Commons Sitting of 4 November 1975

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. Speaker in the Chair]
ORAL ANSWERS TO QUESTIONS
  SOCIAL SERVICES

    Pay Beds
    Mr. Hal Millerasked the Secretary of State for Social Services, what was the total amount received by the National Health Service in the most recent 12- month period for which figures are avail able in respect of fees for pay beds.
    Mr. Gowasked the Secretary of State for Social Services what is her latest estimate of the total sum which will be paid to the National Health Service during the current year in respect of fees for pay beds in NHS hospitals.
    The Secretary of State for Social Services (Mrs. Barbara Castle): Income from pay bed charges in England in 1973–74 was £14·3 million. On the basis of a similar use of pay beds, the estimate for 1975–76 is £26 million.
    Mr. Hal Miller: Will the right hon. Lady confirm that this contribution to the health service is on top of taxes paid by those using the beds and that they have a right to use National Health Service hospitals? May I remind her that she has still not yet indicated how this revenue is to be replaced? Does she agree that it is not right for her to seek to offset other charges, as has been her habit in the past?
    Mrs. Castle: I have told the House previously that funds will be made available so that the revenue allocation to health authorities will not be affected as a consequence of the phasing out of pay beds. Of course, we all contribute to the National Health Service and we all
    202
    have access to it. We are only prohibiting access to the service by the payment of a fee.
    Dr. M. S. Miller: Can my right hon. Friend give some estimate of the contribution made by NHS workers, including doctors, nurses, medical ancillaries and laboratory technicians, to pay beds? Can she confirm that these contributions are not included in the calculations?
    Mrs. Castle: My hon. Friend is quite right. No one other than the consultant servicing a pay bed gets any additional remuneration for it. The phasing out of pay beds will mean that manpower resources at present used on these beds will be available for NHS patients.
    Mr. Gow: At a time when the health service is desperately short of resources, does the right hon. Lady think she is right to deprive it of £26 million revenue from pay beds? Will she reconsider her decision and bear in mind that many users of the National Health Service would readily pay a charge if they thought the service would be improved?
    Mrs. Castle: I think I am right, for the simple reason that I believe we are getting a very good bargain. As I told the House in a recent debate, the phasing out of pay beds will mean the equivalent of between 2,500 and 3,000 more beds being made available for National Health Service use. The capital cost of providing these beds afresh today would be between £60 million and £70 million.
    Dr. Vaughan: Will the right hon. Lady tell us how many pay beds she has already phased out? Her recent figure suggested that about 1,000 beds had been phased out in recent months. Can she confirm that?
    Mrs. Castle: No doubt the hon. Member is referring to the under-occupancy exercise carried out by one of my predecessors, Mr. Kenneth Robinson. We have reviewed that, because these private beds are very under-occupied. In many cases the occupancy rate is as low as 50 per cent. I announced to the House that I was carrying out another exercise to reduce authorisations in cases where the occupancy rate was so low as not to justify the continuance of private beds. I cannot give the hon. Member any figures at the moment, but if he tables

    203
    a Question or writes to me, I shall let him have the information.

    Supplementary Benefit (Hostel Wardens)
    Mr. Simsasked the Secretary of State for Social Services what conclusions she has reached on the payment of supplementary benefit to hostel wardens on behalf of young people in their care.
    The Under-Secretary of State for Health and Social Security (Mr. Micheal Meacher): The question of payment of benefit to young people in hostels, including the use of vouchers for accommodation, is being looked at by the interdepartmental working group on the needs of homeless young people.
    Mr. Sims: I am grateful for the hon. Gentleman's assurance that this matter is being looked into. Will he confirm that under Section 17 of the Ministry of Social Security Act 1966, it is possible for payment for board and lodging to be made direct to a third party, such as a hostel warden? This is exactly what was happening in the notorious Gleaves case, and will the hon. Gentleman take some rapid action on this matter?
    Mr. Meacher: I can confirm that under the Act, payment may be made to a third party—for example, the warden of a hostel. He is given a board and lodging voucher. But the point is that the voucher is awarded to an individual claimant only after an interview by the supplementary benefits officer, and it is in operation for only one week. It therefore does not constitute a block system for a hostel or organisation on the presentation of a list.
    Mr. Canavan: Bearing in mind the recent conviction of Roger Gleaves and the fact that one of my constituents, Billy McPhee from Bannockburn, was brutally murdered by a gang of unscrupulous people who were operating a vicious hostel racket in London whereby they exploited young people, sexually assaulted them and deprived them of their social security benefits, will the Minister take every step to ensure that such crimes do not recur? He could do this by having regular inspections of such hostels and by closer scrutiny of the credentials of the people who run them.
    Mr. Meacher: I certainly deplore the appalling murder of one of my hon. Friend's constituents by members of the Gleaves organisation. In setting up the working group it was our intention to examine the needs of homeless young persons in the inner city areas to prevent the recurrence of any such terrible crime. I give my hon. Friend the assurance that this matter is being pursued urgently. The group has on it not only civil servants but members of the local authority associations and three representatives of leading voluntary organisations concerned with this work. I am very hopeful that they will soon be able to report and provide us with the basis for a policy to prevent any such recurrence.

    Rehabilitation Services
    Mr. Carter-Jonesasked the Secretary of State for Social Services what expansion is envisaged of rehabilitation services in the National Health Service.
    The Minister of State, Department of Health and Social Security (Dr. David Owen): It is for individual health authorities to decide on the development of these services in their areas, within the limits of the resources available to them. But they are aware of the importance which my right hon. Friend the Secretary of State attaches to such development. Substantial amounts of central departmental funds have been provided to establish 19 demonstration centres in medical rehabilitation to demonstrate good practice.
    Mr. Carter-Jones: Does my hon. Friend realise that there is an adverse distribution of these experimental centres from the point of view of services in the North? Does he agree that more central funds should be made available to allow families to participate in rehabilitation and therefore relieve the pressure on the health service? Will he look again at the general situation of severely disabled children who are denied rehabilitation and educational opportunities because of the delays in providing equipment?
    Dr. Owen: I am prepared to consider whether the Northern Region has a fair allocation of such centres. I shall ask the regional health authorities. I know that in the North-West particularly—but in other areas, too—the authorities have investigated this matter. The use of families is a most important aspect of

    205
    reinforcing rehabilitation, and the family is one of the most readily accessible of all the volunteer forces in the country.

    Ministerial Engagements
    Mr. Adleyasked the Secretary of State for Social Services if she will detail her official engagements for 4th November.
    Mrs. Castle: This morning I met the Lord President of the Council and held various internal departmental discussions. I shall spend the remainder of the afternoon in a Cabinet Committee and other official meetings.
    Mr. Adley: Has it occurred to the Secretary of State that first as Minister of Transport, then as Minister of Labour, and now in her present job, she has soured and disrupted, first, the transport industry—
    Mr. Speaker: Order. This is a Question about the right hon. Lady's engagements for today. All this business about the transport industry has nothing to do with that.
    Mr. Adley: Is the right hon. Lady aware that her present activities—
    Mr. Tomlinson: What a nasty little man.
    Mr. Adley: —have soured and disrupted the medical services of this country? To use her own words, does she really think that the country still needs her.
    Mrs. Castle: The answer to the first part of the question is "No."

    Political Advisers
    Mr. Goodhewasked the Secretary of State for Social Services how many political advisers she now has in her Department paid out of public funds.
    Mrs. Castle: Currently, four people are employed as special advisers in my Department, of whom two work on a part-time basis.
    Mr. Goodhew: My Question concerns political advisers. How many of these are erstwhile student agitators, like Mr. Jack Straw, and to what extent is the advice of these persons responsible for the right hon. Lady's damaging and
    206
    dangerous confrontation with consultants and doctors in the hospital service?
    Mrs. Castle: Of the four special advisers, one is a distinguished expert, a professor in social administration, Professor Abel Smith—
    Mr. Goodhew: On a point of order, Mr. Speaker—
    Mr. Speaker: Order. The right hon. Lady must be allowed a chance to reply.
    Mrs. Castle: —and two support him in his work. Mr. Straw is a barrister who was in practice at the Bar before he accepted his present post as special adviser. I have found his advice always excellent.
    Mr. George Cunningham: Has my right hon. Friend noticed how rapidly erstwhile student agitators mature?
    Mrs. Castle: Yes. I was one myself.

    National Health Service
    Mr. Freudasked the Secretary of State for Social Services what is the estimated cost of administration of the National Health Service; and what proportion of total spending on the National Health Service this represents.
    Mrs. Castle: Final accounts for 1974–75 are not yet available, but the cost of administration of the National Health Service for that year is estimated at £235 million, equivalent to about 7½ per cent. of the total budget. Nearly half of this relates to costs in operational units and services that have not previously been classified as administration.
    Mr. Freud: In view of the right hon. Lady's proposals to cut the salaries of junior doctors and agency nurses, will she propose spreading these cuts evenly among administrators in the health service, which appears to be the only growth industry at the moment? Will she confirm that the Royal Commission will look into the setting up of the administrative system?
    Mrs. Castle: I am sorry that the hon. Member is so badly out of touch with what has been happening in the health service. If he were in touch he would have appreciated that, far from having cut the salaries of junior hospital doctors, this Government gave them an increase of 30 per cent. up to April, and

    207
    are currently introducing a new contract, for which they have long asked. On the second part of the question, it will be possible for the Royal Commission to consider the use of manpower in the National Health Service, as that is part of its terms of reference.
    Mr. Speaker: Mr. Snape—I apologise, I meant to say Mr. Garrett.
    Mr. John Garrett: Does my right hon. Friend agree that there is almost certainly one level too many in the National Health Service hierarchy, and that that is probably the region? Is she happy with the situation whereby her Department's finance division supervises the work of finance officers in the regions, who in turn supervise the work of finance officers in the regions, who in turn super-vice the work of finance officers in areas, who in turn supervise the work of district treasurers?
    Mrs. Castle: We on the Labour side of the House have never hidden our dislike of the overstructured, over-tiered reorganisation introduced by our Conservative predecessors. We disliked it at the time, and I am sure that if we had been in a position to start the reorganisation from scratch we would never have introduced such a top-heavy managerial structure. I see that that goes, too, for hon. Members on the Opposition Front Bench, who, unfortunately, supported it at the time that it was going through the House. But we have to realise that the structure has been in operation for only just over a year. People are only just in post. They are only just settling down after the trauma of reorganisation. It would be contrary to the needs of patient care if we were to turn it all upside down again.
    Mr. Evelyn King: What the right hon. Lady has said is interesting, and I hope that she will bear that in mind and act upon it. Is it not a fact that administrators are being paid almost as much, in total, as doctors? How many administrators are now being paid more than £10,000 a year? Does that number run into hundreds, as I am informed? I am being non-party on this matter. Will the right hon. Lady give up her time and attention to investigate the question whether or not administration is inefficient?
    Mrs. Castle: The hon. Gentleman says that he is being non-party. I am glad to see that Labour Party policy on the matter is now accepted, and that we have converted the Opposition, which carried out the reorganisation of which they now complain. It is impossible to turn the structure upside down before people are in post. We must give them some continuing stability.
    The Royal Commission has the right to examine the use of manpower in the service, but what I am concerned about now is helping those who were put in their jobs by the previous Government to do a good job. That must be my priority at present.
    As for the details for which the hon. Gentleman asked, if he cares to table a Question I shall be glad to answer it.
    Mr. Speaker: I should apologise to the hon. Member for Norwich, South (Mr. Garrett). I wish that hon. Members would give me notice of facial changes.

    Watford General Hospital
    Mr. Raphael Tuckasked the Secretary of State for Social Services if she can give some assurance as to when phase 3 or a modified phase 3 of the development of the Watford General Hospital will proceed.
    Dr. Owen: The North West Thames Regional Health Authority is reassessing its priorities for 1976–77 and beyond, following the recent reduction in capital available to the National Health Service. It is not yet known when a further major development at Watford will be fitted into a revised programme.
    Mr. Tuck: Phase 3 is not new. It is about 15 years old. Is my hon. Friend aware of the large waiting lists for both operations and X-rays, the shortage of medical beds, and the need for improved out-patient facilities, all of which are causing great concern in Watford? Can he give me any advice on the matter? Have we not got our priorities wrong? I was delighted to see Her Majesty pressing the button to start oil flowing from the North Sea yesterday, but did it have to cost £500,000 for that to be done, as was said on television? Would not the money have been better used if it had been spent on Watford Hospital?
    Dr. Owen: Everyone has his own expenditure priorities. The health authorities know their present allocations and the allocations that they can expect. They are bound to look for cost-saving redesigns and means of dividing developments into small stages in reviewing the whole of their present capital programme.

    Hospitals (Admissions)
    Mr. Penhaligonasked the Secretary of State for Social Services how many people are currently awaiting an operation in National Health Service hospitals; and if she will make a statement.
    Dr. Owen: Because of considerable variations between specialties and in types and urgency of patients' conditions, an average waiting time for admission would not have any meaning.
    On 31st December 1974, the latest date for which national figures are available, there were 517,424 patients on waiting lists in all specialties in England, including 492,362 in the surgical specialties.
    Mr. Penhaligon: I am sure that the Minister recognises that that is a matter for great concern. Does he agree that the present junior doctors' dispute is not improving the situation for the 500,000 people involved? What negotiations have taken place with the Junior Hospital Doctors' Association? It appears to some that the BMA's lack of credibility within its own profession is at least one of the root causes of the problems being experienced.
    Dr. Owen: The total number on waiting lists has hovered around the 500,000 mark for many years. Industrial disputes in the service in the past few years have undoubtedly contributed to the size of the waiting lists, and there is no question but that the present industrial dispute will aggravate the situation further.
    As to the question of whom the Department negotiates with, it is bound to negotiate with those who are recognised as forming the major negotiating body, and currently those are the people with whom we are negotiating.
    Mr. Loyden: Does my hon. Friend agree that a decision as to priorities between patients should normally be based
    210
    on the need for medical attention at the time? Therefore, will he investigate the practice of consultants who write letters for patients to take to hospital in order that they can claim priority over other patients who are waiting? That practice is causing some of the delays and cancellations for patients who have waited a long time for entry into hospital.
    Dr. Owen: The whole question of waiting lists and queue-jumping is very complex. In the joint working party well over a year ago we put to the medical profession proposals for a common waiting list and proposals together to examine the difficulties that might result from such a list, which would have covered some of the points my hon. Friend mentioned. We very much regret that the medical profession later decided not to agree to common waiting lists.
    Mr. Norman Fowler: Is the Minister aware that although it is ludicrous to blame the junior doctors' dispute for the long waiting lists, it is our strongly held view that the junior doctors should cease their action, pending the ballot which is to take place? Is the hon. Gentleman also aware that what the National Health Service desperately needs now is leadership, and that the Secretary of State should stop behaving like a party politician and start acting like a Minister?
    Dr. Owen: No one would pretend that the waiting lists are solely the responsibility of the present industrial action. We do not have the figures, but it is undoubtedly contributing.
    We all welcome the hon. Gentleman's advice to the junior hospital doctors to await the ballot. I hope that the hon. Gentleman will feel able to go one stage further and tell them that they are not being discriminated against, and that it is a central matter of the Government's overall pay policy, which has been voluntarily agreed. One and a half million other workers are prepared to abide by the pay policy, and about 200,000 have actually renegotiated downwards their recent awards to make them compatible with the policy. If the junior hospital doctors recognise that they cannot have extra money under the terms of the pay policy, they should seriously consider the recent option being discussed with their leaders and my right hon. Friend.

    Attendance Allowance (Handicapped Children)
    Mr. Hannamasked the Secretary of State for Social Services if she will now take steps to amend the regulations so that the Attendance Allowance Board may pay attendance allowance to foster parents of handicapped children who satisfy the criteria.
    The Minister of State, Department of Health and Social Security (Mr. Brian O'Malley): Payment of attendance allowance has not been considered appropriate where a local authority has assumed responsibility for the care of a severely disabled child, whether in one of its own homes or by boarding out.
    Mr. Hannam: Is the Minister aware that a recent survey shows that the local authorities' allowances do not reach the level of the attendance allowance? Does he agree that everything possible should be done to help the handicapped children concerned—only 300 or so—to be taken into private homes and families by foster parents? Will he consider applying the same principle as is being applied to the mobility allowance?
    Mr. O'Malley: I think that the hon. Gentleman misunderstands the position. If the attendance allowance became payable for the small number of children that he describes in his Question, many of the foster parents concerned would be no better off, because the local authorities would clearly reflect the receipt of that allowance in the payment made to the foster parents.
    Mr. Carter-Jones: Is my right hon. Friend aware that the problem is very serious, and that his Department has not treated it with as much care as it should? Genuine hardship is caused for severely handicapped children going into foster care, because insufficient money is made available to them. The remedy proposed in the Question would help relieve the financial hardship. Will my right hon. Friend please consider it again?
    Mr. O'Malley: The attendance allowance is seen primarily as a way to help families who, out of their own resources, look after a severely disabled child of their own in their own home, or where private arrangements are made for the
    212
    child to be cared for by someone else. It is inappropriate for my hon. Friend to criticise my Department on this matter. The costs of bringing up a foster child by foster parents or local authorities is properly a charge on the local authorities concerned.

    Pensioners (Residence Overseas)
    Mr. Mawbyasked the Secretary of State for Social Services what proposals she has to assist United Kingdom pensioners living abroad in countries where there are no reciprocal arrangements and where the country of residence does not provide them with pension entitlement.
    Mr. O'Malley: We have no proposals for modifying the existing policy which has been continued under successive Governments and under which retirement and widows' pensions are already payable in such countries at the rate in force when the pensioner left this country or when he first qualified if he was then living abroad. We are always willing, where possible, to consider appropriate reciprocal arrangements with these countries.
    Mr. Mawby: Is the right hon. Gentleman aware that I have had a sympathetic letter from his hon. Friend the Undersecretary of State regarding two retired persons in Canada? Is he further aware that it is still the position that only one-third of the pensioners living abroad come within the reciprocal arrangement? The people in Canada about who I am concerned are still not within the reciprocal arrangement. As Canada is a member of the old Commonwealth, will steps be taken to speed up the negotiations which I understand are in progress at least to ensure that we get a reciprocal arrangement with old Commonwealth countries?
    Mr. O'Malley: I assure the hon. Gentleman that where it is possible to establish appropriate reciprocal arrangements the Government are prepared to do so. It is true, as the hon. Gentleman has said, that there have been continuing discussions on an intermittent basis, since 1972, between the Canadian Government and Her Majesty's Government. I must point out that this is a complex matter, and I cannot tell the hon. Gentleman that I would assume an early conclusion to the discussions. I must also point out that to make payments abroad on the lines that are sometimes suggested, including

    213
    reciprocal arrangements, would involve an extra £35 million a year in public expenditure. As the hon. Gentleman knows—I am not making a sharp remark to him, because I appreciate the nature of his question—we are expecting, any day, a letter from his right hon. Friend the Leader of the Opposition that will tell us where public expenditure cuts are to be made rather than where increases might be made.
    Mrs. Knight: What estimate has the right hon. Gentleman made of the number of persons in this category? Is he aware that some of them have had to move to foreign countries for health reasons, among other reasons? As he has given us an estimate of the amount involved, has he any idea of the numbers involved?
    Mr. O'Malley: We have about 172,000 pensioners abroad, and 108,000 do not receive increases. On the other hand, 52,000 in Australia and 17,000 in New Zealand may be helped by the reciprocal arrangements which enable residents in this country to be treated as residents in those countries as regards entitlement to the Australian and New Zealand residence-based pensions.

    Age Addition Payments (Over-80s)
    Mr. Rifkindasked the Secretary of State for Social Services whether she has any proposals for maintaining in real value the age addition paid to retirement pensioners 80 years of age and over.
    Mr. O'Malley: This matter will be kept under review in the light of competing priorities within overall provision for retirement pensioners.
    Mr. Rifkind: Does the right hon. Gentleman realise that the over-80s are probably suffering more than any other population group because of the Government's hopeless inability to deal with the rate of inflation or to control the value of savings? Has he anything to say to give an assurance to the over-80s that their present standard of living will be maintained, as opposed to being diminished over the months and years to come?
    Mr. O'Malley: If I may say so, that was a very silly supplementary question. I can tell the hon. Gentleman about the hope that I shall give to old-age pensioners
    214
    —namely, that for a long time in future a Labour Government will continue in office to further the already substantial improvements which have been made by this Government, which we were told in the last weeks of a Conservative Government were extravagant and unrealistic. In fact, we introduced those improvements. The present Government have done more for retirement pensioners than any other Government since the inception of the national insurance system.

    Community Hospitals
    Mr. Hicksasked the Secretary of State for Social Services if she will define the rôle and functions of small cottage and general practitioner hospitals in the future development of the hospital service; if she will confirm that it is her intention progressively to reduce the number of these smaller hospitals; and if she will make a statement.
    Mrs. Castle: A memorandum of guidance has been issued to health authorities describing the rôle and function of a new type of local hospital called a community hospital, which is to provide care nearer their homes for patients who do not need the specialised services of a district general hospital. The medical staff in these hospitals will mainly be general practitioners. Most community hospitals will be provided by adapting existing local hospitals but some small hospitals will need to be closed as the service develops.
    Mr. Hicks: Will the Secretary of State give an assurance to the House that before any decisions are made involving the closure of existing cottage hospitals, social considerations will be taken into account as well as purely economic criteria? Is the right hon. Lady aware that in rural areas, such as South-East Cornwall, the smaller hospitals fulfil an important function, and that their closure could mean that both patients and relatives will be a significant distance from hospitials?
    Mrs. Castle: I appreciate that much local affection builds up around some of the smaller local hospitals. I also accept that there is value in having smaller hospitals situated nearer to the homes of patients who do not need the care that can be provided by a district general

    215
    hospital. However, these matters have to be planned realistically within the resources available. It will be inevitable that some of the existing small hospitals will no be suitable for long-term use as community hospitals. I assure the hon. Gentleman that no decision to close a hospital will be taken until there has been consultation with the community health council, which will be able to press the social factors to which he has referred.
    Dr. Vaughan: Will the right hon. Lady pay special regard to the effects on nurses of any changes in local hospitals? Will she tell the House how many nurses are likely to be unemployed as they come out of training schools in the near future, as a direct result of her policies?
    Mrs. Castle: Certainly no nurses will be unemployed as a result of our policies concerning community hospitals. As for the question of our wider policies, particularly our policy on pay beds, and our policy on nursing recruitment, the hon. Gentleman knows quite well that I covered those matters fully in my speech in the recent debate.

    Psychopathic Patients
    Mrs. Knightasked the Secretary of State for Social Services if she will take appropriate steps to provide properly secure units for psychopathic patients.
    Dr. Owen: We have already asked health authorities to set up regional security units for patients requiring treatment in conditions of security short of that provided by the special hospitals but greater than that normally available in ordinary psychiatric hospitals or units. Such patients may include psychopathic patients requiring hospital treatment.
    The recent Report of the Butler Committee on Mentally Abnormal Offenders expresses the view that dangerous antisocial psychopaths should generally be dealt with in the penal system and that special prison units should be set up for this purpose. The Government are considering this and the other recommendations made by the Committee.
    Mrs. Knight: Will the hon. Gentleman say anything more definite about when the Butler Committee recommendations are likely to be implemented? Does he agree that escapes from mental hospitals
    216
    not equipped to contain dangerous persons are genuinely worrying to the public? Will he comment on the case in Bristol last week, when such a patient had to be sent to prison because the mental hospitals refused to have him?
    Dr. Owen: On the question of the implementation of the Butler Report, the Committee issued an interim report in which it drew attention to the need for regional security units. Action has already been taken on that matter. In its final report the Committee made a recommendation about revenue support as well as capital support. The Government's attitude on this complex and detailed report is that there are some aspects on which we would like to take action before we have considered the full report. We intend to consider these matters in conjunction with the Home Office—the other Department that is most closely involved—with a view to implementing as we can.
    As regards the Bristol case, the South-western Regional Health Authority is continuing its efforts to find a hospital place within the region for the man concerned.
    Mr. Moonman: Is it not appropriate that the consultative document which is to be produced in about three months' time should make some reference to the matter?
    Dr. Owen: I do not know whether my hon. Friend is aware that there are two consultative documents on which we have made a commitment. One document is concerned with the whole question of resources, and with how we manage the question of priorities. We also have a commitment to consider the working of the Mental Health Act. That certainly bears on some of the aspects of the Butler Report, which makes recommendations for changes in the Act. The whole question of the definition of psychopathy is raised. There are some other aspects of the report which are not covered in the consultative paper.

    European Community (Reciprocity)
    Mr. David Mitchellasked the Secretary of State for Social Services what reciprocal arrangements are made for contributors to the British National

    217
    Health Service requiring hospital treatment while in the EEC countries on business or on holiday.
    Dr. Owen: The EEC Social Security Regulations which cover employed persons and their families, provide for urgent medical treatment, including hospital treatment, during a visit to another EEC country, on the same terms as for insured citizens of that country. Bilateral agreements with Denmark and Gibraltar entitle all United Kingdom visitors to urgent medical treatment in those territories.
    Mr. Mitchell: Does that answer apply also to the self-employed?
    Dr. Owen: The self-employed and non-employed are not covered by the EEC regulations, because medical treatment at public expense in other EEC countries is normally available only to persons who contribute to sickness schemes. Not all the EEC countries have such schemes for self-employed and non-employed people. On the other hand, our National Health Service is available to all residents in the United Kingdom, whether or not they pay national insurance contributions. Her Majesty's Government have urged in the Council of Ministers in Brussels that EEC regulations should be extended, or that new regulations should be introduced to cover self-employed and non-employed persons. It has been agreed to set up a special Community working party to consider the question. It is due to meet in Brussels very shortly and will include officials from my Department. Our fellow-members of the Community are under no illusion about the fact that we believe that the system should be extended.
    Mrs. Winifred Ewing: Is the Minister aware that this matter is of burning concern to organisations in Scotland and in the rest of the United Kingdom which have been set up to look to the needs of self-employed people? Will he be more specific and say what, precisely, he intends to do to bring home this matter to the EEC? Incidentally, what does he mean by "very shortly"?
    Dr. Owen: We have made clear in our discussions in the Community that although we recognise that there are differences in comparisons involving countries
    218
    of the Nine, we believe that at present the self-employed person from Britain travelling in a Community country is at a disadvantage when compared with other EEC nationals. We have made this clear and intend to pursue the matter first in the working party which will take place in the next few weeks and then in the Council of Ministers. We shall have to discuss the subject in that Council.

    Runaway Children
    Mr. Norman Fowlerasked the Secretary of State for Social Services whether she will set up an independent inquiry into the question of runaway children.
    Mr. Meacher: We are consulting my right hon. Friend the Home Secretary and other Ministers concerned, and hope to be able to write to the hon. Member shortly.
    Mr. Fowler: Is the Minister aware that the Gleaves case featured in the "Johnny Go Home" programme caused widespread concern to hon. Members on both sides of the House? Does he recognise that part of this case concerns allegations of mismanagement against a Government Department? Would it not be more appropriate to have a fully independent inquiry, rather than an interdepartmental one?
    Mr. Meacher: I have already indicated that the working group that has been set up is not purely internal, because it contains three members of leading voluntary organisations. I have already said that I am hopeful that after consultations, which I accept have been lengthy, we shall shortly be able to write to the hon. Gentleman.
    Mr. Nicholas Winterton: Will the Minister press his right hon. Friend the Lord President of the Council to find time for a debate on the report on fostering, recently submitted to the House by the Employment and Social Services Sub-Committee of the Select Committee on Public Expenditure, which many of us believe is an efficient and sound way of dealing with young runaway children?
    Mr. Meacher: I note what the hon. Gentleman says, but he should put that question to my right hon. Friend the Lord President of the Council.

    Agency Nurses
    Mr. Teddy Taylorasked the Secretary of State for Social Services if she has yet reviewed the effect of her circular on agency nurses and the NHS; and if she will make a statement about its effect.
    Mrs. Castle: I shall review the arrangements when I have received the detailed reports I requested from health authorities. I am glad to say that the implementation of the circular is proceeding smoothly.
    Mr. Taylor: Is the right hon. Lady aware that her circular is causing a great deal of concern in areas in which it is believed that some hospital units will be forced to close or cut down their intake if this policy goes ahead? Is she further aware that in Glasgow a statement has been made by the health authorities that two units face closure as a result of the new policy? Therefore, is there not a case for an urgent review of particular cases of difficulty?
    Mrs. Castle: In respect of England, I have no evidence of any of the developments feared by the hon. Gentleman. Of course, I am watching the situation. There is no evidence of the kind of closure to which the hon. Gentleman refers. If he has in mind any specific incidents in Glasgow, I suggest that he puts them to my right hon. Friend the Secretary of State for Scotland.
    Mr. Molloy: Is my right hon. Friend aware that those who have chosen the National Health Service as their career—I refer to members of associations such as COHSE—believe that the Secretary of State's policy is on correct lines?
    Mrs. Castle: I am grateful to my hon. Friend. He is right, Those who have dedicated their nursing lives to the National Health Service appreciate that, above all, the patient wants continuity of care and familiar faces round him. He also requires regular access to a familiar and stable nursing team.

  PAY POLICY
  Mr. Pardoeasked the Prime Minister which Minister is responsible for working out and negotiating the next
  220
  stage of the Government's pay policy to cover the period beyond August 1976.
  The Prime Minister (Mr. Harold Wilson): A number of Ministers will inevitably be involved, but the main responsibility rests with my right hon. Friends the Chancellor of the Exchequer and the Secretary of State for Employment.
  Mr. Pardoe: I thank the Prime Minister for that reply. Does he agree that, taking the most optimistic view, the rate of inflation in the United Kingdom will still be higher than that of most of our industrial competitors after August 1976? Therefore, does he not now accept that an incomes policy is not a policy of short-term shifts and starts but a policy that will be with us until major restructuring and fundamental changes have been made in our industrial and economic society?
  The Prime Minister: As my hon. Friend the Minister of State, Department of Employment, made clear in an Answer last week, we are principally concerned—as is the whole House—with the fact that the initial success of the policy, its observance by negotiators and all involved, shall be maintained. That is the first priority. I have said in the House—the trade union leaders have also made this point—that early enough before the end of the period covered by the policy agreed by the House we shall need to get down to the task of examining the situation thereafter.
  Mr. Guy Barnett: I recognise the need for incomes restraint, and bear in mind the problems involved in the level of unemployment, but will the Prime Minister investigate the possibility of including in public contracts made by national Government and by local government a clause requiring companies to have regard to the lengths of shifts worked and the amount of overtime worked, so that as a consequence, we do not have situations such as those that exist in the construction industry, in which relatively few people earn inflated incomes at the expense of many others who have no job at all?
  The Prime Minister: It might be difficult to import into contracts rigidities of the kind suggested by my hon. Friend. It is an important suggestion. However,

  221
  I cannot answer it off the cuff, because the matter should be studied.

  NEDC AND TUC
  Mr. Ashleyasked the Prime Minister when he next proposes to take the chair at NEDC.
  Mr. Jim Marshallasked the Prime Minister when he next proposes to take the chair at a meeting of the NEDC.
  Mr. Welbelovedasked the Prime Minister when he next proposes to take the chair at a meeting of the NEDC.
  Mr. Weetchasked the Prime Minister when he next proposes to meet the TUC.
  The Prime Minister: At Chequers tomorrow, Sir.
  Mr. Ashley: Although the readiness of Opposition Members to abuse and attack the trade unions makes it difficult for Labour Members to make constructive suggestions, because they would be distorted, will my right hon. Friend try to ensure that at tomorrow's meeting the need for increased investment is discussed, as also is the need for utilising that investment—which means some straight talking about overmanning?
  The Prime Minister: Yes, Sir. I have never found any of my hon. Friends to be inhibited, in parliamentary terms, by anything said by Opposition Members. My hon. Friends' questions are invariably constructive. What a number of us have said—this includes trade unions and others—is that, under successive Governments, there has been a policy of inadequate investment—a policy that has sometimes been misdirected, with a poor return on investment compared with other countries. We must also consider the urgent matter of overmanning, although it must be said that a period of world depression and of heavy unemployment in most advanced countries is not a period in which one starts to deal with that problem. But in our discussions with the unions and the NEDC we constantly stress the need to deal with overmanning problems at the right time, which may not be very long postponed.
  Mr. Baker: Since the car industry is so important to our economy and will feature strongly in the discussions tomorrow, will the right hon. Gentleman tell us the nature of his discussions with the management of Chrysler last night?
  The Prime Minister: As the House will know, my right hon. Friend the Secretary of State for Industry and I, with my right hon. Friend the Paymaster-General, had discussions with Mr. Riccardo and other representatives of the Chrysler Corporation at Chequers yesterday evening, about the grave situation facing the Corporation in the United Kingdom. They explained the reasons for this situation and its implications for their continued operations in the United Kingdom. Further discussions have been taking place at the Department of Industry, and in a few minutes my right hon. Friend will be meeting the representatives of Chrysler. My right hon. Friend the Secretary of State for Industry will make a statement to the House as soon as it is practicable to do so. As I told the House last Thursday, I would not want to underrate the gravity of the situation. Nothing I heard last night would cause me to do so. We are now in the process of discussing with the heads of the Chrysler Corporation the whole situation, and any ideas which they or anyone else may have for solving the problems.
  Mr. Marshall: Did my right hon. Friend see the misleading leading article in The Times yesterday, concerning import controls, presumably written by a failed Tory candidate? I wonder whether, at the meeting of the NEDC tomorrow, my right hon. Friend will refute these misleading, irrelevant and damaging allegations and, instead, put forward the case for selective import controls, as agreed by the recent TUC and Labour Party conferences.
  The Prime Minister: Tomorrow morning's meeting of very important and busy people will not have time to discuss leading articles in the Press—for which there is no ministerial responsibility whatsoever. At Question Time yesterday my right hon. Friend the Secretary of State for Trade dealt very fully with the subject of import controls. As he made clear, we do not rule out protective measures for particular industries suffering or

  223
  threatened with serious injury as a result of increased imports. We have made it clear that we do not believe that a generalised system of import controls on behalf of our balance of payments or anything else is right for Britain. It would have a serious effect on our exports. My right hon. Friend emphasised the Government's determination—as he did during his visits to the European countries last week—to continue to do our best to sustain world trade. But, as he pointed out;
  "We cannot stand idly by in a situation that would result in the destruction of a major British industrial capacity that we shall need in the future when the world depression gives place to recovery in this and other countries."
  Mr. Hal Miller: Will the Prime Minister ensure that the Central Policy Review Staff's report on the motor industry is on the agenda for the next meeting of the NEDC? Since some of his hon. Friends have been discussing the contents of this report with newspaper reporters, will the right hon. Gentleman ensure that after that meeting the report is published, so that we can all have a look at it?
  The Prime Minister: That report is not on the agenda for tomorrow's meeting. I think the House knows that we have on the agenda a very important paper on the approach to industrial strategy. After tomorrow's meeting we hope to be able to publish the documentation that we shall have been discussing at the NEDC meeting. It is my intention to publish the CPRS report on the motor car industry as soon as possible. Since a considerable amount of the information contained in it was supplied by British motor car firms on the basis of confidentiality, we must naturally get their agreement to its publication.
  Mr. Wellbeloved: While I accept the Prime Minister's comments about the dangers of blanket import controls, may I ask him to initiate, at the NEDC meeting tomorrow, a discussion on selective import controls? Is he aware that the deep and growing concern about unemployment in the textile, footwear and motor industries is not confined to those hon. Members who, by force of habit, oppose Government policy, but goes much wider on the benches behind him?
  The Prime Minister: I am aware of that although I think that the list of industries about which there is deep
  224
  anxiety is not confined to those which my hon. Friend has mentioned. I have said that what we could not accept—and my right hon. Friend said this yesterday—is a situation in which, during a serious world depression, imports reached a level in individual cases—whether or not that level can be proved to be due to dumping, or unfair practices—that led to the disappearance of a British industry which has great prospects for the future when there is a recovery.
  Mr. Crawford: Is the right hon. Gentleman aware that the people of Scotland feel that the Government are welshing on their promises? Will the Prime Minister tell the House when the NEDC will next meet in Scotland?
  The Prime Minister: The hon. Member will know that he has used a word about which I have expressed criticism in the past, and I do so again today. I am sorry to find hon. Members so oblivious to the views of their Nationalist friends elsewhere. I do not accept the hon. Member's statement. There is no going back on important matters of this kind.
  Mr. McCrindle: Since a sizeable proportion of the jobs in this country continues to be provided by smaller firms, has the right hon. Gentleman given any consideration to the more direct representation on NEDC of such firms?
  The Prime Minister: This is a matter for the NEDC as a whole, and not for the Government. The CBI is represented, and if the hon. Member were ever to receive a report, as I have done many times, of one of the quarterly meetings of the CBI—the full-dress conference of its membership—he would find that small firms in all parts of the country were well represented there. I have never found the CBI to be in any way backward in expressing the anxieties of small firms, just as much as it expresses the anxieties of big firms. In some cases it gives more expression to the anxieties of the small firms than it does to those of the large firms.
  Mr. Weetch: So that my right hon. Friend can take part in a constructive discussion of the rôle of public expenditure in the economy, and since there has been a quite obvious absence of any public statement, will he say whether he has

  225
  had any communication from the Leader of the Opposition about her policies with regard to priorities in cuts in public expenditure?
  The Prime Minister: No, Sir. I have not had any such indication, and neither has the country. We do get from Conservative Members—I continue to receive them in my postbag—requests for increased expenditure in their constituencies. The Conservative Party is, of course, committed to vast increases in expenditure, which I have sometimes outlined for the House. I do not think that this is something on which to waste the time of the NEDC. If it will soothe the anxieties of my hon. Friend, if I get the opportunity I shall consider with the NEDC secretariat whether it would like this subject to be discussed.

