SHORT TITLE AND APPLICATION TO CROWN

HC Deb 08 December 1976 vol 922 cc539-88

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

I beg to move Amendment No. 10, in page 3, line 24, leave out 'Insurance' and insert Payroll Tax'

The purpose of the amendment is perfectly clear. It is to change the title of the Bill. Changing the title of the Bill changes not so much the name of the tax we are considering as the name of the national insurance contribution, that name which has been with us for many years and which is totally unsuitable and wrong to describe the levy about which we are talking.

I do not think that the Committee will quarrel with the suggestion that we should bring up to date our nomenclature. The example I cite is that we used to have a poor law which became national assistance and is now called supplementary benefit. It has been thought right and proper to change that title to suit the fashion and jargon of the day and to avoid offending people's susceptibilities.

I support the general suggestion that we should use words that are more in keeping with the spirit of the times rather than use words that may have been appropriate at one time but are not appropriate nowadays. I submit that the words "national insurance" are totally inappropriate to describe the transfer payments that we are discussing. I can do no better than to quote the meaning of "insurance" in the Oxford Dictionary. The substantive definition reads: The act or system of insuring property, life, etc.; a contract by which the one party undertakes, in consideration of a payment (called a premium), to secure the other against pecuniary loss, by payment of a sum of money in the event of destruction or of damage to property (as by disaster at sea, fire, etc.) or of the death or disablement of a person. It is against that definition that I want to consider whether national insurance is insurance. I can do no better than to quote the circular from the Department of Health and Social Security that defends the contributions that the self-employed are called upon to pay. It uses so many words that make it clear that national insurance is not insurance.

My first example is the introduction of graduated contributions. When one insures a motor-car there are no graduated contributions according to income. The contributions may vary according to the size of the motor car or the goodness or badness of the driving record, but they are not graduated contributions based on a scale of earnings. That totally destroys the resemblance to insurance that originally the tax had.

I read in the circular that the Government have decided to increase the earnings-related Class 4 portion of the insurance contribution, which is paid only by the better off, from 5 per cent. to 8 per cent. That was in the previous round of increases. A new round was announced last week and I do not have the details before me. The circular states: The Government decided to do the latter in the belief that those with the broadest backs should bear the greatest burden. That meaningful Socialist redistributive sentiment is not consistent with insurance. No insurance company would ever say to those who pay premiums to it for like benefits that the richer should pay the greatest contribution. This is a total abrogation of the whole idea of insurance. Insurance is a binding contract between the insurer and the insured, yet Governments of all colours have regularly changed the rules governing contributions, the rules for paying out benefits and the rates of benefit.

How anyone who pays a national insurance contribution can believe that he has a contract with the Government is beyond me. At will the contract is altered unilaterally by the Government. This very Bill is a unilateral alteration of the contract by the Government. They have increased the contribution by a considerable amount without any commensurate increase in the benefits that are being provided.

The Government admit that the Bill represents a tax on the national insurance contribution and the Financial Secretary described the proposal in the Bill as a broad-ranging tax. Nobody would quarrel with that. It is broad-ranging and it is a tax. Being that it is a tax, we are having a tax upon a tax. Equally, the rules of the contributions are altered the whole time. Sometimes they are graduated and sometimes they are not. Sometimes the onus is laid upon the employer and sometimes on the employee. There is also the tricky political calculation about how much the self-employed should pay, with all the special pleading that comes from it.

It would be wrong to pass judgment upon any of these facets of our system of payroll tax because that would be out of order. I merely cite instances where the contract has been unilaterally broken by the Government, which destroys any notion that this is insurance.

Mr. George Cunningham

Alterations are decided by Parliament, not by the Government.

The Chairman (Sir Myer Galpern)

No sedentary interventions, please.

Mr. Ridley

The DHSS circular states: The Class 4 contributions can in no way be regarded as a tax. That is the most misleading statement that has ever emerged from a Government Department. After all, that is what they are, a tax, and we are seeing that tax being increased.

The last argument I deploy to destroy the notion that this is insurance is the point that was made at the end of Question Time by several of my hon. Friends—namely, that the National Insurance Fund is likely to go into credit to the tune of £800 million or £900 million by the end of the financial year. It is clear that the Fund is not being used solely as a means of providing benefits on an insurance basis. It is being used to store up a considerable sum for the benefit of the Government's economic policies. There are times when it has been running at a loss and times when has been running at a profit. There is no correlation in contractual terms between what the wretched contributor puts in and what he gets out, nor is there any such correlation between the income based contributions and the benefits that are paid out. To call this system "insurance" is one of the great misnomers of our time.

I wonder why the Government have always stuck to the term "insurance" and why the DHSS is so adamant that this is not a tax. Surely the reason is psychological. It seems that the Government think that people will the more readily pay their national insurance contribution or payroll tax, as I prefer to call it, if they believe that in some way what they put in they will get out as benefit at the other end. I suppose that it has some vague connection with true insurance in the mind of the gullible public. I suppose that there is the individual who thinks that he is paying in, albeit compulsorily, for the sake of his old age, distress or hardship that may befall him in one of the many forms that the National Insurance Scheme covers. That is highly misleading.

We know full well that the amount that the individual employee pays in is hardly one quarter of the value that he will get out. That is partly because the taxpayer contributes, but mainly because the employer contributes a great deal. We build up in the minds of contributors the mistaken thought that as they have paid for their pension they should be able to get out this, that and the other. The truth is, although they do not know it, that they have not paid for even a tithe of the pension they get out, which is mainly paid by the employer and the taxpayer. There is a totally fallacious idea of the value of the contribution in relation to the value of the eventual benefit.

The Government have kept the word "insurance" because they like to keep alive the myth that this is in some way a sound insurance company paying out what is paid in and that people are specifically saving for their specific benefits at the end of their working lives. As I have demonstrated, nothing could be further from the truth. We have one politically motivated set of contributions and one politically motivated set of benefits. Whether the value of the two balance is entirely left to chance. It is in no sense contractually or actuarially correct.

8.0 p.m.

I think, therefore, that it is wrong to go on perpetrating this myth, and that it would be much better to admit that this is a payroll tax. The Government have taken this view in bringing the Bill forward. By imposing the surcharge on the contributions, they are quite openly saying that they no longer wish to pretend that the contributions which are being paid are solely and wholly for the benefit of the contributors when they retire, when they are unemployed, or in whatever other circumstances they may be. The contributions are a tax. They have been so described by the Government and have been admitted on all sides to be a tax.

If we have here this increase in the rate of tax for economic reasons, which have been discussed earlier—I do not wish to go into them now—we ought clearly to admit that the whole structure of the national insurance contribution is that of a political tax, politically aimed to put the brunt on to the employer and politically aimed to put a heavy burden on the self-employed.

We have had debates about this over and over again, and there is a difference between the two sides of the House as to what is fair and what is unfair.

Mr. George Cunningham

Hear,hear.

Mr. Ridley

The hon. Gentleman gives me my point. If he agrees that there is dispute about what is fair and what is not fair, he must equally agree that this just cannot be insurance, because there can be no dispute about what is a fair premium to pay in insurance. There can be dispute whether the premiums as a whole are too high to cover the risk, but there cannot be dispute whether certain groups of people should pay more or less. The nature of insurance is that it is a contract which any citizen can enter into irrespective of his means or circumstances.

Mr. George Cunningham

Does not the hon. Gentleman think that exactly the same considerations apply in the case of an occupational pension scheme, the cost of which falls upon the employee who pays part, the employer who pays part, and the Revenue which, through tax relief, normally bears at least 35 per cent. of the burden? The tax input to the State pension scheme, by means of the 18 per cent. Treasury contribution, is actually less than the tax input into most private pension schemes by means of tax relief on the contributions. There is no difference between the two situations.

Mr. Ridley

I do not quarrel with the hon. Gentleman but I remind him that they are called occupational pension schemes. They are not called private insurance as opposed to national insurance.

We are not here debating the merits of one scheme or another. I am merely sticking, with my accustomed assiduity, to the small point contained in the amendment—that the name is wrong. I should have thought the hon. Gentleman would agree that the name is wrong. He may not have liked my term payroll tax. He may have preferred some other term. But I believe that the time has come to jettison the term "national insurance". It is a payroll tax, and it is far better to be honest about these things.

There has been too much spoofing of the people by Governments over the years dressing up their schemes as one thing when they are something else, and providing mutton dressed as lamb. They use grand words in order to impress people. This is simply one more form of tax, and it is a form of tax which the Government have been building on very rapidly. They have been increasing the yield of this form of tax far more rapidly than any other form of tax.

For the Government to resist the amendment and to say that they want to go on calling this an insurance contribution would in my opinion be almost dishonest. My arguments are totally convincing. I have ignored any contentious grounds about the merits of the tax. I have not spoken on the merits of the Bill. I am merely saying that we should now call a spade a spade. This is a tax. Let us call it a tax. Let us call it the payroll tax.

Mr. Cope

I wish to make two points in support of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). First, it seems to me that the Government actually make things more difficult for themselves in some circumstances by their pretence that it is insurance. One example is the withdrawal of unemployment benefit from those over 60 with occupational pensions.

People are coming to me and to every other Member of Parliament and saying that as they have paid into the scheme for many years they deserve to get this benefit out, and that it is unfair to withdraw it. Whether or not it is fair to withdraw the benefit—I do not want to go into the merits of that on this Bill—the argument does not hold any legal water. It is not an insurance contract.

I accept that people have a moral entitlement to receive this benefit, but there is no financial or contractual requirement or obligation on the Government to pay it. The Government are entitled, if they wish, to withdraw the benefit. But that is a demonstration that it is not insurance. It is also making it more difficult for the Government to withdraw the benefit and to get away with the withdrawal of the benefit, which they wish to do. It makes it more difficult for the Government in that respect.

With regard to the tax relief on occupational pension schemes—a matter raised by the hon. Member for Islington, South and Finsbury (Mr. Cunningham) in his intervention—the point is that when we pay a contribution into a pension scheme of that kind we are allowed tax relief in that year. The tax is postponed until we actually receive the income. The purpose of this is quite simple, and it arises from the insurance nature of the contract.

I will take a simple example. Suppose that there are two individuals, A and B, who have the same income over their working lives and contribute the same amount to an occupational pension scheme. Suppose it so happens that A dies before he retires and does not, therefore, receive any pension at all, whereas B lives for many years afterwards and dies at 104, having received a great deal of income as pension. It is clearly much fairer that B should be taxed on the income he receives as a pension at the time that he receives that income, even though many of A's contributions have gone to help finance his pension, and A, because he died, did not receive any.

It is a long-standing principle of the tax law that we pay tax when we have retired and are in receipt of the pension, rather than paying tax on what would otherwise be our gross income at the time we earned it.

