Commons Sitting of 14 July 1976

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS

  NATIONAL EXHIBITION CENTRE AND BIRMINGHAM MUNICIPAL BANK BILL [Lords]
  As amended, considered.
  Amendment made, in page 9, line 10, at end insert—
  '(2) Regulation B4 of the Local Government Superannuation Regulations 1974 shall have effect as if—
  (a) the following were added to paragraph
  (4)—
  "(j) the Birmingham Municipal Trustee Savings Bank"
  (b) the following paragraph was added after paragraph (4)—
  "(4A) In the case of employees of the Birmingham Municipal Trustee Savings Bank paragraph (1) shall only apply to those who on 31st March 1976 were employed by the Birmingham City Council in connection with the Birmingham Municipal Bank."'—[The Chairman of Ways and Means.]
  Bill to be read the Third time.

  LERWICK HARBOUR ORDER CONFIRMATION BILL
  Read the Third time and passed.
  STORNOWAY HARBOUR ORDER CONFIRMATION
  Mr. Millan presented a Bill to confirm a Provisional Order under Section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to Stornoway Harbour; and the same was read the First time; and ordered to be considered upon Tuesday next and to be printed. [Bill 197.]
ORAL ANSWERS TO QUESTIONS
  ENVIRONMENT

    Wainsford Relief Sewerage Scheme
    Mr. Adleyasked the Secretary of State for the Environment if he will make a statement about the additional pollution of the Solent which will be created by the Wainsford relief sewerage scheme.
    The Under-Secretary of State for the Environment (Mr. Guy Barnett): No, Sir. My right hon. Friend will be considering the Southern Water Authority's statutory submission for consent to discharge related to the Wainsford scheme. This is expected shortly, and I cannot anticipate the outcome.
    Mr. Adley: The scheme itself is welcome, but does the Minister agree that if it goes ahead at present it will result in the discharge of considerable extra sewage into the Solent? Is it not about time that when sewerage scheme are approved they should include full treatment of the sewage and not allow it still to be pumped into our rivers, estuaries and seas?
    Mr. Barnett: The hon. Gentleman's point will be noted, but it would be quite wrong for me, as I said in my original answer, to anticipate the outcome, first, of the submission and, secondly, of my right hon. Friend's reply to it.

    House Building
    Mr. Skinnerasked the Secretary of State for the Environment whether he is satisfied with the latest house building figures.
    The Minister for Housing and Construction (Mr. Reginald Freeson): Public sector dwellings started in Great Britain up to the end of May this year are 22 per cent. up on the same period of 1975. Completions were up by 9 per cent. Private sector starts are up 19 per cent. and completions up 1 per cent. These figures show that good progress is being made.
    Mr. Skinner: Does my right hon. Friend agree that the very latest statistics, compared with the previous quarter's,

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    show that a further decline is taking place compared with the figures that he has given? Is that not as a result of insufficient money being allocated to the public sector to assist with house building? Will he resist to the utmost any further public expenditure cuts, as they affect the Department, in order to ensure that sufficient houses will be built and that no more building workers will be thrown on the dole queue as a result of any of these cuts taking place?
    Mr. Freeson: I am afraid that my hon. Friend is in error in respect of the first few points he made. The figures for the last quarter show a decline over the preceding quarter, which was remarkable because of good weather conditions during the winter, but they are, nevertheless, much higher than last year. There is no question of there having been any reduction in resources being made available for new buildings. As for the future, I cannot guarantee that there will be a continued expansion at the rate there has been so far. But my answer dealt with the position that we have had to date, in which house building is still running at a much higher level than it was last year and, indeed, two or three years ago.
    Mr. Rossi: The Minister chooses last year for the purpose of his comparison but does he not agree that that shows that the figures are deplorable compared with 1972–73? Why is he complacent about this 10 per cent. fall in council house starts in the three months preceding, and not subsequent to, the May elections? Will he comment upon the projection recently made by the Building Material Producers Association, which considers that this steady decline will continue right through to 1979?
    Mr. Freeson: On the last point, I met representatives of the Building Material Producers Association within a few days of the Press release to which the hon. Gentleman refers. They were making reference to the general position with regard to the construction industry and not on house building as such.
    Mr. Rossi indicated dissent.
    Mr. Freeson: I assure the hon. Gentleman that if he will consult with the representatives of the Association he will find that, as far as house building is concerned, they went away perfectly satisfied
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    with the information I gave them. The hon. Gentleman will know from his experience that quarterly figures vary throughout the year, and from one year to another. The important thing is the total throughout the whole of the year. The position is that this year, notwithstanding the quarterly variations, we are running at a much higher rate of house building activity than we were a year ago, or the year before that. Certainly the hon. Gentleman would find the figures much higher than the figures we inherited from the previous Administration.
    Mr. Bowdenasked the Secretary of State for the Environment how the level of private house starts at the latest available date compares with that in 1973.
    Mr. Freeson: Private housing starts in 1972 were 227,000; in 1973, 215,000; in 1974, 105,000; in 1975, 148,000; and in the first five months of this year 60,600. The private enterprise housing inquiry in March showed that builders expect to start 160,000 houses in 1976.
    Mr. Bowden: Will the Minister explain how he thinks there will ever be any chance of getting back to the 1973 levels while the Government persist with legislation like the Community Land Act and with the excessive rates of development land tax? Will he also renounce categorically the Labour Party statement this year about nationalisation of the major building companies, which would set back the chances of thousands of people owning their own homes?
    Mr. Freeson: I do not know about the statement that the hon. Gentleman mentioned. I shall have to check up and read it and comment on it then. I would have expected at least a welcome for my statement that there had been a turn-round in house building from the disastrous slump which we inherited in 1974.
    Mr. George Rodgers: Would my right hon. Friend agree that there is a general availability of houses for sale throughout the country, that the real shortage is in houses to let and that in every local authority which is responsible in this sector there is a huge waiting list? Should not attention be focused on those matters?
    Mr. Freeson: The situation varies considerably from one area to another. In

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    some localities there is a disproportionate shortage of rented accommodation as against owner-occupied, and the position is reversed elsewhere. The Government are and always have been opposed to indiscriminate policies of one kind or another. We need to consider the local housing market and needs and to provide via local authorities and by other means for meeting the needs which are established as a matter of objective fact and analysis.
    Mr. Joseph Deanasked the Secretary of State for the Environment what steps he is taking to ensure that the increased momentum in the council house building programme is maintained.
    Mr. Freeson: The improved level of new house building by local authorities and housing associations is being sustained by the financial support given under our interim Housing Rents and Subsidies Act 1975 and under the Housing Act 1974. Other measures have been taken to encourage councils and associations to maintain, modernise and convert existing houses and to widen the range of tenures.
    Further action will he taken in the light of our housing finance review.
    Mr. Dean: I thank my hon. Friend for that answer, but in view of answers by my right hon. Friend the Secretary of State, in which he said that the Government could give no guarantee about the level of financial support for new council house building under the impending cuts, will my hon. Friend restate the Government's policy that housing will remain the priority? My hon. Friend said that the level of council house building was being maintained. Is he aware that the city held up by the Opposition during the local government debate as a wonderful example of Conservative control—I am talking about Leeds, the city I represent—
    Mr. Speaker: Order. This is not fair. I could have called another Question if the hon. Gentleman's supplementary question had not gone on for so long. Will he come to a conclusion now?
    Mr. Dean: Leeds is cutting its building programme though it has an ever-growing waiting list. Can my hon. Friend do anything about that?
    Mr. Freeson: The latest information I have about Leeds—and this is true of other local authorities—is that there have been no proopsals to cut house building programmes. But if my hon. Friend has further information that he would care to give me, I shall be glad to consider it.
    As to the future of house building, I have said that we have had a major expansion in the past two years. There can be no guarantee of further expansion. At this stage I cannot add to the answer given by my right hon. Friend the Secretary of State earlier.

    British Railways Board (Chairman)
    Mr. Moateasked the Secretary of State for the Environment when he next proposes to meet the Chairman of the British Railways Board.
    The Secretary of State for the Environment (Mr. Peter Shore): I last met the chairman on 14th June. I expect to have further meetings as the need arises.
    Mr. Moate: Can the Secretary of State say whether British Rail plans and expenditure will be affected by the forthcoming cuts in public expenditure? If not, can he tell us when he will be announcing his strategy for British Railways.
    Mr. Shore: I am glad to notice the note of hesitancy in respect of the question that the hon. Gentleman puts to me. Obviously any speculation about future public expenditure cuts is, at this stage, hypothetical. On the second part of the question, we are proceeding with the transport policy review. All written submissions will be in by the end of the month, and as soon after that as possible I hope to come to conclusions.
    Mr. Dalyell: Is my right hon. Friend aware that over the past three months I have had 15 times as many letters from pigeon fanciers concerned about transporting their pigeons by British Rail as I have had about a Scottish Assembly? Will he get his priorities right? What will he do about this grave matter?
    Mr. Shore: I take due note of the importance of this subject, but I understand that the board has decided not to implement the original proposal—[HON. MEMBERS: "Hear, hear."] No, wait a minute—to impose restrictions, pending further consideration of the matter by

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    the Central Transport Consultative Committee
    Mrs. Kellett-Bowman: When the Minister gets round to seeing the chairman in, I hope, the near future, will he point out to him the great hardship that has befallen the town of Carnforth, which in the past was a magnificent railway town and which still depends to a large extent on railways, and where the number of jobs has decreased from 702 in 1966 to 358 today? The jobs are still disappearing. Will the right hon. Gentleman ask the chairman to have mercy on these people and keep them in work?
    Mr. Shore: I am sure that the Chairman of British Rail will always give careful consideration to the effects of employment and services in areas that are serviced by British Rail. Beyond that, I can only say that I am sure that the chairman will have noted what the hon. Lady said.
    Mr. Cryer: Will my right hon. Friend convey congratulations to British Rail's Chairman, if he meets him, on the decision to defer the end of pigeon traffic? Will he also impress on him the desirability of British Rail's not discarding freight traffic, but grabbing all it can? Will he tell the chairman that sometimes British Rail's attitude to freight traffic is so indifferent that it seems to be helping the British Road Federation? Will he explain to the chairman that, as a matter of policy, we want to get as much traffic as possible off the roads and on to the railways?
    Mr. Shore: I concur with my hon. Friend's sentiments. However, I would find it extraordinary if any Chairman of British Rail did not have much the same interests in mind.
    Mr. Gwynfor Evans: When the right hon. Gentleman next meets the chairman, will he inform him of the persistent anxiety felt in western Wales about the future of the line from Swansea to Fishguard, running through Carmarthen and employing 500 people, and will he confirm that this anxiety is understandable, in view of the extensive closures in the 'sixties, in an area that was the most prosperous in the whole of the British Railways region? Will he ask the chairman to make a
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    categorical statement that there is no danger of closure to this line?
    Mr. Shore: I would hesitate to begin by asking the Chairman of British Rail to make categorical statements about every line in the country. However, as I have said, I hope at the end of our general consideration of transport policy to be able to make a much more general and also a more specific statement about the future of rail services in the United Kingdom.
    Mr. Norman Fowler: Getting back to the subject of freight, is not the first aim of Government policy the elimination of British Rail's freight deficit? Will the Government give an assurance, first, that they see no justification for subsidising freight operations and, secondly, that that subsidy will be eliminated, as the right hon. Gentleman's predecessor would have eliminated it, by the end of next year?
    Mr. Shore: What we are concerned with is the total subsidy bill of British Rail. As we have made clear, and as the last public expenditure White Paper made clear, we have to envisage not merely a no-growth situation in subsidies, but a reduction. In that document we did not allocate in any precise detail particular sums to particular activities, and for good reason—because we needed to have further discussions. I would treat this with some reserve, but my information is that there has been an improvement in the freight services this year, reflecting both some increase in charges and some pick-up in traffic. I hope that this will be a success.

    Road Signs (Metrication)
    Mr. Michael Marshallasked the Secretary of State for the Environment what plans he has for converting road speed limits and distance signs to metric units.
    The Under-Secretary of State for the Environment (Mr Kenneth Marks): None at present, Sir.
    Mr. Marshall: Is the hon. Gentleman aware that that answer only adds to the confusion about the Government's metrication policy? If plans are formulated to carry this policy through, will they at least look once more at the business of restriction or derestriction of speed

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    limits? At present, this seems to be a question of passing the buck from the Department of the Environment to the police and to the local authorities, and no one appears to take into account representations such as I and many other hon. Members are making on these matters.
    Mr. Marks: The question of speed limits—what I might call the energy speed limits—will be discussed later this year when they come up for renewal or for dropping. As for metrication, we feel that the matter needs careful consideration. It is not urgent. We hope to make proposals as a basis for discussion later this year.
    Mr. Mark Hughes: While one welcomes the lack of precipitancy by my hon. Friend in going for metrication through discussion, may I ask him to look carefully at the whole problem of achieving more flexibility in laying down speed limits? At the moment they appear to be rather rigidly enforced—not by the police, but in the way in which they are set up—in some parts of the country.
    Mr. Marks: The general question of speed limits is a matter for consultation between my Department, local authorities and the police, and it is not as inflexible as my hon. Friend suggests.
    Mr. Powell: Will the Under-Secretary confirm that there is no EEC obligation to carry out this conversion and that Ministers have undertaken to oppose the suggestion of any such obligation?
    Mr. Marks: There is a draft directive on weights and measures which commits us to phase out certain units by the end of 1979. They include the yard and the ton but not the mile.
    Sir John Hall: Although the Minister has no plans, it has obviously crossed his mind that at some time it may be necessary to change the signs to metric units. Has any estimate been made of the cost of doing so?
    Mr. Marks: Yes; nearly every country which has not yet gone metric has decided to change. It will scarcely be possible for us to stand out against all that permanently. [HON. MEMBERS: "Why not?"] The change of the speed
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    limit signs, would have to be done fairly quickly and the cost would be about £4 million.

    Housing Finance Review
    Mr. Arthur Jonesasked the Secretary of State for the Environment whether he has received the report of his housing finance review.
    Mr. Stephen Rossasked the Secretary of State for the Environment whether he can now give a date when he expects to publish the findings of his Department's review of housing finance.
    Mr. Shore: The review is still in progress. I expect to have the conclusions later in the year.
    Mr. Jones: In view of the cautious reply that was given by the Minister for Housing and Construction to the hon. Member for Bolsover (Mr. Skinner) on housing expenditure, it is clear that significant public expenditure reductions are imminent. Am I right in thinking that those cuts will be implemented irrespective of any recommendations that there may be in the housing finance review?
    Mr. Shore: The housing finance review, as I have indicated, is not yet complete. Therefore, it is not possible for me to take that fully into consideration in any discussions that may be going on at present in the context of the forward public expenditure survey figures for 1977–78 onwards.
    Mr. Frank Allaun: In the review, and in the context of the threatened public expenditure cuts, will my right hon. Friend reject any proposals for slashing council house subsidies? Does he agree that that would inevitably mean further rises in rents, thereby so discouraging council house building as to bring it almost to a halt?
    Mr. Shore: I agree that in any proposals for subsidies we have to strike a balance to avoid the deleterious effect on new house building that my hon. Friend rightly fears. I think it would be unwise for me at this time of the year to try to anticipate the outcome of present discussions. However, my hon. Friend will recall that there were proposals in the last public expenditure survey that affected housing subsidies.
    Mr. Ross: Is the right hon. Gentleman aware that his answer will cause some distress in many circles? Those of us who are interested in getting on with the housing finance review look forward, when the review is finally published, to a change in Government policy and greater flexibility. As the right hon. Gentleman's Department has had evidence from all quarters of the building industry and others involved for many months, it is surely time that the review was published, and that we had dates fixed for its publication and debate in the House.
    Mr. Shore: I am as anxious as the hon. Gentleman to get on with it. I very much wish to complete the study at the earliest moment, and to report to the House and others on its contents, with a view to getting the reactions of the House and other interested parties. I agree that one of the purposes of the review is to achieve a greater flexibility in the provision of housing, in the broadest sense, throughout the country.
    Mr. Raison: Will the right hon. Gentleman make it clear whether it is still his policy that there should be no limit on public sector building, or has it now been brought within the restrictions imposed on local authority spending?
    Mr. Shore: The policy on public sector building remains as it has been stated in the previous Government, PESC and other policy statements. The House will appreciate that I am not at liberty to say what the future will bring.

    Local Government Finance (Consultative Council)
    Mr. Eyreasked the Secretary of State for the Environment when he next expects to take the chair at the Consultative Council on Local Government Finance.
    Mr. Shore: On Tuesday 27th July, Sir.
    Mr. Eyre: Will the Secretary of State tell the House with complete frankness exactly what demands, when he meets the council, he will make upon local authorities to make cuts in their expenditure.
    Mr. Shore: I am always tempted to respond to invitations to be completely
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    frank. However, I find it impossible to accede to the hon. Gentleman's request on this occasion. I still have not received the returns for which I asked from the local authorities. As the hon. Gentleman well knows, the deadline is rapidly approaching. I hope to have the returns soon.
    Mr. Hardy: Will my right hon. Friend make sure that sewerage charges are considered at the meeting, so that local authorities may be given an assurance that the Government will legislate at an early stage to relieve the anxiety and muddle that was inherited from the previous Administration?
    Mr. Shore: That question is somewhat different from the one that is likely to arise at my next meeting with the consultative council. However, I promise closely to examine what my hon. Friend has said.
    Mr. Speed: Does the Secretary of State agree that the present situation does not allow him to curb those local authorities, such as Haringey, which are deliberately defying him on public expenditure, and does not allow him to encourage the many local authorities that are trying to economise? Will these matters be discussed at the end of this month? Has the right hon. Gentleman plans for changing the present situation?
    Mr. Shore: I think it is dangerous to select particular authorities for attack. I must inform the House that one of the remarkable features of the preliminary returns for 1976–77 that we had in April of this year was the near-uniformity of authority increases throughout the country, including Conservative-controlled authorities just as much as Labour-controlled authorities. It is foolish to try to single out particular authorities.
    I agree with the hon. Gentleman at the end of the day one is left with the difficult question of what action to take in the event of overspend. As he knows from the replies that I have given previously, how one reacts to that question may well determine the future relationship of central Government and local government. Therefore, it is a matter to which I shall give the most anxious thought before I make an answer.

    Local Government Expenditure
    Mr. Andrew F. Bennettasked the Secretary of State for the Environment if he will publish any evidence he has as to the relationships between local government spending and levels of employment directly in local goverment and employment in industries supplying local government, respectively.
    Mr. Guy Barnett: Information on expenditure and employment in local government in past years is given in Tables 21, 22 and 30 in Annex 10 of the Layfield Report on Local Government Finance. Information about the effects of local authority expenditure on the levels of employment in supplying industries is not available.
    Mr. Bennett: Is my hon. Friend aware that cuts so far in local government spending have had odd effects on employment prospects in local government? Is he aware that many planning departments have managed to maintain staff levels with little chance of carrying out their plans, whereas many social work departments have had severe cuts in staff, although they face continuing problems?
    Mr. Barnett: It is difficult for me to comment on my hon. Friend's question, because he has not given any specific examples, but, even if he had done so, local authority employment is very much a matter for the authorities and not for us.
    Mr. Evelyn King: May I make a helpful suggestion? If the hon. Gentleman is seeking to save money painlessly, will he take another look at the Dobry Report? Is he aware that it has been estimated that needless planning delays are now costing up to £1,000 million a year? That is money that could be saved and devoted to building houses.
    Mr. Barnett: I shall consider the issue that the hon. Gentleman has raised without making any commitment.
    Mr. Durantasked the Secretary of State for the Environment what has been the percentage increase in local government spending since February 1974.
    Mr. Cartwrightasked the Secretary of State for the Environment if he will make a statement about the progress of
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    his efforts to restrain local government spending.
    Mr. Shore: In 1974–75 local authority current expenditure increased by 9·3 per cent. over 1973–74 and in 1975–76 is estimated to be 6·1 per cent. over the level reached in 1974–75. The April forecasts for 1976–77 indicated a level of expenditure for that year some 3 per cent. to 4 per cent. over the latest estimate for 1975–76. Following the issue of my Circular 45/76, we expect revised returns from local authorities by 16th July. These returns will be discussed at the consultative council on 27th July.
    Mr. Durant: Does the Minister agree that local government expenditure is still not fully under control? How does he reconcile the circular—mentioned in The Times today—from his Department to the Camden finance officer saying that he does not have to pay so much attention to financial control? Does not the Secretary of State agree that local government expenditure is leaking like a sieve?
    Mr. Shore: No, Sir, I do not accept that. There has been a marked improvement in the overall control by local authorities over their expenditure in the past two years, particularly since we have been able to develop the relationship with them that my predecessor established in the consultative council, which is a valuable innovation. All the signs are that from an admittedly high and accelerating rate of expenditure—of which I do not think that the hon. Gentleman would accuse us of being the principal authors, because local authorities were encouraged to budget forward at the rate of 8 per cent. a year by the right hon. Gentleman who held high office in the previous Administration local authorities have had to decelerate, and it is not easy to do that. I do not accept that local government expenditure is out of control. As to the alleged laxity reported in The Times, this was an attempt to clear up the relevance of the housing revenue account to the general figures of overspend which we identified in the circular.
    Mr. Cartwright: Is my right hon. Friend aware that many of us who have had practical experience of leading local authorities accept the need for sensible pruning of local government aspirations

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    in present circumstances? That is very different from the wholesale cuts that are being considered by local authorities such as Surrey. In trying to keep local government expenditure to the levels voluntarily agreed, will my right hon. Friend try to avoid giving aid and comfort to those who have never accepted the necessity for a high level of local government services and who take the earliest opportunity of cutting services painstakingly built up over many years?
    Mr. Shore: My hon. Friend speaks with practical experience in local government and he will be the first to recognise the tightrope that we walk. I do not wish to encourage local authorities to engage in a massive attack on their expenditure on services that they render to the people in their communities. I would deplore it as strongly as would my hon. Friend if my words were misused by politically-motivated councils to attack standards of services which their people have a right to expect. On the other hand, I think it right to ask, in the context of the general difficulties we face, that local authorities should live up to the agreement that they entered into only a few months ago, which involves public expenditure pruning.
    Mr. Raison: The Secretary of State referred to the article that appeared in The Times this morning. Does he accept the argument of the London authorities that rate spending on housing revenue account should fall outside the limits on local authority spending? Does he accept that the present grant system discriminates against under-spenders in favour of over-spenders, and has he any plans to do something about that?
    Mr. Shore: On the hon. Gentleman's first point, I stick to what I said earlier. The circular states that the housing revenue account is not included in the £350 million to £450 million potential overspend which is identified there. As to whether the grant formula discriminates in favour of those who over-spend as distinct from those who under-spend, I am studying that question very closely. The evidence tends to suggests that that is so, and that causes me considerable concern.

    Local Authority Mortgages
    Mr. McCrindleasked the Secretary of State for the Environment whether he
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    will take steps to extend the limit on local councils' lending to enable them to play a major part in helping house purchasers.
    Mr. Freeson: No, Sir. It would be inconsistent with present public expenditure constraints to raise the limit. We must continue to look to the building societies to help house purchasers who, as a result, cannot obtain a local authority loan.
    Mr. McCrindle: Is the hon. Gentleman aware that the wording of the Question is taken straight from the Labour Party manifesto of October 1974? In view of the proven failure of the building societies to come to the Government's rescue, is it not a scandalous betrayal of many people? Surely the Government could solve the problem by the shelving of the Community Land Act and of the municipalisation programme without any net additional public expenditure.
    Mr. Freeson: With due respect, the hon. Gentleman's last point is redundant in relation to the Question before me. I am aware of the paraphrasing of the manifesto. That is an issue to which we shall have to return when we are in a position to do so. In the meantime, the ever-increasing close contact that we have with the building societies is having an effect that is contrary to what the hon. Gentleman has suggested. We estimate that about £1,000 million a year out of the total that is made available by the building societies is loaned on pre-1919 houses, and that a similar figure, about £1,000 million a year from a total of between £5,000 million and £6,000 million, is going to borrowers on below-average incomes. That is an increase.
    Mr. Loyden: Does my hon. Friend agree that the fact that Liverpool is building houses for sale although about 6,500 people are on the register waiting for houses to rent indicates that the Government's policies and attitudes should be directed towards the provision of houses for rent rather than for sale?
    Mr. Freeson: The Government's public expenditure policy is, and has been, primarily directed towards getting more houses built for rent by local authorities, housing associations and other forms of association that we have been stimulating, for example, co-operatives. We have

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    been successful in that policy during the past two years. In saying that, and in reinforcing that policy, I am not saying that there is not a rôle for local authorities in providing houses for sale by building for owner-occupation. There is nothing either in law or in Socialist policy against that. On the contrary, Socialist policy should be aimed at getting public enterprise involved in the provision of all kinds of tenure, according to local need. What I say is not a judgment of the position in Liverpool; I have insufficient detail to be able to comment on that.

    Land Disposals
    Mr. Budgenasked the Secretary of State for the Environment when he expects proceeds from disposals of land to exceed the cost of acquisition and administration under the Community Land Act 1975.
    Mr. Guy Barnett: It is too soon yet to say.
    Mr. Budgen: Will the Minister confirm that the expected receipts from the sale of land during the period between 1976–77 and 1979–80 will be £300 million less under the Community Land Scheme than the cost of acquisition and management of that land under that scheme? Would not that £300 million be better spent, for instance, on honouring the Labour Party's commitment to a child credit scheme?
    Mr. Barnett: I cannot confirm the hon. Gentleman's figures. I do not know how it is possible to arrive at such figures, as so many variables are involved. I assure the hon. Gentleman that the scheme is bound to be highly profitable. One direct consequence of the scheme and the land tax is that many areas of public expenditure by local authorities, which include the use of land, will be a lot cheaper, because local authorities will be able to get the land.
    Mr. Blenkinsop: Does my hon. Friend agree that the considerable benefits that will flow from the Community Land Act will come all the quicker with the full co-operation of the local authorities concerned, including those which have recently changed their composition?
    Mr. Barnett: I am glad to be able to tell my hon. Friend that bids are coming into the Department fast, just as much from Conservative as from Labour authorities.
    Mr. Rossi: If the Minister does not know how my hon. Friend arrived at the net figure of £300 million, will he say why the Government put it into the White Paper, and on what calculations they based it?
    Mr. Barnett: I may have misunderstood the supplementary question asked by the hon. Member for Wolverhampton, South-West (Mr. Budgen). I am aware of the estimate that appears in the PESC report. If that is the estimate that the hon. Gentleman gave, I accept it.
    I am saying that it is impossible to answer the original Question, because the answer must be based on a great number of variables. We do not know now what will be the cost of land, what individual bids by local authorities will be, which bids will be ultimately approved and what will be the interest rate. There are so many variables that I cannot give the hon. Gentleman an intelligent answer.

    Minibuses
    Mr. Luceasked the Secretary of State for the Environment what representations he has received from voluntary organisations regarding the law relating to the provision of minibuses.
    Mr. Marks: A number of voluntary organisations have written to hon. Members, to Ministers and to the Department suggesting changes in the law to put their use of minibuses outside the scope of public service vehicle licensing.
    Mr. Luce: Does the Minister realise that there is widespread support from schools and voluntary organisations for my Transport (Amendment) Bill, which is designed to facilitate the provision of transport for such bodies? How can the Government justify objecting to, and therefore sabotaging, a Bill that is designed to help those in need?
    Mr. Marks: I have sympathy with Clause 3 of the hon. Gentleman's Bill, which deals with minibuses run by voluntary organisations and schools, but to seek to proceed with the Bill before we have

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    had the necessary consultations would be wrong. At the moment the National Council of Social Service and the national youth organisations have a working party that is investigating the matter. We expect it to report in September. We shall be meeting the Association of County Councils and the Association of Metropolitan Authorities to discuss the rôle of the county councils in the matter, particularly on the subject of registration and safety. We must also consult the Charity Commission.
    Sir J. Langford-Holt: Is it not clear that school buses are operating illegally?
    Mr. Marks: I have no knowledge of any schools doing anything that is illegal.
    Mr. Flannery: Is my hon. Friend aware that today I met representatives of the National Union of Teachers, who are deeply disturbed about the matter? Is he further aware that they pointed out that schools all over the country are in real trouble over the issue of minibuses? Will he expedite action?
    Mr. Marks: There has been no recent change in the law. It has been the same for the past 16 or 17 years, when the law of the 1930s dealing with safety was replaced. I declare an interest, as a member of the same trade union as that which my hon. Friend mentioned. We have consulted carefully with organisations such as that and the National Council of Social Service, as well as representatives of the metropolitan and non-metropolitan areas. They will have a lot of work to do, because they have recently been given much work by my right hon. Friend the Secretary of State.
    Mr. Norman Fowler: Is the Minister aware that the issue is causing concern on both sides of the House? Does he accept that the present position of minibuses is also causing anxiety to voluntary organisations and schools throughout the country? Such organisations have heard many words from the Minister; when will they get some action?
    Mr. Marks: I have specified three different things that we are doing. We are consulting county councils of both kinds, the Charity Commission and the various bodies that have expressed support for Clause 3 of the hon. Member's
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    Bill. We must be extremely careful before giving wide powers not just to voluntary organisations but to those people who might look for loopholes in the law.

    Road Building Programme
    Mr. Ronald Atkinsasked the Secretary of State for the Environment whether he will postpone the start of new road building projects where widespread local opposition has been expressed until the independent assessment into the method of appraising road schemes proposed in the consultation document has been completed.
    Mr. Marks: No, Sir. The schemes due to start in the coming year have already undergone rigorous appraisal by current methods and we have no reason to suppose that the outcome of the independent appraisal would alter their justification substantially.
    Mr. Atkins: Does my hon. Friend agree that the Government criticised the present method of appraisal in line 22 of the consultative document by accepting the need for an independent assessment to recommend changes in the appraisal of road building schemes? Bearing in mind the present situation of cuts in expenditure, would it not be reasonable to delay those criticisms until we have had recommendations for the changes needed in appraisals?
    Mr. Marks: It would be disastrous to stop all building to wait for an independent assessment. It is not criticism by the Department if we say that we shall open the matter to independent investigation; it is a sign of confidence.
    Mr. Adley: Does the Minister agree that the current antics in Winchester are designed to give the impression that the 1971 inquiry never took place? Will he condemn the disgraceful attempts to disrupt the inquiry proceedings? Does he agree with the regional organiser of the TGWU, who said that if that kind of fuss was made outside, let alone inside, a factory, the loudest possible complaints would have come from just the sort of people who are currently performing in Winchester?
    Mr. Marks: There is a lot in what the hon. Gentleman said. The purpose of

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    such inquiries is to give people the opportunity to state their objection or their support for a particular project.
    Mr. Shersby: Is the Minister aware that in Uxbridge people are anxious about the route of the M25 motorway? Can he say whether there is likely to be any delay in the programme for that important project?
    Mr. Marks: I cannot say at the moment. There is full consultation about the choice of routes and side roads orders on all such roads. In the past, the Government have attached the highest priority to the completion of the M25.
    Mr. Stephen Ross: Will the Minister accept that where road schemes have been long delayed there are grounds for establishing further inquiries and that in the case of the Winchester bypass there should he a further examination? Does he agree that, after a long interim period of five or six years, issues, attitudes and grounds change? Is there not a case for a re-examination?
    Mr. Marks: That would be an enormous task. The M3 and the Winchester bypass are not the only roads that are proposed at present. Investment in transport, whether in road, rail or any other form, is an important part of our total industrial investment, and hon. Members should recognise that.

    Lorries (Vehicle Excise Duty)
    Mr. Jayasked the Secretary of State for the Environment when the Government propose to introduce the higher vehicle excise duty for heavy lorries proposed in paragraph 5.7 of Volume 1 of the Consultation Document "Transport Policy".
    Mr. Marks: The Budget increase of 7½p per gallon on fuel duty has already imposed substantial extra tax on heavy lorries. Powers to obtain the information needed to restructure vehicle excise duty on lorries have been taken in the current Finance Bill.
    Mr. Jay: As the Government's own document says that the lorries are not covering their full cost to the community, would not a further increase in duty be a good way of reducing the public sector borrowing requirement? Does he agree that we should not wait until next April to do that?
    Mr. Marks: That is a matter for my right hon. Friend the Chancellor of the Exchequer, but my right hon. and hon. Friends in the Department of the Environment have expressed their view on the matter.
    Mr. Fry: If the Minister wants heavy commercial vehicles to pay their full contribution to track costs, will he specify how he intends to make British Rail get its freight loss back into the black, because it is more heavily subsidised?
    Mr. Marks: Our consultations are taking place with the object of seeing that freight is not subsidised.

    London Theatres
    Mr. Townsendasked the Secretary of State for the Environment what discussions he has had with London borough councils and the Greater London Council concerning loss of London's theatres as a result of redevelopment.
    Mr. Guy Barnett: My right hon. Friend has had no requests from the councils for such discussions.
    Mr. Townsend: If the Government put theatres into a separate use class on their own under the Town and Country Planning Act, would not that be a practical way of safeguarding London's theatres?
    Mr. Barnett: I do not think that it would. The hon. Gentleman should first bear in mind that there are no fewer theatres in London now than there were at the end of the war. I think the hon. Member for Bexleyheath (Mr. Townsend) will have noted the support that the Government have given to the Private Member's Bill introduced by the hon. Member for Canterbury (Mr. Crouch). We have undertaken to put words into the general development order which will ensure that the Act has full force, in the sense that any proposals for demolition or alteration of use of a theatre are referred to the local authortiy concerned.

    Trent Lane, King's Newton (Development)
    Mr. Rostasked the Secretary of State for the Environment what representations he has received on behalf of residents in King's Newton, Derbyshire, requesting a meeting with him to discuss land use and development of land at

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    Trent Lane; and what action he is taking.
    Mr. Guy Barnett: Two letters from the Melbourne Civic Society and several from the hon. Member. As has been explained in the replies sent, my right hon. Friend has no further jurisdiction on the matters that he decided on appeal in 1974.
    Mr. Rost: Why did the Department allow land designated for agricultural use to be sold by the Ministry of Defence without protecting local residents against change of land use? Is the Minister aware that over the past three years the land has gradually become a dumping ground and mobile home site? Is it not disgraceful that the Minister has repeatedly refused to meet a deputation of my constituents who wish to air their grievance?
    Mr. Barnett: I well understand the hon. Gentleman's anxieties and the anxieties of those residents who are directly affected, but I repeat that my right hon. Friend has no further jurisdiction. It was decided, on the basis of evidence at the inquiry in August 1974, that the land had been used for storage since before 1964 and that the use had continued since then, so that for the purposes of the Town and Country Planning Act 1971 the land had an established use for that purpose. That decision is final, and no useful purpose could be served by arranging a discussion on it.
    Mr. Rost: On a point of order. In view of the unsatisfactory nature of that reply, I beg to give notice that I shall seek leave to raise the matter on the Adjournment at the earliest opportunity.

    Lorry Routes
    Mr. Hookyasked the Secretary of State for the Environment if he will publish a summary of the discussions held with the Countryside Commission on the proposed network of heavy lorry routes.
    Mr. Marks: It is not proposed to publish any of the representations made on this subject. There would of course be no objection to any of the bodies consulted making its views public.
    Mr. Hooley: Is my hon. Friend aware that it is a matter of great public concern that this network of heavy lorry
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    routes would cut through national parks? Many bodies, apart from the Countryside Commission, would like to know exactly what the consequences of these proposals are and to have a full discussion on them.
    Mr. Marks: The consequences will not be known until we have completed the consultations and issued a report. The Countryside Commission was consulted, and I understand that it is prepared to publish what it said. Until the consultations are finished, we shall not know how many lorry routes there will be in the country as a whole, and particularly in the national parks. Lorries are travelling through national parks now.
    Mr. Madden: Does my hon. Friend agree that it would be transport lunacy and the creation of potential road hazards to create heavy lorry routes on roads such as the A646, through the Calder Valley of West Yorkshire—a road that is close to the M62? Will my hon. Friend give an assurance that any heavy lorry routes will avoid roads of that sort?
    Mr. Marks: The lorry routes are a matter for discussion between the local authorities and ourselves. I should be surprised if lorries travelling from Lancashire to Yorkshire used the road that my hon. Friend mentioned rather than the M62.

    Dogs
    Mr. Cryerasked the Secretary of State for the Environment what representations he has received to publish the working party's report on the control of dogs.
    Mr. Guy Barnett: There have been representations in favour of publication from several hon. Members, including my hon. Friend, as well as from local authorities, organisations interested in dogs and members of the public. These were all taken fully into account by my right hon. Friend in deciding to publish the report.
    Mr. Cryer: Will my hon. Friend accept congratulations on deciding to publish the report? Does he agree that it is important to undertake a widespread debate about the efficient control of the dog population, including a comprehensive scheme of licensing, with licences

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    being obtained before dogs are purchased? Does he agree that stray dogs are a menace in many towns and that, with rabies as an additional potential danger, now is the time to ensure that there is a proper control of dogs, with a proper licensing system?
    Mr. Barnett: I am well aware of the anxieties that my hon. Friend has expressed. Stray dogs are undoubtedly a major part of the problem. But it would not be right for me to anticipate the report or the recommendations that the Government may make as a result of it. I accept the need for full public discussion of the issues.
    Sir J. Langford-Holt: Will the Minister confirm that the law already provides that every dog over the age of six months, I think, must have an identity tag, but that there are no prosecutions of people whose dogs do not have such tags and no effort is made to enforce the law?
    Mr. Barnett: Not being a dog owner, I do not know the answer to that.

    Direct Labour Departments
    Mr. Frank Allaunasked the Secretary of State for the Environment if he will make a statement on his discussions with local authorities over permitting council direct labour departments to build houses for neighbouring local authorities.
    Mr. Freeson: I accept the need for greater flexibility for local authority direct labour organisations to undertake work for other authorities, and I propose to introduce legislation as soon as possible.
    Mr. Allaun: May I warmly congratulate the Government—[Interruption.] I know that it is a bit of a change for me to do that—on accepting this vital point? Could the legislation be introduced in the autumn, to start in January—
    Mrs. Kellett-Bowman: The Government will never get it through.
    Mr. Allaun:—as many local authorities and MPs have been pressing for it, particularly as it would save some highly efficient direct labour departments—
    Mrs. Kellett-Bowman: There are no efficient direct labour departments.
    Mr. Allaun:—such as Manchester and Sheffield, having to cut back on the numbers they employ?
    Mr. Freeson: I seemed to detect from some of the interruptions a somewhat doctrinaire and ideological approach to the matter. I am well aware of the anomalies that have been created, largely as a result of the 1972 local government reorganisation. We have introduced temporary Orders, which will cover the period until March 1977, and we shall have to deal with the situation that follows. It will not be necessary for us to act now to change the situation, but we shall bear in mind the time-lag problem.
    Mr. Speed: I understand that the Minister has never been prepared to accept the CIPFA recommendations because he has always said that he must wait for the report of the working party that has been set up, yet he is prepared to introduce legislation in advance of the working party's report. That is being doctrinal and ideological.
    Mr. Freeson: The hon. Gentleman could not have listened with his usual care to previous answers that I have given when I have tried to explain the position. We are dealing with legal powers for the local authorities to use direct labour organisations. What the working party and the CIPFA report are concerned with is the method of operating the direct works departments concerned. There is no pre-emption of any recommendations that will come from the working party or any consideration of the CIPFA report, which I shall be taking into account as far as I can when we introduce legislation.

    Lorries (Controls and Regulations)
    Mr. Dykesasked the Secretary of State for the Environment if he is satisfied with the progress made by local authorities with traffic responsibilities in England and Wales on preparing the implementation of heavy vehicle controls under the Heavy Commercial Vehicles Act 1973.
    Mr. Marks: My Department will be reviewing the progress made by local authorities over the next few months. Available evidence indicates that authorities are aware of their responsibilities and have made some progress.
    Mr. Dykes: Is the Minister satisfied with the progress, and does he accept that financial stringency and economic recession is not a fundamental excuse for delaying progress on these measures that need to be implemented by 1st January next year?
    Mr. Marks: Yes, I am aware of my duties should local authorities not carry out the provisions of the Heavy Commercial Vehicles Act, which has become known as the "Dykes Act". The councils need to produce at least one draft notice by 1st January 1977, and I am keeping a close eye on what they are doing.

EUROPEAN COUNCIL MEETING
The Prime Minister (Mr. James Callaghan): With permission, Mr. Speaker, I shall make a statement on the meeting of the European Council which I attended in Brussels with my right hon. Friend the Foreign and Commonwealth Secretary on 12th to 13th July. The meeting was a constructive one and progress was made on a number of issues of importance to the United Kingdom and to the Community.
The Council reached agreement on the total number of seats in a directly elected European Assembly and their distribution between member States. The solution to which I formally assented yesterday gives the United Kingdom 81 seats in an Assembly of 410. No solution is ideal, but this outcome provides a reasonable balance between the need to have sufficient numbers to retain a manageable constituency relationship and the need not to inflate the Assembly to excessive proportions. The overall size is within the range proposed by the Select Committee and the distribution of seats among countries takes due account of the principles they put forward.
I also explained that Her Majesty's Government would, for the time being, keep open the possibility that the United Kingdom might continue to nominate representatives in 1978, should it prove impossible to hold elections here by that time. The Danish Prime Minister similarly reiterated his Government's position on holding elections in Denmark. The European Council entrusted to
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Foreign Ministers the task of settling a number of outstanding issues before the end of July.
At my proposal, there was also a discussion of the fisheries problem. I drew the attention of the Heads of Government to the trend towards increasing fishing limits to 200 miles and the need for the Community urgently to tackle the problem of protecting the legitimate interests of Community fishermen, in view of the prospect that an increased number of outside fishermen might wish to fish in the potential waters of member States. It was agreed that the Foreign Affairs Council should consider the problem urgently at its next meeting on 19th–20th July with a view to making a declaration of intent on the extension of Community fishing limits to 200 miles. My right hon. Friend and I emphasised to our colleagues the great importance which Her Majesty's Government attaches to the revision of the common fisheries policy to meet adequately and permanently the needs of our fishermen.
We had a valuable discussion on the problem of international terrorism and issued a declaration condemning it in the strongest terms and stating the intention of all Community Governments to take resolute steps against hijacking, the taking of hostages and other acts of terrorism. The member States agreed to prosecute or extradite to other member States those who engaged in the taking of hostages. Further discussion of this question will be pursued by the appropriate Ministers from each country.
The Heads of Government welcomed Her Majesty's Government's intention to nominate my right hon. Friend the Home Secretary to be a member of the European Commission from 1st January next year. They made clear their intention in due course to support his appointment as President of the Commission under the procedure laid down in the Treaty.
We exchanged views on various aspects of the international economic situation. Several Heads of Government expressed the view that Budget deficits are too high and that there is a danger of growing inflation. I also argued that in certain States the high level of unemployment must be taken into account in formulating economic policy, especially in regard to young people. There was a general acceptance of this approach.