  PRIME MINISTER (ENGAGEMENTS)
  Mr. Pattieasked the Prime Minister if he will list his engagements for 4th November.
  The Prime Minister: I have held a number of meetings with my colleagues and others, including a meeting to receive a report on the discussion this morning at the Department of Industry with the Chrysler Corporation. I hope to have an Audience of Her Majesty The Queen this evening.
  Mr. Pattie: Since the right hon. Gentleman will no doubt be having various other informal meetings with his ministerial colleagues during the course of the day, will he say whether, during such conversations, the question of the level of current public expenditure is likely to crop up? Since an economic forecaster has described public expenditure as being out of control, will the right hon. Gentleman tell us whether we have been blown off course, or whether there is no one on the bridge?
  The Prime Minister: I have made clear, in answering questions of this kind, which are a new and delightful development in our parliamentary institutions—that I answer questions only about meetings I am attending and not about meetings which some hon. Members wish me to attend. The House has seen yet again
  226
  this afternoon the singular unwillingness of those who make the most speeches about this matter to make any concrete proposals. If I understand the hon. Gentleman correctly, he was referring to evidence, published this morning, which was given to a Select Committee of this House at an open meeting dealing with cash limits. We must await the report of that Select Committee. I have told the House, as has my right hon. Friend, that we intend to proceed at a very rapid rate to fix cash limits in important areas of public expenditure. Rapid progress is being made on this. A report will be made to the House by my right hon. Friends concerned.
  Mr. Les Huckfield: I welcome my right hon. Friend's initiative, but does he accept that, counting the employees of Chrysler, the component firms and the distributors, there are probably between 60,000 and 70,000 jobs at stake, or involved in the current talks? I accept the need for my right hon. Friend to make a statement as soon as possible, but will he use his good offices to ensure that at tomorrow's meeting between the company and the unions, the unions are given the fullest possible information about the talks which have been going on?
  The Prime Minister: I have suggested that while these important representatives of the Chrysler Corporation are in the country they should take this opportunity for discussion with the unions. At the meeting, which should be starting about now, the Secretary of State will suggest that it might be useful if one of those representatives were to meet hon. Members from all parts of the House representing the constituencies affected by the Chrysler problems. I do not want to go beyond what I said earlier. It is a grave situation, and I do not want to say anything which might make matters more difficult.
  Many people's livelihoods depend on the sales of these products. I have drawn the attention of the Chrysler Corporation representatives to what was said publicly by the sales organisation—it is an efficient body—about this matter. I pointed out the damage that could be done to Chrysler (UK) and to the Chrysler Corporation more widely, if it took action which made more difficult the jobs in its

  227
  efficient sales organisation here and in many other countries.

STEELWORKS, SCUNTHORPE (EXPLOSION)
Mr. John Ellisasked the Secretary of State for Employment if he will make a statement on the explosion that occurred at the Appleby Frodingham Steelworks, Scunthorpe, in his constituency and if he will order a public inquiry to be held.
The Under-Secretary of State for Employment (Mr. Harold Walker): The Chairman of the Health and Safety Commission informed me that an explosion occurred at the Queen Victoria blast furnace of the Appleby Frodingham plant of the British Steel Corporation at about 3 a.m. today, when a large amount of molten metal was being poured into a torpedo ladle. Four workers were killed and some 15 more were injured, some very seriously, of whom two have since died. I am sure that the whole House will join me in expressing our deep sympathy to the relatives of those who have lost their lives and to those who have been injured.
It is, of course, too early to make any detailed statement about the cause of the explosion. One of the factory inspectors of the Health and Safety Executive commenced an investigation on the site at six o'clock this morning. He has now been joined by others. The Health and Safety Commission was meeting this morning, and the Commission's Chairman, Mr. Simpson, is travelling to the site this afternoon. The Commission instructed the Executive to investigate and to make a special report to it on the matter. The trade unions as well as management will be associated with the inquiry. The report will be published.
Mr. Ellis: May I associate myself with the condolences to the bereaved and injured expressed by my hon. Friend on behalf of the Government and in which I am sure the whole House shares?
Can my hon. Friend say how the side of the operation conducted by the emergency services, the voluntary organisations and British Steel is proceeding? Will he confirm reports, which I have already received, that they are doing a magnificent
228
job in a situation similar to that at Flixborough, in respect of which the emergency services only recently received recognition?
Does the Minister realise that in view of the sad past history of my constituency there is great public concern that this tragedy should be investigated thoroughly? Will he say a little more about the inquiry procedures? Would not a public inquiry be more satisfactory? May I request that in any event the full report of the inquiry and its findings should be published?
Mr. Walker: My hon. Friend does well to remind the House that his constituents have suffered a double tragic blow in a short space of time. I feel for my hon. Friend in this situation because, as at Flixborough, some of my constituents are directly affected, one of them being critically injured. Although I have no direct information, I have no doubt that, as at Flixborough, the emergency services in my hon. Friend's constituency and in the surrounding areas are doing a splendid job.
I think that it may be too early at this stage to decide whether a public inquiry will be appropriate. I hope my hon. Friend will agree that the special report procedure, which I outlined in my reply, will be a speedy way of getting at the facts of the matter. However, it would be equally wrong to rule out the possibility of a public inquiry if the facts suggest that that procedure would be appropriate and necessary.
Mr. Tinn: Although I accept what the Minister said about keeping an open mind on the subject of a public inquiry, may I ask whether he recognises that this disaster highlights the risks present in this industry, and especially the ever-present danger of running hot metal into containers which might accidentally contain a small amount of hot water—which hot metal contains—and thus producing an explosive reaction? That risk is ever-present in the steel and iron-making industry. Will the Minister take every opportunity to ensure that, whatever method of inquiry is employed, he takes every step to prevent a repetition of these all too frequently recurring episodes?
Mr. Walker: I doubt whether the House would want me to speculate on

229
the possible causes in advance of the report to which I have referred. My hon. Friend is right to remind the House of the grievous risks that are run, and often taken for granted by workers every day of their working lives. I recognise the interest of my hon. Friend because of his connection with one of the trade unions which has members involved.
My hon. Friend is right to point out the need to keep an open mind about what kind of inquiry may be necessary. That depends on what arises from the facts revealed by the report to which I have referred.
Mr. Prior: Is the Minister aware that the Opposition associate themselves with the expressions of sympathy extended to those affected by this second disaster in the constituency of the hon. Member for Brigg and Scunthorpe (Mr. Ellis)? We agree with the statement made by the Minister and hope that the inquiry by the Health and Safety Commission will proceed as quickly as possible. We ask the hon. Gentleman to report back to the House when he has further information to give us.
Mr. Walker: I thank the right hon. Gentleman for what he said. I readily give that undertaking. When the report of the Health and Safety Executive is received we shall, with the permission of the House, make a further statement to the House.
Mr. David Watkins: Is the Minister satisfied with the extent to which the British Steel Corporation is applying loss control techniques at all its plants? Is he aware that proper loss control assessment can foresee many accidents and therefore render them avoidable?
Mr. Walker: I understand that that is one of the safety techniques in which the British Steel Corporation has taken a special interest.
Mr. Greville Janner: Without prejudging the outcome of whatever inquiry is held, will my hon. Friend take this opportunity to emphasise that the penal provisions in the Health and Safety at Work etc. Act apply for the protection of workers in both the public and the private sectors?
Mr. Walker: Of course, my hon. and learned Friend is right.

BUSINESS OF THE HOUSE
Ordered,
That, at this day's Sitting, if the Motion in the name of the Prime Minister for the Adjournment of the House is not disposed of by Ten o'clock, it shall not lapse at that hour and may be proceeded with after Ten o'clock, though opposed; provided that Mr. Speaker shall put the Question thereon not later than three hours after proceedings on the Motion have been entered upon.—[Mr. Coleman.]

TRANSPORT (MISCELLANEOUS PROVISIONS)
3.39 p.m.
Mr. David Steel: I beg to move,
That leave be given to bring in a Bill to amend the Transport Act 1968 and the Road Traffic Acts 1960 and 1972.
I recognise that the Bill which I seek leave to introduce has no prospect at this late stage of the Session of becoming law. This is one of the opportunities open to a private Member to draw the Government's attention to important topics. I am glad to see that the appropriate Minister is present.
I seek leave to introduce a Bill to amend the Transport Act 1968 and the Road Traffic Acts 1960 and 1972 in three important respects. I do so against a background of the growing costs of transport, especially in the rural areas, concern about which has been expressed from all sides of the House on many occasions. I refer not only to an increase in public transport costs but also to the increase in the costs of running the private car, the reduction in the number of public transport services available, the growing pressure on the finances of local authorities, which are unable to afford to maintain subsidies on bus services, and the fact that in the last decade the number of bus journeys has been reduced by the staggering figure of 34 per cent. The Select Committee on Nationalised Industries has already drawn attention to the likelihood of further severe cutbacks in public transport road services.
The Road Traffic Act 1968 allows a discretion to the traffic commissioners to waive the need for a public service vehicle driving licence on vehicles carrying up to 12 passengers. The time has come to remove that discretion and, without

231
any application to the traffic commissioners, to allow persons to drive vehicles carrying up to 15 passengers, because that is now the standard size of manufacture, without the need for a PSV licence.
The traffic commissioners should be enjoined to allow any operator on to a route which is not already served by public transport. Great work has been done in recent years by, for example, the Post Office in introducing mini-bus services. I notice that the sixty-second such service was recently introduced in Scotland. A great deal of red tape has to be gone through and a great deal of paper work has to be done before the services can be introduced, and I believe that the time has come to remove some of these restrictions.
My Bill would also have a side effect on the operation of buses by local education authorities. The present law is unduly restrictive and anomalous in declaring that if a local authority owns a vehicle the driver does not have to have a PSV licence, whereas a subcontractor driver must have a PSV licence. A case was recently drawn to my attention in which the school bus operator died one weekend and, so that his daughter—who did not have a PSV licence—could continue the service for the benefit of the community, the local education authority had to buy a bus quickly on Sunday. The time has long since passed for sweeping away some of these restrictions so as to enable mini-bus services to operate more freely in rural areas which have no other services.
Some of the provisions in my Bill were contained in a Government Bill which was proceeding through the House of Lords in 1973 and fell with the General Election of February 1974.
The second provision in my Bill is to increase the use of the vehicle which is popularly known as the moped but which exists nowhere in our statute law. I would remove entirely the need for a driving licence or a vehicle excise licence for powered bicycles up to 50 cc and I would impose a 30-mph speed limit on
232
them. There would, of course, be a requirement for insurance. I suggest that the age at which these vehicles may be ridden should be reduced from 16 to 15 to assist those at the tail end of the school leaving age. That would merely be bringing our law into line with the practice adopted in several neighbouring European countries, and it would assist transport in both rural and urban areas. That provision would help to relieve traffic congestion and, last but not least, by encouraging the use of such vehicles, it would help to conserve fuel and energy.
Thirdly, my Bill seeks to require all bus operators to introduce no-smoking areas in buses. I know that this is an increasing and welcome practice on trains and aeroplanes. My constituents have complained to me that, for example, on the long-distance express buses between London and Scotland there is no such facility. Some people find it impossible to travel for that length of time in a bus filled with cigarette smoke. I have taken up this matter and the operators have refused to do anything about it. Therefore, the House must legislate to require such operators to provide at least one-third of the seats for those who wish to be free of polluted air on their journeys.
I ask leave to introduce my Bill so that the Government will know that the House hopes for action along these lines in the next Session of Parliament to the benefit of the travelling public.
Question put and agreed to.
Bill ordered to be brought in by Mr. David Steel, Mr. Russell Johnston, Mr. Grimond, Mr. Pardoe, Mr. Beith, Mr. Penhaligon, Mr. Freud, Mr. Geraint Howells, Mr. Hooson and Mr. Stephen Ross.

TRANSPORT (MISCELLANEOUS PROVISIONS)
  TRANSPORT (MISCELLANEOUS PROVISIONS)
  Mr. David Steel accordingly presented a Bill to amend the Transport Act 1968 and the Road Traffic Acts 1960 to 1972; and the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 247.]

NORTHERN IRELAND (EMERGENCY PROVISIONS)
3.45 p.m.
The Secretary of State for Northern Ireland (Mr. Merlyn Rees): I beg to move,
That the Northern Ireland (Emergency Provisions) Act 1973 (Amendment) Order 1975 (S.I., 1975, No. 1609), a copy of which was laid before this House on 6th October, be approved.
I wish to make it clear that this is not a renewal of the Act. It is an amendment Order which was made by me on 3rd October under Section 19 of the Northern Ireland (Emergency Provisions) Act 1973, using the urgency procedure under Section 29 of that Act, and requiring confirmation by Affirmative Resolution of both Houses. The effect is to add the Ulster Volunteer Force to the list of proscribed organisations.
The UVF was named as a proscribed organisation in 1973, but on 4th April 1974 I said that I intended to bring forward an Order to de-proscribe it. The reason for this was that there were clear signs that many of its members wished to find a way back to political activity, and I was anxious that this should be encouraged. For a time it seemed that this more constructive path would be followed, and a political wing—the Volunteer Political Party—was formed and entered the field in the October General Election.
Unfortunately, it became increasingly clear during 1975 that a number of members of the UVF were deeply involved in sectarian violence and that the organisation was departing from the path of political argument. I would remind the House, for example, that the UVF admitted the Miami Show Band murders and further indiscriminate killings of Catholics on 2nd October this year. It became abundantly clear that a large number of members of the UVF were once more wedded to violence. Actions of this kind are crimes of the worst sort and are totally offensive to society. It was for these reasons that I signed an Order proscribing the UVF from midnight on 3rd October 1975. It is this Order which I am now asking the House to affirm.
I hope that the UVF will once again turn back to political argument, and I
234
shall return to this later. What I want to do today is to put to the House some wider issues of law and order.
The year 1975 has faced us with a totally different set of security problems. In the previous two years the overwhelming feature was the campaign of virtually unrestricted violence of the Provisional IRA, though it was accompanied by an undercurrent of sectarian murder. This year there have been fewer bombs and fewer attacks on security forces, though in recent months these have been increasing, and the Provisional IRA must bear a large part of the guilt. The prime emphasis this year has been on sectarian and interfactional killings. The figures speak for themselves. In all, 207 people have been killed, of whom 188 were civilians, and of these 157 have been classed as sectarian or interfactional murders. The UVF has played a prominent part in them.
The past week illustrates some facets of the position even more sharply. There have been 74 shooting incidents, the vast majority of which were concerned with the feud between the Official and Provisional IRA. I am glad to say that a number of people have already been charged, and other inquiries are being followed up. There have also been some arms finds overnight; and another man has been murdered in this feud. This is in addition to the five people killed and 64 injured during the week. The dead include a six-year-old child and the injured three women who were shot in the knee. Indeed, during 1975 no fewer than 168 people have been knee-capped. This compares with the figure of 127 for the whole of 1974 and 74 for 1973.
This is gangsterism. There is no other word for it. It can and will be dealt with by effective policing with the full support of the Army. The people responsible must be arrested and brought before the courts. This is the very strong view that I put before the House.
The security forces have been remarkably successful. This year, as of today, more than 1,000 people have been charged with serious crimes. They include no fewer than 118 charged with murder and 77 charged with attempted murder, while 283 travelling gunmen—some at least of whom must be regarded as potential murderers—have been arrested and

235
charged. The net increase in the convicted prisoners in Northern Ireland has been no less than 35 per cent. during the last 10 months, due largely to the more serious crimes committed and the longer sentences which are in consequence awarded by the courts.
Despite the fact that the number of detainees has fallen from 545 to 175, the number of special category prisoners has increased from 1,092 to 1,465. The House will know that male special category prisoners are not in cells but live a collaborative life in compound conditions.
This gives the background to the situation with which we have to deal. The Army still provides the framework for security, but the problem is quite different from that which obtained last year and we need to use different methods. My aim is to deal with it through the police and through the courts. We are faced with crimes against society which cannot be justified on the grounds of any political cause.
It is the police who must be the principal guardians of law and order for Northern Ireland. It is the people of Northern Ireland who can make the essential contribution to ending violence by giving their help to the police—and let no one in this House, which includes hon. Members who live there, be unaware of how difficult it is for the police. As I said in the White Paper of July 1974, however, nothing would transform the situation more quickly than a determination by the whole community to support the police service and co-operate with it.
Here I again pay tribute to the outstanding part which the Army has played and continues to play in supporting the civil power in preserving law and order. A day or two ago I spent an afternoon in Newtownhamilton, Forkhill and Cross-maglen to see the conditions and problems which, on this occasion, the Royal Regiment of Fusiliers has to face. I came away feeling extraordinarily glad that it is the British Army which is dealing with the situation that is faced out there.
It is only against this background of the Army supporting the civil power in the preservation of law and order that the present successes have been achieved. Nevertheless, as the security situation improves
236
and as the police grow yet more successful, so I would envisage the Army being able to make a planned, orderly and progressive reduction in accordance with my statement in the White Paper of July 1974. This has been my overriding aim. It is not a question of political disengagement but depends on the progress that is made in bringing gangsters to justice.
The police expansion programme which started in September last year has shown good results. The regular Royal Ulster Constabulary has grown, as I told the right hon. Member for Down, South (Mr. Powell) recently, by about 300 to about 4,800 during 1975, and the Reserve has almost doubled in size from 2,500 to not far short of 5,000.
Great praise is due to the Chief Constable, Sir Jamie Flanagan, and his senior officers for the leadership and dedication they have shown in meeting the demands made on them, which are far in excess of those made on any other police force. They have not been afraid to make innovations such as the "A" Squad, which was introduced in July 1975 and which has already achieved remarkable results. There have also been outstanding feats of personal courage. In the last fortnight, a young policeman with only a couple of years' service and armed only with a hand gun arrested three armed youths. It is a characteristic of the RUC that it is a new and young force, the overwhelming majority of which have only a few years' service. The whole of the force deserves praise.
The people are in the front line, but there are two points I should make clear, because it is important to be clear as we come to discuss the future in Northern Ireland. The first is the independence of the police. From the Chief Constable down to the newest recruit, their duty is to the law and to the law alone. It is not for me to give them operational directions. It is not for the Police Authority to give them operational control. It is concerned with the efficient administration of the force and with senior appointments. That is the way it should be, that is the way it is and that is the way it will continue to be. There must be no political control of a police force. The independence of the police must be complete in the sense in which I have expressed it.

237
Lawlessness must be defeated in Northern Ireland, and with their growing rate of success I am entirely confident that the police will be fully capable of doing just that. It is, of course, the police who must and do take the lead in the fight against crime. The Army, in its rôle of giving military assistance to the civil power, will continue to support the police in all parts of Northern Ireland as long as it is needed
In some areas, such as along the border and in South Armagh, the Army's rôle will remain of particular importance. As criminals are caught, brought before the courts and sentenced, then the need of the police for more widespread support from the Army will become less. That is the path we intend to follow. It is the path that I have set as a guide since I took office, and in particular since the July White Paper last year. I am convinced that it is the right path for Northern Ireland.
The House is aware of the processes leading to detention as laid down in the Emergency Provisions Act. I have not signed an interim custody order—the first step—since 9th February this year. The reason for this is that I am determined that criminals shall be brought to justice through the courts. The figures I have already given demonstrate the increasing capacity of the police to find and bring to justice those involved. This requires skilful and patient police work.
For example, at my security meetings once a week, time and again the police report to me that a man has been charged with a crime committed perhaps a year before. It hardly hits the headlines, but if I had issued an interim custody order on the man on the day after the crime, if that had been possible, it would have hit the headlines. It is sad that the slow, patient work of the police does not get the recognition that it should. I believe that the full processes of the law are a much more effective deterrent and are more acceptable to the community as a whole than any emergency procedures.
If this policy is to succeed, I must take a number of steps to deal with the unique problems of the prison system which are peculiar to Northern Ireland. I have already given the figures about the number of prisoners who claim and who are granted special category status.
238
It seems to me that nearly everyone who claims it is granted it.
Whatever was the validity at the time—and I understood and supported the action then—in the new situation I am sure that it is wrong. I want to end this system, but the hard fact of life is that it cannot be ended while so many prisoners have to serve their sentences in compounds. If I were to end it now it would mean that the people would go into the compounds, and I would have changed only the name and made no difference to the facts of life.
The key to making progress is to build new prison accommodation, and the necessary building programme has started in the Maze Prison, where 200 cells will be available this month and more will become available next year. As the House knows, work will start shortly on a major new prison at Maghaberry which will provide more cells, but in the longer term. Maghaberry plays no part in the immediate situation.
The programme at the Maze Prison will allow a start to be made in changing the present prison régime—a régime which is made worse by a prison population unnecessarily high because of the absence of a parole scheme in Northern Ireland. This has long been recognised by successive Governments. After a very detailed study, I am in no doubt that a parole scheme on the lines of that in Great Britain will not at present work in Northern Ireland. The reasons are that it is just not possible to do this kind of professional assessment work in compounds or to exercise the necessary degree of supervision when parole is granted.
Any new measure must take account of the realities of the prison situation in Northern Ireland. I propose, therefore, to ask the House early in the new Session to approve an Order in Council which will provide for the conditional release of all convicted prisoners, after one half sentence, whether or not they have special category status. Such releases will be subject to good behaviour in prison. The essential condition will be that any prisoner so released who commits a further serious offence before the full term of his original sentence has expired will be liable to serve the outstanding balance of his existing

239
sentence in addition to any other penalty the court may impose. This will be a matter exclusively for the courts. The new system will replace the present one in Northern Ireland, which gives unconditional release at the moment after two-thirds of a sentence has been served.
These new proposals will not apply to the 97 life sentence prisoners in Northern Ireland, and there will be no change in the procedure under which their cases will continue to be reviewed in consultation with the trial judge and the Lord Chief Justice of Northern Ireland. It is not a matter for me. If we multiplied that figure of 97 by approximately 40 it would give the equivalent number of life sentences in Great Britain.
I propose to introduce the new conditional release scheme on a phased basis over a four-month period from 1st March 1976, so that it will be fully effective by 1st July 1976. The effect of this in terms of average monthly releases will be that the present average figure of about 90 a month being released through ending their sentences will rise. I add that people refer quite properly to the number being released from detention. Every month a substantial number of people who have been sentenced are being released. This figure of about 90 a month will rise to somewhat more than double that figure for that period and then return to about its present level. That is a four-month period next year.
This new scheme will have little practical effect for those serving very short sentences, and I intend shortly to amend prison rules to provide simply that, for sentences of one year or less, the amount of remission will be increased from one-third to one-half. There are about 250 prisoners at present serving one year or less. This represents some 14 per cent. of the total of convicted prisoners.
I should make it plain that the parole schemes in Great Britain do not mean automatic release after only one-third of the sentence has been served. I understand that at present only about 40 per cent. of prisoners in Great Britain are granted parole, and although prisoners are eligible for consideration after one-third of the sentence has been served, it
240
is rare in practice for parole to be granted as early as this.
My scheme is conditional. The emphasis is on individual responsibility to live within the law. If this does not happen, then the sanctions I have outlined will apply.
The effect of this scheme and the new prison building programme will enable me to begin to bring to an end special category status. The facilities are not there for me to deal with those who have already been admitted to special category status. They will not be affected. But those sentenced for offences committed after 1st March 1976 will be accommodated in cellular accommodation and will not be able to claim special category status. Special category status is to end—slowly, I admit.
I also propose to take the opportunity to include in the forthcoming Order a number of other measures. It will provide for community service orders on the lines of those already operating in England and Wales, suspended sentences, and bail hostels.
There is a widespread belief in Northern Ireland that an amnesty will come. Special category status is thought by some to reinforce this belief. There are those who think that the special category means that the prisoner is different. He may have murdered. After the murder he may have dealt with the face of the man—and some terrible things happen. It may be felt that doing this is political and that this makes it a special category, that such people are special, and that the day will come when there will be an amnesty. I wish now to make it clear beyond peradventure that there will be no amnesty. Those who purport to believe that if murder and bombing have a convenient political label it means that they will receive an amnesty tragically mislead themselves. Let there be no misunderstanding of this.
I turn to detention. Since 1971, including those detained more than once, a total of just over 2,000 have been interned or detained. There are parts of Belfast, as the hon. Member for Belfast, West (Mr. Fitt) knows, where in a community living close together there is a high proportion of people who have been in the Maze. The average lime they have

241
been held in custody has been 18 months.
I have already made clear my desire to bring detention to an end, both because of the present successes in bringing people before the courts—this is an important point—and because there is a price to be paid for detention. It undermines the law. It alienates part of the community. It is a fertile ground for recruitment to the paramilitaries.
Nevertheless, it played an important part in dealing with violence in 1972–74. But I must point out that it did not end it. If the security position were to develop in such a way that detention is the right and only course, I shall not hesitate to resort to it again, and I shall seek the approval of the House to extend the relevant provisions in the Emergency Provisions Act in due course so that the powers remain available to me. But I want to make it clear that the onus of reintroduction will rest clearly, for all to see, on those who seek to gain their ends through violence when the political path is wide open for them to take.
It is my strong belief that, in the present security situation, if someone has committed a serious crime, he should be sentenced by the courts. He should not be dealt with by an executive system on an indeterminate basis. The steps which I have announced today strengthen me in my resolve to release all remaining detainees by Christmas, unless there is a fundamental change in the situation. I must emphasise, however, that no release from detention carries any immunity in the courts against prosecution. I repeat that if I have to resort to detention again I shall do so only to protect society. My aim is to release all detainees.
Mr. Sydney Bidwell: When the policy of detention commenced in 1971, to what extent were the then Secretary of State and Home Secretary consulted about it?
Mr. Rees: Whatever happened under the legislation of 1922, 1926 and so on happened under the previous administration. I do not want to dodge the question. However, in 1971 I had no responsibility. But that is not to wash my hands of it. It is simply a short answer to my hon. Friend's question.
242
The violence will not disappear overnight. The Government want to see a permanent end to it. It was to explain the Government's policy that talks were held between my officials and Provisional Sinn Fein and other legal organisations. It was to monitor the cease-fire that the incident centres were set up. They were there for a positive purpose. They have served a useful purpose. But the changed nature of violence, the existence of various splinter groups and the events of the past few weeks have brought this usefulness into question. The opportunity for usefulness is still there, but I must say that in practice it has diminished.
What I would make crystal clear is that the Government are not prepared to abrogate their responsibility for the rule of law and the maintenance of order. We are acting and will continue to act on an even-handed basis. Those who commit criminal offences will be brought to justice. The 1,000 to whom I referred as having been charged since the turn of the year include Provisionals, Officials, IRSP, Loyalists of various hues, including UVF, and other criminals. I shall not give the precise figure, but of about 1,500 special category prisoners—people who are self-classified and who themselves when sentenced say that they want to be classified to live in compounds with certain brands of Loyalists or with certain brands of Republicans—about 900 are Republican and about 600 are Loyalist.
I give those figures to illustrate that the fact that there is no signing of ICOs—the beginning of the detention process—does not mean that people belonging to paramilitary organisations are not being dealt with through the due processes of the courts. Almost daily in the newspapers of Belfast it is reported that there has been a trial that day and that someone belonging to a paramilitary organisation has been sentenced to gaol. It is not just through detention that those who purport to be acting politically by killing and murdering are dealt with.
Mr. J. Enoch Powell: I apologise for not having intervened a little earlier and, therefore, for asking the right hon. Gentleman to backtrack a few passages in his speech. He referred just now to the incident centres and expressed an opinion about their diminishing usefulness, with which most Northern Ireland Members would agree—indeed, I think

243
that they would regard it as an understatement. When he said that, did he mean that it was his intention, nevertheless, to maintain them, or will he bring them to an end?
Mr. Rees: I expressed the view that their usefulness was diminishing. I looked carefully at the reports this morning before leaving Northern Ireland. There has been some usefulness, in terms of information which has been of use to the security forces. I prefer to leave the final decision for a while in order to see how the situation develops. Their usefulness has diminished.
Violence will not solve the problems of Northern Ireland. It will only create more violence. The other day, I dealt with the case involving the transference of a prisoner. It concerned a young person just coming up to the age of 17. It does not matter for the moment which paramilitary group he wanted to join when he went into prison proper. But it was my job to read the details of the case, to discover whether his parents wanted it, and to give my approval or otherwise. He had been involved in six murders, and it was quite clear what had sparked him off. Some three or four years ago someone belonging to his family had been killed by the other side. Violence breeds violence and, as we have seen in the events of the past few days in West Belfast, even interfactional violence. It will breed more violence. The rule of law supported by the community, who can do a great deal to keep the peace, and the political will to work together over a period of years—not weeks—can and will result in progress, which is what we all want to see.
There is a political way forward and, when the Convention Report is received, every political avenue must be followed to find a solution with widespread acceptance through out the community.
I have lived and worked in Northern Ireland for 20 months. I understand in a way that I did not before why it is that political attitudes are polarised. But I have also realised that the vast majority of both communities reject the gangster-ism perpetrated in their name. I understand why it is that the minority community do not support the IRA but nevertheless reject detention. I want to
244
end detention, but that minority community must help and play their part.
I understand and totally share the feeling in the community as a whole that lawlessness must be dealt with. This is best done by the police and the rule of law. It is against this background that I present the Order before the House, which has the effect of re-proscribing the Ulster Volunteer Force. Once an organisation is proscribed under the Emergency Provisions Act 1973 it becomes an offence to belong to it, to profess to belong to it, to solicit financial or other support for it, or knowingly to make or receive any contribution to it. Under the Emergency Provisions (Amendment) Act 1975 it becomes an offence to solicit a person to become a member of the organisation or to carry out its instructions.
This Order will increase the possibilities of bringing people before the courts.
Mr. John Farr: Can the right hon Gentleman say whether this Order will also proscribe members of this force in Great Britain, or is it just applicable to Northern Ireland?
Mr. Rees: The Order is applicable just to Northern Ireland. It is not for me to say what happens here. I have no responsibility. My judgment with regard to the UVF is in the context of Northern Ireland. It is for others to make a judgment about whether the main problem arises in Great Britain.
This Order will increase the possibilities of bringing people before the courts. I am sure that the police and the courts, with no diminution of my praise for the Army—I learned it afresh down on the border last week—believe that this is the way to proceed and that this is the way to get the support of the community as a whole. The community as a whole have had enough of gangsterism. They can help in a major way. We can help by the direction of our policy, and one important part is to begin the end of the special category, and the kudos that it gives to the people involved.
4.18 p.m.
Mr. Airey Neave: The Opposition agree with the purposes of the Order and with a great deal of what the Secretary of State said.