I do not think that the hon. Gentleman's intervention is a valid one in that sense, but it helps to emphasise the true nature of a real insurance contract, and the tax treatment of it, and to show that the tax treatment of this proposal is quite different. For these reasons I support the amendment.

Mr. David Mitchell

I support my hon. Friend the Member for Gloucestershire, South (Mr. Cope). The amendment asks the House to delete "insurance" and to insert "payroll tax". As my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) said in moving the amendment, it is in conformity with reality. It would be no bad thing to have our legislation drafted in conformity with reality.

My hon. Friend the Member for Gloucestershire, South raised a very interesting question when he asked whether this was insurance. I believe that the Government are now killing the myth that the National Insurance Fund is an insurance fund, and that they will live bitterly to regret having done so.

The Government have deliberately breached the Beveridge concept, and they need not have done so. I tabled a Question to the Chancellor of the Exchequer recently asking for information on the latest estimate of the contribution by the Exchequer to the National Insurance Fund in the current year and during the year 1977–78. I was told that the estimate for this year was £1,343 million, and that the Government Actuary's Report, when published, would show the figures for that year. I have now seen that report. It shows, for next year, estimated Treasury contributions to the Fund of £1,518 million and £1,507 million. They could well have allowed that money to be paid into the National Insurance Fund and have left it there, instead of seeking to use it as a tax-collecting device. If they had done that, they would have kept sacrosanct the principle—which perhaps is a myth, but is a myth in which many people believe—that the National Insurance Scheme exists for their benefit.

Mr. Leadbitter

I have a good deal of sympathy with the hon. Gentleman's sentiments about the raising of this money, but he is dealing with the matter in a semantical way. If there is to be a transfer from the National Insurance Fund in the way he suggests, is he not advocating the very concept to which he is objecting?

Mr. Mitchell

In that case, I did not make my point clear. I meant to say that the Treasury is seeking to raise £1,000 million through the National Insurance Fund and is paying that sum into the Consolidated Fund. The average person will say "That is part of the money that will go into the Fund." It is a matter of semantics to deal with the question whose shoulders will bear the payments. By taking this money and paying it into the Consolidated Fund and then making another payment out of the one fund into the other, the situation leads to some confusion. The Minister need not make such a transfer. He should allow the money to go into the National Insurance Fund and reduce the Treasury contribution pro rata. If he had decided to take that course, most people would have understood what was happening. If the Minister had taken that course, the situation would have been more realistic. One can only ask why he did not do so.

I am worried lest that one reason why they do not wish to take that course is that they could have a limited ability to put one line into a future Finance Bill to increase the figure from 2 per cent. to 4 per cent., or to some other figure.

Mr. George Cunningham

If the Government had the limited ability to get rid of the 2 per cent. at some time in the future, that would be even more worrying.

Mr. Mitchell

There is nothing to prevent the House of Commons repealing legislation. Indeed, we might be blessed by the country if, instead of legislating, we occasionally repealed measures.

My hon. Friend the Member for Cirencester and Tewkesbury said that people thought of the scheme as an insurance fund, even though that was not the case. I feel that these provisions might kill that idea and might damage the way in which people regard the National Insurance Fund. Once one starts using the term "national insurance" and breaches the Beveridge principle and alters the amount paid into the fund in line with the political or economic policies of the Government of the day, people will increasingly take a jaundiced view of the purposes of their contributions to a mythological insurance fund, because they will consider that politicians decide the benefits that are to be received.

8.15 p.m.

I am aware that the National Insurance Fund is not a true fund in the ordinary sense of the word. It pays this week's old-age pensions out of this week's contributions from those who are in work, and it does not have large sums of money on which to call. We should remember that our generation will rely on the next generation's contributions to pay our old-age pensions when we retire. If we bring the system into disrepute, we may discover that the next generation is not willing to make the kind of contribution that will give us the standards to which we should like to become accustomed.

The Government have lost a marvellous opportunity on this occasion. They should have made up the Consolidated Fund by reducing the payments made by the Treasury into the National Insurance Fund.

Mr. Denzil Davies

The hon. Member for Basingstoke (Mr. Mitchell) accused us of moving away from the Beveridge scheme and of abusing the National Insurance Scheme. He suggested that a better way to proceed would be not to pay Treasury contributions into the National Insurance Fund, but to reduce the Treasury contribution. But if we had come to the House and said "In future we propose that the Treasury should not make a percentage contribution to the National Insurance Fund", I can well imagine what would be said by Conservatives and indeed by Labour colleagues, as to a change in the basis of the national insurance system.

Mr. David Mitchell

I do not want the hon. Gentleman to misquote me, but if he looks at Hansard tomorrow he will see that I spelled out a figure of £1,500 million as the anticipated contribution from the Treasury to the Fund next year. I was suggesting that £1,000 million of that sum could have come from these provisions, and that the Treasury contribution could have been £500 million. I was not suggesting an alteration of the total figure.

Mr. Davies

The hon. Gentleman suggests a partial reduction in the Treasury contribution to the Fund.

I turn to the comments made by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who appeared to suggest that our proposals amounted to a unilateral abrogation of a contract between the citizen and the Government in respect of the National Insurance Fund. There is no such abrogation of that contract. We make clear that the Bill seeks to impose a surcharge, payable into the Consolidated Fund …". This money goes not into the National Insurance Fund but into the Consolidated Fund. The National Insurance Fund remains intact, as do contributions to it.

The brunt of the hon. Gentleman's argument was that the designation national insurance "was not correct and that he would have preferred the term "payroll tax". It follows that if those contributions into the Fund were entitled "payroll tax" then the Fund should be regarded as a payroll tax. That may be so, but many of us would not accept a change in the name from "national insurance" to "payroll". I suggest that it is logical to regard this tax as a national insurance surcharge. I will concede that if we called national insurance contributions a payroll tax the word would do for both things. But we are not changing the word for national insurance contributions, and as the tax is based on that scheme there is nothing inconsistent in describing this measure as a National Insurance Surcharge. It is a tax, and the money will go into the Consolidated Fund, not the National Insurance Fund.

The hon. Member also suggested that the tax applied to the self-employed. He may not have meant to imply this, but the suggestion was there. He knows very well that it does not apply to the self-employed; it affects only secondary class I contributions. Most people have realised that, but we do not want anyone to be under a misapprehension.

What the tax is called is a matter of semantics, and the present name for it reflects the underlying position of using the machinery of the national insurance system. We are not abusing that system in any way, because we are keeping the payments separate.

Mr. David Mitchell

Perhaps the Minister would answer a point which has been put to me by those interested in small businesses. They complain about the amount of work involved in doing PAYE and national insurance deductions. In the light of what he said just now about the way in which the two will be collected together, would he consider some way of simplifying the PAYE form? As the moneys are to be treated collectively and passed over to the Department, could not the coding be taken into account so that businesses did not have to fill in separate figures? It is all right for firms which have computerisation, but for those who still use a pen and ink there is a great deal of work involved. Would the Minister take account of this in the PAYE coding, and thus save an enormous amount of time and effort in the business community?

Mr. Davies

I will look into that, but obviously I cannot give a commitment. The essence of this tax is that it is a reasonably simple way of collecting the money. It is far simpler than VAT, which was introduced by the previous Administration, and which imposes an enormous burden upon small businesses. The whole object of this tax is to make things as simple as possible. However we will look into the point, and if there is some way to make it even simpler we will consider it. On balance, this is a reasonably simple tax to collect, and it does not impose extra administrative burdens. That is why we chose this form, and that is why I ask the House to reject the amendment.

Mr. Ridley

The Minister has made a brilliant defence against an argument which I never put. I never claimed that this was not a tax, or that its name was wrong. Perhaps he misheard my speech. What I suggested was that national insurance contributions are a misnomer. He justified, with some skill, the use of the words national insurance surcharge in this Bill. But no one said it was wrong. What I was trying to get him to accept was that the national insurance contributions are not insurance, and he did not answer that point at any time.

Mr. Davies

But that has nothing to do with this Bill. I listened with interest to the hon. Member and I conceded that if we were to agree with him, national insurance contributions should be called a payroll tax. Then this measure would be called a payroll tax surcharge. But the debate is not about whether national insurance contributions are rightly named. It is about whether this tax is properly called the National Insurance surcharge.

Mr. Ridley

The Minister of State must not accuse the Chair of calling an amendment which is out of order. Clearly, the amendment could relate only to national insurance contributions. The Minister of State skilfully defended the Government against an argument which I did not put, and would never dream of putting. Still, that is what one must expect when one has a Welsh lawyer in a Labour Treasury team. That is such a difficult animal to grapple with that I shall never be able to lay it down. Therefore, I shall seek leave to withdraw the amendment, but I hope that on another occasion the Minister of State will respond to my arguments and tell me how a national insurance contribution can be conceivably described as insurance. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 ordered to stand part of the Bill.

Bill reported, without amendment.

Motion made and Question proposed, That the Bill now be read the Third time.

8.27 p.m.

Mr. David Howell

It is inevitable that at the end of a day of continuous discussion on a Bill which is being pushed through the parliamentary sausage machine at high speed, we should find ourselves repeating some of the arguments. I hope that I shall not be too tedious or too repetitive, but there are some issues on which we feel very strongly in relation to this very large tax increase. These bear repeating and, indeed, they should be re-emphasised.

There is one point which I must put to the Minister of State. I have high respect for his ability, and I very much admire the way he dropped into his present post rather suddenly, almost in the middle of one of our Finance Bills. However, it is a matter of regret to me that he has not seen fit to withdraw the statement he made on Monday evening when he referred to some figures which I gave as "wildly out". His hon. Friend has since made a handsome apology, but I am sorry that the Minister of State has not done so.

Mr. Davies

My hon. Friend has very graciously said that the figures were not, in fact, wildly out. At the time it seemed to me they were wildly out but on reflection I realised that they were not. If the hon. Gentleman wishes me to withdraw what I said, I do so of course.

Mr. Howell

I am grateful to the Minister of State. My regrets are banished and happiness reigns as far as it can reign in relation to this Bill.

I turn now to some of the things said by the Financial Secretary. I share some sympathy with him, if he does not regard that too much as a poisoned chalice, over the difficulties he is in. During the Second Reading debate on Monday he had a very difficult problem. He wanted to use arguments against our propositions and in favour of raising the tax in this way which were relevant to the situation back in July. The measure is entirely relevant to the situation of that time. But July's disasters have long since been overtaken by September's and October's disasters. These have been overtaken by December's humiliations. Each crisis and each set of errors has led to a further crisis and a further set of errors. We in the House have been in a position similar to that of auditors or accountants appearing long after the event and trying to reconstruct the situation as it was supposed to have existed back in July.