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The President of the Council reported on the work which Foreign Ministers are doing on the Tindemans Report. We agreed that this work should continue, and that a further report should be made to the next meeting of the European Council later in the year.
I am placing in the Library of the House copies of the statements agreed by the European Council on direct elections, fisheries, the Tindemans Report and international terrorism.
Mrs. Thatcher: Is the Prime Minister aware that we welcome his statement, particularly that part of it which deals with the determination of Community Governments to deal with international terrorism?
May I put to the Prime Minister four specific points on the rest of the statement? The first concerns the 81 seats allocated to the United Kingdom in the Assembly. Will he assure the House that there has been no undertaking about the distribution of those seats among the four component parts of the United Kingdom, that that is solely a matter for the United Kingdom Parliament, and that we shall be entirely unfettered in our decision?
Secondly, will he give an undertaking to introduce legislation as soon as possible so that the boundaries of those seats become a matter for the Boundary Commission to decide and so that they can decide the matter in the usual way after full representations have been made by local people? These are important elections and we must get the boundaries question absolutely right.
Thirdly, on the subject of fishing, when may we expect to hear about the new arrangements that will apply to Member States within the 200-mile limit? The Prime Minister will be aware that this is causing considerable concern, and some of us feel that the Government have not prosecuted this question as energetically as they might in the interests of our fishermen.
Finally, may I, if it is not premature, congratulate the Home Secretary, wish him well in his post, and ask the Prime Minister whether he intends to continue the custom of appointing one Commissioner from the Government side and one from the Opposition side?
The Prime Minister: On the subject of the 81 seats, I gave no undertaking about distribution at all. The matter was raised by the Prime Minister of the Republic of Ireland, who, in suggesting that he would agree to a higher number, intimated that he would like to see a third seat in Northern Ireland as opposed to the two seats which they might expect as an electoral quotient. But I made it clear that this was a matter for the United Kingdom and for nobody else. I thought I should make it clear that the matter was raised in that sense but that no undertaking was given.
Clearly, this is a matter for the House, and Her Majesty's Government will put forward proposals in due course. We are totally unfettered about distribution, although I assume that we shall want to discuss the matter and to lay down quotients for individual parts of the United Kingdom, if that is what we wish to do, and to allow boundaries to be fixed by the Boundary Commission in due course. I take note of what the right hon. Lady said. The Government have not yet considered the point about the place of the Boundary Commission, but we shall come forward with proposals in due course, and legislation will have to follow at a later date.
On the subject of fishing limits, I would have welcomed a statement yesterday from the Heads of Government. But the view was expressed that the Foreign Ministers will be considering this matter at their meeting from 19th to 20th July. I wish to make it clear that I can see no reason why the Foreign Ministers at their meeting should not issue a simple, straightforward statement in exactly the way in which we put it forward, amended if they wish to do so in some form but not amending the substance. We intend to follow up the matter.
As for the nomination of my right hon. Friend the Home Secretary, I believe that his adherence to the idea of Europe has been with him in good times and in bad and that he has stuck steadfastly to it. I am sure that he will serve the cause of Europe in a way that will be of value to the people of Europe.
As for the custom mentioned by the right hon. Lady the Leader of the Opposition, I am not sure what precedents exist for her suggestion, but I shall be happy to talk to her about the matter.
Mr. Thorpe: Although the Home Secretary will be widely missed in many quarters, we should like to congratulate him on his appointment. We wish to see him soon confirmed in his position as President of the Commission.
What are the insuperable difficulties that make it necessary for us to continue nominations in 1978? Since the Prime Minister showed a proper regard at the Council of Ministers for the number of seats allocated to this country—namely that they should bear some proportion to our population within the Nine—will he confirm that his colleagues placed equal emphasis on the fact that the seats which we return should likewise fairly reflect all shades of opinion in this country? Could it be that what is for him an unusual problem has been one reason for the delay?
The Prime Minister: There are no insuperable difficulties, as far as know, about 1978. The only difficulty is likely to be the House of Commons. I never presume with the House of Commons. We shall put forward legislation in due course which we hope will receive the assent of the House. Everyone in the House is an authority on constitutional questions and wants his say. I have been cautious from the beginning on this question of the date. As for the way in which members are elected to the Assembly, that will be a matter for each individual country. No opinion was expressed. In some countries elections will be by constituencies, on the basis of first past the post. In others, they will be elected on a list basis, in accordance with the usual procedure. Some countries may combine the two methods. It will be for the House to make up its mind. I have an odd feeling that we shall stick to the first past the post system.
Mr. William Hamilton: Does my right hon. Friend agree that if we are to meet the target date of direct elections by the early summer of 1978, we shall need to introduce legislation next Session? Does that not mean that we would have two major constitutional Bills, one dealing with the devolution proposals for the United Kingdom and one with direct elections to Europe? Which measure does the Prime Minister think is the more important? Does he think that we shall get them both in one Session? There are
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some of us who doubt that. Will my right hon. Friend make it clear that he is against the principle not only of the dual mandate but possibly the triple mandate—from Edinburgh, London and Brussels?
The Prime Minister: I ask my hon. Friend to await the Gracious Speech which will be unfolded in due course—[HON. MEMBERS: "When?"]—when all these mysteries will be revealed. What my hon. Friend says is yet another reason why I have been right to be cautious about the date of 1978. My hon. Friend has confirmed me in my wisdom. Frankly, I see no reason why both Bills should not go through in the next Sestion, if Parliament wishes them to do so.
Mr. Powell: Has any formal decision been taken by the Council of Ministers on the subject of direct elections and is it yet known what form any such decision will take?
The Prime Minister: No, Sir. No formal decision has been taken by the Council of Ministers. It was referred to the European Council, which is made up of the Heads of State and Heads of Government. The matter will have to go back to the Council of Ministers for it to create the appropriate instrument. I am not certain what form that instrument will take, whether it will be a convention or otherwise. The right hon. Member will recall that in the debate at the end of March, when I discussed this, I gave certain assurances about the rights of the House of Commons in debating such a convention. I cannot recall the exact nature of the assurances I gave but I stand by them now.
Mr. Gould: Will my right hon. Friend confirm that the agreement on direct elections which he has reached on behalf of the Government cannot prejudge the decision on the principle of direct elections which has yet to be taken by the House?
The Prime Minister: No, Sir. I cannot confirm that. This is an old argument that is constantly resurrected. The principle is laid down in the treaty—
Mr. Spearing: No.
The Prime Minister:—and it was on the treaty that the British people made an overwhelming decision.
Sir David Renton: is the right hon. Gentleman aware that the statutory procedures of the Parliamentary Boundary Commission are so slow and cumbersome that it will not be making a general report until 1979 and that it will not be making special reports in time for the next General Election, even if that should come as late as the autumn of 1978? Does he agree therefore, that something special will have to be done—possibly legislation will be needed—to enable the Boundary Commission to consider the boundaries of our European constituencies in time for 1978?
The Prime Minister: The right hon. and learned Member states the position correctly. This has been another reason for my caution. As a former Home Secretary I remember very well—
Mr. Clegg: We remember, too.
The Prime Minister: I remember that when I endeavoured to get a more equal distribution of seats the House of Commons would not have it. I therefore proceed with caution on this occasion. All of these factors are reasons for being cautious about the date of 1978. They should not lessen our determination to try to do it, if we can get the legislation on the statute book.
Mr. Roper: Will my right hon. Friend accept that while many hon. Members in all parts of the House are pleased with his success in increasing the number of seats for the United Kingdom from 67 in the original proposals to 81, there will be concern at suggestions that we have seen that about 22·2 per cent. of those seats will go to only 16·7 per cent. of the population of the United Kingdom?
The Prime Minister: The issue of distribution has not yet been considered by the Cabinet, even less by the House of Commons. I take note of what my hon. Friend says. There have been these disparities in the past and I have no doubt that various hon. Members will have their own views about what disparity should exist.
Mr. Reid: Will the right hon. Gentleman confirm that as long as Scotland is a province of the United Kingdom she will not obtain parity of representation with comparable EEC countries? Will the right hon. Gentleman concede that
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the only way Scotland can get such parity, and, more important, a place in the Council of Ministers, is through independence? Does he agree that there is nothing sinister or dishonourable in an independent Scotland seeking membership of the Community in partnership with an independent England?
The Prime Minister: There is certainly nothing sinister or dishonourable about that but it would be a bad deal for the people of Scotland. I confirm that it is only through independence that Scotland will be able to get the same representation as Denmark. If she did, she would then, no doubt, make the same complaint as Denmark is making about the number of seats secured by the larger members which is preventing a proper representation of Danish interests. One day I hope to persuade the hon. Gentleman—I think it will probably be easier to persuade the Scottish people—that Scottish interests—and I make this not as a party point but in the interests of Scotland; and the same thing applies to Wales—will be much better served if Scotland is a member of a large delegation of 81 with all the weight that that carries rather than a small delegation of about 10, 12 or 14. Anyone who has seen this situation knows that it is true.
Mr. John Davies: Can the Prime Minister tell us what was discussed on the subject of the dual mandate? Can he say whether this matter is being left to individual member countries to make their own decisions for the first elections? Secondly, can he tell us, within the framework of a general extension of the fisheries limit to 200 miles, what arrangements are planned for individual member States to protect their own interests within such limits?
The Prime Minister: There was no discussion about the dual mandate. Frankly, it took us all of our time to reach agreement about the number of seats. The existing understanding continues to apply to the dual mandate. The situation has not changed, although it will be for the Foreign Ministers, when they write the convention or whatever instrument they decide, to indicate the position on the dual mandate.
I cannot give an answer to the right hon. Gentleman's question about fisheries policy. We did not get into such

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detailed discussion. It is fair to say that every Head of Government and Head of State recognised that it was necessary to make a statement on this matter at an early date—a declaration of intention—and then to work out the necessary changes in individual countries.
Mr. Dalyell: Is a directly elected Parliament still to wander, nomad-like, between Strasbourg. Luxembourg and Brussels, or was anything said about the siting of the Parliament?
The Prime Minister: No, Sir. Thank goodness, that is nothing to do with us.
Mr. Wigley: Would the Prime Minister accept that if Scotland had 17 or 18 seats, like Denmark, and Wales had 14 or 15, like Ireland, the voice of the United Kingdom would be that much stronger on those matters on which we agreed, and on matters where we disagreed Scotland and Wales would have the right to voice disagreement in strong terms?
The Prime Minister: Yes, Sir, but it would not then be a United Kingdom.
Mr. William Clark: Will the Prime Minister agree that it would be lamentable if the Boundary Commission rushed its work so that there was insufficient time for representations to be made to it? Will the Prime Minister further agree that there is no reason why the Boundary Commission should not immediately start working on the European constituencies so that we can ensure that representations can be made?
The Prime Minister: I will look at that last point, but I wonder whether in fact it has the legal right to do that. I should have thought not. All I can do at the moment is to take note of what the hon. Gentleman says. He is anticipating a number of domestic discussions that we shall have to have in the House.
As to giving the Commission the power, I know that people think that I exercise a great deal of power but I do not have that autocratic right yet.
Mr. James Johnson: Is the Prime Minister aware that his firm and definite statement about fisheries fears will be
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greatly welcomed by all Members representing fishing ports?
I have two factual matters to put to the Prime Minister. A fortnight ago, in The Scotsman, there was a map indicating 50-mile limits, 35-mile limits and 12-mile limits for the various sections of our coastline. Will the Prime Minister confirm that we are discussing and will discuss limits on those lines, as opposed to the niggardly and mean 12-mile limits on which we were taken into Europe by the Conservative Government in 1973?
The Prime Minister: I believe that my right hon. Friend the Minister of Agriculture, Fisheries and Food has spelt this out. We did not discuss this in detail yesterday because we were concerned with the question of a declaration of intent. But certainly it is our very strong view that we could not be satisfied with anything like the terms which exist at the present time.
What my hon. Friend has said is correct. We believe that we are taking such an important resource into the Community—we shall be supplying about 55 per cent. to 60 per cent. of the total fisheries resources of the Community—that special arrangements must be made for the United Kingdom.
Mr. Blaker: Is the Prime Minister aware that there is some disappointment that, owing to the pressure of other subjects, the European Council has not recently been able to devote more attention to the co-ordination of foreign policy within the Community? Will the Prime Minister give an assurance, now we have made progress on direct elections, that he will himself put some considerable effort into this aspect in the coming months, and encourage his colleagues to do the same?
The Prime Minister: The joint attitude on terrorism, I think, had some hopeful aspects on this matter. But it is fair to say that some members of the Community are not as ready to co-ordinate foreign policy as we are. As I have often explained, we need unanimity in these matters before we can make progress.
We ourselves believe that Britain's voice is stronger when there is a unanimous Community voice to back it and

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that the Community also acquires its own personality. We shall continue to put that view forward. On the other hand, I understand the view of those who say that if getting a unanimous agreement means that we have to accept the lowest common denominator, it may mean that on some occasions there is almost a nullity. We have to balance these matters.
Mr. Spearing: Does the Prime Minister recall that paragraph 132 of the negotiation White Paper said that the Government did not accept any sort of federal structure for Europe? If we are to have European Members of the Assembly directly accountable to the electorate, thus bypassing the Floor of this House, how can the Prime Minister explain that these direct elections will not be part of the federal structure to which his Government are not committed?
The Prime Minister: Because the European Assembly will be elected on the powers which it has already. It will be for decision by this House and the eight other Parliaments, acting unanimously, whether to pass over further powers to the European Assembly in due course. But unless and until that happens, by no stretch of the imagination could the existing system and existing powers be construed as federal.
Mr. Dykes: Will the Prime Minister, despite what he said earlier, confirm that the Bill to legislate direct elections could commence its passage in this House next Session, before the Boundary Commission has terminated its work, and that that would be perfectly proper?
The Prime Minister: I have not gone into this question, but if I am right in assuming that we need legislation to empower the Boundary Commission to commence work, we might have to put it all in the same Bill. I think that the hon. Gentleman is anticipating a little. The Cabinet has not considered this matter yet.

OFFICIAL REPORT
Mr. Powell: On a point of order, Mr. Speaker. Yesterday the Lord President indicated that he would be making a statement on the subject of the nonappearance of the Official Report
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for 2nd July. Although he has courteously written to me and to a few other hon. Members, there appears to be no statement.
I wonder, therefore, whether I might emphasise the urgency of this matter, in view of the constitutional importance of that debate for Northern Ireland, and suggest that, if it is not possible in the immediate future to produce the Official Report, those portions of the proceedings which related to the constitutional arrangements for Northern Ireland should be published separately and made available to hon. Members and the public?
The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): Further to the point of order, Mr. Speaker. May I say to the right hon. Gentleman and to the House that I am sorry that the matter is not yet resolved. We are doing our best to resolve it in order that the printing shall go forward. In the meantime, as I have indicated in the letter to the right hon. Gentleman, copies of the proceedings have been made available in an alternative form in the Vote Office. I know that that is not a satisfactory substitute for the full printing of Hansard, but we are trying to resolve the matter as quickly as we can. I hope that we shall be able to do so very soon.
Mr. Gow: On a point of order. Mr. Speaker. It was very courteous of the right hon. Gentleman to write to those who raised the matter yesterday, but will he tell the House what is the nature of these industrial difficulties, and confirm that—
Mr. Speaker: Order. If the hon. Gentleman is addressing a point of order, it must be made in my direction and not to the right hon. Gentleman.
Mr. Gow: I apologise, Mr. Speaker. Would the Lord President care to indicate to you, Mr. Speaker, what is the nature of these industrial difficulties? Would the Lord President take this opportunity of confirming to the House that these difficulties have nothing to do with the nature of the business which was under discussion on 2nd July?
Mr. Foot: Further to the point of order, Mr. Speaker. I confirm that the difficulties have nothing to do with the fact that Irish affairs had been discussed

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on the day in question. I certainly confirm that. I do not wish to say any more about the nature of the difficulties at the moment, because I hope that we shall overcome them. I recognise how inconvenient it is for the House that these difficulties should have arisen and that they still persist.

STATUTORY INSTRUMENTS
Mr. Speaker: In order to save the time of the House, unless there is objection I propose to put together the Question on the three motions relating to Statutory Instruments.
Ordered,
That the draft Horse Racing and Betting (Northern Ireland) Order 1976 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Limitation (Northern Ireland) Order 1976 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Workmen's Compensation (Supplementation) (Amendment) Scheme 1976 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Michael Foot.]

NATIONAL INSURANCE (RETIREMENT PENSIONS) (AMENDMENT)
3.58 p.m.
Mr. Gwilym Roberts: I beg to move,
That leave be given to bring in a Bill to provide that the pensionable age of men be reduced to sixty by not later than 1st January 1985.
It is something of a sad day for me to introduce this Bill, as it is now nearly 10 years to the day since I first introduced a similar Bill in this House. In the course of the intervening years we have had many similar Bills introduced by hon. Members, and even one or two by my right hon. Friends who now sit on the Government Front Bench. But I am sad to reflect that over the decade we have made no progress in this matter whatsoever. In fact, in some senses I think that we have gone backwards. After all, 10 years ago the late Mr. Richard Crossman was prepared to accept the need for this in principle. I
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am not sure that even the need in principle is now subscribed to by spokesmen of the Department of Health and Social Security.
No right minded person can argue with the principles of this Bill. There are, of course, two main arguments, First, there is the argument of sexual equality. But, when we talk in strict sex equality terms, we have to remember that women have a longer expectation of life than men. At 60, the expectation of life of a woman is about 19·9 years and that of a mere male about 15·3. At the age of 65, a woman retains her lead having an expectation of 16·6 years compared with a man's 12·1 years. So, in strict equality terms, one would have to have a proposition whereby men would retire about four and a half years earlier than women.
The second argument, which I believe is equally important, is the very simple one that a great many working men who have worked hard all their lives feel with some justification that they have done enough for the country's economy by the time that they have reached 60 years of age.
The Government's attitude to this proposition has been completely hypocritical. From the Government we have had a considerable amount of legislation on sexual equality, which I support. We have also had support from the Government for a great many provisions for extended leisure. But, at the same time as the Government are talking in terms of sexual equality and of provisions for extended leisure, in the one area where they can do something directly about it they have refused to do anything.
I accept, of course, that the Government have difficulties in this area. That is why this measure is an extremely moderate one. It gives the Government nine years in which to do something about it. This, of course, removes the cost argument which is so often put before us. If it is spread over a period like nine years, the cost of it becomes minimal. It would also allow many occupational schemes to adjust themselves to the new pension date. No one can tell what the cost is, of course, because no one knows what the take up would be. The Bill does not force men to retire at 60. Some men are very fit at 80, whereas others are finished in their 40s. That is a sad fact of life.

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The Government will have noticed the decision taken at the conference of the National Union of Mineworkers, which I believe was agreed to unanimously, that mineworkers should be allowed to retire at 60. The Government should take this seriously. It is the feeling not only among mineworkers, because many industrial workers and their wives believe that men should be allowed to retire at this earlier age.
The difficulties of the Labour Government in the late 1960s which led to their defeat in the 1970 election were largely based on the fact that they grew out of touch with their rank and file support. I feel that their pigheaded attitude in this area could well be the straw which breaks the camel's back by antagonising millions of their potential supporters throughout the country. The Government will neglect at their peril this basic step towards sexual equality. It is at their peril that they ignore completely this simple humanitarian measure. It is a necessary measure of social justice.
Question put and agreed to.
Bill ordered to be brought in by Mr. Gwilym Roberts, Miss Jo Richardson, Miss Joan Maynard, Ms Maureen Colquhoun, Mrs. Audrey Wise, Mrs. Millie Miller, Miss Joan Lestor, Mr. George Rodgers, Mr. Alec Woodall, Mr. John Forrester and Mr. Ivor Clemitson.

NATIONAL INSURANCE (RETIREMENT PENSIONS) (AMEDMENT)
Mr. Gwilym Roberts accordingly presented a Bill to provide that the pensionable age of men be reduced to sixty by not later than 1st January 1985: and the same was read the First Time; and ordered to be read a Second time upon Friday next and to be printed. [Bill 201.]
ORDERS OF THE DAY

  FINANCE BILL
  Not amended (in the Committee) and as amended (in the Standing Committee), further considered.
  4.5 p.m.
  Mr. Tony Newton: On a point of order, Mr. Speaker. Before we embark upon this business, may I raise with you a matter concerning your selection of amendments? Amendment No. 232 to Clause 34 has not been selected. Obviously I do not wish to make a great issue of your selection, but the amendment concerns a matter that we were not able to debate properly in Standing Committee—namely, the delay in some cases in the application of the clause—because the amendment was out of order. It was supported by hon. Members on both sides of the Committee, and I submit that there is some case for you to reconsider whether we should not have an opportunity to discuss the matter on the Floor of the House.
  Mr. Speaker: I am obliged to the hon. Member for Braintree (Mr. Newton). Discretion in the selection of amendments lies, of course, with Mr. Speaker. However, I might tell the House that I do not find it an easy task. I spend hours trying to be fair to both sides of the House. I do not want to raise false hopes, but I shall of course look again at the matter which the hon. Gentleman raised.
  Mr. Newton: I am extremely grateful to you, Mr. Speaker.

Clause 12

  CHARGES ON REQUEST FOR REGISTRATION NUMBER
  Mr. David Howell: I beg to move Amendment No. 1, in page 10, line 15, leave out from 'section' to end of line 18 and insert 'shall not exceed £100'.
  Mr. Speaker: With this, we may take the following amendments:
  No. 229, in line 15, leave out from 'section' to end of line 18 and insert:
  'shall be of an equal amount for each assignment or (as the case may be) inspection. and

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  shall be of such amount as may be assessed by the Treasury as required to ensure that the total revenue from such charges shall in each year cover the total costs incurred in making such assignments or (as the case may be) of arranging for such inspection'.
  No. 2, in line 16, leave out 'need not' and insert 'must be'.
  No. 254, in line 18, at end insert:
  '(3A) Regulations under this section shall be made by statutory instrument, which shall not have effect unless a draft thereof has been laid before and approved by the House of Commons'.
  Mr. Howell: This amendment and, indeed, the whole clause concerns what are known as cherished transfers. I should perhaps explain to hon. Members who did not have the opportunity to take part in the debates in Standing Committee that a cherished transfer is not, as some might think, the handing over of a little gift to a loved one or a relative and has very little to do with that kind of finance at all. It has to do with the transferring of number plates which bear the initials and numbers that have special significance for the persons involved in the transfers, so much so that they are prepared to pay not only what hitherto has been the standard fee to the public authorities for a transfer but also considerable sums over and above that.
  The clause included in the Finance Bill seeks to give the Minister powers to set a fee at a level unspecified for the transfer process and allows the Treasury to make an order which cannot be questioned setting the fee at some unspecified and unknown figure.
  One of the world's leading authorities on cherished transfers is the present Minister for Transport, who is here for this Report stage. He has given us a great deal of inside information on how cherished transfers work, and it was he who revealed to an astonished Standing Committee on the night of 18th May last that no fewer than 100 civil servants are involved in completing some 50,000 cherished transfers a year.
  I might add that it took only a second for one of my more astute colleagues on the Committee to do the necessary calculation to disclose that, on the assumption of 250 working days a year, each public servant had two cherished transfers a day to complete. That was their work load and schedule. This is a mat-
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  ter which caused some comment, because it could be argued that two transfers a day was not a very heavy work load. We wondered what the civil servants did for the rest of the day. That was the first relevation which the Minister put before us, and it was a very important one indeed.
  Part of the thinking behind the discussions upstairs and behind this amendment is that there should be some relation between the cost to the public authority of making the transfer and the fee charged. We do not seek to make a judgment either way on this practice, and all sorts of views are held about it. Government Ministers have taken very biased views about the virtues or vices of indulging in this practice. Broadly, our attitude is that this is a free society and that if people wish to use their money in certain ways they should be allowed to do so. But it is perfectly proper for the Government to seek to cover the cost of the operation by a fee, and therefore it is very important to identify the cost.
  The fact that each civil servant is doing two transfers a day is of extreme relevance and importance. The Minister went on to tell us that pressures are put upon some civil servants and attempts are made to corrupt them by members of the public who try to get certain number plates transferred in certain ways. This was a matter which caused us considerable concern and was very relevant to the whole organisation and administration of cherished transfers. The Minister told us that in the Bill there is a reference in Clause 12 to a process of inspection, either at a place designated under the regulations, or elsewhere, to be carried out by the public authorities, and he explained how this would work. He undertook to explain more to us on Report stage and to give more of the full implications of the inspection process.
  If it is proposed under Clause 12 to set up a new Government inspectorate with all the necessary appendages of Government, the career structures, designated vehicle centres and so forth, this would involve a gigantic cost, and would be a considerable development. It could involve personnel in numbers far larger than the savings in personnel which might arise from fixing the fee at a higher level. Therefore it would defeat

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  the purpose of the Minister in guarding against waste and inefficiency. We look forward to hearing more details on this issue.
  The third aspect behind this amendment, and the other amendments being taken with it, concerns the propriety of allowing the Treasury the power to fix this tax or fee entirely independent of any parliamentary control on a regular basis. This is a matter which has worried us greatly, and my right hon. Friend the Member for Crosby (Mr. Page) was entirely correct in pointing to the unusual nature of this arrangement in which the Treasury was free to fix the tax or penalty for those who seek to have a particular number plate transferred.
  The purpose behind Amendment No. 254 is to seek to regularise that position and to ask that any Orders are made by Statutory Instrument so that we may have some control over the fee. This would, in turn, allow us to enquire about costs and the relationship of the fee to the costs.
  If we do not get a lot more information from the Minister than we had in Committee, we may press Amendment No. 254 to a Division. Amendment No. 1 seeks, in a different way and perhaps a less satisfactory way, to do the same thing and to try to fix a fee. We suggest in the amendment that the fee should be £100 in order to try to get some knowledge of what exactly is being charged and why, rather than leave the whole matter to the Treasury to fix from time to time. Our main concern is to know just what is going on inside this administration. The productivity performance is not particularly inspiring. The Minister for Transport's familiarity with this whole area seemed charmingly vague in Committee and we feel that we have a right to ask for a little more information about how it all works.
  4.15 p.m.
  Mr. Newton: I add briefly to what my hon. Friend has said because it was a modest amendment of mine that sparked of this controversy upstairs. Having looked through Clause 10 I saw no reason why the Treasury should have the power to do what it liked in this field, or in any other for that matter. I wanted the charges to be related to the costs incurred,
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  and the Minister for Transport replied in his own inimitible way, with the result that a debate that we intended should take 10 minutes went on for well over an hour, into the small hours of the morning.
  It is worth emphasising a whole series of points that the Minister made, which had a great effect on the Committee. The first one, which was mentioned by my hon. Friend, was that the average civil servant transferred one number plate in the morning and one in the afternoon. To be fair to the Minister, we have since extracted some more information from him. He said in a Written Answer on 23rd June:
  "The equivalent of about 100 full-time civil servants were involved in processing 55,481 'cherished' transfers in 1975–6; 19 civil servants at the Driver and Vehicle Licensing Centre in Swansea working full-time and many more working part-time in local offices—some local government officers, some civil servants—whose duties often include the inspection of the vehicles involved."—[Official Report, 23rd June; Vol. 913, c. 509.]
  The Minister may put a gloss on it, but this does not modify the fact, or reduce my alarm about the fact, that it is taking the equivalent of half a day per vehicle to carry out these transfers. Even given the difficulties experienced with the Swansea computer and the handicap of that automation which so many of us know about from constituency correspondence, this seems a remarkably low productivity rate.
  We also had the revelation about bribery to which my hon. Friend the Member for Guildford (Mr. Howell) referred.
  Another surprising revelation was that number plates had been transferred and charges made apparently with no legal authority. The Minister for Transport said:
  "the Department had been criticised in court proceedings for operating a procedure for which there is no legal backing. In the past, under successive Ministers, a fee of £5 has been levied for which there was no statutory basis."
  A little later he summarised the position by saying:
  "In effect, it operates as an extra-statutory concesion on which an extra-statutory fee has been levied. It is a thoroughly irregular situation in both directions."

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  He can say that again! A vast administrative apparatus has been operating inefficiently to do something for which there is no power and has been levying charges for which there is no authority.
  One of my amendments, which was not selected, would have insisted that any Regulations made under the clause should provide for a refund to all these aggrieved citizens who, I believe, are entitled to their money back.
  I hope that the Minister will at least say something about what would happen if a citizen who had transferred a plate and paid the £5 sued the Department for the return of his money. If this system has been operating without legal authority, it is a serious matter.
  Another question that caused concern in Committee was the inspection of these vehicles. The Minister said:
  "I would not want to go firm on the system now, but I contemplate that we would ask the police if, within the limitation of their manpower, they would be agreeable to inspect these vehicles."—[Official Report, Standing Committee E, 18th May 1976; cc. 113–122.]
  The police have quite enough to do without being asked to run around the country inspecting vehicles, broken down or otherwise, in pursuit of some scheme of the Minister. The Minister says "Hear, hear", but he will not repeat that when he has heard my next remarks. The hon. Gentleman has no business bringing a Bill before the House with proposals for inspection and charges when he cannot give us better answers about the way in which he proposes to operate the system.
  What on earth is going on when the Minister could say no more about the operation of this system than that he thought he might ask the police whether they could cope with it? Another of my amendments which was not selected proposed that the police should not be asked to undertake this task.
  I hope that we shall hear a great deal more about the way in which this inspection procedure is to work and have a clear assurance that it will not be wished upon the police, who have many more important things to do.
  In Committee we were also concerned about the procedures by which the House was to authorise the new charges. Quite
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  apart from the question of principle, it would be wrong for the charges to go through on the basis of Regulations under the Vehicles (Excise) Act 1971, which would be extremely difficult to question effectively in the House.
  Amendment No. 1 would limit the charge to £100. That seems a very modest proposal, as the Minister said in a Written Answer that the average cost is now about £10. Amendments Nos. 2 and 229 insist that the charges are related to the costs incurred. That seems the right way of proceeding.
  My Amendment No. 254 provides that Regulations imposing charges should be approved by the House before they are put into effect. It would give us direct and positive parliamentary control over the charges.
  I think that most of my hon. Friends share my view of cherished transfers as a rather eccentric but inoffensive activity. I have far better things to do with the small amount of money I have than to spend £2,500 on a Honda in order to acquire the number plate "JB 7". The Chief Secretary might take a different view about that number plate. It is a rather silly way of spending money, but if people want to do it, let them. Providing they have paid tax on the money in the first place, it is up to the people concerned how they spend it.
  The Minister is right to want to end the subsidising of this activity from public funds. If the average cost of a transfer is £10, it is ridiculous that the charge should be only £5 and wholly absurd that taxpayers should have to pay the other £5 to enable to pay £2,500 for number plates. I agree that we should get rid of the subsidy.
  However, it is wrong that the public sector, which has a monopoly power over the issue and control of licence plates, should agree that it is reasonable for citizens to transfer these plates between themselves and then seek to make it a commercial activity from which the Government make a substantial profit. It is not right for the Government to treat as a profit-making operation the issue and control of licences that are statutorily required. We should be seeking only to cover costs. If the Minister insists on making a profit, the case for Amendment No. 254 becomes even stronger, because

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  he is proposing not a charge in the normal sense but a new tax on the transfer of licence plates.
  It cannot be argued that the Treasury should have power to fix this tax at whatever level it likes, with virtually no proper opportunity for the House to scrutinise and check it.
  If the Minister is prepared to limit the charge to cover the costs involved, I shall be happy for that to be done under normal Regulation-making powers. However, if he insists on having a new tax, it should be subject to parliamentary procedures appropriate to taxation and not to the hole-in-the-corner procedures proposed in the clause.
  4.30 p.m.
  Mr. Graham Page: I assure the Minister that I am with him in trying to regularise this procedure and I am sure that most of my hon. Friends share that view.
  A most extraordinary position was disclosed when we debated this Clause in Committee. We learned of the very casual operation of this system by the office concerned. The clause gives the Secretary of State open-ended authority to set out the procedure which should be adopted in Regulations made under the Vehicles (Excise) Act.
  These Regulations can go very wide. Under Section 37 of the Act, to which I presume this clause is intended to refer, the Regulations may make different provisions for different circumstances. I do not know whether the Minister intends to charge a different fee for different cars in different parts of the country. He shakes his head. That is the sort of assurance we need.
  The Regulations provide for exemptions from any provisions of the Regulations and may contain such incidental and supplemental provisions as the Secretary of State considers expedient for the purposes of the Regulations. As the clause is drawn, the Secretary of State is given an open-ended authority to set out the scheme. Indeed Clause 12(2) says:
  "The regulations may—
  (a) require the vehicle to which a mark is requested to he assigned,"
  There is no formal procedure in law for assigning a car. Therefore what assignment will be required in that case?
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  Dealing with prescribed cases the clause says:
  "and also in prescribed cases the other vehicle, to be made available for inspection either at a place designated by or under the regulations, or elsewhere;".
  It may be that that would be a great inconvenience to members of the public owning that kind of car. We need to know what the Minister intends to put in the Regulations. The Regulations may provide for a prescribed charge to be made for the inspection and for the whole or part of this charge to be retained, whether or not the mark is assigned as requested. Therefore the Secretary of State may take the fee and not deliver the goods—or not carry out the job for which the fee is paid. The clause says that the fee may be decided by the Treasury but that it need not be related to the costs of making the assignment.
  In view of all the matters which are contained in the Regulations, as the clause is drafted this is not a licence fee. It is a charge which may be varied, but not in accordance with the cost of doing the job. It may be varied so that the establishment performing the task makes a profit. It may be varied like a tax. It should come before the House in the formal way in which delegated legislation is presented.
  It is almost a farce for a Bill to say that a Statutory Instrument shall be subject to an annulment procedure in the House. Scores of Statutory Instruments are passed every month. Thousands are passed every year. Many of them are subject to annulment procedure. Some hon. Members may wish to pray against them and have them debated in the House, but time is not found for that purpose.
  Mr. Nigel Lawson: Does my right hon. Friend agree that what makes it a complete farce is the use of the Standing Order known as the 11 o'clock Rule? Until that Rule is abandoned—I hope that the Committee on Procedure may look at this—there will not be any proper method of debating Statutory Instruments subject to the negative procedure.
  Mr. Graham Page: I wish to correct my hon. Friend slightly. He should have referred to the 11.30 Rule—not the 11 o'clock Rule. However, I know exactly

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  what he means. There is no time to debate Statutory Instruments which are subject to the annulment procedure. Therefore, I think that where an open-ended authority is to be given to the Secretary of State, as in Clause 12, we should ensure that there is debate at least the first time it comes before the House. It may well be that a compromise is possible on that point. We have said in respect of a considerable quantity of road traffic legislation that only the first Order should come before the House as a draft and that afterwards we may trust the Secretary of State to amend it in a reasonable way.
  I hope that the Minister will be able to accept Amendment No. 254 so as to enable the Regulations to come before the House in draft before they are made. I shall not object if he wishes to modify that proposal to the extent of saying that the first Regulation shall come before the House. In that way we shall see what is in the Secretary of State's mind about these Regulations, and what system will be laid down to regularise a procedure that has been irregular up to the present.
  Mr. Lawson: One important general point arises from this clause and the amendments. I should like to address myself to that point before dealing with cherished transfers.
  At the commencement of the proceedings on Report yesterday my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) pointed out how wholly unsatisfactory was the House's treatment of fiscal legislation and Finance Bills. He said that it was impossible to have a proper discussion of a Finance Bill under our procedures. The Chief Secretary agreed. However, the Minister did not think that the Government had behaved in an especially bad manner with this Finance Bill. I believe that the Government have behaved badly.
  We cannot debate and scrutinise a Finance Bill adequately because of the inbuilt guillotine in the Provisional Collection of Taxes Act, which means that we must pass the measure four months after the presentation of the Budget—which is 5th August in this case. The Government make use of that fact to put into the Finance Bill more and more
  676
  legislation that has no business whatsoever in the Bill, to ride on the back of the inbuilt guillotine. That leaves less time for the scrutiny of other legislation and the clauses that are properly contained in the Finance Bill.
  This clause contains a proposal by the Minister for Transport to regularise the system of changing registrations. It applies to people who, for instance, wish to have registration numbers containing their own initials. That proposal has no business to be in the Finance Bill. There are many similar provisions in the Bill. I cite Clause 14, which is concerned with the definition of fishermen's tractors. Schedule 6, on the investigatory powers of the Inland Revenue, has no business to be in the Bill. There should be separate legislation for that.
  The Provisional Collection of Taxes Act was introduced not to deal with clauses of that kind but to deal with the collection of income tax and the rates of income tax and allowances. That illustrates precisely why we are unable to scrutinise adequately the Finance Bills put before us by the Government. The Government pack into this legislation more and more stuff that has no business to be there. It prevents us from discussing adequately the Finance Bill and fiscal legislation.
  I now address myself to one or two specific points that have not already been made by my hon. Friends. The points that they made were important and I hope that the Minister for Transport will reply to them. But he made a curious remark in Committee, which seemed to me to explain why civil servants spend all day making two vehicle transfers—one in the morning and one in the afternoon, and that is their lot. He said:
  "I may say that patriotic civil servants down at Swansea thoroughly resent having to spend their time on this type of work at all, and regard it as a thoroughly frivolous use of their time."—[Official Report, Standing Committee E, 18th May 1976; c. 106.]
  That is the position. The civil servants disapprove of this work because it is one of the few aspects of Civil Service work that give harmless pleasure to anybody. Civil servants are therefore on a go-slow. The Minister called them patriotic. That is a strange notion of patriotism.
  Mr. John Nott (St. Ives): They do only two car transfer registration plates every day.
  Mr. Lawson: As my hon. Friend says, they carry out only two car registration transfers a day. That is called patriotism. I am sure that the former Chief Whip would be only too happy to assist them in their work. I suggest that he be appointed to undertake that task. Later I shall make some radical suggestions which will dispense with the whole matter.
  My hon. Friend the Member for Guildford (Mr. Howell) quoted part of the remarks made by the Minister for Transport. I should like to quote the whole of those remarks as the Minister made a serious charge, when he said:
  "I have had reported to me some extremely unsavoury cases of people trying to offer bribes in order to get…certain registrations.…Various other dishonest practices are involved in the whole operation, but I shall not weary the Committee with details about them."—[Official Report, Standing Committee E, 18th May 1976, c. 106.]
  We must be told what are those dishonest practices.
  It is very worrying, if legislation is to be brought before us to deal with dishonest practices about which the Minister for Transport merely hints darkly but does not tell us what they are. The hon. Gentleman must either withdraw or come clean and tell us about these dark practices concerning car number plates which have caused him so much concern and so many sleepless nights and explain his presence on the Treasury Bench on Report today.
  In column 116 the Minister went on to talk about "unscrupulous operators" diddling the public "out of their rights". The hon. Gentleman referred to "diddling the public out of their registration numbers." How does that happen? What is the process about which he was talking? The hon. Gentleman was talking about practices which he thinks that he "can close without making the whole transfer system illegal."
  Mr. Nicholas Fairbairn: Does my hon. Friend appreciate that there is a book that registers all these idiosyncratic numbers and that the one for which the highest price has ever been paid is FU 2?
  Mr. Lawson: That is understandable. It is not for me to speculate whether it belongs to the Scottish National Party or to the Minister for Transport. However, it is necessary that we should be told what these disreputable practices are. I hope that the Minister for Transport will pay attention to the debate. We know that he has difficulty in doing so.
  What are these disreputable practices that the Minister thinks he "can close"—I use his words—"without making the whole transfer system illegal"? How does he propose to prevent these disreputable practices? We ought to know about these matters. These are new crimes about which he is informing us. These are new deeds about which any honest man should be concerned. It is no use muttering in vague terms. The hon. Gentleman must come clean.
  Mr. Graham Page: My hon. Friend will have observed that, under the Regulation under which these Regulations will be made, a penalty of only £20 can he imposed. That seems a very small penalty for the kind of crimes about which my hon. Friend has been speaking.
  Mr. Lawson: It does indeed. I have a strong suspicion that the Minister was guilty of a certain hyperbole when trying to persuade the Committee to pass the legislation on the ground of these unspecified vices in which people indulge relating to car number plates. I suspect that he made it up as he went along. If there is something more to it, let him tell us.
  The next point arises from what was said by my hon. Friend the Member for Braintree (Mr. Newton) about whether this was a charge or a tax. This is an important point for I have many reasons for saying this, including the question of VAT.
  I put down a Question to the Chancellor of the Exchequer, which was answered by the Financial Secretary—I am glad that he is here—on 24th May. I asked
  "if VAT is chargeable on the charge levied for having a particular registration mark transferred from one vehicle to another; and whether it will be so chargeable, assuming the passage of Clause 10 of the Finance Bill."
  The Financial Secretary replied that at present VAT was levied on charges for which there was no statutory authority whatsoever. Yet VAT is levied on them.