245
The UVF has admitted openly to serious crimes of violence, and this Order is the immediate result of its terrible 24-hour blitz of bomb and gun attacks on 2nd October which will not be forgotten for some time in most parts of Northern Ireland.
We agree also with a great deal of the other matters referred to by the right hon. Gentleman, and we welcome the intention of the Government to end the special category. This is an essential step in making it clear that terrorists and murderers cannot be dignified with a political label. This is a very important move.
We also welcome the fact that there will be no amnesty. I hope that all concerned will take note of everything the Secretary of State has said about that. If he decides to reply to this debate, it will be interesting to know whether those who cease to belong to special categories and who are the subject of a conditional release scheme will have to give an undertaking not to engage in terrorist activities. I raised this point in Committee, as the right hon. Gentleman will remember. Perhaps he will deal with it towards the end of the debate.
Although Conservative Members remain of the opinion that fundamental questions of policy should be treated on the bipartisan principle whenever possible, we have always reserved the right to probe and sometimes to disagree with the Government's security measures, as did the right hon. Gentleman when he was in opposition. Therefore, I want to raise a number of points.
We should not be prepared to become involved in any strategy of withdrawal of the Army at present. The Government have made this clear on several occasions. I was glad to hear what the right hon. Gentleman said as a tribute to the Services and the police. There are certainly areas in Northern Ireland where the Government need to toughen up their security measures. In the course of my remarks I shall mention them.
Proscription of terrorist organisations such as the UVF raises a number of important questions. Many people will ask why the Provisional Sinn Fein, as the political wing of the Provisional IRA, is not included in this Order. The Minister
246
of State may wish to explain this for the benefit of public opinion. The Secretary of State, as he described in his remarks, de-proscribed the UVF and the Provisional Sinn Fein last year, adding the hope that they would find their way back to political activity. We agreed with that at the time. Some members of the UVF tried to do this but they received a negligible percentage of votes. This has led to increasing militancy.
What is the distinction between the UVF and the Provisional Sinn Fein in this respect? The Sinn Fein has made no attempt to enter democratic politics. On the other hand, it does not claim responsibility for violence as the so-called political wing of the Provisional IRA. Some find the distinction difficult to understand, especially those who strongly dislike the idea of conversations between officials and the Provisional Sinn Fein. I hope that the Minister of State will deal with this point.
Mr. Merlyn Rees: In the 1973 Act the then Secretary of State arranged for the Sinn Fein—that is, both Official and Provisional Sinn Fein—to be proscribed. Last year I de-proscribed the Sinn Fein—again, both the Provisional Sinn Fein and the Official Sinn Fein. The distinction between the IRA and Sinn Fein is a meaningful one, certainly in West Belfast and with regard to the numbers involved.
Mr. Neave: It may be said that those two organisations were not directly at war at that time. Public opinion in Northern Ireland is exercised about this. It is a matter which the Government should consider. Proscription is a difficult measure in itself because it will not substantially alter the activities of any terrorist organisation. Proscription may end the affront to public opinion by the open soliciting of funds and Press statements which claim responsibility for what all hon. Members regard as the most despicable crimes.
We are also entitled to ask how the provisions of the principal Act relating to proscription are to be enforced. I am considerably worried about this, as are many others. Before the Summer Recess, hon. Members who were present at the Standing Committee when we discussed this will remember that Conservative Members moved amendments to enable

247
security forces more easily to secure convictions of members of proscribed organisations. However, these were difficult points and we did not succeed. Since then there has been some consternation in Northern Ireland and elsewhere about the non-arrest of individuals such as Seamus Twomey. Many believe that if the case for membership of an illegal organisation cannot be made out against him, it cannot be made out against anyone, because he is generally believed to be chief of staff of the Provisional IRA.
On a recent visit to the Province I discussed this matter with the legal authorities and others. Although there are difficulties, I suggest that the Secretary of State should reconsider the possibility of using the system which is now in use in the Republic of Ireland. The law in this respect has to be amended to make it more effective and to give more confidence to the people. In the Republic of Ireland a statement under oath by a senior police officer that he believes an accused to be a member of an illegal organisation is accepted as prima facie evidence. There is a division of opinon here. There are those in the police who believe that it cannot be done and there are those in the legal world who believe that it is possible. Perhaps the Government will tell hon. Members their thinking on this point. There is no purpose in this House passing a statute part of which it is admitted cannot be enforced. I am trying to put forward a constructive suggestion.
Mr. Merlyn Rees: I have considered this matter carefully and have rejected the system which applies in the South. If we wish to lock people up in a way which is outside the courts' jurisdiction, we should be clear—I am not talking about the South, because the South governs itself—about the matter and return to the system of detention. We would be moving away from the processes of law. I have considered it and I do not believe that it can be done. I do not interfere in what the police want to do. All I have said is that people will not be the subject of an ICO for the moment.
There must be evidence of membership to put before a court. It is not good enough to say that one believes or thinks
248
or that maybe such is the case. If I proceeded on the basis of "think" or "maybe" in Northern Ireland, I should be proceeding against the beliefs of a large number of people. There must be evidence of membership. I have with me my Labour Party membership card. However, I do not think that many people carry a membership card of the sort of organisations about which we are talking which could be used as proof.
Mr. Neave: No. However, there is a need to find means of enforcing the law. We have only just passed this statute. Just two or three months later we are saying that that part of the Act of Parliament which relates to membership of a proscribed organisation cannot readily be enforced in Northern Ireland. There should be some examination of this point. The Secretary of State has graphically illustrated the difficulties of producing evidence of membership. He should consider this matter seriously.
Mr. Gerard Fitt: Does not the hon. Gentleman agree that in 1971 when internment was first introduced it was on the word of the RUC. the police force, which advised the then Prime Minister in the Northern Ireland Parliament that it had grounds for believing that all those who were to be arrested and interned were members of illegal organisations? Subsequently it was found by the then Secretary of State for Northern Ireland, on investigating the papers, that there was no proof that those people were members of illegal organisations. The right hon. Member for Penrith and The Border (Mr. Whitelaw), the then Secretary of State, took a courageous step and released many hundreds who had been arrested on the say-so of the police.
Mr. Neave: I dare say that that is so if this is a question of strict proof. This is the view that many lawyers take. It is essential that we find a way of giving evidence to a court, perhaps by a police officer or someone else who knows that a particular person belongs to an illegal organisation. I hope that this matter will be dealt with in the winding-up speech. It is one which we have discussed a good deal in the past. Such proof requires to be according to law, but not, I believe, in such a way that it prevents police evidence being given in any circumstances.

249
There are too many violent organisations in Ulster, some illegal and some not. That is really why I am raising this point and why the Government must look at the point raised by the hon. Member for Belfast, West (Mr. Fitt) and others as to whether we ought not to review the entire matter again.
We regard the Order as necessary. However, on a wider point, I think that the Government must create an atmosphere of respect for the law in Northern Ireland. The Secretary of State said that that was the function of the Government, and I think that is true. The question is, how can this atmosphere be created more effectively?
I am sure that the House will be with me when I say that we shall not be intimidated by bombs, either in London or Belfast, as the very brave example of my right hon. Friend the Member for Stafford and Stone (Mr. Fraser) has recently shown. Likewise, we should remember the ordeal of both Catholics and Protestants in ordinary homes in Ulster, hon. Members who represent Ulster constituencies, Members of the Constitutional Convention and all those in judicial office and the public services. There are also the members of the various security forces and the UDR who daily carry out their duties in a way which ought to command the respect of all civilised people.
I think that the House should know the present position with regard to the cease-fire with the IRA. The Secretary of State said in the House on 26th June:
"I want to go through the courts."
Perhaps I may say that, whatever my views about releases from detention, I agree with him that these matters should ideally be dealt with through the courts. However, he also said,
"But if there were a military campaign with the middle of Belfast burning in the way we have known in the past, we should not be able to stand back."—[Official Report, 26th June 1975; Vol. 894, c. 819–20.]
During the bombing blitz, on 22nd September, this time by the IRA, not only was the centre of Belfast burning but so were the centres of other towns in the Province. After the UVF bombings on 2nd October, which I mentioned earlier, there were massive swoops in County Antrim and scores of people were brought before the courts—which is quite
250
right. But after the increased IRA activity there were stricter security measures, certainly—I pressed those on the right hon. Gentleman during the recess—but so far there do not seem to have been the same results. No doubt there are good reasons for this. It is perhaps due to the inability of the RUC to operate in certain IRA areas.
Like many of my hon. Friends and hon. Members on the Government side of the House, during the recess I visited South Armagh. There was a massively publicised search operation during September, but it does not seem that a very large number of terrorists were actually caught. I am sure the Secretary of State agrees that he still needs to restore confidence in the area in his determination to stamp out the threat in the area from the IRA. I am sure he could not disagree with that.
Effective policing, as the right hon. Gentleman has often said, is the only answer in an area where I have been told by the police that there are examples of children of 12 and 13 driving untaxed and uninsured vehicles on the road. It is in respect of the law as a whole, not only the law relating to murder but in the use of cars or indiscriminate terrorism, that order must be restored in Northern Ireland.
So far not all that amount of progress has been made in reintroducing the RUC, although it has done magnificently well by bringing people before the courts, into certain parts of Northern Ireland. I would instance South Armagh, Mid-Ulster, parts of West Belfast and parts of Londonderry. I hope that the security forces under the right hon. Gentleman's direction are concentrating in those areas, because the restoration of respect for the law, the ordinary law of the land with regard to domestic things rather than murder and terrorism alone, must be enforced. For a younger generation to grow up without any regard for the minor consequences of breaches of the law will bode very ill for the future. This must be done whatever constitutional solution we in this House agree upon in the future months for Ulster. The latest outbreak to which the right hon. Gentleman referred, interfactional IRA violence, is a symptom of the breakdown of civilised values, which the Government have a unique duty to uphold. In doing that,

251
although we should be ready to criticise the Government or disagree when we think they are wrong, we shall give them full support when they take measures which are essential.
The Order expresses our deep abhorrence of one violent organisation, and we therefore support the right hon. Gentleman in this matter.
4.36 p.m.
Mr. James Molyneaux: I ought to begin by assuring the Secretary of State that my colleagues and I have no intention of moving an amendment to add the Labour Party to the list of proscribed organisations—so that he can continue to carry and exhibit the document to which he has recently referred.
Although we are very grateful to the Chair, Mr. Deputy Speaker, for the latitude given to us to discuss the wider statement of the Secretary of State, a matter which is not strictly within the terms of the order, we shall want to study the statement in detail, particularly the complicated passages about release and the ending of political status, the special category.
At first glance, however, we recognise that the Secretary of State has gone a long way towards meeting the requests which we have repeatedly put to him regarding the introduction of a parole system roughly on the lines of that obtaining in Great Britain. It may be that the conditional plan is the best we can get in the meantime. We are aware of the difficulties which would confront any Secretary of State trying to implement the English system with conditions as they are in Northern Ireland.
With regard to the special category, my hon. Friends and I disagreed with the practice of classifying some convicted prisoners as special category—entitled, as they were, to special treatment by reason of the supposedly political motive which prompted the offence for which they had been convicted. This practice, as I understand it, has no basis either in common law or in statute law, and I doubt very much whether it has any basis in any of the emergency regulations. Certainly, as the Secretary of State has said, it tends to glamorise the offenders and to
252
raise hopes of an early amnesty, thus reducing the deterrent. It should never have been adopted, and we support the Secretary of State's decision to phase it out.
Mr. Norman Miscampbell: Does not the hon. Gentleman agree that the very worst feature of it is that the special category is self-selecting, because there is no judicial decision whether a person is in the special category? He comes to the camp and says, "I am so and so", and if he is accepted into the compound, in he goes.
Mr. Molyneaux: I agree with the hon. and learned Gentleman, and there are other aspects of the matter which we need not go into at present. However, I think that all of us agree that the idea of a special category was a highly undesirable exercise.
With regard to the Order, no one will disagree with the Secretary of State's decision to include the UVF on the list of proscribed organisations. Following its operations on 2nd October, I think he had very little option. But whether the mere act of proscription will make the organisation any more easily dealt with is a matter for doubt.
Presumably, if a member of the organisation is found guilty of an offence he will be dealt with accordingly and suffer a penalty. But if he is merely shown to be a member of the organisation, presumably nothing very much will happen to him and he will be allowed to go free. I doubt whether any hon. Member in the House really supposes that a proscription order by itself will make any significant difference to achieving the desired result, which is to defeat terrorism in its many forms.
For some time we have discussed murders and shootings in terms of tit for tat. I do not think we have ever clearly specified who is tit, and who is tat, and I suggest that tat is that element in the violence with which we ought to be concerned and which must first be eliminated, because that ruthless, guerrilla force which we know as the Provisional IRA is the root cause from which all the subsidiary and subordinate violence sprang. It has been the failure of successive Governments to deal firmly with that primary cause that has brought into being all

253
these do-it-yourself organisations that we all strongly condemn.
I agree that the Government cannot and should not relax their efforts until legal authority is restored and all wrongdoers are firmly dealt with. Their task in achieving that will be made very much easier once they have demonstrated their determination to ensure that terrorism in all its many forms will be defeated. Once the Government demonstrate their determination to restore the civil authority in all parts of Northern Ireland, the message will quickly get through to all levels of evil doers of every grade and they will be all the more easily dealt with, as dealt with they will have to be.
One form that that message of firmness might take is to end all contacts and talks with any terrorist body, because such talks encourage terrorists to believe that somehow or other, at some time or other, a deal will be done. We welcome the assurance of the Secretary of State that there will be no question of granting an amnesty. That will do much to reassure people in Northern Ireland, but convicted terrorists have a great capacity for deluding themselves and if we preserve in being the mechanism for doing a deal, that will make it that much easier for them to kid themselves that the mechanism will one day be activated and brought into use.
There is another part of the message that would be extremely effective. It has been referred to by the Secretary of State—and we understand his reasons for not wishing to press further ahead with it at present—and that is the question of the incident centres. This is not a strange demand for Ulster Members to make. We have said it before, and we do not apologise for repeating it, because our demand has become more relevant with every month that has passed and with every bomb that has been detonated. In our view, these incident centres can do nothing but harm and the sooner they are finally disposed of the better. However, in view of the remarks of the Secretary of State, my colleagues and I should not want to press him further on that matter now.
A major hazard lies ahead of us, and that is the Christmas season and all that goes with it, because prior to last Christmas there was a feeling—perhaps it was more than a feeling because it was based on fact and knowledge—that at long last
254
the security situation was beginning to stabilise and there were clear indications that the Provisional IRA and certain other terrorist organisations were seriously weakened and facing defeat. But then there came to their rescue various well-meaning but totally misguided persons, and no doubt their appearance was no mere accident. No doubt they received innocent, or seemingly innocent, invitations. No doubt there were hints, nods and winks, but the effect of it all was utterly disastrous.
The appearance of these people could only have the effect of weakening the Government's position, because my colleagues and I can think back to some of these television appearances and recall a well-meaning cleric appearing on the "box" and saying, "We have been talking to leaders of the IRA. We find them to be reasonable and sensible people. Tomorrow we shall talk to the Secretary of State, and if he will be equally reasonable we have no reason to believe that a truce cannot be arranged".
In all fairness, what else could the Government do but make some move in that direction and at least listen to what was being put to them? It was for that reason that my colleagues and I thought it right at that time, and in those early months of the year, to support the Secretary of State because we realised that he was having the rug pulled from underneath him by people Who we might charitably say did not really know what they were doing. Some of them ought to have known better.
I make this plea to them and to all those who might be tempted to repeat this kind of exercise. They and all Members in this House must recognise that responsibility must rest where the power lies, and that power lies here in this Parliament and with this Government. I have tried on various occasions to assure the Secretary of State—and I hope he will realise that I am sincere when I say this—that firm action by him and by the Government would be supported by all political parties in Northern Ireland—because what have any of them to gain from a continuation of violence?—and by all responsible and right-thinking citizens throughout Northern Ireland.
Finally, I beseech the Government to exploit to the full the support and good

255
will which they now have in Northern Ireland and to lead us in the crusade to rid this Province of ours of the plague of violence once and for all.
4.47 p.m.
Mr. Gerard Fitt: It is ironic that we should today be discussing the proscription of the Ulster Volunteer Force because of the brutal murder of a number of Catholics in the month of October when within the past few days we have witnessed the terrible spectacle of Catholics being murdered by Catholics and some of them in an even more atrocious manner than that used by the UVF.
I suggest that the UVF is not being singled out today because of the single series of killings early in October. Since last year, when the Secretary of State tried to involve this organisation in legitimate of political action, there have been a series of murders in what has become known as the murder triangle in the North Armagh area and openly claimed by the UVF. Many innocent people have been brutally murdered by the UVF and an associate force which has not been mentioned by the Secretary of State, the Protestant Action Force, which claims to have some association with the UVF, just as the UFF, Ulster Freedom Fighters as they were called, claimed an association with the UDA.
I wonder whether, at this stage, the proscription that has been announced by my right hon. Friend will also apply to the Protestant Action Force, which seems sometimes to contain members of the UVF but is the Protestant Action Force when its members are engaged in murder.
Mr. Merlyn Rees: My hon. Friend has raised an important point which ties in with our discussions in Committee. The UVF is an old name going back to before the First World War. It is easy for people to change the name of an organisation from day to day. I forget whether it is 40 or 49 different organisations that one can find. As I say, it is easy to change a name, and one cannot make a change every day to allow for the various names of an organisation that is so ephemeral. That illustrates the nature of the problem.
Mr. Fitt: I am grateful to my right hon. Friend, but I have a newspaper cutting here stating that the UVF recently formed what it calls the Ulster Central Intelligence Agency, composed of the UVF, the Protestant Action Force and the Red Hand Commandos. I agree that these names spring up overnight, but if someone is to be charged now with an offence and claims to be a member of the PAF, what will be the legal position? Will the Secretary of State then say that he will bring in an Order to proscribe the PAF? I realise that there is tremendous difficulty here.
As for the UVF, in 1968, before there was an IRA as we know it now, it was the UVF which engaged in the first bombings of strategic areas in Northern Ireland, with the intention of bringing about the downfall of the then Prime Minister of Northern Ireland, Captain Terence O'Neill. So it is well recognised in Northern Ireland as a force which is determined to use violence to achieve their political ends, whatever they may be. Speaking as a Catholic, I believe that the UVF would be the most feared of all the Loyalist organisations outside the UFF, which also has claimed responsibility for some of the most heinous crimes.
But will proscription have any effect? I remember that, on the passing of the Prevention of Terrorism (Temporary Provisions) Act as it applied to the United Kingdom, I tried to move an amendment to include the UVF and the UFF, which are not unknown in this part of the United Kingdom. Many of their members have been charged before the courts in Great Britain. I agree with the hon. Member for Abingdon (Mr. Neave) that if they are proscribed in Northern Ireland they should also be proscribed in Great Britain. The Home Secretary should consider this.
In the early days of October, when so many Catholics were killed—I knew them all and attended every one of their funerals—they were killed by the UVF because they were Catholics. Within the past 72 hours or four days, an almost equal number of Catholics have been killed not by the UVF but by those who would claim to be the protectors of the Catholic community in Northern Ireland. My condemnation is not selective against the UVF or extreme Loyalist forces. It is

257
levelled against anyone who uses violence, either of the bomb or of the bullet, and against the taking of innocent lives, as happens throughout my constituency.
In the past two or three days, five Catholics have been killed by the Provisional IRA. One Provisional IRA Catholice has been killed and it is suspected that another was killed by the Official IRA. There have been scores of instances of knee-capping. Only yesterday, we read in the Press that a 10-year-old girl was knee-capped—I suspect by the Provisional IRA—and it is possible that she will never walk again. My right hon. Friend was right to say that violence in Northern Ireland is not restricted to one section of the community. There are far too many people with guns.
When political category status was introduced, I thought that it was a recognition of the fact that there were people involved who honestly believed that they were engaged in a political battle to achieve their idealistic ends. I disagreed completely with it, but I know that there are people, probably on both sides, who are absolutely convinced that they are engaged in a political struggle. Many of them may be men of integrity and supreme honesty—I do not know. But I know that those responsible for the killing of a six-year old girl in my constituency last week and for shooting the kneecaps of an 18-year-old girl, those responsible for all the murders of recent weeks and days, have no right to political status because they are not engaged in political activities. They are engaged in mass murder, thuggery and gangsterism. From that point of view, I do not regret seeing the end of political status.
However, I am wholly convinced that there are people engaged in this struggle who honestly believe they have a right to act as they have acted. My right hon. Friend will have to separate those people who were legitimately caught up in what they regarded as political action and have been sentenced to imprisonment and who have not been engaged in vile murder and terrorism. There is a clear distinction to be made. I would lend myself to helping the Secretary of State in any way to differentiate those people.
But there will be difficulty about ending the special category. For example,
258
my right hon. Friend has said that he will end that status next March—
The Minister of State, Northern Ireland Office (Mr. Stanley Orme): For new entrants.
Mr. Fitt: Yes, for new entrants. But my right hon. Friend also congratulated the police on their efforts to bring before the courts those engaged in violence. Next week, if a person is arrested by the police for a crime committed last year, he will still be able to claim political status. But will that end after March? If someone is apprehended after March, after the ending of political categories, for a crime that he committed when political categories existed, will be be able to claim that status or will it finish completely in March?
Mr. Merlyn Rees: Could I get this right, because it is important that it should be clear in the prisons of Northern Ireland? Those sentenced for offences committed after 1st March 1976 will be accommodated in cellular accommodation and will not be able to claim special category status.
Mr. Fitt: With respect, that does not clarify it. My right hon. Friend refers to those sentenced for offences committed after 1st March. But if someone is arrested after 1st March next year for an offence committed this year, will he be afforded that status?
Mr. Merlyn Rees: This will apply for offences committed after 1st March.
Mr. Fitt: As I say, there will be reason to scrutinise closely those who have been afforded political status in Northern Ireland. I hope that those who are engaged in what they would regard as a political struggle—whether the Provisional IRA or the UVF or extreme Loyalist organisations—will recognise that they have no possibility of winning the battle in which they are engaged. That applies right across the board, to the UVF and to the Republican forces. My knowledge of the situation convinces me that they will not be the victors in the long term.
The whole Catholic community is standing back in fear, terror and revulsion at the happenings over the past four or five days. So many innocent people have been killed and maimed.

259
Those engaged in this action do not have the support of the Catholic community. Last year, when the UV and the UVA were engaged in an internecine war, the Catholic community was inclined to say, "Very good: let them go on murdering each other." In the same way, I suspect that the Protestant community is hoping that at the moment the Catholic community will rend itself asunder because of the activities of these paramilitary groups.
No one has listened to me in the past. However, I make an impassioned appeal to everyone, especially to all those on the Republican side in which I would be classed because I am a Catholic and come from that community, to desist from further action so as to ensure that there is some hope of bringing normality to Northern Ireland.
My right hon. Friend the Secretary of State paid a tribute to the police in Northern Ireland. Other hon. Members who represent constituencies in Northern Ireland recognised that there was a problem with the RUC because of its political overtones, because it was under the political control of a Minister of Home Affairs and because it had never been accepted by the Catholics as their police force.
In Britain everyone of every political persuasion, whether he be Labour, Liberal, Conservative, National Front and so on, regards the police of this country as his police force. That was never so in Northern Ireland. The majority community always took the view that it was their police force and that it existed to implement laws which the majority regarded, rightly or wrongly, were aimed at oppressing the Catholic population. We have come a long way since then. There may be slight signs that the police force in Northern Ireland is not what it was in 1969, but more dramatic steps will have to be taken and many things done in the police force before it can be accepted by the whole community in Northern Ireland.
I unhesitatingly state that I look forward to the day when Northern Ireland police will be in full and complete control of law in Northern Ireland, because I do not believe that the British Army is the right weapon or the right
260
structure to use in Northern Ireland to try to enforce law and order.
Mr, Miscampbell: The hon. Gentleman has made an important point. What steps have to be taken to make the police force now acceptable? That is one of the crunch issues in Northern Ireland.
Mr. Fitt: I do not want to anticipate a debate which we shall probably have in early December, but I believe that political steps have been taken, which have been obvious during the past few months, in which politicians, not of my persuasion, were involved, notably the right hon. Member for Belfast, East (Mr. Craig). Those political steps have made it clear that it is not impossible to create acceptable political structures in the interests of everyone in Northern Ireland. I believe that this can be done.
I shall dedicate myself on behalf of my party and the Catholic minority in Northern Ireland to that end. I hope that this will be met by a response from the representatives of the Loyalist community. I hope that we can get together and create acceptable political structures in Northern Ireland which will involve the whole community, because in that situation there will be absolutely nothing which will prevent wholehearted support from being given to the police.
5.3 p.m.
Mr. William Craig: We have all listened with great interest to what the Secretary of State has said. He knows from the representations which I have made to him over recent weeks that there will be a ready welcome for his improvements to our penal system, especially concerning the phasing out of the special category status.
There are one or two matters on which I should like further clarification. The Secretary of State said that he proposed shortly to amend the Regulations and to increase remission for short-term prisoners to one-half. What is meant by "short-term prisoners"? I should also like clarification concerning the conditional release system which is to be proposed. What sort of sentence qualifies for that type of remission? Will short-term sentences be treated differently with 50 per cent. remission and no conditional release, while long-term sentences can

261
merit conditional release amounting to 50 per cent.?
Mr. Orme: The answer to the first part of the right hon. Gentleman's question is "Under one year". The answer to the second part is "Over one year".
Mr. Craig: There was also a brief reference to the fact that the Order will make provision for community service orders, deferred sentences and bail hostels. All those involved in the legal processes in Northern Ireland will welcome such proposals.
However, there is one aspect of the whole procedure which is causing great concern, and that is the abnormal time that prisoners spend on remand. I have known cases to be remanded in custody for approximately 16 months. No one will welcome such a situation. As the Secretary of State is addressing his mind to the improvement of the operation of the law of Northern Ireland, I hope that he will give early attention to this matter.
I turn to the terrorist situation. I readily concede that considerable progress has been made in dealing with terrorist offences through the courts. The record is quite impressive. However, although there has been progress terrorism is still a real threat to our community. Indeed, some of us fear that it will not be long before we have to withstand another major onslaught. I was reassured to hear the Secretary of State say that in that event he would be prepared to reintroduce detention.
However, I should have been happier if there had been some indication that we were to have a special code of law to deal with terrorism, because it is most horrible when it is reduced to the level of indiscriminate murder. I believe that the penalties are far from adequate and that we should attach a heavier penalty, perhaps even thinking in terms of capital punishment. I should like the Goverment to think in terms of a special code of law that would apply to a terror situation bearing in mind whether one has to declare a state of emergency or whether the courts will decide that the offence was committed in a terrorist situation.
Mr. Merlyn Rees: Perhaps the right hon. Gentleman, who has great experience,
262
will take the point further. Let us consider the position where someone robs a bank. Friday is bank-robbing day by paramilitary organisations, although this trend has decreased slightly in recent months. Let us assume that there is a straightforward classical robbery of a bank or a post office, that the offenders are caught and, when sentenced to two, three or four years' imprisonment, claim to belong to a paramilitary organisation. How would one decide, without the self-classification, that it was a terrorist offence? If the sentence was trebled for such an offence, it would be easy for the culprits not to claim that they belonged to such an organisation. I can see the point which the right hon. Gentleman is making concerning murder, but how would such a system work with a vast range of offences?
Mr. Craig: I was about to come to that point. I appreciate the difficulties, and that was why I was speculating that it might well be left to the courts to decide whether the offence was committed in a terrorist context. I was thinking particularly about bank robberies carried out by members of an illegal organisation.
We have proscribed another organisation today. If a member of that organisation commits a bank robbery, it is at least reasonable to assume that he has done so in pursuit of his membership of that organisation and, therefore, the onus of proof should perhaps switch to him.
I was a little unhappy that the Secretary of State should depart so quickly from the proposition put forward by the hon. Member for Abingdon (Mr. Neave) regarding membership laws as they exist in the Irish Republic. Those laws have been very valuable in the Irish Republic, and I prefer that system to executive detention. I hope that we shall be able to look at this situation again. I do not know how many organisations in Northern Ireland are proscribed at the moment, but there are very few convictions for membership of illegal organisations. I ask the Secretary of State not to close his mind entirely to this type of legislation whereby the onus of proof can be switched to the accused in terms not only of membership

263
of an illegal organisation but of specific crimes which are being committed.
I wholeheartedly agree with the Secretary of State that, apart from laws and detention procedures, the way to defeat terrorism is by the whole community co-operating with the police and security forces. I think we can honestly report that that is happening now. I was pleased at the revulsion felt by the whole community following that awful day of UVF terrorism. I know that a lot of information was given to the police following that terrible day.
I was disappointed that the hon. Member for Belfast, West (Mr. Fitt) could not have been more forthcoming by making a call for assistance to be given to the RUC and the Army in their difficult task. Had he done so, I am sure that it would have helped the situation and would lead to a political settlement. I am not trying to score cheap political points. I appreciate the hon. Gentleman's difficulties and welcome the steps that he has taken. I merely ask him to hurry the pace a little, because I detect a great willingness all over the Province to have a speedy decision and restoration of law and order. That will come from the lead that politicians can give, from the agreements that politicians can enter into and from the support that politicians can give to the forces of law and order.
5.13 p.m.
Mr. Kevin McNamara: I welcome the statement by my right hon. Friend the Secretary of State about the phasing out of detention by Christmas and his reiteration of what he has already said on this matter. However, there is one point on which I disagree about detention. My right hon. Friend seemed to think that in the years 1972 and 1973 it was conducive to cutting down a great deal of the violence. I suggest that much of the violence was caused by the creation of detention in 1971 and that that was the reason for rent strikes and people joining paramilitary organisations. The great lesson to be learned is that a precipitate and clumsy stroke like that can cause far more harm than the immediate good which it might at first appear to create. In this instance
264
internment created no good and brought long-term disruption to Northern Ireland.
Dealing with parole, my right hon. Friend said that in any case of conditional release, if the releasee were convicted of another serious offence, he would have to serve the remaining part of the sentence from which he was released. How is "serious offence" to be defined? Is it associated with terrorist activities? Would it come under the offence of terrorism under the present legislation, or under another offence outside that area? This is important.
Mr. Merlyn Rees: I used the word "serious" because I was giving advance notice of the scheme. It will be defined in the Order that I will introduce. The difficulties of definition will be seen more clearly then. I used the word "serious" in the sense of "important".
Mr. McNamara: If a person kills somebody by drunken driving, that is important, but it has nothing to do with terrorism. That is why I am seeking to draw a distinction. It is a matter about which we should be very certain.
The hon. Member for Abingdon (Mr. Neave) and the right hon. Member for Belfast, East (Mr. Craig) spoke in glowing terms of the system in the Republic of Ireland of convicting people in special courts on the say-so of a senior police officer. One of the main difficulties in Northern Ireland has been the grave suspicion attached to the police force by not only the minority but parts of the majority community.
This situation was highlighted in the period leading up to detention, as my hon. Friend the Member for Belfast, West (Mr. Fitt) said, by the poor information given to the executive, with the resultant difficulties. If we put the police in that situation, we might ruin the tremendously good work that they are doing. Conviction rates are now higher among people of both communities because both communities are coming forward with information about terrorism and other offences. To ruin all that by putting a policeman, albeit a special policeman, in the witness box on oath to say what he believes to be true without producing positive evidence would be counterproductive.

