our business beliefs are wrong, too, in that we worship the goddess of size—as the hon. Member for Carmarthen (Mr. Evans) also mentioned—and that this has damaged industrial enterprise. Where do we find inefficiency? Where do we find a lack of competitiveness? Where do we find poor management and strikes, and where is morale not good? I suggest that it is in large firms and nationalised industries—in both the so-called private and the so-called public sectors. There is little point nowadays in asking a person whether he feels it would be better to work for British Leyland or for British Railways. They are rather similar. In their previous incarnations, British Railways was separated into the LMS, the LNER, the Southern Railway and the Great Western Railway, and British Leyland was separated into Jaguar, Rover, Austin and Morris, and they were much better firms individually then than they are collectively today.

When a small firm goes bust, it goes out of business. With a large firm or a nationalised industry, the State comes along and bails it out with taxpayers' money.

Looking towards the god of size has another damaging effect. What happens to a local community when a small firm is taken over? The main reason for firms being taken over is the taxation policy of successive British Governments. What happens next is that we get what is called rationalisation, which is really the beginning of inefficiency because a firm finds it difficult to compete with other small firms. The final death knell comes when head office sends a chartered accountant to be the chief executive. That is usually the end of a small thriving business.

What happens to local interests? Firms of this kind for many years have supplied local councillors to authorities. The big firms say that their employees have not time for this work. The small firms have supported local charities. Now the big firms say, "We shall covenant these at source and deal with them in that way." Therefore, the community suffers when businesses grow from small to large.

Right hon. and hon. Members on both sides of the House should be thinking of encouraging small businesses, for the sake of the country's future. They should be given every encouragement instead of every discouragement.

6.22 p.m.

Mr. Jim Marshall (Leicester, South)

In the few minutes available to me I want to make two substantive points. However, before coming to them, I want to refer briefly to one matter raised by the hon. Member for Aberdeenshire, West (Mr. Fairgrieve) when he spoke of inefficiency in the nationalised industries. I do not know which industry he was referring to, or which part of that industry. but I ask him to come a little more up to date and to recognise the increasing evidence that labour productivity in the nationalised industries bears comparison with that in any other private industry. be it large or small.

The hon. Member for Argyll (Mr. MacCormick) accused Government supporters of introducing class into the argument. I have been sitting here for most of the debate and I have not heard one speaker use the class argument. Not once has class been mentioned from the Government benches. Whenever it has been mentioned it has come from an Opposition Member. I remind the House that many of the people whom we are discussing today are not members of the Tory Party, of the Liberal Party or of the SNP. They are members of the Labour Party. I shall not argue about the statistics. I simply make that point.

Like others among my hon. Friends, I represent a constituency whose prosperity has been based upon a thriving small business sector, and I should not support any Government measure likely to undermine that basic prosperity. I believe that none of the measures which my right hon. and hon. Friends have introduced will have that effect.

I come, then, to the first of my two substantive points. It refers to town planning In that connection I have considerable sympathy with what the right hon. Member for Leeds, North-East (Sir K. Joseph) said. Many local authorities, when they were carrying out clearance schemes, swept away completely many small, back-street business men who in the past had provided employment not only for themselves but also for others, albeit in many cases only a handful. Local authorities as well as central Government must bear the responsibility for this. If it is not too late, I urge local authorities when they are carrying out clearance schemes, to ensure, as my own local authority does, that any small business men in a clearance area are provided with alternative accommodation, if necessary purpose-built accommodation, so that they do not go out of business, so that they have alternative premises, and so that they may continue to thrive.

The second of my substantive points concerns the difficulties faced by small business men as a consequence of the effects of their bigger brothers. I hesitate to call them "bigger brothers" in this context, because it is really a case of dog eat dog. Smaller companies, especially those dealing primarily with the large multi-store outlets, find continually their profit margins decreasing. This happens a great deal in the hosiery and footwear industries. This continual paring of profit margins does not benefit the consumer. Many of the multi-store outlets also deal with the low-cost supplier countries, and I can guarantee that there is practically no difference between the retail prices of many hosiery and footwear articles produced at home, where the profit margins of the producers have been pared down, and of imported articles from a low-cost supplier. Here it is a case of a large company paring down the profits of small business men.

I hope to hear my hon. Friend say that be is considering seriously making a further investigation into the relationships between small businesses and large businesses, especially those concerned with hosiery and footwear.

6.26 p.m.

Mr. John Stokes (Halesowen and Stourbridge)

It is a commentary on the times in which we live that there should be such widespread discontent and unease among small business men and the self-employed. I find this in my constituency, where we have always had a tradition, common in the West Midlands, of sturdy independence and of men leaving the shop floor to start on their own. Many famous businesses have started in this way. It is part of the fabric of our industrial life.