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  That is pretty disreputable. The hon. Gentleman went on:
  "This position will need to be reviewed in the light of Regulations made following the passage of Clause 10."—[Official Report, 24th May 1976; Vol. 912, c. 88.]
  This clause was then Clause 10. It is no good saying that the matter will be reviewed. We want to know now whether VAT is to be levied on the charges or not. If it is a tax, clearly VAT will not be levied. If it is a charge, it probably will be. This is an important point.
  4.45 p.m.
  I should like to put forward my proposal for dealing with the whole matter and cleaning it up. The obvious answer is to close down the Vehicle Licensing Department at Swansea. No Department in the whole of the Civil Service is more incompetent than the Vehicle Licensing Department. All of us have had letters from constituents complaining about the nonsense and the interminable delays which are caused. It is no wonder that there are delays if each official can transfer only two number plates a day. If we closed that Department, we could make a saving on public expenditure. We are always keen to save public expenditure. Indeed, half of the Labour Party is also keen to save public expenditure. Of course, the other half wants it increased.
  The question to which we must address ourselves is: what will happen if the Vehicle Licensing Department is closed? My solution is that the responsibility should be given back to the local authorities which should be able to charge whatever the market will bear for transferring a number plate. That would be a new source of local government revenue, which is much needed. At the same time, there would be no monopolistic system. If one local authority were charging too much, someone who wanted a fancy number plate on his car could go to another local authority which was charging less. Therefore, we would get the benefits of competition and of a new source of local government revenue. Above all, we would get the benefit of closing down the Vehicle Licensing Department at Swansea and getting rid of the nonsense for which the Minister is responsible.
  Mr. Nicholas Ridley: I think that I am the loser in that I was not a member of the Committee upstairs which found this fertile ground which, no doubt, was exploited to the best advantage. Judging from the debate so far, my hon. Friends have been extremely diligent in their researches into this nightmare establishment at Swansea, where apparently not only is there gross inefficiency but dark figures in black cloaks pass bundles of dirty notes in the course of corrupt practices for personal gain. I believe that a full Royal Commission should be set up to look into the whole situation. A committee of inquiry of the highest power should be set up to investigate this vicious establishment. The Minister of Transport's admissions have revealed enough from behind the cloak to make it clear that we should not be satisfied with the little that he has released.
  Is there a number plate entitled JHW 1 in the public service? Is there a number plate entitled LJC 1 in the public service? Is that LJC 1 treated as a benefit in kind? If it exists, is tax paid upon it by its beneficial user in the public service? These and other corrupt questions must be investigated immediately. Is there a number plate entitled LIB 1? If that is the number of the car used by the Leader of the Liberal Party, the proposals will certainly smite deep at the finances of the Liberal Party after the many changes that we have seen this year in the beneficial ownership of that car.
  I should like to inquire a little further into the 100 people who discharge the work about which we are talking. Presumably one or two decide which number plates are obscene and cannot be used at all. Or is the number higher? Is the reason for the poor productivity that quite a number of people—perhaps a committee—look at number plates to consider which would be indecent if exposed at the front or rear of a vehicle? Somebody must do that, because, from researches that one does on the roads, one is astonished at the prudity of the bureaucracy in keeping offensive combinations of letters and numbers away from our eyes. Who does this? On what Vote does it come? Is it included in this inefficient organisation about which we are talking?
  Mr. Douglas Crawford: Presumably part of the hon. Gentleman's argument is that the former Government Chief Whip would not be able to have his initials on his car.
  Mr. Ridley: I am trying to remember whether the right hon. Gentleman has a whole string of Christian names or whether he has only the obvious one that I can think of. Perhaps the right hon. Gentleman would assist the House.
  Mr. Robert Mellish: My present number plate is FPM, and I always interpret that as "future Prime Minister".
  Mr. Ridley: The question is whether the number after FPM is 1, 2, 3 or 4. The right hon. Gentleman has not told us. Maybe it is FPM 9099.
  How do we know the efficiency of those 100 people who deal with the difficult combinations, and how do we charge for the value of their service to the pepole who are going to change their number plates? My hon. Friend the Member for Braintree (Mr. Newton) rightly explored whether this was a tax or a charge and whether it should be related to the cost of providing the service or how it should be done. The difficulty is that if we related the charge to the cost of providing the service we would see straight away that it would be far too high, because there are all sorts of inefficiencies in the system and people would have to pay far more than they should.
  It is no defence to say that the cost is so much because too many people are trying to transfer the same number plate. What is the true price which should be charged? In the General Sub-Committee of the Expenditure Committee, I have been asking civil servants what are the costs of the things they do and, where they make charges to the private sector—say, the education of overseas students—how they assess what they should charge. The extraordinary thing is that no work has been done on this at all.
  The Civil Service does not think in terms of market prices or charges and has no philosophy as to whether we should charge what the work costs or a percentage of it. It does not know whether to try to determine a market price or how to go about it. I do not
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  want to make a profit, nor do I want to make a loss. But what is a profit and what is a loss in terms of a public service? There is only one way to discover this, and that is to put the work out to tender and ask a number of firms what they would charge for performing the service. We could then take the lowest tender.
  My hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) is always ready to spring into a competitive bid situation. He promised to plant the trees above our car park for £100 instead of the £4,000 that the Department paid. That is the way to discover what these things should cost.
  There cannot be said to be any great political kudos behind the transfer of number plates. It is not a commanding height of the economy. It is not something on which the security or the safety of the realm is at stake. Nor can it be said to be something which is essential for ordinary working people and, therefore, has to be handled by the bureaucracy. It is simply a piece of candy floss. What on earth is it doing in the public sector anyway? Why is the public sector concerned with this nonsense in the first place? Could it not be the first candidate for denationalisation? There are many candidates for that treatment, but would this not be a good place to start?
  The Government have added so much to the public sector in the last two years that they should hang their heads in shame in regard to the burdens they have placed upon the public purse. However, they can start to recant by making a little slow, gingerly progress back to sanity by denationalising the cherished transfer number plate establishment at Swansea.
  Mr. A. P. Costain: Would not my hon. Friend agree that if we put this out to public enterprise it would supply the number plates as well and we would save more money?
  Mr. Ridley: That is a serious point and my hon. Friend is quite right. There are too many activities of this sort in the public sector which do not have to be done by civil servants and could be done much more cheaply by people contracted to perform that service. Of course, this

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  applies a fortiori to Swansea itself. Here is a case where a major activity is carried on and the State has the wrong computer. I must declare an interest as someone who works in the computer industry. Out of political motives, the State has decided to buy a British computer at all costs, and "all costs" mean £30 million to the taxpayer. But the computer is not doing the job, and the State has had to get people with quill pens to replace the computer. Hundreds and thousands of them are scratching away with them. Undoubtedly that will help the unemployment problem in South Wales, but that is the only conceivable justification.
  No private company would tolerate what is happening at Swansea. The time has come to test it out. I shall design a tender, as my hon. and learned Friend the Member for Kinross and West Perthshire is not here, and we will get quotations from the private sector for performing the work of these cherished transfers and also in respect of all the activities at Swansea. That would mean that we would cut out the waste and extravagance and, better still, the corruption which has been revealed.
  Mr. Mellish: The hon. Gentleman's party started it up.
  Mr. Ridley: Yes, but whether or not that is true—I am told it is not true—it is no valid attack to say that a previous Conservative Government did it. That is probably quite often true, but that is not in itself a reason for not reversing the situation now. This matter has wider implications than can be applied to this short debate. The Minister for Transport should take his courage in both hands and cease the carrying on of this ridiculous activity by the State. If it is worth doing, the private citizens who would benefit from it would pay whatever it costs for it to be done by somebody else. The Minister could put it out to tender or to an agency. That is the principle he should be looking for in everything he does. He will realise that the failures of bureaucratic administration are now such that we have to look at other ways of doing these things. This would be a very good place to start.
  Mr. Hector Monro: My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) has just
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  highlighted the total irrelevance of this whole clause to a Finance Bill which is supposed to deal with the economy of this country. I think, too, that the Government attitude to retaining number plates, as indicated in the proceedings of the Standing Committee, show how narrow minded they are to anyone having some small pleasures in life. I declare an interest in having a number plate—I do not see it as a cherished one or a personalised one—which happens to have been on various cars for many years and and I do not see any reason why that should not continue.
  I would tell the Minister that for many years in my own county of Dumfries, SM1 and SM7 are still going strong. Many of these number plates are in the same ownership as they were in 1904. Why should this tradition not be carried on? There is no form of egotism, which the Minister seemed to read into anyone wishing to retain what, in fact, was a family possession over very many years.
  5.0 p.m.
  What we are criticising is not the desire to retain a number but the whole system at Swansea. Anyone, like me, who has changed number plates knows that what used to be a simple system as done by the old local authorities has now become a major headache. Anyone who does not believe me has only to ask any salesman who has the responsibility of registering new cars and transferring the plates. One used to go to the registration authority and fill in the form and the whole thing was over in five minutes. The Minister should explain how this has suddenly become a £100-plus operation in Swansea.
  Why cannot the comparatively small number of transfers, many of them in rural areas, continue to be done by the local authorities at the offices now run by the Department of the Environment? When the Minister comes to a satisfactory conclusion, I hope that he will also consider why the system has become so much more detailed. It is hard enough to transfer a plate to a new car, but to transfer it to a second-hand car is three times as complicated and has to be done in Swansea.
  What is this provision doing in the Finance Bill anyway? Why can the Minister not deal with it administratively and economically? Why can he not

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  return to the old system which worked admirably and cheaply, with no complaints that I know of? It was never said then that charges would have to be put up to deal with what appeared to be five or 10 minutes' worth of paper work. It is an indication of the Government's thinking when they have to spend a considerable period dealing with something so irrelevant to the economy. The Minister should withdraw the clause and start again.
  Mr. Fairbairn: I have long expected that the right to have one's own individual number plate would eventually become a target for Socialist destruction. Nothing is more symbolic of all the things to which they object than that someone should not only differ from the system anonymously but should be able to point out that he has taken the trouble to do something idiosyncratic.
  I have always assumed that the puritanism which no Minister demonstrates and embodies more than the Minister for Transport would eventually lead him to say, "Thou shalt not be different." The ultimate of so much Socialist thinking is to create a society in which what is not compulsory is forbidden, in which it is wrong that the individual should actually have a choice, be able to express his personality or preference and even be able to pay for it.
  Mr. Patrick Cormack: Perhaps eventually we shall all have to have the same number plate.
  Mr. Fairbairn: I think that we are coming to that situation. The previous system was an intelligent one. Local authorities gave numbers and one could tell immediately whether the car in front came from Sussex or Glasgow. Local police were assisted when there was a robbery or an accident by knowing that the car had come from another area. But now, the grand magnificence of Socialism requires that we all have a number which means nothing to anybody, one which is much more difficult to note or to remember. But the machine finds it better to have it that way.
  Who is the machine? We now know that it is not the computer which requires this awful, inhumane, soul-destroying system. It is the pygmies who run the machine who find it offensive to their little
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  Meccano, Dinky Toys minds that real human beings should actually want something which matters to them.
  If the Minister could say that these busy, patriotic, inflation-proof-pensioned civil servants who manage, in order to swell the national product, to change two numbers a day would have their numbers reduced by 25,000 if this provision remained, we might be happy to make such a sacrifice. But if we remove this facility by charging it out of existence, only a few Arab emirates will be able to afford to have SA1 on their cars. The Dipplomatic Corps will be able to carry on doing this—that is all right because we are sycophantic about that—but if the ordinary British citizen wants to keep doing it, it will be made a matter of penalty and fine.
  Why is this such a pain to those patriotic zombies who run the system with such classic inefficiency—despite all the magnificent machinery of the technological revolution which was going to make it cheaper, which would centralise it but which in fact has made it more expensive and offended local feelings, in Surrey as in Caithness? The system in offensive, muddling and irritating. It is absolutely typical of this Government's approach.
  Nothing stands out more in the Finance Bill than this provision. It should not be there, and it is there only because there is no other way in which this piece of resentment and vindictiveness against ordinary human eccentricity can be brought in. There is no other way to sandpaper each of us down, to force us to be the same. The same happens when one enters the Army. One is given a number and one jolly well takes it. One cannot choose it: one just stands in line.
  That is what this provision is all about. It is an indication that we are all thought of as units and digits. No doubt if everything else can be centralised, every car will eventually be identical. In Germany, they had the Volkswagen and the idea was that everybody would have one. No doubt when the Minister has the numbers right he will get the cars right and then the way will be clear to get the people right to sit in them. That is the Government's attitude. It is filthy and it is Puritan. I regret to say that, 400 years after we thought we had abolished the Puritans, they are back—sitting on the Government Front Bench.
  The Minister for Transport (Dr. John Gilbert): This is something of an occasion for me. It is the first time that I have been accused of being a Puritan, here or anywhere else.
  I will deal with some of the frivolities of the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) in a moment. I would say first that it is distasteful for any hon. Member to attack Government servants who do their job and have loyally served administrations of the hon. and learned Gentleman's own party in the past, as they no doubt will again at some time in the future. I entirely repudiate remarks of that sort.
  The hon. and learned Gentleman accused us of trying to legislate out of existence the cherished transfer system. In Committee I said that
  "it is a harmless form of personal vanity that I would not seek to legislate out of existence."—[Official Report, Standing Committee E, 18th May 1976, c. 106.]
  I then said—this is the general theme behind inserting the clause in the Bill—that I was seeking to regularise a situation that is thoroughly irregular. I do not think that that has been recognised by Opposition Members. I am seeking to reduce the amount of bureaucracy that is involved, as well as the drain on the public purse. Surely those are objectives that should commend themselves to Opposition Members, even though I had some sympathy with the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) when he asked why the public sector should be involved in this candy floss. As I said in Committee, I have been under considerable pressure to legislate to remove these arrangements entirely.
  The hon. Member for Dumfries (Mr. Monro) asked why it was necessary to produce these proposals. He said that everything worked very well in the old days. The reason is that there has been an explosion in the number of transfers being sought in the past few years. In the 1960s they were running at about 5,000 a year. In 1973 they had risen to 30,000 a year, and in 1975 to 50,000 a year. It is estimated that this year they will be running at about 60,000.
  In Committee I gave various undertakings to Opposition Members—
  Mr. Fairbairn Mr. Fairbairn rose—
  Dr. Gilbert: No. Not now. Possibly I shall give way a little later.
  I said that I would explain some of the procedures and the reason for so many staff being involved in this work. The arrangements began as a result of a Ministry of Transport circular to registration and licensing authorities way back in 1924. It is extraordinary that until quite recently no one in Government appreciated that the whole system was thoroughly irregular both with respect to the authority of those involved and the transferring of plates. The hon. Member for Braintree (Mr. Newton) asked "What about those who sue to get back their £5?", but what would they be saying if they were invited to return number plates that had been transferred irregularly? I am sure that the hon. Gentleman, in his usual fair way, takes the point.
  In fact, the situation is even more irregular than I realised when discussing it in Committee. There is a great variety of ways in which local transfer offices handle these matters. Until now they have had total discretion regarding the rules that they have imposed on individual members of the public. I consider that to be a thoroughly unsatisfactory state of affairs. [HON. MEMBERS: "Why?"] If Opposition Members think it is satisfactory for individual civil servants to impose different sets of arrangements on individual members of the public for basically the same transaction, I am surprised.
  Mr. Ridley: The Minister has castigated my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) for criticising civil servants, but now he is doing exactly the same thing.
  Dr. Gilbert: Not at all. If the hon. Gentleman had listened with his customary lucidity of mind to what I was saying, he would have appreciated that I was pointing out that civil servants had discretion under the rules. I was not criticising their use of that discretion, but the fact that the discretion existed. Surely the hon. Gentleman is capable of grasping that distinction.
  Some LTOs insist that both vehicles must be currently licensed, in running

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  order, and presented for inspection. There are others requiring only part, or none, of those provisions to be carried out. Some offices are ready to accept and process an application at considerable inconvenience to themselves while others are less inclined to do so.
  The reason for this is largely historical. Before we embarked on the process of centralising the vehicle licensing system, local authorities carried out statutory licensing and registration duties quite independently and not as agents of the then Ministry of Transport, although they had guidance from the Minister.
  5.15 p.m.
  It might be of assistance to the House if I set out the basic procedure involved in all cases where a cherished transfer is sought. In the first place, the applicant has to submit an application form—namely V317—[Interruption.] I think it is as well that Opposition Members should learn the amount of paper work that is involved. It is the intention to reduce that paper work. That is the basis of the proposals behind the clause. Surely Opposition Members can grasp that if nothing else. They will be surprised at the amount of work that is involved.
  The applicant submits an application—
  Mr. Fairbairn Mr. Fairbairn rose—
  Dr. Gilbert: No, not now.
  The applicant submits a V317 with a fee. The fee is returned if the transaction is not completed. The applicant, under the normal procedure, submits the registration documents for both donor and recipient vehicles. [Interruption.] It might help if Conservative Members know why these procedures are necessary. As I have said, we are trying to cut down the volume of transactions. Opposition Members should know why they take so long to process and why there is such a demand on civil service manpower.
  Mr. Fairbairn Mr. Fairbairn rose—
  Dr. Gilbert: No. I am in the middle of outlining the basic procedure involved in all these cases. If it is going to take a long time to outline it, so be it.
  Licences and test insurance certificates are required. The licensing office checks
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  that both vehicles are registered in the name of the applicant—[Interruption.] Opposition Members should realise that these procedures are necessary for the protection of the public.
  The next stage is for officials to ensure that the object of the transfer is not to make the vehicle that receives the new licence plates appear to be younger than it really is—[Interruption.]
  Mr. Ian Gow Mr. Ian Gow (Eastbourne)rose—
  Dr. Gilbert: Opposition Members, who are fortunate enough always to buy new cars and not secondhand ones, may not require such protection, but ordinary members of the public who are in the market for buying secondhand cars need to know that the car that is being sold is not older than it appears to be. It is a necessary protection, and one that should have occurred to various Opposition Members.
  The officials also have to be satisfied that neither vehicle is a public service vehicle or licensed as a goods vehicle of over 30 cwt. unladen weight, or subject to Customs restrictions. If any one of those conditions is not met, the application has to be rejected.
  If the conditions are met, the licensing office may arrange for an inspection of the vehicles concerned. That may be carried out by its staff or by the local police on its behalf. I accept that it is a waste of time for the police to be involved in such activities. That is a further reason for trying to cut down the number of these transactions. Opposition Members cannot have it both ways when some of them argue that the police should not have to take time to carry out such inspections. If the inspection is unsatisfactory, the application has to be rejected.
  The next step is to examine the records of both vehicles to ensure that they have not been stolen or scrapped. If both vehicles are satisfactory, the transfer is permitted, and a replacement registration mark, appropriate to the age of the donor vehicle, is allocated to it. The registration documents and the test certificates, if any, of both vehicles are amended to show the new registration marks and replacement licences are issued showing the new marks. New records are created for the two vehicles under their new registration marks.

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  The hon. Member for Blaby (Mr. Lawson) asked what sort of abuses had manifested themselves under the existing system. I will give him a couple of examples. I cannot, for obvious reasons, give him every example. [HON. MEMBERS: "Why not?"] For the obvious reason that I do not wish to draw attention to the way in which certain malpractices arise. For example, individuals may seek to obtain information improperly from the vehicle record office to trace the keeper of a particular mark with a view to purchase. [HON. MEMBERS: "What is wrong with that?"] The record of licence numbers is supposed to be a matter of confidence.
  Mr. Lawson: Why?
  Dr. Gilbert: For the simple reason that if the hon. Gentleman were driving along and saw an attractive young lady he could not ring up Swansea and get her address. That will do as a starter.
  Mr. Fairbairn: Would that person first have to discover whether the blonde had stolen the car? Otherwise, he might get the wrong blonde.
  Dr. Gilbert: That is a fate I would wish to spare most young ladies.
  A person might buy a vehicle on hire purchase, transfer the mark and sell the vehicle for cash, making it difficult, if not impossible, for the finance company to get its money back. There are more serious examples of law breaking, but I am glad to say that they are on a relatively small scale.
  There is, however, one case awaiting trial at the Old Bailey in which one of the defendants is an officer of a local licensing office. The charges include conspiracy to defraud, and he is implicated because it is alleged that he allowed transfers without inspection when the circumstances clearly required it. There are similar cases in various stages of investigation and preparation. The hon. Member for St. Ives (Mr. Nott) seems to find that funny. When he was responsible for administering the tax system he took a rather different view of these matters.
  Mr. Lawson: I asked the hon. Gentleman to explain his reference in Committee to members of the public being
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  diddled out of their registration numbers by unscrupulous operators. Can the hon. Gentleman tell me how that happens?
  Dr. Gilbert: I can tell the hon. Gentleman how that happens, but I prefer not to do so, because I do not wish to give knowledge of these procedures wider circulation. It is a thoroughly unsatisfactory state of affairs.
  I have set out the basic transfer scheme. Many complications can be involved in an apparently simple transfer. The simplest case is where both vehicles are registered at the same local office and a properly completed application, together with all the necessary papers in good order, are presented at that office. In that event, the total amount of work required for handling the papers, excluding any allowance for inspection time, is about half an hour. Unfortunately, a great many cases are not as simple as that. About half the vehicles are at present being inspected, although I accept that, by definiition, that is the half that is most likely to cause trouble. It is not uncommon for inspecting officers to have to visit two or three places before finding the vehicles concerned, and in those circumstances a whole day's work is involved.
  Complications arise when reference has to be made from one office to another within the licensing system, and there is frequently considerable correspondence with the public about the possibility of transfer and about troublesome or rejected cases. In addition, for every four transfers carried out there is another application which travels some way through the procedure before being rejected.
  At Swansea, 19 people are employed full time on cherished transfer work, but they carry out only part of the procedures. All other staff working on cherished transfers do so as part of their local office duties. Because of that, it is not easy to arrive at a total figure for the staff involved. Including inspections where they are carried out, and allowing for general inquiries and successful or withdrawn applications, our best estimate of the work is that if all the work were to be done by one member of the staff, he could carry out about two to three transfers a day. Before hon.

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  Gentlemen laugh too much about that, in terms of staff time per transfer there is no difference between the old system that obtained under the Conservative Government and the system which continues today, with the centralised procedure. The Conservative Government presided over that system without having the faintest idea that it was irregular, and without trying to tighten it up. I am glad at least to have the acknowledgement of the right hon. Member for Crosby (Mr. Page) that it is high time that something was done in principle about this, although he may not agree with all the proposals. At least there is one Opposition Member who is seized of the sense of what we are trying to do. I accept that there is an element of open-endedness about the authority that is involved, and I am anxious to try to meet the point made by the right hon. Member for Crosby.
  I would be prepared to offer the House, with your agreement, Mr. Deputy Speaker, a manuscript amendment which has the effect of ensuring that the first regulations under the clause will be made by the affirmative procedure whereas subsequent regulations will be made by the negative procedure. The words are in precisely the same form as those we have adopted for the Road Traffic (Seat Belts) Bill currently in Report stage. I propose at the end of page 10. line 18, to insert:
  "(3A) The first regulations under the Vehicles (Excise) Act 1971 prescribing the amount of any charge by virtue of this section shall not be made unless a draft of a statutory instrument containing them has been laid before Parliament and approved by a resolution of each House; and those regulations shall not then be subject to annulment as otherwise provided for regulations under the Act."
  I hope that will go a long way to meet the points made by the right hon. Member for Crosby and the hon. Member for Guildford (Mr. Howell).
  Mr. Graham Page: The hon. Gentleman said that the regulations would be approved by each House. I suppose that that is constitutionally right, the charge being not a tax but a licence fee?
  Dr. Gilbert: I am advised that that is right. My understanding is that it is not a tax; it is a consumer charge for a service.
  Mr. Lawson: The hon. Gentleman has not answered my question whether VAT will be levied on the charge.
  Dr. Gilbert: I cannot give a definitive answer to that, but my impression is that it would, because a service is provided. I think that VAT would be assessable, but I do not want the hon. Gentleman to take that as a final reply. It will depend on the way the regulations are framed.
  Mr. Cranley Onslow: Is it the Minister's intention that there should be one level of charge, or will he make provision for simple transfers on the one hand and for complicated transfers which cause a great deal of expensive work on the other?
  5.30 p.m.
  Dr. Gilbert: As I said in Committee, it is our intention to make a standard charge for doing the work and presumably, in cases where the transfer does not go through, to make a partial charge.
  Mr. Onslow: The Minister has said that there are some cases where the whole work can be done in half an hour. Surely it is unreasonable that people who have submitted applications that take only that length of time should have to bear part of the cost of difficult and complicated cases.
  Dr. Gilbert: I understand the argument of the hon. Member for Woking (Mr. Onslow). It has always been difficult to strike a balance between convenience to the citizen and the cost of administration. I shall look at the matter again, but our present intention is to make a flat charge. I propose to hold the normal consultations with interested bodies and those points will fall to be considered then.
  I now turn to Amendment No. 1. It would be our intention to see that the fee would not be in excess of £100.
  Mr. Gow: On a point of order, Mr. Deputy Speaker. The Minister has asked your leave to move a manuscript amendment. Perhaps you would care to advise him about tabling manuscript amendments at this late stage, particularly since the manuscript amendment is dated 12th July and today is 14th July. Is that not a discourtesy to the House? It makes it difficult for us to debate the matter properly. There are not other

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  copies of the amendment, except that which the Clerk has kindly handed to me. The Minister has had months in which to table such an amendment, since he first discussed it on 18th May. Would you care to rule on the matter and give the House your advice?
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Perhaps I can help the House. This procedure is not uncommon, and it is entirely within the discretion of Mr. Speaker. The manuscript amendment was submitted to Mr. Speaker and he indicated to me that if events took the course that they have taken, it would have been his intention to accept the manuscript amendment.
  Dr. Gilbert: Further to that point of order. The manuscript amendment was submitted to meet the wishes of the Opposition.
  Mr. Nott: I have often been called upon to wind up debates in the House, but I confess that I am at a total loss for words in winding up this debate. I shall therefore be brief.
  I still do not understand why it should be a law-breaking activity—those are the Minister's words—to obtain the address of a blonde from her number plate.
  Dr. Gilbert Dr. Gilbert rose—
  Mr. Nott: My God, the Minister has taken me seriously.
  Dr. Gilbert: I imagine that the hon. Member for St. Ives (Mr. Nott) can get instructions from his hon. Friends about why the records at Swansea are supposed to be kept confidential.
  Mr. Nott: If the Official Secrets Act is designed to protect blondes from interested males, I suppose that there is some good purpose in the confidentiality and secrecy with which civil servants conduct their business, but if that is a law-breaking activity it does not seem to me to be one that is likely to undermine the constitution.
  If time must be taken by civil servants to transfer cherished number plates, and if abuses and corrupt practices are likely to occur and it does not involve anything worse than protecting blondes from male activity, then we need not be too concerned.
  Mr. Ridley: If one saw a blonde, it would be easy to take the number of her car and ask for her number plate, pretending it was a cherished possession, when one really cherished the blonde. By that means, one could obtain her telephone number.
  Mr. Nott: I am sure that I have much to learn from the experience of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley).
  We all appreciate that the public sector provides a most valuable service to the community, but I did not appreciate, until we had the debate, the enormous amount of work that is done on behalf of the population and the extremely involved procedures connected with the transfer of cherished number plates from one individual to another. Among my personal vanities was never the wish to transfer a number plate from one of my cars to another, and having heard the Minister's description of the procedures I am glad of that.
  The whole procedure could be simplified if it were carried out by the private sector. The Minister's reaction to that proposal was interesting. He did not say that we should transfer the whole procedure to the private sector. His alternative was to close the whole thing down. He did not believe that the procedures could be carried out more swiftly, cheaply and efficiently by a small group in the private sector, he said that the best alternative would be to close it down.
  I do not know whether the Minister is a puritan, but when he quoted the words that he used in Committee he implied that he was, because he described the transfer of cherished number plates as a "harmless form of personal vanity". That seems to be the statement of a puritan. To be described as a puritan is not a term of abuse, and for someone to describe this practice as a harmless form of vanity indicates puritanism. There are not enough puritans around, and we do not hold anything against the Minister for being one.
  I now understand why the Public Accounts Committee spent considerable time on the Swansea Licensing Centre when it considered it some time ago.
  I remind the House that in 1968 a full costing of the proposed system

  697
  generally, based upon an estimated staff requirement of 5,431, revealed that the total cost over the 12 years to 31st March 1980 was £146 million. A revised costing in July 1970, based on an estimated staff requirement of 7,029, showed that the cost over the 14 years to 31st March 1982 was £233 million. The Minister should not be too sensitive about those figures, because I am making an attack not on the Government but on the organisation at Swansea, which has had a chequered career. The whole thing has gone badly wrong, but it does not stem from a period of Conservative Government. The working party was set up in 1965 by the former Labour Government, and the process of centralisation, which has failed, was set in train during a period of Labour Government. Clearly, the inefficiencies of the place carried on under us, as they have done under the present Government.
  I come to the serious points. I do not understand why we cannot have an affirmative procedure for the levying of taxation. Admittedly, the Minister suggested an affirmative procedure in the first year, but we are talking about the levying of a tax, and I believe that such a procedure is right in general terms. Therefore, we shall press Amendment No. 254 to a Division.
  I must take up the point made by my hon. Friend the Member for Eastbourne (Mr. Gow). It is extraordinarily difficult to understand why, if the Government were trying to help the Opposition and the House, they could not table a proper amendment but, instead, produced a manuscript amendment after three months. Surely it would have been possible to table an amendment last week The matter was debated in Committee on 18th May.
  This is but a tiny example of the shambles in the Government's handling of the Bill. The Committee debate took place on 18th May and today the Government present a manuscript amendment on an unimportant matter. This demonstrates how the Government seem incapable of handling the Bill in a normal way. The amendment could have been tabled on Friday.
  Mr. Fairbairn: If the manuscript amendment is dated 12th July—and no doubt the Vehicle Licensing Centre has
  698
  gone through the process of checking that the date is right—the Minister deliberately hid it from the House until he felt compelled to produce it as a halfway measure. Far from being helpful, he produced it just to help himself, and not us.
  Mr. Nott: I do not know whether my hon. and learned Friend is right, but I should have thought that it would have been much easier to table the amendment last week.
  We come to the question of the 100 civil servants doing the two transfers of cherished numbers a day. I can see why that takes them so long. I understand that the simple transfer, without an inspection, takes half an hour. The enormously complicated procedure cannot be necessary in every case. It must be possible to cut down each transfer to an hour, on average. It cannot be sensible administration to go through the fantastic procedure about which we have heard in order to register a number plate. No doubt it has been going on for years, but that is no reason not to try to improve the procedure now. The Government have an opportunity to do it.
  The Minister wants to be covered in glory for having discovered the malpractices. We give him his glory. Now let him try to simplify the procedures, so that more than two cherished number transfers are done each day by those overburdened, patriotic civil servants of whom we have heard so much.
  Mr. Onslow: A great deal of the bumph could be cut out for people who could satisfy the centre that they had had a cherished number plate in their possession for five years.
  Mr. Nott: I hope that the Minister will consider that suggestion. I cannot think that all the forms are necessary. Must there be a check that the vehicle is not younger than it is, to quote the Minister's own words?
  Dr. Gilbert: Yes.
  Mr. Nott: I am not sure what that means.
  5.45 p.m.
  Mr. George Cunningham: What other countries have this silly arrangement by

  699
  which people can purchase ego numbers, which is what they are? Should people be allowed to choose the number on their birth certificate or their national insurance number? This is a waste of Civil Service time. Why are the Government wasting two hours on this nonsense, instead of letting us get on with the serious business?
  Mr. Nott: To use the Minister's expression, it is a harmless vanity. If people wish to transfer number plates and pay the full economic costs—and we support the Minister in requiring that—why should they not do so? Why should Socialists wish to prevent people having those number plates if they wish? It may boost their egos, but it is a harmless vanity. The country will note that many Labour Members want to prevent ordinary people doing harmless things which please them. I know that the hon. Gentleman thinks that it is a waste of time and that people who do it are foolish and full of vanity, but let them be so, if that is how they wish to spend their money. No harm can come to the country or the hon. Gentleman from allowing it to continue.
  This has been a long debate. We expected that the debate in Committee would be very short, but it took a long time. I am sorry that we have taken up so much time on the matter, but it has illuminated some strange corners of the public sector. The Minister would be wise to consider the recommendation of my hon. Friend the Member for Cirencester and Tewkesbury and move the whole of this simple procedure into the private sector, where I am sure it could be done at a tenth of the cost, far more efficiently and without all the absurdities.
  Dr. Gilbert: The hon. Gentleman was a Treasury Minister.
  Mr. Nott: I never had anything to do with the Vehicle Licensing Centre, which does not come under the Treasury. The Minister has it under his care. As he read his extraordinary, almost lunatic brief—and we all realise that he is overwhelmed by the lunatic briefs given to him—the Minister must have seen that there was a job for him to do in Swansea. I hope that after the debate he will take the first train there and try to sort it out.
  Question put, That the amendment be made:—
  The House proceeded to a Division; but no Member being willing to act as Teller for the Ayes, Mr. SPEAKER declared that the Noes had it.
  Question accordingly negatived.
  Mr. Newton: On a point of order, Mr. Speaker. Will it get the House out of its difficulties if I formally move Amendment No. 254?
  Mr. Speaker: I am much obliged to the hon. Gentleman.
  Mr. Newton: I beg to move Amendment No. 254, in page 10, line 18, at end insert:
  '(3A) Regulations under this section shall be made by statutory instrument, which shall not have effect unless a draft thereof has been laid before and approved by the House of Commons'.—[Mr. Newton.]
  Question put, That the amendment be made:—
  The House divided: Ayes, 190, Noes 219.

  Division No. 245.]

  AYES

  [5.51 p.m.

  Aitken, Jonathan

  Brown, Sir Edward (Bath)

  Douglas-Hamilton, Lord James

  Amery, Rt Hon Julian

  Buchanan-Smith, Alick

  Dunlop, John

  Atkins, Rt Hon H. (Spelthorne)

  Budgen, Nick

  Dykes, Hugh

  Baker, Kenneth

  Bulmer, Esmond

  Eden, Rt Hon Sir John

  Beith, A. J.

  Burden, F. A.

  Edwards, Nicholas (Pembroke)

  Bell, Ronald

  Butler, Adam (Bosworth)

  Eyre, Reginald

  Bennett, Sir Frederic (Torbay)

  Chalker, Mrs Lynda

  Fairgrieve, Nicholas

  Bennett, Dr Reginald (Fareham)

  Channon, Paul

  Fell, Anthony

  Benyon, W.

  Churchill, W. S.

  Finsberg, Geoffrey

  Berry, Hon Anthony

  Clark, William (Croydon S)

  Fletcher-Cooke, Charles

  Biffen, John

  Clegg, Walter

  Forman, Nigel

  Biggs-Davison, John

  Cockcroft, John

  Fowler, Norman (Sutton C'f'd)

  Blaker, Peter

  Cooke, Robert (Bristol W)

  Fox, Marcus

  Boscawen, Hon Robert

  Cope, John

  Freud, Clement

  Bottomley, Peter

  Cormack, Patrick

  Fry, Peter

  Braine, Sir Bernard

  Costain, A. P.

  Gardner, Edward (S Fylde)

  Brittan, Leon

  Cronin, John

  Gilmour, Rt Hon Ian (Chesham)

  Brocklebank-Fowler, C.

  Dean, Paul (N Somerset)

  Gilmour, Sir John (East Fife)

  Glyn, Dr Alan

  Lewis, Kenneth (Rutland)

  Rodgers, Sir John (Seven oaks)

  Goodhart, Philip

  Lloyd, Ian

  Ross, Stephen (Isle of Wight)

  Goodhew, Victor

  Luce, Richard

  Rossi, Hugh (Hornsey)

  Goodlad, Alastair

  McCrindle, Robert

  Rost, Peter (SE Derbyshire)

  Gorst, John

  MacGregor, John

  Sainsbury, Tim

  Gow, Ian (Eastbourne)

  Macmillan, Rt Hon M. (Farnnam)

  St. John-Stevas, Norman

  Gower, Sir Raymond (Barry)

  McNair-Wilson, M. (Newbury)

  Scott-Hopkins, James

  Gray, Hamish

  Marshall, Michael (Arundel)

  Shaw, Michael (Scarborough)

  Grimond, Rt Hon J.

  Marten, Nell

  Shersby, Michael

  Grist, Ian

  Maude, Angus

  Silvester, Fred

  Hannam, John

  Maudling, Rt Hon Reginald

  Sims, Roger

  Harrison, Col Sir Harwood (Eye)

  Mawby, Ray

  Sinclair, Sir George

  Harvie Anderson, Rt Hon Miss

  Maxwell-Hyslop, Robin

  Skeet, T. H. H.

  Havers, Sir Michael

  Mayhew, Patrick

  Smith, Cyril (Rochdale)

  Hawkins, Paul

  Meyer, Sir Anthony

  Speed, Keith

  Heseltine, Michael

  Miller, Hal (Bromsgrove)

  Spence, John

  Holland, Philip

  Mills, Peter

  Spicer, Jim (W. Dorset)

  Hooley, Frank

  Miscampbell, Norman

  Sproat, Iain

  Hooson, Emlyn

  Moate, Roger

  Stainton, Keith

  Hordern, Peter

  Monro, Hector

  Stanbrook, Ivor

  Howe, Rt Hon Sir Geoffrey

  Montgomery, Fergus

  Steel, David (Roxburgh)

  Howell, David (Guildford)

  Moore, John (Croydon C)

  Steen, Anthony (Wavertree)

  Howell, Ralph (North Norfolk)

  More, Jasper (Ludlow)

  Stewart, Ian (Hitchin)

  Howells, Geraint (Cardigan)

  Morris, Michael (Northampton S)

  Stradling Thomas, J.

  Hunt, John (Bromley)

  Morrison, Charles (Devizes)

  Tapsell, Peter

  Hurd, Douglas

  Morrison, Hon Peter (Chester)

  Taylor, R. (Croydon NW)

  Hutchison, Michael Clark

  Mudd, David

  Taylor, Teddy (Cathcart)

  Irving, Charles (Cheltenham)

  Neave, Airey

  Tebbit, Norman

  Jenkin, Rt Hon P. (Wanst'd & W'd'fd)

  Nelson, Anthony

  Thatcher, Rt Hon Margaret

  Jessel, Toby

  Newton, Tony

  Thorpe, Rt Hon Jeremy (N Devon)

  Johnson Smith, G. (E Grinstead)

  Nott, John

  Townsend, Cyril D.

  Johnston. Russell (Inverness)

  Onslow, Cranley

  Tugendhat, Christopher

  Joseph, Rt Hon Sir Keith

  Oppenheim, Mrs Sally

  Wainwright, Richard (Colne V)

  Kaberry, Sir Donald

  Page, John (Harrow West)

  Walder, David (Clitheroe)

  Kershaw, Anthony

  Page, Rt Hon R. Graham (Crosby)

  Walker-Smith, Rt Hon Sir Derek

  Kilfedder, James

  Parkinson, Cecil

  Wall, Patrick

  Kimball, Marcus

  Penhaligon, David

  Warren, Kenneth

  King, Evelyn (South Dorset)

  Peyton, Rt Hon John

  Weatherill, Bernard

  King. Tom (Bridgwater)

  Rathbone, Tim

  Wiggin, Jerry

  Kitson, Sir Timothy

  Rees, Peter (Dover & Deal)

  Winterton, Nicholas

  Knight. Mrs Jill

  Rees-Davies, W. R.

  Wood, Rt Hon Richard

  Knox, David

  Renton, Rt. Hon Sir D. (Hunts)

  Young, Sir G. (Ealing, Acton)

  Lamont, Norman

  Renton, Tim (Mid-Sussex)

  Langford-Holt, Sir John

  Rhys Williams. Sir Brandon

  TELLERS FOR THE AYES

  Lawrence. Ivan

  Ridley, Hon Nicholas

  Mr. Spencer Le Marchant and

  Lawson, Nigel

  Ridsdale, Julian

  Mr. Carol Mather.

  Lester, Jim (Beeston)

  Roberts, Michael (Cardiff NW)

  NOES

  Abse, Leo

  Cartwright, John

  English, Michael

  Anderson, Donald

  Clemitson, Ivor

  Ennals, David

  Archer, Peter

  Cocks, Michael (Bristol S)

  Evans, Fred (Caerphilly)

  Armstrong, Ernest

  Cohen, Stanley

  Evans, Ioan (Aberdare)

  Ashley, Jack

  Coleman, Donald

  Ewing, Harry (Stirling)

  Ashton, Joe

  Colquhoun, Ms Maureen

  Ewing, Mrs Winifred (Moray)

  Atkins, Ronald (Preston N)

  Conlan, Bernard

  Faulds, Andrew

  Atkinson, Norman

  Cook, Robin F. (Edin C)

  Fernyhough, Rt Hon E.

  Bain, Mrs Margaret

  Corbett, Robin

  Flannery, Martin

  Barnett, Guy (Greenwich)

  Cox, Thomas (Tooting)

  Foot, Rt Hon Michael

  Barnett Rt Hon Joel (Heywood)

  Craigen, J. M. (Maryhill)

  Ford, Ben

  Bales, Alf

  Crawford, Douglas

  Freeson, Reginald

  Bean, R. E.

  Crawshaw, Richard

  Garrett, John (Norwich S)

  Bonn, Rt Hon Anthony Wedgwood

  Cronin, John

  George, Bruce

  Bennett, Andrew (Stockport N)

  Crowther, Stan (Rotherham)

  Gilbert, Dr John

  Bidwell, Sydney

  Cryer, Bob

  Ginsburg, David

  Blenkinsop, Arthur

  Cunningham, G. (Islington S)

  Golding, John

  Boardman, H.