265
The only reason that system succeeds in the Republic is that the Garda is generally accepted by the whole population. All the good work being done in the furtherance of my right hon. Friend's policy, which is direct and correct, of bringing people to court, getting convictions and having them sentenced properly, could be put at risk. It could be as useless an expedient as detention in trying to deal with a very difficult situation.
The same argument applies to the proposal put forward by the right hon. Member for Belfast, East regarding a special system of law. My right hon. Friend said that he would get rid of political status. He says that if a man breaks the law, he is a criminal. We may not like the law and we may seek to change it by democratic methods. The paths to democracy in Northern Ireland are now open as they were not before. However, if we create a special law, we shall be going back to everything associated with the Special Powers Act. Everything that was evil within that Act, which was a cause of great concern, would come back again. If we introduce a system whereby we say "That man is guilty of that offence, but, bingo, we shall put him under another special law and bring him up before a special court", we shall be going back to the old system.
Mr. Neave: The hon. Gentleman has given reasons, which no doubt the House and the Government will consider, for rejecting what I suggested. However, I think that he will agree that the Government should consider how the law regarding membership of a proscribed organisation can be enforced. If the Southern Irish system is not suitable for Northern Ireland, has he any suggestion about how the law should be enforced?
Mr. McNamara: I believe that the law should be enforced by being administered impartially, by our giving every help and succour to the police force in times of difficulty, by ensuring that the police force is seen to be independent of political motivation and pressure, and by the police acting in the interests of the whole community. I believe my right hon. Friend's policy is beginning to bear fruit in just that way. The hon. Member is suggesting we should put the whole thing at risk once again.
266
In a sense, we are going through a charade in banning the UVF. As my right hon. Friend has admitted, his hand was forced by the events of 2nd October. I am not certain that banning any organisation is ever of any value, even in a political terrorist situation, but at least under this Order evidence will have to be produced of membership and involvement in the activities of a proscribed organisation. That is the difference between the situation in the North and that in the Republic where the same degree of evidence does not have to be produced for a person to get a six-month prison sentence. In the Republic the case is decided merely on the word of a senior police officer. A similar policy in Northern Ireland in the past has been disastrous.
Mr. Craig: I accept what the hon. Member says about putting the police in a difficult situation, but how is it more difficult for them than detention? The Secretary of State has said that if there is another major onslaught, he will detain again.
Mr. McNamara: The right hon. Member is asking me to answer for the sins of my right hon. Friend, who is well able to do that for himself, but I am prepared to absolve him. The difference is relatively simple. We are phasing out detention and hoping that it will never be reintroduced. If it is reintroduced, it will be in a completely different political climate. The grounds for introducing it in 1971 are gone—Stormont is gone, the alleged discrimination against one part of the community is gone and the roads towards political democracy and progress are open to everyone.
The police are gradually getting away from any involvement in politics and, because the situation has changed, our position is strengthened if it is necessary to reintroduce detention. There is a difference in attitude among both communities towards the police, who are seen to be becoming more impartial.
I hope that we shall not hear pleas from any part of the House for members of the SDLP to make speeches urging support for the police force. That would be counter-productive. They must do that in their own time and in their own way. The real test of acceptability is that people are giving the police information

267
and are helping them. It is not right to refer to a case which is sub judice, but if that case is proved, the fact that the police succeeded will be far more significant than any speeches that could be made by the hon. Member for Belfast, West.
Mr. Merlyn Rees: My hon. Friend quite properly raises the matter of evidence in relation to the existing law. This Government will never introduce a system, in the nature of the society in Northern Ireland, under which extraordinary methods of law are used on the say-so of the police. It would be fatal to the police. I would not want anybody to think I am considering such action. It is vital for the police to be accepted in the community. There is grave suspicion, wrong but understandable, in one part of the community. There must be no thought that I am considering such action. I am grateful to my hon. Friend for raising this matter in the way he has.
Mr. McNamara: I am most grateful to my right hon. Friend. I am sorry to have excited the attention of so many hon. Members, because I wanted to keep my speech brief.
It is important that a criminal should be treated as a criminal and not given special status. It is important that we do not use detention again, and therefore my right hon. Friend's policy should have the support of the whole House. It is of great importance that there should be adequate schemes for the rehabilitation, retraining and accommodation of released prisoners so that they can play their rightful part in society and pursue legitimate political aims in a democracy which is free from terrorism and fear and in which every man can get up and say his piece.
5.26 p.m.
Mr. John Farr: I welcome the introduction of this Order. I suppose that the outlawing of the UVF is a step in the right direction, although such action tends to drive groups underground and make police surveillance more difficult. However, no doubt the decision has been carefully weighed.
Some people think that a change of emphasis is required in dealing with some of the ghastly crimes committed in Northern Ireland. The hon. Member for
268
Belfast, West (Mr. Fitt) has made many pleas to the terrorists for humanity, peace and decency in the years that he has been in the House, and they have been repeatedly ignored. The Secretary of State told us that 207 people had been killed in Northern Ireland this year, and if one multiplies that figure by 40, it is the equivalent of more than 8,000 people killed by terrorism in mainland Great Britain. I wonder whether the penalties and deterrents are adequate and whether there is not a case for a more energetic form of action against terrorists from both communities who perform these ghastly crimes in which innocent people suffer and lose lives or limbs.
For years we have heard well-meant and well-intentioned pleas like those of the hon. Member for Belfast, West, who has often said that he believed that we had turned the corner and that the end of terrorism was near. We must look at the facts. After seven years, the bloodshed and tyranny in Northern Ireland are as bad today as they have ever been.
Northern Ireland is rapidly becoming, if it is not already, synonymous with blood and despair. It is right to proscribe the UVF and a number of other organisations in Northern Ireland, but it is about time we considered the introduction of severe penalties for those who so wantonly kill and maim innocent people in the sort of incidents we have already heard described so graphically.
Innocent people who have no responsibility for the political state of Northern Ireland are murdered in the most terrible ways. Is it not about time that, instead of making these pious pleas, we considered the re-introduction of the death penalty for murders and crimes of this nature when innocent persons are killed, either through a bomb explosion, or because of a deliberate act of terrorism? Members of proscribed organisations, including the UVF, who are responsible for the death of an innocent person should run the risk of suffering the death penalty.
It has become apparent that these people live by the most bloody methods. They are completely ruthless, and six or seven years' of platitudes in this House have got us nowhere. I do not say that the approaches of successive Secretaries of State have not been absolutely right. Successive Ministers and Governments

269
have sought a political solution, and their efforts must be redoubled. Nevertheless, any Secretary of State for Northern Ireland would have his arm immeasurably strengthened if the Northern Ireland judiciary had the power to sentence a terrorist to death for causing the death of an innocent person.
When we discuss Northern Ireland, many strange ideas are inevitably put forward. One which emanated recently from the Conservative side of the House was for the imposition of martial law in Northern Ireland. Of course these ideas must be considered, but even if martial law were introduced and even if it had the effect, which I do not think it would, of clearing the Province of terrorists and terrorism and of restoring a state of security, it would be impossible to maintain that situation. The long and winding border between the North and the Republic would prevent that. No one who has suggested martial law has also suggested a fortified border. Without such an arrangement, it would be impossible to prevent continuing infiltration from the South.
The only course to follow is the present painstaking one adopted by the Secretary of State. In general, we fully support the Government's policy on Northern Ireland. I personally admire the way in which the Secretary of State has steadfastly maintained an attitude of complete impartiality and has striven as hard as possible to find some common political ground by which a sense of stability can be reintroduced into Northern Ireland. That task would be made much easier for him and for his successors if they had behind them the additional assistance of a law under which the thugs who live by bloodshed would know that they would receive the ultimate and just retribution of the death penalty. I support the Order.
5.35 p.m.
Mr. Stan Thorne: The hon. Member for Harborough (Mr. Farr) has suggested imposing the death penalty for acts of terrorism. I can think of no better way of creating an even worse situation than already exists. Whether it was Protestant or Catholic who was subjected to that penalty, the upsurge of terrorism that would follow would overshadow any good, if there be any, that might flow
270
from that penalty. I therefore hope that the Government will reject that suggestion.
I noticed some Opposition Members nodding in agreement with me as I was saying that, but I think that their nodding will cease as I develop my speech. What I am about to say will not be popular on that side of the Chamber. Indeed, certain of my hon. Friends will not be particularly happy with the points I shall make. Nevertheless, I believe that those who participate in Northern Ireland debates must show that they speak with a firm conviction. Whether their views are acceptable to their party is irrelevant.
I want to look at this issue in the long term. We repeatedly and inevitably discuss questions affecting security, the police force and the Army. It is, however, from the policy of the Government that all other things stem. Even proscription of an organisation is an act of policy.
I believe that the Government's attitude is fundamentally wrong, because it accepts the continuance of Northern Ireland as a part of the United Kingdom. That is its basic premise. Northern Ireland is a part of Ireland and the perspective should be the establishment of a united Ireland. Those are my views and they have been the views of Labour Party conferences. Nothing has happened in recent years to suggest that the Labour Party has in any way changed that policy. I am therefore addressing myself to complete disengagement from Ireland.
Some people suggest that for Britain to make such a declaration at this time would result in a tremendous upsurge of Orange activity in Northern Ireland, to the detriment of the Catholic population. I cannot answer that sort of suggestion in detail. Certainly such a move would be most unpopular with the Protestants in Northern Ireland—
Mr. Michael Mates: The majority.
Mr. Thorne: The majority in Northern Ireland, but the minority in Ireland. The Catholics might be a 40 per cent. minority in Northern Ireland, but they represent a majority in Ireland as a whole.
Mr. Mates: On what basis does the hon. Gentleman say that the majority or otherwise of the people of Southern Ireland wish to see a change in the situation in the North? That has not been tested.

271
The opinion of the people of Northern Ireland has been tested.
Mr. Thorne: I did not say that the people wished for the change to which the hon. Gentleman referred. I am addressing myself to what I see to be the solution. If you have evidence to establish that the majority of people in Ireland reject what I am suggesting, no doubt you will produce that evidence.
Mr. Deputy Speaker (Mr. George Thomas): Order. The hon. Gentleman must address the Chair differently if he wishes to address the Chair.
Mr. Thorne: Thank you, Mr. Speaker. I addressed you as Mr. Speaker, but I looked at the hon. Gentleman because he raised the point.
Mr. Deputy Speaker: The hon. Gentleman has misunderstood. He keeps saying "you" and obviously means the hon. Member for Petersfield (Mr. Mates).
Mr. Thorne: These niceties of discussion in this Chamber become a trifle irksome at times. [Interruption.] I agree that the Irish question, too, is irksome at times.
The establishment of a united Ireland and our disengagement from Ireland constitute the perspective to which I address myself. In order to achieve those ends we must establish structures and institutions in the North that will encourage Catholics and Protestants to work together. There are those who will say straight away that that is what the Government have been in business for over several years, that they have not achieved it so far, and that it is not achievable. I do not accept that, but it seems to me that there are certain conditions for achieving it.
I am sure that the British Government are prepared to give positive encouragement based upon a clear and unmistake-able statement of our intention to disengage. The alternative in my view, irrespective of what may emerge from the Convention, is another patched-up job which retains Northern Ireland as part of the United Kingdom and which will subsequently produce periodic outbursts of violence varying in length and intensity. We may have several years of relative peace, but inevitably there will yet again
272
be an upsurge of violence as long as Northern Ireland is seen and held to be a part of the United Kingdom.
Under partition the Catholic minority in the North of Ireland have been deemed to be people without the same rights as the majority here. There has been constant evidence of injustices arising from that. I used to travel to Belfast fairly frequently years ago, and I can remember being told again and again "If you are an Orangeman or a Mason you are 'in' in Northern Ireland. If you are a Catholic, you are in difficulty." That situation has continued over a long period, and has caused many of the present difficulties. Catholics have been denied civil rights and discriminated against.
We on the Labour Benches have many times urged the drawing-up of a Bill of Rights that would seek to protect minorities in Northern Ireland. The announcement of the introduction of a Bill of Rights as part of the statement that I seek from the Government of their intention to disengage is still relevant. It could still be drawn up. It would address itself to some of the difficulties experienced by minorities. My right hon. Friend the Secretary of State spoke this afternoon of certain improvements in the matter of internment, and they are to be welcomed.
I am certain that it will be necessary to retain troops in Northern Ireland for some time. At one stage I took the view that it was possible—in fact, necessary—for us to withdraw troops in the short term because of the continuing situation. However, I now see only too clearly that if they were withdrawn now, extreme Right-wing elements in Northern Ireland would take advantage of the situation to perpetuate the absence of the civil rights of defenceless minorities.
The basis of an agreement to constitutional changes providing for disengagement from Ireland can be worked out, with the participation of Catholics and Protestants in Northern Ireland, the Republican Government and our own Government. It might take a year or two, but over that period it would be possible to reach such an agreement on the basis of a clear declaration of the kind I have described. I recognise that there is no prospect of any eventual change without such a declaration. The

273
longer we put it off, the worse the situation will be. Only when we have made it can we begin to build the dialogue that can produce the necessary constitutional changes.
In the meantime, the troops' rôle in Northern Ireland would be to ensure that there is democracy, to protect the civil liberties of minorities, in a way that we have not seen hitherto. They would have behind them a Bill of Rights that we had agreed should apply until the Irish people themselves determined, in their own way, the form of government appropriate to their situation. It is not for me to speculate on what that form of government would be, but it seems to me that a federal type of government would be perfectly feasible in Ireland.
The problem of Northern Ireland is not merely a matter for those who reside there. It is very much one for the people of England as well. I represent a constituency with a 40 per cent. Catholic vote. [Hon. Members: "Ah."] In that constituency there are a variety of approaches to the problem of Northern Ireland. I tell those hon. Members who said "Ah" that when I speak of a 40 per cent. Catholic vote, that does not mean that those 40 per cent. who are Catholics have a monolithic view of the solution to the problem of Northern Ireland. They have several.
My belief is that Members of Parliament must take cognisance of the growing bodies of opinion throughout Britain with similar approaches to the problem. One section of the community says "We should withdraw from Northern Ireland because it has brought us nothing but trouble over the years and some of our lads are being called upon to die for reasons that we consider to be irrelevant." That is one shade of opinion that is often put forward in my constituency.
There is another body of opinion which says that we should withdraw from Ireland because Ireland belongs to the Irish people. It is said that the Irish people should determine the character of their political life and Ireland's social and economic circumstances. They say that those matters should not be subject to any control from London.
Mr. Powell: What about the Scottish nationalists?
Mr. Thorne: Does someone wish to intervene?
Mr. Deputy Speaker: Has the hon. Member for Preston, South (Mr. Thorne) finished?
Mr. Thorne: No, Mr. Speaker. It is a little confusing when one hears the mumblings that come from the benches opposite. I sincerely hope that the mumblers will get into the debate later.
Some people view the matter from the standpoint of the majority in Ireland. Whatever the motivation, there is a growing United Kingdom demand for our disengagement. The constitution of a new all-Ireland State, some may argue, should stem from the previous attitudes of British Governments. I reject that approach. I believe that we have to accept the same sort of criteria for Ireland that we seek to apply in other countries when we talk about the right of self-determination. I believe that the Irish have the right of self-determination.
Mr. Powell: And the Scots?
Mr. Thorne: And the Scots. I have never refuted the claim of the Scots.
Mrs. Jill Knight rose—
Mr. Thorne: I can only answer one point at a time, Madam. I apologise to you, Mr. Speaker, for referring to you as "Madam". That clearly is not appropriate. The constitution which Northern Ireland—
Mr. Deputy Speaker: Order. I do not mind the hon. Gentleman promoting the corporal to sergeant all the time, but I hope he will bear in mind that this is a short debate in which there are strong feelings to be expressed. Other hon. Members on both sides of the House wish to express their feelings.
Mr. Thorne: That means that I shall have to cut my speech. I respect your views, as always, Mr. Deputy Speaker.
Hon. Members will be pleased to hear that I close by asking the Government to consider seriously that which they have been unwilling to consider for the best part of 20 or 30 years—namely, a complete disengagement from Ireland so that the Irish people can determine their own future.
5.53 p.m.
Mr. McCusker: The only comment I wish to make on the speech of the hon. Member for Preston, South (Mr. Thorne) is that the hon. Gentleman has come so far from his marching support for the "troops out" movement to his present position that there must be hope for him yet.
I accept that the Secretary of State has no alternative but to bring forward the Order following the UVF's acceptance of responsibilities for various atrocities. However, I regret that the Order displays the same self-deception as was demonstrated by the de-proscription order of May 1974. It was then quite obvious that the Government wanted to legalise the Provisional Sinn Fein and perhaps, incidentally, the Official Sinn Fein. To prevent a Loyalist reaction the UVF was included. At that time the UVF was in a period of claimed cease-fire. It also claims to have a political voice to express. That made it easier for the Government.
However, I believe it has become increasingly clear why the Government wanted the Provisional Sinn Fein de-proscribed: namely, to enable them to talk to it. It enabled the Government to negotiate with the Provisional Sinn Fein. It enabled them to agree a ceasefire which defies description—based on what I know to be a cease-fire. Further, it enabled them to set up the incident centres.
I welcomed the view expressed by the hon. Member for Abingdon (Mr. Neave) when he touched on the issue of self-deception. Of course, he will remember that the Government were able to move the 1974 Order at a late hour of the night in May with the collusion of one of his Front Bench colleagues. I intended to speak on that Order but because I was more innocent in the affairs of the House than I am today I was prevented from doing so. If I had spoken on that occasion I would have objected to the Order. I would have objected on the same basis as I object today. It is my contention that we must view these matters in an evenhanded fashion.
If we are to de-proscribe the UVF and to declare it an illegal organisation we are blinding ourselves to reality to suggest that the Provisional Sinn Fein is
276
not exactly the same thing. The 1974 Order was moved the day after the Prime Minister thought it sufficiently important to make a statement in the House concerning plans which had been found in a Belfast suburb outlining the IRA's proposals for escalating the violence and introducing a greater element of sectarian killings. It may well have been that some of the events in my constituency put into operation some of those long-term plans.
At that stage the Secretary of State chose blindly to pretend that the Provisional Sinn Fein and the Provisional IRA are two separate and distinct organisations. The right hon. Gentleman knows as well as the hon. Member for Belfast, West (Mr. Fitt) and myself that they are inexplicably intertwined, and that to all intents and purposes they are the same thing. It was O'Brady and Drumm who led the Provisional IRA funerals this week and who delivered the orations. It was Joe Cahill a fortnight ago who sat at the top table of the Provisional Sinn Fein conference in Dublin, a conference that was addressed by the army leaders of the IRA. It must have offended the hon. Member for Belfast, West and his constituents just as much as my constituents and myself to hear Pronsias McAirt or Frank Card, in common English, apologising or putting forward the voice of apology on behalf of the Provisional IRA for the murder of a 6-year-old child. He put over the apology in such a way that made it obvious that he had probably written the statement himself.
That is the body we are supposed to accept as a legal political organisation. If the UVF needs to be declared an illegal organisation, then Provisional Sinn Fein also needs to be the subject of a similar declaration. It was the Provisional Sinn Fein which provided the propaganda battle. It manipulates the emotions in the Catholic ghetto areas. The incident centres are an invaluable part of the Republican terrorist campaign. When we consider the folly of the ceasefire and the fact that it is considered a cease-fire, we can appreciate the importance which can be attached to Provisional Sinn Fein spokesmen.
Reference has been made to the successes of the security forces. It would be wrong for the House to blind itself by

277
the statistics of the Secretary of State. Since the cease-fire, and in my constituency, Postmaster Elliot has been murdered at Silver Bridge. No one has been apprehended or charged. Three dog fanciers have been killed outside Newry and no one has been apprehended or charged. Four soldiers have been killed at Forkhill. Again, no one has been apprehended or charged. Detective Constable Anderson was murdered on 9th July at Lurgan. No one has been apprehended or charged. William Hanna was murdered on 26th July at Lurgan. No one has been apprehended or charged. George McCall was murdered on 16th August at Charlemont. No one has been apprehended or charged. Mr. Kerr was murdered on 17th August in Armagh city. No one has been apprehended or charged. William Meeklim was murdered on 18th August in Newton Hamilton, and again, no one has been apprehended or charged. Two Gaelic fans were murdered on 24th August at Newton Hamilton. No one has been apprehended or charged.
There was the case of William Frazer on 30th August at Whitecross, when again nobody was apprehended or charged. There was the case of Joe Reid on 31st August, with nobody apprehended or charged. Then on 1st September five Orangemen at Tullyvallen were killed, and yet again nobody was apprehended or charged. There was the case of Andrew Baird on 22nd September, at Portadown, again with nobody being apprehended or charged. Furthermore, two soldiers were killed in South Amagh, again with nobody being apprehended or charged.
Therefore, it is all very well to produce statistics to show success in the anti-terrorist campaign, but I have to look at these matters from the point of view of my constituency, and I see no such success.
Mr. Fitt: Is not the hon. Gentleman being a little selective in the names he has given? Is he not aware that in the Armagh constituency in the Portadown triangle 31 Catholics have been murdered as well?
Mr. McCusker: I am referring specifically to County Armagh. Most of the murders in the area to which the hon. Gentleman refers were committed in
278
County Tyrone. I meant to go on to say that members of the Miami Showband were shot in County Down. Then there were incidents involving a darts club in County Down, and also Bingo players in the same county. I am referring to my own constituency. I included two Catholics when I mentioned the two Gaelic fans. Again, nobody has been apprehended or charged with murder. In view of all this, what success can I attribute to the drive by the security forces?
After some of the incidents at the beginning of September in County Armagh we were assured that certain action would be taken in the southern part of the county. A total of 1,500 troops were rushed into Crossmaglen, but in broad daylight, three miles from Crossmaglen, six armed masked Provisional IRA men mounted a road block and stopped a Press car whose occupants were on their way to Crossmaglen to report on the operation.
I took a Member of this House to County Armagh to show him the situation there, and I had to offer him a gun to protect himself, when we got to a certain area, because there is no guarantee that anybody else would protect him. He did not take it, but it was offered.
Mr. Orme: That is illegal.
Mr. McCusker: Nobody else could have protected him. He was being taken into an area where one has to rely on one's wits and ability to get oneself out again.
Cross-border roads have been closed and in the past fortnight they have been opened. If the Army intended to close those roads it should have kept them closed. If that was not its intention, it should not have been done in the first place. It will help nobody if the Army loses face in this way.
I had a telephone call on Sunday from a family in Tullyvallen two of whose members had been murdered, and I was told that the Provisional IRA was operating openly at a road block only 300 yards from their home.
I have to listen to the Secretary of State congratulating himself on the success he has had in certain areas. I ask the House to look at my constituency and to ask whether this has any relevance to the true situation. The right hon. Gentleman must decide whether he wants to defeat the

279
Provisional IRA. I hope that he is coming to the view that it can be defeated. It can and must be defeated. I hope that some of the things that the right hon. Gentleman has said today show that he is prepared to defeat the Provisional IRA.
6.5 p.m.
Mr. John Watkinson: I share the concern of many hon. Members about the basis of this Order, which adds the UVF to the list of proscribed political organisations.
The hon. Member for Abingdon (Mr. Neave) made some telling points about the manner in which the law can be enforced, and raised the question of whether it was being enforced. I do not sit for a Northern Ireland constituency, but I have no doubt that hon. Members from Northern Ireland could give a great deal of evidence about members of so-called proscribed organisations. I wonder to what extent the law is being brought into greater disrepute by the Order. It is to the subject of disrespect for the law that I wish to address my remarks, particularly the effects of detention.
I wholeheartedly support the Secretary of State's policy aimed at doing away with detention. I appeal to him not to give way to the temptation to reintroduce detention. It brings into disrespect the law that we are trying to maintain in Northern Ireland. On the one hand, we state that we want a society that respects law and order; on the other hand, we seek to impose on that society a system of law and order that people cannot respect.
Under the detention processes the laws of evidence are suspended. Under that system people can give evidence behind a screen and the defendant himself may be removed from the court and may not hear what is being said against him. Oral and written evidence may be introduced which would not be accepted in courts in other parts of the United Kingdom. We must ask ourselves to consider to what extent a person is given a fair trial in those circumstances.
I believe that the processes are wrong and that we must look at their effect on the system. I have a letter dealing with the case of somebody in Northern Ireland who has been wrongfully detained. The
280
net result has been that members of his family, previously not concerned with the IRA, have promptly joined it. That is one of the effects of detention, and it cannot be denied.
We must look at the effect of detention in a wider context. During the summer on behalf of an organisation I visited a Middle Eastern country to ask about political prisoners. Finally, I met an official in the Foreign Office there and mentioned the names of the prisoners in whom I was interested and I instanced the procedures and trials that they follow in his country. The retort from that official was "Just look at what is going on in your own country in Northern Ireland". We must bear these matters in mind when we seek to condemn the procedures elsewhere. These procedures are taking place on our own doorstep and we must answer for them.
I do not suggest that we live in a police State, or that there is such a situation in Northern Ireland, but I believe that it is the beginning of a police State when court procedures in Northern Ireland exist as they do at present. From that point of view alone we are running a risk in Northern Ireland.
We have heard a great deal about special categories of prisoners. I am not in favour of such procedures. If a man commits a crime, he is a criminal, but under the procedures in Northern Ireland, involving special categories of prisoners, people are tried without due process of law. Has this proved a deterrent? In face of the present serious problems, it does not appear to have done so. It may be that deterrence works in certain parts of the world—but only because those countries are prepared to embrace a system of punishment that is inconceivable to us in this country. I believe that detention should be done away with, and I welcome the Secretary of State's commitment in this respect.
The Secretary of State outlined details of a scheme whereby he would give remission of sentence to those who had been imprisoned. As I understand it, he said that these persons, if they committed a further offence, would have to serve out their remitted sentence. There appears to be some confusion here. It seems that this is simply carrying across to the Northern Ireland situation the suspended

281
sentence principle, whereby if a person commits an offence and is given a suspended sentence but subsequently reappears before the court, he has to serve the full amount of the suspended sentence.
A point which has been made repeatedly is that if we have so-called political prisoners, we must concern ourselves with the problems of rehabilitation. This point has not been adequately dealt with. I appreciate that we are faced with the problem of finding the money. I hope that money can be provided to give Northern Ireland suitable rehabilitation centres for those who come out of prison.
6.12 p.m.
Mr. Robert J. Bradford: There are many in the House who will be grateful to the Secretary of State for the information that one of the disastrous anomalies in the penal system of Northern Ireland is to be removed—that of special category status for certain prisoners. We are also grateful to the right hon. Gentleman for widening the debate somewhat and thereby enabling us to deal with some law and order issues. We have heard a great deal about inter-faction conflict and internecine conflict, but it must be borne in mind that one of the grave problems facing Northern Ireland is the continual violence and destruction perpetrated by the Provisional IRA while a cease-fire or truce is in existence with that organisation.
Instances of the activities of the Provisional IRA are legion. As recently as September there were atrocities in the constituencies of my hon. Friends the Members for Londonderry (Mr. Ross), Armagh (Mr. McCusker) and my right hon. Friend the Member for Down, South (Mr. Powell). In my constituency there has been the destruction of a police station. The Secretary of State will recall the earnest warning and the sincere advice given by hon. Members with regard to the advisability of creating incident centres and the warnings given about their rôle in the truce between the British Government and the Provisional IRA.
Regrettably, the Secretary of State seems to have fallen into the simple yet sinister trap of involvement with the Provisional IRA. My hon. Friend the Member for Armagh rightly made the point that there was no distinction between Provision Sinn Fein and the Provisional IRA. Having fallen into the trap
282
of involvement with this destructive terrorist organisation the Secretary of State will find it impossible to extricate himself without exposing himself to the charge of harassment and suppression of the minority community should he seek seriously to deploy the troops in Northern Ireland against the Provisional IRA.
The brilliance of the IRA manoeuvre lies in its simplicity. If the British Government decide to act contrary to the "advice" given by the Republicans controlling the incident centres, once again the old rallying cry will erupt in the so-called minority sections of the community—"Unite to oppose British aggression." It is a war cry which is emotive, irrational and illogical, yet the awful consequence of that war cry would be that all the IRA atrocities, the death and murder due to the activities of the Provisionals—even the murder of a 6-year-old child recently—would be forgotten. Once again we should find the minority misled and misguided, yes, even by some politicians as well as by the murderous rabble with which the British Government have effected a more than formal relationship.
This kind of simple trap is deeply to be condemned. The IRA ploy is sinister in that any terrorist group can destroy or attempt to destroy with impunity, yet the cease-fire or truce continues so long as that group is not connected with those who are allegedly the signatories to the cease-fire, or the allegiants of that group which has agreed to the cease-fire. What do we find? We find that a growing number of maverick IRA groups continue to bomb, murder and maim. The level of anti-IRA activity remains at an inadequate level because of a commitment to one group of terrorists. What is to stop terrorists from taking action under another name when they know of the unwillingness of the British Government to grasp the nettle and defend part of the United Kingdom?
If the Secretary of State thinks that the cease-fire or truce and the incident centres determine the level of violence, he is naive in the extreme. The level of IRA violence and activity are determined by many other factors, perhaps including the progress or otherwise at the Convention. But the British Government's contact and pleadings with this illegal organisation is not a determining factor. I am

283
not one of those who divorce consent from authority. Therefore, I recognise the difficulty of re-introducing in full the police presence into areas in which residents have been brainwashed by thugs and irresponsible politicians to reject the RUC.
If I may reply to a statement made by the hon. Member for Belfast, West (Mr. Fitt), I would point out that the police force is not acceptable in some parts of the minority community not because it has been brutal and discriminatory, but because there has been an unwillingness in those areas to support the police force since the inception of Northern Ireland. There has been rather an eagerness to oppose Northern Ireland, to show open hostility to the custodians of law and order and to lay the blame on a so-called sectarian police force for this kind of reaction.
The Secretary of State must take immediate steps to rob violent men and their passive office boys in incident centres of any credibility. He must do this by giving himself the opportunity to appeal direct to every decent citizen in Northern Ireland, Roman Catholic and Protestant, and encourage them to recognise the need for effective policing and for an effective security policy throughout the Province. For God's sake get rid of the silly centres and break any relationship with the Provisional IRA through the Provisional Sinn Fein! Do it now, for the sake of Ulster!
6.18 p.m.
Mr. John Biggs-Davison: May I at the outset make clear to the House and particularly to the hon. Member for Kingston upon Hull, Central (Mr. McNamara), who is not now in the Chamber, that my hon. Friend the Member for Abingdon (Mr. Neave) did not for one moment propose, either for himself or for the Opposition, that Northern Ireland should adopt the Southern Irish expedient of putting away members of illegal organisations on the say-so of an officer of the Garda Siochana not below the rank of chief superintendent. My hon. Friend asked whether the Secretary of State had given consideration to this as a possible alternative to detention which the Secretary of State, with the warm approval of his hon. Friend the Member for Gloucestershire,
284
West (Mr. Watkinson), means to bring to a speedy end. My hon. Friend did not advocate this as a matter of policy and I think that Hansard will bear that out.
My hon. Friend the Member for Abingdon and I recently visited Dublin. There we were encouraged, as the House had been encouraged, by the courage and constancy of the Government in Dublin at grips—as are our own Government—with terrorism. Upon the defeat of terrorism hangs not only the safety and cohesion of the United Kingdom but the peace and, indeed, the existence of the Irish Republic.
On this side of the water we are watching the process of the criminal law jurisdiction legislation. Democratic institutions and civilised life throughout the British Isles are in peril. If there is any certainty in the politics of our neighbour, it is this. Responsible statesmen there are anxious that the forces of the United Kingdom should continue to soldier on in Northern Ireland in support of the civil power until normal policing is possible throughout the Province.
I do not think that the view expressed by the hon. Member for Preston, South (Mr. Thorne) would receive a warm welcome in Dublin. There is no burning desire there to assume the administration of Northern Ireland, where an overwhelming majority of the people, including many Catholics, voted in successive elections and in the border poll to remain citizens with us of the United Kingdom.
The Minister for Posts and Telegraphs of the Irish Republic, Dr. Conor Cruise O'Brien, said recently on a BBC television programme that the main achievement of the IRA had been to widen the differences in Northern Ireland and to eliminate counter-organisations of extremists on what he called the Protestant side
"of equal brutality and greater numbers".
Of such is the Ulster Volunteer Force which has committed, and has gloried in, murder.
I do not think that any hon. Member would dissent from what the hon. Member for Belfast, West (Mr. Fitt) said about the UVF. We applaud his condemnation of all murder gangs, whatever flag they befoul. It takes courage to say

285
what the hon. Gentleman said. That is a virtue of which the hon. Gentleman has not been deficient—I am sorry that he is not present to hear me say this—although many members of the Opposition have often disagreed with him and will do so often again.
Nearly everyone will agree that on both sides of the Irish border and the Irish Sea there is need for reassurance that the Government mean to extirpate the IRA, which the hon. Member for Antrim, South (Mr. Molyneaux) described as the "root cause" of the troubles. The UDF has been properly proscribed.
The hon. Member for Armagh (Mr. McCusker) asked "What then of the Provisional Sinn Fein?" and the hon. Member for Belfast, South (Mr. Bradford) referred scathingly to the incident centres. We do not hear very much from the Treasury Bench about them, but anyone visiting northern Ireland learns of the resentment which they have aroused, especially perhaps amongst Catholic people and Catholic politicians.
It is with the Provisional Sinn Fein that unnamed officials of the Northern Ireland Office have day-to-day, and perhaps night-to-night, contact, while members of the Constitutional Convention, elected by their constituents, complain that they are held at arm's length by the same set of civil servants.
I thought that the hon. Member for Antrim, South made a strong point when he said that these contacts, which suggest that everything is negotiable, weaken the assurances we heard today by the Secretary of State—which we accept—that there will be no amnesty for terrorists.
The hon. Member for Armagh spoke of the anarchy in that country. He spoke also of bitter resentment aroused by the toleration of illegal, but televised, paramilitary funerals. When such incidents occurred this side of the water there was much indignation. Action was taken in London under the Public Order Act 1963. We do not need much knowledge or imagination to grasp the fact that it is much more difficult to enforce a law of that kind in Northern Ireland. Nevertheless, when uniformed IRA men parade in Belfast before the populace and cameras there is a deplorable effect on public morale. Few, if any, insurrectionary organisations have attuned their guerrilla
286
operations more closely to the mass media, and in this way the propaganda of the Irish Republican Army gains access to the screens of millions.
We await the report of the Constitutional Convention. The more constructive political approaches there are in Northern Ireland, the more likely there is to be a crescendo of bombs and bullets. There is nothing that terrorists detest more than a coming together of the law-abiding. We must, I fear, expect terrorism to sink to the lowest depths of indiscriminate atrocity. But no one, either here or abroad, should be deceived because the British are easy going, rather insular and slow to anger. We must steel ourselves and do our duty to our constituents.
Tribute has been paid to Her Majesty's Forces, whether the Regulars or the Ulster Defence Regiment. We owe much to those who, incredibly, carry on their businesses, farms and occupations by day and yet manage to patrol by night, month after month, year after year, and to the Royal Ulster Constabulary and the Royal Ulster Constabulary Reserve.
What are the security forces doing? Sometimes it is suggested that they are engaged in holding a ring between opposing factions until politicians contrive conciliation and compromise. That is a dangerous contention.
It is also dangerous to assert that terrorism cannot be beaten, as we sometimes hear stated. This country has experience of guerrilla war. Terrorism was defeated in more than one territory overseas. If that can be done amongst strangers, it can be done in this troubled part of the homeland.
The Secretary of State called for Catholic co-operation. He was right to do so. At the risk of being criticised by the hon. Member for Kingston-upon-Hull, Central for saying something counter-productive, I state that Councillor Connelly made a fine speech when he praised the RUC as a force to which Catholics might well be pround to belong. I have found great confidence amongst the ordinary people of Ulster, belonging to different parties and of different persuasions, in the Chief Constable, Sir Jamie Flanagan.
Mr. McNamara: The hon. Gentleman misinterpreted what I said. I said that it was not for us to tell the politicians how,

287
when or why but that they should proceed in their own way and in their own time. Therefore, I was not criticising Counsellor Connelly.
Mr. Biggs-Davison: I am glad that the hon. Gentleman said that. Many members of the SDLP show great courage in difficult and dangerous circumstances. It is for them to choose their own time to make the statements which should be made.
Policing is the key. That has been said often by Front Bench speakers on both sides. We cannot expect co-operation unless we can give protection. What matters is the will to win.
The right hon. Member for Belfast, East (Mr. Craig), with the experience of a former Minister of Home Affairs, suggested that there should be a special code for the punishment of terrorists. The right hon. Gentleman and my hon. Friend the Member for Harborough (Mr. Farr) want the introduction of the death penalty for terrorists. The hon. Member for Preston, South put a contrary view. We know that many of our constituents want the restoration of the death penalty. That matter should be calmly considered without emotion by the Government.
The hon. Member for Gloucestershire, West spoke of his visit to the Middle East. Israel has been one of the most successful States in grappling with terrorism. There is no death penalty in Israel. What is Israel's secret?
I conclude by offering Her Majesty's Government the backing of Her Majesty's Opposition for all the measures and all necessary expense to give the security forces the means and, above all, the intelligence to hunt down and bring to justice in courts of law the mafias of murder.
6.30 p.m.
The Minister of State, Northern Ireland Office (Mr. Stanley Orme): I am sure that the whole House will agree with the final words uttered by the hon. Member for Epping Forest (Mr. Biggs-Davison). My right hon. Friend the Secretary of State and the Government have turned their attention to emphasising the use of the law in the strictest sense.
The debate has been hard-hitting, but reasonably so considering the subject. It has also been constructive. I have known
288
debates on Northern Ireland over many years that have been far from constructive. We seem to have reached a stage when ideas can be examined. Those ideas may be accepted or rejected, but nevertheless a common thread has run through the debate.
The hon. Member for Abingdon (Mr. Neave) made some telling remarks about proscription. The developing aspects of policy which the Secretary of State laid before the House this afternoon deal with the difficult questions of special category, the release of convicted prisoners and the ending of detention. The Government are not spelling out their policy in a period of calm but are showing that they have a consistent and constructive policy. They recognise the rôle played by the RUC and the Army and, at the same time, look forward to more constructive political developments following the Convention's report.
The Government recognise that the proscription of an organisation probably raises more questions than it solves. If the Order is accepted there will remain seven proscribed organisations, but we want to get rid of all proscription.
As the hon. Member for Armagh (Mr. McCusker) said, we de-proscribed the Provisional Sinn Fein and the UVF last year to encourage political dialogue to take place within the Province. There are other political organisations in Northern Ireland which do not measure up in any way to the political parties in the rest of the United Kingdom. We hoped that the de-proscription of the UVF and Sinn Fein would lead to increased political activity. I spent some time talking to the people within the UVF when it was de-proscribed and trying to encourage them to go along political lines, to fight elections in the normal way and to advocate their own philosophy and policy. This appeared to be bearing fruit, but unfortunately, as we have seen over a period, the idea of political activity has been completely rejected. The people who had tried to pursue political activities were rejected and the law of the gun and gangesterdom took over. Faced with this situation, the Government felt that they had no alternative but to proscribe the UVF in the interests of the decent and ordinary people in Northern Ireland.
The hon. Members for Abingdon and Armagh and several other hon. Members