We all know why small business men and the self-employed are so unhappy and unsure of their future under this Government. The unfairness of the rise in their national insurance contributions together with the lack of benefit, and the arbitrariness and colossal rates of VAT, are but two outward causes of their discontent, but what really disturbs them is that they feel that this Government are hostile to them and hostile to any entrepreneur who is ready to have a go. It seems incredible that this Government should not back those who are the creators of wealth—some 2 million of them who employ another 4 million.

It is fitting that at this stage I should declare an interest. I am the proprietor of a small consultancy business. I gave up a salaried job with a great and famous firm to start on my own with a partner at the age of 41. The business has prospered, but now we have the cloud of the capital transfer tax over us and the worry about what, if anything, I shall be able to leave my children. I have been enabled, by giving up a salaried post and becoming self-employed, not only to feel that I have a stake in this country but to stand for Parliament, which no salaried man can do. We have many trade unionists in this House. We have many who were directors of companies. We have too few practising industrial managers. They cannot afford to get here. I took the risk, and I have got here. Now everything that I fought for and built up is put at risk by this Government.

Do the Government want everyone to belong to the Civil Service, to the nationalised industries or to the large firms? Why are the Government so vicious to the small man? Is it his sturdy independence which they so dislike? Is it hatred of the professions and their high standards? Anyone going to Europe, especially to France, sees that the small business is so well entrenched that no Government would dare harm it. It is no wonder that France is already very much further ahead than we are.

If we wish to raise productivity and prosperity, if we wish to raise ourselves from the inertia and lethargy that we now see, the Government must look again at what they are doing to the small man and to the small business. These are the people who have the inventions, the drive and the guts. They are the people who one day, if they prosper, will make small firms into large ones.

6.30 p.m.

Mr. David Mitchell (Basingstoke)

This has been a short debate but a worthwhile one, and if there had been more time many more hon. Members would have spoken. Perhaps I might venture, in the words of the immortal Lord Stansgate, to say "Thank you for your company".

We have been debating the problem of small businesses against the background of accelerating inflation, and, as we all know, this means that companies need more working capital. One of the pronounced features of the present Government's tenure of office has been the way in which they have taxed away from small businesses the essential working capital which they had rather than giving them the chance of accumulating more, by bringing in a Budget with increases in corporation tax, advance corporation tax, and income tax, and so on, all stripping away the money that is needed to finance a business.

For the large business the answer is provided by the Secretary of State for Industry, who provides cash with strings. I realise that this fits in with the concept of the Labour Party's determination to transfer wealth, power and decision-making into the hands of the State. Resources are more and more allocated by centralised decisions or by bureaucrats and the pressure of politicians. It is the grand Socialist concept. The Chancellor of the Exchequer takes, and the Secretary of State for Industry provides aid with strings, and so, without even a nationalisation Bill, there passes into the hands of the Government increasing control over the enterprises of this country.

What of the small businesses? They are equally affected by rising costs and by excessive taxation, but they have no one to whom they can turn. In effect. the Government are castrating the small business sector and then complaining of its lack of virility. This is the forgotten sector, or it would be if it were not for the Opposition who continually draw its problems to the attention of the Government.

These small businesses were not forgotten before the election. We then had the plans of the Labour Government, including those for the regeneration of industry. They said then that in times of economic difficulty it is often a small business man, dependent to a great extent on personal wealth as a source of finance, who suffers the greatest hardship. That is right. They said: The Government therefore are reviewing the problems of small businesses and will put forward separate proposals to cater for their special needs. That was last August, and we are still waiting for some of them, although to be fair it must be said that we have had some of the special proposals.

The self-employed have been singled out for increased contributions. Corporation tax is up and advanced corporation tax has been introduced. A wealth tax is proposed, and we have the Employment Protection Bill. We have had capital gains tax and the inflation-increased effect of it. All these things have been brought in against the background of increasing inflation. The Government have introduced measures, but hardly those which will support or help the small business community.

We all knew that when pensions went up last summer they would have to be paid for, but what we did not expect was that the increase would come from a reduction in the average amount paid by the average employee and that the self-employed would pay a savage and disproportionate increase. I call on the Government today to ensure that in the Budget which they will introduce within the next month or six weeks they take some steps to help this group of people. I realise that it will be asking too much to expect the Minister to withdraw the social security measure which increased the contributions of the self-employed, but I ask him to consider very carefully whether he can make the contribution allowable for tax. I ask him to do this when he offers advise to the Chancellor of the Exchequer for his next Budget.

I should like to sum up the problems of small businesses under three heads—time, money and motivation. I propose to deal first with time.

One can define a small business in a number of ways. Bolton described it as employing 200 people. The tax law defines it as a company with profits up to £25,000. I define it as a company where there are one or two working proprietors, and it is their ability to cope with the mass of regulations, which consume their time, that is the key to the amount of time that they can spend on the productive side of their business.