  Cunningham, Dr J. (Whiteh)

  Gourlay, Harry

  Booth, Rt Hon Albert

  Dalyell, Tam

  Grant, George (Morpeth)

  Boothroyd, Miss Betty

  Davies, Bryan (Enfield N)

  Grocott, Bruce

  Bottomley, Rt Hon Arthur

  Davies, Denzil (Llanelli)

  Hardy, Peter

  Bottomley, Peter

  Davies, Ifor (Gower)

  Harper, Joseph

  Boyden, James (Bish Auck)

  Deakins, Eric

  Harrison, Walter (Wakefield)

  Bradley, Tom

  Dean, Joseph (Leeds West)

  Hart, Rt Hon Judith

  Bray, Dr Jeremy

  de Freitas, Rt Hon Sir Geoffrey

  Hatton, Frank

  Brown, Hugh D. (Provan)

  Dell, Rt Hon Edmund

  Hayman, Mrs Helena

  Buchan, Norman

  Dempsey, James

  Heffer, Eric S.

  Buchanan, Richard

  Doig, Peter

  Henderson, Douglas

  Callaghan, Rt Hon J. (Cardiff SE)

  Dormand, J. D.

  Hooley, Frank

  Callaghan, Jim (Middleton & P)

  Douglas-Mann, Bruce

  Horam, John

  Campbell, Ian

  Duffy, A. E. P.

  Hoyle, Doug (Nelson)

  Canavan, Dennis

  Dunwoody, Mrs Gwyneth

  Hughes, Rt Hon C. (Anglesey)

  Cant, R. B.

  Eadie, Alex

  Hughes, Mark (Durham)

  Carmichael, Neil

  Edwards, Robert (Wolv SE)

  Hughes, Robert (Aberdeen N)

  Carter-Jones, Lewis

  Ellis, John (Brigg & Scun)

  Hughes, Roy (Newport)

  702

  703

  Hunter, Adam

  Molloy, William

  Snape, Peter

  Irving, Rt Hon S. (Dartford)

  Moonman, Eric

  Stallard, A. W.

  Jackson, Colin (Brighouse)

  Morris, Alfred (Wythenshawe)

  Stewart, Rt Hon M. (Fulham)

  Jackson, Miss Margaret (Lincoln)

  Morris, Charles R. (Openshaw)

  Stoddart, David

  Jay, Rt Hon Douglas

  Murray, Rt Hon Ronald King

  Stott, Roger

  Jeger, Mrs Lena

  Ogden, Eric

  Strang, Gavin

  John, Brynmor

  O'Halloran, Michael

  Strauss, Rt Hon G. R.

  Johnson, James (Hull West)

  Orbach, Maurice

  Summerskill, Hon Dr Shiney

  Jones, Dan (Burnley)

  Ovenden, John

  Thomas, Jeffrey (Abertillery)

  Kelley, Richard

  Owen, Dr David

  Thomas, Ron (Bristol NW)

  Kerr, Russell

  Padley, Walter

  Thompson, George

  Kilroy-Silk, Robert

  Palmer, Arthur

  Thorne, Stan (Preston South)

  Lambie, David

  Park, George

  Tierney, Sydney

  Lamborn, Harry

  Parker, John

  Tinn, James

  Latham, Arthur (Paddington)

  Parry, Robert

  Tuck, Raphael

  Leadbitter, Ted

  Pendry, Tom

  Urwin, T. W.

  Lee, John

  Phipps, Dr Colin

  Wainwright, Edwin (Dearne V)

  Lestor, Miss Joan (Eton & Slough)

  Prescott, John

  Walker, Terry (Kingswood)

  Lewis, Ron (Carlisle)

  Price, C. (Lewisham W)

  Ward, Michael

  Lipton, Marcus

  Price, William (Rugby)

  Watkins, David

  Litterick, Tom

  Radice, Giles

  Welsh, Andrew

  Loyden, Eddie

  Rees, Rt Hon Merlyn (Leeds S)

  White, Frank R. (Bury)

  McCartney, Hugh

  Richardson, Miss Jo

  White, James (Pollok)

  McElhone, Frank

  Roberts, Albert (Normanton)

  Wigley, Dafydd

  MacFarquhar, Roderick

  Robinson, Geoffrey

  Willey, Rt Hon Frederick

  McGuire, Michael (Ince)

  Roderick, Caerwyn

  Williams, Alan (Swansea W)

  MacKenzie, Gregor

  Rodgers, George (Chorley)

  Williams, Rt Hon Shirley (Hertford)

  Mackintosh, John P.

  Rodgers, William (Stockton)

  Williams, Sir Thomas

  Maclennan, Robert

  Rooker, J. W.

  Wilson, Alexander (Hamilton)

  McMillan, Tom (Glasgow C)

  Roper, John

  Wilson, Gordon (Dundee E)

  McNamara, Kevin

  Rose, Paul B.

  Wilson, William (Coventry SE)

  Magee, Bryan

  Ross, Rt. Hon W. (Kilmarnock)

  Wise, Mrs Audrey

  Mahon, Simon

  Rowlands, Ted

  Woodall, Alec

  Marks, Kenneth

  Sandelson, Neville

  Woof, Robert

  Marquand, David

  Sheldon, Robert (Ashton-u Lyne)

  Young, David (Bolton E)

  Marshall, Dr. Edmund (Goole)

  Short, Rt Hon E. (Newcastle C)

  Mason, Rt Hon Roy

  Short, Mrs Renée (Wolv NE)

  TELLERS FOR THE NOES:

  Mellish, Rt Hon Robert

  Silverman, Julius

  Mr. James Hamilton and

  Millan, Bruce

  Skinner Dennis

  Mr. Edward Graham.

  Miller, Dr M. S. (E Kilbride)

  Small, William

  Question accordingly negatived.
  Manuscript amendment made: In page 10, line 18, at end insert:
  '(3A) The first regulations under the Vehicles (Excise) Act 1971 prescribing the amount of any charge by virtue of this section shall not be made unless a draft of a statutory instrument containing them has been laid before Parliament and approved by a resolution of each House; and those regulations shall not then be subject annulment as otherwise provided for regulations under the Act.'.—[Dr. Gilbert.]

Clause 24

  CHARGE OF INCOME TAX FOR 1976–77
  The Financial Secretary to the Treasury (Mr. Robert Sheldon): I beg to move Amendment No. 3, in page 15, line 21, leave out "£4,500" and insert "£5,000".
  Mr. Deputy Speaker: With this we may take the following Amendments:
  No. 4, leave out "£4,500" and insert "£6,000".
  Government Amendment No. 5.
  Amendment No. 6, in line 33 leave out "£4,500" and insert "£6,000".
  Government Amendment No. 7.
  Mr. Sheldon: This is the first of a number of amendments which are
  704
  intended to implement my right hon. Friend's conditional reliefs, which were announced in his Budget Statement. These amendments deal with the higher rates. They raise by £500 the higher-rate threshold and each of the next four thresholds. This concerns the progressive tax system, for which I make no apology. In a just society a progressive system must be regarded as fair and right. The starting point remains unchanged at the levels between 65 per cent. and 83 per cent.
  The arguments on these amendments were fully deployed in Committee. I shall deal with Amendment Nos. 4 and 6, tabled by the hon. Member for Norfolk, South (Mr. MacGregor). The Government amendments represent a total of £103 million to the Revenue. The extra cost of Amendments Nos. 4 and 6 would increase that £103 million by a further £180 million. The hon. Member's amendments seek to increase the tax threshold from £4,500 to £6,000 and consequently alter the thresholds at which subsequent higher rates commence. We are not prepared to accept that this amount of money should be expended. What we have done is to remove about 600,000 taxpayers from the higher rates of tax.

  705
  The number of higher-rate taxpayers has been reduced from 1,900,000 to 1,300,000 as a result of our proposals. If the amendments in the name of the hon. Member for Norfolk, South were carried it would mean that a person paying tax at the marginal rate of 83 per cent. would receive a benefit of £600 a year.
  We feel that this is totally unacceptable when compared with the pay deal, whereby ordinary people are to get between £2·50 and £4 a week. It is unreasonable to have this disparity of treatment between the two categories. I go further, and say that the biggest advantage that these higher-rate tax payers will get will come about through the success of the pay policy. It is they, together with many other sections of the population, who will gain from a reduction in the levels of inflation.
  These proposals are part of the package negotiated in consultation with the TUC and agreed as being the best way to proceed. We shall be discussing further amendments concerning other aspects of personal relief when I shall make comments on the nature of the undertakings that have been given.
  Sir Geoffrey Howe: Plainly there are many topics that we could raise on this group of amendments, because they go not merely to the heart of the pay deal, as it has come to be called, but to the heart of many aspects of the Government's economic strategy, if that is what that is to be called. It is remarkable that neither the Chancellor of the Exchequer nor the Chief Secretary should be present to move these amendments, which go to the heart of the strategy outlined by the Chancellor in his Budget speech. We do not have a massive disrespect for the Financial Secretary, but we do feel that if this matter is as important as it was said to be, the Chancellor ought to be here outlining this fulfilment of his Budget strategy.
  The truth is that the Chancellor of the Exchequer is by now busily engaged in negotiations with the trade union movement, with the Parliamentary Labour Party, and with almost anyone else with whom he can find an opportunity of talking in the process of rewriting large chunks of that strategy. He is trying to persuade them to accept reductions in public expenditure on a
  706
  substantial scale, as we understand, going to the heart of the deal of which this is one other part.
  The Chancellor, according to this evening's papers, is spelling out to these two audiences that there could be disastrous consequences for jobs if Britain does not now follow the example of France, America and Germany in taking vigorous action to reduce the Budget deficit. The tragedy is that that penny has taken so long to drop. If that is the reason why the Chancellor is not on parade this evening, I suppose we must count it as an advantage.
  As the Financial Secretary has said, the amendments in the Chancellor's name—Nos. 3, 5 and 7—implement the changes outlined in the Budget speech. Amendment No. 4, in the name of my hon. Friend the Member for Norfolk, South (Mr. MacGregor), seeks to challenge the scale on which the tax burden is being lightened for those at the top of the standard rate band.
  If we accept Government Amendment No. 3, as I understand it, it will not then be possible for us to vote, as we had intended, on Amendment No 4. In that event, we should propose to vote against Amendment No. 7, as being the best alternative way of criticising the general structure of the Government's tax policy. But nobody should imagine that we are thereby committing ourselves to particular figures of tax bands at this time.
  Plainly, the kinds of changes in direct policy that we would regard as right could not become possible or acceptable without other fundamental changes in the Government's policy, principally, reductions in public spending, which are unlikely to be forthcoming.
  The point of the debate is to focus attention on one very important aspect of the pay deal as it has been hatched out between TUC leaders and the Labour Party, namely, the price being paid by the nation as a whole for the method whereby the Government are tackling inflation, the method whereby they are managing the economy, and, in particular, the continued prospect of a high and crippling burden of taxation—especially direct taxation—which now falls on the shoulders of almost every citizen.
  It is that feature of the present Government's economic policy that we wish to

  707
  criticise in the debate. That feature of high direct taxes will be only modestly abated by the changes proposed in the amendments in the Chancellor's name. Let us consider the reality, for example, of somebody on the average wage of about £70 a week.
  Mr. Tom Litterick: Not £70.
  Sir G. Howe: Yes, the average industrial wage is £68 a week. That may astonish hon. Members on the Government Benches, but I am taking the average industrial wage of about £70 a week. The value of the tax relief conferred by these changes amounts to £1·68 a week—a little less than 2½ per cent. of pay. For the people at the top of the standard rate, on £100 a week—the skilled workers and middle managers—the relief is worth £1·68 a week—1¾ per cent. of pay.
  By the time the Retail Price Index figures are published on Friday of this week, the total value of these tax concessions of between 1¾ per cent. and 2½ per cent. of pay will already have been exhausted by the price changes that have taken place since the Chancellor's announcement.
  Mr. Litterick: The people of Birmingham will be very surprised to learn that what the right hon. and learned Gentleman called the skilled workers are earning anything like £100 a week.
  6.15 p.m.
  Sir G. Howe: The hon. Gentleman's intervention illustrates one of the perpetual self-deceptions of so many hon. Members below the Gangway on the Government side. The facts and realities of the situation have been demonstrated in the debates on taxation on benefits in kind. The average industrial earnings are £68 a week, but the benefits in kind begin to incur tax, under the Government's original proposals, at the level of £100 a week. This has provoked protest not from the modest army of Rolls Royce-owning plutocrats but from 54,000 workers on British Rail, and from hundreds of thousands of workers at all levels of British industry.
  There are very few places in which we cannot find, as a matter of routine, skilled working people—who play an important
  708
  part in keeping plants and factories going —receiving wages of that kind. Skilled workers and middle managers are the people—astonishing as it may seem to the Labour Party, to whom £5,000 a year has always seemed a Croesus-like figure—who are now being clobbered by this Government's tax policy.
  Mr. Litterick: Is the right hon. and learned Gentleman arguing that the protests made by British Rail workers are being made because they are earning £100 a week? That is not so.
  Sir G. Howe: It is astonishing that the hon. Gentleman reacts with total disbelief. The fact is that the number of British Rail employees represented in the protest against the proposals to tax benefits in kind, at £5,000 a year, amounts to 25 per cent. of the work force of British Rail—in other words, 54,000 employees. These are the facts, and they were accepted as common ground in Committee.
  The same kind of protest is being made by large numbers of people working at the airports around London, and also by long-distance lorry drivers. They have been locked in negotiation with the Treasury for the same reason. People working as commercial travellers and as salesmen are similarly affected. These are the people whom the Labour Party has regarded as the rich, to be clobbered by its tax policies.
  The Ministers concerned—if not hon. Members below the Gangway—have found out that policies designed to clobber those earning £5,000 a year are in fact clobbering large chunks of the skilled working class. That is one way of demonstrating the extent to which this country, under the tax policies and spending policies of the Labour Government, has reached the end of the road.
  Mr. Ron Thomas Mr. Ron Thomas (Bristol, North-West)rose—
  Sir G. Howe: I shall give way to the hon. Gentleman in a moment. The high and crippling burden of taxes—only modestly abated by these changes, and already substantially eroded by the price changes that have taken place—is no longer something with which only middle-class well-paid minorities are concerned.
  In the debate last night one of the Labour Members below the Gangway pointed out that the reason why a change

  709
  in policy on the taxation of war widows was now necessary was that the tax threshold, starting to be borne at the rate of 35p in the pound, was biting on the modest incomes of those war widows.
  This is the reality of the world in which we now live. The drive towards ever higher direct taxes, reaching further and further down into the population, is the consequence of Labour Party fiscal policy. It is bearing not just on war widows and widows generally but on people with earnings below half the average industrial wage, who are beginning to pay taxes at 41p in the pound. That is where the tax threshold falls.
  As we move up to the average industrial wage earner, the skilled worker, or to those earning as much as £100 a week, we really are moving out of the standard rate of tax into the higher rate bands. All these groups of people—skilled, average, below average, pensioners, widows, and those on social benefits and nothing else—are now being grievously affected by the high direct taxes which the Labour Government have succeeded in shackling on the people of this country.
  Mr. Ron Thomas: It is the case that average earnings are about £59 a week. The right hon. and learned Gentleman referred to an industrial average of about £70 a week. He then talked about the small group earning £100 a week. Is it not the case, however, that, given the allowances for a man and his wife—-the average family—and the allowances for a reasonable mortgage and for insurance, one has to be earning almost £7,000 in order to come into the 40 per cent. category? We are talking about taxable income, not total income. We can add on at least £2,000, if not more. We are talking about the next rate above the standard rate, which would not touch any average family with an income of under £6,000 a year.
  Sir G. Howe: Even if we speak of anyone getting less than £6,000 a year, that figure is no longer way beyond the reach of a skilled electrician earning £120 a week, or of a bus driver or a Post Office worker taking home equivalent amounts —[Interruption.] Government supporters have lived for so long in a mythical world that they do not realise. Do not they realise that 23 per cent. of the em-
  710
  ployed work force have average earnings of more than £100 a week? That is not a small, rich minority. It is almost one-quarter of the total number of working people now earning more than £5,000 a year, and the average industrial wage now runs at £70 a week.
  These are facts of life, and it is not only on those people that high direct taxes begin to bear. The high direct tax rate, starting at 35 per cent. plus national insurance contributions, begins to operate at less than half average industrial earnings. It is against that burden of high taxation that we protest.
  The aspect on which I focus attention is one the significance of which Government supporters do not realise. It is the extent to which, as one moves into the top end of the 35 per cent. rate and the 40 per cent. and higher bands, those burdens fall on the skilled workers and on middle and senior managers such as sales directors—the kind of people who travel the world—upon whom rests critically any chance of achieving the restoration of economic health.
  Today we hear that the trade balance is running at £360 million in the month, which is the highest for 10 months. Those people who work long hours, often without overtime, who take decisions affecting the prosperity of millions of working people and who help to create and maintain the jobs of millions of working people, are the people who are being constantly squeezed by the combination of inflation, increasingly progressive taxes and the unwillingness of the Labour Party to recognise what it does to them.
  One has only to look at what has happened to the real value of the take-home pay of skilled workers in the past four years. Skilled workers' take-home pay has been cut in real value by 10 per cent., that of middle managers by 20 per cent. and that of senior managers by almost one-third. Our economy and society cannot for long survive that kind of squeeze upon the people who play such a critical part in making it work. They have seen their post-tax differential between senior managers and manual workers just about halved in the past four years, from 8 to 1 to a figure quoted by the Financial Secretary the other day of 3·88 to 1—lower, he said, than in many economies such as that of Poland.
  Mr. Litterick: I take the right hon. and learned Gentleman's point about the squeezing of differentials. He will understand that we on this side of the House regard the squeezing of differentials as desirable in principle. Does not he agree, however, that when his party was in office during the first four years of the 1970s there was a widening of the differentials which, strangely enough, did not produce an economic revival? In fact, it ended in disaster. There was no benefit in widening the differentials for the economy as a whole. We had a disastrous collapse of the economy after the Conservative Party left office.
  Sir G. Howe: Sadly, the net post-tax differentials did not widen in those four years. We were trying to reduce the direct tax rate, and I fear that we did not go far enough in reducing top direct tax rates. One of the consequences of our incomes policy was to squeeze the pre-tax differentials, as this incomes policy is doing.
  For too long we have been seeing this squeezing of post-tax differentials. It is no wonder that the brain drain of the 1960s has been transformed into the talent trek of middle management in the 1970s. The figures speak for themselves, and we should not ignore them. In the past two years, half a million people have left our shores. Of the working men and women in that group, more than half have professional and technical qualifications and skills above the average—the very kind of people that we cannot afford to lose. If we go on deceiving ourselves that we can continue taxing people at ever-progressive and ever-tightening rates, we shall see the final disappearance of much of the talent which we need to create the jobs required to keep our working people employed and prosperous.
  Mr. Doug Hoyle: The right hon. and learned Gentleman quoted the figure of those with qualifications. Can he say how many of them were the middle managers about whom he is talking? What was the percentage?
  Sir G. Howe: I cannot give a percentage. All that I know, for example —and the literature is stuffed with examples—is that in January 1975 the number of managers on the Government's
  712
  own Professional and Executive Register seeking employment overseas was 9,000. In January 1976 that figure had trebled to 28,000.
  Mr. Litterick: That is as a result of unemployment.
  Sir G. Howe: There are many reasons. I did not expect to hear a Government supporter sitting below the Gangway explaining that people were leaving Britain under a Labour Government because of the high level of unemployment. That is, no doubt, one of the reasons, and it is an important insight. But Government supporters deceive themselves if they do not recognise that the other cause is the increasingly oppressive pattern of taxation on these people.
  I take one example which was quoted in evidence given to the Diamond Commission concerning ICI. A man responsible for managing an important subsidiary of ICI overseas came back to Britain on promotion to the pinnacle of his industrial career to the main board of ICI. As a result of coming back from the fiscal climate prevailing overseas, his reward for his promotion was a reduction in his post-tax take-home pay of exactly 50 per cent.
  Mr. Litterick: Quite right too.
  Sir G. Howe: The hon. Member for Birmingham, Selly Oak (Mr. Litterick) deceives himself more than I thought possible.
  Mr. Robert Hughes: Since the right hon. and learned Gentleman is making such great play of this individual's position, can he say from which country he came back?
  Sir G. Howe: It could be any one of our European competitors. There is almost no country in continental Europe—
  Mr. Robert Hughes: Which country?
  Sir G. Howe: He was working in a European country. If the hon. Gentleman wants another example, I will give him one—
  Mr. Robert Hughes: Which country?
  Sir G. Howe: A country in the European Community where the average levels

  713
  of taxation are far below those prevailing here and where the top rates of direct income taxation do not go—
  Mr. Robert Hughes: Ah!
  Sir G. Howe: —that is what we are talking about—do not go beyond 60 per cent. of earned income and 75 per cent. on investment income and where the lower rates are correspondingly lower. There is no country in the world where income tax starts to be paid at as high a figure—35p in the pound—as it does in Britain or in which it starts to be paid as low down the salary scale as it does in Britain. People below average pay, people on average pay and people above average pay in Britain now pay a higher rate of tax throughout, starting at a lower point throughout. These are the facts. If Government supporters do not understand that, they commit this country to a continuing outflow of the talent upon which our fuure depends.
  Mr. Ralph Howell: My right hon. and learned Friend is right to say that no other country has a higher starting point of taxation. Only four countries in the world have a higher top rate for taxation than Britain. They are Algeria, Tanzania, Portugal and Egypt. This is the sort of league that we have got ourselves into when Government supporters suggest that we should have even higher income tax rates.
  Mr. Robert Hughes: What is wrong with Tanzania?
  Sir G. Howe: Tanzania is struggling with one of the lowest incomes per head in the continent of Africa and is not finding it easy to break out of it in the context of a Socialist egalitarian economic environment.
  Mr. Litterick: That has nothing to do with taxation.
  Sir G. Howe: It has a certain amount to do with it. However, I prefer to confine my examples—and my instruction to Government supporters below the Gangway—to the Western industrialised countries, where it is unarguable that the highest prosperity has come to those where people are allowed to keep a higher proportion of their pay and where differentials are wider than in this country. So long as we go down the present Social-
  714
  ist road, so long shall we be destroying the jobs of our people.
  I give one example from a source for which Government supporters may have some respect. I refer to a letter which many hon. Members received on 17th June. It says that the British film industry is in danger of becoming a cottage industry as a result of the current tax provisions for foreign residents who have been in the country for more than nine out of 10 years. It goes on to explain that, because of the high level of taxes now being imposed on foreigners who come to work in Britain in the film industry, quite apart from those who live here, the British film industry is in danger of becoming a cottage industry. This is one of many documents produced by the General Secretary of the Association of Cinematograph, Television and Allied Technicians, Mr. Alan Sapper, who is certainly no Conservative.
  The same message emerges clearly from the report of the Committee on the Film Industry which was produced for the last Prime Minister. In that report Lady Falkender, Lord Ryder and others said that high direct taxes were causing much difficulty in and emigration from this country, and that high taxes represented a real threat to the film industry and to other industries as well. That is the reality of the situation.
  6.30 p.m.
  As long as we are governed by a party which is obsessed with the pursuit of equality and committed to the incomes policy approach as being essential in the conquest of inflation, we shall continue to march down the wrong road. As long as we are governed by a party which fails to recognise the importance of cutting public spending, not instantly and savagely but on a long sustained programme, we shall have to face high tax rates on all working people, particularly skilled workers and middle management. As long as we are governed by a party committed to a high public spending programme, we are running constantly into the danger of inflationary monetary policies.
  These truths are being driven home to Ministers. One has only to look at the banner headlines in the evening papers tonight to see that the Chancellor is trying to drive home to members of his

  715
  party the fact that high public spending is a proposition which will lead to disaster. High public spending means the continued threat of inflationary borrowing and a return to tear-away inflation. It means that we will never escape high direct taxes and there will be no chance whatever of restoring health to our economy.
  We must break away as soon as we can from this crippling, compressing, egalitarian tax policy. We must restore to office a Government with the capacity to cut public spending and to change the shape and burden of the tax system so that those with enterprise and talent will feel that it is well worth while working, taking risks and remaining in this country.
  Mr. Ron Thomas: Many of us on this side of the House are very concerned by the Government Amendments Nos. 3 and 5. We would have no hesitation in voting against Amendments Nos. 4, 6 and 7, and I must warn the Government that we intend to divide on Nos. 3 and 5.
  Mr. John MacGregor: Did the hon. Member say that he would have no hesitation in voting against Amendment No. 7? If so, I am sure he cannot fully understand it.
  Mr. Thomas: No—I am sorry, we will vote for Amendment No. 7. The right hon. and learned Member for Surrey, East (Sir G. Howe) has made many points about the differences in tax between Britain and other countries. Such comparisons are a nonsense unless one takes account of details of the social wage, facilities for education and hospitals and the rates of indirect taxation in other countries.
  In many European countries the level of VAT and other indirect taxes is far higher than it is in the United Kingdom. It is quite clear that there are a number of countries, including Sweden, where the total burden of taxation is higher than that prevailing in the United Kingdom. It is a question of balancing indirect taxation—the rates of VAT and other consumer taxes—with taxes on income and, indeed, on wealth, which we still hope for.
  Any tax on expenditure will hit the low-paid worker. It has been a continual theme of the Tory Party that taxes
  716
  on income should be reduced and that taxes on expenditure should be increased, because this hits the low-paid members of society. This is the position in certain Western European countries, and it is something which we as Socialists would reject. I have always believed that taxation should be based upon the ability to pay. Our present taxation system, in terms of income tax, goes only so far to meet that yardstick.
  We have a situation now in which a person on £1,600 a year who receives an increase of £1 a week will pay a marginal rate of tax of 35 per cent. on that £1 That situation goes right through to about £6,000 a year. In other words, someone on £30-plus a week who gets another £1 a week has to pay 35 per cent. on that £1, and someone who is on £120 a week and who receives another £1 a week also pays 35 per cent. tax on that £1.
  The wealthier members of society have bigger mortgages and insurances which help them to avoid tax, and also many other ways of avoiding tax. But what, in effect, is being asked by the Opposition in their amendment is that the 35 per cent. rate should apply to incomes up to almost £9,000 a year. I do not believe that it would be wrong to suggest that there are many people in the £4,000 to £7,000 a year bracket who receive sufficient mortgage and insurance allowances and other allowances of one kind and another to enable them, if the amendment were accepted, to be earning something like £9,000 a year in real terms and still to be paying only 35 per cent. as a marginal rate of income tax.
  As a long-term proposal, I would have liked to see the Government slowly moving towards a situation in which someone earning £1,600 a year would start paying income tax at a rate of about 5p in the pound and those in the next band, earning £200 more, paying about 10p in the pound. That system, which used to operate, was much nearer a system based on ability to pay. We no longer have that. Instead, we have a considerable taxable area in which the marginal rate is 35 per cent.
  While we on these benches welcome the fact that the tax threshold has been lifted, I do not accept the implied suggestion of my hon. Friend that we have

  717
  to add another £500 to this taxable band before which people pay more than 35 per cent. To leave the position as it is at the moment would mean that someone earning between £5,000 and £6,000 a year would still be paying only 35 per cent. on his marginal £1,000, £100 or £1—just the same as someone who is on £1,600 a year. I cannot accept that.
  The Budget Statement highlights the fact that when these thresholds are increased the wealthy come off best. In the documents issued after the Budget, it is shown that a married couple with two children, both under 11, and with income which is all earned will gain £87 a year if they are earning £2,000 a year, £268 if they are on £10,000 a year and £333 if they are on £25,000 a year. A worker on £2,000 a year, who has complied with the TUC's proposals and made all the sacrifices, will gain £1·50 a week. Someone on £25,000 a year will get nearly £6·50 a week. That is the iniquitous and unfair result of these proposals.
  The Minister said in the Red Book that the cost would be £103 million in a full year. The Tory amendment would add another £180 million a year. The Tories are always talking about the public sector borrowing requirement and the need to cut public expenditure, but when it comes to looking after their friends they are quite happy for the Government to spend another £180 million.
  We believe that the Government should leave the position unchanged. That would give them £103 million a year and, although I did not vote for my hon. Friends' new clause on war widows' pensions last night, the £5 million involved in that clause could be taken out of the £103 million. Sacrifices which our people are having to make could be reduced instead of our giving to those on higher incomes quite substantial tax rebates compared with those on low incomes.
  I intend to vote against Amendment No. 3.
  Mr. Gow: The debate has an air of unreality about it. It takes place when we are considering our taxation policies against an unprecedented Budget deficit. That is why my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) was right to point out that there
  718
  can be no consideration of a reduction in the revenue available to the Chancellor without a corresponding—and I would say a very much more than corresponding—reduction in public expenditure. The unreality surrounding the debate is of unprecented proportions. If the over-spending represented by the deficit of £12,000 million for the current year were financed honestly out of taxation instead of dishonestly by borrowing, the basic rate of tax would have to go up from 35p to 65p in the pound.
  Mr. Litterick: Will the hon. Gentleman explain to the House the inherent dishonesty of deficit financing, considering that it is standard fiscal practice throughout the developed world in the northern and southern hemispheres? The hon. Gentleman may think it wrong or inadvisable, but it is surely not dishonest.
  6.45 p.m.
  Mr. Gow: I am glad to have the chance to explain why I regard deficit financing, especially on this scale, as inherently dishonest.
  Where a corporation raises money by an issue of shares, loan stock or on a debenture, it does so, in almost every case, to finance capital expenditure and development plans. There would be something to be said for the Government financing their expenditure in the same way if the money being borrowed were used for investment purposes or if even part of the money were used to re-equip the nation and to invest in new plant and machinery. There would then be a case of borrowing on something like one-tenth of the present scale, but where the Government are borrowing, not in order to invest, but in order to maintain a false level of expenditure and consumption, that is dishonest.
  Mr. Robert Kilroy-Silk: The hon. Gentleman is surely not suggesting that investment means only money put into manufacturing industry? Would he not agree that it is investment to raise money, from borrowing or any other source, for public works and public expenditure on hospitals, schools and people? Surely that is investment? Is not some of the money the Government have spent on job creation, training and retraining also investment? The hon. Gentleman is getting rather obscure in

  719
  trying to tie down his definition of morally superior investment to that which goes exclusively to manufacting industry.
  Mr. Gow: Borrowing on this scale is borrowing in order to finance a level of consumption that is not being earned and it is, therefore, dishonest. We cannot go on at this level of expenditure, as the Chancellor of the Exchequer is painfully finding out. Hon. Members opposite are diverting me, and I must return to where I started.
  We cannot consider reductions in revenue without, at the same time, considering reductions in Government expenditure. Hon. Members opposite below the Gangway seem to contemplate the present rates of taxation with complete equanimity. I think they will reap a bitter harvest. The extent to which there is growing resentment among workers on average and below average wages at the present levels of taxation is now here appreciated, especially among hon. Members below the Gangway opposite. Unless there is to be a substantial reduction in public expenditure and taxation, the growing gulf between government and the governed will get wider still. Hon. Members opposite look incredulous.
  Mrs. Audrey Wise: My hon. Friends and I look incredulous at the idea that we should express anxiety about taxation at the lowest levels of income by lightening the taxation burden of those who are better off. We are incredulous at the hon. Gentleman's complete lack of logic.
  Mr. Gow: I shall deal with the hon. Lady's point a little later.
  Hon. Members opposite seem to believe that a basic rate of tax of 35p with the rapidly accelerating scale provided in Clause 24 of the Bill is no cause for concern, and that the present tax rates are perfectly acceptable, and even, if I understood the hon. Member for Bristol, North-West (Mr. Thomas) correctly, that the tax rates ought to be increased, particularly for those on above average earnings. I reject that proposition.
  The hon. Member for Coventry, South-West (Mrs. Wise) asked how it would be helpful to the majority to reduce the level of taxation on those with above
  720
  average earnings. We live in a rapidly shrinking world. The figures for the emigration of skilled people with managerial talents are due in substantial measure to the fact that tax rates in the United Kingdom are substantially higher than those of any country in Western Europe with the exceptions of Sweden and Portugal. That fact drives people away, not least now that we are members of the Community, to work overseas. The flight of talent from Britain is not to the advantage of those whose earnings are below the average. If the talented and skilled people in the higher income groups are driven from this country, that will be grievously damaging to the economy.
  The amendment is to be welcomed as it affords a small reduction in the rate of direct taxation. However, it should have been accompanied now—as it will be accompanied next week—by an announcement of a substantial reduction in public expenditure. I welcome the amendment. I also support it in the name of my hon. Friend the Member for Norfolk, South (Mr. MacGregor).
  We have seen a squeezing of differentials. There has been a massive, indeed vicious, assault on people whose earnings are above the average. Till we halt and reverse that trend there will be a continuing decline in the numbers of skilled and talented people. Those people are at present being driven out of Britain as a result of our taxation policies.
  Mrs. Wise: I was interested in the views expressed by the hon. Member for Eastbourne (Mr. Gow) on our skilled and talented people, whose concern for our country is apparently so tenuous that, in his words, they are driven out and are unwilling to devote their talents and skills—having been trained here, often at considerable expense—and have so little concern for this country that we must bribe them to remain here. I beg to differ from the hon. Gentleman. I believe that those with skills and talents have a concern for their native land. They do not need bribing to remain here.
  The hon. Gentleman's concern for these better-off and comfortably-off people in our society is in striking contrast to the attitude of the Opposition to the mineworkers, who are expected to work in unpleasant and dangerous conditions and whose endeavours to obtain good

  721
  remuneration for working in those conditions have never met with one iota of support from the Conservatives.
  The right hon. and learned Member for Surrey, East (Sir G. Howe) referred to "almost every citizen", but when he came to give his examples it was noticeable that he laid great stress on someone who was such an average citizen as to be on the main board of ICI. He also displayed great concern about film stars. Presumably he overlooked pop singers. Our economy will be in an even more dire state if our fiscal policies are directed to featherbedding film stars and pop singers. I should have thought that the people on the main board of ICI and those with qualifications, skills and talents were influenced by the fact that they had jobs of considerable inherent interest. I should have thought that it would not be unreasonable of us to expect them to gain a measure of feeling of reward from the job satisfaction which it is in their hands to create That is not so in the case of the average citizen.
  We find it useful that the Opposition should have expressed the essence of their concern for people earning about £8,000. Their attempts to cover that by a spurious concern for those earning about half the average wage simply do not hold water. It is useful to us to demonstrate the real interest of the Opposition. That, however, is not the heart of the real argument.
  I turn to my right hon. Friend the Chancellor's amendment. My hon. Friends and I would feel much happier if the thresholds for higher rates of taxation remained unchanged. We were concerned at the statement made by the Chancellor in his Budget speech, and this was taken up in the Budget debate by, for example, my hon. Friend the Member for Luton, West (Mr. Sedgemore) and my hon. Friend the Member for Chorley (Mr. Rodgers), who, unfortunately, did not receive answers to their points in the Budget debate.
  We do not understand why someone earning £8,000 needs an extra tax concession as opposed to someone earning £2,000 or £3,000. We simply fail to understand why it is proper at this time of economic stringency to devote £103 million to helping the better-off in our
  722
  society. I believe that the better-off would feel considerably happier knowing that we were devoting the £103 million to helping, for instance, disabled people, facilitating the allowance for disabled housewives, relieving family poverty in the direction of the Child Benefit Scheme, or spending £7 million on extending the mobility allowance to the blind. There are many worthy causes to which £103 million might be devoted.
  I may be starry-eyed or naïve. However, I believe that many people who are comfortably off would receive more pleasure from their comfort if they felt that we were helping disabled people. Perhaps I have a higher view of middle management and professional people than have the Opposition. I represent a considerable number of such people in my highly marginal constituency. My contact with them has shown me that they have a considerable concern for the worst-off. We do them an injustice if we assume the contrary.
  7.0 p.m.
  We were worried about this proposal in April. In his Budget speech my right hon. Friend the Chancellor made the point that he proposed to limit the value of fringe benefits through action on business cars. He said:
  "Nevertheless, the counterpart of action on fringe benefits must be some reduction in the income tax burden, particularly on middle managers in industry."—[Official Report, 6th April 1976; Vol. 909, c. 276.]
  There, when it was originally proposed this change in tax thresholds for higher rates was in part a quid pro quo for other changes which would have borne more hardly on people in those income bands. For reasons which satisfy the Chancellor and which I am in no way challenging, those proposals have been modified. It is not unreasonable to suggest that this proposal ought therefore to be notified. If an action has a counterpart and we modify the action, is it not reasonable to suggest that we should modify the counterpart? That is one change which has taken place since April.
  A further change is that the Government feel that it is necessary to give way to the urgings of sterling holders, international bankers and the Opposition to reduce public expenditure. In April we thought that that particular hurdle had been overcome for the time being. Now

  723
  we know differently. We are told that further stringency faces the nation.
  We are often asked: from where will the money come to maintain public expenditure, let alone to improve services? We are asked where the money will come from for such matters as helping war widows and others.
  We have here £103 million. I believe that it would be an earnest of the Government's good intentions in this matter if they felt it necessary to modify their original desire to give £103 million to the better-off in our society and to devote it instead to reducing the public sector borrowing requirement or to helping one or other of the worthy causes I have suggested. No doubt the Cabinet could greatly lengthen that list.
  If the Government do not do this—if they say that they have increased tax thresholds for everyone but that those earnings between £6,000 and £8,000 must have extra special concessions—they will be wrong. I do not think that their action will be understood or appreciated by their supporters in the country. We are entitled—indeed, we have a duty—to register a gentle protest.
  Price changes have been mentioned by Opposition Members, but price changes affect everyone. The Opposition lead us to believe that workers now earn £100-plus a week. The Opposition have the novel view that, because some employees of British Rail have travel concessions on the railway, that is equivalent to money in their pockets in the same way as wage earnings.
  Mr. MacGregor Mr. MacGregor rose—
  Sir Geoffrey Howe Sir Geoffrey Howe rose—
  Mr. MacGregor: I am sure that my right hon. and learned Friend and I are about to make the same point. It was not our view. It was the Government's view.
  Mrs. Wise: The Government modified their view because the point was made that a concession such as travel on the railway is not the same as money in the pocket.
  As a Coventry Member, I am well aware that trade union representations regarding company cars came not from trade unionists who are the happy
  724
  recipients of company cars—there are not so many of them—but from those who were afraid of losing their jobs producing cars for the better-off who have the company car perk. Trade union protests about compay cars did not reflect concern by people earning enormous amounts in the car industry, because earnings in that industry have been falling due to the ineptitude of the management of what until recently were private enterprise companies.
  Coventry workers felt impelled to support the perks of company directors to protect their own right to make motor cars. The Government have met these points, which have nothing to do with the claim that workers in general are earning £100 a week plus. They are not.
  I express my satisfaction that the Government will resist the blandishments of the Opposition. However, I reiterate the view that the Government are mistaken in devoting £103 million to helping those who are amongst the better-off in our society by giving double tax concessions. I urge the Government to think again and at least to modify this proposal.
  Mr. MacGregor: I should like to follow the hon. Member for Coventry, South-West (Mrs. Wise) in two respects and to make two comments before coming to the main theme that I wish to develop, which will in part be a reply to the hon. Lady.
  First, on benefits in kind, which are relevant to the amendment because many people will be affected, I have always expressed the view that I do nut like a system in which quite a lot of the rewards have to come in the form of benefits in kind. I should prefer to see a clearing up in this whole area, coupled with a much bigger attack on direct taxation. Resort to benefits in kind is the result of high levels of direct taxation
  When the Government started to attack benefits in kind—the hon. Lady should realise that this is what happened in Committee—they discovered that so many ordinary working people would be hit by the proposal, for example in respect of travel concessions, that they had to give way. They gave way not because of any ideological view about the beneficial effects of travel concessions for those

  725
  employed by British Rail or by the airlines but because the protests were so strong. They suddenly realised that 54,000 people, many of them on modest incomes, were being dragged into the net. That was the sole reason why the Government gave way. The debates on the benefits-in kind clauses showed up the hypocrisy of the attack that we were facing and explain why so many concessions have been made.
  The hon. Lady began her remarks by attacking us for saying that people in middle and senior management were considering seeking jobs abroad. Therefore, by implication, she was attacking their patriotism, particularly as their skills had been acquired in British educational establishments, and she considered that those skills and talents should be applied in this country. That was the effect of what the hon. I ady said.
  Mrs. Wise: I was denying imputations on their patriotism that were being made by hon. Gentlemen opposite. I was not conceding that at all. I was flattering in my references to the skilled and talented in our society.
  Mr. MacGregor: I am not aware that any hon. Member on this side of the House made any attack on the patriotism of those who had gone abroad to seek jobs. The hon. Lady and her hon. Friends must recognise that not everyone in this country is as highly politically motivated as they or we are. Many people do not make decisions in their lives for political reasons. They frequently put the interests of their families first. They put first what they regard as decent rewards for the skills and qualifications that they have acquired over many years of sacrifice. We must take account of the practical fact that many more people are now considering going abroad because they do not believe that they get fair rewards in this country. We cannot criticise them for having a different view of life and what they are in life for from that of the hon. Lady and her hon. Friends or of us.
  In a highly mobile Western economy, it is natural that skilled people will frequently get and take offers. It is not an argument to be put against them and it will not work as an argument in a practical sense. The only logical conclusion from the hon. Lady's point of
  726
  view is to prevent people going abroad in the first place. I am sure she would not wish to do that. However, we must take account of the fact that many people are going abroad and that many more are thinking of doing so.
  We on this side of the House have been attacked for putting forward the amendment dealing with this group of wage earners, but many of my hon. Friends have made numerous speeches in the House, in their constituencies and elsewhere about the problem of taxation on the average wage earner and the lower-paid. It is something about which I feel extremely deeply. It is absolute nonsense that the tax thresholds start as low as they do.
  We had many expressions of this view last night concerning war widows. For the average wage earner, the effective tax rate is now 41p in the pound for every extra pound he earns. That explains why so many are looking for ways of avoiding tax, why so much moonlighting is going on and why many will not take on extra responsibilities. I believe that there is massive resentment throughout the country in relation to both these groups of wage earners.
  As Members of Parliament we frequently get representations from our constituents either in letters, or at meetings and interviews at surgeries about this situation. I think it is indefensible. Unfortunately, the practical effect is that it is extremely expensive to tackle the problem on the scale that is required. We all know that public expenditure has to be brought under control and that it will not be possible properly to tackle the problem with the solutions we seek. But Labour Members must recognise that when we talk about high rates of tax and high tax levels we are talking about the thresholds at which tax begins, which results in high tax rates throughout the system.
  The point of the amendment is simply to air a separate problem, and there is every justification for doing so. But because we do so does not mean that we are not equally concerned—perhaps more concerned—about the other groups of wage earners.
  It so happens that in respect of this particular group it does not cost as much to try to make some changes in the tax