289
wanted to know why in proscribing the UVF we were not also proscribing Sinn Fein. I want to make clear that the IRA is proscribed. Reference was made to members of that military organisation operating in Northern Ireland. I should like to take this opportunity to make clear that there has never been and is never likely to be immunity for people such as Mr. Twomey.
The security forces are absolutely free to operate under their terms and not under the direction of the Secretary of State. All that the Secretary of State has said is that, in following his policy, he will not sign an interim custody order. Any person who is arrested will have to be proceeded against through the courts in the normal way.
Mr. Fitt: Will my right hon. Friend state clearly whether the Government's intention is that all the remaining detainees will be released by Christmas this year? If that is so, the overwhelming majority of people in Northern Ireland—particularly the Catholic community land—will be glad to hear that news and will seek to ensure that those who are released will not again be involved in violence.
Mr. Orme: My right hon. Friend the Secretary of State made clear to the House that that is his desire. He hopes to release all detainees before Christmas unless there are exceptional circumstances which prevent his doing so. That is certainly the Government's intention. That policy has been widely welcomed in all quarters. In the past, there have been differing views on this subject.
During the period when the Secretary of State has been releasing detainees, the prison population has increased by about 400. That is an indication of the success achieved by the security forces and the policy that is being pursued. According to the evidence of people who live in Northern Ireland in difficult areas and whom the Government respect, many of the people who commit atrocities are involved not in political activity but in sheer gangsterdom. It is almost impossible to attribute any motive to them for these deeds. That is why the Government and the Secretary of State want to unfold this policy.
290
When an organisation is proscribed, people who commit offences have to be charged. They have to be proceeded against in the normal way and proof has to be shown in the courts. Such prosecutions are not always successful. The action taken by the Secretary of State has been of assistance to the security forces in Northern Ireland. If it had not been, the Government would not have pursued this policy.
The hon. Member for Epping Forest asked whether the Government had considered introducing similar legislation to that which is in force in the Republic with regard to members of proscribed organisations. The Government have considered this matter and rejected it for the reasons that my hon. Friend the Member for Kingston upon Hull, Central (Mr. McNamara) so lucidly explained. If we are to gain the confidence of the minority community, this type of legislation in Northern Ireland could be extremely counter-productive. It would need only one bad case or one issue to destroy a great deal of the work that has been done to involve the minority, especially in policing.
Much has been said about the ceasefire, the incident centres and the action that the Government have taken. The statements on Government policy that have been made to the House have set out the position. Explanations have been given. The incident centres were for monitoring purposes only and have not been used for other purposes. The case that my right hon. Friend the Secretary of State has made about amnesty is an indication of the Government's determination to ensure not only that there is justice but that their policy is operated fairly. My right hon. Friend is watching the situation but he believes that it should be left as it is at present.
I turn to the question of the IRA and Sinn Fein. If a member of the political wing of the IRA openly states that he is involved in or takes part in violence, he will be dealt with without hesitation. I am sure that assurance is unnecessary, but no guarantees have been given to any individual in Northern Ireland. The Government stand firm on that issue.
My hon. Friend the Member for Preston, South (Mr. Thorne) raised some

291
interesting points, in particular the issue of capital punishment. Situations could be re-created in particular circumstances which would be absolutely disastrous. My views on capital punishment are well known, as are the views of most other hon. Members. I am opposed to capital punishment. However, in a Northern Ireland context it would be absolutely disastrous. My hon. Friend mentioned a declaration and said that the matter should be dealt with by Britain issuing a declaration and withdrawing. Mr. Lynch made a point about a declaration only last week. My right hon. Friend the Secretary of State referred to this matter over the weekend and said that the question should not be posed to the British Government but should be put to a million people in Northern Ireland. When we receive an answer to that question, the Government can re-examine the issue.
These measures are short-term and interim ones for Northern Ireland. There is no simple, long-term answer. The questions of detention, special category and the UVF are all part of a continuing process. Our policy has a definite thread and is leading in the right direction. I believe that this has been generally accepted by hon. Members this afternoon.
I turn to the murders in South Armagh, in that triangle, not least the constituency of the hon. Member for Armagh. I am informed that of the 118 people charged with murder a large number have been Republicans who have been operating in these areas. They include those who have been involved in the Bayardo Bar bombing and in incidents elsewhere. The security forces, including the Army with the assistance of the RUC, are operating in every part of Northern Ireland, not least within the hon. Gentleman's constituency. We want to be successful in this matter.
Mr. Fitt: I appreciate that the Minister is trying to illustrate the number of people who have been detained, arrested and charged with murder. He mentioned the Bayardo Bar. It may have been a slip of the tongue, but in case someone takes the opportunity to sneer I should point out that that bar is not in South Armagh.
Mr. Orme: It was not a slip of the tongue because I did not go into detail. I know it was in Belfast. I was speaking
292
in shorthand, in effect, because I was dealing with South Armagh. I was also dealing with West Belfast and other areas. I believe that the hon. Member for Armagh fully understood the point.
The hon. Member for Abingdon asked whether there would be any undertaking when special category prisoners were released. The answer is "No". This has been tried in the past without success. It would not be successful in the future. The policy that my right hon. Friend has outlined, which deals with conditional discharge and with what would happen if those who are discharged become involved again in violence, is an indication of what the Government propose.
Mr. Powell: I do not know whether the right hon. Gentleman is coming to the question of special category, but, if he is not, perhaps I might put to him a point for clarification now. It was in reply to the hon. Member for Belfast, West (Mr. Fitt) that the Secretary of State repeated that the special category would not be allowed for persons convicted of offences committed after 1st March next. Has there been some change of mind about this as, in the indication which he helpfully, in the light of this debate, gave to a number of hon. Members, the Secretary of State said that the admission of new prisoners to special category would come to an end at the earliest possible date, which at the moment he thought would be 1st March? Quite obviously "new prisoners" means persons convicted—becoming prisoners—for the first time. These, therefore, are two different dates of commencement.
If there has been a change of mind or if the Government still have this matter open, may I put it to the right hon. Gentleman that there is great advantage in adhering to the proposition of new prisoners as from 1st March, as it would surely be disadvantageous that after 1st March special category should still be considered on some historical basis, which would not seem to be reasonable as between one prisoner and another and which will serve only to perpetuate the system? Having taken the opportunity of the right hon. Gentleman giving way, I am asking only that this matter should be reconsidered if necessary and clarified in due course, if not this evening.
Mr. Orme: I thank the right hon. Gentleman for raising that matter. Perhaps I may repeat that those sentenced

293
for offences committed after 1st March 1976 will be accommodated in cellular accommodation and will not be able to claim special category status. I can see the sort of points that the right hon. Gentleman has in mind. My hon. Friend the Member for Belfast, West (Mr. Fitt) raised a similar point. My right hon. Friend the Secretary of State will obviously consider the points raised when the Order is laid, and there will be time for consideration of this matter. Perhaps the right hon. Gentleman will accept that as an assurance.
I was saying that in this regard no signed statements would be requested, because this would be counter-productive.
The Government feel that proscription is not only necessary but essential at this stage—not because we like it, but we see no alternative. We feel that the strands of policy that have been developed this afternoon are based on the reality of the situation in Northern Ireland. They will be pursued by the Government during the coming weeks and months, which could be crucial for the development of Northern Ireland.
Mr. Miscampbell: Shall we be able to debate the Order? The point raised by the right hon. Member for Down, South (Mr. Powell) is of great importance. Clearly we shall be faced with a situation in which, if the explanation now given by the Government as to the special category is adhered to, not only will there be no trials at least until this time next year at which people will not be eligible for the special category but, worse still, anyone coming to trial in, say, two or three years from now for an offence committed today could still be getting special category provision.
It would seem to be extremely sensible to impose a time limit, so that the crime had to have been committed after such and such a date. There ought to be a further date so that, no matter when the crime was committed, there would be a final date on which this is all finished, otherwise we shall have a farcical situation years from now with people still going into the special category.
Mr. Orme: We shall look at this matter. It is very complicated and difficult. The Government are faced with the
294
question of numbers and accommodation. We shall not get any absolutely perfect and smooth transition in which everyone fits into a firm package. Nevertheless we shall examine this point. Certainly it is useful to have had it raised this evening.
Mr. Wm. Ross: There is one other aspect of the special category of prisoners that seems to have got lost in the general melee of discussion about them. That is the problem of the long-term prisoner and the 97 life prisoners, of which no doubt there will eventually be more. At some stage I have no doubt that the Secretary of State will contend that the special category status of prisoners should disappear entirely. At what point is it intended that these long-term and life prisoners shall lose the special category status which they are allowed at present?
Mr. Orme: Because of what we have said this evening, these people cannot be affected. The House might as well face up to this difficult problem. There may be possibilities, as the numbers reduce and circumstances change, that the situation will change. However, we must say very clearly that the status of those people who have at present claimed political status will remain. The proposed legislation will deal with new prisoners on and from 1st March next year.
Question put and agreed to.
Resolved,
That the Northern Ireland (Emergency Provisions) Act 1973 (Amendment) Order 1975 (S.I., 1975, No. 1609), a copy of which was laid before this House on 6th October, be approved.

SOCIAL SECURITY (CONTRIBUTIONS)
Mr. Speaker: We now come to the two motions on social security in the name of the right hon. Lady the Secretary of State for Social Services. I understand that it has been agreed that they should be taken formally so that we can come to the debate, on the Adjournment, when the House can have a wide debate on the position of the self-employed.
Resolved,
That the Social Security (Contributions, Re-Rating) Order 1975, a draft of which was laid

295
before this House on 23rd October, be approved.—[Mr. O'Malley.]
Resolved,
That the Social Security (Contributions) (Consequential Amendments) Regulations 1975, a draft of which was laid before this House on 7th August, be aproved.—[Mr. O'Malley.]

ADJOURNMENT
Motion made, and Question proposed, That this House do now adjourn.—[Miss Boothroyd.]

SELF-EMPLOYED PERSONS
6.56 p.m.
Mr. Norman Fowler: Regrettably, this will be an all too short debate. Nevertheless, we thought it right to suggest it. It is, of course, not the first time by any means that the subject of the position of the self-employed has been raised by the Opposition. We have raised it in debate after debate about the injustice of their national insurance position; and in March we raised it in a more general debate on small businesses. It is that sort of more general debate that we hope for tonight.
We make no apology for raising the subject of this group again, because it is part of our case that the interests of the self-employed and of small businesses can all too easily be overlooked as the big battalions clamour for attention. Yet I think that we ignore the position of the self-employed at our peril, because they occupy a vital part in our society, relying, as they do, on their individual effort and individual skill. They are the people between the TUC and the CBI—people in the professions, the shopkeepers, the farmers and small business men. I should like to pay particular attention to these small business men tonight.
The self-employed in small businesses are of crucial importance in our economy. A great deal will depend upon them over the next few years. According to the Bolton Committee there are about 1¼ million small businesses in the United Kingdom, and they employ about 6 million people—about one-quarter of the nation's work force. The Bolton Committee has set out compelling reasons why we should guard their interests. In many industries the small firm is the most efficient form of business organisation. It can supply large companies with goods at a lower cost than that at which large companies could supply them for themselves. But above all, of course, the small firms are the innovators. The men who run them back their own judgment and take their own risks. New industries can develop from the small firms sector, and small firms can grow to challenge the established leaders in their field. It is in this way that we help to ensure our future, for the small firms play an invaluable part in the process of national

297
wealth creation—and that, after all, is the overwhelming problem today.
The Minister of State, Department of Health and Social Security knows the position in relation to health and social services. He knows that the truth today is that we have glaring gaps in our social services provision, and that we have groups who are urgently in need, but for whom we can bring only limited help. He knows that we have, in relation to health, particularly in the hospital service, urgent needs which cannot be met. He also knows what the problem is. That problem is not one of caring. It is the problem of providing, and, most of all, of creating, the wealth which is necessary to meet this nation's undoubted social needs.
In creating and providing that wealth, the self-employed have a vital rôle. Let us in this debate agree on the importance of the self-employed, and let us now examine the Government's record in relation to them.
Perhaps the first question that we should ask is how the self-employed themselves regard the Government because, after all the claims and counterclaims, after the huffing and puffing of Ministers, that is the acid test. Do the self-employed feel that the Government are encouraging their effort? Do they feel that the Government are taking account of their legitimate interests? Over the past few months many hon. Members will have attended meetings organised by the National Federation of Self-Employed, and they must make their own judgment on how Government policy is regarded. My impression is that amongst the self-employed there is a feeling of widespread disillusionment, there is sometimes anger, and there is nearly always bitter disappointment.
Most self-employed people work hard. Many work very hard, putting in long hours not expected in the normal job. Many self-employed risk their capital on their ideas and their skill at work, which, again, is not expected in the normal job. Let us be clear, of course, that that is their choice. They choose to live and work in that way. They do not expect to be made a special case, but they do expect to be given a fair deal.
This, they believe, has been denied them over the past 18 months. They believe
298
that the Government have produced not just one policy that goes against their interests but a whole range of them. Above all, they charge the Government with having failed to tackle inflation early enough and having thus helped to create an economic climate that could hardly be worse for small firms.
It seems to me that amongst small firms and the self-employed there is the feeling "What is the use?" What is the use of building up a business? What is the use of putting in long hours of overtime?" We should remember that even at the time of the Bolton Report the birth rate of small businesses was far less than the death rate. How disastrous it would be if that trend should not only increase but accelerate, particularly when the country has proportionately fewer small businesses than many other comparable industrial nations.
Let us, therefore, look at some of the specific causes of anger and resentment amongst the self-employed. As the Minister of State, Department of Health and Social Security is to open the debate on behalf of the Government, let us look at the national insurance position. The matter has been debated in the House time and again, and our case has consistently been that we accept that extra benefits have to be paid for, including the relaxation of the earnings rule, and if the Government want to campaign in the country as defenders of the old rule they are welcome to do just that. We accept the principle of earnings-related contributions, as I believe does every other major party in the country. What we objected to was the discrimination in the Government's proposals. We said that the proportionate increase for the self-employed man compared with the employed man was, by any measure, out of line.
We fought the Government on that issue, and in the Lords we were supported by former Labour Ministers, such as Lord George-Brown. The right hon. Lady may laugh at that, but in the present Cabinet of political midgets someone of the stature of Lord George-Brown would not come amiss. If one thing was constant throughout that period it was the obdurate refusal of the Government to listen. According to them there was no discrimination, and some went as far as to suggest, at meetings that I have attended, that the opposite was the case.

299
It is, therefore, all the more surprising to find in the Department's Press release on the new national insurance contributions the claim that special steps are being taken to help the self-employed. It is all the more surprising because, up to now, the Government's case has been that the self-employed were not entitled to any extra help. The self-employed should take some heart from this development. Regrettably, however, they will hardly be jumping in the air with glee at their position.
It seems to me that the new contributions are an implicit admission by the Government that there is a balance to redress, but what the Government must remember is that these men have faced massive increases over the past 18 months. If one considers the £3,600 a year man one realises that he will still be paying £285 a year in national insurance contributions, while a man on the top rate will now be paying almost £400 a year in contributions. It is, at its mildest, doubtful whether the earnings of many self-employed have kept pace with the scale of this increase and it would have been indefensible had this gone up further at this stage for the lower-paid self-employed.
The Government make great play in their Press release of helping the lower-paid self-employed but, as the Minister realises, the threshold of £1,600 for earnings-related contributions remains the same. That has not gone up with inflation. The effect of this is that the self-employed man whose income has advanced through inflation, but whose real earnings have remained static, will now pay earnings-related contributions, and it will be interesting to know how many self-employed men that will bring into the net.
I think that the case with national insurance is symbolic, for the discontent with the Government's measures has gone much deeper than that, and as the Chief Secretary to the Treasury is to wind up the debate I ask him to address his mind to two specific pieces of legislation that have been pushed through by the Government.
First, there is the question of the capital transfer tax, a measure that has caused widespread concern amongst the self-employed. It is a measure which they see as striking against the continuance of
300
their businesses. Let me give the House an example of how that tax affects a small family concern employing about 60 people and having assets of about £250,000. Before the start of the capital transfer tax, if a father transferred the business to a son during his, the father's, lifetime and lived for at least seven years thereafter, no liability in respect of this transfer arose on the father's death. The position now is that liability for capital gains tax, amounting to more than £76,000, will arise as soon as the transfer is effected. Admittedly the liability can be paid off over a period but that does not alter the fact that it is probably equivalent to about twice the average annual profit which such a concern might be expected to make.
The second policy of which we would like some explanation from the Chief Secretary is the higher 25 per cent. rate of VAT. This, again, is a matter of real concern to the self-employed and small business men. We all suffer from this charge, but no one suffers more than the trader who has to work out the absurdities of it all.
Let me give an example that has been raised with me. Let us consider a small electrical and television shop. If it sells a battery for a radio, VAT is at the 25 per cent. rate, but if that battery is sold for an electric clock it carries VAT at 8 per cent. The trader is left to sort out that kind of absurdity.
Perhaps I may refer the Chief Secretary to a report in Electronics Weekly, in which Peter Hawyard, a director of an electronics firm, describes a situation of undoubted confusion within one industry, with suppliers charging his firm VAT at 25 per cent. because of a total misunderstanding. The report adds:
"Mr. Hawyard attempted to invoice HM Customs and Excise for the extra work involved in multi-rate VAT collection, but he was told that there was no authority in law to pay such an invoice."
Some may think that is a small point, but I invite them to talk to the self-employed who feel themselves pressed down not only by financial measures but by administrative burdens, which are becoming unacceptable to the small man.
What words of comfort do we get from the Government on this issue? At the Labour Party conference at Blackpool,

301
the Secretary of State for Energy declared:
"We were not elected to nurse an unjust and ineffective society through yet another crisis so that it can recover its vitality and be handed back to the same people in whose interests it will aways operate…We are not just here to manage capitalism but to change society."
I hope that the Government will define their intentions here with regard to small businesses. Views like that, expressed in that way, encourage councils like the West Midlands County Council, for example, to seek power to go beyond their scope and operate as traders. What a lunatic policy to pursue at a time like this!
Underlying our debate is a much bigger question. That is the problem of unemployment. This also underlies in part the massive increase in national insurance contributions. They are raising, after all, about £1,200 million. This, and the extension of unemployment, are points not mentioned in the Department's Press release on this issue, but the toll of unemployment not only adds to the cost of the fund but also decreases its income. I hope that the Government will show some humility on this issue at any rate.
We know that the Secretary of State for Social Services said at the last election that unemployment was levelling off. The Minister of State—I am glad that both he and his right hon. Friend are here—has also had something to say on the issue. In April 1973, in the debate on the National Insurance and Supplementary Benefit Bill, he quoted from the Report of the Government Actuary and said:
"It is also alarming to read…
'I have been instructed to assume for purposes of illustration…that in both the years 1973–74 and 1974–75 the number of unemployed, excluding school leavers and adult students will average 600,000…'.
We are likely to see the tragedy of the long-term unemployed remain with us for as long as the present Government are in office."—[Official Report, 30th April 1973; Vol. 855, c. 821.]
I hope that we shall hear his views tonight. We shall certainly listen to his economic forecasts with some care.
The group whom we are discussing tonight have also suffered from unemployment. More and more men who were once self-employed are now unemployed.
302
They have suffered in the same way as everyone else from the Government's disastrous economic policies. The only difference is that they do not get unemployment benefit. Bankruptcies in small firms are increasing and some areas are particularly hard hit. Figures that I was supplied with yesterday by the National Federation of Building Employers show that, in the first half of the year, there were 800 bankruptcies in the building and construction industry. It is predominantly small firms that were going to the wall, at the rate of about 1,600 a year.
The issue to which the self-employed attach probably the most importance of all is inflation. Above all they blame this Government for their failure to tackle inflation, because it is this failure which has wreaked havoc among the self-employed. High taxes now hit them on the one hand and inflation on the other. Inflation has helped to send business rates soaring and has placed massive new burdens on virtually every self-employed person.
What is worst about the Government's attitude is not only their refusal to act or even to acknowledge the problem but also their wilful cover-up on this issue at the last two elections.
Mr. George Cunningham: Would the hon. Gentleman agree that, in a time of high inflation, it is a particularly great advantage to be able to pay one's tax a year after one has received the income—which is the position of the self-employed?
Mr. Fowler: If one can afford it, that may be right.
But to return to the point that I was making, at the last two elections this Government refused to acknowledge the problem that this country now faces and can be seen to face. The Chancellor's statement at the last election about an 8 per cent. inflation rate is well known. The Secretary of State for Social Set vices actually used a one-month figure, which led her to the conclusion in April 1974:
"While inflation in most Common Market countries"—
I thought that we would get that in somewhere—
"has been speeding up, we had the smallest rise for three years."

303
That was the message last October, and a year later the picture looks very different.
In October 1974 the Government pretended that there was no problem to face. Now we see that problem in all its clarity. Men are unemployed, small firms are going bankrupt. So we charge the Government on two counts: first for their specific policies like CTT and their VAT system; but second and above all for their delay in tackling the national problem of inflation. The self-employed are not the only group to have suffered, but beyond doubt they are among the worst casualties caused by this Government.
7.16 p.m.
The Minister of State, Department of Health and Social Security (Mr. Brian O'Malley): I can agree with the hon. Member for Sutton Coldfield (Mr. Fowler) on only one thing—the importance of the efforts which self-employed people put into building up their own livelihoods and businesses which provide employment for a substantial number of people. There was nothing else in his speech with which I can agree.
It behoves an Opposition Front Bench spokesman to know a little more about the detailed facts that he uses in his argument before he stands up at the Dispatch Box. It would have helped if the hon. Member had taken the trouble to read the proceedings in Committee on the 1973 Social Security Act, in which the Class 2 and Class 4 contributions structure was established by a Conservative Government. With all that is on the record, the hon. Member has the impudence, in the unctuous way that he has used this evening, to make the nauseating speech that we have just heard, condemning this Government for inflation and every other trouble we face, when he knows very well that the first inflationary movements from purely domestic reasons arose from the trigger mechanism in the incomes policy of the previous Government, for which the right hon. Member for Finchley (Mrs. Thatcher), who is present tonight, has a responsibility as a member of the then Cabinet.
When the hon. Member goes on to say that the self-employed are not getting a
304
fair deal from this Government—[Interruption.] I shall deal with that in a moment, if hon. Members will wait. Just let me get going. I have not said anything yet. I have not dealt with any of the detailed facts yet.
I am merely saying to the hon. Member that it is becoming for an Opposition spokesman to speak with reasonable integrity on any subject. This manifestly does not happen when it comes to the self-employed and the national insurance contributions system. It is also becoming to check one's facts on inflation and the reasons for it before making the kind of speech that we have just heard.
The present system of national insurance contributions and benefits for the self-employed was devised by the Conservative Government and put into legislation in the 1973 Social Security Act. No one would guess, on the basis of the hon. Member's behaviour or, indeed, that of his whole party in recent months in Opposition, that the Conservative Party has any responsibility for this matter at all. On the whole question of the national insurance structure as it affects the self-employed, the Opposition's approach has been mischievous, irresponsible and ignorant. If there are inaccuracies, misapprehensions and misunderstandings among the self-employed about the contributions system, which I was bound by the previous Government's Act to bring into operation in April 1975, they arise from the wilful and deliberate campaign of distortion which Tory Front Bench and Back-Bench Members have carried on throughout the country.
Mr. Nicholas Ridley Mr. Nicholas Ridley (Cirencester and Tewkesbury) rose—
Mr. O'Malley: I shall give way later.
Mr. Deputy Speaker (Sir Myer Galpern): Order, I hope that hon. Members will show some respect for the Chair. I took the Chair with the assurance that this was to be a peaceful debate.
Mr. Ridley rose—
Mr. O'Malley: I had hoped so too, Mr. Deputy Speaker, but I was provoked by the hon. Member for Sutton Coldfield. I shall give way to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) later.

305
I do not expect the public at large, including the self-employed, to understand without explanation the reasons underlying the new contributions structure. However, I do expect, and I think that hon. Members when debating among themselves have a right to expect, that hon. Members and especially Opposition Front Bench spokesmen should explain their responsibility in the matter and the reasons why they introduced the Class 4 contribution which is the subject of controversy in the House tonight and which has been the subject of controversy throughout the country in recent months.
Mr. Ridley rose—
Mr. O'Malley: The hon. Member for Sutton Coldfield mentioned that the self-employed do not receive unemployment benefit. He knows that this has been the situation under successive Governments. We all know that that is one of the things that self-employed people would like. However, a Conservative Government instigated a major review of the whole of the benefit structure before the introduction of the 1973 Act. They made no changes at that time. The hon. Gentleman also knows that the self-employed would like earnings-related benefits similar to those we are providing under the Social Security Pensions Act. However, again, under the 1973 Act there were no earnings-related benefits for the self-employed. They were confined under that Act to flat-rate benefits in return for their contributions.
Mr. Ridley: I am grateful to the right hon. Gentleman for giving way. His promises to do so take a long time to be fulfilled. I remind the right hon. Gentleman that the Conservatives introduced income tax, but we introduced it at 5 per cent. I do not think the right hon. Gentleman would suggest that it is our fault that the top rate is now 98 per cent. Has he addressed himself to the point that his Government have greatly increased their share of the self-employeds' income? That is the fault not of the people who introduced the Act but of those who put up the rates.
Mr. O'Malley: I appreciate that the hon. Member for Cirencester and Tewkesbury has a deep understanding of the tax system. It must be due to the fact that he has spent so much time examining
306
the system of taxation that he has not had time to examine the national insurance system. The present Government have not loaded any financial burdens on to the self-employed additional to those which were inherent in the contributions structure set out in the 1973 Social Security Act, and I shall prove it.
Mr. Robert Boscawen: When the right hon. Gentleman has a weak and bad case, we know that he has to adopt the line of attacking my hon. Friend on a matter about which he pretends he does not know. Is it not true that the new structure was introduced with the full connivance and even congratulation of the right hon. Gentleman and the right hon. Lady during the Committee stage of the Bill? Is it not also true that whereas the whole of the change in the ratio of the contributions may not have been altered, it has been substantially altered in the case of higher incomes? That is what part of the trouble is all about.
Mr. O'Malley: I have said on more than one occasion in the House and in the country that when we were in opposition we did not try to seek short, cheap electoral popularity in this matter. I led for the Opposition in Committee on the Social Security Act 1973 and supported the Government in introducing the Class 4 contributions on the basis which I am now operating. Moreover, I have maintained the same ratio of contributions from the self-employed, compared with those of employers and employees, as was envisaged in that Act. Therefore, this Government have not changed the balance between Class 1 and Class 2/4 contributions.
I understood that four years ago when we first discussed this matter we all recognised at the outset that what we were producing with a Class 2/4 contribution structure was what I described in the House later as an "unsatisfactory hybrid". That was recognised in the White Paper "Strategy for Pensions" published by the Conservative Government in 1971. It was also recognised during the proceedings of Standing Committee E on the 1973 Act when the then Secretary of State said that:
"The hon. Member for Rotherham (Mr. O'Malley) has asked me four questions. First, I assure him that Governments in their own

307
interests of administration and equity will continue to search for ways of raising earnings-related contributions from the self-employed, but I hold out no prospects of early discovery of a panacea."—[Official Report, Standing Committee E, 25th January 1973; c. 249–50.]
Therefore, there was agreement between at least the two major political parties in 1973.
I thought that there was agreement on the general desirability of moving towards a fully earnings-related system of contributions and benefits. We have deliberately moved in that direction and, at the same time, attempted to help those of the self-employed with the lowest incomes. Last year we sought to move further towards the principle of earnings relation by holding the Class 2 contribution at £2·41, the level at which it had been put in August 1974. In order to maintain the balance as between the self-employed and Class 1 contributors, we increased the 5 per cent. rate to 8 per cent. This brought in exactly the same amount of money as would have been raised if we had increased the £2·41 to the higher figure which would have been inevitable had we accepted an unamended formula from the previous administration. The self-employed as a group paid no more.
The reasons why we chose that method were, first, to move towards earnings relation and, secondly, to prevent any increase for between one-third and one-half of the total number of people who were self-employed, whose Schedule D profits or gains were likely to be below £1,600 a year. We have again held the Class 2 contribution at £2·41. Had I carried out the formula which I inherited from the previous administration, the flat-rate contribution of £2·41 would have been increased to over £2·70 at the last uprating, and in April 1976 it would have had to be increased to £3·10. I make no apology for the fact that the Government decided, without changing the total balance between the self-employed and Class 1 people, to peg the £2·41 rather than to move to the higher figure first of £2·70 and then to £3·10.
The House must recognise that an integral part of an earnings-related contributions scheme is that the ceiling will rise as earnings and incomes rise. That was inherent and specified in the 1973 Social Security Act. Therefore, since
308
coming into office the present Government have tried to move towards what I believed was a common objective among the parties—namely, increasingly away from dependence on the Class 2 contribution, which imposes a heavy percentage burden on the self-employed with the lowest incomes. We did that first in April 1975 and we shall do so again in April 1976. However, we have also put in hand a detailed re-examination of the problems involved in establishing a system of earnings-related pensions with corresponding contribution rates for the self-employed.
But it is inevitably a major undertaking to try to overcome the practical difficulties which ruled out such a system under successive Governments. Meanwhile, the contribution changes for 1976–77 which increase the proportion of self-employed contributions, to be collected on an earnings-related basis, are consistent with the Government's objective. I should have thought and hoped, on the history of the affair, that that would be generally acceptable to the House. Surely we ought, if we can, to get rid of flat-rate contributions altogether and move to a completely new earnings-related system of both contributions and benefits for the self-employed. The Order, about which the hon. Member for Sutton Cold-field complains, attempts to move in this direction. The increases were inevitable. Additional income was needed to pay inflation-proofed pensions and benefits.
If we compare the employed with the self-employed, we see that all employed persons throughout the range of their incomes will be paying an extra ¼ per cent. on their contributions since the contribution rate goes up from 5½ per cent. to 5¾ per cent. The costs of additional unemployment benefit, about which the hon. Gentleman made so much play, clearly could not be put on the shoulders of the self-employed, because they are not entitled to unemployment benefit. Therefore, the levels of contributions set for the self-employed do not take any account of the higher levels and amounts of unemployment benefit. They are being asked to pay their share of the higher levels of the benefits to which they are entitled.
The employed man on a ceiling of £95 a week will be paying £1·67 a week extra as the result of this Order. The man

309
on £69 a week, whose earnings are at the previous ceiling, will have to pay 19p a week extra in contributions.
I ask the House to consider the changes we are proposing against the background of the increases which are having to come into operation for employed persons. We could have put the Class 2 contributions up to £3·10 and maintained the 5 per cent. rate or put it up to £2·76 and then had a band not of £1,600 to £4,900 but of £2,100 to £4,900 at 8 per cent. Instead, we have held the Class 2 contribution at £2·41 and left the bottom of the Class 4 band at £1,600.
I want to explain why we have done that. In general terms we see it as a move towards earnings relation, and it is designed to help the self-employed on lower incomes. It is estimated that in 1976–77 1·5 million self-employed people will be liable to pay a Class 2 flat-rate contribution. Of those 1·5 million, we estimate that 450,000—about one-third—will have Schedule D profits or gains below £1,600 a year. By pegging the £2·41 Class 2 contribution, there will be no increase for those 450,000 self-employed.
Secondly, as a result of this formula, a further 700,000 self-employed, whose Schedule D profits or gains are estimated to be between £1,600 and £3,600, because there will be no increase in the percentage payable on the Class 4 contribution and because the Class 2 contribution is frozen, will pay no increase as the result of the contributions in the Order which was agreed earlier.
Of the 1·5 million self-employed with liability to pay national insurance contributions, we estimate that about 1,150,000 will not be paying any additional contributions on the same earnings as the result of the changed arrangements in the Order. Of the remaining 350,000, about 150,000 have profits or gains of £4,900 or more. The House will see that if we had adopted an unamended Social Security Act 1973 formula, those 450,000 self-employed would have been paying substantially more. The 700,000 with incomes between £1,600 and £3,600 would have been subject to all kinds of variants and the people at the top of the Class 4 band would have been paying more under these arrangements because of the increased Class 4 contributions.
310
We justify these increases on the grounds that we are protecting the interests of the self-employed with the lowest incomes up to £3,600 a year and moving towards an earnings-related system of contributions. We hope that as a nation we shall eventually establish a completely new system of wholly earnings-related contributions and benefits.
Mr. John Gorst: If the Minister has more or less finished his argument, will he try to address himself to the wider question? It is difficult to follow whether he thinks that there is any justification for the discontent of the self-employed. Is he saying that this has been got up by the Opposition and that there is no justification whatsoever for the discontent of the self-employed?
Mr. O'Malley: I am surprised at the hon. Gentleman, who was at one time connected with small businesses. I thought I had explained in considerable detail—it was necessary to explain in detail because of the Opposition's behaviour—that the charge made by the hon. Member for Sutton Coldfield has not been justified. The charge simply does not stand. We are dealing with an Opposion who, on this issue, are without either guts or integrity. They are prepared to renege even on their own decisions made in Government if they think there is short-term electoral popularity to be gained.
The House must recognise that better pensions have to be paid for and that the self-employed are by no stretch of the imagination being asked to pay more than their fair share. The Opposition are too craven to admit it. They demean themselves and the nation by this behaviour.
7.38 p.m.
Mr. Jeremy Thorpe: If I got the Minister's message right, he is inviting the House to accept that, whatever the problems of the self-employed, they did not automatically arise at midnight on 28th February 1974. I suspect that, on reflection, the Conservative Opposition might be carried along with that view.
The Minister of State said that the Government accepted the principle of moving towards income-related benefits and contributions. That is to be welcomed. I hope that principle will receive wide support on both sides of the House.