One of the arguments that the Financial Secretary would have liked to use in July, which he used on Monday night, was that the Government would rather have acted through a jobs tax, a payroll tax, an employment tax, or whatever name it might have, than through raising value added tax. I do not fully follow their argument. It seems these days, as the Chancellor reminded the House a few days ago, that value added tax is a good deal less regressive than this kind of employment tax will be and is possibly less regressive than income tax. It used to be the other way round. Income tax was supposed to be progressive and all indirect taxes regressive. But times have changed. Everyone down to those on one-third of average earnings is paying personal tax at some of the highest starting rates in the Western world. For that reason the progressive nature of income tax has possibly been somewhat eroded. By contrast VAT, which does not fall on foods or on quite a lot of the household budget, is not as regressive as the other taxes, including this employment tax.

Therefore, I would not have accepted the Financial Secretary's arguments in July or August. When he tried to use them here and now in December the immediate implication, which was seized upon by a number of newspapers, was that he was talking about December, not July, and that in talking about December he was saying that VAT was not the tax to raise. Of course, he knew full well, and I suspect that the House recognised it, that no Minister can state for the Chancellor in advance what the Chancellor might be deciding, for all we know, at this moment. The likelihood is that he will include increases in direct taxes, value added tax and the excise taxes as well, as part of the attempt to shore up the edifice in steps which must now be taken because of failure to take action last July. The arguments were relevant to the past, but when they were used in the present they were bound to be misjudged and misunderstood.

Our opposition to the Bill is not related to whether we would have preferred value added tax or income tax to be increased, or the other alternative tax increases that the Financial Secretary and the Minister of State have offered us throughout the debate. Our proposition is that if in July the Government had made firm and decisive cuts in public spending, not of £1,000 million, but of £2,000 million, had shown that they were going to get control of the financial situation, keep control of the gilt-edged market, and, therefore, of interest rates, thus keeping control of the public sector borrowing requirement and giving priority to financial stability, we never would have reached today's humiliating situation. Now there must be bigger spending cuts, which are at present being worked out by the Cabinet and the Treasury. They will be awkward and painful, and the Left-wing will find them indigestible. This situation need never have arisen.

We always said that if decisive action was not taken in time the Chancellor would lose control of the timing and would have to take action at the behest of other people in a more painful, clumsy and reluctant way than should have been the case with an orderly strategy which entailed keeping control over the economy and our finances. We have no hesitation in putting that forward as a consistent and strong argument which has been cruelly justified by the events now before us.

Mr. Eddie Loyden (Liverpool, Garston)

It is quite true that the argument about public expenditure was whether the cuts should be phased or should be made in one fell swoop. Does the hon. Gentleman not agree that the net result would be an increase in unemployment? Views have been expressed on the Conservative Benches about the unacceptable level of unemployment. How can the hon. Gentleman square that with the public expenditure argument?

Mr. Howell

An increase in unemployment, yes, but not as great as the increase that will now take place. We recognise that cuts in public expenditure are painful. No one has denied that. We said that to delay the cuts would be more painful. We now see that. People will be out of jobs, particularly in the private sector. They are being thrown out of jobs as a result of the private sector's finding it impossible to get going again, to invest, to borrow money to put in new equipment, to open new warehouses and to take on new hands. All these things are the pimples on the face of the body economic as a result of public expenditure's not being cut Because of these things more people will be out of jobs.

If one can be so callous—we are talking about human beings and jobs—one must say that it is a question of the net balance between the painful effects on the public sector of cuts made in time versus the beneficial effects of more favourable monetary and investment conditions that will lead to a pick-up in confidence. That is what we are looking for on both sides. We are longing to get out of this vicious spiral of falling confidence, poor performance, low investment and innovation and lack of competitiveness which lead to further balance of payments difficulties, further weakness in sterling and further inflation. We are longing to reverse that spiral. I am arguing, as my hon. Friends have argued again and again, that the kindest way, even though it looks tough in terms of preserving and creating new jobs, is to get control of the financial situation again, to put that first. All the other aims that we share—the desire to see everyone in good jobs, with job stability, an end to the threat to job security—will follow.

Those hon. Members who insist on putting the economic target of jobs first in the shortest term, in a zero time scale, are constantly having to retreat from that position and are constantly being forced to take measures, such as we shall see in the next week or two, which throw more people out of work.

Mr. Litterick

I have been listening intently to the hon. Gentleman's remarks. He tends to overstate his argument, giving the impression that there is something unique about the British situation and about the problem facing the Government. Does he not agree that the problems faced by this country, and by this Government, are shared by virtually every developed country in the northern hemisphere? Does he not agree that the problem of mass unemployment is greater than, the same as, or a little less than ours in most of the developed countries? They all have similar problems of under-investment. They all have an apparent inability to stimulate what the hon. Gentleman called confidence so that investment takes place. The commonality of those problems must surely make the hon. Gentleman hesitate about emphasising that the only way the problem can be solved is by t he Government's acting unilaterally as though they lived in a vacuum. That imparts unreality to the hon. Gentleman's argument.

Mr. Howell

All politicians, particularly when we talk about economics and particularly when we look at the record of this country, should hesitate before emphasising anything too much. I share that view with the hon. Gentleman.

I am not sure that I can agree with the hon. Gentleman about the commonality of this problem. Of course, the movement of the world business cycle is decisive in this country as in our neighbouring European countries, the United States and Japan. That goes without question. The fact that the world recovery is faltering is serious for us as for every other country.

But we have to bear in mind the differences, which led last summer and the summer before to that appalling gap between our rate of inflation and that of our main competitor countries, which in turn led people to say that sterling had to be adjusted. That in turn forced on us the crisis arising from the depreciation of sterling, which in turn forced up internal costs and made it still more difficult for us to operate in this country. So our inflation rate has been worse, and on present trends as we move into the coming year—it gives me no joy to say it—although inflation may cease to fall in other countries it looks as though we shall once again ride on a higher level than our competitor countries.

Problems of investment, new equipment and new products are deep seated. There, too, we have obviously not been able to compete. As a result, we are one of the deficit countries, not one of the surplus countries. All the time we go to the surplus countries. The Chancellor of the Exchequer tells them "You must cut your surplus in order to prevent the world recovery faltering even more." That has some validity, but the other side of the argument is that therefore we should do nothing about our deficit. We should do something about it. We, too, have a responsibility in the international community, a severe responsibility to bring our deficit under control so that we can move towards the mean and—who knows?—become a surplus country as well. That would be a very proud day.

I take the hon. Gentleman's point that we live in an international community and that what is happening on the international economic scene is relevant. But we can do much more than in the past to help ourselves and the international community get through the present world business cycle and see that this country comes out in a dignified rather than a humiliating way.

What worries my hon. Friends and many people outside the House is that at every point in the process the Government, by a mixture of misjudgment and good intentions, leading to the place to which all good intentions lead, and through failures of analysis, have constantly found themselves proclaiming the aim of maintaining employment, job creation and job security and yet pursuing measures which have led to job destruction. That is why I do not think that it is an overstatement to talk about the Bill as part of the Government's job destruction programme. It has been a most elaborate programme which would do credit to any manifesto-drafter or programme-maker.

I should like to list some of the items in that programme which have been rolled forward and have led inevitably, as this measure will, to more people being thrown out of work rather than more being kept in work. First, we must go back to the obvious fact, but one that is still worth commenting on, that we have record interest rates. Sometimes hon. Members, perhaps in any part of the House but certainly among those who are afficionados of high public expenditure, do not realise just how socially cruel really high interest rates are, how they cut into jobs and smash into the household budget of the mortgage-payer, how bitter and difficult are the conditions that they create. At the levels that we have suffered in this country, they are an instrument not of benefit, ensuring that public expenditure can be financed at a high level, but of attack of the most insidious kind on the working people and their interests.

It behoves everyone who puts the interests of the working people first in every way to regard with great suspicion and detestation the kind of high interest rates to which we have been driven. The high interest rates— —

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

I am sure that the hon. Gentleman will not overlook that he must discuss only what is in the Bill.

Mr. Howell

I shall certainly take account of your ruling, Mr. Deputy Speaker. I was trying—and with your guidance, I should like to continue to try—to put the details of the Bill in the context in which they belong, but I appreciate that if the context becomes too large we lose sight of the details of the Bill, and I shall try to limit the context.

We have argued backwards and forwards throughout this debate as to what direct effect the measure will have on jobs. Evidence has been given in Select Committees that as many as 100,000 jobs could be affected. Ministers have clung, somewhat desperately at times, to their estimate of 10,000 jobs by the fourth quarter of next year. The truth is that the Government have no idea what the effect of the Bill will be because there are so many other factors involved. There are other threats to small businesses, the wealth tax—which is a wicked attack on working people and their jobs, and I do not understand the motives of those people who put it forward—and capital transfer tax—

Mr. Deputy Speaker

Order. Wherever the wealth tax may or may not be, it is not in the Bill.

Mr. Howell

I accept that point. Perhaps the fact that the context of my speech is becoming wider indicates that I have said enough about our objections to the measure and our reasons for opposing it. They are sound and solid reasons that are related closely to the interests of working people and the private sector.

The tax is an attempt to shift on to the private sector the burdens that will eventually—and probably quite soon—have to be borne by the public sector, particularly the administration of the public sector. There is no shirking that. We have always thought, and still do, that the measure is an attempt to shirk it and to escape the realities that are rapidly catching up with the Government.

For those reasons, I strongly advise my hon. Friends to oppose the measure. We think that it is damaging to employment and that it has been overtaken by the events of the autumn and winter. It should be resisted in every possible way.

8.47 p.m.

Mr. John Wakeham (Maldon)

rose—

Mr. Deputy Speaker

>: Mr. Brotherton. I am sorry, I mean Mr. Wakeham.

Mr. Wakeham

I had hoped that the strenuous efforts that I have made to lose weight during the last few weeks had met with some success, but apparently they have not. Having received such a rebuke at the beginning of my remarks, I shall strive further—until Christmas—to try to make the difference between my form and that of my hon. Friend the Member for Louth (Mr. Brotherton) more readily appreciated by the Chair.

In advancing arguments on the reason why we should not give the Bill a Third Reading, I want to refer to the speech made by the Minister of State, Treasury, on Second Reading. The whole of the latter part of that speech concerned the fact that industry was likely to make substantially increased profits in the coming year. As a result, the Minister felt that industry could well afford to pay what has generally been accepted as a tax out of increased profit.