  727
  system because there are fewer of them. It is right to discuss this group. My amendment is a gesture amendment. For public expenditure reasons I would not seek to press it to a Division. I put it down as a gesture amendment because among managements throughout the country there is strong feeling, which is growing month by month, that the position they are in is simply not recognised by this House. I happen to believe that that is not true. More and more of us are becoming concerned about their position, but because so many of the noises which come from this House are concerned with other groups, and because it has become popular to attack this group of people, not only in speeches but in Government proposals, they feel that their position is not being recognised.
  This debate is highly justified and very important. I know that there will be many hon. Members on the Government side of the House who will never agree with us. I accept that there is an enormous ideological difference. I personally am not an egalitarian in respect of income matters. I am much more concerned to see more of our people able to earn more for themselves and to acquire a little bit of savings and capital beyond the owner-occupation of their own house, which, of course, I widely welcome. I am much more concerned to see that people who acquire extra qualifications, without any private income or capital of their own to start with, are given some rewards for their efforts. I want to see them given extra rewards for their responsibilities.
  I know that many Labour Members will not agree with me. They ought to recognise some of the practical implications of the situation we are now facing as regards middle management. I welcome what the Government are doing in their amendment as a small step back to what the position was when they first came to office, not even taking into account the necessary indexation that there should have been in the thresholds of the higher starting rates of pay. The amendment does not go far enough. It is becoming more and more recognised in this House that more needs to be done.
  7.15 p.m.
  I shall refer briefly to the Diamond Report and to some of the general argu-
  728
  ments and statistics contained in it. It pointed out that
  "salaries after tax at constant prices had fallen between July 1969 and July 1975 by 17 per cent. at the £10,000 a year level and 25 per cent. at the £20,000 a year level, most of this decline occurring in the last two years."
  Hon. Members opposite may say that we need not worry about people on salary levels of that sort. I do not agree with them. I believe that they are often the people on whom our economic performance will most depend, and it is important that we attract the best ones to the best jobs.
  The report also graphically demonstrates in Table G2 a point which some of my hon. Friends made earlier in regard to tax rates and social security contributions. I fully accept that social security contributions have to be included because of the differences in European practices in the balance between direct taxation and social security contributions. The table in the Diamond Report demonstrated quite clearly that at the higher salary levels we in the United Kingdom, taking income tax and social security together, are way out of line with every other Western and developed nation except Sweden, and that at the £10,000 a year level we are about on a par with the Netherlands.
  Mr. Ron Thomas: May I remind the hon. Gentleman that the Diamond Report does not take into account the considerable increase in all kinds of tax allowances like the £1,000 million given in respect of mortgages, many of them on high-price properties? The price index is based on Mr. Average and, clearly, the standard of living of those who are above the average has fallen less than that of those who are at about and below the average. If we look at the way in which the Retail Price Index is weighted, we see this very point clearly. There has been a considerable increase away from indirect taxation, which has helped the wealthy in our society, and towards direct taxation.
  Mr. MacGregor: I find the hon. Gentleman's last point very strange when he argues that the switch away from indirect to direct taxation necessarily helps the wealthy. If that is what the hon. Gentleman believes, he must be

  729
  extremely critical of all that his Government have done in the last two years.
  On the general point, of course, I accept that there will be differences in the position of individual taxpayers. That is inevitably correct. But one has to take into account that in many cases many of the allowances, as the hon. Gentleman will know, have been much curtailed in the last two years. But none of this, nor indeed the point he made about the difference in prices and, therefore, in consumer expenditure between different income groups, applies to the international comparison in the Diamond Report, which did all that it could to get a comparison on a fair basis. I do not wish to rest my case on statistics. However, the Diamond Commission, which was set up to provide the facts, has proved clearly what has started to happen to middle and senior management.
  The point I want to make about inflation is that the figures in the Diamond Report are more than a year out of date and that much of the effect on middle and senior management has taken place in the period since the commission reported, first because of the freeze and the cut-off point of £8,500 and, secondly, because inflation has been much more severe in the subsequent period. Therefore, the figures given originally in the Diamond Report now need to be magnified.
  Why does it matter? Why is it serious that there has been this fairly heavy attack on middle and senior management? I want to look at some of the practical effects. I made a number of interventions on this point during Second Reading, and as a result I received a lot of correspondence and I have been contacted by a lot of companies. This attack is having a severe effect on the morale of management. Many managers are beginning to think more about how they can simply hold on to living standards than about getting on with the job. Senior company executives are having to spend more and more time trying to deal with this problem instead of getting on with other aspects of managing their companies.
  I should like to quote some of the companies by which this has been said in the last three weeks. Their senior managers have said that the trend has increased in the last year and is getting worse by the month. They include ICI, Unilever, Dun-
  730
  lop—that company has said it publicly—British Petroleum, Marks—
  Mr. Litterick: Lonrho.
  Mr. MacGregor: The hon. Gentleman keeps trotting out that name, but he should recognize—
  Mr. Litterick: The hon. Member does not like it.
  Mr. MacGregor: I am talking about a highly serious problem, which the hon. Gentleman should take on board as well, for the large companies which are making a major contribution to the British economy, not only in creating jobs but in exports. ICI, Unilever, Dunlop, British Petroleum, Marks and Spencer, GEC and many others are all now so worried that they are starting to make public statements.
  The Chairman of ICI said recently in the annual report:
  "Because it is no longer possible in the UK to ensure adequate reward for dedicated management effort, for creative commercial skill or for scientific innovation, the Company is finding it increasingly difficult to transfer staff from overseas to take up senior management posts in the UK."
  That can be mirrored by many other companies. The Chairman of Unilever was forced this year to make the same point.
  The Chairman of Marks and Spencer said last month:
  "For the first time in my forty years with Marks and Spencer, capable people are asking what reward will they get for accepting more responsibility."
  The Chairman of Dunlop said recently at his annual meeting:
  "Last year no employee in the United Kingdom received a net take home pay in excess of £10,000 a year though this figure was surpassed by 240 overseas employees."
  Later he said:
  "Marginal rates of taxation in Britain have eroded net income to this extent. Our differentials and hence our incentives have been markedly reduced compared with those existing in the United States, Germany and France."
  There are many more examples. Because of their problems and pressures, companies have been forced to state the facts publicly. So there is the effect on management morale.
  There is also the effect on responsibility. I have heard of middle and

  731
  senior managers refusing promotion not only because it involved coming back to this country—that is a separate problem—but when it meant merely going to another part of the United Kingdom to take on a more important job. After working out the effect on their net take-home pay, they have decided that the extra responsibilities are simply not worth the candle. This applies in the public as well as the private sector. [Laughter.] If the hon. Member for Birmingham, Perry Barr (Mr. Rooker) does not believe me, I can tell him of managers who have told me exactly that.
  I heard the other day of an engineer in his mid-forties, highly qualified, who suffered a severe heart attack and is now doing a physically gentle job. Previously, he frequently had to go out in the middle of the night to attend to breakdowns and so on. He is now a storekeeper. I do not comment on the importance of his present job, but he can no longer exercise his previous skills. The astonishing thing is that not only is he better off in take-home pay but he has no responsibilities as he had previously when he was running a department. He gets paid overtime, whereas before when he went out in the middle of the night he got nothing extra. He says "At the end of the day, I go home and I do not worry. I am beginning to wonder what I was doing in the first place."
  There are also the difficulties of attracting people back, within their companies to the United Kingdom. I am thinking not only of the ICI director who comes back from a job in Europe. This is happening to many younger people who are now given junior and senior management positions overseas to gain experience. When they are asked to come back to take up the job for which they have been groomed, they say that it is not worth it.
  The other reason why the statistics to date, worrying though they are, do not show what is about to happen is that more and more this is happening to those who are just coming out of university with accountancy qualifications and so on. The very young are now beginning to take careers abroad, especially if they have no family responsibilities. If those people go and do not come back, the
  732
  British economy and British companies will suffer.
  If Labour Members think that this is special pleading, I beg them to think of the practical implications of the present squeeze on middle and senior management. Everyone will be worse off if we lose these people. The same is beginning to happen in professions like medicine, Whatever the ideological objectives of Labour Members, what the Government are doing is highly justified but does not go far enough. The problem will still have to be tackled in a major way when the economic situation and public expenditure cuts allow some leeway to deal with it.
  Mr. Litterick: I ask the Government to withdraw Amendments Nos. 3 and 5. They are ill advised. I think the Government now wish that they could withdraw them, for the fairly brutal reason that they need the money. That appears to have been the burden of most of their arguments during the last week or so. A certain loss was suffered last night. The £103 million involved in these amendments would come in handy not only to cover that damage but, perhaps, to make restitution to ordinary families whose expectations of the child benefit scheme have been disappointed. The sum of £100 million, together with the existing £1 a week that is promised, would go a long way to meet the financial commitment of introducing such a scheme at a rate of £2·50 or £2·60 per child.
  It is therefore all the more puzzling that the Government should make this concession to this group. Despite what the right hon. and learned Member for Surrey, East (Sir G. Howe) said, we are talking about a relatively small proportion of the population. While statistics were being bandied around, no one pointed out that they related to male earnings. One-third of the working population are women, with average earnings of £34 or £35 a week. They are therefore even further than their male counterparts from the £95 gross on which the Government wish to make a concession. Those who do not make that much are in the vast majority.
  The right hon. and learned Gentleman sought to convince us that this was a hugely significant proportion of the working population when in fact it is a

  733
  minority. Also, he was talking only about the employed population. As I recollect, there are about 10 million pensioners of various sorts who do not figure in the income levels of average female or male incomes, and certainly not in the realms of fantasy that the right hon. and learned Member for Surrey, East spoke about. They are at subsistence level. They are the people who are under the greatest pressure in the inflationary circumstances in which we find ourselves.
  7.30 p.m.
  I am sure that it is evident to every hon. Member that those who have been asked to make the most significant sacrifices are on lower income levels. They have been asked to forgo the wage increases that in many cases their bargaining strength would have won them in unfettered negotiation, but they, like everyone else, have to endure the consequences of inflation. Those who represent them have actually negotiated a significant reduction in their real incomes, in gross terms, for the second year in succession. However, we find that the higher income groups making £4,500 plus are not only given the same concession as everyone else, by the raising of the tax threshold, and the same concession in terms of the Child Allowances changes, but are being offered an additional concession that will not be given to the vast majority of those who work for their living, or those who live on pension.
  Those who are on higher income levels are being offered the third concession that is contained in Clause 30, namely, increased tax relief on insurance premiums. Not only are such people in the more expensive insurance premium market; because of higher tax rates they receive more valuable tax relief. In other words, they are receiving additional benefit. Given the high level of interest rates, it is obvious that their housing subsidies are enormous. Comparing family with family, their subsidies must be enormous in contrast to anything that is offered by local authorities to working-class families. My own subsidy is between £6 and £7 a week, but by middle-class standards that is modest. Huge and valuable concessions are already made to higher-income families. That makes this additional concession much less easy to justify. I suggest to the Government that that is an additional reason to think
  734
  again, hearing in mind our already tight circumstances.
  We sympathise with the Government that so many demands are being made to them not to press too hard on this or that group, or to make a concession to various needy groups, but we are not talking about a needy group when we refer to those who are earning gross wages of £4,500 a year or more.
  Mr. J. W. Rooker: Perhaps my hon. Friend will comment on the fact that the very people who negotiated the agreement with the Government—namely, the leaders of the TUC—are all earning more than £90 a week, the £4,500 cut-off point. In many cases they are earning twice as much.
  Mr. Litteriek: Yes. My hon. Friend has made a helpful intervention. In another debate I made the same point in slightly different terms, when I referred to the character of the general council members who negotiated the agreement. I hope that my hon. Friend will agree that the members of the CBI with whom the Government had talks were even more gotesquely unrepresentative of the community than were the members of the General Council of the TUC.
  We can all reasonably wonder what sort of helpful advice, in terms of the interests of the average working family, came from the CBI. I imagine that my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) will agree that it was probably the sort of advice that we have had from the Opposition this evening.
  It is noticeable in these debates that, by implication, the Opposition would have everyone believe that it is possible to do away with taxes. I have been a local government representative and I have heard the same tale trundled out by Tories at that level. They have said that if only the people would elect them they would get rid of or reduce taxes. They attempt to persuade the people that roads, schools and hospitals, for example, could all be had for nothing if only they would elect the Tory Party to office either locally or nationally.
  We all know that there has never been a time in history, in any country in the world, when taxes have been popular. Everyone objects, at least superficially, to paying taxes. However, few responsible

  735
  and mature citizens fail to understand that social provisions have to be paid for socially. To the extent that we provide goods and services for one another by social means, we must pre-empt the incomes of the individuals who make up society. Mature people understand that. They are not to be fooled by airy talk to the effect that if only we could cut taxes everything would be so much better.
  The comparisons that are made by Opposition Members are misleading. Of course, they are designed to be misleading. That is the point of the arguments of those hon. Members. For example, they do not mention the incredibly high level of indirect taxation in most European countries. They do not mention the unbelievable expense of medical treatment for the individual family in the United States or in other countries that do not have State-sponsored or State-organised social insurance schemes. They do not like to talk about such matters. They want people to believe that those services can be had for nothing. The fact is that they cannot.
  Only recently a member of my family had occasion to take his child to a doctor in France. He was asked for money before the doctor would even look at the child, who was suffering from a minor illness. The parent had to fork out a large sum. In the United States the situation is even more brutally shocking. The United States is a country that has probably the most wealthy medical profession in the world, but it has one of the least efficient medical systems in the developed world. It does not know how to run the business of preventive medicine or curative medicine. However, all members of the medical profession are wealthy. According to the Opposition, when individuals are wealthy, or have the prospect of becoming wealthy, they are all efficient, but life does not work in that way, and never has. That prospect tends to bring to the fore the least admirable members of society —those who are motivated by money and nothing else.
  It is fortunate that we have a sufficiency of independent and educated people, who know that they must pay their taxes, that there is more to a standard of living than merely the price tag on a job, and that the quality of life in any country is made up of a compound of many factors, one of which is the sort of
  736
  sacrifice that has to be made for social benefits. They do not apply the narrow, mean and grubby interpretation of human motivation that characterises the speeches of Opposition Members.
  The concession that is being offered to the higher income groups is unwise. It will be seen by those on lower incomes as a gratuitous concession to a vociferous group that does not need yet another concession of this type in these times. It will inevitably make lower-income families feel that the Government expect them to be loyal, because they have always been Labour voters, while they woo an income group that has more leverage and is more articulate—a group that is heavily represented on the Opposition benches.
  Mr. Cecil Parkinson: The Left-wing Tribune Group Members never cease to amaze me—
  Mr. Litterick: We are never boring.
  Mr. Parkinson: I agree that the hon. Member for Birmingham, Selly Oak (Mr. Litterick) is never boring, but he does not do my blood pressure much good. I hope that I shall not improve his.
  We now have another demand to add to the Left-wing list—namely, insurance. Time after time this evening we have heard talk about the insurance policies that are being taken out by the crafty middle class and middle management.
  I am sure that the hon. Gentleman accepts that savings are important in a society. For this Government, overspending by £1,000 million a month, they are especially important. After all, someone has to buy the gilt-edged shares and find the public sector borrowing requirement. Middle-class people who are taking out insurance policies are, in their own misguided way, helping the Government to carry on with their job of wrecking and transforming our society. I sometimes think that a savings strike might be a sensible way for members of the middle class to hit back, but they are not put off; they continue to save and will continue to do so. Their savings, far from being anti-social, are very important. If Labour Members do not believe me, I am sure that the Financial Secretary will confirm what I say about the importance of savings—and I hope that he will deny that he shares the view

  737
  of his hon. Friends that insurance policies are anti-social.
  What I find particularly hard to take is the way in which members of the Tribune Group—this is a particular hobby-horse of the hon. Member for Coventry, South-West (Mrs. Wise)—talk about people who earn £6,000 a year as if they were people they only read about, had no personal knowledge of and never bumped into. They are talking about themselves. The one thing that the hon. Member for Coventry, South-West and I have in common is that we both earn about £6,000 a year. Every Member of the Tribune Group is in that bracket. The sooner they stop talking of people like themselves as not wealthy people, and giving the impression that wealthy people are the people they read about and not people like themselves, the better.
  What puzzles me more than anything is where they get their ideas from. Whom do they talk to? Where do they find this rubbish, which they push at us night after night? If they went to any factory in their constituency and asked middle management, senior foremen, works managers and production managers whether high taxation had a disincentive effect, there would be no doubt about the message they would receive. They would be told quite clearly "Yes, it has."
  A person who is asked to move 100 miles away to another branch and to take promotion with a salary increase will say that by the time he has paid the tax it is not worth it. I am not talking about the occupants of boardrooms in the City, I am talking about the people at the sharp end, in shops and factories. They have no doubt that they are being discouraged by the level of taxation.
  Day after day we hear from trade union leaders about the need to restore differentials. The most damaging aspect of the pay policy is that it is eroding differentials. Differentials are differences in salary which recognise skill and responsibility. Trade union leaders have no doubt that some jobs carry more responsibility than others, and are worth more than others.
  When we talk about the need to restore differentials, about the erosion of
  738
  the difference between skilled and unskilled workers and of the difference between middle and senior management and workers on the shop floor, we are told by Labour Members that we speak for a tiny section of our friends. But the trade unions say that in every industrial society, skill, responsibility and effort must be rewarded. When Jack Jones says that Labour Members nod wisely, but when we say it they accuse us of preaching the class war and looking after the interests of our supporters. We are simply telling them what anybody in his right mind knows, that people will not take on additional responsibility unless it is rewarded, and will be discouraged from putting in a major effort when there is nothing in it for themselves as well as for the State.
  7.45 p.m.
  Mr. Joe Gormley, in a revealing speech at the National Union of Mineworkers' conference, had no doubt about the disincentive effect of high taxation. He told the lads that behind closed doors he had been getting for them benefits in kind, on which they would not have to pay tax. He recognised that rewards on which tax has to be paid are less attractive than rewards on which tax does not have to be paid. That was his way of saying that tax has a disincentive effect. Joe Gormley also said that when the value of money goes down the real value of benefits goes up. I wish that we could organise a teach-in in the Parliamentary Labour Party and get Joe Gormley to repeat 10 times his speech on fringe benefits.
  Joe Gormley knows that many of his members are moving into higher tax brackets and that that is beginning to put them off. He knows that telling his men that he has gained them £1,000 a year is as nothing compared with telling them that he has gained an extra-statutory tax-free concession for them.
  Sir G. Howe: He has got the union to pay his rates for him.
  Mr. Parkinson: Yes, he wisely chose to have his rates paid rather than have the extra £6. He knows the basic lesson of high taxes being a disincentive. If people are given an increase and it is taken away from them in tax, they will not be given the encouragement they need to make the extra effort.

  739
  No one—trade union leader, business leader, or man in the street—has any doubt about the disincentive effect of high taxation, but tonight, as on every previous occasion when the subject has come up, the Members of the Tribune Group reiterate their nonsensical notions about the creation of their version of a more fair society.
  The group of amendments that we are discussing—
  Mr. Deputy Speaker (Sir Meyer Galpern): Order. I am glad that the hon. Member for Hertfordshire, South (Mr. Parkinson) is getting down to what we are discussing. During his eight-minute speech I have not heard one reference to any of the amendments.
  Mr. Parkinson: I have a certain amount of difficulty in explaining myself, and I have perhaps not been so successful with you, Mr. Deputy Speaker, as I have been with some of my hon. Friends.
  Mr. Deputy Speaker: Order. The hon. Gentleman has not the least difficulty in expressing himself; it is just that his remarks are not relevant.
  Mr. Parkinson: If you would like me to go back over the last eight minutes, Mr. Deputy Speaker, and demonstrate how I have been keeping closely to the subject, I should be happy to repeat what I have been saying for your benefit.
  We are considering whether tax allowances need to be raised. The argument that has been put forward against raising allowances is that high taxes have no disincentive effect. My remarks are an argument against that point of view and in favour of raising the allowances, thereby reducing the taxes that people will pay.
  I move on to the group of people who are the subject of the amendment. They have had their differentials squeezed. The Chancellor promised to squeeze the rich, but he has, in fact, been squeezing the differentials of middle management and the middle income groups.
  In the White Paper on pay, the Government said that they wanted to create a strong economy and a fairer society. If the Government mean what they say about creating a fairer society, they should invite the House to accept the
  740
  amendments. They should admit, as the trade unions admit, that differentials are important. They should admit that the group of people who will be helped by the amendments are those who have had their differentials squeezed. They should admit that many have had their wages and salaries effectively frozen for the last two years and their real standard of living savagely reduced. The arguments in favour of the amendments are many and strong. I have touched upon a few and, in response to your hint, Mr. Deputy Speaker, I shall not refer to the others.
  One of the particularly galling features of the Government's policy and one of the particularly hard things for middle management—and others for whom we speak—to take, is not only that they have been squeezed and over-taxed but that the tax has been used to undermine the kind of society in which they want to live. Many people would not mind paying such high tax if they felt that the Government were capable of using it wisely. We have seen money squandered and wasted. The added disincentive is that we are paying over record amounts of tax to the Government, who are using it to undermine the society about which we care.
  It is important that the Government amendments be accepted. They do not go far enough, but they are a start. We shall continue to press and argue with them until they finally admit that high tax rates have a major disincentive effect and that the people who are being most discouraged are those who comprise the most vital group in our society.
  Mr. Rooker: The amendments should not be accepted. I make no bones about that. I am for the rate for the job, not for perks. If a worker wants a car he must pay for it out of his salary, and that salary should be sufficient to pay for such extras.
  For my sins, I used to be the production manager of a fairly large factory. If I were still there I would be earning twice as much as I earn today. I considered that I was getting the rate for the job and I believe that the person doing that job today gets the rate for the job. I do not accept that differentials are sacrosanct and should be perpetuated. Nobody wrote down those differentials. They were usually achieved by group

  741
  bargaining power, which was often at the expense of the low-paid.
  We are being asked by the Government to give tax relief—extra money—to the better-off in our society. We are being asked to give extra money to those being paid £90 a week. No one can deny that a person earning £90 is among the better paid. I was recently told in a Written Answer that 68 per cent. of adult male workers earned less than the average wage for adult male workers. That average wage is considerably less than £90 a week. I was told that 76 per cent. of adult female workers earned less than the average wage for female workers, which is also considerably less than £90 a week.
  Mr. George Cunningham: Is my hon. Friend assuming that, as the law stands at the moment, a person earning £90 a week will start to pay the higher rate of tax? That is not the case. A person has to receive £4,500 a year taxable income to start paying the higher rate of tax. A married man with two children, an insurance policy, a mortgage and a small deduction for retirement would normally be earning £7,000 a year before paying the higher rate of tax.
  Mr. Rooker: My hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) has helped me make my point. Let us take the example of an average Member of Parliament who does not earn much outside apart from a few hundred pounds in broadcasting fees. He may be earning £6,500 a year. If he had a mortgage and one or two children, he might only just come into the tax threshold. The figure we are talking about is considerably higher than £90 a week.
  About 68 per cent. of the population earn less than the average adult male wage of about £65 a week. That is worse than the figures in the Finance Bill purport to show. The position is worse than I have stated. That is all the more reason for opposing the Government tonight in their effort to give more money to the better paid.
  Last year, the inspectors of wages council industries had to cajole and threaten employers to pay back £500,000 in wages to 15,000 workers earning £30 a week gross. They are considerably
  742
  worse off than the people about whom we are talking tonight. I do not accept that those people are hard done by. I do not see why they should not be prepared to shoulder the tax burden laid down by Parliament last year and in previous years or why they should not pay back the tax. They are getting the rate for the job. If they are not, something is wrong.
  Government interference in collective bargaining and wage policies have made nonsense of the levels of salary of many people. I do not object to someone earning £10,000 a year, provided that he earns it and is not just making it by sitting and speculating. Such people should be prepared to pay more tax. If hon. Members visit factories in their constituencies, it will be clear to them that people object in the main to the fact that the Government restrict the level of their gross earnings. They will say that they pay too much tax, but that is a smokescreen.
  People do not complain about the 40 per cent. or 45 per cent. tax bands contained in Clause 24, but we have to consider whether we should give them more money in 1976. I do not accept that we should. The Government will give away £103 million by their amendment. Last night the House passed a new clause worth, at the most, £10 million, although some of us thought that the figure was nearer £4½ million. By opposing the Government's amendment tonight, hon. Members could get back the money to pay for last night's "misdemeanours".
  We should not take lightly the agreement made outside the House between the Government and the TUC. I agree that the TUC and trade unions should be involved in the central arrangement of the economy, but I do not accept that we should have no say in the discussions. The only way in which we can have a say is to debate and amend Government proposals in the Bill.
  I cannot see why people should earn £90 or up to £100 or £130 a week before they have to pay 40 per cent. tax on their income. Such people should not be upset or complain about being hard done by. They may be doing an efficient and good job, but generally they do not even know of the existence of people

  743
  earning £35 a week or less—people earning below supplementary benefit rates for a 40-hour week and on which they are taxed. We should not support the Government. If my hon. Friends wish to press the issue to a Division, they may rely on my support in the Lobby.
  The Government must give practical reasons for their proposals, bearing in mind the public expenditure cuts of £1,000 million that are to come in the next few weeks. Ten per cent. of that sum could be saved tonight by withdrawing the Government amendments. Although it may seem a small amount, it is the sort of issue on which we should divide the House. In the next few weeks my right hon. and hon. Friends at the Treasury will talk about there being less money for schools, roads and housing when they will have given away money to people with gross salaries of £140 a week and more. They want us to allow that to be done "on the nod". I am not prepared to accept it. Therefore we should have a Division.
  8.0 p.m.
  Mr. John Wakeham: The Budget seems a long time ago, but we must recall how we reached the present situation of dealing with Government amendments that represent the Chancellor's original tax plans. There are lessons to be learnt from the situation.
  When I heard the Chancellor of the Exchequer announce his proposal for conditional arrangements, with the tax provisions to follow successful negotiations on wages, my first reaction was that it was a constitutional outrage and nightmare, but, having thought about it, I have changed my mind. The Prime Minister seems happy these days to announce that he has changed his mind on important matters, so I feel no inhibitions about saying that I have changed mine, in view of the state of the economy.
  We must carefully consider any proposals that will work. If the Chancellor's proposed method has had one good effect, it is that it has made the vast majority of people realise that the real value of their pay is its take-home value, after taxation, rather than its gross value.
  To some extent there has been a failure in the way in which the proposals
  744
  were presented. The point originally made by my right hon. Friend the Member for Sidcup (Mr. Heath) needs an answer. By announcing that they would move the amendments on Report, the Government seemed to play into the hands of the TUC. That is how the matter looked overseas. Anyone who was overseas after the Budget will know that many commentators and others who scrutinise our economic affairs considered that there was a danger in this method.
  The Government might have said "This is what we propose to do, but if we cannot reach a satisfactory agreement we shall introduce amendments on Report to increase taxation." That may seem a small difference, but the psychological effect is important and should not be overlooked.
  The fall in the value of the pound since the Budget has removed all the value of the tax reliefs, because of the resulting rise in retail prices.
  Although I no longer feel the same disapproval of the Government's method of dealing with the situation, I believe that they could have handled it better. If their method is to become anything like regular practice, we must carefully consider the implications and their way of handling the situation, and see that we handle it better in the future.
  Mr. Robert Sheldon: We have had a lengthy debate, with a polarisation of the argument between the two sides of the House. My hon. Friends the Members for Bristol, North-West (Mr. Thomas), Coventry, South-West (Mrs. Wise), Birmingham, Selly Oak (Mr. Litterick) and Birmingham, Perry Barr (Mr. Rooker) argued for further sacrifices by the better-off. They said that we should not make the proposed changes which would offset some of the disadvantages that the better-off have suffered over the past year or two. The hon. Members for Eastbourne (Mr. Gow), Norfolk, South (Mr. MacGregor) and Hertfordshire, South (Mr. Parkinson) concentrated on the effect of the erosion of differentials.
  We on the Government side of the House believe in a progressive but fair tax system. My hon. Friend the Member for Perry Barr did the House a service when he said that he was strongly in favour of the rate for the job. When he spoke about what differentials should be,

  745
  he went to the heart of the matter. It concerns the ratio between the incomes of the various strands of our community—the people who make up the economic strength of our managerial and working population.
  "Who gets what?" is the basic question that must be asked by any Socialist or anyone else who is interested in these matters. The figures that I have quoted remain the best guide that I have been able to obtain. Over the past year or so there has been a compression of differentials. Taking into account life assurance, mortgage relief, and such matters, where there are wide differences between the allowances that different people may have, we find that the post-tax earnings ratio between the man at the top and the person on average industrial earnings is probably about 4 to 1.
  I do not think that those of us who give thought to the kind of society we wish to see ever envisaged a situation in which the difference between the after-tax earnings of a person in charge of a large industrial or non-industrial organisation and those of the average male industrial worker would be of that order. Nobody can say what the ideal is, but we must appreciate that ours is one of the closest ratios in the whole world, including the East. What have we done in the Bill? We have brought about the changes I have described in the higher rate. The result is not to widen the ratio but to maintain it.
  We have to accept, among the various sacrifices that people are being asked to make, the existence of the sacrifice of those people who suffer compression of differentials in the way that has been described. A number of people have accepted obligations and liabilities. Mention has been made of those people who have most to gain by a reduction in inflation levels, which is the centre-piece of the Government's economic strategy. It may not be possible for some people to obtain an improvement in their standard of living at a time when sacrifices are being called for all round. This is nothing new. At all times in our history when we have faced crises, the sacrifices have been greatest among those who are best able to bear them.
  I must tell my Labour Back-Bench colleagues that the TUC accepted our
  746
  arguments; indeed, they were part of the package. The TUC Economic Review said:
  "Any adjustment in higher rate tax bands to take account of inflation should narrow the width of the bands without moving the level of the top bands."
  That is what we have done.
  I accept that matters may be difficult for those on higher rates of pay, but we believe that this is the proper way to proceed. We think that we have produced amendments that will satisfy the aspirations and responsibilities of these people, and I ask the House to support our proposals.
  Sir Geoffrey Howe: With the leave of the House, I should like to make plain the way in which I shall invite my hon. Friends to vote on these proposals.
  At the outset I wish to make it clear that we shall be voting against the Government on Amendment No. 7 as a matter of principle rather than as a matter of money. We are convinced that the continuing compression of differentials makes the top rates of tax much too high, and that this is unacceptable.
  We gather that Labour Members below the Gangway will divide against the Government on Amendments Nos. 3 and 5. On those amendments I shall invite my right hon. and hon. Friends to join me in voting with the Government against hon. Members below the Gangway who, astonishingly enough, are determined to increase the burden of taxes even on those who are just on or above average industrial earnings.
  The polarisation is not, as the Minister said, between the Left and the Opposition; it is more complex than that. The Government are egalitarian at heart, but do not recognise the case that we have made—namely, that our present tax system is intolerable because it cripples the talents and skills of our nation.
  The Government do not recognise that situation, but at least they have the wisdom to recognise that their hon. Friends below the Gangway are even more foolish than they are. The Government are foolish, but are not quite as foolish as those who sometimes support them but who, on this occasion, will vote against them. We believe that if this country is not prosperous, we shall not

  747
  be able to do all the things that we want to do—for example, help the disabled, the blind, the widows and the sick, or alleviate unemployment. Therefore, we must restore the wealth-creating capacity of our country. But we shall not do so if we continue with a vindictive egalitarian tax structure that will drive away from our shores those with skill, enter-
  prise and talents, on whom the rest of the country depend. I invite my colleagues to support the Government on Amendment No. 3, but to vote against them on Amendment No. 7.
  Question put, That the amendment be made:—
  The House divided: Ayes 255, Noes 47.

  Division No. 246.]

  AYES

  [8.15 p.m.

  Abse, Leo

  Evans, Ioan (Aberdare)

  McGuire, Michael (Ince)

  Adley, Robert

  Ewing, Harry (Stirling)

  MacKenzie, Gregor

  Anderson, Donald

  Ewing, Mrs Winifred (Moray)

  Mackintosh, John P.

  Archer, Peter

  Fell, Anthony

  Maclennan, Robert

  Armstrong, Ernest

  Foot, Rt Hon Michael

  Macmillan, Rt Hon M. (Farnham)

  Ashley, Jack

  Ford, Ben

  McMillan, Tom (Glasgow C)

  Atkinson, Norman

  Forman, Nigel

  McNair-Wilson, M. (Newbury)

  Awdry, Daniel

  Fowler, Gerald (The Wrekin)

  McNamara, Kevin

  Bain, Mrs Margaret

  Fowler, Norman (Sutton C'f'd)

  Madel, David

  Barnett, Guy (Greenwich)

  Freeson, Reginald

  Magee, Bryan

  Barnett, Rt Hon Joel (Heywood)

  Fry, Peter

  Mahon, Simon

  Bates, Alf

  Gilbert, Dr John

  Marks, Kenneth

  Bean, R. E.

  Gilmour, Sir John (East Fife)

  Marshall, Dr. Edmund (Goole)

  Beith, A. J.

  Golding, John

  Marshall, Michael (Arundel)

  Bell, Ronald

  Gourlay, Harry

  Mason, Rt Hon Roy

  Bonn, Rt Hon Anthony Wedgwood

  Gow, Ian (Eastbourne)

  Maude, Angus

  Benyon, W.

  Gower, Sir Raymond (Barry)

  Mawby, Ray

  Blenkinsop, Arthur

  Graham, Ted

  Mellish, Rt Hon Robert

  Boardman, H.

  Grant, George (Morpeth)

  Meyer, Sir Anthony

  Booth, Rt Hon Albert

  Gray, Hamish

  Millan, Bruce

  Boothroyd, Miss Betty

  Grimond, Rt Hon J.

  Miller, Hal (Bromsgrove)

  Bottomley, Peter

  Grist, Ian

  Miller, Dr M. S. (E Kilbride)

  Boyden, James (Bish Auck)

  Grylls, Michael

  Miscampbell, Norman

  Bradley, Tom

  Hamilton, James (Bothwell)

  Moate, Roger

  Bray, Dr Jeremy

  Hannam, John

  Montgomery, Fergus

  Brown, Sir Edward (Bath)

  Hardy, Peter

  Moonman, Eric

  Brown, Hugh D. (Provan)

  Harrison, Col Sir Harwood (Eye)

  Morris, Alfred (Wythenshawe)

  Buchanan, Richard

  Harrison, Walter (Wakefield)

  Morris, Charles R. (Openshaw)

  Buchanan-Smith, Alick

  Hatton, Frank

  Morris, Michael (Northampton S)

  Budgen, Nick

  Havers, Sir Michael

  Morrison, Charles (Devizes)

  Bulmer, Esmond

  Hayhoe, Barney

  Morrison, Hon Peter (Chester)

  Butler, Adam (Bosworth)

  Henderson, Douglas

  Mudd, David

  Callaghan, Rt Hon J. (Cardiff SE)

  Hooson, Emlyn

  Murray, Rt Hon Ronald King

  Callaghan, Jim (Middleton & P)

  Horam, John

  Nelson, Anthony

  Campbell, Ian

  Hordern, Peter

  Newton, Tony

  Cant, R. B.

  Howe. Rt Hon Sir Geoffrey

  Nott, John

  Chalker, Mrs Lynda

  Howells, Geraint (Cardigan)

  O'Halloran, Michael

  Clarke, Kenneth (Rushcliffe)

  Hughes, Mark (Durham)

  Orbach, Maurice

  Clegg, Walter

  Hughes, Roy (Newport)

  Owen, Dr David

  Cocks, Michael (Bristol S)

  Hunt, John (Bromley)

  Padley, Walter

  Cohen, Stanley

  Hunter, Adam

  Page, Rt Hon R. Graham (Crosby)

  Coleman, Donald

  Irving, Charles (Cheltenham)

  Palmer, Arthur

  Conlan, Bernard

  Irving, Rt Hon S. (Dartford)

  Park, George

  Cormack, Patrick

  Jackson, Colin (Brighouse)

  Parker, John

  Costain, A. P.

  Jackson. Miss Margaret (Lincoln)

  Parkinson, Cecil

  Cox, Thomas (Tooting)

  Jay, Rt Hon Douglas

  Pendry, Tom

  Craigen. J. M. (Maryhill)

  Jessel, Toby

  Phipps, Dr Colin

  Crawford, Douglas

  John, Brynmor

  Price, William (Rugby)

  Crowther, Stan (Rotherham)

  Johnson. James (Hull West)

  Radice, Giles

  Cunningham, G. (Islington S)

  Johnston, Russell (Inverness)

  Rees, Rt Hon Merlyn (Leeds S)

  Cunningham, Dr J. (Whiteh)

  Jones, Barry (East Flint)

  Rees, Peter (Dover & Deal)

  Dalyell, Tam

  Jones, Dan (Burnley)

  Reid, George

  Davies, Bryan (Enfield N)

  Kershaw, Anthony

  Renton, Rt. Hon Sir D. (Hunts)

  Davies, Denzil (Llanelli)

  King, Evelyn (South Dorset)

  Ridsdale, Julian

  Davies, Ifor (Gower)

  Kitson, Sir Timothy

  Roberts, Albert (Normanton)

  Deakins, Eric

  Lamborn, Harry

  Roberts, Michael (Cardiff NW)

  de Freitas, Rt Hon Sir Geoffrey

  Lamont, Norman

  Robinson, Geoffrey

  Dempsey, James

  Langford-Holt, Sir John

  Roderick, Caerwyn

  Doig, Peter

  Latham. Michael (Melton)

  Rodgers, William (Stockton)

  Dormand, J. D.

  Leadbitter, Ted

  Roper, John

  Duffy, A. E. P.

  Le Marchant, Spencer

  Ross, Stephen (Isle of Wight)

  Dunlop, John

  Lester, Jim (Beeston)

  Ross, Rt. Hon W. (Kilmarnock)

  Dunwoody, Mrs Gwyneth

  Lewis, Kenneth (Rutland)

  Rossi, Hugh (Hornsey)

  Eden, Rt Hon Sir John

  Lewis, Ron (Carlisle)

  Rost, Peter (SE Derbyshire)

  Edwards, Robert (Wolv SE)

  McCartney, Hugh

  St. John-Stevas, Norman

  Ellis, John (Brigg & Scun)

  McCrindle, Robert

  Scott-Hopkins, James

  English. Michael

  McElhone, Frank

  Shaw, Michael (Scarborough)

  Ennals. David

  MacFarquhar, Roderick

  Sheldon, Robert (Ashton-u-Lyna)

  Evans, Fred (Caerphilly)

  MacGregor, John

  Short, Rt Hon E. (Newcastle C)

  Sims, Roger

  Tebbit, Norman

  Welsh, Andrew

  Skeet, T. H. H.

  Thatcher, Rt Hon Margaret

  White, Frank R. (Bury)

  Small, William

  Thomas, Jeffrey (Abertillery)

  White, James (Pollok)

  Smith, Cyril (Rochdale)

  Thomas, Mike (Newcastle E)

  Whitehead, Phillip

  Snape, Peter

  Thompson, George

  Willey, Rt Hon Frederick

  Speed, Keith

  Tierney, Sydney

  Williams, Sir Thomas

  Spence, John

  Tinn, James

  Wilson, Alexander (Hamilton)

  Spicer, Jim (W. Dorset)

  Tuck, Raphael

  Wilson, Gordon (Dundee E)

  Sproat, Iain

  Wainwright, Edwin (Dearne V)

  Winterton, Nicholas

  Stallard, A. W.

  Wainwright, Richard (Colne V)

  Woodall, Alec

  Steel, David (Roxburgh)

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

  Woof, Robert

  Stewart, Ian (Hitchin)

  Walder, David (Clitheroe)

  Wrigglesworth, Ian

  Stewart, Rt Hon M. (Fulham)

  Walker, Terry (Kingswood)

  Young, Sir G. (Ealing, Acton)

  Stott, Roger

  Walker-Smith, Rt Hon Sir Derek

  Strang, Gavin

  Ward, Michael

  TELLERS FOR THE AYES:

  Summerskill, Hon Dr Shirley

  Watt, Hamish

  Mr. David Stoddart and

  Tapsell, Peter

  Weatherill, Bernard

  Mr. Joseph Harper.

  Taylor, R. (Croydon NW)

  NOES

  Allaun, Frank

  Flannery, Martin

  Parry, Robert

  Ashton, Joe

  Garrett, John (Norwich S)

  Prescott, John

  Atkins, Ronald (Preston N)

  Grocott, Bruce

  Richardson, Miss Jo

  Bennett, Andrew (Stockport N)

  Heffer, Eric S.

  Rodgers, George (Chorley)

  Bidwell, Sydney

  Hoyle, Doug (Nelson)

  Rooker, J. W.