311
I should like to refer to some issues on which the Government can act and help. Some are budgetary matters. Therefore, the Chief Secretary will no doubt say that he has noted them and will pass them on to his right hon. Friend, which means that he may or may not. I hope Shat he will.
Basically, the problems of the self-employed are inextricably linked with the problems of small businesses. There is a theory in this country that we have a mixed economy in which the private and public sectors each have a part to play. Unfortunately, under successive Governments the mix has been changed. The balance has swung in favour of the public sector against the private sector and in favour of the larger sections of the private sector against the smaller.
Although the Conservative Government gave lip service to free enterprise and competition, we must bear in mind that one of the major complaints from small traders and businesses concerned the way in which the previous Administration would hold down the prices of nationalised industries by pouring in immense sums of the taxpayers' money, thereby enabling many of them to compete unfairly with the private sector. One of the economic realities facing the present Government was that the nationalised industries must begin to pay and to charge the full economic price for their services. I support that view. Likewise, the imputation system of the corporation tax which the Conservative Government introduced in 1973 had a disastrous effect on those who wanted to retain profits and plough them back into their businesses.
The National Insurance Act 1974 was a refinement of the Social Security Act 1973, presented by the right hon. Member for Leeds, North-East (Sir K. Joseph), under which the 5 per cent. levy on the self-employed would have been due on 5th April this year. It would have cost them about £72 per head more each year and they would have received no corresponding benefits. The Government are entitled to say that the problems of the self-employed did not start on 28th February, but they are continuing problems with which the Government could and should be dealing.
The Bolton Report on Small Businesses pointed out that the sector of the economy
312
represented by small businesses was going into a long-term decline and that not enough new firms were being set up to replace those going out of business. In the past five years, there have been 3,000 receiving orders a year in respect of small businesses. In the first three months of this year there have been 1,000 orders and, if I may use what might be called the Healey calculation system and multiply by four, that makes 4,000 for this year. Certainly the number is increasing.
There are about 2 million self-employed in this country and they employ another 4 million—totalling together 25 per cent. of the country's work force. They make up one-fifth of the nation's wealth and very many small firms service larger companies. Rolls-Royce, for instance, has 4,500 smaller suppliers. The fate of these large companies has a great effect on small businesses. We are justified in saying that the self-employed are a very important section of the community and although they cannot expect special treatment, they are entitled to be treated fairly.
Marks and Spencer, Pilkington and Sainsbury's all started as small family businesses and if such firms find it difficult to prosper and expand, we shall see the whole private sector of our economy atrophy. With one or two exceptions, I do not think that any hon. Member would want that. The self-employed feel that in the past Governments have tried to satisfy large sections of private business, or to satisfy the demands of trade unions—both courses of action being at the expense of the self-employed.
The hon. Member for Rutherglen (Mr. Mackenzie) is responsible for small businesses, but when he was asked to address a meeting of the self-employed, he replied that he had no responsibility for the self-employed as such and therefore declined the invitation. No Minister has special responsibility for the self-employed. I asked the Prime Minister to consider appointing such a Minister. He was abroad at the time my Question appeared on the Order Paper, but the Leader of the House replied:
"The problem is that the self-employed are not a homogeneous group. They range, for example, from the small business man and shopkeeper to the professional person. The only common points are the way in which they are taxed and the way in which their national insurance contributions are computed, and here I think that a very fair balance is struck. The

313
great difficulty, therefore, is in regarding them as one coherent, homogeneous group."—[Official Report, 24th July 1975; Vol. 896, c. 766.]
I beg to differ. I think that social security matters, taxation and the general climate are common in their application to the self-employed.
The national insurance leaflet put out before the 8 per cent. increase said honestly that there would be no entitlement to any additional benefit. We know that there are 19 or 20 benefits to which the self-employed are not entitled, including unemployment and redundancy pay, `graduated pensions, disablement benefit and special hardship allowance. Employers also get tax relief on their Class 1 contributions but the self-employed do not. The self-employed have to pay income tax on the extra earnings required to pay for the extra benefits.
The faults of the 1973 Act cannot be overturned overnight, but we want much more information from the Minister. The Secretary of State said in a Press handout:
"My proposals are paving the way towards our goal of a completely earnings-related system for the self-employed in which earnings-related pensions would be paid in return for corresponding contributions. If we can find a solution to this problem which I am urgently examining, this woud right one of their biggest grievances."
She is right. This is one of the greatest grievances felt by the self-employed at the present time. If the Government can speed up their review and work towards earnings-related benefits and contributions, it would be a tremendously beneficial development in our social security system.
Mr. George Cunningham: Is the right hon. Gentleman saying that there are at least 19 national insurance benefits paid from the National Insurance Fund to which the self-employed are not entitled? If so, will he accept my assurance that if his claim turns out to be true, I shall contribute £10 to Liberal Party funds?
Mr. Thorpe: I said the figure was either 19 or 20 and I apologise if I did not speak with sufficient clarity. If the Minister wishes to correct that assertion, I shall be very happy to give way. I at least respect his knowledge of these matters.
314
I hope that the Government will also consider the possibility of a universal system of benefits along with a credit income tax system. Lord Barber started to introduce such a scheme, but it excluded the self-employed and low-paid. This would be one way of giving a guaranteed minimum income to everybody, including the self-employed.
It is ludicrous that we should have four rates of VAT. I appreciate that this matter can only be dealt with in a Budget, but some other countries have a far simpler form of VAT and I wonder whether Ministers have worked out how many man-hours are lost to the country by people having to work out VAT returns. I heard from a retail pharmacist recently who reckons to spend 40 hours a month filling in prescriptions at multi-rates of VAT.
Mr. John Mendelson: It is a bad tax.
Mr. Thorpe: This is not the occasion to enter into a debate on whether one agrees with VAT. I happen to agree with it. However, if we have multi-rates, we are piling on an appalling amount of administrative work and the self-employed are hardest hit. Firms and companies can employ accountants and write off the cost, but the self-employed cannot do that. I hope that this matter will be dealt with in the next Budget.
I believe that the captal transfer tax is preferable to death duties and has much to commend it, provided that it is paid by the donee and not the donor.
The Chief Secretary will know that there has been much argument about that in Standing Committee on the Finance Bill. The problem of the CTT is that it inhibits people from making gifts, because they know that they will have to pay tax on them.
The self-employed are likewise restricted by the rates position, which was invented in the reign of Elizabeth I and is still being amended as we go along. I hope that we shall have the Layfield Report on that matter very soon. The last Conservative Government not only reorganised local government wrongly, but failed to reorganise local government finance at the same time. That is why we are in the present appalling position.
Mr. John Ovenden: They did everything wrong.
Mr. Thorpe: The hon. Gentleman should be grateful. His party would not have got in if it had had to do so on merit.
There is an enormous amount that the Government can and must do to rid the self-employed and others of bureaucracy. Simplification of the tax structure is one matter for their attention, and the multi-rate VAT a particular aspect of it. The rates position will depend on the Lay-field Report.
The tax exemption certificates are the latest refinement. Those who wish to get a certificate as a sub-contractor have to append a photograph to the application. No doubt fingerprints will be demanded next year.
Mr. Ridley: Would not another terrible impost on the self-employed be the system whereby extra national insurance contributions are levied upon those paid more than some Liberal norm in wage increases, which is the policy of the right hon. Gentleman's party?
Mr. Thorpe: I do not accept that. The hon. Gentleman said that the Government had been a long time coming round to tackle inflation. It took us three years to persuade his former leader of the need for a prices and incomes policy, which was introduced in 1973. When this Government tried to introduce such a policy, the Conservatives were neither for nor against it: they abstained, like solemn eunuchs on the Front and Back Benches. A pay policy must be a permanent feature of our economy at least until we have overcome inflation. Those who go beyond a norm must be surcharged by an extra national insurance contribution.
What is much more important than a specific tax, a specific amount of bureaucracy, or a particular planning decision for the self-employed is the climate in which they are required to operate. The plans of successive Governments have militated against the small trader and the small business man, and that is damaging this country economically and is endangering its social fabric.
7.53 p.m.
Mr. Ted Graham: I am grateful for the fact that the hon. Member
316
for Sutton Coldfield (Mr. Fowler) indicated very quickly that we were not merely debating the Orders but that the subject had been widened. In his opening remarks he mentioned among the problems of the self-employed the Bolton Report, taxation, including VAT unemployment, bankruptcies and a great many other aspects. I think we shall benefit from our discussion on these matters tonight, but it is necessary for the House to keep the problems of the self-employed in perspective.
A self-employed person can be in business in a very small way, in which case the problems of inflation as as real for him as for any wage earner. On the other hand, he can be in a substantial way of business, either as a sole trader or in partnership with others, in which case he may not be relatively as badly off as the low-paid worker. Members of certain professions such as the law, medicine, and auditors are self-employed. This is sometimes because their professional charters specify that they must not be under a contract of service. I am not aware that there has been any demand by the professions for a transfer from self-employment to a salaried basis, even in the present inflationary conditions.
The reason is that, mainly for taxation purposes, it is still better to be self-employed than employed. The rules for deduction of tax liability are more generous under Schedule D than under Schedule E. There is also the attraction that the rewards for success go directly to the individual. In Britain we confer the privilege of limited liability both easily and cheaply. I maintain that the private company is the best form of organisation for the self-employed, and this structure should be considered by small family businesses which are still not bodies corporate. Once again the tax rules are more favourable for the private company than they are for wage or salary earners.
There has been more than one reference in the debate to the Report of the Bolton Committee on Small Firms. Perhaps I may quote briefly from the Report where, at page 85, it says:
"the small firm sector in this country…is also in a state of long term decline"—
this was in 1971—
"in terms of the number of small firms in existence…A similar decline is taking place

317
in all the other developed countries…but it has gone further here than elsewhere and is still proceeding rapidly than in some other countries."
Therefore, when the broad allusion is made that the problems of the self-employed and the small firms can be laid more at the door of the present Government than of any other, we have to look much further back than did the Leader of the Liberal Party, who went back to March 1974.
The Bolton Committee said that the reason for the diminution in small businesses was financial and due to bankruptcies, but that is not the only cause of small businesses continuing to go out of business. There is the problem of succession in a one-man business where the proprietor dearly wishes to pass on the business to a son or daughter who has declined to take it on. There is the problem of the small business which has decided to sell out to a bigger business.
I would not decry the fact that it is the right of any small business to take as big a profit as it can in selling out to a larger concern. There is the laudable action of the big business and the small business getting together to make arrangements for tied suppliers and tied outlets. The biggest danger to the small business continues to be the big business. It is in the nature of the jungle that the big business will continue to look for small businesses to eat up in order to make their big businesses even bigger and more efficient.
Small businesses are exempt from a number of legislative measures which large businesses must comply with, even though those larger companies have small units. There is the Offices, Shops and Railway Premises Act and the training board levies. Those are examples of exemptions enjoyed by small businesses and the self-employed. The exemptions may be small but in the present climate they are most important.
I agree with the right hon. Member for Devon, North (Mr. Thorpe) about the frustrations concerned with VAT—the compilation and the returns. I disagree with having too many different rates of VAT. This is a big problem for both small and large businesses. I wonder whether there is some scope for a common VAT accounting service for the self-employed. I have in mind the possibility
318
of trade associations representing the self-employed and the small firms setting up a district or regional scheme on a non-profit-making basis to assist their members. Confidentiality must be assured.
Perhaps a feasibility study could be carried out and the interest of the Small Firms Information Centre could be enlisted. Perhaps the voluntary chains which now act as wholesalers—Spar, Vivo and Mace—could add another service to those which they give to their members, to include standardised accounting and mechanised systems run on a non-profit basis.
In the co-operative movement—here I declare an interest—we are well aware of the problems of keeping small units operating on a modest profit. We have the benefit of cross-subsidisation, which has always been necessary to maintain shops in rural areas and certain urban districts where special problems arise. I sympathise with the small trader, whether self-employed or part of a co-operative, who seeks to maintain a service to an isolated community in a rural area or to an urban area where the population continues to decline.
I would support suggestions that might emerge from the Government to give encouragement and financial assistance to organisations which will maintain a service to the community in such areas despite the fact that the usual norms and yardsticks of profitability make it imperative that they should get out. The 1971 Census of Distribution, the belated publication of which reflects no credit on the Department responsible, shows clearly—
Mr. F. P. Crowder: On a point of order, Mr. Deputy Speaker. May I ask who wrote what the hon. Gentleman is reading out?
Mr. Graham: In order to make sure that some important points are made, I have read certain parts of my speech. [Interruption.] Though I have been here for 18 months, I have not known the hon. Gentleman for as long and I have not seen him before. What is his name?
The tenor of what I have to say is that the small business man and the individual self-employed person have many problems, which are well understood by the various Departments of Government. But

319
the self-employed and the small business men are not owed a living by other members of the business community or the country at large. They have been well treated by the country and the Government of the day.
The hon. Member for Sutton Coldfield referred to a West Midlands authority's consideration of going into some forms of municipal trading. I view such proposals with a great deal of care and caution. The temptation for municipalities to go in for that form of trading in less attractive locations can lead to many pitfalls, and I advise them against doing so. It is bad enough for the self-employed person to make a living in those circumstances. Firms which have to employ staff at trade union negotiated rates of pay and conditions will be hard put to it to break even in difficult circumstances of that kind.
The dilemma of the self-employed is no different to that facing the nation as a whole. On the one hand there is inflation, and on the other hand there are counter-inflationary measures and world conditions which are producing a recession.
Part of the attraction of being self-employed is that the self-employed are their own masters. It is still a good way of life, provided that a living can be earned. There are examples in certain European countries of persons who are basically self-employed co-operating with each other in a variety of ways.
There are problems of under-capitalisation and the under-utilisation of capital in small firms. Most of our craft and professional training is designed to produce vocational competence. I should like to see instruction on the ability to manage and to cost much more effectively introduced into the training of the self-employed.
It may be cold comfort to say this but, having had the training to assess problems, one is better off not becoming self-employed than facing the perils of bankruptcy.
8.5 p.m.
Mr. David Mitchell: The problems of the self-employed are so many and so serious that one cannot do justice to them in a three-hour debate. I could not do it even if I were allowed to spend the whole time on my own speech,
320
which would not be acceptable to you, Mr. Deputy Speaker, or to the House.
The problems of the self-employed fall into two groups—the national insurance problems and the problems of the self-employed as small business men. I shall first examine the national insurance problems. The story must start a year ago, when the Government announced that they would increase the level of pensions and other national insurance benefits. I think that every hon. Member realised that that meant that the national insurance contribution had to go up. The question was how to share the burden fairly between the different groups of contributors—the self-employed, the employer and the employee.
The Government chose to impose a substantial increase on the employer to make a reduction for the average employee and to impose a savage increase on the self-employed. It was the unfairness of the treatment as between the average employee and the self-employed which aroused so much justifiable anger.
Mr. Ovenden: If the hon. Gentleman is so interested in fairness, he should examine the previous relationship between the contributions of the self-employed and the combined employee-employer contributions. Does he not accept that until the increases of last year the self-employed were not paying their fair share of the contributions?
Mr. Mitchell: I dispute that. It is all very well for the hon. Gentleman to claim that the self-employed were not paying their fair share, but one must view the matter against the background of the self-employed having been subjected in their small businesses—shops and the like—to the most rigorous price control. They were therefore unable to find the additional money required, at a time when inflation had been playing havoc with their ability even to finance their existing businesses.
Last year's increases were unfair because they put the burden disproportionately on the self-employed compared with the average employee, whose contribution was reduced when benefits were going up and he expected to have to pay an increased amount.
It is true that this year, as a result of Opposition pressure in Parliament and

321
pressure from such organisations as the National Chamber of Trade, the National Federation of Self-Employed and the Smaller Business Association, and a great welling-up of public opinion in protest, the Government have treated the self-employed less unfairly than they did last year. I believe that it is as a result of all that pressure that this time there is a much fairer sharing of the burden.
Let us take the example in the Government's own statement to see the mitigation of the burden. The Secretary of State chose a man earning £4,900 a year. The employee earning that amount will pay an extra £1·65 a week and the employer an extra £2·38. The self-employed man will pay an extra £2. That is not as good as it sounds, although we have achieved quite a lot.
I am glad that a Treasury Minister is present, because the nub of the problem here moves from national insurance to tax. First, the problem is that this year's increase is made on top of last year's unfair levy. Employers get tax relief on their contributions, the self-employed do not. Therefore, the self-employed must earn gross the pre-tax amount necessary, which I estimated at about £180 a year, taking the level of salary chosen by the Secretary of State. It has been suggested that the contribution of the self-employed to the National Insurance Fund is limited to £104 a year. That has been given as the maximum increase. The reality is that the amount which the self-employed pay in tax should be added to the amount of contribution that they are making—namely, a further £76.
Although the National Insurance Fund uses the contribution principle to decide who are the beneficiaries, it does not operate on an actuarial basis—namely, that the amount contributed provides the amount drawn in benefits. The Minister will know only too well that subventions from the Treasury are substantial. As the self-employed are paying in a considerable amount which varies according to their scale of income—in fact, they are putting this additional amount into Treasury funds—they are contributing towards the financing of the National Health Service and National Insurance Fund. I reckon that it is about £76 per self-employed person on £4,900 a year, and very much higher when we take into
322
consideration the higher levels of tax on earned income.
The other factor that has to be borne in mind in considering the degree of mitigation which we have in the proposed increase which has been passed by the House is that there are a substantial number of benefits which the self-employed do not enjoy. I am told by the National Association for the Self-Employed that they total about 20. I am not prepared to argue whether the number is 19 or 20, but it is of that order.
Mr. George Cunningham rose—
Mr. Mitchell: No, I wish to develop my argument. There are many benefits which do not go to the self-employed.
Mr. Cunningham: How many?
Mr. Mitchell: I illustrate the point by referring to a Question which I put to the Secretary of State today. I asked the right hon. Lady to indicate the reciprocal arrangements made for contributors to the British National Health Service requiring hospital treatment while in EEC countries on business or on holiday. The right hon. Lady replied that there is a wide range of reciprocal arrangements for people on business or on holiday who are taken ill while on the Continent. When I asked whether they applied to the self-employed, the right hon. Lady made it clear that the arrangements do not apply to the self-employed. No doubt the Government have undertaken discussions with our EEC partners to try to achieve a situation in which the self-employed will be able to benefit in that way as a result of that Question.
That is one further example of the way in which benefits are so different for the self-employed. It is an example which many of my constituents have drawn to my attention. It is a considerable shock to many people to find that there is a group of people to whom the reciprocal arrangements do not apply—namely, those who are self-employed.
Mr. George Cunningham: The question of how many national insurance benefits the self-employed are and are not entitled to is a simple matter of fact. For the benefit of those who have not done their homework, the answer is to be found in a Written Answer to me

323
dated 22nd January 1975. The reply makes it clear that the benefits to which the self-employed are not entitled include unemployment benefit, earnings-related supplement to sickness benefit and the widow's allowance. That makes three benefits so far. Also included are graduated retirement benefits and industrial injuries benefits. That makes five benefits so far. The number of benefits or parts of benefits paid out of the National Insurance Fund comes to approximately 12 in all. That fact can be obtained at the drop of a hat by anyone who is interested in doing his homework before he gets up and speaks, unlike the hon. Gentleman and the Leader of the Liberal Party.
Mr. Mitchell: The hon. Gentleman's tongue may be dipped in acidity, but after the interesting answer to which he has just referred I hope he will haul his ministerial friend over the coals for failing to include a complete list. The answer to the Question which I put to his right hon. Friend this afternoon is not included in the list which he has read out. Therefore, his list is incomplete. Further, there are a number of other benefits that are missing from the list. When Ministers deceive their colleagues by giving them incomplete answers, we have a most unsatisfactory state of affairs.
Those who are self-employed are entitled, for example, to sickness benefit, but they draw a great deal less benefit than other contributors. We find that the self-employed person running his own business will work through influenza and perhaps half way through pneumonia. Many self-employed suffer from rheumatism and back ache but, unlike people who work in factories who go off sick, they continue to work. They cannot shut their shop doors and lose all their trade to their competitors down the road. That is a reality of life for the self-employed. It is so different from the theory and hot air of Labour Members. They have no idea of what running a small business is like.
I turn to the increases that have been announced. It is interesting that they have been announced by the Secretary of State by means of a Written Answer published on a Friday.
Mr. Robin Maxwell-Hyslop: It is an old trick.
Mr. Mitchell: Yes, it is an old trick, the result of which is that there is no opportunity for cross-examination. I would like to cross-examine the right hon. Lady now. I hope that we shall have a reply at the end of this debate. The right hon. Lady picked out two reasons for the substantial increases which she has had to make. One reason is the pensions increase and the other is the increase in the level of unemployment benefit.
The right hon. Lady's Written Answer states:
"It is also necessary to take into account the prevailing high level of unemployment, which reduces the income from contributions and increases the amount paid in benefit. These factors make substantial contribution increases for 1976–77 inescapable."
We should be told how many millions of pounds will be going out through unemployment benefit, a benefit which the self-employed do not enjoy. I think we should be told of the Government Actuary's estimate of the amount to be paid out in 1976–77 for which the contributions will be paid. What degree of unemployment has been calculated by the Government Actuary in advising the right hon. Lady on this matter? I hope we shall have an answer to that.
Mention is also made of the upper limit of earnings on which contributions are paid. The Written Answer reads:
"In view of the increase of about 30 per cent. in the general level of earnings in the period of 12 months up to April 1975".—[Official Report, 23rd October 1975; Vol. 898, c. 236.]
That is one of the factors which the right hon. Lady has taken into account in arriving at the distribution of cost to contributors, including the self-employed.
How much has the income of the self-employed increased during that period? As the right hon. Lady has been taking in money during the current period as regards the national insurance element, she must be able to tell us the increase that has taken place in the incomes of the self-employed. I suspect that the self-employed have not enjoyed anything like the 30 per cent. increase which has been the average for so many people.

325
I turn from the problems of the self-employed as national insurance contributors to the problems of the self-employed small business men. I am delighted to know that the Chief Secretary to the Treasury will be replying to the debate But where is the Minister with responsibilities for small businesses—namely, the Minister of State, Department of Industry? The Government congratulated themselves on the fact that they had appointed a Minister with special responsibilities for looking after small businesses, but in this important debate on the self-employed why is that Minister not present? Will somebody send for him? Is not the House entitled to have him here during this debate? Cannot the Government Whips send for him? I can understand why he does not wish to be present. Obviously he knows that he is not able to achieve anything, because in his representations to the Treasury he gets no change at all.
I agree with the right hon. Member for Devon, North (Mr. Thorpe) that one cannot separate the business problems of the self-employed from their national insurance problems.
Mr. George Cunningham: The Conservative Party attaches great importance to this subject. Therefore, why is not the Opposition Shadow Minister present for the debate—or is the hon. Member for Basingstoke (Mr. Mitchell) simply emitting a lot of hot air?
Mr. Mitchell: The hon. Gentleman should be aware not only that there is on the Opposition Benches a Shadow Minister for Industry with responsibilities at Shadow Cabinet level for the problems of small business men, but that my right hon. Friend the Leader of the Opposition has shown great interest in the problems of small business men and the self-employed and has great experience in these matters.
Mr. Cunningham: Where is she, then?
Mr. Mitchell: Perhaps I can be allowed to develop my argument. I am dealing with the problem of the self-employed and their difficulties in relation to national insurance matters, especially the small business men who are most affected.
Since a Treasury Minister is due to reply to the debate, perhaps he can tell
326
the House what the Government are doing about the problem of rates. Does he appreciate that the rate increases will make many small business men bankrupt in the coming year? The Rating and Valuation Association—an authoritative but not a political source—calculates that last year the average domestic increase was 35 per cent. but that the average business increase was 55 per cent. The outlook for the coming year is about 40 per cent. If we add the 55 per cent. figure last year to the 40 per cent. estimate in the coming year, we can see clearly that the level of rate increases will bankrupt and close a large number of small shops and businesses run by self-employed people.
The National Chamber of Trade indicates that this item is the worst single complaint lodged by its members and it is the area that causes it the most worry. One example I give involves a rise in the rate burden from £157 to £866. That may be an extreme case but it indicates the range of increase. What do the Government intend to do about the situation and about the possibility of allowing small businesses to pay their rates by instalments?
The problem of the small business man in seeking to fight these increased costs against pegged and price-controlled selling prices may end in his being squeezed out of existence.
I turn to the problem of VAT—a killing burden for the small business man. I use the word "killing" advisedly because there are countless small business men whose wives sit up late at night ruining their health trying to understand the complexity of a VAT system that involves a 25 per cent., an 8 per cent. and a nil rate.
Mr. George Cunningham: Who voted for VAT?
Mr. Mitchell: Of course there are difficulties in having to administer a system involving rates ranging from 25 per cent. to 8 per cent. A dispensing chemist told me that he must cope with some 600 invoices a quarter in respect of his VAT returns. The calculation does not simply involved extracting the VAT from the invoices. For example, when the chemist sells an aspirin on prescription it is free of VAT, but when the aspirin is sold to a customer over the counter the chemist must calculate the VAT at 8 per cent.

327
Furthermore, when the chemist sells electrical goods, cameras and so on, the rate he then has to deal with is a 25 per cent. VAT rate. It is a nightmare for people to understand and it is even worse when they come to calculations of the end result. I do not think the Government have any idea of the complexity of these matters facing the small business man.
We demand that the Government should give the House an assurance that they will give no parliamentary time to any extension of municipal trading powers.
The major concern of the Treasury, of economists and of international experts relates to the low level of investment and, indeed, the utilisation of investment. On the latter, one can be sure that investment by the small business man involves the full and maximum use of that money. If we wish to become more competitive, to secure export orders and to provide jobs for our work force, we must increase the level of investment. Furthermore, the Government are paying £10,000 per job in the regions in terms of job creation, and they are paying even more to preserve jobs in the motor car industry. But they are giving nothing to the small business man. He is not asking for subsidies or money to be doled out to him. All he requires is for enough money to be left in his till at the end of the day to pay his increased costs.
We have been told that the NEDC is due to meet tomorrow, but there is no item on its agenda relating to the problems of small businesses. It must be borne in mind that such businesses comprise about 25 per cent. of our gross national product, but still the NEDC does not intend to discuss their problems. The situation should be rectified as soon as possible. Investment in the small business sector is being killed off by a combination of the Government's extra taxation in the form of corporation tax, the proposed wealth tax, the capital transfer tax and the capital gains tax—without any offset for inflation and similar burdens.
The hon. Member for Edmonton (Mr. Graham) referred to big business cannibalising the small business. I ask the
328
House to consider what will happen when those small businesses cease to exist and there is nothing for the cannibal to eat.
Mr. Deputy SpeakerIt is the duty and aim of the Chair to try to acommodate as many hon. Members as possible in this debate. I understand that 10 hon. Members are anxious to take part in these discussions. That means that speeches will have to be a great deal shorter. The hon. Member for Basing-stoke (Mr. Mitchell) took longer than both Front Bench speakers, and that does not help the situation.
8.29 p.m.
Mr. John Mendelson: I have taken part in many debates with the hon. Member for Basingstoke (Mr. Mitchell) on various aspects of industrial relations legislation. I am accustomed to the hon. Gentleman's taking a long time to say his piece—but there is no harm in him. The hon. Gentleman indulged in a little propaganda, but he made one or two useful points. This was in marked contrast to the piffling propaganda contained in the speech of the hon. Member for Sutton Coldfield (Mr. Fowler). At least the hon. Member for Basingstoke sought to emphasise the difficulties of small business men and people in trade generally when they fall ill.
My right hon. Friend the Minister of State made an outstanding speech tonight which completely silenced the hon. Member for Sutton Coldfield. I wish to support the hon. Member for Basingstoke in that I believe that there is a need to make provision for those people in business in a small way who are helped by their wife, a member of the family, or an assistant. When such people fall ill, the amount of income that they would lose through being away from business for four or five days could make such a difference to their total income that they are not prepared to face that loss.
It is within the responsibility of a State that rightly spends so much on social services—irrespective of what legislation we inherited—to take another look at the position and to bring forward amending regulations so as to bring small business men within the ambit of the social service legislation. It should be possible for them to receive free medical provision

329
and some small contribution. They ought to be entitled to that even though they do not pay the full amount of national insurance.
The House of Commons exists to look after the interests of such groups of individuals, to discuss them with Social Service Ministers and Treasury Ministers so that those who are not easily classified receive careful consideration. It is not beyond the considerable intellectual capacity of my colleagues at the Department of Health and Social Security and the Treasury to bring forward proposals to cover such people.
I shall not spend much time on the social services because I should be repeating the excellent case made by the Minister of State. It would be gilding the lily for me to try to add to his case. He silenced the Opposition and made certain that those who are usually so vociferous had nothing to say. I was waiting to hear from those who usually interrupt, but they had nothing to say. I want to concentrate on another feature affecting the interests of small business men and of equal importance. I refer to their investment possibilities and their chances of maintaining and developing trade.
Many hon. Members have known me for many years. I hope that they will not take it amiss when I say that it is dangerous for the well-being of the State, regardless of which party is in power, to create among small business men an atmosphere of Poujadist persecution. It is dangerous to set at the helm of such a movement people who are not well versed in political life, people who try to make quick political capital, heaping propaganda upon propaganda. If the small business man, who has traditionally and rightly regarded himself as an important section of the nation, becomes convinced that everything and everyone is against him, he may not turn to the middle class for a leader. He may look for a leader in a completely different area, one who does not have the avenue of politics in mind. I give this warning to those who lightheartedly believe in the kind of propaganda that we have heard tonight.
It is much more important to discuss the interests of those facing difficult economic and social problems than to
330
give them a persecution complex for which there is no justification. I hope that the Government will reprint the Minister of State's speech. I hope that what he had to say about the fairness of the case and the care with which these small business men are treated will be made widely known throughout the constituencies. These facts are more important than philosophical speeches on the high problems of politics. These are things people ought to know.
I come now to the problem of keeping a business and developing it. I wonder whether other hon. Members saw a television programme on BBC2 last week when a small business man met three representatives of investment houses and private banks. Although I do not always recommend the BBC, I thought that that programme was instructive. Although part of it was obviously staged, it could teach us a great deal.
Briefly, there was a small business man who wished to expand and who consulted three investment bankers and representatives of finance houses. He put his case to them and asked them for a loan. He opened his books. His financial adviser was with him. He made his case, which was turned down.
The hon. Member for Basingstoke asked about larger firms taking over smaller firms. The first finance man who spoke during the programme turned down the small manufacturer's request for a loan. He said "I do not think that you have a case for developing your business. I think that you are a case for a takeover." He used that word. It was not a Left-wing member of the Parliamentary Labour Party who used that blessed word. It was used by the representative of a finance house on television in front of 5 million viewers.
Mr. David Mitchell: That business might have been in a situation in which the bank would not lend money, as the bank would have been taking a share in the risk of running the business. If more than half the finance used in running a business comes from a bank and not from funds ploughed back into the business, or the money invested by shareholders, the bank must carry part of the risk of running the business. It would be wrong for the bank to do that. However, the business man would not be able to provide

331
further capital because of the taxation system.
Mr. Mendelson: The hon. Gentleman has always been good at defending big business. We are accustomed to that.
Whatever the circumstances of any case, small firms face one great difficulty. This has nothing to do with the propaganda accusation of the Conservative Party about what happened in February 1974. This has occurred during the past 35 years. This problem is faced by the business which is situated between the giants of business and industry and the international market. Small firms face a considerable difficulty. They have good ideas, technical ability, courage and enterprise with which to develop their businesses, but they face the problem of finding capital.
I make this proposal to the Treasury. We are dedicated to the proposition that our future depends upon investment. It is clear that not all investment is best placed and most advantageously developed. A way must be found by the Government to come in where the private financial consortia and the banks refuse to provide comparatively small sums. I do not wish to make a propaganda comparison with the case of British Leyland. Nor shall I compare the large sums that might be necessary there with the smaller sums about which I am speaking.
These sums should not be provided to produce a temporary reduction, in one corner of the country, of the total number of unemployed, even though unemployment is already intolerably high. I refer to the time when the creation of future manufacturing processes will guarantee that money will not have to be spent on the artificial creation of jobs, but will be repaid twice over by smaller firms developing new processes, becoming slightly larger, and being allowed to make their additional contribution to British industrial life.
The appointment of another Minister to deal with small firms might be helpful although the creation of new Ministries alone solves nothing. The Government must set aside a considerable amount of capital and establish a small Department to be exclusively occupied with looking for opportunities and providing investment capital for smaller firms. Would that not be a sensible policy for a Labour
332
Government to pursue? The Government are not wedded by definition to big business. They are not in the pocket of big business and they do not owe any allegiance to it.
The small firms and the small business community face another difficulty. I refer to the large-scale publicity which is required if manufacturers want to make their products known. Often is is not the quality of the product that determines who is successful. It is the amount of money that can be spent on propaganda and publicity services. Coupled with that is the amount that can be bought in bulk, which can be justified only by an expectation of sales beyond that of the small man.
In the correspondence I receive from small traders, as distinct from small manufacturers, this plays a very large part. We all know of the sentimental complaint about the disappearance of the corner shop. Why is it disappearing? It is not disappearing because of the wickedness of the Labour Government. That is why it is so misguiding to stage this debate and start with 1st February 1974. To do that does not serve the interests of the self-employed, the small business man, or the small shop keeper. The problem arises because in the High Street the shop keepers who buy in bulk and look forward to bulk sales have the loss leader and the possibility of making propaganda and capturing the customer. The small man is defenceless against this.
I am convinced that there is a long-term future for the small shop keeper, as there is for the small manufacturer. I know of many communities abroad where in a changeover from one economic system to another economists and others thought that if there were big industrial manufacturing corporations on the one hand, large numbers of industrial work people on the other hand and, in between, socialised distribution, everything would run automatically. That was found to be not enough. Some of those communities invented small shops, small manufacturers and small traders to meet the more personal desires.
There has never been created in any country, as I hope there will be in this, a community based upon the idealism of Socialistic ideas under democratic conditions. We have no model. If it were done, it would be done for the first time