The Minister quoted from a report by a firm of stockbrokers, Phillips and Drew, which said: Despite the current slow down in world economic growth and the worsening outlook for consumer spending in the United Kingdom we still expect that there will be another significant advance in company profits next year. We are forecasting a 20 per cent. rise in industrial profits, 34 per cent. in financial profits and 25 per cent. increase in oil company's profits."—[Official Report, 6th December 1976; Vol. 922, c. 150.] That was a very important part of the Minister's argument. Indeed, if it could be shown to be true. I should consider that he had made a very strong point in favour of his contention that industry should be able to pay a further contribution. However, if it can be shown that his case is not a good one, much of his argument falls by the wayside and makes his conclusions much less valid.

I tried to get hold of a copy of the report and was told by the stockbrokers that it would cost me £5. I do not know whether, because of the publicity given to the report by the Minister, the company decided to increase the price, but the fact that it cost £5 made me suspicious of its contents, and I was determined to get a copy. Not having £5, I had to resort to subterfuge to get a copy of the relevant part of the report.

The Minister quoted correctly the section printed in bold type in the report, but, no doubt because of his busy and onerous job, he failed to read the following paragraphs, which present a different picture from the bold statement of the Minister—which I do not challenge, but which should be read in the context of the information which follows it in the report.

The report says that industrial profits are likely to increase by about 20 per cent., but that 15 per cent. of the increase is accounted for by inflation. Thus, the increase in profits is reduced immediately to about 5 per cent.

It is accepted on both sides of the House that profits from manufacturing industry have fallen from about 15 per cent. in 1965 to 2 per cent. last year, so we are talking about a 5 per cent. increase on a base level of profits of 2 per cent. That sort of projection does not justify the Minister's saying My point was that the profitability of industry next year will show a healthy increase as a result of many measures which have been introduced."—[Official Report, 6th December 1976; Vol. 922, c. 150.] A 5 per cent. increase on 2 per cent. profits is not particularly healthy.

A number of interesting points are revealed if we look further at the report's projection of increased profits. The increase forecast by the stockbrokers is mainly an increase in the profits of overseas subsidiaries of United Kingdom companies and not an increase in the profits of companies trading within the United Kingdom. The report refers specifically to a 6 per cent. increase in the growth of OECD countries, upon which it puts considerable store, and also refers to a 1 per cent. fall in demand in the United Kingdom.

The report also considers that part of the increased profits will arise as a result of local inflation overseas assisting the subsidiaries of United Kingdom companies, and that a substantial part of the increase in profitability of United Kingdom companies will result from the fall in the value of sterling.

I am afraid that I find the whole basis of the Minister's case, on which he commended the Bill to the House on Second Reading, to be extremely inaccurate. I am extremely unhappy that he should have been so selective in his quotations from Phillips and Drew, a firm of stockbrokers who have a high reputation for objective analysis. A more careful look at the report would have given him a more balanced picture. There is nothing in the report to support the contention that there is likely to be a real increase in United Kingdom profits in the coming year.

I would add that I also speak as a business man, and what I have said is much more in line with my experience in talking to the companies and clients with whom I deal. The increase in profits that will come to United Kingdom companies will come mainly from their overseas subsidiaries, largely as a result of the devaluation of the £sterling. That is a very bad case indeed on which to commend the Bill to the House. That is why I shall vote against it on Third Reading.

8.56 p.m.

Mr. Litterick

The proposal to impose a 2 per cent. surcharge on contributions is a deflationary measure. Few people would be able to assert confidently what its effects will be, although it is a habit of many hon. Members to be confident about things on which they have no basis for confidence. Its effect on employment is indeterminate. We have no way of telling whether this £1,000 million reduction in expenditure will increase unemployment at all, because there are so many other factors at work. It is wholly interminate.

This measure will affect the consumer. There can be no doubt that this extra cost to employers will simply be passed on, price control policy or not. It will be passed on in the form of price increases, although I am certain that little or not attempt will be made to prove that this is happening. The regressive character of this proposal is evident for that reason. It will simply be passed on as prices and will most gravely and adversely affect the lowest income groups in society—those people who cannot avoid spending all of their income.

It seems peculiarly ironic, as the Minister said earlier, that the instrument by which this £1,000 million is being taken out of the economy should be the social security or national insurance system. I take the points he made earlier about this surcharge. But the fact is that the national insurance system is being made the vehicle for a tax—whether one calls it a payroll tax is neither here nor there—which is regressive in character. At the same time, the national insurance system proper is acting in a similar way in relation to the population at large, to the extent that, as the Government Actuary informed us today in his report, the National Insurance Fund is generating a very large surplus, the effect of which is precisely the same in character as the £1,000 million surcharge now proposed. The size of the current surplus in the National Insurance Fund is not far short of another £1,000 million. In fact it is £932 million, with the promise of yet another very large surplus next year.

What we are talking about is a difference between the amount of money being taken by the State from the population, be they workers or employers, and the value of services or benefits paid out by the State, this year and next year. I am sure that the House will be interested to be reminded, if not informed, that the same relationship has existed for many years vis-à-vis the National Insurance Fund. It has been persistently in surplus. I have simply jotted down the figures provided by the Actuary in this context. Taking the current year and next year, together with the previous three years' history of the National Insurance Fund, the total deflationary effect of the operation of the Fund, measured in money terms, is £2,800 million. That is a very large attack on the consuming ability of the population at large. It is £2,800 million cumulative. The surcharge is simply a siphoning off of purchasing power.

Hon. Members have argued that we are simply using the mechanism of the Fund to siphon off purchasing power. I am pointing out that the national insurance system, as a social security system, is being used in the same way, and has been used in the same way for a number of years. Whether that was intended is neither here nor there. However, the size of the surplus seems to indicate either that there is a great deal of incompetence within the Civil Service, or that it is and was deliberate. I am persuaded to the latter view —that it is a deliberate intention that this year there should be a surplus of £932 million and that there was a deliberate intention last year that there should be a surplus of £637 million.

I address myself to the Government I have to point out that this is very much at odds with what some economic orthodoxies would suggest. It seems almost as though the Government were reacting to an earlier phase in the economic cycle. It seems to me and to many others that we have long since reached the stage in the style of capitalist decline and expansion at which we ought to be thinking in terms of reflation, and in fact we are still arguing over deflationary measures, cuts and the like, and this £1,000 million surcharge.

It seems that the Civil Service—the Treasury—is once again out of sync. It takes the Treasury a long time to react to a situation, and when it reacts it is reacting to the situation as it was and not the situation as it will be tomorrow—as it ought to be doing.

The economy is being hit hard by the operation of the social security system, that is the operation of the Fund and this surcharge together. The impact in terms of spending power is very severe. Whether the Government choose to call the thing a tax or something else is not important. What is important is the essential economic decision made to deflate when we should be doing the very opposite.

At the same time as this is being done, we discover that Defence departments are asking for more money—£517 million.

Dr. McDonald

Disgusting!

Mr. Litterick

If, in terms of the economic situation, my right hon. Friends can justify deliberately creating a surplus from the mechanism of the social security system in the National Insurance Fund, how in thunder can they, in terms of any logic, justify a further £517 million for defence? It does not make sense, taken together. It is almost a wilful contradiction by the Government themselves.

Another way of putting this matter, as a Socialist, would be that as a party of redistributors we are currently indulging in the most grotesque kind of redistribution imaginable. We are reducing the social services available and the moneys allocated to the provision of those services, while providing an increase in the very expenditure which, in my humble opinion at least, is so flagrantly inflationary—namely, military expenditure. I leave aside the question of commitment.

Mr. Deputy Speaker

Order. The hon. Gentleman will have heard me reminding an hon. Member a few minutes ago that it is only matters that are in the Bill which are relevant in this debate.

Mr. Litterick

I am grateful for those words of advice, Mr. Deputy Speaker. However, I have some advice to offer the Government. In their wisdom, they have decided that they must milk the population of this £1,000 million. I am in the odd position—it is very odd for me—of having to echo, at least to some extent, the words of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). There is at least a certain verbal dishonesty here in associating this tax—they call it a surcharge, at least—with the National Insurance Fund.

I gently suggest to my right hon. Friends that they could have been a little more explicit. This is not something on which I am prepared to go to the barricades, but as a matter of principle I am a believer that our people should know how much tax they pay. For that reason, I am no supporter of indirect taxation. I am a great believer in calling a tax a tax, and nothing else. I also believe that we should tell each individual how much he is paying in tax week by week, so that at least he will have half of the calculation he needs to make as a citizen—that is, he can judge, first, on the basis of what he pays and, second, on the basis of what he gets in terms of service from the State.

Most citizens are aware that they have to purchase things collectively as citizens of a community, but we obfuscate and obscure the situation when we offer an indirect tax system, when we offer things called surcharges which are in fact taxes, and thus make it more difficult for the citizen to make an intelligent judgment of the Government's behaviour.

Although I sympathise with the Government's problem, that they are ill-advised people who apparently take at least half of an economic cycle to react to reality and therefore to this kind of advice, as a supporter of a Government who are at least tinged with Socialism—if they do not have Socialist pretensions, they are at least formally committed to Socialist objectives—and who have to live in a capitalist world in which capitalist priorities predominate, I should be more confident about this measure if the Government were more open about its purposes.

I am prepared to accept that the Government believe that reducing the public sector borrowing requirement is vital to the recovery of the British economy. I do not believe it, but I am prepared to accept that they sincerely believe it. But I wish that they would be more explicit on the question why they have exploited the National Insurance Fund in this way. I do not recollect hearing it said, and I should be more encouraged to hear it said. I should be more encouraged if the Government would assert more overtly Socialist priorities in the face of hostile pressures.

Lastly, I believe that the Government would help themselves if they were less immersed in the logic and priorities and peculiar incestuous mentality of the Treasury and spoke as if they were living in a much broader world than the British economy and therefore did not encourage those in the House and outside who would have our people believe that our economic problems are peculiarly and uniquely ours and are not experienced by anyone else. Those of us who know the world know that the problems we face are faced by practically every developed country.

Therefore, arguments about such apparently small issues as this should always be couched in terms which enable people to see clearly that this is a problem of world capitalism and that this £1,000 million is, in effect, tribute money which is being exacted from our people to placate those who are at present masters of that capitalist world.

9.11 p.m.

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

In this short debate I want to advance two reasons why I believe that the Government have chosen an unsatisfactory instrument and why the addition of this surcharge to the employer's contribution, will be harmful and ought not to be given the backing of a Third Reading in this House.

The first reason is that I want to see people employed, not paid by the State to be unemployed. It is possible to argue that we cannot know in precise terms the employment consequences of this measure. I accept that. However, I know that the employers with whom I deal in my rural constituency are increasingly perturbed at the additional cost of employing a man. The cost per employee is one of the disincentive factors to them in retaining or adding to their present labour force.

