HC Deb 04 November 1975 vol 899 cc296-363

6.56 p.m.

Mr. Norman Fowler (Sutton Coldfield)

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 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 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.

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 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, 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. 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 (Islington, South and Finsbury)

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. 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 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 (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


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.

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


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 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 (Wells)

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 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 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 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.

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 (Hendon, North)

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 (Devon, North)

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.

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 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 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.

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 (Penistone)

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 (Gravesend)

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 (Edmonton)

I am grateful for the fact that the hon. Member 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 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 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 (Ruislip-Northwood)

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 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 (Basingstoke)

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, 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 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 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


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 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 (Tiverton)

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.

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 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. 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 House to consider what will happen when those small businesses cease to exist and there is nothing for the cannibal to eat.

Mr. Deputy Speaker

It 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 (Penistone)

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 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 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 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 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 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 (South Angus)

I shall try to obey your stricture, Mr. Deputy Speaker.

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 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 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 (Islington, South and Finsbury)

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 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.

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 (Kinross and West Perthshire)

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.

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 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 (Carmarthen)

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 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 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 (Wells)

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 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 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 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 (Devon, West)

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 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 (Glasgow, Cathcart)

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 (East Kilbride)

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 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. 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 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 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 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 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 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 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 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 (Dover and Deal)


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 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 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)
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.

  1. ADJOURNMENT 12 words
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