So many of these small business men are trapped in a web of controls and regulations of growing complexity. My hon. Friend the Member for Upminster (Mr. Loveridge) drew attention to this. They are caught up with price controls, profit regulations, returns to the business statistics office, consumer protection, hire-purchase regulations, training boards, labelling regulations, the Trade Descriptions Act, VAT calculations, wages councils, Factories Acts, contracts of employment, and so on. The list is endless yet all this constant outpouring of stuff has to be observed by the hapless manager before he can start to think about the productive side of his business. All these things may be individually justified, but cumulatively they are suffocating initiative. That is one of the major factors which face these small businesses when they think about the time factor.

The suggestion that the next Budget should contain multiple VAT rates applying to the business community will, if implemented, be the straw that will break the camel's back. I join the hon. Member for Edmonton (Mr. Graham), a Government supporter, and the hon. Member for Carmarthen (Mr. Evans) in what they had to say. I agree with the illustration used by the hon. Member for Carmarthen to show the difficulties which even the two-rate petrol tax brings for many garages.

I propose to deal next with money. A business needs more money today than ever before, because the cost of stock is up and because of the amount of working capital that is required. The Government gave some relief in the autumn Budget against stock appreciation, but not for the small business. The business which has £25,000 worth of stock or less received no help at all.

The Minister will, no doubt, say that the Government have given a bankable assurance about help in the next Budget. I want to know from where I can borrow against this bankable assurance. What bank will lend money on the strength of that? In 1974 compared with 1973 there was a 65.6 per cent. increase in bankruptcies. Where can these companies go for a bankable assurance? What will be done to give them the money? Will they be resuscitated or helped? They cannot be, and the Minister knows it. That was a bogus promise.

One sympathises with the Minister who has responsibility for small businesses, and we are grateful to him for what he said today. I agree that we do not want subsidies for small businesses, but the logic of the case is that we should not tax them so much, that we leave them with their profits to fructify in their businesses, and that there is a reduction in corporation tax across the field.

I share the Minister's anxieties, but one has to ask what power he has and what influence he can use to put things right. His heart may be in the right place, but my hon. Friends are entitled to ask what influence he has. If he is no more than a postman conveying our views, worries and concern to other Ministers, that is not good enough in terms of doing something to help small businesses. He must succeed in persuading the rest of the Government of the rightness of the case which I believe he understands and sympathises with.

Looking at the problem in terms of money, one has to mention the wealth tax because already it is casting its shadow ahead. I know that Labour Members believe that accumulations of wealth are wrong, and that they should seek to distribute that wealth from the individual to the State. I see some hon. Gentlemen opposite nodding and others shaking their heads, but the point is that a business can be prosperous only if money is invested in it, and if the Government tax people that means taking money out of the business. Already many of those running small businesses are saying to themselves "We must take money out of the business so as to have the cash to pay the wealth tax", because they cannot pay the wealth tax by offering part of the business to the Government.

I come finally to the question of motivation. My hon. Friends and I believe that the Government have not the faintest comprehension of what makes people sweat long hours to build up a business. Above a certain size and when the proprietor is over a certain age, it is not what he is going to get out of it for himself. He could in many cases sell his business and live off the invested proceeds at a higher standard of living than he would get by continuing to work in the business. When a man reaches 50 or thereabouts his interest is in preserving what he has built up for future generations, in seeing that there is something that continues for posterity. This is a basic human trait. If we defy it, or fail to recognise it, we work against the grain of human nature, and for the destruction of people's motivation.

Mr. Clemitson

I am always interested when human nature is mentioned. I mentioned a person who appeared to act from quite different motives. He is one exception. The hon. Gentleman said that human nature is such that people act in a certain way. I have quoted the case of a man who acted very differently, and that knocks a big hole in the hon. Gentleman's argument.

Mr. Mitchell

I am sorry that I gave way, Mr. Speaker, in view of the brief time which is available. I apologise for not dealing in depth with what the hon. Gentleman said. I will simply say that there are of course people who operate from purely altruistic motives, but I do not think that there are many hon. Members who are sufficiently unrealistic as not to recognise that the motivation to which I have referred is one of the major motivations, and almost the only motivation of a man over 50 is to continue to build up his business for his heirs. The hon. Member's friend was able to do as he said before the introduction of the capital transfer tax. Had he waited until afterwards, his business would have been destroyed when he sought to pass it on.

The Finance Bill was guillotined and we were not able to discuss matters in great depth. Companies can be divided into three groups. There are the large companies which are quoted. For such companies, capital transfer tax may mean desperate difficulties and a loss of capital to those who own the shares, but they can sell shares on the Stock Exchange to realise the money.

Then there are the very small companies—so small that they make a small impact on employment in their locality. For such companies the capital transfer tax does not bite, because the sum involved is low.

In the middle there is a great slab of unquoted companies that are sufficiently large to be valuable in the employment they give but not sufficiently large to be quoted companies. These are the companies where trouble really comes.

I said in the House on 6th March—it is recorded in column 1852 of Hansard—that it would cost £50,000 a year, when income tax has been taken into consideration, to get enough money out of a business over eight years to pay the tax on a £250,000 business. I was wrong. It would be £63,000.