There are a number of reasons why this House has had to increase the cost per employee to the employer. Many welfare, industrial training, and other measures passed by this House unavoidably add to employer's costs. Now we are adding to the employer's costs a burden which we could have dealt with in other ways. For general economic management reasons, we are adding items which I regard as having a particularly serious effect in the whole delicate balance of employment. I think particularly of small firms and undertakings which have to consider whether it is worth keeping their present labour force or taking on more apprentices, bearing in mind the many costs and loss of time associated with apprenticeship. That is all added to the additional National Insurance Surcharge as part of the calculation.

Again and again employers in my constituency tell me that the additional costs of employing labour represent a serious disincentive to them. I should prefer to see us discouraging employers from spending their money on imported machinery and expensive energy, rather than on labour. We have a pool of unused labour in this country. I do not want this kind of disincentive to be imposed on employers. Neither I nor the Minister can make a real calculation of what the total general employment consequences will be. But I am convinced that in areas such as mine, individual employers of one, two, three or four extra men will say "No. When this is added to the rest, we cannot afford it". It is on this marginal point that the surcharge will bear particularly heavily.

The second reason why I think that the House should not give a Third Reading to the Bill is that it has not been possible to deal with a particular area of general concern—the Churches and charities. Therefore, the Bill contains unqualified provisions which would place a particularly heavy burden on organisations which are not well placed to afford them.

Again, we have to relate this proposal to the context of the Churches' point of view on recent decisions on national insurance. The Churches were invited and encouraged by the Government to place the people they employ—clergy and lay employees—in an employed position under the National Insurance Scheme, not in a self-employed position. The Churches have had to pay the price for this. They sought to do it and have met the Government's request. Now they face a considerable extra burden. They were led, by previous taxation decisions, to assume that the Government recognised their special position of not being able to pass on additional costs in charges for services or anything of that kind.

Because of the way in which the Bill has been handled by the House and the procedural resolutions—the Ways and Means Resolution in particular—it has not been possible for right hon. and hon. Members to secure amendment of the Bill. Therefore, we are left with a Bill whose provisions, applied directly to the Churches and charities, will be harmful and may cause them to withdraw particular services.

The fact is that any charitable organisation with heavy labour costs, as most of them have, because they try to keep down administrative costs and to use their money mainly for field workers, has to ask "Where do we find this 2 per cent.? Is there any alternative but to reduce the number of people we employ in order to find the money? "Churches and charities placed in that position will have no alternative but to reduce the level of services to the community which their professional employees give by reducing the number of those employees.

The House should not be contemplating the Bill without at least passing judgment on specific amendments relating to it. Since the House has not been able to do that, the Archbishop of Canterbury is justified in taking offence, not at the Prime Minister for failing to find time to see him, but at the fact that the House of Commons has been prevented from dealing with the matter. That is what makes this aspect of the Bill so unpalatable.

Employers in areas such as mine will think twice before adding to or even retaining their present labour forces. Churches and charities will be severely damaged by the Bill. For those reasons, we should not give it a Third Reading.

9.16 p.m.

Mr. Robert Kilroy-Silk (Ormskirk)

The Bill imposes a 2 per cent. surcharge on employers' national insurance contributions, which will raise £1,000 million. That amounts to an average of £1 per week tax on every worker in the country. I can see the attraction of the measure to the Government. It is an easy and quick way of collecting that sum—and it has gone through the House very quickly. It is also attractive because it can be sold as a tax on employers—no one seems to like employers these days—but in reality it is a tax upon work. It is a payroll tax that will make it more difficult to solve our employment problems.

At a time when we have 1½ million unemployed, it is remarkable that we should be asked to approve a measure which will not reduce employment and which, in the regions, will add to the total pool of unemployed.

Government spokesmen have given various estimates of the increased number of workers who will be unemployed as a result of this measure, but no one has any confidence in estimates from the Treasury. If the Bill results in one extra man becoming unemployed, that is one man too many. If that man works on Merseyside it is certainly one too many. There is a serious unemployment situation on Merseyside. The area has the highest rate of male unemployment in the United Kingdom. It is far greater than in areas of Scotland or Wales. More people are unemployed on Merseyside than in the whole of Wales.

The measure will hit hardest the areas that can least afford extra burdens. The regions, where unemployment rates are already highest, will not be able to absorb or pass on the effect of this increase as will firms in London, the South-West or even the West Midlands. Firms in areas such as mine that are already struggling to maintain their present workforces will find that this burden is too great.

There are threats of many closures on Merseyside. For instance, in Skelmersdale, where the unemployment rate is 19.5 per cent. Courtaulds is to close and 1,000 jobs will be lost. A further 600 jobs are threatened in Aintree and Control Data and Albright and Wilson of Kirkby will announce redundancies in the next two weeks. Plessey and GEC in Liverpool are likely to announce redundancies as a result of a cut back in Post Office orders. This situation exists before employers have to face the additional burden of paying £1 per week per worker. Many of those workers will not be workers once the Bill becomes law. It is regrettable that my Government could not find a find a more selective and flexible means of raising the money they need.

Mr. Cyril Smith (Rochdale)

I am intrigued by the hon. Gentleman's speech. Would he mind telling us how he voted on Monday night in the Second Reading debate and how he proposes to vote tonight, in view of his condemnation of the Bill?

Mr. Kilroy-Silk

The hon. Gentleman always was impatient. If he will just listen quietly he will get the answer to his question. I would have preferred the Government to find a more selective measure that would not have had such an impact on unemployment.

I accept that an increase in VAT would probably have had far more impact on unemployment than will this measure. I would have preferred the Government to find a less blunt instrument that would not hit employment across the whole country irrespective of the needs and handicaps of specific regions such as Merseyside. I did not vote against the Bill on Monday night and I shall not vote against it tonight. [Interruption.] I do not know why my sincerity should be in dispute. The sincerity of the hon. Member for Rochdale (Mr. Smith) is not in dispute.

I am deeply concerned about employment in my constituency and in the country as a whole. I am perturbed about the effects which the measure will have on employment, and I am also profoundly concerned to keep my Government in office. I am far more concerned about the measures that would be enacted by the rabble sitting on the Opposition Benches if they were in Government. I have no inhibitions about supporting my Government on Monday and again tonight, although I do so regretfully and reluctantly.

I would prefer the introduction of other measures, perhaps concerning defence, which has not been cut back as much as many of us would like. Even more money is now being asked for defence. Had my hon. and right hon. Friends looked more closely at other choices, they could have been found, especially in defence. The Bill will hit hard at my constituents who are already severely pressed by the high level of unemployment.

9.22 p.m.

Mr. Robert Boscawen (Wells)

The hon. Member for Birmingham, Selly Oak (Mr. Litterick) referred to a pertinent matter—the size of the surplus of the National Insurance Fund. Had he looked at the Government Actuary's report he would have seen the assumptions upon which the Government Actuary had been told by the Government to base his conclusions to arrive at a surplus. The assumptions were an average unemployment figure of 1¼ million and an average increase in annual earnings of 8 per cent. It is clear that if those rates produce that surplus the Government expect a substantial increase in the unemployment level during the coming 12 months.

I cannot believe that only 10,000 people are likely to be thrown out of work by the Bill. That estimate bears no relation to reality. It is a figure plucked out of the blue to suit the debate and the argument. On previous occasions when the Government have predicted unemployment levels over the ensuing few months they have been wildly low in their estimates, and that is likely to happen on this occasion. That is the first reason why I hope we shall not give the Bill a Third Reading.

My second reason is that the surcharge is indiscriminate and takes no account of how well or ill an industry is doing. I represent an industry that is suffering severely in the present difficult recession and the difficulties of world trade generally—namely, the shoe manufacturing industry. It is a labour-intensive industry that is suffering from low-cost imports, especially from Iron Curtain countries. It is finding it extremely difficult to keep its head above water. But along come the Government and hit the industry just as hard as any other.

The Minister said that the Government considered the Bill to be the most suitable method of reducing the public sector borrowing requirement next year. Another reason for the Bill was that industry's profits were likely to increase substantially next year. The Minister is talking through his hat if he applies that reason to certain sections of industry and decides to hit them as hard as others. This is an indiscriminate measure that will hit the industries that are already down and struggling to survive in the present difficult circumstances.

My third reason for opposing Third Reading is that the suffering will be concentrated among those on day work who receive low wages as opposed to pieceworkers. The low-wage day workers in firms that are not particularly profitable at the moment will suffer most. In the main, those who are on piece-work can increase their productivity from time to time and improve their earnings. That option is not available to day workers. It is the day workers receiving low wages who will suffer most, and they are the people whom we need to help.

In my view I have put forward three solid reasons for the Bill being the wrong way of going about reducing the public sector borrowing requirement. As has happened many times in the past few months, I have no doubt that if the Bill is given a Third Reading we shall be forced at a later stage to take measures to put right the mistakes that result from it.

9.27 p.m.

Mr. Loyden

I shall be brief, because I know that other Members want to speak. I wish to return to the point that was made by my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk). In considering this measure our minds are bound to turn to the unemployment that now prevails in areas such as Merseyside.

My hon. Friend the Member for Ormskirk catalogued not only the present unemployment but the possible closures that Merseyside industry is facing. It must be borne in mind that my hon. Friends below the Gangway have been offering the Government alternative economic policies, especially industrial policies for the regions, over a prolonged period. No matter what the Government say about regional unemployment, especially on Merseyside, they have made no real and serious attempt to alleviate the problem. They have proceeded in the hope that in the immediate future there will be a betterment of the present situation.

The argument goes far beyond the questions posed by my hon. Friend the Member for Ormskirk. In addition to the catalogue that he arrayed before the House there are the difficulties at Shotton, the steelmaking industry in North Wales. We must bear in mind the effect that they will have upon the Birkenhead docks, which are largely reliant upon handling iron ore from the Shotton steelworks. There are also the difficulties faced by factories in my hon. Friend's constituency and in my constituency. Firms in the engineering sector and other sectors of industry have closed already, or are faced with closure. In addition, there are the problems facing the telecommunications industry.

Against that background, I am sure that no Minister will expect my hon. Friends below the Gangway fully to accept the Bill. It is a measure that could add to the already unacceptable level of unemployment in the regions. I have not yet made up my mind what to do on Third Reading. At the same time, some of the measures proposed by the Opposition would be less acceptable than those now proposed by the Government.

I recall the point made by the Conservative Front Bench spokesman—the hon. Member for Guildford (Mr. Howell)—when he referred to the non-regressive nature of VAT. I remind him that VAT in that sense has no relationship at all to the income of the person paying it, and that therefore as a means of indirect taxation it is even less acceptable from my point of view than the Government's present proposals.