  Boardman, H.

  Hughes, Robert (Aberdeen N)

  Rose, Paul B.

  Buchan, Norman

  Jeger, Mrs Lena

  Selby, Harry

  Canavan, Dennis

  Kelley, Richard

  Short, Mrs Renée (Wolv NE)

  Carmichael, Nell

  Kilroy-Silk, Robert

  Skinner Dennis

  Clemitson, Ivor

  Lambie, David

  Thomas, Dafydd (Merioneth)

  Cook, Robin F. (Edin C)

  Lamond, James

  Wigley, Dafydd

  Corbett, Robin

  Latham, Arthur (Paddington)

  Wise, Mrs Audrey

  Cryer, Bob

  Lee, John

  Young, David (Bolton E)

  Dean, Joseph (Leeds West)

  Loyden, Eddie

  Douglas-Mann, Bruce

  Maynard, Miss Joan

  TELLERS FOR THE NOES:

  Evans, Gwynfor (Carmarthen)

  Molloy, William

  Mr. Tom Litterick and

  Fernyhough, Rt Hon E.

  Ovenden, John

  Mr. Ron Thomas.

  Question accordingly agreed to.
  Amendment made: No. 5, in page 15, line 33, leave out '£4,500' and insert '£4,500' and insert '£5,000'.—[Mr. Robert Sheldon.]
  Amendment proposed, No. 7, in line 38, leave out '£2,000' and insert '£1,500'.—[Mr. Robert Sheldon.]
  Question put, That the amendment be made:—
  The House divided: Ayes 203, Noes 164.

  Division No. 247.]

  AYES

  [8.30 p.m.

  Abse, Leo

  Cocks, Michael (Bristol S)

  Ewing, Harry (Stirling)

  Allaun, Frank

  Cohen, Stanley

  Ewing, Mrs Winifred (Moray)

  Anderson, Donald

  Coleman, Donald

  Fernyhough, Rt Hon E.

  Archer, Peter

  Conlan, Bernard

  Flannery, Martin

  Armstrong, Ernest

  Cook, Robin F. (Edin C)

  Foot, Rt Hon Michael

  Ashley, Jack

  Corbett, Robin

  Ford, Ben

  Ashton, Joe

  Cox, Thomas (Tooting)

  Fowler, Gerald (The Wrekin)

  Atkins, Ronald (Preston N)

  Craigen, J. M. (Maryhill)

  Freeson, Reginald

  Atkinson, Norman

  Crawford, Douglas

  Garrett, John (Norwich S)

  Bain, Mrs Margaret

  Crawshaw, Richard

  Gilbert, Dr John

  Barnett, Guy (Greenwich)

  Crowther, Stan (Rotherham)

  Golding, John

  Barnett, Rt Hon Joel (Heywood)

  Cryer, Bob

  Gourlay, Harry

  Bates, All

  Cunningham, G. (Islington S)

  Graham, Ted

  Bean, R. E.

  Cunningham, Dr J. (Whiteh)

  Grant, George (Morpeth)

  Benn, Rt Hon Anthony Wedgwood

  Dalyell, Tam

  Grocott, Bruce

  Bennett, Andrew (Stockport N)

  Davies, Bryan (Enfield N)

  Hardy, Peter

  Blenkinsop, Arthur

  Davies, Denzil (Llanelli)

  Harrison, Waller (Wakefield)

  Boardman, H.

  Davies, Ifor (Gower)

  Hart, Rt Hon Judith

  Booth, Rt Hon Albert

  Deakins, Erie

  Hatton, Frank

  Boothroyd, Miss Betty

  Dean, Joseph (Leeds West)

  Heffer, Eric S.

  Boyden, James (Bish Auck)

  de Freitas, Rt Hon Sir Geoffrey

  Henderson, Douglas

  Bradley, Tom

  Dempsey, James

  Horam, John

  Bray, Dr Jeremy

  Dolg, Peter

  Hoyle, Doug (Nelson)

  Brown, Hugh D. (Provan)

  Dormand, J. D.

  Hughes, Mark (Durham)

  Buchan, Norman

  Douglas-Mann, Bruce

  Hughes, Robert (Aberdeen N)

  Buchanan, Richard

  Duffy. A. E. P.

  Hughes, Roy (Newport)

  Callaghan, Rt Hon J. (Cardiff SE)

  Dunwoody, Mrs Gwyneih

  Hunter, Adam

  Callaghan, Jim (Middleton & P)

  Edwards, Robert (Wolv SE)

  Irving, Rt Hon S. (Dartford)

  Campbell, Ian

  Ellis, John (Brigg & Scun)

  Jackson, Colin (Brighouse)

  Canavan, Dennis

  English, Michael

  Jackson, Miss Margaret (Lincoln)

  Cant, R. B.

  Evans, Fred (Caerphilly)

  Jay, Rt Hon Douglas

  Carmichael, Neil

  Evans, Gwynfor (Carmarthen)

  Jeger, Mrs Lena

  Clemitson, Ivor

  Evans, Ioan (Aberdare)

  John, Brynmor

  Johnson, James (Hull West)

  Murray, Rt Hon Ronald King

  Stewart, Rt Hon M. Fulham)

  Jones, Barry (East Flint)

  Ogden, Eric

  Stoddart, David

  Jones, Dan (Burnley)

  O'Halloran, Michael

  Stott, Roger

  Kelley, Richard

  Orbach, Maurice

  Strang, Gavin

  Kilroy-Silk, Robert

  Ovenden, John

  Summerskill, Hon Dr Shirley

  Lambie, David

  Owen, Dr David

  Thomas, Dafydd (Merioneth)

  Lamborn, Harry

  Padley, Walter

  Thomas, Jeffrey (Abertillery)

  Lamond, James

  Palmer, Arthur

  Thomas, Mike (Newcastle E)

  Latham, Arthur (Paddington)

  Park, George

  Thomas, Ron (Bristol NW)

  Leadbitter. Ted

  Parker, John

  Thompson, George

  Lee, John

  Parry, Robert

  Tierney, Sydney

  Lewis, Ron (Carlisle)

  Pendry, Tom

  Tinn, James

  Litterick, Tom

  Phipps, Dr Colin

  Tuck, Raphael

  Loyden, Eddie

  Prescott, John

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

  McCartney, Hugh

  Price, William (Rugby)

  Walker, Terry (Kingswood)

  McElhone, Frank

  Radice, Giles

  Ward, Michael

  MacFarquhar, Roderick

  Rees, Rt Hon Merlyn (Leeds S)

  Watt, Hamish

  McGuire, Michael (Ince)

  Reid, George

  Welsh, Andrew

  MacKenzie, Gregor

  Richardson, Miss Jo

  White, Frank R. (Bury)

  Mackintosh, John P.

  Roberts, Albert (Normanton)

  White, James (Pollok)

  Maclennan, Robert

  Robinson, Geoffrey

  Whitehead, Phillip

  McMillan, Tom (Glasgow C)

  Roderick, Caerwyn

  Wigley, Dafydd

  McNamara, Kevin

  Rodgers, George (Chorley)

  Willey, Rt Hon Frederick

  Magee, Bryan

  Rodgers, William (Stockton)

  Williams, Sir Thomas

  Mahon, Simon

  Rooker, J. W.

  Wilson, Alexander (Hamilton)

  Marks, Kenneth

  Roper, John

  Wilson, Gordon (Dundee E)

  Marshall, Dr. Edmund (Goole)

  Rose, Paul B.

  Wilson, William (Coventry SE)

  Mason, Rt Hon Roy

  Ross, Rt. Hon W. (Kilmarnock)

  Wise, Mrs Audrey

  Maynard, Miss Joan

  Selby, Harry

  Woodall, Alec

  Mellish, Rt Hon Robert

  Sheldon, Robert (Ashton-u-Lyne)

  Woof, Robert

  Millan, Bruce

  Short, Rt Hon E. (Newcastle C)

  Wrigglesworth, Ian

  Miller, Dr M. S. (E Kilbride)

  Short, Mrs Renée (Wolv NE)

  Young, David (Bolton E)

  Molloy, William

  Skinner Dennis

  Moonman, Eric

  Small, William

  TELLERS FOR THE AYES:

  Morris, Alfred (Wythenshawe)

  Snape, Peter

  Mr. Joseph Harper and

  Morris, Charles R. (Openshaw)

  Stallard, A. W.

  Mr. James Hamilton.

  NOES

  Adley, Robert

  Gorst, John

  Macmillan, Rt Hon M. (Farnham)

  Aitken, Jonathan

  Gow, Ian (Eastbourne)

  McNair-Wilson, M. (Newbury)

  Awdry, Daniel

  Gower, Sir Raymond (Barry)

  Madel, David

  Baker, Kenneth

  Gray, Hamish

  Marshall, Michael (Arundel)

  Beith, A. J.

  Grimond, Rt Hon J.

  Marten, Neil

  Bell, Ronald

  Grist, Ian

  Maude, Angus

  Bennett, Dr Reginald (Fareham)

  Grylls, Michael

  Maudling, Rt Hon Reginald

  Benyon, W.

  Hall Davis, A. G. F.

  Mawby, Ray

  Bitten. John

  Hampson, Dr Keith

  Maxwell-Hyslop, Robin

  Biggs-Davison, John

  Hannam, John

  Mayhew, Patrick

  Boscawen, Hon Robert

  Harrison, Col Sir Harwood (Eye)

  Meyer, Sir Anthony

  Bottomley, Peter

  Harvie Anderson, Rt Hon Miss

  Miller, Hal (Bromsgrove)

  Brittan, Leon

  Havers, Sir Michael

  Mills, Peter

  Brocklebank-Fowler, C.

  Hawkins, Paul

  Miscampbell, Norman

  Brotherton, Michael

  Hayhoe, Barney

  Moate, Roger

  Brown, Sir Edward (Bath)

  Heseltine, Michael

  Monro, Hector

  Buchanan-Smith, Alick

  Holland, Philip

  Montgomery, Fergus

  Budgen, Nick

  Hooson, Emlyn

  More, Jasper (Ludlow)

  Bulmer, Esmond

  Hordern, Peter

  Morris, Michael (Northampton S)

  Burden, F. A.

  Howe, Rt Hon Sir Geoffrey

  Morrison, Charles (Devizes)

  Butler, Adam (Bosworth)

  Howell, Ralph (North Norfolk)

  Morrison, Hon Peter (Chester)

  Chalker, Mrs Lynda

  Howells, Geraint (Cardigan)

  Mudd, David

  Clark, William (Croydon S)

  Hunt, John (Bromley)

  Neave, Airey

  Clarke, Kenneth (Rushcliffe)

  Hurd, Douglas

  Nelson, Anthony

  Clegg, Walter

  Irving, Charles (Cheltenham)

  Newton, Tony

  Cooke, Robert (Bristol W)

  Jessel, Toby

  Nott, John

  Cope, John

  Johnson Smith, G. (E Grinstead)

  Oppenheim, Mrs Sally

  Cormack, Patrick

  Johnston, Russell (Inverness)

  Page, John (Harrow West)

  Costain, A. P.

  Kershaw, Anthony

  Page, Rt Hon R. Graham (Crosby)

  Douglas-Hamilton, Lord James

  Kilfedder, James

  Parkinson, Cecil

  Dunlop, John

  Kimball, Marcus

  Rees, Peter (Dover & Deal)

  Dykes, Hugh

  King, Evelyn (South Dorset)

  Rees-Davies, W. R.

  Eden, Rt Hon Sir John

  King. Tom (Bridgwater)

  Renton, Rt. Hon Sir D. (Hunts)

  Edwards, Nicholas (Pembroke)

  Kitson, Sir Timothy

  Rhys Williams, Sir Brandon

  Emery, Peter

  Knight, Mrs Jill

  Ridsdale, Julian

  Eyre, Reginald

  Knox, David

  Roberts, Michael (Cardiff NW)

  Fairgrieve, Russell

  Lamont, Norman

  Rodgers, Sir John (Sevenoaks)

  Fell, Anthony

  Langford-Holt, Sir John

  Ross, Stephen (Isle of Wight)

  Fletcher-Cooke, Charles

  Latham, Michael (Melton)

  Rossi, Hugh (Hornsey)

  Forman, Nigel

  Lawrence, Ivan

  Rost, Peter (SE Derbyshire)

  Fowler, Norman (Sutton C'f'd)

  Lawson, Nigel

  Sainsbury, Tim

  Fox, Marcus

  Lester, Jim (Beeston)

  St. John-Stevas, Norman

  Fry, Peter

  Lewis, Kenneth (Rutland)

  Scott-Hopkins, James

  Gardner, Edward (S Fylde)

  Luce, Richard

  Shaw, Michael (Scarborough)

  Gilmour, Sir John (East Fife)

  McCrindle, Robert

  Sims, Roger

  Goodhew, Victor

  McCusker, H.

  Sinclair, Sir George

  Goodlad, Alastair

  MacGregor, John

  Skeet, T. H. H.

  Smith, Cyril (Rochdale)

  Tapsell, Peter

  Wall, Patrick

  Speed, Keith

  Taylor, R. (Croydon NW)

  Warren, Kenneth

  Spence, John

  Tebbit, Norman

  Weatherill, Bernard

  Sproat, Iain

  Thatcher, Rt Hon Margaret

  Winterton, Nicholas

  Stainton, Keith

  Trotter, Neville

  Young, Sir G. (Ealing, Acton)

  Stanbrook, Ivor

  Tugendhat, Christopher

  Steel, David (Roxburgh)

  Wainwright, Richard (Colne V)

  TELLERS FOR THE NOES:

  Stewart, Ian (Hitchin)

  Walder, David (Clitheroe)

  Mr. Spencer Le Marchant and

  Stradling Thomas, J.

  Walker-Smith, Rt Hon Sir Derek

  Mr. Carol Mather.

  Question accordingly agreed to.

Clause 28

  RELIEF FOR INTEREST: LIMIT FOR 1976–77
  Mr. MacGregor: I beg to move Amendment No. 8, in page 16, line 33, at end insert—
  '(2) Where an individual occupies living accommodation provided by his employer and by reason of the terms of his employment he is required to reside in the accommodation provided and it is necessary for him to reside on the premises for the proper performance of his duties, that living accommodation shall not be treated as his only or main residence, but instead any land, caravan or houseboat which he purchases and does not let at a commercial rate, but elects to treat as his only or main residence shall be treated for the purpose of Part II of Schedule 1 of the Finance Act 1974 as his only or main residence:
  Provided that a borrower and his spouse (unless separated) may elect only for one property, caravan or house-boat to be treated as his only or main residence at any particular time.
  (3) This section shall apply in respect of any interest paid in 1976–77 or any subsequent year of assessment'.
  Mr. Deputy Speaker (Mr. Oscar Murton): With this we may take the following amendments:
  No. 9, in page 16, line 33, at end insert—
  '(2) Where an individual occupies living accommodation provided by his employer and by reason of the terms of his employment he is required to reside in the accommodation provided and it is necessary for him to reside on the premises for the proper performance of his duties, that living accommodation shall not be treated as his only or main residence, but instead any land, caravan or houseboat which he purchases and elects to treat as his only or main residence shall be treated for the purpose of Part II of Schedule 1 of the Finance Act 1974 as his only or main residence:
  Provided that a borrower and his spouse (unles separated)may elect only for one property, caravan or houseboat to be treated as his only or main residence at any particular time.
  (3) This section shall apply in respect of any interest paid in 1976–77 or any subsequent year of assessment'.
  754
  No. 10, in page 16, line 33, at end insert:
  '(2) In paragraph 4(1) of that Schedule, after paragraph (b), there shall be inserted the following additional paragraph:—
  "or
  (c) is at the time the interest is paid the only residence of the person by whom it is paid (in this Part of the Schedule referred to as 'the borrower') other than accommodation provided by his employer, and the borrower is an employee who is required by the terms of his employment to reside in the accommodation provided, and it is necessary for him to reside on the premises for the proper performance of his duties,"'.
  No. 11, in page 16, line 33, at end insert:
  '(2) "An only or main residence" shall be taken, in the case of a person who is required by his employer to live in a particular place connected with his employment, to include one residence in the United Kingdom which is owned by that person.'.
  Mr. MacGregor: The Financial Secretary will recall that we debated this set of problems at length in Standing Committee. I hope, therefore, that it will not be necessary for me to delay the House very long on this occasion.
  There is a choice here, as there was in Committee, and my preference is for Amendment No. 10, although even that may be deficient in its drafting. What is most important, however, is that we have a chance to return to these problems. At the end of the debate in Standing Committee, the hon. Gentleman agreed to look again at all the points which had been raised and to see whether it was possible for the Government to move a suitable amendment on Report. I very much regret that they have not done so. The Minister agreed, however, that if they did not do so whe should have the opportunity to return to this matter.
  The point is simple. It concerns those people in various occupations who have to live in tied houses for one reason or another. It is not just the 10 per cent. of people who live in tied agricultural cottages, but many others who are in the

  755
  same situation and to whom the Government have paid no regard at all in their housing difficulties.
  The sort of people affected are clergymen, who are still obliged to live in the rectory or the vicarage, which might be described as a tied house; people in employment overseas, or even in this country, who for one reason or another have to live in premises which belong to their employers and which they do not have an opportunity to buy; and Service men, who are in a special position and with whom we dealt at length in Committee.
  Before the 1974 Finance Act these people had difficulties in providing homes for their retirement or for the period when they ceased to live in their tied accommodation. In the Services, this occurred at an earlier age than in most other occupations. These groups faced real hardship, because they had the burden of two homes—admittedly they were purchasing only one but they had to maintain and furnish two. This problem of providing a home for retirement was particularly difficult for the clergy, who, by and large, have to live on low stipends. The Financial Secretary himself recognised the position of the clergy in our discussions in Committee.
  However, the 1974 Finance Act made the situation much worse for these people. New proposals were brought in on mortgage interest relief, under which such relief was confined to the principal home and any other residence was excluded. This provision was originally intended to apply to people with second homes for holiday purposes, but it drew into the net of tax relief exclusion those people who were in tied accommodation. So, on top of their difficulties in trying to buy a home for their retirement—a home in which they would be resident at all times after retirement—these people faced the added problem of undertaking the purchase of that home without any tax relief on their mortgage payments.
  For the clergy, particularly, this means that most of them will be unable to buy a home for their retirement. Since the Finance Act of 1974 the Churches have been in contact with the Chancellor, and there is no doubt that many individual
  756
  clergymen and the Churches officially view the situation with great concern.
  The situation also adversely affects Service men, as they frequently spend much time overseas in their occupation but nevertheless need a home for their families to live in and for their holidays. The only exception that is made is the case in which a person is able to find a dependent relative who can live in the house while that person is trying to acquire it. Tax relief can then be claimed.
  But the definition of a dependent relative is a relative of the borrower or spouse who is incapacitated by old age or infirmity from maintaining himself, except that where the relative is his or his spouse's mother and she is widowed, divorced or living apart from her husband, the incapacity provision does not apply.
  8.45 p.m.
  That is a very limited exclusion. One has either to have a relative incapacitated by old age or infirmity or one must try to ensure that a relative is divorced if one wishes to gain the benefit of the exclusion. That is not a very happy situation.
  If the people with whom I am concerned are able to rent out the house that they are trying to buy, that could be offset against the cost of the mortgage, but I think that the Financial Secretary accepted that that will apply in only a very limited number of cases.
  Apart from the difficulties of the Rent Act, there are not many cases in which these homes, purchased for retirement, will be easy to rent or to rent at levels to meet the mortgage costs.
  Despite the Government's attempts to show that the difficulties are not as severe as they seem, the people concerned find it extremely difficult to purchase their homes when they do not get tax relief on mortgages.
  The amendments provide that when a person is in accommodation provided by his employer and is trying to purchase a principal or main residence elsewhere, tax relief should be granted on the purchase of that other residence.
  In Committee, the Financial Secretary said that he would produce a number of reasons for objecting to that proposal. I have read his speeches and can find

  757
  only one reason of substance—the difficulty in defining the main or only residence. The Minister said:
  "It was felt that to give relief for a residence which was not the main residence, or which might be a secondary residence, would be held to contravene the general principle of this relief. The principle of the relief is, naturally, to prevent a subsidy from being given on a second home, or on a holiday home. Tax relief ought, as consequence, to be given for the only or main residence."— [Official Report, Standing Committee E, 27th May 1976; c. 399.]
  I still do not see that as an overwhelming objection, because all these people are purchasing homes that will be their principal or main residences, but, because of their employment, they have to live elsewhere in the meantime.
  I accept that there may be an element of subsidy in relation to the tied accommodation in which they are living, but they have to meet all the costs of purchase and are naturally anxious to purchase a property as early as possible. Inevitably, house prices will continue to rise over the years and these people may not be able to purchase a home on retirement.
  The objections to the amendment hang on the point about principal or main residence, but I contend that these properties will ultimately be the principal or main residences of people who propose to buy a property as a family base and not as a holiday or second home.
  Unless a concession like this is conceded, these people, unlike every other potential owner-occupier, will never be able to buy their own home and get the normal tax reliefs that are available to everybody else. Unless the amendment is passed, there will be a specific bias against this group.
  It is surely not too difficult to draw up a definition of a principal or main residence that will be a family home without risking the Financial Secretary's objection that it will also apply to second and holiday homes.
  There is a genuine problem here. It infuriates the clergy and concerns the Churches. It is causing increasing resentment among Service men. I think that the Financial Secretary accepts our case in principle and that we have a genuine point of grievance, which should be met. Therefore, I feel that the technical objections should be overcome and that some-
  758
  thing along the lines of this amendment should be acepted by the Government.
  Mr. David Mudd: I describe myself as an innocent abroad on the storms of the Finance Bill. The point of my argument will be developed. I shall raise the problems of different sections of the seafaring industry. I hope that I shall obtain reassurances from the Financial Secretary to the Treasury to the effect that I am on a wrong course I apologise in advance if it is proved that I am thinking in the wrong direction.
  My fears are not concerned so much with the tied cottage differentials of farmers, clergy and those involved in education and police operations. I am worried about those who are involved in tied cottage operations but who find themselves in a tied cottage situation which occupies 51 per cent. of their time over and above the basic commitment to the tied cottage.
  To avoid the bafflement that I may have unwittingly created, let me say this. My problem concerns the Trinity House pilots, lighthouse men, coastguards and Customs officers who, through no fault of their own, often find themselves occupying tied cottages as a consequence of the job they do. As a further consequence of their job, they may find themselves afloat in a Customs or pilot launch or living in a lighthouse for 51 per cent. of their time. As a result of the requirements of their occupation they may be divorced from their shorebound home, which may be regarded as a tied cottage.
  I seek an assurance that the Government have no intention at any stage of penalising those who, by virtue of their legitimate calling, find themselves afloat, as a result of their duty, in a home which, although not permanent, they occupy for 51 per cent. of their working time.
  Mr. Nott: Does my hon. Friend refer to houses owned by Trinity House? He referred to tied cottages. I am not sure what he meant. I raise the point as I should like to understand what he means.
  Mr. Mudd: I am grateful to my hon. Friend for giving me the opportunity of clarifying the point. I have in mind the Coastguard or Trinity House employee who lives in a Trinity House tied cottage

  759
  when he is on shore but who, by virtue of his job, spends 51 per cent. of his time on the Bishop Rock, Wolf Rock or Eddystone lighthouse. It seems to me that the man involved is becoming more and more tied up as a result of the nature of his job.
  Mr. Richard Wainwright: Members of the Liberal Party find it disappointing that the Government have not tackled the tied accommodation problem in view of their resources for laying their hands on information and the legal draftsmanship at their disposal. Many civil servants are involved, especially those who do work which most of us would find difficult. Their work is not popular. I refer to the officers of the Prison Service. The hon. Member for Falmouth and Cam-borne (Mr. Mudd) mentioned other valuable servants of the community whose lot is not, on the whole, to be envied.
  The Government, if they care for their reputation as a good employer, must consider the plight of those people. I am also thinking of the clergymen of most denominations, especially those with an itinerant ministry, who never know from one year to the next where they will be expected to take their families. These problems are great, and the responsibility rests upon the Government to tackle them. We shall have to do what we can to remedy the Government's deficiency by supporting one or other of these admirable amendments.
  An additional responsibility rests upon the Government to tidy up the muddle they created in the Finance Act 1974 when they reintroduced the curious theology of some interests being considered virtuous and admissible but of other interests being rejected.
  As the records testify, we on the Liberal Bench, like others, have never been satisfied that the Government had properly thought through what were reasonable objects for borrowing money and incurring interest charges and items which, on the other hand, were rightly considered to be outside the pale for tax relief.
  The whole edifice is precarious. The Government ought to have done something to remedy their own jerrybuilding.
  760
  Since they have apparently been unwilling or unable to do so, Liberal Members will support whichever of the various amendments, all having the same broad purpose, the Opposition decide to press to a Division.
  Mr. Peter Rees: I rise to support the amendments so eloquently moved by my hon. Friend the Member for Norfolk, South (Mr. MacGregor). In doing so, we and the hon. Member for Colne. Valley (Mr. Wainwright) are endeavouring to tidy up the dimly-perceived consequences of the Finance Act 1974 when the Government, in their first careless rapture, were dealing with the social evil of second holiday homes. As often happens, many innocent victims fell before their untrained discharge.
  I suppose that every constituency has its own particular group or groups. My hon. Friends have mentioned particular groups in their constituencies. I was delighted to hear my hon. Friend the Member for Falmouth and Camborne (Mr. Mudd) mention Trinity House, which is represented in great measure and distinction in my constituency. I particularly commend the Prison Service, the Armed Services and the clergy, all of which are represented to a great degree and with distinction in my constituency, but perhaps no more and no less than in other constituencies.
  The root principle—it is not a technical point but a point of principle, and I hope that the Financial Secretary will deal with it as such—must be whether people, by virtue of their occupations, can be said to have a principal residence independent of that which they occupy by reason of their professional commitments. One might advance the argument, if it were not too legalistic and technical, that, because they are required by virtue of their careers to occupy official houses, they might be said to be in representative occupation of those houses and that, therefore, those houses are ineligible to be classed as their main residences.
  Mr. Fairbairn: Not only is it not too legalistic, but it is right.
  Mr. Rees: My hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) seems to find favour with this argument. But those

  761
  who are not so well versed in the intricacies of this area of law would no doubt prefer to deal with this matter as a general question of principle.
  Let us look at the practicalities. The various categories which have so far had their cases advanced consist of people who probably lead a peripatetic life and are compelled to change their houses many times in the course of their careers. They cannot be said to put down roots in their official residences. It is understandable that, against the day of their retirement when they give up their official residences, they should have acquired what they can regard as their own homes. Therefore, I believe it is right and fair that they should enjoy the same advantages by way of tax relief as the rest of us.
  9.0 p.m.
  I dislike the perversion of language, which comes so often from the Government Benches, suggesting that this is some kind of subsidy. If it be a subsidy, let it be universally available. The categories that my hon. Friends and I have in mind are apparently not getting that subsidy under the law as it now stands, with two exceptions. By virtue of the exigencies of their employment, the two exceptions are those who are able to let their houses on satisfactory terms and those who are able to place in their homes a dependant in a narrowly-defined range.
  I find that a rather unattractive solution to this particular problem. Certainly the difficulties of letting accommodation now are manifest. I do not believe that this is satisfactory for someone in the Armed Services who may want to come back and take up residence in his own home for a short period of about six weeks. He may have considerable difficulty in finding a tenant who is prepared to take the property on those terms. He may find that the tenant would take him through all the rigmarole of the courts. I do not think that the Minister will rest his case on that argument. I think that there is a basis in equity and principle why this claim should be conceded.
  The Financial Secretary was disposed to look at this argument with some favour in Committee. I regret very much that
  762
  we have not had a Government amendment on this subject. I am not saying that there has been any breach of faith. Perhaps the pressures on the Financial Secretary have been such that he has not been able to apply his mind to the problem. He cannot give that excuse now, because the eloquent speeches from this side must have focused his mind on the true principles at stake.
  I think it was on a closely-related problem, with all the relief of the capital gains tax which is afforded to people who have a principal main residence, that the hon. Gentleman said in Committee that there was some kind of extra statutory concession available. I always view extra-statutory concessions with extreme repugnance. If it is to be dealt with in this way, could we perhaps, for the benefit of the House and of those who study our debates outside, spell out in more detail or particularity what that extra concession is?
  I think it has been amply demonstrated from these Benches that there is a good case in principle and equity for affording this relief—do not let us call it a subsidy—on the various categories which have already been deployed. I think that some of my hon. Friends could add to them.
  I very much hope that the Financial Secretary will allow his natural generosity full rein in this respect and that he will be able to tell us that he has considered our amendments and is prepared to accept the best of them. In my humble view Amendment No. 9, which would give an election to the taxpayer, is possibly the best of them. I very much hope that the Minister will be able to accept it.
  Mr. Fairbairn: I have been most impressed by the observations of my hon. and learned Friend the Member for Dover and Deal (Mr. Rees). The Financial Secretary should understand that we are not dealing with a privileged class although, undoubtedly, the intentions of the Finance Act are to destroy what the Government imagine are a privileged class. The people for whom we are seeking relief form an under-privileged class.
  I have a brother who is in a tied house. It is extremely unfortunate that he is not able to obtain a family home, because he is forced to live in a tied house that will never belong to him. Eventually, upon

  763
  his retirement, he will somehow have to obtain a house of his own for his family. Far from being a privileged class, those for whom we are concerned are people who have the very grave difficulty of not having the privilege of a permanent home.
  Nothing, I would have thought, was more difficult for a family than constantly having to move from one house to another, which does not belong to them, so that they cannot commit themselves to a permanent home, a permanent residence and a permanent family establishment.
  I fear that the motivation that may influence the Financial Secretary—I hope that his generosity of spirit will for once overcome the principles of Socialism—is the resentment that someone may get away with two homes. Some men may have a house in my constituency but live in London. Some awful people may actually have two homes, like the right hon. Member for Huyton (Sir H. Wilson), who has three. Some terrible person may have accepted the nomination for the Presidency of the European Commission at a salary of £60,000 net, and may therefore be able to pay for mortgages on various homes. Such people may get away with it, and since they are Socialists it does not matter.
  But why be vindictive against those who are successful? We do not mind the right hon. Member for Huyton or the Home Secretary being successful. Apparently, Labour Members do not mind either. So why be vindictive in order to prevent few people from obtaining something? Why be malevolent, in the words of my right hon. and learned Friend, in order to tweak off one or two successful people who have two homes? Why make it impossible for those in peripatetic professions who are compelled to have tied houses to obtain these benefits? I am sure that they would rather have permanent homes.
  This is a matter of grave injustice and I ask the Financial Secretary to consider it as such. We might let off the hook one or two spivs. Very well—let the spivs go. Let us do justice to those who serve their country.
  Mr. Robert Sheldon: The hon. Member for Falmouth and Camborne (Mr.
  764
  Mudd) asked about lighthouse men. There are two problems here. The first concerns the lighthouse man who owns his own house—probably buying it on mortgage—and who spends his time afloat. If his wife and family are resident there, he is eligible for mortgage relief. The hon. Gentleman may have been referring, however, to someone living in a Trinity House cottage—a tied home. He will not be eligible for mortgage relief but he will come into a category with whom I shall deal later.
  The hon. Member for Colne Valley (Mr. Wainwright) talked about clergymen and the hon. and learned Gentleman for Dover and Deal (Mr. Rees) asked about only or main residences, and the details of the extra-statutory concession. I have those details, and they make fairly turgid reading. I gave an explanation in Committee. I could give the hon. and learned Gentleman all the details now or, alternatively, I could send them to him.
  Mr. Peter Rees: Now, please.
  Mr. Sheldon: Very well. Section 29(7) of the Finance Act 1965 allows a taxpayer to choose which residence is to be regarded as his main residence for capital gains tax purposes. An occupant of tied accommodation who owns another house may therefore nominate the house he owns as his main residence, provided both that it is available to him for residential purposes and that he resides there at regular intervals. Each case will have to be considered on its own facts.
  Section 29(7) requires that any nomination should be made within two years of acquisition of the second residence. Where, however, the occupants of tied accommodation have been unaware of the need to make a nomination under the subsection and the time limit is past, inspectors will be prepared to accept a late notice of nomination. Those are the details for which the hon. and learned Member asked.
  Mr. Peter Rees: The difficulty I foresee arises in the case where a person has let his house while he has been away on foreign service. He may have let it for a considerable period. Would the inspector be prepared to accept a nomination in that situation?
  Mr. Sheldon: I shall be coming to the general problems in the course of my

  765
  remarks. That is probably the most important aspect with which I shall be dealing.
  Mr. Lawson: Is it necessary that the house that is nominated as the principal residence for capital gains tax purposes shall be the same house that is the principal residence for mortgage interest relief for tax purposes? Must it be the same house?
  Mr. Sheldon: It would be the only house that was owned, otherwise the point would not arise. One could hardly nominate a tied home that one did not own. We are considering the situation in which two homes are owned, one of which is nominated, possibly under the terms of the extra-statutory concession.
  The amendment provides for those living in tied accommodation and seeks to obtain for them the utmost relief for interest on loans—namely, on the purchase of a property. In Committee I undertook to consider the matter further and I envisaged two main groups. There are those in tied accommodation purchasing for their retirement and there are others—mention was made of them in a number of contributions to this debate— who have left their homes for tours of service overseas or elsewhere in the United Kingdom.
  The solution that I suggested was to let the property, until the owner was able to re-occupy, in the case of a person who went on a tour of service, or until retirement for those who purchased for that purpose. In that way the owners would find that they would be able to have their mortgage interest set off against the rent. That would provide no disadvantage to them, and would have the welcome effect of making the best use of the available housing stock. In Committee I mentioned the leaflet issued by the Department of the Environment entitled "Letting Your Own Home?" It is a useful guide on how to avoid what some would call the pitfalls, which appear to be readily capable of being avoided when examined.
  I have considered the arguments that have been adduced on possible relaxations. First, I shall deal with temporary absences. From the inquiries that I have been able to carry out in the limited way that has been available to me, it seems
  766
  that there are many people who make arrangements to let their own homes in a way that does not lose them their mortgage relief. There are parts of the country in which there are a number of such lettings. There are communities where such lettings are a fairly common feature.
  People let their own homes in that way for very good reasons. They do so to avoid losing mortgage relief, and partly to ensure that the fabric of the house is maintained. If the property is let, the fabric is looked after in a way that is not possible when a property is left vacant. However, there will be a number of hard cases where, for various reasons, such provisions will not be possible.
  9.15 p.m.
  In view of that I have considered the relaxation of the existing rules. If a person is required by his employment to move from his home, either overseas or elsewhere in the United Kingdom, for a period not expected to be more than four years, the property will still be treated as the only or main residence. There are two conditions which I believe can easily be met. The first is that the property was the person's only or main residence before he went away. The second is that it can reasonably be expected to continue to be his only or main residence after his return. That is a considerable advance over the one year that is normally allowed at present.
  I come to the second category—tied accommodation. The hon. and learned Member for Dover and Deal argued the case for clergy, prison governors and other categories, including certain school teachers. The problem presents great difficulty. These are people who already have living accommodation, sometimes rent-free and sometimes at a nominal rent. Sometimes they are not prepared to let the property, because they desire to use it as a weekend or holiday home. We should be realistic about that. No one is against such people using their houses as holiday homes but tax relief for that purpose is a difficult proposition to accept. Once we allowed tax relief for holiday homes it would be difficult to withstand argument for similar relief on the purchase of holiday homes to be given to people living in other forms of rented accommodation, or even council houses.

  767
  The hon. and learned Member for Dover and Deal referred to the right to choose the only or main residence. That is to open the provision very wide. It means that virtually anyone who rented a home would have the power to choose as his only or main residence a holiday home, a caravan, or something of that sort. Once we did that we should be moving on to very difficult ground. Such a right would not only be expensive; it would need to be set in the context of the general housing policy. For that reason, I am unable to accept a general relaxation. Nevertheless, taking into account some of the arguments used effectively in Standing Committee and to a lesser extent in the House, I am prepared to undertake to look again at this matter.
  I am particularly concerned about the clergy, to whom special factors apply. On 18th May I announced the setting up of a review to examine the distinction between representative and beneficial occupation in connection with the taxation of benefits. The issue before us turns on the question of accommodation provided with a person's job. I propose to have this matter re-examined together with the other review, which covers several closely related problems. If it is possible to give some limited relaxation, I shall be happy to bring forward proposals to the House when this information is available. Naturally, I cannot comment on what proposals may emerge, but I have expressed my general view, which I hope commends itself to the House.
  Mr. Peter Rees: These matters have dragged on for a considerable time. When does the hon. Gentleman expect to receive the result of the review? Those whose case we have deployed from the Opposition Benches wish to know whether they can expect some relief in the fairly near future.
  Mr. Sheldon: I cannot promise a date, and the hon. and learned Gentleman would not expect me to give a date. I want the inquiry to be as expeditious as possible.
  Mr. Fairbairn: Is the Financial Secretary seriously suggesting that he thinks it likely, or even possible, that many people will be able to rent houses and
  768
  buy other houses to abuse the system? That does not seem to be a likely proposition, but that is what he has said he fears. Does he really regard that as a likely manifestation of attitude if he makes a general relaxation?
  Mr. Sheldon: The hon. and learned Member misunderstands me. I was saying that there were a number of cases where the main purpose was to obtain tax relief for a holiday home. That kind of relaxation could extend to many people in not dissimilar circumstances.
  Mr. Nott: I suppose that the Financial Secretary has tried to help. I do not wish to be too critical, because we welcome the tone he used in answering the debate, but his remarks do not take us far enough.
  I wish to thank my hon. Friend the Member for Norfolk, South (Mr. MacGregor) for raising this important matter here and in Committee. I also want to thank others of my hon. Friends who have demonstrated the wide range of provisions which are affected by this new legislation. My hon. Friend the Member for Falmouth and Camborne (Mr. Mudd) mentioned Trinity House and coastguards, while my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) mentioned members of the Prison Service. Fire officers also are involved, and the clergy are the best-known examples. The police and members of the Armed Services are also affected. Every hon. Member knows of a Service man in his constituency who is affected. There are also members of the Civil Service and the Diplomatic Service —who are not short of untaxable fringe benefits—who have a genuine problem over mortgage interest relief when serving overseas.
  The Financial Secretary is obviously genuinely concerned about such cases and he has made some attempt to look into them. I shall deal with two categories which he selected. First, I shall deal with those who are moving abroad and who, by the nature of their jobs, have to move to other accommodation. The Financial Secretary said that he was prepared to extend the practice of the Inland Revenue to give extra-statutory concessions. Of course the Inland Revenue must have some discretion when dealing with individual cases, otherwise

  769
  our statute book would be even worse than it is. I do not dissent from the Inland Revenue having some discretion, but I agree with my hon. and learned Friend the Member for Dover and Deal, who said that he would like it all to be enshrined in the statute book. There will always be areas where an element of discretion must be given to the Inland Revenue.
  Mr. Robert Sheldon: Perhaps I can clarify the matter. The definition of "only or main residence" is the issue involved.
  Mr. Nott: I accept that discretion may be necessary in certain cases, but it is not satisfactory that the Revenue's discretion should be extended from one to four years. That does not seem to be the way to handle the matter. Such wide discretion should be in statutory form.
  One must ask "Why four years?" A person might have a tour of duty lasting four and a half or five years. I am not being niggardly, but an engineer, for instance, might be sent to the Middle East for longer than four years. It would have been better if the Financial Secretary had decided to allow the Revenue complete discretion to look at the facts of an individual case and to make a decision on them. That is not the main point I am making, but I think my hon. Friends will agree that the matter should be enshrined in statutory form.
  Mr. MacGregor: The four-year discretion will more easily help members of the Diplomatic Service than most other groups. One suspects that it may have been given mainly to meet their situation. Is it not the case that none of our other groups except people in companies with short service abroad will be helped by it?
  Mr. Nott: That may be the case. I do not know the reason for choosing four years.
  Mr. Robert Sheldon: A three-year period is about the normal maximum tour. Beyond three years, one is almost moving one's residence. I thought that this represented pretty well a maximum tour in ordinary service. I tried to be as helpful as possible in extending the period as much as I could.
  Mr. Nott: I think that the hon. Gentleman was trying to be helpful, but most Englishmen, even if they are working abroad for 10 years, want to retain roots in their own country, and this desire usually finds expression in a home to which they return on long leave.
  Mr. Costain: In a company such as BP, people generally do four tours of three years. Does each tour count separately, or will they be aggregated?
  Mr. Nott: My hon. Friend raises a fair point, but I am not the Minister and I am not here to answer those questions. I am trying to make a point on which I think all my hon. Friends agree.
  What about the person employed by Shell, or the police officer, the fire officer or the business man, or even the diplomat who, while abroad, decides to buy a home? Why should there be a distinction between the man who happens to have bought a home in England and a week later goes on a tour overseas and the man who is abroad but nips back and buys a house, which becomes his principal place of residence and for all intents and purposes, if not in tax terms, becomes his home? I understand that the man serving away from the place that he wishes to be his home base will not come within the Revenue's discretion.
  I am not criticising the Minister but am pointing out the flaws in what is proposed. I believe that the matter would be covered by our amendments.
  Mr. Lawson: This is a very important matter. There may be missionaries in Uganda who might feel that it was time to buy a home in this country. The amendment would deal with that, but the Financial Secretary and the Government are resisting it.
  Mr. Nott: The missionary in Uganda is a good example, as is the diplomat, perhaps a member of the High Commission in Kampala. I have made my point and I think that the Financial Secretary has it on board. I am not happy with the discretion, which is too tight and does not cover the point.
  I come to another area in which I much more greatly dissent from what the Financial Secretary suggests. I refer to the clergyman in tied accommodation. I. understand that we shall have to look

  771
  at the concept of representative occupation because of the tax-free comfort in which ministers live, and that the matter has all come up for review as a result of the criticism this year. The police house case is the excuse for reviewing the comfort in which ministers live without paying tax on their benefits. Because the Financial Secretary wants to help, he is to throw the clergy in with the Chancellor of the Exchequer and consider them all as part of the interdepartmental review. We want to help the clergy rather more than the Chancellor.
  9.30 p.m.
  I do not regard the point made by the Financial Secretary about possible abuse under our proposals as relevant. Our amendments deal with those who live in tied accommodation. They are surely a well-understood category of people. They have nothing to do with somebody who lives in a council house going off and buying a holiday home. If such a tenant buys a holiday home, it will be difficult to draw legislation in such a way that he may obtain tax relief on that home. Many council tenants, given the management of their housing estates, may feel that they live in a quasi-slavery. The fact is, however, that council tenants do not live in tied accommodation, and very few of them would go out and buy private accommodation while continuing to live in council homes.
  Next Thursday, subject to any further change, the House will debate the legislation on the tied agricultural cottage. We all know the meaning of that term. We are not talking about council tenants who obtain mortgage relief on large plush residences. Therefore, the Minister's argument does not make sense.
  All these problems stem from the Finance Act 1974. Here we are in 1976 and nothing has happened. Yesterday we heard about the interdepartmental committee on forestry, but it is more than a year since capital transfer tax was introduced. Furthermore, a period of two years has elapsed since the 1974 Act put the clergy in this situation. This is not good enough. Something should have been done about the situation earlier, because the Church authorities have been pressing this matter for two years or more.
  772
  Our amendments are clear and specific. The Financial Secretary has not said what is wrong with them. Because we feel that there is a genuine case affecting the police, prison officers, coastguards, the clergy in particular and the Armed Forces—and they are not covered by what the Financial Secretary said today —we feel that we should divide the House. I think that it would be most suitable, Mr. Deputy Speaker, to divide on Amendment No. 9.
  Mr. George Cunningham: Why are the Opposition dividing? They know that they will lose.
  Mr. Nott: I had not quite sat down. Let me say to the hon. Gentleman—
  Mr. Mark Hughes: On a point of order, Mr. Deputy Speaker. I clearly saw the hon. Gentleman's posterior reach his seat. That means that he had sat down.
  Mr. Deputy Speaker: The hon. Gentleman changed his mind.
  Mr. Nott: Surely I know better than the hon. Gentleman whether I have sat down. The hon. Member for Islington, South and Finsbury (Mr. Cunningham) should not assume that all Labour Members will go blindly through the Division Lobby on every occasion when the Government have a bad case. There are surely some Labour Members who will have sympathy with the situation of the clergy, the Armed Forces, Trinity House officers, coastguards, fire officers and police officers who do not obtain mortgage relief on their homes.
  Mr. Deputy Speaker: The Chair will put the Question on Amendment No. 8, which can be negatived if so desired. I understand that the matter for Division will be Amendment No. 9.
  Amendment negatived.
  Amendment proposed: No. 9, in page 16, line 33, at end insert:
  '(2) Where an individual occupies living accommodation provided by his employer and by reason of the terms of his employment he is required to reside in the accommodation provided and it is necessary for him to reside on the premises for the proper performance of his duties, that living accommodation shall not be treated as his only or main residence, but instead any land, caravan or houseboat which he purchases and elects to treat as

  773
  his only or main residence shall be treated for the purpose of Part II of Schedule 1 of the Finance Act 1974 as his only or main residence:
  Provided that a borrower and his spouse (unless separated) may elect only for one property, caravan or houseboat to be treated as his only or main residence at any particular time.
  (3) This section shall apply in respect of any interest paid in 1976–77 or any subsequent year of assessment'.—[Mr. Nott.]
  Question put, That the amendment be made:—
  The House divided: Ayes 174, Noes 193.