I am conscious that the Minister wants to wind up, so I will bring my remarks to a close.

We had a debate in the House on 6th December when the Government accepted a motion seeking the encouragement of individual enterprise and initiative. I raised this matter during Business Questions and asked when the Government intended to do something about it. I had a letter from the Leader of the House who said that he was anxious to take proper and practical account of"— the interests of small businesses— of which they leave us in no doubt, in framing general policies and legislation … I am assured by my colleagues that they will, as opportunity offers, inform the House of the outcome of their deliberations". This evening the Minister has an opportunity of doing just that.

I invite the Minister to do so and to tell us three things. First, will he give the House an assurance that in the next Budget consideration will be given to making national insurance contributions allowable for tax? Secondly, will he assure the House that the Government will not introduce multiple rates of VAT? Thirdly, will he explain to the House how the Government propose to resolve the head-on conflict between the Government's desire to destroy private wealth and the criteria of a small business that it is private wealth that provides the capital, private wealth that provides the investment, and private wealth that is the source of these jobs? How do the Government reconcile the two?

6.45 p.m.

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

I extend a warm welcome to the hon. Member for Basingstoke (Mr. Mitchell) on what I believe is his first appearance at the Dispatch Box. I have argued, disputed and debated with him on many occasions. This is the first time I have seen him in this capacity, and I hope to see him in such a capacity many times in the future.

I accept the kind of tribute that the right hon. Member for Leeds, North-East (Sir K. Joseph) paid to the Labour Government for setting up the Bolton Committee. As one who followed the activities of the Bolton Committee with very great interest and a great deal of expectation, I must say that I am unable to dissent from the view that the Committee's report is a very disappointing document. This imputes no blame to those who worked so hard and who examined in the best way possible the various problems and possible solutions to the difficulties facing small businesses generally.

Those who expected that there would be some positive solutions available to be used by the Government were disappointed. I am sure that the right hon. Gentleman will be the first to admit that the suggestions he made were very much second order matters for assistance to small businesses. He dealt with the possibility of credit assistance to small businesses. He dealt with the difficulties faced by small businesses in retaining premises consequent upon the clearance of city centres. I am sure that we all agree with what he said in that regard.

That does not go to the heart of the main problems facing small businesses and the way in which we wish them to be treated if they are to thrive.

Mr. Gorst

Will the hon. Gentleman make one thing clear? Is either he or his colleague the Under-Secretary of State for Industry directly responsible as a Minister either for the self-employed or for the professions, or are they speaking only for small businesses?

Mr. Sheldon

As the House knows, my hon. Friend the Under-Secretary of State for Industry has responsibility for small firms. Other aspects come under the general umbrella of the Treasury and other Government Departments.

Perhaps the most valuable suggestion made in the debate was that made by my hon. Friend the Member for Dudley, West (Dr. Phipps), who spoke of the need for a system such as we have for farmers with the Agricultural Advisory Service. My hon. Friend expressed the hope that a similar advisory service might be made available to small firms.

Management advice is one of the matters at present being considered by the management consultants who have been engaged to review the service of the Small Firms Information Centres. Small businesses in general have had the one overriding desire—this is a general observation, but it is true of many—to be left alone to pursue their own paths free from Government interference and free from the interference of many other large-scale bodies. If the Government are ever to be of any help to industry and to small firms, we must overcome the reluctance to deal with certain elements of government and find some way of providing real assistance—assistance which, so far, none of us can claim that either Labour or Conservative Governments have been able to give.

In dealing with the problems of small companies, I wish to deal with the question of bankruptcies which was referred to by the hon. Members for Basingstoke (Mr. Mitchell) and Upminster (Mr. Loveridge) and by my hon. Friend the Member for Edmonton (Mr. Graham). The level of bankruptcies has increased, and it certainly increased in the period 1973–74. The increase was a steady one, beginning in the third quarter of 1973, and went on right through the autumn of 1974. Nobody can dispute that fact. Therefore, I find it a little difficult to accept attribution of responsibility. Bankruptcies are not matters decided as a result of the events of the past month or two. Their causes existed some time ago.

I should not have referred to this matter had not certain Conservative Members raised the topic, and I must tell them that the major share of the blame and responsibility for the situation flows from the policies of the Conservative Government. [An HON. MEMBER: "Rubbish." The hon. Gentleman cries "Rubbish". If he recalls the virtual printing of £4,000 million in, deficit money, he will appreciate that that was one of the most disgraceful things which happened to small businesses in its effect on the economy generally.

I turn now to the topic of rates. The hon. Member for Carmarthen (Mr. Evans) made strong reference to this point and said that it particularly affects small businesses. A substantial lump sum is demanded of a small business, and that in itself is a problem. The hon. Gentleman will appreciate that we have set up the Layfield Committee and hope that some suggestions will be made as to how these problems can best be dealt with. Small but valuable assistance is given in regard to mixed hereditaments, and pressure has been put on local authorities to restrict the growth in local authority expenditure. That, again, will be of value in the present situation.