Our main concern has been expressed quite forcibly tonight by Labour Back Benchers. The Government must take into account the effect of their measures on the important question of employment. I did not join the Labour Party in order to see 1½million of our people unemployed, and I was not elected to this House to see it. I accept that world recession and other factors are involved, but when the Government take upon themselves the responsibility for introducing measures which create further unemployment, there can be no excuses for their behaviour.

Even at this late stage the Minister ought to think again on the effect that the measure will have on unemployment in this country.

9.32 p.m.

Mr. J. W. Rooker (Birmingham, Perry Barr)

Like my hon. Friend the Member for Liverpool, Garston (Mr. Loyden) I shall await with interest the Minister's winding-up speech before deciding how I vote on Third Reading. I was in two minds as to how to vote on Second Reading on Monday. I spoke against the Ways and Means Resolution last week simply because of the effects on unemployment and the apparent lack of thought behind the Bill. I know that it was announced in July, but the reintroduction of what is in effect a tax on jobs—a payroll tax—had not been discussed al length on the Government side.

There has been a semblance of rushing through the measure in the last few days. There are good party political reasons why it should be rushed through before Christmas. I make no bones about that. We have a majority and we are entitled to use it as long as we still maintain it. Nevertheless, it was with reluctance that I voted for the Bill on Second Reading. I almost abstained, but I thought it might be better to support the Government on Second Reading and then, if they did not come up with some good answers and good reasons for supporting the Bill on Third Reading, to abstain then.

The Opposition are not exactly fighting tooth and nail against the Bill as they were on Monday, as is shown by the Government majority of 16 earlier this evening, which is a little different from their majority of two on Monday.

We have heard a lot about the effect of the Bill on the Church of England. We have heard about meetings which may or may not have been arranged between the Prime Minister and the Archbishop of Canterbury. I understand that the financial effect of the Bill on the Church of England is £350,000. That means that the Church of England must have a payroll of £17½million, which is minuscule in relation to the size of the Church. I have every confidence that the Church will be able to drum up another £350,000. I mention it only because examples have been given of the effect of the measure on the Church.

We have also heard a good deal about charities, but there are charities and charities. There are some quite legitimate charities doing very good work, and I should be the first to support any measures the Government can take in the next few months to exempt certain charities from the full effects of the Bill.

There are certain regimental associations which are registered with the Charity Commissioners. There is one in the West Midlands. These associations deal with money donated for prisoners of war in the last war. The funds are growing year by year, but the associations are not spending money in order to seek out former prisoners of war who may be in distress. The money is not being used by these charitable institutions for the purpose for which the money was donated.

I do not want to see the money go in tax. I should prefer to see it used for the purposes for which it was donated originally. I am in correspondence with the Charity Commissioners with regard to the misuse of funds by a large regimental association in the West Midlands. Funds are being used for officers' functions and for the purpose of meeting expenses, and so on. These are somewhat beyond the ambit of the charity as approved by the Charity Commissioners when setting it up.

Although there are some charities in one category and some in the other, I would not wish to tar all the charities with the same brush in terms of the way in which they will be affected. I support relaxations for many of the worthy charities, and the Government have given half a commitment that they will examine the situation before tax is collected.

I wish to examine the way in which the Bill will affect local authorities. I understand that the cost effect of the Bill will involve a figure of £140 million initially and £145 million in August, less a figure for rate support grant of £90 million. That will mean that the rate burden, following these provisions, will increase by nearly £60 million. That is a large whack to be put on ratepayers, and it could have been avoided bearing in mind the fact that in any case rates will increase next year.

The Labour Front Bench occupants know that I put my vote where my mouth is, and I am prepared to cause the Government to be defeated in respect of public expenditure cuts. But when we consider the alternative policy, involving a figure of £1,000 million, we know from where the Opposition would obtain that money. We have heard Opposition suggestions for cuts in the discussions on the Social Security (Miscellaneous Provisions) Bill and on the Second Reading of this Bill. The Opposition policy would mean increases in school meal costs and the taxing of sickness benefits for those who are unable to work. These suggestions were advanced by Conservative Members. They would cut food subsidies far more than the Labour Government intend to cut them—and I do not excuse the Labour Government entirely on that score.

We face a situation in which we have tax increases as opposed to public expenditure cuts. So far as I am concerned, the net result is the same. Conservative spokesmen roam the country screaming for public expenditure cuts, and yet they oppose this measure. Why do they take that view? They do so because this is not their kind of cut. Therefore, on balance I am inclined to support the Government. The alternative, if we were to defeat the Government on this measure, would be to have the IMF coming down on us like a ton of bricks.Labour Weekly highlighted the situation recently by citing the secret discussions with civil servants and the suggestion of £5,000 million public expenditure cuts—

Mr. David Howell

I am sure the hon. Gentleman is aware that that report was a complete fabrication. I have denied it publicly, both outside and in the House. I hone that the hon. Gentleman will respect that denial.

Mr. Rooker

The report inLabour Weeklyquoted the hon. Gentleman as seeking £5.000 million in cuts. He has denied that. Perhaps he wants cuts of £6,000 million or £7,000 million. The hon. Gentleman and his cronies are on record as saying—

Mr. Deputy Speaker

I remind the hon. Member that it is only what is recorded in the Bill that is under consideration.

Mr. Rooker

The Conservative Opposition are on record about these matters in discussions on the Bill. They have made these points during debates on the Ways and Means Resolution, on the Money Resolution and on Second Reading. They oppose this Bill and have voted against it. The Bill does not comprise their kind of cut.

The Conservatives have put forward alternatives—and they are alternatives which I would not tolerate in any circumstances from a Labour Government. The Government will bring forward a measure to increase charges in the National Health Service. and in no circumstances will I support that move—[Interruption.] The hon. Member for Rochdale (Mr. Smith) can have it on the record that when the time comes I shall not support increased NHS charges. We face the alternative of Left-wing cuts or Right-wing cuts. That is the choice. We on the Government Benches below the Gangway have an alternative strategy, but the Government will not put it into operation.

We know the kind of cuts sought by the Conservative Opposition. The Rightwing Fascists among the Opposition would wish to inflict cuts on the poor, the needy and the sick. In no circumstances would I be prepared to join them in defeating the Government on this Bill.

9.40 p.m.

Mr. David Mitchell

The Preamble to the Bill states that this House has freely and voluntarily resolved to give and grant this surcharge". That phrase always sounded rather quaint to me, but it sounds positively bizarre after the way in which this measure has been railroaded through the House without any time being given for us to consult our constituents, and without our having any opportunity to examine the situation facing Churches and charities such as Dr. Barnardo's Homes and Save the Children. The Bill has been rushed through, with its Second Reading on Monday and Third Reading on Wednesday. That is a disgrace, and the Government should be thoroughly ashamed of the way they have behaved.

We are opposed to this measure for four reasons. In some of the reasons I expect that I shall carry with me some Labour Members as well as my hon. Friends. First, it is an abuse of the National Insurance Fund and a perversion of the Beveridge principles. We had a debate on that earlier today, and I shall not go into it again, except to say that my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) dealt with it very well. Secondly, the measure undermines the whole of the Chancellor's stated policies. If he has any credibility left it is undermined by the Bill. Thirdly, the measure will have disastrous effects on production and small businesses. Fourthly, it is a charter for unemployment by a Government of unemployables.

Turning to the battered remains of the Chancellor's economic policies. I point out that we have been told repeatedly that the Government want to see the release of resources for industry. We were told in the Spring Budget that the Government have limited the demands of the public sector in order to make room for industrial expansion. I could produce Hansard quotes by the shoal about the central economic policy of the Government being to release resources for industrial expansion. Yet here they are taking £1,000 million out of industry— and out of that part of industry which should be expanded. When hon. Members consider the irrelevance of that they will have considerable cause for concern about the way in which the Chancellor has behaved.

Then there is the damage to industry. We all know that industry needs a partnership of skilled men, motivated management, and investment. Without these three things there would be no jobs and no production, and British industry could not keep on its feet. Skilled men cannot do it on their own. There must be motivated management, but that is taxed sick by the present Government.

Yesterday, in my constituency, I opened a factory which produces automotive equipment. This can increase productivity seven times over in relation to the number of lathe and similar operations in a factory. It is said that Britain is the sick man of Europe. We may well ask why. I can tell the House why. It is because we have too little investment behind each worker in industry. It is not because of the trade unions, and it is not because we are lazy or that our workers are overpaid. It is because behind each man there is less capital equipment than there is behind equivalent workers in the countries of our European competitors. Yet today the House is being asked to vote to take money away from industry.

This money should be invested in working capital in order to bring about an expansion and modernisation of equipment in British industry. The worst-hit are the small businesses. They are not large businesses writ small; they are a different animal altogether. They cannot go to the Stock Exchange for extra working capital. They have to rely on ploughing back the surplus from the previous year's trading. That surplus will be eroded by millions of pounds by the Bill.

I estimate—the Government have not denied this figure—that £202 million will come out of the small-business sector directly because of the Bill. That is in addition to the high cost of bank borrowing—about 17 per cent. or 18 per cent. for small firms. It is in addition to problems of cash flow which are associated with a high and increasing rate of inflation. It is also in addition to the highest number of bankruptcies in the small business sector since figures were first kept in 1914.

I am glad to see that the Minister who is responsible for small firms has come into the Chamber. We have not seen him once throughout the debate on this Bill—a Bill which will affect small businesses very much. It takes working capital out of them and will reduce their ability to compete, to modernise and to employ.

How many small firms does the Financial Secretary think will go bankrupt as a result of his activities today? I suspect that he neither knows nor cares, and that he has made no inquiries to that end.

The third reason we oppose the Bill is unemployment. We are entitled to ask where the "Minister for Unemployment" is. This is a measure which he has admitted will add about 100,000 to the number of unemployed, yet he is not here. We have had conflicting evidence about the extent to which unemployment will increase. The Chancellor said that it would go up by 10,000, but the Deputy Chief Economic Adviser to the Treasury said that the £2,000 million of economies promised in July would lead to between 150,000 and 160,000 more people being unemployed. He said that the calculation was based upon conventional Treasury arithmetic. We have before us £1,000 million of those cuts. Therefore, on straight mathematics, that would mean 75,000 to 80.000 more unemployed as a result of voting for the Bill tonight.

We must decide whether to believe the Chancellor and his 10,000 or the conventional Treasury arithmetic of 75,000. The latter is more likely to be accurate than is the political arithmetic of the Chancellor. He is more concerned with the politics of how many Back Benchers he can persuade to go into the Lobby.

I am one of those Members on both sides of the House who share the view that unemployment is a disaster and that it should be avoided at every opportunity. For six years I was a member of the Transport and General Workers Union. I was younger then and at a more impressionable age. I remember the way in which, during the inter-war years, unemployment had bitten deep into the hearts, souls and minds of many trade unionists, particularly the older ones. We must do what we can to avoid a recurrence of that situation.