333
in this land. Under such conditions the small manufacturer and the small shop keeper would continue and have a secure and important place.
Meanwhile, the Government's task is to make the burden on the small shopkeeper deliberately easier by organising bulk buying opportunities for him and by helping small shop keepers to form associations among themselves. That has been done for the farmers in Scandinavia. Those possibilities are much more realistic than people who are wedded to the capitalist system will easily understand.
Conservative Members do not want small traders to be helped. They want to use them as propaganda to beat the Labour Government over the head. They are not concerned about the real interests of small traders and small manufacturers. That subject leaves them cold. They are hypocrites and humbugs on this subject, as they are on the National Health Service and every other subject.
However, there is a need to improve the credit facilities of the small shop keeper and to afford the possibility of buying in a large market. The small shop keeper must not always be beaten by companies such as Marks and Spencer and other big stores in the High Street.
Those are some of the problems and some of the needs of small shop keepers that the Government should consider. They are more realistic than some of the remarks made by Conservative Members. In relation to social security and taxation, the speech of my hon. Friend the Minister of State has convinced me that small traders and businesses have nothing to fear from the Government and that their interests are well looked after.
Mr. Deputy Speaker: The Chair has no power to limit the length of speeches. The hon. Member for Penistone (Mr. Mendelson) said that he wanted to be brief. His idea of brevity differs entirely from mine. It is only fair to let other hon. Members speak. The hon. Member spoke for 22 minutes, and his was the second longest speech. The Chair has power to say that the debate will end at 10 o'clock and that the winding-up speeches will begin at 9.20 p.m.
8.52 p.m.
Mr. Andrew Welsh: I shall try to obey your stricture, Mr. Deputy Speaker.
334
It is important to consider the type of persons who make up the category of the self-employed. In occupation they vary from window cleaners, doctors, and lawyers through to farmers, fishermen and a host of other means of earning a living. They are a diverse, wide-ranging, multi-occupational and multi-skilled group of individuals who collectively contribute a great deal of skill, expertise and employment to our commerce and industry. In number they come to about 2 million, which when multiplied several times gives an indication of the number of people employed by the self-employed. Therefore, they are an extremely important group in our community.
This debate is a recognition of that importance. I hope that the Government will take the hint. Many European countries acknowledge the importance of the self-employed and have a Minister for self-employed affairs. I hope to see one in the United Kingdom and I certainly hope to see a Minister for self-employed affairs in the Scottish Assembly. In the meantime, as a short-term measure, I hope that the Government will consider setting up a Select Committee or a similar body to examine the problems which now face small businesses and the self-employed.
Rightly or wrongly, the small trader and shop keeper and the self-employed person believe that they are fighting for their economic life. They feel overburdened by red tape, bureaucracy and the immense amount of paper work that has been thrown on to them. VAT is a good example. VAT is a daft enough tax anyway, but when multi-rate tax is introduced it almost reaches the level of an obscenity. For example, the small trader faces a choice between nine different VAT systems in his daily operation. He now faces a bundle of solid type VAT regulations which is 2½ inches thick, which he must obey, otherwise he will bear the full stricture of the law.
One of my local traders estimates that on average he spends one hour per day during the trading period filling up forms and VAT returns, yet at the end of what was a particularly busy quarter he sent the Government a cheque for the mighty sum of 98p. All that effort, endeavour, time and work had been spent for such a small amount. It is no wonder that the

335
self-employed are complaining that they are acting as unpaid civil servants.
I hope that the Government will seriously consider some reform of the present VAT set-up. I hope they will consider a scheme whereby recompense can be given to the small trader in return for the work and effort that he puts in when filling up VAT returns.
Rightly or wrongly, small traders and the self-employed feel that the present taxation system is designed, in its amount and complexity, to handicap and frustrate their efforts. The self-employed levy, for example, is a particular bone of contention. My party, the SNP, has always opposed that levy. There has been a good deal of hypocrisy from the Conservative Benches, because it was the Conservatives who introduced it, as the Minister rightly pointed out.
Nevertheless the self-employed should be given reasonable welfare benefits, which the rest of us take for granted. As an example of that, I take the reciprocal health agreement. If employed people fall ill abroad they can be looked after, and similarly if employed people come to this country they can be looked after. This applies to everyone except the self-employed and the unemployed. The Department of Health and Social Security's pamphlet No. A. 28 points out that the self-employed in this matter have fewer rights than refugees and Stateless persons. That is a disgraceful way to treat an important section of the community.
Rightly or wrongly, for self-employed people there is little enough incentive to work hard in their own businesses and the Government seem, by the taxation system, to make it worth a man's while not to go into business for himself. The logical conclusion to this trend is that eventually everyone will end up being employed either by the State or by some monopoly firm. The centralisation and depersonalisation that that system implies is something for which we shall pay dearly. At the very least we shall have lost the variety of choices and individual and personal service which is the hallmark of the present system at its best.
I would rather look for an alternative outlook and option in which individual enterprise is encouraged and in which the
336
myriad needs of society can be met in a flexible and complex number of ways. For example, a portion of Scottish oil revenues could be used as venture capital to allow an individual with an idea to put that idea into practice, to create the new growth industries of the future and to give our people employment. I should like to see family ownership encouraged—in farming, for example, where continuity and individual attention can be allied to essential efficiency.
That could be the strength of our economic system, yet the present Government's taxation policies are designed to achieve exactly the opposite effect. In my constituency there is a farm which has been held by one family for six generations. The present generation will be the last, thanks to the workings of capital transfer tax. The situation has been reached where a man cannot hand his land and livestock to his son, and either the land must go or the livestock must go merely to meet the needs of the Government's taxation.
I should like to make it plain that I am not talking about multi-millionaires, the idle rich or massive individual wealth. I am talking about small and medium farms, fishing boats and small businesses. All of the people who run these come into the self-employed category. It is this group of people to whom the Government have signally failed to respond. I hope that this debate will be a springboard for action by the Government to take into account the needs of this extremely important group in our community.
8.58 p.m.
Mr. George Cunningham: I had not intended to take part in the debate, because I find that taking part in debates about the self-employed is very bad for my nerves. But I have been provoked by some of the remarks in the debate—not least those of the right hon. Gentleman the Leader of the Liberal Party, which showed that he was inadequately informed on some of the basic facts behind this debate. I am sorry to see that, of course, he has pushed off, though I hope that he has taken time to read the piece of paper that I gave him, which showed that his accusations that I had my facts wrong were untrue.
The hon. Member for South Angus (Mr. Welsh) suggested that there ought

337
to be a Select Committee to look into the problems of the self-employed or the small businessman. I certainly think that, given that in the past 18 months we have considered the matter of the tax and national insurance situation of the self-employed several times, any competent House of Commons that ran its affairs sensibly—as this House does not, of course—would have had one of its many Committees which could do this looking at the situation, so that the House might have the benefit of some impartial assessment of the problems before getting down to the sort of slanging match that too often takes place upon the Floor of the House.
The Leader of the Liberal Party announced that there were 19 or 20 national insurance benefits to which the self-employed were not entitled. In my rather lengthy intervention—as you pointed out, Mr. Deputy Speaker—in the speech of the hon. Member for Basing-stoke (Mr. Mitchell), I was able to show that there were only five national insurance benefits to which the self-employed were not entitled. There are seven benefits to which they are entitled, but that ratio of being entitled to seven and not being entitled to five does not properly reflect the cost of the benefits, since it is the expensive benefits, on the whole, to which the self-employed are entitled equally with other contributors to the National Insurance Fund.
Over the past five years, from 1969 to 1974, the proportion of the National Insurance Fund being spent on benefits to which the self-employed are not entitled averaged 12·5 per cent. per year. The self-employed were, therefore, on average, over those five years receiving benefits accounting for 87½ per cent. of the outgoings of the Fund. In the final year in that series, 1974, the proportion to which they were not entitled had fallen to 10·6 per cent. I concede straight away that because of the current high level of unemployment that percentage of 10 to 12 must inevitably rise, and rise quite significantly in the coming year or two, and that in itself justifies the marginally preferential treatment that the self-employed are getting in the latest increase in contributions. But the self-employed cannot claim that there is a significant part of the benefits paid for by the fund to which they are not entitled.
338
There are other points, however, which members of the Conservative Party, if they would get round to thinking about them, ought to bring forward in support of the self-employed. One is the point mentioned by the hon. Member for Basingstoke and by my hon. Friend the Member for Penistone (Mr. Mendelson) about the self-employed tending not to go sick as often as do people who are employed.
A far more important point in financial terms is the fact that on average the self-employed person retires later than does the employed person, because if he is working in a shop, he tends to go on working after the normal retirement age. This means that the amount of retirement pension that the average self-employed person draws out of the Fund must be less than the average drawn out by the employee. If that could be given some actuarial value, that would begin to justify the lower contribution to the Fund that the self-employed have always enjoyed from the beginning in 1948, but the factors so far adduced in the debate do not, I respectfully submit, justify that.
Mr. Nicholas Fairbairn: I do not understand what the hon. Gentleman means by the lower contribution. The contribution made by the employee is lower than that made by the self-employed person. The total of the contribution made by the employer of an employee and that made by the employee is higher than that made by a self-employed person. But let us be quite clear about this: the self-employed person pays much more than the employee.
Mr. Cunningham: We all know that. Time does not allow me, without incurring your annoyance, Mr. Deputy Speaker, to explain fully the answer to that point, but I shall do my best.
Let us consider the position of two establishments, one a self-employed concern and the other not self-employed, both performing similar functions and next door to each other. In the case of the establishment that is not self-employed there will have to come out of profits or be added to prices the employee's and the employer's contributions. From the self-employed establishment next door there will have to come only the self-employed contribution.

339
Then one has to take into account, of course, the fact that the self-employed gets no tax relief on his contribution, whereas the employer gets full tax relief on his contribution. If the self-employed person were being made to pay the total of the employer and employee contribution minus the 12½ per cent. for the benefits that he does not enjoy, he should get tax relief on that part which is deemed to be equivalent to the employer's contribution. But as long as he is not paying anything like the total of those two parts, he cannot expect to have it both ways, and have the tax relief as well as paying a lower contribution than other people are paying for equivalent benefits.
The self-employed also have a huge advantage in being able under Schedule D to pay their taxation long after they receive the income to which it relates. It is a marvellous advantage to have a year of not paying tax when inflation is running at its present rate. There is not an hon. Member who would not pay his tax under Schedule D rather than Schedule E if he could get away with it.
There is another factor about the new increases in the contributions. It was the case, until these increases were made, that, up to a level of £1,600 a year, the self-employed were paying over 8 per cent. contributions and only those receiving over £1,600 a year were paying as low as 8 per cent. One effect of inflation is that it is the lower level in real terms—namely, £1,600—at today's values rather than at last year's values below which one is paying a contribution in excess of 8 per cent. So in that sense, inflation has operated to the benefit of the self-employed. I concede that there are other factors working in the opposite direction. but not all the factors have worked in the opposite direction.
For the first time in all the working of the National Insurance Scheme we have a Government who are working out a method—I think that they will successfully work it out, although they are not bound to succeed—of paying the self-employed earnings-related benefits. What is so irritating to Conservative Members is that they see the same thing happening on this as happened with the option mortgage scheme. They stand up and do all the shouting about owner-occupiers and
340
how they stand for the ownership of property, but it was a Labour Government who did the only thing in that sector that actually helped the person who could be persuaded to make the switch into owner-occupation rather than being outside it. Similarly, it will be a Labour Government who for the first time produce a scheme which gives earnings-related benefits to the self-employed. That is what is driving the Tories to distraction—that we are doing the practical thing while they only do all the shouting about it.
We tend in this country, in relation to small businesses or big, to say that, if they are not succeeding, it must be the fault of the Government. The Government never get the credit when they make a profit, but if they fail, it is always the Government's fault. Surely it is obvious to a blind man that there is happening at the moment a long-term secular decline in the state of efficiency and enterprise in this country. It is the case throughout our society, from top to bottom, from side to side, through and through, and it is illustrated in this incompetent House of Commons, in its administrative procedures, as much as anywhere.
When we see businesses failing, be they small or be they large, let us realise that the fault lies usually and principally with the entrepreneurs who are in charge of them. The managers of Rolls-Royce botched it, not the Government. The managers of Leyland botched it, not the Government. If some of the self-employed go to the wall, it is normally their fault and not the fault of the Government whose activities are, in the main, extremely marginal compared with the input of efficiency and enterprise, or otherwise, by the entrepreneurs of those institutions.
9.10 p.m.
Mr. Gwynfor Evans: The pressures on the self-employed come from many quarters. They come from central Government, from local government and also, especially in the case of the small retail shops, from the chain stores, the huge multiples, the hypermarkets and huge international companies. Big business can be the most lethal enemy of small business, and it is the very small people who most need protection. It is they who suffer most

341
from what seems to be the iniquitous use made of them as unpaid tax collectors of VAT—work which in many cases takes them hours each week. This is a cause of deep and continuing resentment.
I should like to give one example from my own constituency of the way in which an international company can use the power of its near-monopoly of selling its products in order, I believe, deliberately in some rural areas to destroy small companies. It uses its wealth and its power in this way. I want to refer especially to the way in which Shell uses its power in its sale of petrol to small firms, shops, garages or petrol stations. It pursues an anti-social policy by insisting on payment for its petrol within three days of delivery, although a small rural shop or garage perhaps cannot sell that petrol within a month. In addition, if the little customer firm is only one day late in making its payment, thus taking four days instead of three, Shell from then on rigorously demands payment three days before delivery. That kind of commercial behaviour is not found in decent business circles.
Shell's attitude is that of a bully untouched by compassion. Shell represents modern Shylocks demanding their pound of flesh even at the cost of a little firm's life. In order to pay for the, let us say, £1,000 worth of petrol three days before delivery, the small firm has to have an extra £1,000 worth of capital. Where will that come from in three days? If this policy is followed persistently, the smallest people will be driven out of business—as so many of them are—for lack of capital. That is probably the object of the exercise, but it is a thoroughly anti-social practice. I wonder what the Government can do to protect the very small man against this clear example of capitalist oppression.
The same small businesses are oppressed by the weight of rates. I draw attention to the invidious situation of the small shopkeeper whose shop occupies the same premises as his home. There are many instances in my constituency of small business families suffering considerably from the fact that they have to pay the same rates for their domestic home premises as for their business premises without the rate reliefs
342
which are usually automatically granted to domestic premises. Will the Government look at this matter?
I am told that, because of the differential assessment according to size, the smallest shops pay more on average per square metre than their larger competitors. This is an anomaly which should be reviewed.
In Wales a major cause of the high rates has been the reorganisation of local government. The White Paper setting out plans for local government appeared first in 1968. It was issued by a Labour Government but its provisions were implemented by a Conservative Government. Plaid Cymru alone opposed the plans. It was a centralising measure designed to reduce the amount of local government. The result has been higher rates, higher costs and more inefficiency.
One contributory factor to the higher rates has been the water rate. The power to levy the water rate was taken out of the hands of the local authority and put into the hands of a national body, but that national body is not allowed to use its power to sell the water from Wales. If it had that power, our water rates, instead of being the highest in Europe, would be about the lowest. That would be of great help in reducing rates generally.
Lastly, on behalf of my constituents and ratepayers, I want to make a plea to the Government to do something to help them regarding the cost of the Cleddau Bridge in Pembrokeshire. I mention this point because Government intervention is responsible for the rise in the cost of this bridge from £3 million to £12 million, yet they are not prepared to pay a penny towards the cost of the bridge. The cost of the bridge is adding £1½ million a year to my local authority's rate demands. I hope that the Government will look at the matter again and help the local authority in Dyfed in a way which will enable it to look to its rural roads and other social services.
9.17 p.m.
Mr. Robert Boscawen: It is true that the problems of the self-employed, the small employer, small business, farmer and craftsman did not start with the advent of the Labour Government. By themselves some of the severe problems faced by the self-employed

343
might have been just tolerable. The problem today is that so many grave disadvantages affecting the small man have come all at once. The national insurance contribution increase, without any increase in benefits, has been the last straw which has triggered off much of the anger and ill-feeling amongst the self-employed today.
I am glad that the Minister of State has returned. The Conservative Government realised that it was necessary to increase the share of the contribution paid by the self-employed when they introduced the new structure. It had been falling over the years. It had fallen from about 70 per cent. of a joint contribution rate of the employer and employee to about 33 per cent. when the Conservative Government took office. That was a substantial fall and something had to be done to put it right.
That situation had arisen largely because the self-employed had not been brought into the earnings-related contribution scheme of earlier years. It was right to tilt the balance towards the self-employed contributing a little more for the basic pension they were to receive. Indeed, the right hon. Gentleman and his right hon. and hon. Friends connived with us in agreeing the structure. They did not oppose it. They even congratulated the previous Government on finding a way of doing it.
The right hon. Gentleman today used his great knowledge about these matters to confuse the House. He said that the Labour Government had not altered the share of the contribution which the self-employed were paying towards their benefits. That may be true taking the whole self-employed as a class. The Conservative Government had increased the self-employed's contribution from about 33 per cent. to 55 per cent. of the joint contribution rate of the employer and employee. The right hon. Gentleman now tells us that his Government are putting up contributions but are maintaining that share at about 55 per cent. I do not disbelieve him, but he failed to make clear that, while the lower levels of contributions are to remain the same, a very large slice of the cost is being transferred to the higher earners.
It is how this problem affects certain individuals and not the self-employed as
344
a class that is causing the trouble. The higher earners—those getting more than about £2,800—are being called upon to pay substantial increases, about 90 per cent. of the share of the joint contribution by employers and employees, while they do not receive the tax advantages which they would get if they paid corporation tax. It is the self-employed on higher earnings who are at a great disadvantage, and this is why they have such a considerable grievance.
The Government are using the social security system to redistribute income, within the self-employed, from the higher-paid to the lower-paid. That is the job of the Chancellor of the Exchequer, not the Secretary of State for Social Services. We should go back to the original idea of contributions being made towards the benefits received and a system which is at least fair between one contributor and another.
Mr. O'Malley: I am listening to the hon. Member with interest because he is making a knowledgeable and sensible contribution to the debate. With the Class 1 contributions under the formula of the 1973 Act, there is a redistributive element inherent in the earnings-related principle. Under today's Order, employed people pay 5·75 per cent. of their reckon-able earnings up to £95 a week to get the same flat-rate benefit. That is where the present Government disagree with the previous administration. If it was right under the previous administration's legislation that Class 1 contributors should be treated in that way, why does the hon. Member now argue that Class 2 contributors should not be treated in the same way in the interests of the self-employed who are lower paid?
Mr. Boscawen: It is quite simple. The Government are redistributinig from the higher level of earnings of a very small band—only the self-employed. If the redistribution was being made across the whole spectrum of employed people, that would be a different matter. The way the Government are proceeding is giving rise to substantial grievances, and I hope that my party will put this right when we get back into office. If this was the single problem, the self-employed would not be making such a fuss about their difficulties. The problem is the combination of the whole host of other problems

345
like rates, the capital transfer tax, multi-rate VAT and so on all coming at once, each one a straw breaking the camel's back several times over.
The self-employed have a case and it is high time that the Government paid a great deal more attention to them, not least because they are substantial employers. One of the problems today is that we are having to put up contributions in order to pay increased unemployment benefits which the self-employed do not get. If they are to be penalised in the way they have been in the last year or two, many of them will go out of business and will create even more unemployment by laying off the small number of workers each of them employs, contributing in total substantially to unemployment generally. By penalising the self-employed the Government will not make the position any better for employees, because more and more of them will be put out of work.
9.26 p.m.
Mr. Peter Mills: I wish to draw attention to the problems of the self-employed and the small businesses in the rural areas, particularly the small villages and towns. They have not been mentioned tonight and the Government should turn their attention to these problems. I do not blame the Government entirely for the position of the small shopkeepers, garages and post offices in the rural areas, though they are contributing greatly to the problems of these people. Economic pressures are squeezing them out, and the Government are adding to the burden.
Let me highlight the position of the rural post offices. These establishments are essential to rural areas. Not everyone can get into the town. Because of the high cost of petrol and the dwindling number of buses, it is getting increasingly difficult for pensioners and others living in rural areas to obtain their supplies, their postal requirements and all the other things they need. I urge the Government not to write off the rural areas in this way. Something must be done to help them.
I do not want any further depopulation of rural areas. The age levels in in villages are very high. People cannot move because they do not have the cars, the buses are not there, and the younger
346
people have gone away. It is vital for us to care for those who live in the remoter areas. In the past this country has owed much of its backbone to those who live in rural areas and small towns. I beg the Government not to forget them.
9.28 p.m.
Mr. Teddy Taylor: I feel very guilty speaking tonight when so many of my hon. Friends, having sat throughout the debate, have been unable to speak. We have had the pleasure of all the minority parties participating, and in a short debate that means that many of my hon. Friends do not get the chance to take part.
This is a subject on which the House has not had the pleasure of hearing my voice before. It is appropriate for the winding-up to be given by a Scots Member, because in these devolutionary days it is as well to remind ourselves that Scotland is still part of the United Kingdom. Many of us are determined that that is how it will remain, in spite of the views expressed by the hon. Member for South Angus (Mr. Welsh). It is also appropriate since six out of every hundred people at work in Scotland are self-employed.
Dr. M. S. Miller: The vast majority of people in Scotland feel exactly the same way as the hon. Member. They also want to remain part of the United Kingdom, but they want authority to be devolved and to have more say in their own affairs.
Mr. Taylor: I do not want to enter that debate. Every piece of advice that I have heard from the hon. Gentleman in my 11 years in the House has been entirely wrong. If the Government took his advice, the country's position would be even more serious.
The self-employed in Scotland suffer in exactly the same way as the self-employed in the South because of the Government's anti-free-enterprise vendetta. They have the additional problem which many self-employed people and small businesses in England do not have of having mainly Socialist councils. It would be refreshing and enlightening for some of the more youthful Left-wing Members, such as the hon. Member for Islington. South and Finsbury (Mr. Cunningham), to come to Glasgow, if the

347
hon. Gentleman thinks, as he obviously does, that the introduction of more Socialist measures would help industry and commerce.
We have heard some remarkable speeches. There was a speech of great common sense from the hon. Member for Edmonton (Mr. Graham). I was delighted to hear what he said about the dangers of unfair competition from municipal enterprises. I hope that the Government and Labour councils will listen to what he said. We had a speech of great wisdom from my hon. Friend the Member for Basingstoke (Mr. Mitchell), who outlined some of the problems facing small firms and the self-employed.
But I thought that the highlight of the debate was the speech of astonishing complacency by the Minister of State, who gave the impression that the self-employed, instead of complaining as they have been, should be sending him a message of good will for his work for them. I wonder why the right hon. Gentleman is not aware of what has been happening. Is he not aware of the monstrous burdens and restrictions that the present Government have placed on the self-employed and small businesses? Has he not heard of the inequities of the dual VAT and the monstrous increase in taxation which has been inflicted on the self-employed and private business? Why does he think there is so much concern? Why does he think there have been so many bankruptcies? Are people just closing down businesses out of spite against the Government?
There was a speech of astonishing length by the hon. Member for Penistone (Mr. Mendelson), which we found enlightening. His basic message was that we should be wrong to create a feeling of persecution in the minds of small business people and the self-employed. There is a simple answer, which is for the Government to stop persecuting the self-employed and small businesses. That is precisely what the Government have been doing. It is why we have been complaining in debates, why so many small business men are giving up their work, closing up their businesses, and why we see so many empty shops in our streets.
The Minister said that his regulations were very helpful to the self-employed.
348
The extent to which they are not so adverse and objectionable as the previous regulations is undoubtedly due to the fearless opposition put up by the Conservative Party and the small-business fraternity.
I hope that the Chief Secretary to the Treasury will give a further explanation of some parts of the regulations. The Minister of State, in saying that there was no increase for those with lower incomes, assumed that people would have the same income next year as they have this year. But, with inflation at 25 per cent., a self-employed person with an income of £1,600 rising to about £2,000 will be worse off than an employee, not only as regards the absolute amount he pays, but as regards the amount of the increase. His payment will rise from £125 to £157, an increase of £32 compared with an additional £27 for an employed person. There will be a substantial increase for those in the higher income groups. For example, the amount paid by a self-employed person with an annual income of £4,900 will rise by £104, on top of the substantial rise that he has already had to pay.
Inflation is bringing more people into Class 4 contributions. I hope that the Chief Secretary will tell us how many more people will be brought into the net. In this connection, it is interesting to see what has happened to the actuarial estimates. Whereas in last year's Government Actuary's Report Class 4 contributions for next year were estimated at £57 million, the new estimate is £93 million.
We must always remember that self-employed persons do not receive the full range of benefits available to others in the community. For example, they do not receive the earnings-related benefit. They are deprived of unemployment benefit and many other benefits. They get nothing like the range of benefits available to others. We also had an indication from my hon. Friend the Member for Basingstoke that they do not get what some people regard as the full advantages of the Common Market.
In the debate on 13th March we impressed on the Government that the situation facing the self-employed was serious and urgent. At a time when we have new regulations before us, it is right briefly to go over what has happened

349
since 13th March. The then Minister of State at the Treasury accepted that the situation was serious. He gave us an indication of the kind of steps he hoped might be taken. He gave a kind of assurance that he thought might be helpful to the self-employed and to small businesses. First, he said that most of the problem was the responsibility of the Tories. Perhaps it is better to ignore that and to go on to what was said thereafter.
The hon. Gentleman acknowledged that rates were a major problem. He indicated the action which would be taken. He said:
"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."
Let us remember that that was only a few months ago. Is the Minister willing to go up to Scotland to make a statement that the Government have taken action to restrain rates? The Secretary of State has anticipated the decimal system by introducing something called a 10-month year. However, in Scotland we have had rate increases of up to 200 per cent., with an average of over 50 per cent. Rates are a crippling burden on small businesses. There is industrial derating but there is no derating for commerce.
The Minister also indicated that some action might be taken on tax relief for contributions made by the self-employed. That is desperately important. Although the employers' contribution of 8·5 per cent. is allowable for corporation tax, thus reducing the net expenditure to 4·08 per cent., there is no tax relief for the self-employed in the same situation. The Minister accepted that this was a serious situation and he hoped that something could be done. In fact, he said:
"I assure the hon. Gentleman that the matter will be further examined by my right hon. Friend the Chancellor of the Exchequer."—[Official Report, 13th March 1975; Vol. 888, c. 880.]
Unfortunately, instead of the Government's examination being successful, the only thing that emerged from the Budget was the introduction of the dual rate of VAT. That system has added enormously to the administrative burdens faced by the self-employed.
On looking back at the Minister's speech I am struck by the fact that his
350
only practical suggestion was in response to our bitter complaints about the effect of the capital transfer tax on small businesses and the self-employed. The hon. Gentleman tried to justify the situation by explaining that Labour's proposals would mean that businesses up to £100,000 or £200,000, under Labour's new plan for the small business man, would do reasonably well on death. That was not entirely a good answer. It perhaps justifies the interpretation of a new slogan—namely, "under Labour you will be better off dead than self-employed." The Prime Minister obviously noticed that, becauses shortly afterwards the hon. Gentleman was promoted.
We gained nothing from the debate on 13th March. The Minister made a pledge in a Press release a few days later that something else might be done for the self-employed. He accepted that there were problems concerning earnings-related benefits and he gave an assurance that something would be done. It seems that the Government were actively considering the matter. The words used were far more specific:
"We are in favour of earnings-related pensions for the self-employed."
There again, we have had the assurance today that the matter is still being reviewed. When we consider the monstrous burden placed on the self-employed and small businesses by the Government since the March debate, we can judge how the review has proceeded. Specific suggestions were put forward, but nothing positive has been done. The introduction of a dual rate of VAT has had a negative effect.
We might have expected something more from the present Government because they have introduced the concept—although I am sure that most hon. Members are not aware of it—of a Minister with special responsibilities for small businesses. It is surely an indication of the priority given to this matter by the Government that that Minister has not been able to be present for this discussion of the self-employed and the small business man. Many people are not aware that such a Minister exists, but I hope that the hon. Gentleman concerned is aware of his responsibilities—[AN HON. MEMBER: "Who is he?"] He is the Minister of State, Department of

351
Industry, the hon. Member for Ruther-glen (Mr. Mackenzie). After examining the Government's activities in respect of the self-employed and the small business, I believe that instead of his being the Minister for small businesses, he should be called the "Minister for Inactivity". We have certainly had no indication of any positive steps taken by that Minister to help the interests of small businesses.
I do not make a general criticism about inactivity on the part of Government Ministers. There are many Labour Ministers whom I would be happy to see doing nothing at all, instead of the monstrous activities in which they indulge. I should be happy, for example, if the Secretary of State for Education would do nothing, instead of entering into agreements with the Liberals to try to bring death to the grant-aided schools. I should be happy to see the Secretary of State for Energy doing nothing at all, instead of indulging his foolish plans to spend hundreds of millions of pounds on nationalisation. Furthermore, we should be happy to see the Secretary of State for Scotland doing nothing, because he was the person who said that once unemployment reached 100,000 the honourable course for him to take would be that of resignation. That figure in Scotland has now reached 140,000.
We are tonight examining a serious matter. The Labour Government have inflicted great damage on the self-employed and on small businesses. I repeat that the Minister who has been given special responsibilities for small businesses has not been present for one moment during this debate, and he has made no apparent contribution of any sort to further the interests of the self-employed. That is a wash-out and an affront to honest people who are working round the clock to earn an honest living despite the burdens inflicted upon them.
These small businesses cannot be isolated from the general economy. We must bear in mind the substantial increases in contributions that are to be paid by every class of contributor, and the burden of financing benefits would not have been so great and the mountain of unemployment so large if the Government had been honest, had shown integrity, and had acted in time, instead of
352
deliberately delaying economic measures, either through wishful thinking or because of what I suspect to have been downright deception before the General Election last October.
A year before that election the Minister of State, Department of Employment expressed himself to be outraged that an estimate of 600,000 unemployed had been made in 1975. He said that we were likely to see long-term unemployment remain as long as Conservatives were in office. I wonder what the hon. Gentleman thinks now.
We then had the right hon. Lady the Secretary of State for Social Services in the October election making the astonishing statement that unemployment was levelling off. She said that Labour was determined to create more jobs and not fewer. She went on to say that because the Conservative Government had failed to act in time, there was a monstrous problem of unemployment that had to be financed.
I believe that the Government have wholly under-estimated the seriousness of the problem facing the self-employed and the difficulties of small businesses. There are 2 million people self-employed in this country who work hard for the economy and make a great contribution. We have 1,250,000 small businesses employing 6 million people, and it cannot be denied that the Government have done a great deal of damage to the self-employed and to small businesses. They have imposed penal taxation, which has knocked the heart out of business men and destroyed enterprise. The Government have imposed an enormous bureaucracy, a multi-rate VAT, and capital transfer tax.
In March we issued a warning to the Government. [Interruption.] This is a short debate and it is monstrous that there should be so much laughter on the Government Benches. We should be concerned about unemployment and the hardship in this section of the community. I was saying that we issued a serious warning to the Government in March. We voted against the Government because of their extremely unfair policies aimed at the self-employed and the small business. We shall vote against those policies tonight—and we shall continue to do so until the Government recognise

353
the contribution made by the self-employed and give them the justice they so well deserve.
9.45 p.m.
The Chief Secretary to the Treasury (Mr. Joel Barnett): I can fairly say that some of my best friends are self-employed. If any self-employed friends of the hon. Member for Sutton Coldfield (Mr. Fowler) had heard his speech tonight, he would have lost a large number of them. There was not one jot of constructive thought throughout the whole of his speech. The same comment applies to the speech of the hon. Member for Glasgow, Cathcart (Mr. Taylor). The only constructive points came from my hon. Friends. [Interruption.] Conservative Members who are now shouting were not even in the Chamber when my right hon. Friend spoke.
The Opposition have raised the issue of national insurance and various tax matters. On the insurance side my right hon. Friend the Minister of State utterly demolished every word the hon. Member for Sutton Coldfield spoke. My right hon. Friend exposed him as a humbug who had not even learned his facts. I have never seen a Shadow spokesman so utterly destroyed. I hope that the hon. Members who were not present at the time will read the speech to see the way it exposed the nonsense we heard from the Opposition.
Mr. Speaker: Order. I am prepared to hear the word "humbug" applied to an argument but not to an individual.
Mr. Barnett: I am happy to withdraw the word "humbug" in that sense and apply it to the whole of the Opposition. [Interruption.] I am sorry that they are so sensitive about these matters.
I turn to the tax matters that were raised. For the Opposition to pretend, as they have done, that in some way they would have changed the way the tax system works on the self-employed is dishonest and disreputable. I cannot use that other word again and I would not want to. I assume that they are not serious in suggesting that they would somehow or other provide special tax relief for the self-employed. I take it that even they would not suggest that. I assume that they would want to provide tax relief not only for the self-employed
354
but for the whole of the tax-paying public.
Some of my hon. Friends have pointed out that the self-employed already have a considerable advantage. They made the point that the self-employed pay their tax 12 months in arrear. My hon. Friends understate the case. It is anything from nine to 15 months, or twice as much depending on the year-end of the firm concerned. The Government have provided substantial tax relief through the stocks scheme introduced in the last Budget, plus a 5 per cent. bonus to compensate for the year's delay.
The suggestion that the self-employed and small business men have been hurt by the corporation tax system and its rates was exposed by the right hon. Member for Devon, North (Mr. Thorpe), the Leader of the Opposition. [Interruption.] He is the Leader of the real Opposition because the official Opposition never make a constructive point. The right hon. Gentleman was honest enough to concede that it was the imputation system, introduced by a Conservative Government, which hurt the small business men and small companies. The more serious members of the official Opposition—on the Back Benches—will concede that point. We do not hear that from the Opposition Front Bench. Instead we hear only the sort of rubbish we have heard today.
We heard a great deal about VAT. I should never have believed, listening to the contributions from the Opposition, that VAT was introduced by a Conservative Government. I have never made any bones about it. I do not like VAT. I do not pretend to like it. I should have preferred the purchase tax system, but we are stuck with VAT.
I am aware of the problems affecting the truly small business man. We are trying to help. We are meeting the National Federation of Self-Employed and we have promised to consider its representations. It has promised to resubmit its proposals, and my hon. Friends will be meeting its representatives shortly to consider them.
Further considerations were advanced about the capital gains tax. There were many complaints about the way in which capital gains tax affects small business men and the self-employed. Inflation

355
hits small business men and other people in business. [Interruption.] I am sorry if the Opposition are upset, but I must reply to points made about the capital gains tax. I accept that the capital gains tax hurts some small business men. The Government accepted the recommendation of the Bolton Committee and increased retirement relief from £10,000 to £20,000. The Conservative Government sat on that recommendation and did nothing about it for two years. That is what a Labour Government did for the truly small self-employed business men.
Mr. Teddy Taylor: The Minister has answered two points which were not raised in the debate. Would it not be helpful if he addressed himself to those points which were raised in the debate?
Mr. Barnett: The hon. Gentleman must control his impatience. I am sorry that I cannot agree with every word he uttered. The points which were raised require a reply. I agreed to limit my speech to 15 minutes.
The capital transfer tax limit was increased. Opposition Members who raised the question of the capital transfer tax did not do us the courtesy of reading the lengthy debates on that tax in Committee. However, I know the problem. I know what the Opposition mean by a small business man. The hon. Member for Sutton Coldfield referred to the £¼ million small business man. That is his idea of a small business man. The truly small business man does not have the opportunities that are available to the larger concerns for sophisticated tax avoidance. The small business man is considerably better off than he was under the system of estate duty.
Mr. Peter Rees rose—
Mr. Barnett: I have listened night after night to the nonsense of the hon. and learned Gentleman.
Mr. Rees: I rise because the Minister referred to me.
Mr. Barnett: The Opposition are pursuing precisely the line indicated by my hon. Friend the Member for Penistone (Mr. Mendelson). They are deliberately pandering to prejudice. The small
356
business man is helped by the capital transfer tax. Under the system we have introduced, a small business man—indeed, anyone—can leave his business to his wife and pay no tax, although tax would have been paid under the estate duty system. The truly small business man and the small farmer are not only not hurt by capital transfer tax but positively gain from it. [Interruption.] If Conservative Members really understood the capital transfer tax they would not try to make a case for going back to a system whereby the small business men of whom they speak avoided paying a single penny in estate duty. That was why we introduced capital transfer tax. I do not apologise for it. The small business man has no need to be worried about it.
We all know that the rating system is not fair. We also know that the Layfield Committee will report towards the end of the year. Then will be the time to consider the rates.
The Opposition's case has been exposed as a cynical attempt to show that they are helping the self-employed, but their speeches have been full of dishonest rubbish. Opposition Members who listened to the hon. Member for Sutton Coldfield must be ashamed of every word he spoke. The Opposition know that any major help in taxation is impossible at this time with the borrowing requirement running at its present level. They also know that without reducing public expenditure the borrowing requirement cannot be reduced. The Opposition have not proposed any way of reducing public expenditure. They have shown in the debate a shameful disregard of the national interest.
The Opposition's constant claim to speak for the self-employed is a fraud. If our society were run in the way they want it run, the result would be large monopoly capitalism. That concept is precisely opposed to the interests of the self-employed. The Opposition talk about wanting to help the self-employed and the small business man, but their policies would squeeze out the very people they seek to help. I hope that the self-employed will read the debate. If they do they will realise that what was said by the Opposition Front Bench would in no way help them—quite the contrary. The best speeches came from my right hon. Friend the Minister of State and my

357
hon. Friends on the Labour Benches. The Opposition can no more speak for the self-employed than they can speak for the country generally.
I ask my right hon. and hon. Friends to vote to show their contempt for the fact that the Opposition even deign to vote and pretend to be spokesmen for the self-employed. I hope that the more responsible
Members who have listened to at least part of the debate will recognise that the way to deal with the problem is to vote for the Government and against the Opposition.
Question put, That this House do now adjourn:—
The House divided: Ayes 267. Noes 286.