I turn next to the subject of national insurance contributions. I shall not spend much time on this topic, but I wish to point out that it was a piece of Conservative legislation which led to problems. We must consider the contributions paid by the self-employed and the increase in contributions as a direct consequence of the inflation which occurred from November 1972, when figures were put before the House. One aspect of the matter which has not generally been understood is that the large increase in retirement pension is of great benefit to the self-employed. In the year 1974–75 the cost of retirement pensions to the Exchequer was nearly £3,600 million. In the following year the figure had grown to over £4,500 million. That is an enormous increase, and part of that increase will go to the benefits available to self-employed persons.

On the question of tax reliefs on contributions by the self-employed, a question put to me by the hon. Member for Basingstoke, I would point out that I have received representations on this and other matters but I am unable to comment in advance of the Budget. I assure the hon. Gentleman that the matter will be further examined by my right hon. Friend the Chancellor of the Exchequer.

I turn now to two areas in which the Conservative Government cannot claim to have helped the self-employed and people in small businesses. My hon. Friend the Member for Edmonton pointed out that the abolition of resale price maintenance and the value added tax were measures introduced by a Conservative administration, and, although they had merit in certain respects, those measures had a great deal to do with the problems of the self-employed. The abolition of resale price maintenance and the problems to which it gave rise are matters with which we have had to contend in our constituencies. When VAT has to be dealt with by well over 1 million traders, obviously it gives rise to great problems.

I turn next to the taxation measures of the Labour Government. The Conservative Government changed the basis of the corporation tax system and produced a system favouring those who distributed most by way of dividends. The one thing that is clear about small firms generally is that their dividend distribution is much less than is the distribution in large companies. Nobody could claim that this is a benefit to the small company. Indeed, it was a great problem which the small company had to face.

I am appalled at the way in which the capital transfer tax is attacked as an imposition on small firms and small business men. Under the old estate duty, on a sum of £100,000 a figure of around £37,000 was payable. Under the capital transfer tax, about £28,000 is payable on death, and for retirement gifts about £14,000. On a figure of £50,000 as a lifetime gift, the amount payable is £3,875.

We find ourselves in great difficulty in

face of all the extreme statements about malice and injustice, and so on, since there is a fundamental difference of opinion about Labour's definition of small businesses and small firms. Under a figure of £100,000 or £200,000, a person would do very well in terms of a lifetime gift. Indeed, such a person does reasonably well in terms of estate duty on death, and at these levels there are considerable advantages in the changeover from the old estate duty which hurt those people so much. At that level shop keepers, small firms and thousands of people throughout the country do very well, and they should understand what we have provided for them.

The truth is that the Opposition have sheltered behind those people, and the bogus campaign which they have conducted on behalf of the small man needs to be exposed. I hope that this debate has helped to do so.

Question put, That this House do now adjourn:—

The House divided: Ayes 252, Noes 276.