The Government progressively promised that if we did this or that they would get the unemployment figures down. They said that if we accepted the social contract, unemployment would progressively reduce. The reality is that it has gone up and up. Only yesterday, the Government Actuary's Report indicated a level of unemployment of 1,400,000 next year. I wonder how much higher it will prove to be.

The hon. Member for Birmingham, Selly Oak (Mr. Litterick) said that there was the same unemployment problem in every capitalist country. That is not so. The latest figures for unemployment percentages that I have are those given to the House on 2nd August, relating to the first quarter of 1976. They show that the unemployment rate in the United Kingdom was 6.2 per cent., whereas in Italy it was 3.6 per cent., France 4.8 per cent., Germany 4 per cent. and Sweden 1.6 per cent. It is not something that equally affects each capitalist country. In fact, the more Socialist the countries are the more unemployment they have. That is one of the factors that we should certainly take into account.

The House should reject the Bill tonight, as a betrayal of the Chancellor's own strategy and of manufacturing industry. We should reject it as a betrayal of investment and small business, of the unemployed and the many more who will become unemployed if it is passed. The decision will rest with hon. Members in a few moments' time. The Bill is also a betrayal of the electorate. On those grounds I urge all hon. Members to join us in the Lobby in defeating the Bill.

9.52 p.m.

Mr. Robert Sheldon

I should start by saying something about the reasons for the introduction of the Bill at this time. The most important aspect concerns the inconvenience to employers. If we had delayed the Bill any longer the printing of tables would not have been done. The employers would have received very much later notification about the extent of the deductions they are obliged to make, and the programme of administrative changes, which are scheduled to fit in with the operation of the National Insurance Scheme, could not have been met.

I know that some hon. Members do not consider this an important matter. In fact, one Opposition Member said that small businesses were not the most important aspect. I go along with what the hon. Member for Basingstoke (Mr. Mitchell) said and accept that this is an important matter for small busineses and, indeed, all businesses. Their convenience needs to be studied as well.

The final reason for the late arrival of the Bill, and our inability to discuss it for as long as we would have wished was the late opening of the new Session. I remind the House that an attempt was made through the usual channels to satisfy the Opposition by making various alternative suggestions with regard to timing. There was the possibility of next week, but for one reason or another that was not convenient and was not accepted.

My hon. Friends the Members for Ormskirk (Mr. Kilroy-Silk), Birmingham, Perry Barr (Mr. Rooker) and others talked about this being a tax on employment. That suggestion was echoed in other parts of the House. I should make clear just what we are taxing. Hon. Members wondered whether it was a tax or a surcharge. To me it is a surcharge for the purpose of collection, but clearly it is a tax as well. I should not wish to mislead the House on that.

The tax will be 2 per cent. on the national insurance contributions, but the question which then arises is "On whom will it bite?" This is a more complex matter than might be supposed.

Where the tax bites depends on whether its effects are fed through into prices, whether there are reductions in the profits of the organisation concerned, or whether there are improvements in efficiency, leading to higher levels of unemployment. Our view is that in the end the tax will work through in prices, in the same way as VAT does. The advantage of that is that the effect tends to be somewhat more delayed, but there are one or two consequences. First, because it takes longer, the price increase 12 months after the introduction of the tax will be considerably less than it would have been if we had introduced other forms of indirect taxation.

I agree with my hon. Friend the Member for Liverpool, Garston (Mr. Loyden) that any increase, however small, is to much. But we must consider the alternatives, which include those that the Conservatives might choose. The Conservatives' objection is that the public expenditure cuts that we have proposed are too small. The tax increases that we propose do not represent the way in which the Conservatives would prefer to handle the matter. They would prefer extra public expenditure cuts, with a certain amount of overkill.

We have had great difficulty in persuading the Opposition to tell us the figures they have in mind. My hon. Friend the Member for Perry Barr mentioned the figures they had in mind. We know that such figures exist. Now and again it looks as though the Conservatives will pull aside the veil and let us into their secret, but they always fail to do so. We know, however, that they would go for a overkill—even if it meant much higher levels of unemployment—and be on the safe side. as they would put it. Although we understand that the public sector borrowing requirement must be cut, because of the difficulties in financing it, we are not anxious to do more than we believe to be necessary to undertake that financing and make sure that it is in line with our general economic strategy.

Mr. Nott

All that we suggested, as I said on Second Reading, is that we would have made the extra £1,000 million cut in Government expenditure in July, whereas the Government will make them next week. Will the Minister repeat the point he made with great clarity the other day—that he thinks that this is an infinitely better tax than VAT and that if additional revenue needs to be raised it will be raised in this way rather than by VAT?

Mr. Sheldon

Before letting the hon. Gentleman off the first hook, we must bear in mind that he has given a very interesting figure. We hear that it is not the £2 billion that all the argument has been about it is a much higher figure. Just before he sat down in the Second Reading debate, the hon. Gentleman said that he would inform the House what cuts he had in mind. Then he got cold feet and sat down without any disclosure.

The hon. Gentleman has given the House new information, and I am entitled to make something of it before answering his question. Tories now say that a £2 billion cut was all that they required. That is massive new information, and the House will look forward to hearing it confirmed.

I made quite clear on several occasions that the slow effect on consumer prices that will be caused by this tax is of great value with the kind of social contract which we shall continue to have. I know that the right hon. and learned Member for Surrey, East (Sir G. Howe) finds the social contract amusing but it is a fact of British political life. Many of my hon. Friends do not find it amusing and believe that it is a fundamental factor in what we are trying to give the country, in reducing levels of inflation, and in achieving industrial harmony which the Tories never attempted and were certainly never successful in achieving.

Alternatives to this type of tax are VAT and other forms of indirect taxation. The Tories would have chosen massive deflation through public expenditure cuts. That has to be the best

reason for voting for this Bill tonight. The kind of public expenditure savings that the Tories require would produce chaos industrially and economically. The aims of the Bill are clear. They are to reduce the level of public sector borrowing requirement while raising prices in as modest a way as possible, by having a low rate and broad base, and while having the unemployment consequence as low as we can obtain by any means available to us. We can obtain revenue and reduce the public sector borrowing requirement in the way that I have indicated. The choices are not easy but this is the best one available to us. I ask the House to give the Bill Third Reading.

The Chief Secretary to the Treasury, Mr. Joel Barnett, by Her Majesty's Command, acquainted the House, That Her Majesty, having been informed of the purport of the Bill. gives Her Consent, as far as Her Majesty's interest is concerned, That the House may do therein as they shall think fit.

Question put, That the Bill be now read the Third time:—

The House divided: Ayes 244, Noes 233.