  Division No. 248.]

  AYES

  [9.34 p.m.

  Adley, Robert

  Harrison, Col Sir Harwood (Eye)

  Morrison, Hon Peter (Chester)

  Aitken, Jonathan

  Harvie Anderson, Rt Hon Miss

  Mudd, David

  Awdry, Daniel

  Havers, Sir Michael

  Neave, Airey

  Bain, Mrs Margaret

  Hawkins, Paul

  Nelson, Anthony

  Baker, Kenneth

  Hayhoe, Barney

  Newton, Tony

  Beith, A. J.

  Henderson, Douglas

  Nott, John

  Bell, Ronald

  Heseltine, Michael

  Oppenheim, Mrs Sally

  Bennett, Dr Reginald (Fareham)

  Holland, Philip

  Page, John (Harrow West)

  Benyon, W.

  Hooson, Emlyn

  Page, Rt Hon R. Graham (Crosby)

  Bitten, John

  Hordern, Peter

  Parkinson, Cecil

  Blggs-Davison, John

  Howell, Ralph (North Norfolk)

  Penhaligon, David

  Boscawen, Hon Robert

  Howells, Geralnt (Cardigan)

  Rees, Peter (Dover & Deal)

  Bottomley, Peter

  Hunt, John (Bromley)

  Rees-Davies, W. R.

  Brittan, Leon

  Hurd, Douglas

  Reid, George

  Brocklebank-Fowler, C.

  Irving, Charles (Cheltenham)

  Renton, Rt. Hon Sir D. (Hunts)

  Brotherton, Michael

  Jessel, Toby

  Rhys Williams. Sir Brandon

  Brown, Sir Edward (Bath)

  Johnson Smith, G. (E Grinstead)

  Ridsdale, Julian

  Buchanan-Smith, Alick

  Johnston, Russell (Inverness)

  Roberts, Michael (Cardiff NW)

  Budgen, Nick

  Joseph, Rt Hon Sir Keith

  Rodgers, Sir John (Sevenoaks)

  Bulmer, Esmond

  Kershaw, Anthony

  Ross, Stephen (Isle of Wight)

  Burden, F. A.

  Kilfedder, James

  Rossi, Hugh (Hornsey)

  Butler, Adam (Bosworth)

  Kimball, Marcus

  Rost, Peter (SE Derbyshire)

  Chalker, Mrs Lynda

  King, Evelyn (South Dorset)

  Sainsbury, Tim

  Clark, William (Croydon S)

  King, Tom (Bridgwater)

  St. John-Stevas, Norman

  Clarke, Kenneth (Rushcliffe)

  Kirk, Sir Peter

  Scott-Hopkins, James

  Clegg, Walter

  Kitson, Sir Timothy

  Shaw, Michael (Scarborough)

  Cooke, Robert (Bristol W)

  Knight, Mrs Jill

  Sims, Roger

  Cope, John

  Knox, David

  Sinclair, Sir George

  Cormack, Patrick

  Lamont, Norman

  Skeet, T. H. H.

  Costain, A. P.

  Langford-Holt, Sir John

  Smith, Cyril (Rochdale)

  Crawford, Douglas

  Latham, Michael (Mellon)

  Speed, Keith

  Douglas-Hamilton, Lord James

  Lawrence. Ivan

  Spence, John

  Dunlop, John

  Lawson, Nigel

  Sproat, Iain

  Dykes, Hugh

  Lewis, Kenneth (Rutland)

  Stainton, Keith

  Eden, Rt Hon Sir John

  Luce, Richard

  Stanbrook, Ivor

  Edwards. Nicholas (Pembroke)

  MacCormick, Iain

  Steel, David (Roxburgh)

  Emery, Peter

  McCrindle, Robert

  Stewart, Ian (Hitchin)

  Ewing, Mrs Winifred (Moray)

  McCusker, H.

  Stradling Thomas, J.

  Eyre, Reginald

  MacGregor, John

  Tapsell, Peter

  Fairgrieve, Russell

  Macmillan, Rt Hon M. (Fernham)

  Tebbit, Norman

  Fell. Anthony

  McNair-Wilson, M. (Newbury)

  Thatcher, Rt Hon Margaret

  Fletcher-Cooke, Charles

  Madel, David

  Thompson, George

  Forman, Nigel

  Marshall, Michael (Arundel)

  Trotter, Neville

  Fowler, Norman (Sutton C'f'd)

  Marten, Neil

  Tugendhat, Christopher

  Fox, Marcus

  Mather, Carol

  Wainwright, Richard (Colne V)

  Fry, Peter

  Maude, Angus

  Walder, David (Clitheroe)

  Gardner, Edward (S Fylde)

  Maudling, Rt Hon Reginald

  Walker-Smith, Rt Hon Sir Derek

  Gilmour, Sir John (East Fife)

  Mawby, Ray

  Wall, Patrick

  Goodhew, Victor

  Maxwell-Hyslop, Robin

  Warren, Kenneth

  Goodlad, Alastair

  Mayhew, Patrick

  Watt, Hamish

  Gorst, John

  Meyer, Sir Anthony

  Weatherill, Bernard

  Gow, Ian (Eastbourne)

  Mills, Peter

  Welsh, Andrew

  Gower, Sir Raymond (Barry)

  Miscampbell, Norman

  Wilson, Gordon (Dundee E)

  Gray, Hamlsh

  Moate, Roger

  Winterton, Nicholas

  Grimond, Rt Hon J.

  Monro, Hector

  Young, Sir G. (Ealing, Acton)

  Grist, Ian

  Montgomery, Fergus

  Grylls, Michael

  More. Jasper (Ludlow)

  TELLERS FOR THE AYES:

  Hall_Davis. A. G. F.

  Morris, Michael (Northampton S)

  Mr. Spencer Le Marchant and

  Hampson, Dr Keith

  Morrison, Charles (Devizes)

  Mr. Jim Lestor.

  Hannam, John

  NOES

  Abse, Leo

  Bean, R. E.

  Brown, Hugh D. (Provan)

  Allaun, Frank

  Benn, Rt Hon Anthony Wedgwood

  Brown, Robert C. (Newcastle W)

  Anderson, Donald

  Bennett, Andrew (Stockport N)

  Buchan, Norman

  Archer, Peter

  Blenkinsop, Arthur

  Buchanan, Richard

  Armstrong. Ernest

  Boardman, H.

  Callaghan, Rt Hon J. (Cardiff SE)

  Ashley, Jack

  Booth, Rt Hon Albert

  Callaghan, Jim (Middleton & P)

  Ashton, Joe

  Boothroyd, Miss Betty

  Campbell, Ian

  Atkins, Ronald (Preston N)

  Boyden, James (Bish Auck)

  Canavan, Dennis

  Atkinson, Norman

  Bradley, Tom

  Cant, R. B.

  Barnett Guy (Greenwich)

  Bray, Dr Jeremy

  Carmichael, Nell

  Clemitson, Ivor

  Hughes, Roy (Newport)

  Phipps, Dr Colin

  Cocks, Michael (Bristol S)

  Hunter, Adam

  Prescott, John

  Cohen, Stanley

  Irving, Rt Hon S. (Dartford)

  Price, William (Rugby)

  Coleman, Donald

  Jackson, Colin (Brighouse)

  Radice, Giles

  Conlan, Bernard

  Jackson, Miss Margaret (Lincoln)

  Rees, Rt Hon Merlyn (Leeds S)

  Cook, Robin F. (Edin C)

  Jay, Rt Hon Douglas

  Richardson, Miss Jo

  Corbett, Robin

  Jeger, Mrs Lena

  Roberts, Albert (Normanton)

  Cox, Thomas (Tooting)

  John, Brynmor

  Robinson, Geoffrey

  Craigen. J. M. (Maryhill)

  Johnson, James (Hull West)

  Roderick, Caerwyn

  Crawshaw, Richard

  Jones, Barry (East Flint)

  Rodgers, George (Chorley)

  Crowther, Stan (Rotherham)

  Jones, Dan (Burnley)

  Rodgers, William (Stockton)

  Cryer, Bob

  Kelley, Richard

  Rooker, J. W.

  Cunningham, G. (Islington S)

  Kilroy-Silk, Robert

  Roper, John

  Cunningham, Dr J. (Whiteh)

  Lambie, David

  Rose, Paul B.

  Dalyell, Tam

  Lamborn, Harry

  Ross, Rt. Hon W. (Kilmarnock)

  Davies, Bryan (Enfield N)

  Lamond, James

  Selby, Harry

  Davies, Denzil (Llanelli)

  Latham, Arthur (Paddington)

  Sheldon, Robert (Ashton-u Lyne)

  Davies, Ifor (Gower)

  Leadbitter, Ted

  Short, Rt Hon E. (Newcastle C)

  Deakins, Eric

  Lee, John

  Short, Mrs Renée (Wolv NE)

  Dean, Joseph (Leeds West)

  Lewis, Ron (Carlisle)

  Skinner Dennis

  de Freitas, Rt Hon Sir Geoffrey

  Litterick, Tom

  Small, William

  Dempsey, James

  Loyden, Eddie

  Snape, Peter

  Doig, Peter

  McCartney, Hugh

  Stallard, A. W.

  Dormand, J. D.

  McElhone, Frank

  Stewart, Rt Hon M. (Fulham)

  Douglas-Mann, Bruce

  MacFarquhar, Roderick

  Stoddart, David

  Duffy, A. E. P.

  McGuire, Michael (Ince)

  Stott, Roger

  Dunwoody, Mrs Gwyneth

  MacKenzie, Gregor

  Strang, Gavin

  Ellis, John (Brigg & Scun)

  Mackintosh, John P.

  Summerskill, Hon Dr Shirley

  English, Michael

  Maclennan, Robert

  Thomas, Dafydd (Merioneth)

  Ennals, David

  McMillan, Tom (Glasgow C)

  Thomas, Jeffrey (Abertillery)

  Evans, Fred (Caerphilly)

  McNamara, Kevin

  Thomas, Mike (Newcastle E)

  Evans, Gwynfor (Carmarthen)

  Magee, Bryan

  Thomas, Ron (Bristol NW)

  Evans,Ioan (Aberdare)

  Mahon, Simon

  Tierney, Sydney

  Ewing, Harry (Stirling)

  Marks, Kenneth

  Tinn, James

  Fernyhough, Rt Hon E.

  Marshall, Dr. Edmund (Goole)

  Tuck, Raphael

  Flannery, Martin

  Mason, Rt Hon Roy

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

  Foot, Rt Hon Michael

  Maynard, Miss Joan

  Walker, Terry (Kingswood)

  Fowler, Gerald (The Wrekin)

  Mellish, Rt Hon Robert

  Ward, Michael

  Freeson, Reginald

  Millan, Bruce

  White, Frank R. (Bury)

  Garrett, John (Norwich S)

  Miller, Dr M. S. (E Kilbride)

  White, James (Pollok)

  Gilbert, Dr John

  Molloy, William

  Whitehead, Phillip

  Golding, John

  Moonman, Eric

  Wigley, Dafydd

  Gourlay, Harry

  Morris, Alfred (Wythenshawe)

  Willey, Rt Hon Frederick

  Graham, Ted

  Morris, Charles R. (Openshaw)

  Williams, W. T. (Warrington)

  Grant, George (Morpeth)

  Murray, Rt Hon Ronald King

  Wilson, Alexander (Hamilton)

  Grocott, Bruce

  Ogden, Eric

  Wilson, William (Coventry SE)

  Hamilton, James (Bothwell)

  O'Halloran, Michael

  Wise, Mrs Audrey

  Hardy, Peter

  Orbach, Maurice

  Woodall, Alec

  Harrison, Waller (Wakefield)

  Ovenden, John

  Woof, Robert

  Hart. Rt Hon Judith

  Owen, Dr David

  Wrigglesworth, Ian

  Hatton, Frank

  Padley, Walter

  Young, David (Bolton E)

  Heffer, Eric S.

  Palmer, Arthur

  Horam, John

  Park, George

  TELLERS FOR THE NOES:

  Hoyle, Doug (Nelson)

  Parker, John

  Mr. Joseph Harper and

  Hughes, Mark (Durham)

  Parry, Robert

  Mr. Alf Bates.

  Hughes, Robert (Aberdeen N)

  Pendry, Tom

  Question accordingly negatived.

Clause 29

  ALTERATION OF PERSONAL RELIEFS
  9.45 p.m.
  Mr. Robert Sheldon: I beg to move Amendment No. 12, in page 16, line 34, leave out
  'In section 8(1A) and (1B) of the Taxes Act'
  and insert:
  'In section 8 of the Taxes Act (personal reliefs)—

  (a) in subsection (1)(a) (married) for "£955" there shall be substituted "£1,085";

  (b) in subsections (1)(b) (single) and (2) (wife's earned income relief) for "£675" there shall be substituted "£735";

  (c) in subsections (1A) and (1B)'.

  Mr. Deputy Speaker: With this we may take the following amendments:
  No. 14, in line 43, at end insert:
  '(3) In section 10(5) of that Act (restriction of relief where child has income exceeding £115) for "£115" there shall be substituted "£350" and at the end of the proviso there shall be inserted the words" and that in the case of a child who—

  (a) is under the age of eighteen at the end of the year of assessment and is unmarried throughout that year; and

  (b) either has not earned income or has earned income not exceeding £235,

  this subsection shall have effect with the substitution for the words "income exceeding £350" of the words "investment income (that is to say, income other than earned income) exceeding £115"—
  (4) In section 14(2) and (3) of that Act (additional relief for widows and others in respect of

  777
  children) for "£280" there shall be substituted "£350".
  (5) In section 14(2)(a) of that Act (relief available only for claimant entitled to relief under section 10 in respect of a child resident with him) after the words "resident with him" there shall be inserted the words "or would be so entitled apart from subsection (5) of that section".'.
  Amendment (c) to the proposed Amendment No. 14, in subsection (3), leave out from '£350' to end of subsection.
  Amendment (a) to the proposed Amendment No. 14, in subsection (3)(a), leave out eighteen 'and insert sixteen'.
  Amendment (b) to the proposed 'Amendment No. 14, in subsection (3)(a), leave out 'and is unmarried throughout the year'.
  Amendment No. 16, in page 16, line 43, at end insert:
  '(3) In section 10 of that Act (Children) for any reference to £115 there shall be substituted a reference to £300'.
  Government Amendment No. 195.
  Amendment No. 263, in line 44, at end insert:
  '(3) In section 8 of the Taxes Act (personal relief)—

  (a) for the reference in subsection (1)(a) (married) to £955 there shall be substituted a reference to £1,275; and

  (b) for the references in subsection (1)(b) (single) and (2) (wife's earned income) to £675 there shall be substituted references to £900'.

  Mr. Dafydd Wigley: On a point of order, Mr. Deputy Speaker. Earlier in the day, Mr. Speaker indicated that a separate vote would be allowed on Amendment No. 263. Will you confirm that that is the case, and that a vote can be taken, irrespective of whether Government Amendment No. 12 is agreed to?
  Mr. Deputy Speaker: The best answer will be to see how we get on with the Government amendment. We shall come to Amendment No. 263 in due course.
  Mr. Sheldon: This amendment implements the main part of the conditional reliefs set out in the Budget Statement by the Chancellor. Here we are using the tax system for the first time to increase take-home pay in return for cooperation on the pay agreement. The agreement has been accepted very widely, even though somewhat reluctantly by right hon. and hon. Members opposite.
  778
  They have endorsed it, querulously at first, then doubtfully, and finally grudgingly. It has also been endorsed in the TUC by 20:1. This was the final endorsement of the agreement that led to the conditional reliefs being implemented.
  We are fulfilling our part of the bargain in these amendements. We are giving reliefs amounting to £920 million for a full year, or a total of £1,300 million when one includes the child tax allowances and the age allowances, which were the unconditional parts of the package.
  Work has already begun in tax offices to implement these new reliefs. A start was made after the Ways and Means Resolution was passed on 7th July, and most people will receive the benefit in their pay packets on the first pay day after 26th July. Some people whose pay codes need revision will be in a situation in which the arrangements will take longer, and they will receive the benefit in their first pay packets after 16th August. All these benefits will be backdated to 6th April and they will represent a very welcome tax bonus, the size of which will depend on family circumstances and the level of pay.
  I shall give the House a broad guide to how much these benefits will be. A married man on average earnings will have a tax figure of £15 less than usual, and a single person will have a figure of about £7 less. Those who are just above the tax threshold may get a rebate, and those with children are already receiving the benefit of the lower tax deduction.
  Some hon. Members may talk about the removal of powers from the House of Commons. A month or two ago a number of Conservatives were saying this. Today we are showing what these powers mean, because we are debating the conditional relief in the House.
  Mr. Lawson: Rubbish.
  Mr. Sheldon: If the hon. Member feels that way he can vote against them if he wishes. It will be interesting to see whether he does vote against these reliefs. [Interruption.] I know that the hon. Member is rather bad-tempered. He always is on these matters. This is understandable, because there is a very wide division between the right hon. and

  779
  learned Member for Surrey, East (Sir G. Howe)—who has been extremely grudging in his welcome—the former Leader of the Opposition, the right hon. Member for Sidcup (Mr. Heath)—who has shown great enthusiasm—and the Shadow Employment Secretary, the right hon. Member for Lowestoft (Mr. Prior). I understand the Opposition's problem and I draw attention to it because it is likely to result in a certain amount of irritability on their side of the House.
  The child income limit above which relief is restricted has been increased from £115 to £350 in the case of children who have reached the age of 18 or are married. For younger children, the amendment raises the limit of earned income to £350, but retains £115 as the limit on any income that is ranked as investment income.
  The second of the proposals in Amendment No. 14 implements the conditional tax reliefs by raising personal allowances for single-parent families by £70, from £280 to £350. This allowance applies to two-parent families where the wife is totally incapacitated thoroughout the year of assessment.
  The third part of the clause eases the present rules for additional personal allowance to give an allowance to single- parent families who are unable to claim it at present because their children's income is above the limit of the child allowance. From now on, the level of the children's income will have no bearing on the parent's claim to the additional personal allowance. This follows an undertaking given by the Chief Secretary in Committee.
  Mr. Deputy Speaker: Before I formally put the amendment, it may be for the convenience of the House if I explain, so that it is quite clear, that we are discussing Amendment No. 14 with Amendment No. 12 and that it will be convenient to discuss at this time the sub-amendments that were called. At the appropriate time, should it be so desired, Divisions on the sub-amendments may take place.
  Mr. Lawson: The Financial Secretary has attempted to lead us into a whole new economic debate, but we have many important amendments to deal with tonight and, even if he is not anxious to
  780
  get his business through, we are anxious to give proper scrutiny to the remaining amendments. So I shall waste little time on the hon. Gentleman's comments except to say that it is the biggest nonsense of all to pretend that there would be any real increase in allowances as a result of these amendments.
  The increase in the married man's allowance is 12 per cent.—roughly half the rate of inflation of the past year. The increase in the single allowance is about 9 per cent.—an even smaller proportion. In real terms, allowances have declined and the rates of tax have risen. Even if the Financial Secretary is not prepared to index these figures, he should understand the difference between money terms and the real terms and not try to pull the wool over the eyes of hon. Members on this matter.
  It is significant that the Chief Secretary is not here to deal with this matter. In the normal course of events he would be with us, but he is dealing with what really matters. He is busy finalising the details of the £1,000 million cuts in public expenditure. That is really important in dealing with the problems of inflation and the management of the economy.
  By contrast, this residue of an irrelevant TUC deal is neither here nor there. At least the Chief Secretary has got his priorities right. He is dealing with what is important in economic policy. The Financial Secretary is concerned with a TUC deal which is of supreme irrelevance to the serious economic problems facing the country.
  10.0 p.m.
  I turn to Amendment No. 14. I welcome that amendment. The Financial Secretary said that it had been drafted in pursuance of an undertaking given by the Chief Secretary in Committee on the Floor of the House in reply to an amendment I moved on 13th May. It shows that persistence has paid in this matter.
  There was a manifest injustice in the way that parents of children, especially students, who tried to earn a little money in the vacation were treated. As soon as a child earned over £115, the parents' child allowance was taken away pound for pound. My hon. Friend the Member for Norfolk, South (Mr. MacGregor) pointed that out forcibly in his amendment in 1974. That amendment was

  781
  resisted by the Government. I moved another amendment to correct that injustice in 1975. That, too, was resisted by the Government.
  I moved a further amendment to the Finance Bill this year. The Chief Secretary said that he agreed with the point and would try to meet it. He has now met it, although he has not done so to my total satisfaction. However, the important fact is that he has very largely met the point. I welcome his response to the cause for which the Opposition have been fighting for the past three years.
  I made a number of points in Committee. [Interruption.] If Government supporters wish to intervene, I am more than happy to allow them to do so. I see the hon. Member for Keighley (Mr. Cryer) squatting. That does not prevent him from being voluble. If he wishes to rise, I shall be more than happy to give way to him. In Committee I showed prescience that I did not realise I possessed. On 14th May I said:
  "Even if they are not prepared to accept it"—
  that is, the concession for which we were pressing—
  "for unearned income, I hope that the Government will move an amendment of their own, accepting it for earned income.
  In the case of earned income one other objection was given last year by the Financial Secretary, when he said that we were just about to go away from child allowances and move to a whole new system of child benefits. That is not an argument for not acting now."—[Official Report, 13th May 1976, Vol. 911, c. 743.]
  My goodness, that is not an argument: the whole child benefit switch has been abandoned. However, the Government have, in this matter, acted now. I welcome their action.
  In Committee I pointed out—the point was also made by my hon. Friend the Member for Norfolk, South—that[Interruption.] When Government supporters make so much noise from a sedentary position, it is necessary for me to make every point at least twice. However, I am glad that Government supporters are present. I say that sincerely.
  In Committee I made the point that the existing system was particularly absurd, in that, while even help was
  782
  given to students who wished to draw social security benefits, perhaps because the National Union of Students advised them to, and the parents of such students did not suffer any reduction in the child tax allowance, the parent of a student who wished to finance himself in the long vacation by actually earning money was harshly penalised.
  The Government have now raised the amount that a child up to the age of 18, or any dependent child, may earn before there is a reduction in the parents' child allowance. The Government have raised the figure from £115—at which point it had remained since 1963–64, which is far too long—to £350. That is a reasonable improvement. However, I ask the Financial Secretary to explain the basis for that figure.
  Until 1963–64 the amount that a child could earn before there was any reduction in the parents' child allowance was the same as the allowance for a child under the age of 11. That would make it £300 at present. The Government have now come forward with a proposal to make it £350.
  I do not cavil at putting it still higher. But how is the figure of £350 arrived at? I suppose that it might be fixed there because it is the average of the allowance for a child between the ages of 11 and 16, which is £335, and the allowance for a child over 16, which is £365. I hope that the Financial Secretary will tell us whether that average was taken. It might, in fact, be more logical, because these children are mainly over 16, to take the allowance for a child over 16, which is £365.
  But unless we peg or anchor this allowance to one of the child allowances, it is likely to be forgotten again. We must not allow this allowance to get stuck as it has done in the past. We must not have a repetition of the 13 wasted years in which the allowance from 1963–64 to the present time stayed at £115. Since the Government are not prepared to index the allowance, as I believe they should, it is important that it be anchored to one of the child allowances which is under regular review so that it will automatically be regularly reviewed in the same way. I hope that the Financial Secretary will address himself to this point

  783
  The Government in their amendment have made a distinction—this is a novelty in the system—between earned and unearned income. The limit for investment income before there is any reduction of the parents' allowance remains at £115. Investment income is defined as anything other than earned income, which would include compensation for injury and that kind of income. It is not merely investment income in the normal sense.
  Although the Minister has met the main argument, which was concerned with earned income, petty malice is involved here. There is enough discrimination in the system against investment income, as it is: there is no need to add to it still further. If it is to be added to still further—this is the burden of one of our amendments—it should cease at the age of 16, not 18 as the Government would have it. After all, the age of 16 is a more rational break point. It is the school leaving age, the age at which a child can start taking a full-time job. It is also the age at which a child can get married, with parental consent. Therefore, 16 seems to be the logical break point rather than 18.
  I mentioned getting married, because this is mentioned in the Chancellor's own
  784
  amendment. There are additional arguments for this, with which I shall not detain the House, which are implicit in the Expenditure Committee's report on maintenance allowances for children between the ages of 16 and 18.
  The main point, however, is that, at long last, after great pressure from this side of the House over three years, the Chancellor has yielded. We welcome this concession. Parents with children in this age group will be delighted with the news. But we want an assurance that the allowance will not again be permitted to be left behind at a time of rapid inflation. The fact that it was left behind for 13 years, from 1963–64 to the present day, is a major scandal. This is one of the many arguments for indexation. I do not propose to develop that point now. The Financial Secretary knows my views on that matter.
  But it is important, if we are not going to let this allowance get left behind again, for the Financial Secretary to give us an assurance that the allowance will be tied in a fixed way to the other child allowances so that it will be automatically reviewed under the same procedure as the other allowances. For this affects a small but important minority in the community who otherwise will get left out.
  Mr. MacGregor: As my hon. Friend the Member for Blaby (Mr. Lawson) has said, on the very first Finance Bill with which I was involved when I came into the House I proposed an amendment along these lines, and I have been associated in every Finance Bill since, with my hon. Friend, in trying to pressurise the Government into doing something about this matter.
  I am unreservedly grateful to the Financial Secretary for honouring the commitment given in respect of this amendment. Since perseverance seems to have brought its own reward, I hope that the Minister will do the same next year in respect of the amendment about tied homes which we were discussing earlier. We shall attempt to persuade him to do so.
  I think the position was becoming quite ludicrous because there was a positive incentive to students simply to take social security benefits rather than try to earn during the summer vacation. That was an extra strong argument which the Minister has obviously now accepted.
  I do not want to be grudging in any way in my gratitude but there is one group in this general area which is still not covered, which, in Committee, we referred to only briefly but in respect of which, since the publicity given to this amendment, I have heard of further cases. This is the case of people on sandwich courses. One particular example often makes the point better than generalities. I have the case of somebody who has an 18-or 19-year-old son who is serving a six-month apprenticeship with British Leyland for which he gets what British Leyland describes as a subsistence allowance of £25 a week, provided, I presume, because he is living away from home. That is to enable him to meet all his commitments during that six-month course. He then spends the other six months at a polytechnic doing a course, reading business studies. I understand that the only grant which he has been given for this remaining six months is one of £2·90p for the whole year.
  Unfortunately, because he is earning this £25 a week, which over the period amounts to £600 and, therefore, takes him
  786
  over the top, his parents will not only have to meet the cost of his subsistence during the remainder of the six months but the boy's father will have his child allowance substantially reduced, even if not totally eliminated.
  However, this still seems to be an anomaly to which I hope that, on a future occasion, the Financial Secretary will apply his mind and perhaps deal with in the same way as he has dealt with the points that we have made in respect of child allowances.
  Mr. Wigley: May I thank you, Mr. Speaker, for calling Amendment No. 263. It is gratifying to have an opportunity to speak on it, because my party was not represented in the Committee. Perhaps those who decide these things will give us an opportunity in future years to make our points known on that occasion.
  As a party we feel strongly about the need to be more generous in the raising of the personal allowance. We feel that the Government have gone some way and, hearing the Minister speaking a moment ago, I appreciate the significance of the sum that the Government are allowing in terms of absolute cash. The magnitude of that sum, running up to almost £1,000 million, only reflects the effect of inflation, but it takes that much money only to catch up to half, or even one-third, of what is necessary to get back to the situation of 1972–73 in terms of allowances.
  There has been a grave change in income tax liability, particularly in respect of the lowest-paid, in recent years. That has had a very hard effect indeed on many who are in the lower quartile of manual employees.
  Last night we had a very moving debate on war widows, a debate in which certain hon. Members spoke against the amendment which helps war widows because they felt that there was an inequity and that what was being done for war widows should be done for other people who are, perhaps, equally deserving. One case cited was that of someone who came through the war alive and well only to die a few weeks later at the age of 36, with five children. His widow would not have benefited from the amendment passed last night.

  787
  10.15 p.m.
  A whole range of people deserve, if not as much, at least something like the benefit given to war widows. We should be considering the level at which the tax threshold files to ensure that income tax does not hit people whom it was never designed to hit.
  An Answer to the hon. Member for Walsall, South (Mr. George) some time ago showed that for a married couple with two children the income tax threshold in 1947–48 started at about 110 per cent. of average earnings. By 1972–73 the threshold was down to 60 per cent. The change in the last five years, particularly since 1972–73, has been even more staggering. The allowance for a married couple has dropped by 23 per cent. in real terms between 1972–73 and 1975–76. To return just to the 1972–73 level, not to mention the 1948 level, we calculate that we should need to raise the single person's allowance from £675 to £953. Our amendment specifies £900, so to that extent it underrates the job which needs to be done. The married couple's allowance would have to be increased to more than £1,200 and our amendment proposes £1,275. I emphasise that this is only to get back to the 1972–73 position, which has been so drastically and devastatingly eroded by the effects of inflation.
  Some groups have been hit particularly hard by this change. An Answer to the hon. Member for Norfolk, North (Mr. MacGregor) on 19th May showed that a manual family with four children had their tax threshold lowered from over 80 per cent. of average earnings in 1972 to only 59 per cent. in 1975–76. That is a staggering reduction for the group in society which can least afford to bear the burden—those who are nearest the door in terms of resources and cannot absorb this increased level of taxation.
  Indeed, it is the lowest-paid who have been relatively hardest hit. The lowest decile of manual workers with two children in 1970 paid on average 70p a week in income tax. In 1975 they were paying £4·10—an increase from 4·1 per cent. of gross pay to 11·1 per cent. That compares with the increase for the median of manual workers from 13·3 per cent. of gross pay in 1970 to 18·5 per cent. in 1975. So the increase for the lowest
  788
  decile was almost threefold but for the median it was less than 50 per cent. For the median of non-manual workers the increase was from 16·8 per cent. in 1970 to 20·8 per cent. of gross pay in 1975. It is the lowest-paid who have been hardest hit, largely because of the effect of inflation.
  There is a need for action by the House to make up for the effect of inflation where it hits hardest. Because the threshold bites more into the lower-paid, the tax net has caught many more people. In 1972 or thereabouts the changes in the thresholds meant that 3 million people were excluded from liability for income tax. I am certain that the changes since 1972 mean that many more people than those 3 million have been taken back into the tax net.
  Between 1970 and 1975 the earnings in real after-tax terms of the lowest quartile of non-manual workers increased by 5·6 per cent. and of the upper quartile by 4·6 per cent. That shows a narrowing of only 1 per cent. over five years in differentials. So it is a myth that there has been a great narrowing of the wages differentials over the last five or six years. The narrowing has been only 1 per cent. over five years, or 0·2 per cent. per annum on average.
  The net result is that families are beginning to pay income tax on 45 per cent. of average incomes in 1975 whereas it was paid on 55 per cent. of average earnings in 1970.
  The proposals in the amendment would cost money. I know that that will be the response from the Government Front Bench. The hon. Member for Horsham and Crawley (Mr. Hordern) received an Answer on 1st March to the effect that it would cost £1,260 million to effect half our proposed increase of the tax threshold. Presumably it would cost about £2,500 million for what we propose. But that is the cost that those at the lower end of the income scale have been asked to pay over the past four years towards the Government's programme. In other words, it is the cost of the MRCA programme—that might appeal to some Labour Members—that those at the lowest end of income scale are being asked to bear. Conservative Members might feel that it is the cost of the nationalisation programme. However, the fact is

  789
  that about £2,000 million to £2,500 million is now being borne by those who were not paying income tax some four years ago.
  The present situation is having a devastating effect. It is biting into people's living standards and affecting them gravely. Even more important, the Government should bear in mind the effect that it will have on their pay policy. The current incomes policy will not be sustainable unless there is a substantially greater movement of the income tax threshold. We ask the House to support Amendment No. 263 to help all those at the lower end of the income scale. The amendment will only regain the situation that existed in 1972.
  Mr. Nott: The provocative nature of the Financial Secretary's remarks in moving the Government amendment led me to believe that he is anxious to have another economic debate, especially on the pay deal. I am not slow to respond to that sort of challenge, but if the hon. Gentleman does not know how to get his own business I might at least assist him by failing to respond to the challenge that he threw out. We have debated the pay deal on sufficient occasions not to be provoked by his remarks.
  I fully support the remarks of the hon. Member for Caernarvon (Mr. Wigley). Every word he uttered received an echo on the Opposition Benches. I very much hope, Mr. Speaker, that you will allow a Division on Amendment No. 263. However, I fear that my hon. Friends will not be joining the hon. Gentleman in the Lobby in its support. That is not because we do not join him in spirit. Indeed, his every word was an indictment of the period of Socialist government, an indictment that could not have been put in better terms. If I may say so, Mr. Speaker, I sometimes wonder why Wales is Socialist. I sometimes wonder why the Welsh nationalists as a body tend frequently to support the Socialist Party rather than our own.
  The hon. Member for Caernarvon mentioned £2,500 million, and that is the price of Socialism. It is the extent to which real income has been taken out of the pockets of the lower-income groups and transferred into Government spend-
  790
  ing of the most profligate and wasteful sort.
  When the hon. Gentleman divides the House, if he is given the opportunity to do so, I am sure that the Conservative Party will support him in the Lobby in spirit. However, the sums involved are so vast that I am afraid we shall not actually be with him. Nevertheless, I hope that he will be able to demonstrate his own feelings and those of his party about the Government's record.
  Mr. D. E. Thomas: I support Amendment No. 263. Despite the kind and generous remarks made by the Conservative Front Bench spokesman, I want to suggest where the real difference is between our parties. It is not that we do not agree on the impact of inflation on low-income families generally under the Labour Government —and under the previous Conservative Administration. The question of the tax threshold has not been dealt with adequately by either Government. The major difference is in our priorities of public expenditure.
  Whereas Plaid Cymru would argue that transferred expenditure which becomes part of the social wage is desirable, public expenditure which is squandered on non-viable defence projects is no way to spend public resources. That is perhaps the major reason why neither in spirit nor in body are we more often in agreement with Conservative Members, some of whom are away both in spirit and in body at convenient times.
  The issue of the tax threshold and the impact of income tax and the interrelationship between the tax threshold and income maintenance policy has been neglected by the Government. A much-neglected document was published over a year ago entitled "A Joint Framework for Social Policy" by the Central Policy Review Staff. One of its central aims was to ensure greater co-ordination between Government Departments. Improved co-ordination is essential between the Treasury and the Department of Health and Social Security in securing a satisfactory relationship between benefits and tax thresholds. I hope that the Minister will indicate a firm intention to secure better integration to secure an overall policy to tackle family poverty.