Division No. 148.]	AYES	[7.0 p.m.
Adley, Robert	Cormack, Patrick	Gray, Hamish
Aitken, Jonathan	Costain, A. P.	Grieve, Percy
Alison Michael	Critchley, Julian	Griffiths, Eldon
Amery, Rt Hon Julian	Crouch, David	Grist, Ian
Arnold, Tom	Crowder, F. P.	Grylls, Michael
Atkins, Rt Hon H. (Spelthorne)	Davies, Rt Hon J. (Knutstord)	Hall, Sir John
Bain, Mrs Margaret	Dean, Paul (N Somerset)	Hall-Davis, A. G. F.
Baker, Kenneth	Douglas-Hamilton, Lord James	Hamilton, Michael (Salisbury)
Banks Robert	du Cann, Rt Hon Edward	Hampson Dr. Keith
Bell, Ronald	Durant, Tony	Hannam, John
Bennett, Sir Frederic (Torbay)	Eden Rt Hon Sir John	Harrison, Col. Sir Harwood (Eye)
Bennett, Dr Reginald (Fareham)	Edwards, Nicholas (Pembroke)	Harvie Anderson, Rt Hon Miss
Berry, Hon Anthony	Elliott, Sir William	Havers, Sir Michael
Biffen John	Emery, Peter	Hawkins, Paul
Biggs-Davison, John	Evans, Gwynfor (Carmarthen)	Hayhoe, Barney
Body, Richard	Eyre, Reginald	Henderson, Douglas
Boscawen, Hon. Robert	Fairbairn, Nicholas	Hicks, Robert
Bowden, A. (Brighton, Kemptown)	Fairgrieve, Russell	Higgins, Terence L.
Boyson, Dr Rhodes (Brent)	Farr, John	Holland, Philip
Brittan, Leon	Finsberg, Geoffrey	Hordern, Peter
Brotherton, Michael	Fisher, Sir Nigel	Howe, Rt Hon Sir Geoffrey
Brown, Sir Edward (Bath)	Fletcher, Alex (Edinburgh N)	Howell, Ralph (North Norfolk)
Bryan, Sir Paul	Fletcher-Cooke, Charles	Howells, Geraint (Cardigan)
Buchanan-Smith Alick	Fookes, Miss Janet	Hunt, John
Buck, Antony	Fowler, Norman (Sutton C'f'd)	Hurd, Douglas
Budgen, Nick	Fox, Marcus	Hutchison, Michael Clark
Bulmer, Esmond	Fraser, Rt Hon H. (Stafford & St)	Irvine, Bryant Godman (Rye)
Burden, F. A.	Fry, Peter	Irvine, Charles (Cheltenham)
Carlisle, Mark	Galbraith, Hon T. G. D.	James, David
Carr, Rt Hon. Robert	Gardiner, George (Reigate)	Jessel, Toby
Chalker, Mrs Lynda	Gardner, Edward (S Fylde)	Johnson Smith, G. (E Grinstead)
Channon, Paul	Gilmour, Rt Hon Ian (Chesham)	Jones, Arthur (Daventry)
Churchill, W. S.	Gilmour, Sir John (East Fife)	Jopling, Michael
Clark, Alan (Plymouth, Sutton)	Glyn, Dr Alan	Joseph, Rt Hon Sir Keith
Clark, William (Croydon S)	Goodhart, Philip	Kershaw, Anthony
Clarke, Kenneth (Rushcliffe)	Goodhew, Victor	Kilfedder, James
Clegg, Walter	Goodlad, Alastair	Kimball, Marcus
Cockcroft, John	Gorst, John	King, Evelyn (South Dorset)
Cooke, Robert (Bristol W)	Gow, Ian (Eastbourne)	Knight, Mrs Jill
Cope,John	Gower, Sir Raymond (Barry)	Knox, David
Cordle, John H.	Grant, Anthony (Harrow C)	Lamont, Norman
Lane, David	Nott, John	Spence, John
Langford-Holt, Sir John	Onslow, Cranley	Spicer, Michael (S Worcester)
Latham, Michael (Melton)	Oppenhelm, Mrs Sally	Sproat, lain
Lawrence, Ivan	Osborn, John	Stainton, Keith
Le Marchant, Spencer	Page, Rt Hon R. Graham (Crosby)	Stanbrook, Ivor
Lewis, Kenneth (Rutland)	Paisley, Rev Ian	Stanley, John
Lovendge, John	Pardoe, John	Steen, Anthony (Wavertree)
Luce, Richard	Parkinson, Cecil	Stewart, Ian (Hitchin)
McAdden, Sir Stephen	Pattie, Geoffrey	Stokes, John
MacCormick, lain	Penhaligon, David	Stradling Thomas, J.
McCrindle, Robert	Percival, Ian	Tapsell, Peter
Macfarlane, Neil	Peyton, Rt Hon John	Taylor, R. (Croydon NW)
MacGregor, John	Pink, R. Bonner	Taylor, Teddy (Cathcart)
Macmillan, Rt Hon M. (Farnham)	Pym, Rt Hon Francis	Tebbit, Norman
McNair-Wilson, M. (Newbury)	Rathbone, Tim	Temple-Morris, Peter
McNair-Wilson, P. (New Forest)	Rawlinson, Rt Hon Sir Peter	Thatcher, Rt Hon Margaret
Madel, David	Rees, Peter (Dover & Deal)	Thompson, George
Marshall, Michael (Arundel)	Rees-Davies, W. R.	Thorpe, Rt Hon Jeremy (N Devon)
Marten, Neil	Reld, George	Townsend, Cyril D.
Mates, Michael	Renton, Rt Hon Sir D. (Hunts)	Trotter, Neville