Division No.19.]	AYES	[10.2 p.m.
Abse,Leo	Cook, Robin F. (Edin C)	Fletcher, Ted (Darlington)
Allaun, Frank	Corbett, Robin	Ford, Ben
Anderson, Donald	Cowans, Harry	Forrester, John
Archer, Peter	Cox, Thomas (Tooting)	Fowler, Gerald (The Wrekin)
Armstrong, Ernest	Craigen, Jim (Maryhill)	Freeson, Reginald
Atkins, Ronald (Preston N)	Crawshaw, Richard	Garrett, John (Norwich S)
Atkinson, Norman	Cronin, John	Garrett, W. E. (Wallsend)
Bagier, Gordon A. T.	Crowther, Stan (Rotherham)	George, Bruce
Barnett, Guy (Greenwich)	Cryer, Bob	Gilbert, Dr John
Barnett Rt Hon Joel (Heywood)	Cunningham, G. (Islington S)	Golding, John
Bates, Alf	Davidson, Arthur	Gould, Bryan
Benn, Rt Hon Anthony Wedgwood	Davies, Bryan (Enfield N)	Gourlay, Harry
Bennett, Andrew(Stockport N)	Davies, Denzil (Lianelli)	Graham, Ted
Bidwell, Sydney	Davies, Ifor (Gower)	Grocott, Bruce
Bishop, E. S.	Davis, Clinton (Hackney C)	Hamilton, James (Bothwell)
Blenkinsop, Arthur	Deakins, Eric	Hardy, Peter
Boardman, H	Dean, Joseph (Leeds West)	Harper, Joseph
Booth, Rt Hon Albert	Dell, Rt Hon Edmund	Harrison, Walter (Wakefield)
Bottomley, Rt Hon Arthur	Doig, Peter	Hart, Rt Hon Judith
Boyden, James (Bish Auck)	Dormand, J. D.	Hatton, Frank
Bradley, Tom	Douglas-Mann, Bruce	Healey, Rt Hon Denis
Bray, Dr Jeremy	Duffy, A. E. P.	Heffer, Eric S.
Brown, Hugh D. (Provan)	Dunn, James A.	Hooley, Frank
Buchan, Norman	Dunnett, Jack	Horam, John
Buchanan, Richard	Eadie, Alex	Hoyle, Doug (Nelson)
Butler, Mrs Joyce (Wood Green)	Edge, Geoff	Huckfield, Les
Callaghan, Jim (Middleton & P)	Edwards, Robert (Wolv SE)	Hughes, Rt Hon C. (Anglesey)
Campbell, Ian	Ellis, John (Brigg & Scun)	Hughes, Robert (Aberdeen N)
Canavan, Dennis	English, Michael	Hughes, Roy (Newport)
Carmichael, Neil	Ennals, David	Irvine, Rt Hon Sir A. (Edge Hill)
Cartwright, John	Evans, Fred (Caerphilly)	Irving, Rt Hon S. (Dartford)
Castle, Rt Hon Barbara	Evans, Ioan (Aberdare)	Jackson, Colin (Brighouse)
Clemitson, Ivor	Ewing, Harry (Stirling)	Janner, Greville
Cocks, Rt Hon Michael	Faulds, Andrew	Jay, Rt Hon Douglas
Cohen, Stanley	Fernyhough, Rt Hon E.	Jeger, Mrs Lena
Coleman, Donald	Fitch, Alan (Wigan)	Jenkins, Hugh (Putney)
Colquhoun, Ms Maureen	Flannery, Martin	John, Brynmor
Conlan, Bernard	Fletcher, L. R. (Ilkeston)	Johnson, James (Hull West)
Johnson, Walter (Derby S)	Morris, Charles R. (Openshaw)	Spearing, Nigel
Jones, Alec (Rhondda)	Morris, Rt Hon J. (Aberavon)	Spriggs, Leslie
Jones, Barry (East Flint)	Moyle, Roland	Stallard, A. W.
Jones, Dan (Burnley)	Murray, Rt Hon Ronald King	Stewart, Rt Hon M. (Fulham)
Judd, Frank	Newens, Stanley	Stoddart, David
Kaufman, Gerald	Noble, Mike	Stott, Roger
Kilroy-Silk, Robert	Oakes, Gordon	Strang, Gavin
Kinnock, Neil	Ogden, Eric	Strauss, Rt Hon G. R.
Lambie, David	O'Halloran, Michael	Summerskill, Hon Or Shirley
Lamborn, Harry	Orme, Rt Hon Stanley	Taylor, Mrs Ann (Bolton W)
Lamond, James	Ovenden, John	Thomas, Mike (Newcastle E)
Latham, Arthur (Paddington)	Padley, Walter	Thomas, Ron (Bristol NW)
Leadbitter, Ted	Palmer, Arthur	Tierney, Sydney
Lee, John	Park, George	Tinn, James
Lestor, Miss Joan (Eton & Slough)	Parker, John	Tomlinson, John
Lewis, Ron (Carlisle)	Parry, Robert	Torney, Tom
Lipton, Marcus	Pendry, Tom	Urwin, T. W.
Litterick, Tom	Perry, Ernest	Varley, Rt Hon Eric G.
Loyden, Eddie	Phipps, Dr Colin	Walden, Brian (B'ham L'dyw'd)
Luard, Evan	Price, C. (Lewisham W)	Walker, Harold (Doncaster)
Lyon, Alexander (York)	Price, William (Rugby)	Walker, Terry (Kingswood)
Mabon, Dr J. Dickson	Rees, Rt Hon Merlyn (Leeds S)	Ward, Michael
McCartney, Hugh	Roberts, Albert (Normanton)	Watkins, David
McDonald, Dr Oonagh	Roberts, Gwilym (Cannock)	Watkinson, John
McElhone, Frank	Robinson, Geoffrey	Weetch, Ken
MacFarquhar, Roderick	Roderick, Caerwyn	Weitzman, David
McGuire, Michael (Ince)	Rodgers, George (Chorley)	Wellbeloved, James
MacKenzie, Gregor	Rooker, J. W.	Whitlock, William
Mackintosh, John P.	Rose, Paul B.	Willey, Rt Hon Frederick
Maclennan, Robert	Ross, Rt Hon W. (Kilmarnock)	Williams, Alan (Swansea W)
Madden, Max	Rowlands, Ted	Williams, Alan Lee (Hornch'ch)
Magee, Bryan	Ryman, John	Williams, Rt Hon Shirley (Hertford)
Maguire, Frank (Fermanagh)	Sandelson, Neville	Williams, Sir Thomas (Warrington)
Mallalieu, J. P. W.	Sedgemore, Brian	Wilson, Alexander (Hamilton)
Marks, Kenneth	Selby, Harry	Wilson, William (Coventry SE)
Marquand, David	Shaw, Arnold (Ilford South)	Wise, Mrs Audrey
Marshall, Dr Edmund (Goole)	Sheldon, Robert (Ashton-u-Lyne)	Woodall, Alec
Marshall, Jim (Leicester S)	Shore, Rt Hon Peter	Woof, Robert
Maynard, Miss Joan	Short, Mrs Renée (Wolv NE)	Wrigglesworth, Ian
Meacher, Michael	Silkin, Rt Hon John (Deptford)	Young, David (Bolton E)
Mikardo, Ian	Silkin, Rt Hon S. C. (Dulwich)
Millan, Rt Hon Bruce	Silverman, Julius	TELLERS FOR THE AYES:
Miller, Dr M. S. (E Kilbride)	Skinner, Dennis	Mr. Frank R. White and
Miller, Mrs Millie (Ilford N)	Small, William	Mr. Joseph Ashton.
Moonman, Eric	Snape, Peter
NOES
Adley, Robert	Cope, John	Glyn, Dr Alan
Aitken, Jonathan	Cormack, Patrick	Godber, Rt Hon Joseph
Alison, Michael	Corrie, John	Goodlad, Alastair
Amery, Rt Hon Julian	Costain, A. P.	Gorst, John
Arnold, Tom	Craig, Rt Hon W. (Belfast E)	Gow, Ian (Eastbourne)
Atkins, Rt Hon H. (Spelthorne)	Crawford, Douglas	Gower, Sir Raymond (Barry)
Awdry, Daniel	Crowder, F. P.	Grant, Anthony (Harrow C)
Bain, Mrs Margaret	Dean, Paul (N Somerset)	Gray, Hamish
Baker, Kenneth	Dodsworth, Geoffrey	Griffiths, Eldon
Banks, Robert	Douglas-Hamilton, Lord James	Grimond, Rt Hon J.
Beith, A. J.	Drayson, Burnaby	Grist, Ian
Bell, Ronald	du Cann, Rt Hon Edward	Grylls, Michael
Bennett, Dr Reginald (Fareham)	Durant, Tony	Hall-Davis, A. G. F.
Benyon, W.	Eden, Rt Hon Sir John	Hamilton, Michael (Salisbury)
Berry, Hon Anthony	Edwards, Nicholas (Pembroke)	Hampson, Dr Keith
Biggs-Davison, John	Elliott, Sir William	Hannam, John
Blaker, Peter	Emery, Peter	Harvie Anderson, Rt Hon Miss
Body, Richard	Ewing, Mrs Winifred (Moray)	Hastings, Stephen
Boscawen, Hon Robert	Eyre, Reginald	Havers, Sir Michael
Bottomley, Peter	Fairbairn, Nicholas	Hayhoe, Barney
Bowden, A. (Brighton, Kemptown)	Fairgrieve, Russell	Henderson, Douglas
Boyson, Dr Rhodes (Brent)	Farr, John	Hicks, Robert
Braine, Sir Bernard	Finsberg, Geoffrey	Higgins, Terence L.
Brittan, Leon	Fisher, Sir Nigel	Hodgson, Robin
Brocklebank-Fowler, C.	Fletcher, Alex (Edinburgh N)	Holland, Philip
Brotherton, Michael	Fletcher-Cooke, Charles	Hooson, Emlyn
Brown, Sir Edward (Bath)	Fookes, Miss Janet	Hordern, Peter
Bryan, Sir Paul	Forman, Nigel	Howe, Rt Hon Sir Geoffrey
Budgen, Nick	Fowler, Norman (Sutton C'f'd)	Howell, David (Guildford)
Bulmer, Esmond	Fox, Marcus	Howells, Geraint (Cardigan)
Butler, Adam (Bosworth)	Freud, Clement	Hunt, David (Werral)
Chalker, Mrs Lynda	Fry, Peter	Hurd, Douglas
Churchill, W. S.	Galbraith, Hon T. G. D.	Hutchison, Michael Clark
Clark, Alan (Plymouth, Sutton)	Gardiner, George (Reigate)	James, David
Clark, William (Croydon S)	Gardner, Edward (S Fylde)	James, R. Rhodes (Cambridge)
Clegg, Walter	Gilmour, Rt Hon Ian (Chesham)	Jenkin, Rt Hon P. (Wanst'd & W'df'd)

Jessel, Toby	More, Jasper (Ludlow)	Smith, Dudley (Warwick)
Johnson Smith, G. (E Grinstead)	Morgan, Geraint	Speed, Keith
Johnston, Russell (Inverness)	Morgan-Giles, Rear-Admiral	Spence, John
Jones, Arthur (Daventry)	Morris, Michael (Northampton S)	Spicer, Michael (S Worcester)
Jopling, Michael	Morrison, Hon Peter (Chester)	Sproat, Iain
Kershaw, Anthony	Mudd, David	Stainton, Keith
Kilfedder, James	Nelson, Anthony	Stanbrook, Ivor
Kimball, Marcus	Neubert, Michael	Steel, David (Roxburgh)
King, Tom (Bridgwater)	Nott, John	Steen, Anthony (Wavertree)
Kitson, Sir Timothy	Onslow, Cranley	Stewart, Donald (Western Isles)
Knight, Mrs Jill	Oppenheim, Mrs Sally	Stewart, Ian (Hitchin)
Knox, David	Page, John (Harrow West)	Stokes, John
Lamont, Norman	Page, Rt Hon R. Graham (Crosby)	stradling Thomas, J.
Langford-Holt, Sir John	Page, Richard (Workington)	Tapsell, Peter
Latham, Michael (Melton)	Parkinson, Cecil	Taylor, R. (Croydon NW)
Lawrence, Ivan	Pattie, Geoffrey	Taylor, Teddy (Cathcart)
Le Marchant. Spencer	Penhaligon, David	Tebbit, Norman
Lester, Jim (Beeston)	Percival, Ian	Thomas, Rt Hon P. (Hendon S)
Lewis, Kenneth (Rutland)	Price, David (Eastleigh)	Thompson, George
Lloyd, Ian	Pym, Rt Hon Francis	Townsend, Cyril D
Loveridge, John	Raison, Timothy	Trotter, Neville
Luce, Richard	Rathbone, Tim	van Straubenzee, W. R.
McAdden, Sir Stephen	Rees-Davies, W. R.	Viggers, Peter
MacCormick, Iain	Reid, George	Wainwright, Richard (Colne V)
McCrindle, Robert	Renton, Rt Hon Sir D. (Hunts)	Wakeham, John
Macfarlane, Neil	Renton, Tim (Mid-Sussex)	Walder, David (Clitheroe)
MacGregor, John	Ridley, Hon Nicholas	Wall, Patrick
Macmillan, Rt Hon M. (Farnham)	Ridsdale, Julian	Walters, Dennis
Madel, David	Rifkind, Malcolm	Warren, Kenneth
Marshall, Michael (Arundel)	Roberts, Wyn (Conway)	Watt, Hamish
Marten, Neil	Rodgers, Sir John (Sevenoaks)	Weatherill, Bernard
Mates, Michael	Ross, Stephen (Isle of Wight)	Wells, John
Mawby, Ray	Rossi, Hugh (Hornsey)	Welsh, Andrew
Maxwell-Hyslop, Robin	Rost, Peter (SE Derbyshire)	Wiggin, Jerry
Mayhew, Patrick	Sainsbury, Tim	Wigley, Dafydd
Meyer, Sir Anthony	St. John-Stevas, Norman	Wilson, Gordon (Dundee E)
Miller, Hal (Bromsgrove)	Shelton, William (Streatham)	Winterton, Nicholas
Mills, Peter	Shepherd, Colin	Young, Sir G. (Ealing, Acton)
Miscampbell, Norman	Shersby, Michael	Younger, Hon George
Mitchell, David (Basingstoke)	Silvester, Fred
Moate, Roger	Sims, Roger	TELLERS FOR THE NOES:
Monro, Hector	Skeet, T. H. H.	Mr. Nigel Lawson and
Montgomery, Fergus	Smith, Cyril (Rochdale)	Mr. Michael Roberts.
Question accordingly agreed to.
Bill read the Third time, and passed.