Division No. 382.]

AYES

[9.59 p.m.

Adley, Robert

Fletcher, Alex (Edinburgh N)

Langford-Holt, Sir John

Aitken, Jonathan

Fletcher-Cooke, Charles

Latham, Michael (Melton)

Alison, Michael

Fookes, Miss Janet

Lawrence, Ivan

Amery, Rt Hon Julian

Fowler, Norman (Sutton C'f'd)

Lawson, Nigel

Arnold, Tom

Fox, Marcus

Le Marchant, Spencer

Atkins, Rt Hon H. (Spelthorne)

Fraser, Rt Hon H. (Stafford & St)

Lester, Jim (Beeston)

Awdry, Daniel

Freud, Clement

Lloyd, Ian

Bain, Mrs Margaret

Fry, Peter

Loveridge, John

Baker, Kenneth

Galbraith, Hon. T. G. D.

McAdden, Sir Stephen

Banks, Robert

Gardiner, George (Reigate)

MacCormick, lain

Beith, A. J.

Gardner, Edward (S Fylde)

McCrindle, Robert

Bennett, Sir Frederic (Torbay)

Gilmour, Rt Hon Ian (Chesham)

Macfarlane, Neil

Bennett, Dr Reginald (Fareham)

Glyn, Dr Alan

MacGregor, John

Benyon, W.

Godber, Rt Hon Joseph

Macmillan, Rt Hon M. (Farnham)

Berry, Hon Anthony

Goodhart, Philip

McNair-Wilson, M. (Newbury)

Biffen, John

Goodhew, Victor

McNair-Wilson, P. (New Forest)

Biggs-Davison, John

Goodlad, Alastair

Madel, David

Blaker, Peter

Gorst, John

Mates, Michael

Body, Richard

Gow, Ian (Eastbourne)

Mather, Carol

Boscawen, Hon Robert

Gower, Sir Raymond (Barry)

Maude, Angus

Bottomley, Peter

Grant, Anthony (Harrow C)

Maudling, Rt Hon Reginald

Bowden, A. (Brighton, Kemptown)

Gray, Hamish

Mawby, Ray

Boyson, Dr Rhodes (Brent)

Grieve, Percy

Maxwell-Hyslop, Robin

Braine, Sir Bernard

Griffiths, Eldon

Mayhew, Patrick

Brittan, Leon

Grist, Ian

Meyer, Sir Anthony

Brocklebank-Fowler, C.

Grylls, Michael

Miller, Hal (Bromsgrove)

Brotherton, Michael

Hall, Sir John

Mills, Peter

Brown, Sir Edward (Bath)

Hall-Davis, A. G. F.

Miscampbell, Norman

Bryan, Sir Paul

Hamilton, Michael (Salisbury)

Mitchell, David (Basingstoke)

Buchanan-Smith, Alick

Hampson, Dr Keith

Moate, Roger

Buck, Antony

Hannam, John

Monro, Hector

Budgen, Nick

Harrison, Col Sir Harwood (Eye)

Montgomery, Fergus

Bulmer, Esmond

Harvie Anderson, Rt Hon Miss

Moore, John (Croydon C)

Burden, F. A.

Hastings, Stephen

More, Jasper (Ludlow)

Butler, Adam (Bosworth)

Havers, Sir Michael

Morgan, Geraint

Carlisle, Mark

Hawkins, Paul

Morris, Michael (Northampton S)

Chalker, Mrs Lynda

Hayhoe, Barney

Morrison, Charles (Devizes)

Channon, Paul

Heath, Rt Hon Edward

Morrison, Hon Peter (Chester)

Churchill, W. S.

Henderson, Douglas

Mudd, David

Clark, Alan (Plymouth, Sutton)

Heseltine, Michael

Neave, Airey

Clark, William (Croydon S)

Hicks, Robert

Nelson, Anthony

Cockcroft, John

Higgins, Terence L.

Neubert, Michael

Cooke, Robert (Bristol W)

Holland, Philip

Newton, Tony

Cope, John

Hooson, Emlyn

Nott, John

Cordle, John H.

Hordern, Peter

Onslow, Cranley

Cormack, Patrick

Howe, Rt Hon Sir Geoffrey

Oppenheim, Mrs Sally

Corrie, John

Howell, David (Guildford)

Page, John (Harrow West)

Costain, A. P.

Howells, Geraint (Cardigan)

Page, Rt Hon R. Graham (Crosby)

Crawford, Douglas

Hunt, John

Pardoe, John

Critchley, Julian

Hurd, Douglas

Pattie, Geoffrey

Crouch, David

Hutchison, Michael Clark

Penhaligon, David

Crowder, F. P.

Irvine, Bryant Godman (Rye)

Percival, Ian

Dodsworth, Geoffrey

Irving, Charles (Cheltenham)

Peyton, Rt Hon John

Douglas-Hamilton, Lord James

James, David

Pink, R. Bonner

Drayson, Burnaby

Jenkin, Rt Hn P. (Wanst'd & W'df'd)

Price, David (Eastleigh)

du Cann, Rt Hon Edward

Johnson Smith, G. (E Grinstead)

Prior, Rt Hon James

Durant, Tony

Jones, Arthur (Daventry)

Pym, Rt Hon Francis

Eden, Rt Hon Sir John

Jopling, Michael

Raison, Timothy

Elliott, Sir William

Joseph, Rt Hon Sir Keith

Rathbone, Tim

Emery, Peter

Kaberry, Sir Donald

Rawlinson, Rt Hon Sir Peter

Ewing, Mrs Winifred (Moray)

Kimball, Marcus

Rees, Peter (Dover & Deal)

Eyre, Reginald

King, Evelyn (South Dorset)

Rees-Davies. W. R.

Fairbairn, Nicholas

King, Tom (Bridgwater)

Reid, George

Fairgrieve, Russell

Kitson, Sir Timothy

Renton, Rt Hon Sir D. (Hunts)

Farr, John

Knight, Mrs Jill

Renton, Tim (Mid-Sussex)

Fell, Anthony

Knox, David

Ridley, Hon Nicholas

Finsberg, Geoffrey

Lamont, Norman

Ridsdale, Julian

Fisher, Sir Nigel

Lane, David

Rifkind, Malcolm

Rippon, Rt Hon Geoffrey

Sproat, lain

Vaughan, Dr Gerard

Roberts, Michael (Cardiff NW)

Stainton, Keith

Viggers, Peter

Roberts, Wyn (Conway)

Stanbrook, Ivor

Wainwright, Richard (Colne V)

Rodgers, Sir John (Sevenoaks)

Stanley, John

Wakeham, John

Ross, Stephen (Isle of Wight)

Steen, Anthony (Wavertree)

Walder, David (Clitheroe)

Rossi, Hugh (Hornsey)

Stewart, Donald (Western Isles)

Walker, Rt Hon P. (Worcester)

Rost, Peter (SE Derbyshire)

Stewart, Ian (Hitchin)

Wall, Patrick

Royle, Sir Anthony

Stokes, John

Walters, Dennis

Sainsbury, Tim

Stradling Thomas, J.

Warren, Kenneth

St. John-Stevas, Norman

Tapsell, Peter

Watt, Hamish

Scott, Nicholas

Taylor, R. (Croydon NW)

Weatherill, Bernard

Shaw, Giles (Pudsey)

Taylor, Teddy (Cathcart)

Wells, John

Shelton, William (Streatham)

Tebbit, Norman

Welsh, Andrew

Shepherd, Colin

Temple-Morris, Peter

Wiggin, Jerry

Shersby, Michael

Thatcher, Rt Hon Margaret

Wilson, Gordon (Dundee E)

Silvester, Fred

Thomas, Rt. Hon P. (Hendon S)

Winterton, Nicholas

Sims, Roger

Thompson, George

Young, Sir G. (Ealing, Acton)

Sinclair, Sir George

Thorpe, Rt Hon Jeremy (N Devon)

Younger, Hon George

Skeet, T. H. H.

Townsend, Cyril D.

Smith, Cyril (Rochdale)

Trotter, Neville

TELLERS FOR THE AYES:

Speed, Keith

Tugendhat, Christopher

Mr. Richard Luce and

Spence, John

van Straubenzee, W. R.

Mr. Cecil Parkinson.

Spicer, Michael (S Worcester)

NOES

Allaun, Frank

Deakins, Eric

Hughes, Roy (Newport)

Anderson, Donald

Dean, Joseph (Leeds West)

Hunter, Adam

Archer, Peter

Delargy, Hugh

Irvine, Rt Hon Sir A. (Edge Hill)

Armstrong, Ernest

Dell, Rt Hon Edmund

Irving, Rt Hon S. (Dartford)

Ashley, Jack

Dempsey, James

Jackson, Colin (Brighouse)

Atkins, Ronald (Preston N)

Doig, Peter

Janner, Greville

Atkinson, Norman

Dormand, J. D.

Jay, Rt Hon Douglas

Bagier, Gordon A. T.

Douglas-Mann, Bruce

Jeger, Mrs Lena

Barnett, Rt Hon Joel (Heywood)

Duffy, A. E. P.

Jenkins, Hugh (Putney)

Bates, Alf

Dunn, James A.

John, Brynmor

Bean, R. E.

Dunnett, Jack

Johnson, Walter (Derby S)

Benn, Rt Hon Anthony Wedgwood

Eadie, Alex

Jones, Alec (Rhondda)

Bennett, Andrew (Stockport N)

Edge, Geoff

Jones, Barry (East Flint)

Bidwell, Sydney

Edwards, Robert (Wolv SE)

Jones, Dan (Burnley)

Bishop, E. S.

Ellis, John (Brigg & Scun)

Judd, Frank

Blenkinsop, Arthur

English, Michael

Kaufman, Gerald

Boardman, H.

Ennals, David

Kelley, Richard

Booth, Albert

Evans, Fred (Caerphilly)

Kerr, Russell

Boothroyd, Miss Betty

Evans, Ioan (Aberdare)

Kilroy-Silk, Robert

Bottomley, Rt Hon Arthur

Evans, John (Newton)

Kinnock, Neil

Boyden, James (Bish Auck)

Ewing, Harry (Stirling)

Lambie, David

Bradley, Tom

Faulds, Andrew

Lamborn, Harry

Brown, Hugh D. (Provan)

Fernyhough, Rt Hon E.

Lamond, James

Brown, Robert C. (Newcastle W)

Fitch, Alan (Wigan)

Latham, Arthur (Paddington)

Brown, Ronald (Hackney S)

Fitt Gerard (Belfast W)

Leadbitter, Ted

Buchan, Norman

Flannery, Martin

Lee, John

Buchanan, Richard

Fletcher, Raymond (Ilkeston)

Lestor, Miss Joan (Eton & Slough)

Butler, Mrs Joyce (Wood Green)

Fletcher, Ted (Darlington)

Lever, Rt Hon Harold

Callaghan, Rt Hon J. (Cardiff SE)

Foot, Rt Hon Michael

Lewis, Arthur (Newham N)

Callaghan, Jim (Middleton & P)

Forrester, John

Lewis, Ron (Carlisle)

Campbell, Ian

Fowler, Gerald (The Wrekin)

Lipton, Marcus

Canavan, Dennis

Freeson, Reginald

Litterick, Tom

Cant, R. B.

Garrett, John (Norwich S)

Lomas, Kenneth

Carmichael, Neil

Garrett, W. E. (Wallsend)

Loyden, Eddie

Carter, Ray

George, Bruce

Luard, Evan

Carter-Jones, Lewis

Gilbert, Dr John

Lyon, Alexander (York)

Cartwright, John

Ginsburg, David

Lyons, Edward (Bradford W)

Castle, Rt Hon Barbara

Golding, John

Mabon, Dr J. Dickson

Clemitson, Ivor

Gould, Bryan

McCartney, Hugh

Cocks, Michael (Bristol S)

Gourlay, Harry

McElhone, Frank

Cohen, Stanley

Graham, Ted

MacFarquhar, Roderick

Coleman, Donald

Grant, George (Morpeth)

McGuire, Michael (Ince)

Concannon, J. D.

Grant, John (Islington C)

Mackenzie, Gregor

Conlan, Bernard

Grocott, Bruce

Mackintosh, John P.

Cook, Robin F. (Edin C)

Hardy, Peter

Maclennan, Robert

Corbett, Robin

Harper, Joseph

McMillan, Tom (Glasgow C)

Cox, Thomas (Tooting)

Harrison, Walter (Wakefield)

McNamara, Kevin

Craigen, J. M. (Maryhill)

Hart, Rt Hon Judith

Madden, Max

Crawshaw, Richard

Hatton, Frank

Magee, Bryan

Cronin, John

Hayman, Mrs Helene

Mahon, Simon

Crosland, Rt Hon Anthony

Healey, Rt Hon Denis

Mallalieu, J. P. W.

Cryer, Bob

Heffer, Eric S.

Marks, Kenneth

Cunningham, G. (Islington S)

Hooley, Frank

Marquand, David

Cunningham, Dr J. (Whiteh)

Horam, John

Marshall, Dr Edmund (Goole)

Davidson, Arthur

Howell, Denis (B'ham, Sm H)

Marshall, Jim (Leicester S)

Davies, Bryan (Enfield N)

Hoyle, Doug (Nelson)

Maynard, Miss Joan

Davies, Denzil (Llanelli)

Huckfield, Les

Meacher, Michael

Davies, Ifor (Gower)

Hughes, Rt Hon C. (Anglesey)

Mellish, Rt Hon Robert

Davis, Clinton (Hackney C)

Hughes, Robert (Aberdeen N)

Mendelson. John

Mikardo, Ian

Rodgers, William (Stockton)

Tomlinson, John

Millan, Bruce

Rooker, J. W.

Tomney. Frank

Miller, Dr M. S. (E Kilbride)

Roper, John

Torney, Tom

Miller, Mrs Millie (Ilford N)

Rose, Paul B.

Tuck, Raphael

Molloy, William

Ross, Rt Hon W. (Kilmarnock)

Urwin, T. W.

Moonman, Eric

Rowlands, Ted

Varley, Rt Hon Eric G.

Morris, Alfred (Wythenshawe)

Sandelson, Neville

Wainwright, Edwin (Dearne V)

Morris, Charles R. (Openshaw)

Sedgemore, Brian

Walden, Brian (B'ham, L'dyw'd)

Morris, Rt Hon J. (Aberavon)

Selby, Harry

Walker, Harold (Doncaster)

Mulley, Rt Hon Frederick

Shaw, Arnold (Ilford South)

Walker, Terry (Kingswood)

Murray, Rt Hon Ronald King

Sheldon, Robert (Ashton-u-Lyne)

Ward, Michael

Newens, Stanley

Shore, Rt Hon Peter

Watkins, David

Noble, Mike

Short, Rt Hon E. (Newcastle C)

Watkinson, John

Oakes, Gordon

Short, Mrs Renée (Wolv NE)

Weetch, Ken

O'Halloran, Michael

Silkin, Rt Hon John (Deptford)

Weitzman, David

O'Malley, Rt Hon Brian

Silkin, Rt Hon S. C. (Dulwich)

Wellbeloved, James

Orbach, Maurice

Sillars, James

White, Frank R. (Bury)

Orme, Rt Hon Stanley

Skinner, Dennis

White, James (Pollok)

Ovenden, John

Small, William

Whitehead, Phillip

Owen, Dr David

Smith, John (N Lanarkshire)

Whitlock, William

Padley, Walter

Snape, Peter

Willey, Rt Hon Frederick

Palmer, Arthur

Spearing, Nigel

Williams, Alan (Swansea W)

Park, George

Spriggs, Leslie

Williams, Alan Lee (Hornch'ch)

Parker, John

Stallard, A. W.

Williams, Rt Hon Shirley (Hertford)

Parry, Robert

Stewart, Rt Hon M. (Fulham)

Williams, W. T. (Warrington)

Peart, Rt Hon Fred

Stoddart, David

Wilson, Alexander (Hamilton)

Pendry, Tom

Stonehouse, Rt Hon John

Wilson, Rt Hon H. (Huyton)

Prentice, Rt Hon Reg

Stott, Roger

Wilson, William (Coventry SE)

Price, C. (Lewisham W)

Strang, Gavin

Wise, Mrs Audrey

Price, William (Rugby)

Strauss, Rt Hon G. R.

Woodall, Alec

Radice, Giles

Summerskill, Hon Dr Shirley

Woof, Robert

Rees, Rt Hon Merlyn (Leeds S)

Swain, Thomas

Wrigglesworth, Ian

Richardson, Miss Jo

Taylor, Mrs Ann (Bolton W)

Young, David (Bolton E)

Roberts, Albert (Normanton)

Thomas, Jeffrey (Abertillery)

Roberts, Gwilym (Cannock)

Thomas, Ron (Bristol NW)

TELLERS FOR THE NOES

Robertson, John (Paisley)

Thorne, Stan (Preston South)

Mr. James Hamilton and

Roderick, Caerwyn

Tierney, Sydney

Miss Margaret Jacksoa.

Rodgers, George (Chorley)

Tinn, James

Question accordingly negatived.

SELF-EMPLOYED PERSONS
  ADJOURNMENT
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dormand.]

TELECOMMUNICATIONS INDUSTRY
10.15 p.m.
Mr. Jim Lester: I am sorry that this matter should need to be raised on the Adjournment, but the telecommunications industry is in a state of grave uncertainty. Although I intend to deal with the effect of the Post Office cuts on a factory in my constituency, I am not unmindful of the situation elsewhere, in Liverpool, Sunderland, Coventry and South Wales, and I shall understand if the Minister chooses to speak to a wider audience. But it is essential that he speaks, because it is now five weeks since the initial cuts were announced and during that time it appears to many in the industry that little has been heard.
First, we are talking not about a lame duck, out-dated or under-invested industry, but about an industry with enormous potential for exports and raising standards which is not fully understood. It cannot meet that potential and take the hammer blows from its principal customer that it has been required to take this year.
I am not trying to pour blame on the Post Office. One realises that it has a vast task and major problems—whether the pension fund or the borrowing requirement. I am trying to point to the effect of what I believe to be an ill-considered decision on an industry and a particular section of it, and to do so constructively and, I hope, with some suggestions for the future.
I know that much of the discussion has been concerned with the main exchanges but the Plessey factory in Beeston principally manufacturers what it calls "subs apparatus", or private communication systems, and there are 5,000 people employed on that site manufacturing these things. The result of what is said to be a commercial decision to raise prices in this area has been an overall cutback in orders in this section
364
of the business of 55 per cent. But in my constituency and this part of the factory it has meant a cutback of 72 per cent. of production on orders for the Post Office. That is a considerable cut and means over 40 per cent. of the total production in that area of the factory. This is a proposed order level decline from 18th September for deliveries from April 1976.
It is incredible that the results of this cut were not realised by the Post Office when it made this decision. In human terms, a cutback of 40 per cent. on 5,000 employees means 2,000. That is an unacceptable level to be threatened in so short a time. The social consequences are most serious, not only to those immediately affected, but to the surrounding community. Such a steep rundown in so short a time, when there are no other similar vacancies, without consultation or the ability to adjust, is a major matter.
There are also economic consequences on the site itself, because a cutback of this proportion affects the viability of the site and of the other productions. There is also the viability of the export production on this side.
What is equally important—I should like to emphasise this—is the effect of the decision on the Post Office. By the raising of the prices in one jump on 28th April not only was the market distorted—one has written to the Post Office and realises that it has not changed its prices since 1969—but its production line could be destroyed as well. I cannot believe that to be a good commercial decision.
Good telecommunications equipment is a vital part of any modern concern or business. No one can do without it for long. Eventually the market could readjust to the prices, but it might take a year or two years and by then new orders from the Post Office could be only at a much higher unit price if at all, because they would mean setting up new production lines to replace those dismantled. One cannot replace the dispersed skills of the people currently making this equipment.
I am advised that adjustment to a supply cut of this proportion is not possible. It is normal within the industry

365
at indicative levels to get variations—that is normal in any commercial enterprise—but a 20 per cent. cutback over 12 months is a major cutback needing a great deal of thought about adjustments. However, a cutback of over 40 per cent. in six months is not commercially viable. I do not believe that this cut was made with any ill-will but when one has a spending power of some £800 million, it is a question of not realising the consequences of one's action.
There is no question that the consequences have been realised now. I am satisfied that the management has communicated at every appropriate level with the Post Office and spelled out the true effects to both the Post Office and the industry. The joint union committee has campaigned vigorously and done a good job in contacting not only myself but other local Members of Parliament, including Ministers, and it has left no stone unturned to support the colleagues and employees of the firm.
After five weeks in this sector we are still waiting for some indication of whether there is to be any restitution of any form of support. It is with great disappointment that we have yet to hear of anything resulting from our efforts. Order reductions are critical to the future supplies of the Post Office. It is understandable that the union should request the cuts to be restored in full, but it may well be that that is not viable or possible. However, one would like to see the cuts restored sufficiently to continue balanced production in the interests of all.
I do not want to persuade the Post Office to buy out-dated equipment, nor to overstock to uneconomic levels. Could not the Post Office with the industry start a vigorous sales drive from 1st January to promote and sell the equipment that it has by offering rebates and three months' free rental if necessary? Surely it is better to get the equipment moving, installed and used than for it to remain in store and for the whole of the pipeline to disintegrate.
The Post Office has traditionally made its profit from telecommunications and calls. I hope that it will continue to do so. The Post Office's record on the telecommunications side is good in investment and productivity. I hope that it will be
366
good in the sale of private communications systems. If nothing is done and that decision proves to be wrong, who will carry the responsibility. There are many points that I should have liked to make, but I know that other hon. Members may wish to make a contribution.
Concerning exports, the Plessey Company has gone in for a vigorous sales drive and has more than doubled its sales overseas from 1973–74 to 1975–76. It has sold private systems worth millions of pounds. This drive has been based on a balanced production on the site. It is difficult, when there are already 3,000 men on short time, to persuade anyone to come in especially to do an export order at the weekend. That is understandable. Whatever the sales drive overseas, it cannot replace the cutback in the volume which is lost. One knows that in new markets in Ghana, Egypt, Kuwait and Syria there is no tolerance for default or poor performance on delivery.
The company has set higher targets still for its export drive and is setting on new staff to expand and sell still more. Therefore, a major home selling promotion effort by the Post Office would be of direct support to the energetic efforts made by the company in exports and would help to restore some sense of balance to the industry.
The third point concerns research and development generally. If the new System X exchange is to come in and has an export potential, the equipment designed to fit it will also have an added export potential. Therefore, now is the time, when there is a fallow period, for joint development contracts and for private and public investment in research and development to be made in these new areas. Surely it is possible to bring forward massive schemes of development, if the decision is to have the System X, to try to even out the design capability rather than to make redundant the managers and designers whom it is almost impossible to put on short time.
Research and development in the industry are difficult. With one major customer it is difficult, unless there is co-operation, to design what that customer wants and will buy. There is no future in designing anything in telecommunications that will not be required by the Post Office.

367
The last point concerns imports and import control. It seems incredible that only on 21st May, I got a letter from the Post Office indicating that, because there was such an upsurge in ordering of Plessey equipment, it was buying and putting in a Thorn Ericsson exchange costing £30 million. Yet by September we have a severe cutback.
Again, I can understand, though not necessarily agree with, the union's demand for some form of import restriction. The union wants me to make the point that there is a reasonable case for local authorities and public bodies spending either £250,000 or £500,000 on equipment from overseas getting clearance from the Department. I hope that the Minister will comment on and consider that matter.
I have tried in a short time to talk about sub-assemblies and private systems to try to make clear that I do not believe that the decision which has been taken is in any way commercial in the true sense. Its results are savage on people and skills. It harms future supplies to the Post Office and, through that, the industry's efficiency and our export potential. I am convinced that there are the brains, the will and the energy at all levels in the industry and that they can respond to the challenge of today's difficulties, given half the chance. There may be only a few here, but there are thousands outside who will be interested in the Minister's reply.
10.29 p.m.
Mr. William Whitlock: The hon. Member for Beeston (Mr. Lester) has raised an important matter and put fairly and forcefully the view of the employees at the factory in his constituency. I am glad of the opportunity of supporting the hon. Gentleman, since many of those employees live in my constituency.
My right hon. Friend the Secretary of State for Industry is reviewing the long-term relationship between the Post Office and the telecommunications industry. I hope that that means that there will be an inquiry into the industry. The Post Office is a monopoly concern, but its suppliers are also monopoly concerns, and the Post Office and consumers have suffered from the lack of enterprise in the telecommunications industry.
Employees at the factory feel that the Plessey management has taken advantage
368
of the present situation to indulge in what amounts to a cost reduction exercise and that it is now seeking to lay the blame for the consequences on the Government and the Post Office. Overseas orders in the telecommunications industry are few and far between because in the past the industry has evidently not considered exporting to be fun. It has been content to concentrate on Post Office equipment, for which there is no demand in other countries.
The position is changing with the new generation of equipment, for which there is likely to be considerable export potential once is has been fully developed. If we are not ready with that equipment at the right time, we shall lose out in important export markets and we shall be in danger of losing the specialised skills at the Beeston factory if the men are made redundant and drift into other industries.
The demands of the employees, as put to me, are that the development of System X should be brought forward, that the Government should invest capital in the telecommunications industry in specific products, and that there should be controls on the importing of equipment that can be made here. This is a very sore point with the workers in the industry.
10.32 p.m.
The Under-Secretary of State for Industry (Mr. Gerald Kaufman): I am grateful to the hon. Member for Beeston (Mr. Lester) for giving me the opportunity to comment on an issue that is of great concern to my hon. Friends and to myself. My hon. Friend the Member for Nottingham, North (Mr. Whitlock) has voiced, with his usual eloquence, the concern felt by hon. Members on this side on this subject.
The hon. Member for Beeston talked about ill-considered decisions and questioned the basis of the policies being pursued. I have no wish to engage in recrimination, but it is appropriate in view of his remarks that I put the record straight. Essentially what we are discussing is one more example of the outcome of the mistaken policies towards the nationalised industries followed by the party opposite when last in office These are the root cause of the Post Office's current problems.

369
In the period from 1970 to 1974, the Conservative Government applied severe price restraints to the publicly-owned industries, and these were more stringent than those applied to companies in the private sector. In particular, Post Office tariffs were prevented from rising in line with costs. As a consequence, the demand for telecommunications services was artificially inflated. To make matters worse, when this inflated demand led to lengthening waiting lists and calls for better services, the hon. Member's colleagues, as part of their so-called "race for growth", pressed for an increased investment programme. Thus at one and the same time the Post Office was persuaded to invest more heavily in new plant but was prevented from operating it profitably under the price restraints which were applied to it. This situation had all the seeds of disaster and we have been reaping the harvest ever since.
The Post Office telecommunications business is a growth industry and is inherently well able to pay its way. But by the time we came into office in 1974 its financial state had become desperate. Tariffs were so far out of line with the costs of providing services that large subsides had become essential. These had to be provided at the expense of other more pressing calls on the public purse. Clearly, we could not allow this situation to continue, and we immediately instituted measures to bring prices more nearly into line with costs. But, as my right hon. Friend the Chancellor of the Exchequer explained in his Budget Speech in March last year, the situation in respect of many of the nationalised industries had gone too far to be corrected by a single round of price increases. This was true of the Post Office, and we have therefore encouraged it to increase its tariffs progressively since then to the point where now, with the latest rates just introduced, there is every prospect that the telecommunications business is back on an even keel. This is, of course, in line with our overall economic strategy, which requires that the nationalised industries should operate on an economic basis subject to normal market considerations, and that subsidies should be brought to an end just as soon as practicable.
370
The hon. Member for Beeston appeared to criticise the outcome of this policy, but it is a policy that has been repeatedly pressed upon us from the Opposition Front Bench. All Front Bench speakers during the recent Statutory Corporations (Financial Provisions) Bill pressed for this economic pricing for the Post Office and elsewhere and praised us for instituting it. I would hope that the hon. Gentleman would support the present line of his Front Bench on this and not advocate a return to the sterile policies that gave rise to such an uneconomic and imprudent use of national resources and removed financial disciplines from the nationalised corporations. In talking of the restoration of cuts the hon. Gentleman is calling for increased public expenditure.
Unfortunately, corrective measures of the kind we have had to apply are, in the short term, inevitably unpleasant, not only for the industries concerned, but for their customers and for their suppliers. In the case of the telecommunications business, the return to realistic rates of charging has had its effect on demand. This has occurred at a time when external economic factors have led to an unusual reduction in the normal pattern of traffic growth. To add to this, the Post Office has responded to our calls for greater efficiency by finding ways and means of using its existing plant more intensively. The production cycle for much of the equipment that the Post Office needs is of the order of two years or more. So it is still experiencing the effects of the inflated ordering put in hand under the previous Government. Taken with the downturn in demand resulting from the factors that I have just mentioned, it finds that it now has enough equipment in hand or on order to cater for two years' normal growth over and beyond the reserves it considers to be prudent.
Clearly, and especially in view of the repeated calls from the Conservatives for restraint in public expenditure and the utmost scrutiny of public expenditure, and recalling the remarks from the Opposition in the recent unsuccessful censure debate on the Post Office, it has had no option in these circumstances but to reduce the forward ordering programme. This it has been doing in stages over the past year or so as the situation has developed and become clear to it. For our part, we do not feel that we should

371
interfere with this process and seek to persuade it to buy more equipment than it judges it needs, equipment that would not earn revenue for it. Hon. Members opposite would surely accept that, if an industry is required to operate on a commercial basis, it cannot be expected to buy large stocks of equipment that it does not currently need.
It may be argued that the Post Office has over-reacted to the situation and has altered its ordering programme too drastically or at too frequent intervals. But the demand for its services is sensitive to the level of business activity in the country at large and to other factors outside its control. Because of the long ordering cycle, it is not easy to forecast accurately, particularly in the face of a rapidly changing economic situation such as we have experienced recently. In such circumstances, it is necessary to be flexible and to keep forecasts up to date with the latest available information. This is why there have been changes in its forecasts.
The reduced pattern of forward ordering by the Post Office comes at a time when it is beginning to change over from the traditional but obsolescent electromechanical designs to more modern part-electronic equipment—TXE 4. This new equipment requires relatively less labour to produce than the traditional designs, and the industry had hoped to be able to contain the resulting reduction in manpower requirements by natural wastage. But, in the light of the later Post Office estimates, this seems to be no longer possible, and redundancies have become inevitable.
The Government are deeply concerned about the redundancies, particularly since they bear so heavily on areas where there are at the moment few opportunities for alternative employment. In the past few weeks my right hon. Friend the Secretary of State and my hon. Friend the Minister of State have met a wide and representative selection of union delegates from the work forces affected, as well as from hon. Members and local councillors. We have also spoken to the Post Office and the managements concerned to establish the extent of the problem and to see what
372
could be done to help. Following these meetings, my right hon. Friend asked the Chairman of the Post Office to re-examine the estimates put to the manufacturers in September to consider whether they were in any way over-pessimistic, or if they could be re-arranged to alleviate any part of the problem.
As a result of this approach the Post Office was able to indicate to the manufacturers that the September figures represented the "worst case" situation, and gave revised estimates which showed the "best guess" at the likely outcome. The manufacturers are considering the implications of this latest forecast, but Post Office estimates are that they may preserve up to a thousand jobs as compared with the September figures. The implications of this for particular plants such as Beeston are of course for the companies to decide. We shall continue to keep in touch with all concerned.
The Government and the Post Office believe that the well-being of the industry and of its employees rests squarely on the early growth of more modern designs. The part-electronic equipment I have already mentioned is almost entirely unaffected by the downturn in the ordering programme; the main constraints on its more rapid introduction are the need for the manufacturers to convert their factories and retrain their staff to deal with the very different type of product involved. This part-electronic design leads in turn to an advanced design—system X—development of which is already under way as a co-operative exercise between the manufacturers and the Post Office. We intend that this equipment should not only be capable of meeting the needs of the Post Office in the 1980s and beyond, but that it should have major export potential, as has been demanded from both sides of the House in this debate. If we can build up a much greater share of the export market than we have at present in telecommunications, this will go a long way towards ensuring a prosperous future for the industry and those who work in it.
Question put and agreed to.
Adjourned accordingly at seventeen minutes to Eleven o'clock.