Mather, Carol	Renton, Tim (Mid-Sussex)	Vaughan, Dr Gerard
Maude, Angus	Rhys Williams, Sir Brandon	Viggers, Peter
Maudling, Rt Hon Reginald	Ridley, Hon Nicholas	Wainwright, Richard (Colne V)
Mawby, Ray	Ridsdale, Julian	Wakeham, John
Maxwell Hyslop, Robin	Rifkind, Malcolm	Walder, David (Clitheroe)
Mayhew, Patrick	Rippon, Rt Hon Geoffrey	Walker, Rt Hon P. (Worcester)
Meyer, Sir Anthony	Roberts, Michael (Cardiff NW)	Walker-Smith, Rt Hon Sir Derek
Miller, Hal (Bromsgrove)	Roberts, Wyn (Conway)	Wall, Patrick
Mills, Peter	Ross, Stephen (Isle of Wight)	Walters, Dennis
Miscampbell, Norman	Rossi, Hugh (Hornsey)	Warren, Kenneth
Mitchell, David (Basingstoke)	Rost, Peter (SE Derbyshire)	Weatherill, Bernard
Moate, Roger	Royle, Sir Anthony	Wells, John
Monro, Hector	Sainsbury, Tim	Welsh, Andrew
Montgomery, Fergus	St. John-Stevas, Norman	Whitelaw, Rt Hon William
Moore, John (Croydon C)	Scott, Nicholas	Wiggin, Jerry
More, Jasper (Ludlow)	Shaw, Giles (Pudsey)	Wilson, Gordon (Dundee E)
Morgan, Geraint	Shelton, William (Streatham)	Winterton, Nicholas
Morgan-Giles, Rear-Admiral	Shepherd, Colin	Wood, Rt Hon Richard
Morris, Michael (Northampton S)	Shersby, Michael	Young, Sir G. (Ealing, Acton)
Morrison, Charles (Devizes)	Silvester, Fred	Younger, Hon. George
Morrison, Hon Peter (Chester)	Sims, Roger
Neave, Airey	Sinclair, Sir George	TELLERS FOR THE AYES:
Nelson, Anthony	Skeet, T. H. H.	Mr. W. Benyon and
Neubert, Michael	Smith, Dudley (Warwick)	Mr. Adam Butler.
Newton, Tony
NOES
Abse, Leo	Carter-Jones, Lewis	Edge. Geoff
Allaun, Frank	Cartwright, John	English, Michael
Anderson, Donald	Castle, Rt Hon Barbara	Evans, loan (Aberdare)
Archer, Peter	Clemitson Ivor	Evans, John (Newton)
Armstrong, Ernest	Cocks, Michael (Bristol S)	Ewing, Harry (Stirling)
Ashley, Jack	Coleman, Donald	Faulds, Andrew
Ashton, Joe	Colquhoun, Mrs Maureen	Fernyhough, Rt Hon E.
Atkins, Ronald (Preston N)	Concannon, J. D.	Fitch, Alan (Wigan)
Atkinson, Norman	Conlan, Bernard	Flannery, Martin
Bagier, Gordon A. T.	Cook, Robin F. (Edin C)	Fletcher, Raymond (Ilkeston)
Barnett, Guy (Greenwich)	Cox, Thomas (Tooting)	Fletcher, Ted (Darlington)
Barnett, Rt Hon Joel (Heywood)	Craigen, J. M. (Maryhill)	Foot, Rt Hon Michael
Bates, Alf	Crawshaw, Richard	Ford, Ben
Bean, R. E.	Cronin, John	Forrester, John
Benn, Rt Hon Anthony Wedgwood	Crosland, Rt Hon Anthony	Fowler, Gerald (The Wrekin)
Bennett, Andrew (Stockport N)	Cryer, Bob	Fraser, John (Lambeth, N'w'd)
Bidwell, Sydney	Cunningham, G. (Islington S)	Freeson, Reginald
Bishop, E. S.	Cunningham, Dr J. (Whiteh)	Garrett, John (Norwich S)
Blenkinsop, Arthur	Dalyell, Tam	Garrett, W. E. (Wallsend)
Boardman, H.	Davidson, Arthur	George, Bruce
Booth, Albert	Davies, Bryan (Enfield N)	Gilbert, Dr John
Boothroyd, Miss Betty	Davies, Denzil (Llanelli)	Ginsburg, David
Bottomley, Rt Hon Arthur	Davis, Clinton (Hackney C)	Golding, John
Boyden, James (Bish Auck)	Deakins, Eric	Gould, Bryan
Bray, Dr Jeremy	de Freitas, Rt Hon Sir Geoffrey	Gourlay, Harry
Brown, Hugh D. (Provan)	Delargy, Hugh	Graham, Ted
Brown, Robert C. (Newcastle W)	Dell, Rt Hon Edmund	Grant, George (Morpeth)
Brown, Ronald (Hackney S)	Dempsey, James	Grocott, Bruce
Buchan, Norman	Doig, Peter	Hamilton, W. W. (Central Fife)
Buchanan, Richard	Dormand, J. D.	Hardy, Peter
Butler, Mrs Joyce (Wood Green)	Douglas-Mann, Bruce	Harper, Joseph
Callaghan, Rt Hon J. (Cardiff SE)	Duffy, A. E. P.	Harrison, Walter (Wakefield)
Callaghan, Jim (Middleton & P)	Dunn, James A.	Hart, Rt Hon Judith
Campbell, Ian	Dunnett, Jack	Hattersley, Rt Hon Roy
Canavan, Dennis	Dunwoody, Mrs Gwyneth	Hatton, Frank
Cant, R B.	Eadie, Alex	Hayman, Mrs. Helene
Carmichael, Neil	Edelman, Maurice	Healey, Rt Hon Denis

Heffer, Eric S.	Marshall, Jim (Leicester S)	Short, Mrs Renée (Wolv NE)
Hooley, Frank	Mason, Rt Hon Roy	Sifkin, Rt Hon John (Daptford)
Horam, John	Meacher, Michael	SIliars, James
Howell, Denis (B'ham, Sm H)	Mellish, Rt Hon Robert	Silverman, Julius
Hoyle, Doug (Nelson)	Mikardo, Ian	Skinner, Dennis
Huckfield, Les	Millan, Bruce	Small, William
Hughes, Rt Hon C. (Anglesey)	Miller, Dr M. S. (E Kilbride)	Smith, John (N Lanarkshire)
Hughes, Mark (Durham)	Miller, Mrs Millie (Ilford N)	Snape, Peter
Hughes, Robert (Aberdeen N)	Mitchell, R. C. (Soton, Itchen;	Spearing, Nigel
Hughes, Roy (Newport)	Molloy, William	Spriggs, Leslie
Hunter, Adam	Morris, Alfred (Wythenshawe)	Stallard, A. W.
Irving, Rt Hon S. (Dartford)	Morris, Charles R. (Openshaw)	Stewart, Rt Hon M. (Fulham)
Jackson, Colin (Brighouse)	Morris, Rt Hon J. (Aberavon)	Stoddart, David
Jackson, Miss Margaret (Lincoln)	Moyle, Roland	Stott, Roger
Janner, Greville	Mulley, Rt Hon Frederick	Strang, Gavin
Jay, Rt Hn Douglas	Murray, Rt Hon Ronald King	Strauss, Rt Hon G. R.
Jeger, Mrs Lena	Newens, Stanley	Summerskill, Hon Dr Shirley
Jenkins, Hugh (Putney)	Noble, Mike	Swain, Thomas
John, Brynmor	Oakes, Gordon	Taylor, Mrs Ann (Bolton W)
Johnson, James (Hull West)	Ogden, Eric	Thomas, Jeffrey (Abertillery)
Johnson, Walter (Derby S)	O'Halloran, Michael	Thomas, Mike (Newcastle E)
Jones, Alec (Rhondda)	O'Malley, Rt Hon Brian	Thomas, Ron (Bristol NW)
Jones, Barry (East Flint)	Orbach, Maurice	Thorne, Stan (Preston South)
Jones, Dan (Burnley)	Ovenden, John	Tierney, Sydney
Judd, Frank	Padley, Walter	Tinn, James
Kaufman, Gerald	Palmer, Arthur	Tomlinson, John
Kelley, Richard	Park, George	Tomney, Frank
Kerr, Russell	Parry, Robert	Torney, Tom
Kilroy-Silk, Robert	Pavitt, Laurie	Varley, Rt Hon Erlc G.
Kinnock, Neil	Peart, Rt Hon Fred	Wainwright, Edwin (Dearne V)
Lambie, David	Pendry, Tom	Walden, Brian (B'ham, L'dyw'd)
Lamborn, Harry	Perry, Ernest	Walker, Terry (Kingswood)
Lamond, James	Phipps, Dr Colin	Ward, Michael
Leadbitter, Ted	Prentice, Rt Hon Reg	Watkins, David
Lee, John	Price, C. (Lewisham W)	Watkinson, John
Lewis, Arthur (Newham N)	Price, William (Rugby)	Weetch, Ken
Lewis, Ron (Carlisle)	Radlce, Giles	Weitzman, David
Lipton, Marcus	Rees, Rt Hon Meriyn (Leeds S)	Wellbeloved, James
Litterick, Tom	Richardson, Miss Jo	White, Frank R. (Bury)
Lomas, Kenneth	Roberts, Albert (Normanton)	White, James (Pollok)
Loyden, Eddie	Roberts, Gwilym (Cannock)	Whitlock, William
Luard, Evan	Robertson, John (Paisley)	Willey, Rt Hon Frederick
Lyon, Alexander (York)	Roderick, Caerwyn	Williams, Alan (Swansea W)
Lyons, Edward (Bradford W)	Rodgers, George (Chorley)	Williams, Alan Lee (Hornch'ch)
McElhone, Frank	Rooker, J. W.	Williams, W. T. (Warrington)
MacFarquhar, Roderick	Rose, Paul B.	Wilson, Alexander (Hamilton)
McGuire, Michael (Ince)	Ross, Rt Hon W. (Kilmarnock)	Wilson, Rt Hon H. (Huyton)
Mackenzie, Gregor	Rowlands, Ted	Wilson, William (Coventry SE)
Maclennan, Robert	Ryman, John	Wise, Mrs Audrey
McMillan, Tom (Glasgow C.)	Sandelson, Neville	Woodall, Alec
McNamara, Kevin	Sedgemore, Brian	Wrigglesworth, Ian
Madden, Max	Selby, Harry	Young, David (Bolton E)
Magee, Bryan	Shaw, Arnold (Ilford South)
Mahon, Simon	Sheldon, Robert (Ashton-u-Lyne)	TELLERS FOR THE NOES:
Marks, Kenneth	Shore, Rt Hon Peter	Mr. John Ellis and
Marquand, David	Short, Rt Hon E. (Newcastle C)	Mr. James Hamilton.
Marshall, Dr Edmund (Goole)

Question accordingly negatived.