  791
  Speaking in the debate on the Queen's Speech, the Chancellor of the Exchequer said:
  "income tax is already bearing heavily, not only on the average worker but also on the low paid."
  He did not go on to indicate the way in which the tax threshold has been biting further and further into the real income of families.
  According to figures recently produced by Mr. Chris Trinder, taking the tax threshold and its relation to national average earnings for different types of family between 1961–62 and 1975–76, and taking the level of 100 in 1961–62, the position of a single person now is down to 92 in terms of the level of the tax threshold in relation to national average earnings. Again taking the base figure of 100 in 1961–62, for a married couple with one child the position is down to 64 in the last financial year. Taking the same base figure, the position of a married couple with four children is down to 47 in 1975–76. The tax threshold for the four-children family has fallen to less than half of its 1961–62 value in the last financial year. That fall is far more than severe than the fall experienced by single persons. Families with children are being penalised severely at a time when the Government are talking of a need for a strategy for family poverty.
  I am concerned not only about the tax threshold position in relation to national average earnings but about the people below supplementary benefit level who are still being taxed. It is an incredible anomaly within our social security and tax systems that people with earnings below the official poverty line are being taxed.
  The Chancellor referred to that in his speech when he said:
  "There are now significant numbers of men and women whose earnings are below the level for supplementary benefit but who are now being taxed on those earnings. Yet to have kept such people out of tax by further increasing the personal allowances…I would have had to increase the basic rate of income tax by a further 3p, to 38p in the pound."— [Official Report, 25th November 1975; Vol. 901. c. 706.]
  Our amendment is aimed at raising the tax threshold to ensure that low-income families in poverty and families on sup-
  792
  plementary benefit are not subject to the high marginal tax rate from which they suffer now.
  In 1952 a married man with two children did not begin to pay tax until his earnings were 107 per cent. of average earnings. After the April 1975 Budget that same family man with two children began to pay tax as soon as his earnings were up to 49 per cent. of average earnings. If the tax threshold for that man had remained at the same level in proportion to average earnings as it was in 1952 the tax threshold for that family would now be £58·48p. But the same family starts to pay tax in 1975 on an income of only £26 a week.
  10.30 p.m.
  The Chancellor has admitted that the Government have not been able to maintain the level of tax thresholds in real terms. Successive Governments have failed to do it. Despite the Conservatives' kind words about our amendment, I doubt whether they would have been prepared to carry out what we propose had they been in office.
  In the 1975 Budget the married person's tax allowance was increased by only half the amount which would be needed to bring it up to its value at April 1974. That had substantial effects on low-paid workers and their families. I represent a relatively low-paid rural area with a high proportion of the population living on marginal incomes. That is why my party feels so strongly about the issue. We see how the tax threshold is eating into the low pay and social security benefits on which families in such areas must rely.
  This year many poor families whose head of household is in full-time work have started to pay income tax. The argument is similar to that last night about war widows. The proportion of income of working families taken in tax in the last tax year is significantly higher than the previous one. A married man with two children who is earning £25 a week will have paid £17·75 in tax during the tax year 1974–75. This year his tax bill for an equivalent level of earnings will rise to £89·25. That shows how inflation and the tax threshold have eaten into the income of poor families.
  It is incredible that the tax threshold has fallen to such a low level that families

  793
  earning low wages or on supplementary benefit or family income supplement are being taxed. We should like the Government to tell us that they will seriously examine the relationship between social security benefits and the taxation system. I see no reason why that should not be a priority for the Government. I know that a Royal Commission is looking at the overall distribution of income and wealth. We look to it to give us new statistics about the real wealth and poverty position in the United Kingdom. But we also look to the Government now to examine the real distribution of income between social benefits and taxation.
  I cannot stress sufficiently the problems of families on supplementary benefit and family income supplement who are being taxed. An estimate has been made by the Child Poverty Action Group that it would cost about £950 million to bring the tax threshold up to a level at which families on FIS would not be taxed.
  If the Government cannot go the whole way on our amendment, I press them to raise the tax threshold so that families are lifted at least to the FIS entitlement level. That would be only logical, let alone providing social justice, which the Labour Party pretends to support but so often fails to bring about.
  Mr. Robert Sheldon: The hon. Member for Merioneth (Mr. Thomas) asked for an assurance that in the coming year I would consider the relationships between social benefits and the tax system. I can give him that assurance. This is a matter of the highest importance, and the interaction between the two is becoming more and more important as the benefits are revalorised at higher levels than the tax thresholds. We have discussed this matter on a number of occasions and it will receive my close attention.
  Amendment No. 263 would be very expensive. It would involve extra relief amounting to a figure of £1,500 million compared with that which we have already undertaken to provide. I am sure the hon. Gentleman will forgive me if I call it a "cornucopia amendment" since it is beyond the capacity of any Government, faced with the present economic situation, to meet the request embodied in it. I understand the important principle behind the amendment and I appreciate the amount of work undertaken by both the hon. Member for Merioneth and the
  794
  hon. Member for Caernarvon (Mr. Wigley) in tabling their suggestions.
  I know that both hon. Gentlemen will expect me to spend a little time in considering the detailed points which they have made and the figures that underlie their contributions. I shall be happy to examine the matter, and if any points emerge from their speeches which I might usefully take up, I shall be happy to do so.
  The hon. Member for Norfolk, South (Mr. MacGregor) asked me about sandwich courses. I regard such courses as extremely important because they are the finest form of training for industrial management. I am always happy to provide assistance, and, indeed, I have been able to do so on one or two previous occasions. I shall take up his points and consider them.
  The hon. Member for Blaby (Mr. Lawson) pointed out his own persistence in trying to obtain an increase in the child income limit and claimed credit for his own role. I am happy to accept that, but he must remember that many people before him have drawn attention to these matters. The hon. Gentleman seems to think that nothing of importance ever happened in this House before his arrival. These matters were raised by a number of hon. Members, including me. The main difference is that in those days—I am not making a party point here—Ministers did not take a great deal of notice of what was said in Committee. These days Ministers obviously are more ready to respond to what is said.
  The hon. Member will not want me to go further into the indexation argument. We have explored that matter on other occasions and I do not wish to get caught up in it again. I think I owe the hon. Gentleman an explanation on the question of the level at which the figure is set and the reasons for it. The right hon. and learned Member for Surrey, East (Sir G. Howe) and the hon. Member for Guildford (Mr. Howell) tabled an amendment to provide for a figure of £365. We have gone rather nearer to that proposal than we have gone to the proposal of the hon. Member for Blaby. The hon. Gentleman may consider that a sign of generosity on our part.
  Mr. Lawson: Will the Minister consider one important point? Is this proposal

  795
  being anchored to an existing child allowance, or is it to be left on its own? The £365 related to an allowance for a child over 16. If the figure is not anchored to an existing child allowance, there is a fear that the matter will be left as it is for many years to come.
  Mr. Sheldon: It will come as no surprise to the hon. Gentleman to hear that I can offer him no assurance on that point. He seeks to align any level of benefit or allowance with the cost of living, either directly or indirectly. I am afraid that I can give him no assurance on that matter.
  Mr. Speaker: I wish to explain to the House why I am unable to call for Division Amendment No. 263 in the name
  of the hon. Member for Caernarvon (Mr. Wigley) which is being taken with this group. If Government Amendment No. 12 is carried, Amendment No. 263 will fall. That would be inconsistent with a decision taken by the House. Therefore, to allow an opportunity for a Division, I propose to accept a manuscript amendment to Government Amendment No. 12. That amendment occurs in line 3 and seeks to leave out '£1,085' and insert '£1,275'.
  Manuscript amendment proposed: In line 3, leave out '£1,085' and insert '£1,275'.—[Mr. Wigley.]
  Question put, That the amendment be made:—
  The House divided: Ayes 24, Noes 191.

  Division No. 249.]

  AYES

  [10.40 p.m.

  Bain, Mrs Margaret

  Johnston, Russell (Inverness)

  Watt, Hamish

  Bradford, Rev Robert

  Kilfedder, James

  Welsh, Andrew

  Brotherton, Michael

  Penhaligon, David

  Wigley, Dafydd

  Dunlop, John

  Reid, George

  Wilson, Gordon (Dundee E)

  Evans, Gwynfor (Carmarthen)

  Ross, Stephen (Isle of Wight)

  Winterton, Nicholas

  Grimond, Rt Hon J.

  Smith, Cyril (Rochdale)

  Henderson, Douglas

  Steel, David (Roxburgh)

  TELLERS FOR THE AYES:

  Hooson, Emlyn

  Thomas, Dafydd (Merioneth)

  Mrs. Winifred Ewing and

  Howells, Geraint (Cardigan)

  Thompson, George

  Mr. Douglas Crawford.

  NOES

  Aliaun, Frank

  Davies, Ifor (Gower)

  Irving, Rt Hon S. (Darlford)

  Anderson, Donald

  Deakins, Eric

  Jackson, Colin (Brighouse)

  Archer, Peter

  Dean, Joseph (Leeds West)

  Jackson, Miss Margaret (Lincoln)

  Armstrong, Ernest

  de Freitas, Rt Hon Sir Geoffrey

  Jay, Rt Hon Douglas

  Ashton, Joe

  Dempsey, James

  Jeger, Mrs Lena

  Atkins, Ronald (Preston N)

  Doig, Peter

  John, Brynmor

  Atkinson, Norman

  Dormand, J. D.

  Johnson, James (Hull West)

  Barnett Guy (Greenwich)

  Douglas-Mann, Bruce

  Jones, Barry (East Flint)

  Bates, Alf

  Duffy, A. E. P.

  Jones, Dan (Burnley)

  Bean, R E.

  Dunwoody, Mrs Gwyneth

  Kelley, Richard

  Benn, Rt Hon Anthony Wedgwood

  Ellis, John (Brigg & Scun)

  Kilroy-Silk, Robert

  Bennett, Andrew (Stockport N)

  English, Michael

  Lambie, David

  Blenkinsop, Arthur

  Ennals, David

  Lamborn, Harry

  Boardman, H.

  Evans, Ioan (Aberdare)

  Lamond, James

  Booth, Rt Hon Albert

  Ewing, Harry (Stirling)

  Latham, Arthur (Paddington)

  Boothroyd, Miss Betty

  Fernyhough, Rt Hon E.

  Leadbitter, Ted

  Bradley, Tom

  Flannery, Martin

  Lewis, Ron (Carlisle)

  Bray, Or Jeremy

  Foot, Rt Hon Michael

  Litterick, Tom

  Brown, Hugh D. (Provan)

  Ford, Ben

  Loyden, Eddie

  Brown, Robert C. (Newcastle W)

  Fowler, Gerald (The Wrekin)

  McCartney, Hugh

  Buchan, Norman

  Freeson, Reginald

  McElhone, Frank

  Buchanan, Richard

  Garrett, John (Norwich S)

  MacFarquhar, Roderick

  Callaghan, Jim (Middleton & P)

  Gilbert, Dr John

  McGuire, Michael (Ince)

  Campbell, Ian

  Ginsburg, David

  MacKenzie, Gregor

  Canavan, Dennis

  Goodhart, Philip

  Mackintosh, John P.

  Cant, R. B.

  Gourlay, Harry

  Maclennan, Robert

  Carmichael, Nell

  Graham, Ted

  McMillan, Tom (Glasgow C)

  Clemitson. Ivor

  Grant, George (Morpeth)

  McNamara, Kevin

  Cocks, Michael (Bristol S)

  Grocott, Bruce

  Magee, Bryan

  Cohen, Stanley

  Hamilton, James (Bothwell)

  Mahon, Simon

  Coleman, Donald

  Hardy, Peter

  Marks. Kenneth

  Conlan, Bernard

  Harper, Joseph

  Marquand, David

  Cook, Robin F. (Edin C)

  Harrison, Walter (Wakefield)

  Marshall, Dr. Edmund (Goole)

  Corbett, Robin

  Hart. Rt Hon Judith

  Maynard, Miss Joan

  Cox, Thomas (Tooting)

  Hatton, Frank

  Millan, Bruce

  Crawshaw, Richard

  Heffer, Eric S.

  Miller, Dr M. S. (E Kilbride)

  Crowther, Stan (Rotherham)

  Horam, John

  Molloy, William

  Cryer, Bob

  Hoyle, Doug (Nelson)

  Morris, Alfred (Wythenshawe)

  Cunningham, G. (Islington S)

  Hughes, Rt Hon C. (Anglesey)

  Morris, Charles R. (Openshaw)

  Cunningham, Dr J. (Whiteh)

  Hughes, Mark (Durham)

  Murray, Rt Hon Ronald King

  Dalyell, Tam

  Hughes, Robert (Aberdeen N)

  Ogden, Eric

  Davies, Bryan (Enfield N)

  Hughes, Roy (Newport)

  O'Halloran, Michael

  Davies, Denzil (Llanelli)

  Hunter, Adam

  Orbach. Maurice

  Ovenden, John

  Rowlands, Ted

  Wainwright, Edwin (Dearne V)

  Owen, Dr David

  Selby, Harry

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

  Padley, Walter

  Sheldon, Robert (Ashton-u-Lyne)

  Walker, Terry (Kingswood)

  Palmer, Arthur

  Short, Rt Hon E. (Newcastle C)

  Ward, Michael

  Park, George

  Short, Mrs Renée (Wolv NE)

  Watkins, David

  Parker, John

  Skinner Dennis

  Watkinson, John

  Parry, Robert

  Small, William

  White, Frank R. (Bury)

  Phipps, Dr Colin

  Snape, Peter

  White, James (Pollok)

  Prescott, John

  Stallard, A. W.

  Whitehead, Phillip

  Price, C. (Lewisham W)

  Stewart, Rt Hon M. (Fulham)

  Willey, Rt Hon Frederick

  Price, William (Rugby)

  Stoddart, David

  Williams, Sir Thomas

  Radice, Giles

  Stott, Roger

  Wilson, Alexander (Hamilton)

  Richardson, Miss Jo

  Strang, Gavin

  Wilson, William (Coventry SE)

  Roberts, Albert (Normanton)

  Strauss, Rt Hon G. R.

  Wise, Mrs Audrey

  Robinson, Geoffrey

  Summerskill, Hon Dr Shirley

  Woodall, Alec

  Roderick, Caerwyn

  Thomas, Jeffrey (Abertillery)

  Woof, Robert

  Rodgers, George (Chorley)

  Thomas, Mike (Newcastle E)

  Wrigglesworth, Ian

  Rodgers, William (Stockton)

  Thomas, Ron (Bristol NW)

  Young, David (Bolton E)

  Rooker, J. W.

  Thorne, Stan (Preston South)

  Roper, John

  Tierney, Sydney

  TELLERS FOR THE NOES:

  Rose, Paul B.

  Tuck, Raphael

  Mr. Tom Pendry and

  Ross, Rt. Hon W. (Kilmarnock)

  Urwin, T. W.

  Mr. James Tinn.

  Question accordingly negatived.
  Amendments made: No. 12, in page 16, line 34, leave out
  'In section 8(1A) and (1B) of the Taxes Act'
  and insert
  'In section 8 of the Taxes Act (personal reliefs)—

  (a) in subsection (1)(a) (married) for "£955" there shall be substituted "£1,085";

  (b) in subsections (1)(b) (single) and (2) (wife's earned income relief) for "£675" there shall be substituted "£735";

  (c) in subsections (IA) and (1B)'.—[Mr. Robert Sheldon.]

  No. 13, leave out line 37 and insert—
  '(2) In the year 1976–77 only, the allowances set out in section 10(3) of the Taxes Act (children) shall be amended as follows—'.—[Mr. George Cunningham.]
  No. 14, in line 43 at end insert—
  '(3) In section 10(5) of that Act (restriction of relief where child has income exceeding £115) for "£115" there shall be substituted "£350" and at the end of the proviso there shall be inserted the words "and that in the case of a child who—

  (a) is under the age of eighteen at the end of the year of assessment and is unmarried throughout that year; and

  (b) either has not earned income or has earned income not exceeding £235,

  this subsection shall have effect with the substitution for the words "income exceeding £350" of the words "investment income (that is to say, income other than earned income) exceeding £115".
  (4) In section 14(2) and (3) of that Act (additional relief for widows and others in respect of children) for "£280" there shall be substituted "£350".
  (5) In section 14(2)(a) of that Act (relief available only for claimant entitled to relief under section 10 in respect of a child resident with him) after the words "resident with him" there shall he inserted the words "or would
  798
  be so entitled apart from subsection (5) of that section".'.—[Mr. Robert Sheldon.]
  Mr. John Hannam: I beg to move, in line 43, at end insert—
  '(3) In section 10(5) of the Income and Corporation Taxes Act 1970 after the words "or other similar education endowment" shall be added "or of a mobility allowance awarded under section 37A of the Social Security Act 1975".
  (4) After section 16(5) of the Income and Corporation Taxes Act 1970 shall be added the following subsection:—
  "(6) In calculating the income of any such person as is mentioned in subsection (I) above, no account shall be taken of a mobility allowance awarded under section 37A of the Social Security Act 1975"'.
  The amendment, in the name of hon. Members on both sides who take an active part in disablement matters, was debated in the previous debate on 13th May. In view of the preceding debate which has taken place on Government Amendment No. 14, which raised the child's disregard from £115 to £350, it would indeed be churlish not to thank the Government for accepting the arguments put forward during the Committee stage by hon. Members on both sides of the House.
  The raising of the disregard level for earned income will now mean that a child receiving the mobility allowance and no other income will be able to keep the full amount of that allowance and will not in future lose half of the excess over the £115. But a disabled child in receipt of the mobility allowance of £260 who also receives some investment income which may exceed £115 may once again be in the trap of losing a pound for every pound of the child's tax allowance.
  If the rather inadequate £5 a week mobility allowance is increased in the near

  799
  future, as everyone hopes it will be—because at the moment it is not a proper alternative for a disabled person to the provision of a vehicle—we shall once again be back in the situation where, unless the disregard is adjusted up again, remembering that it has not been adjusted for a number of years before today, the 50 per cent, tax situation will arise for children receiving the mobility allowance.
  I shall not repeat all the arguments that were advanced on 13th May. Suffice it to say that we exposed what appeared to be an anomaly which the Minister accepted. In the end, he asked for further representations to be made and said that he would look again at the amendment and the principle behind it.
  It is the principle which is still at stake. We ask whether the income of a disabled dependent relative or child who is so disabled as to be in receipt of the mobility allowance should be aggregated with the parents' income for tax purposes. I do not argue for a tax-free mobility allowance, which is what the Minister seemed to imply in reply to the previous debate. If a child has other income which, together with the allowance, brings the total to a sum above the level of personal allowances, we should expect that child, like everyone else, to pay the fair whack of tax. But it must be unfair, and it cannot be the Government's intention, to have a situation where a disablement allowance like the mobility allowance awarded as of right to a child to enable him or her to get about and to live as integrated a life as possible results in its recipient being brought into the tax net.
  We are pleased that Government Amendment No. 14 will lift this problem temporarily from the child receiving the basic allowance, but the danger remains that the tax erosion of the mobility allowance will start all over again when it is increased at some stage in the future. If some other unearned income exceeding £115 arises—possibly from the investment of a mobility allowance over previous years, or possibly from compensation for an injury or accident—we are back in this heavy 50 per cent. loss of the child's tax allowance.
  The fact that the mobility allowance is treated as earned income is a great
  800
  advantage, and I should like the Minister to confirm that it is treated as earned income.
  We are also concerned about the continuing £115 threshold for adult dependants, and the second part of our amendment, subsection (4), therefore, is vitally important. I remind the Minister of the case of the 25-year old severely disabled adult dependant from Hounslow who was losing £65 a year of the mobility allowance because of the loss of the tax allowance. If a disabled person of 19, 20 or 25 in receipt of the mobility allowance finds himself in this position, surely he should be allowed the full value of the mobility allowance. As I understand it, this bar to the disabled adult dependant still remains at £115.
  This amendment seeks to remove the mobility allowance, as already we have educational endowments removed, from the parents' taxable income. It does not involve any increased Government expenditure. It will not affect the position of a child's other income. It will remove an anomaly which will prove damaging once again in the future if it is allowed to remain part of this legislation.
  11.0 p.m.
  I wrote to the Financial Secretary early in June pointing out the effects of this anomaly on poorer families with disabled children or dependants. I had hoped to receive a reply before this debate, because it may have affected my attitude.
  The Minister in a previous debate was unable to refute my arguments on this matter. The long-awaited uplifting of the disregard for earned income will alleviate the problem at this moment, but the anomaly still remains. I hope that the Government will accept this amendment, and the principle behind it.
  Mr. Robert Sheldon: The amendment moved by the hon. Member for Exeter (Mr. Hannam) provides that for child allowance no account shall be taken of any mobility allowance received by the child or dependent relative. The £5 a week allowance comes to a total of £260 a year, and the hon. Gentleman gratefully accepted the previous amendment, the purpose of which was to increase to £350 the child's income limit. He accepts graciously that this goes perhaps the

  801
  whole way to meeting his points, but he expressed some doubt about the possibility of tax erosion of the mobility allowance. I see his point.
  It is not for me to give the hon. Member the assurance he seeks on these matters, which are the province of others as well as myself. But we have gone so far in advance of the mobility allowance—£350 compared with £260—that, naturally, looking at these matters, one would be surprised if the two were ever to overlap in the way they have done in the past. Although no one in my position could give him that categorical assurance, he may seek some comfort from the fact that the new figure exceeds the mobility allowance by such a large amount.
  Mr. Hannam: Does the Minister accept that there is a limit of £235 on earned income by a child, and often there is unearned income which can accrue from compensation, or other factors, which will be included in the £350? Therefore, there is not such a great overlap above the mobility allowance as that which he indicated in his remarks.
  Mr. Sheldon: The £350 includes all the income of the child concerned. If that child gets a large amount of other income besides the mobility allowance, it will, of course, use up some of the allowance, but that is not the point of the original amendment. We have met the main points in what is not an ungenerous way. The campaign which the hon. Member for Exeter has rightly carried out for these people has resulted in his point being met by the concessions and understanding which we have shown.
  Mr. Hannam: Will the Financial Secretary answer the particular question about dependent adults? As I understand it, they are barred at £115. Anyone over 18 who will receive a mobility allowance will find himself or herself in exactly the same position as before.
  Mr. Sheldon: If the hon. Member is talking about an incapacitated relative, such a relative can have an income of up to £731.
  Amendment negatived.
  Mrs. Lynda Chalker: I beg to move Amendment No. 234, in page 16, line 43, at end insert—
  802
  '(2A) In section 15(l) of the Finance Act 1974 (Maintenance payments), after the word "benefit" delete "the first £1,000 of."'.
  I am most grateful to you, Mr. Speaker, for calling this amendment, even though it seems to have come as a surprise to many hon. Members that the addendum should be added to the provisional selection of amendments. It is an important amendment.
  Dedicated followers of debates on Finance Bills will recall that I first raised the question of the investment income surcharge on the maintenance income of divorced and separated women in the House last May. I stressed then the story of how my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) had attempted to rectify a very real injustice way back in 1965. I recalled that the right hon. Lady the Member for Blackburn (Mrs. Castle) had said in 1960–16 years ago now—that it was an outrage that women who had had to face the break-up of family life and their home should have their housekeeping income awarded as maintenance treated as if it were investment income.
  Lest anybody should inquire, let me declare now that I have no personal interest in the amendment: I receive no maintenance, by agreement with my former spouse.
  This is a very difficult situation. If a marriage breaks up in amicable circumstances, the amount of maintenance is agreed between the separated partners without recourse to the courts. In that case, the payment of tax is settled between the former husband and wife so that the wife receives her housekeeping without the interference of any Government Department.
  The concern of my amendment is for those whose maintenance has to be agreed through the courts, where the divorce is less amicable or more complicated. I am well aware that our lawyers can in many cases of separation and divorce arrange successful maintenance without undue hassle, but there are an increasing number of divorces, and thus there are an increasing number of difficulties faced by separated and divorced women when it comes to the maintenance payments that they are allocated by the courts.
  A divorced husband is allowed tax relief on the alimony or maintenance

  803
  that he pays, but the divorced recipient pays tax—not just the ordinary basic rate tax, but the investment income surcharge —on all the maintenance income above £2,000. Maintenance income is being treated by our finance laws as unearned income. This is grossly unfair, and I sincerely hope that right hon. and hon. Members on both sides will listen carefully to the grounds on which I shall continue to fight hard to right this injustice once and for all.
  On the last occasion when I raised this issue in Committee on the Floor of the House the Chief Secretary first sought to say, by implication, that the Government's action in past years in increasing personal allowances for widows had helped divorced recipients of court-agreed maintenance. This was absolute nonsense, so the right hon. Gentleman quickly changed tack once that was pointed out to him. He then told the House that his Government had
  "given additional relief for the woman on maintenance income, and £1,000 has been added to the £1,000 relief applying already, so there is £2,000 of investment income relief already for that woman."—[Official Report, 11 th May 1976; Vol. 911, c. 399.]
  The Chief Secretary also tried to imply on that occasion that I had not understood the matter. I can tell him that he was very wrong.
  Let me quickly remind the House of this Government's previous actions in respect of the maintenance income of divorced women. Under Section 15(1) of the Finance Act 1974 the first £1,000 of maintenance payments was exempted as investment income. At the same time, we experienced a reduction of the exemption limit for investment income surcharge from £2,000 down to £1,000, with Section 15 of the 1974 Act providing the additional exemption of £1,000. Thus, the divorced woman receiving maintenance was no worse off. It was no great concession for her; it was simply maintaining the status quo, while others received tougher treatment from this Government—which, perhaps, the House would have expected.
  The entire payments situation of the divorced or separated couple rests on Sections 52 and 53 of the Income and Corporation Taxes Act 1970. The end result is that the ex-husband bears no
  804
  effective charge on that part of his income which he uses to pay maintenance, but his ex-wife receives her maintenance less an amount equal to the tax charged at standard rate on earned income, but that income is then treated as unearned and is subject to the investment income surcharge for all maintenance of £2,000 per annum, or less than £40 a week. I remind the House that this is somewhat less than two-thirds of the average industrial wage, and she is seeking to do with that money many of the things for which a man today will not work because it is not worth working, because it is worth resting on the State for that sort of income.
  Back in May I mentioned the growing number of divorces and the growing number of women being affected by a new sort of poverty trap as well as the greatly decreased purchasing power of the £2,000 maintenance before double taxation, which is what these divorced and separated women face.
  Many of these families are now in extremely difficult circumstances as a result of inflation, and, despite the warnings given in the House over the past 16 years, there has been no move by the Government to rectify their plight. I warned the Chief Secretary on 11th May, and I had hoped that the Government would see fit to correct both an injustice and a financial hardship at the same time. If the Financial Secretary and his right hon. Friend refuse to act, I shall do my best to make them act in this matter. So far as we have been able to calculate, the sum of money involved is not large, though I expect that we shall hear from the Government that they are not inclined to accept the amendment.
  Maintenance income is not investment income. It is fully earned. It is not unearned. Any woman who looks after husband and family over a period of years does not usually receive enough in the housekeeping to put money on one side to save. Some people would compare the maintenance income of a divorced woman with the pension which a widow might receive, because the divorced woman in certain circumstances, I think, can justifiably feel as though she has been pensioned off.
  We do not treat the pension money as unearned income. We do not subject it to the investment income surcharge.

  805
  But we subject to this system the maintenance income of a divorced woman when it is agreed through the courts.
  If one goes through a comparison of a widow's financial position with that of the ex-spouse, one finds time and again that the ex-spouse comes off far worse, with a number of similar penalties and a number of other greater penalties besides the simple taxation penalties. The investment income tax relief is applicable to the widow but not to the ex-spouse. There is an additional tax allowance for the widow as a single parent, but not for the ex-spouse. There is freedom to earn an income without reduction or cancellation of maintenance because that is not a matter for the widow.
  Thus, the ex-spouse comes off worse in each respect. The investment income surcharge discriminates heavily against the divorced woman in respect of higher maintenance over £2,000. The larger the proportion of tax paid by the recipient, the greater is the reduction of the tax liability of the husband. The Chief Secretary has often declaimed his hatred of discriminatory taxation. Here is just such a case. The paying husband gets standard rate tax relief, for he has all the benefit of the allowances, including that for maintenance, while his recipient wife pays investment income surcharge on top of basic rate and higher rate tax on all her receipts.
  11.15 p.m.
  It is no excuse to say that the lawyers may sort the matter out elsewhere. A fortunate person may have a lawyer who sorts out the matter equitably. But that should not be the basis of the laws that we make. The basis of the law should be justice and fairness to all the parties involved. Parliament must not fall over backwards to be just to the paying husband and not to the recipient wife in respect of investment income surcharge on maintenance payments. If the Treasury Bench continues a discriminatory practice which helps the higher-paid husbands whose marriages have ended, it will go against everything it has said on practically every other issue that it has resisted.
  If the Treasury Bench is truly against using the tax system to help particular groups of taxpayers, it has no argument against accepting this amendment. Tonight the Chief Secretary may take the
  806
  first steps to stop unfair discrimination. He may accept my amendment, which simply leaves maintenance payments subject to basic and higher rates of taxation but excludes them from treatment as investment income—for those payments are not investment income.
  Mr. Robert Sheldon: The House will have listened with interest to the spirited arguments produced by the hon. Member for Wallasey (Mrs. Chalker). What the hon. Lady said on the subject came as no surprise. We listened to her with respect and interest and—if we cannot accept her arguments—a little trepidation.
  The purpose of this amendment is to exempt from the investment income surcharge all payments of maintenance. When we look at the cases of which the hon. Lady has knowledge, and which we have learned something about, we recognise that a number of them are the cause of great concern and, frequently distress.
  It is difficult to provide an estimate of cost of the amendment, as the information on which to base it is just not available. We always look at these matters with some doubt as we hone that further methods of analysing them may come to light so that we may be able to give an estimate which hon. Members may use either for or against the argument.
  The first £1,000 of maintenance payment to the divorced or separated wife is not treated as investment income. I should explain the two types of income that qualify for either earned income status or investment income status. Earned income status is applicable to wages, salaries and pensions. Investment, or what we used to call unearned income is the rest. That is no condemnation of the second category of income. It just does not fit in with the first category. [Interruption.] If the Opposition will allow me, I shall go on to provide the justification. I hope that hon. Gentlemen will listen. If they have any questions I shall be glad to do what I can to answer them.
  We introduced the £1,000 exemption limit, plus the additional £1,000 exemption for maintenance payments and—the hon. Lady did not mention this, although she did not have to do so—there is the 10 per cent. charge on the next £1,000. So a person can receive maintenance up to £3,000 before the full investment income surcharge becomes payable.

  807
  We should recall that, before the unified tax system came into operation, all tax was paid at the unearned income rate. There was no earned income relief of any kind whatever allowed against maintenance. We need to take that into account, because it is not many years since we went on to the unified tax system. Maintenance payments are, and always have been, treated as investment income for tax purposes.
  Mr. Tom King: Why?
  Mr. Sheldon: Perhaps I may remind the House—I am trying to respond to the hon. Gentleman who wanted a full account—that earned income was wages, salaries, pensions and other income derived from a job of work together with certain social security payments and that other income not falling within that definition was automatically treated as investment income. Historically, the distinction between the two categories of income that hon. Gentlemen decided to retain, when they were in Government and no doubt still wish to retain, until we hear to the contrary, has always been that earned income does not normally provide the kind of security that unearned or investment income has been considered to provide.
  Mrs. Chalker rose—
  Mr. Sheldon: If the hon. Lady will allow me, I will come on to the distinction between normal investment income and the kind of income that she has in mind. Clearly, there is a distinction between investment income, which has been regarded as giving more security—that is the justification for the difference in treatment—and earned income, which is not of the same kind.
  Mrs. Chalker: Will the hon. Gentleman give way?
  Mr. Sheldon: I will give way as often as the hon. Lady requires, but I should like to complete this point. The hon. Lady should not read too much into this definition of investment income. It is simply the most convenient term to describe income which is not earned income. Maintenance payments are not directly connected with the job or occupation of the recipient. Therefore, they fall to be treated as investment income. I
  808
  think that the hon. Lady was seeking to point out that investment income that consists of maintenance payments does not have the security of the ordinary type of investment income.
  Mrs. Chalker indicated assent.
  Mr. Sheldon: I note that the hon. Lady indicates agreement. That is the point to which I was coming, and that is the point that the hon. Member for Bridg-water (Mr. King) keeps commenting on from a sedentary position.
  We have taken this matter into account precisely because it has not got that same degree of certainty. We introduced the £1,000 exemption for maintenance payments as an initial relief to allow for the lack of certainty to which the hon. Lady referred.
  Mrs. Chalker: I hope that the Financial Secretary will not try to get away from the fact that the Government, at the same time as they introduced the extra £1,000 exemption from investment income surcharge for maintenance payments, reduced the overall exemption from £2,000 to £1,000, leaving the divorced or separated woman in no different position from before, but everybody else worse off. That is no argument against accepting my amendment.
  Mr. Sheldon: I understand the point being made by the hon. Lady. Clearly there were other reasons for the reduction of the investment income surcharge exemption limit, which she will know about; we felt the limit was too high. So it was reduced to £1,000. But—this is the difference—an exception was made for this category of people. By comparison with the normal arrangements, those receiving maintenance payments were entitled to a rather higher exemption limit than that applicable to the normal case. That was the measure of the preference. The hon. Lady can condemn and be very sad about the way in which the investment income surcharge exemption limit was reduced but it was not reduced for these people. For these reasons, and although I admire the way in which the hon. Lady has moved the amendment, I cannot accept it.
  Mr. David Howell: We are not prepared to accept that disgracefully thin response to a matter which is a burning

  809
  injustice. The Financial Secretary has not answered the point of my hon. Friend the Member for Wallasey (Mrs. Chalker). Nor has he grasped what my hon. Friend is trying to say in the amendment.
  We are not debating the investment income surcharge. That is another issue on which we feel strongly. We understand the point of view of the Financial Secretary's party here. We happen to believe that the idea of charging the surcharge on someone who is receiving only £40 a week—two-thirds of the average manual wage—at a rate of 45 to 50 per cent. is repulsive. But we shall reserve our feelings on that for another time, when Labour Members understand what damage and evil they do with that point of view.
  We are here discussing whether maintenance income—income going to the wife, who has worked, which is usually her sole income—can be classified as investment income at all. We do not think that it belongs in that classification. It is no good the hon. Gentleman telling us that this is how things have been classified in the past and that, therefore, maintenance income qualifies for a rate of investment income surcharge, although not at such a ferocious rate as the rest of investment income. That is not what we want to hear. We want to hear from the hon. Gentleman that it should no longer be classified as investment income. The hon. Gentleman has not explained why maintenance income belongs in this category.
  The group with whom we are dealing —if we must talk in social groups—are perhaps the one group in society who have to pay investment income surcharge which adds up, through marginal tax rates, to 45 per cent. for £40 a week and 50 per cent. once they get over £60 a week, on an income which is entirely unconnected with the definition of investment income. I do not concede that it is right to have a surcharge on investment income at the present starting points, but let us be clear that in this case we are not even talking about investment income. This is a completely different group, who have worked and who are receiving what is in a sense their pension.
  As my hon. Friend said, this is a discriminatory tax. It arises always
  810
  from maintenance payments which in the hands of the payer involve considerable deductions off the top slice of either investment or earned income and which in the hands of the recipient are then taxed at these highly discriminatory rates, not at all as the income which they are.
  We realise that the Financial Secretary has been told in his brief that no concession is to be given here because these are not in trade union terms, the useful people. They do not fit into the neat categories of organised labour and the TUC. They are only people who have slaved away and may have had a rough deal, whose husbands have pushed off and who have to live on the income they get. They are not the productive people who will get all the benefits. We think that it is disgraceful that no concession will be given, and that the Financial Secretary's reply was pathetic.
  This is a group with a deep and genuine grievance, which can be repaired without large cost. The hon. Gentleman said that he did not know the cost, but it would probably be very small. If the surcharge cannot be changed in other areas, where it is creating a deep social injustice, at least in this area, where we are concerned not with investment but with a kind of pension, a change could be made, and these people could be classified as receiving an earned income and, therefore, not liable for the investment income surcharge.
  We want to hear the hon. Gentleman's explanation. He has not given it to us yet. I hope that he does not imagine that silence will get him through the rest of the debate. We want to hear why this maintenance income, which is not investment income, cannot be reclassified and freed of the surcharge which the Government, in their pleasure, like to impose after the first £1,000, or the first £1,500 over 65.
  11.30 p.m.
  We should feel strongly about this matter if the investment income surcharge were back at the 1972, 1973 or 1974 levels, but we feel a thousand times more strongly about it now when it is considered in real terms. It bites into the basic maintenance income as well despite alleviation.

  811
  Let there be no feeling on the part of the Financial Secretary that he has satisfied us. Let him have no feeling that this matter can merely be swept under the carpet because it happens to suit the Labour Party to believe that all investment income must be surcharged. As I have said, this is not investment income. We are talking about a deprived social group that is often struggling in difficult circumstances. We want a serious answer from the hon. Gentleman.
  Mr. Charles Fletcher-Cooke: The appalling lack of principle in the taxation system which the Financial Secretary has disclosed is terrifying. This might be referred to as investment income although we believe that it should not be regarded as such and although I do not understand the nature of the investment. Is it investment in fidelity or in something else? But why is the first £1,000 not investment income whereas anything over that is? That is the lack of principle that brings the whole taxation system into total contempt. Either it is investment income or it is not.
  As my hon. Friend the Member for Guildford (Mr. Howell) has explained so well, the first £1,000 plus a little more is not regarded as investment income as there are many votes involved. It is regarded as investment income for that reason and not other. How the Inland Revenue can support that sort of distinction is beyond comprehension. There has been no explanation so far.
  This is the most scandalous and disgraceful discrimination against women that I have ever heard about in the House. However, the Labour Benches are empty of the right hon. Member for Blackburn (Mrs. Castle), the hon. Members for Northampton, North (Ms Colquhoun) and Wolverhampton, North-East (Mrs. Short) and all those who are in favour of the proper treatment of ladies. They have absented themselves and left this issue to my hon. Friend the Member for Wallasey (Mrs. Chalker), who moved the amendment so well. That is incomprehensible, but even more incomprehensible is the lack of principle of the Financial Secretary. He must explain why the first £1,000 is regarded as earned—earned in what sense? Why earned when the other £500 is not earned? What is the principle
  812
  behind that? Will the hon. Gentleman explain?
  Mr. Robert Sheldon: Certainly. Until the 1973 unified tax system came into operation this income was classified by the Conservative Government as investment income or unearned income. When they introduced the unified tax system, which we took over, they classified it as investment income. They were in power for a long time and they carried out a great deal of research into their new tax measures.
  Without being too controversial, they spent most of the time of the Treasury on tax matters rather than economic matters, to the disadvantage of the country. They took pride in those measures, but they did not see fit to meet the point made by the hon. Member for Wallasey (Mrs. Chalker). They had plenty of opportunity to do so, but they devoted a great deal of their time and energy—some of us say too much of their time and energy—to rather narrow points. The result of all that time and energy was not to change the system in the way required by the hon. Lady. It is easy for the hon. Lady to get support from the Opposition, who do not have responsibility for operating the tax system. My task is to operate the tax system which I inherited.
  Mr. David Howell: Will the hon. Gentleman give way?
  Mr. Sheldon: No, I cannot give way. The Opposition are in a great crusading mood, but I am entitled to put it to the House that the Conservatives created the system. It is not as if the Conservatives are saying that we should change a system which both parties inherited. They created that system, and we are charged with operating it.
  Mr. David Howell: The Financial Secretary must not mislead the House. It is not correct to say that he inherited the system. The level of investment income surcharge for divorced women has been lowered to a starting point of £1,000 in money terms. The impact is much more in real terms. It is a gross distortion to imply that the system is the same as it was before.
  Mr. Deputy Speaker (Sir Myer Galpern): The Question is—
  Mr. Ridley Mr. Ridley rose—
  Mr. Newton Mr. Newton rose—
  Mr. Deputy Speaker: I did not see the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). I was not aware that he was here. Mr. Newton.
  Mr. Newton: I listened with admiration to my hon. Friend the Member for Wallasey (Mrs. Chalker) when she spoke on a subject about which I know very little. I then listened to one of the most pathetic speeches from a Treasury Minister I have ever heard. Having heard several pertinent questions put to the Minister by my hon. Friend the Member for Guildford (Mr. Howell) and my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke), I heard the Treasury Minister try to turn the debate into a party political knockabout by arguing that it was all the fault of the Conservatives, not answering the arguments put to him. That is disgraceful and cannot be allowed to pass.
  My hon. and learned Friend the Member for Darwen said that no question of principle can be involved because the Government have chosen to exempt the first £1,000. That at once shoots down the argument that there is a magic distinction between this form of income and another form of income.
  The Minister tried to rely on the fact that this income was treated as investment income under the tax system introduced by the Conservatives. So what? The Minister did not advance any good argument why that system should continue. Whatever may have happened in the past, and whatever may be the reason for the present position, we want to know why income which is patently not investment income is treated as investment income.
  We have heard the historical story and the political story, but we have not heard why the maintenance income of divorced women should be treated as investment income. We have heard that pensions, social security benefits and earnings are treated as earned income. Why does it have to stop there?
  When maintenance is not paid the social security people take over its payment. That often happens. Is that then treated as investment income or earned income? What principle is there in a
  814
  situation in which the money is treated as earned income if the social security people pay it but as investment income if the husband pays it under the court order? There is no principle or common sense in anything the hon. Gentleman has yet said. We want another answer.
  Mr. Deputy Speaker: I call the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). I hope that the hon. Gentleman is aware of what has happened in the debate during his absence.
  Mr. Ridley: Perhaps the Financial Secretary is very tired. It is unbelievable to hear him posing as the arch-Conservative whose only duty is to defend the tax system that he inherited, lasting out on an impossible wicket by saying that my right hon. and hon. Friends accepted the situation and that what is good enough for us is good enough for him.
  What has happened to the hon. Gentleman's revolutionary zeal? Has he forgotten that the Government were not happy with the system of capital taxation what we left? Does he not remember night after night in Committee dealing with capital transfer tax? He was not happy with what my hon. Friends did there. He was not even happy with the investment income surcharge, which he lowered from £2,000 to £1,000. He was not happy about land, and brought in the development gains tax. He was not even happy with his own tax, so he brought in the development land tax. Then he says "My duty is to preserve the tax system that we inherited".
  The hon. Gentleman would be wise to adjourn the debate before the vote on this amendment so that he can return tomorrow afternoon dressed in a white sheet and with a brief which can carry some weight with his hon. Friends, even if not with my hon. Friends. His answer was disgraceful and should not have been allowed to be given. If the hon. Gentleman cannot find a better argument than that his predecessors allowed this but he cannot think why, he had better try to find one tomorrow. I do not believe that the House will accept his performance.
  Mrs. Chalker: With the leave of the House, may I say that in two and a half years I have never heard a speech quite like that which we have just heard from the Financial Secretary? He clearly said

  815
  that wages, salaries and expenses were not investment income. What does he think the housekeeping awarded by the courts to a divorced woman in considerable difficulty is, except a housekeeping income, a wage for carrying on a job which often the errant husband has given up?
  I have no doubt that the hon. Gentleman understands why I firmly believe that there can never be any certainty of maintenance. He took the point during his speech. He is looking at a remarkably small group of women in tax terms compared with other groups suffering more than somewhat from the inflation we have experienced in the past two years.
  The hon. Gentleman cannot find an argument, so we have had bluff and guff for about 10 minutes, to deprive a group
  of people doing their best to keep their remaining family together and bring them up in the spirit the House normally supports whole-heartedly. He is doing his best to make it the most difficult task possible for them.
  Whatever tax reforms may be needed, if we go step by step we may at least achieve some of the goals of justice which the Minister has always said his party stands for. I do not believe that any more. I now know, and so should the country, which party will stand up for justice not only for war widows but for divorced women in receipt of maintenance income, which is truly earned and not unearned.
  Question put, That the amendment be made: —
  The House divided: Ayes 169, Noes 190.

  Division No. 250.]

  AYES

  11.45 p.m.

  Adley, Robert

  Grist, tan

  Montgomery, Fergus

  Aitken, Jonathan

  Grylls, Michael

  Morris, Michael (Northampton S)

  Atkins, Rt Hon H. (Spelthorne)

  Hall-Davis, A. G. F.

  Morrison, Charles (Devizes)

  Awdry, Daniel

  Hampson, Dr Keith

  Morrison, Hon Peter (Chester)

  Bain, Mrs Margaret

  Hannam, John

  Mudd, David

  Baker, Kenneth

  Harrison, Col Sir Harwood (Eye)

  Neave, Alrey

  Beith, A J.

  Harvie Anderson, Rt Hon Miss

  Nelson, Anthony

  Bennett, Dr Reginald (Fareham)

  Hawkins, Paul

  Newton, Tony

  Benyon, W.

  Hayhoe, Barney

  Nott, John

  Biffen, John

  Henderson, Douglas

  Oppenheim, Mrs Sally

  Biggs-Davison, John

  Heseltine, Michael

  Page, John (Harrow West)

  Blaker, Peter

  Holland, Philip

  Page, Rt Hon R. Graham (Crosby)

  Boscawen, Hon Robert

  Hooson, Emlyn

  Parkinson, Cecil

  Bottomley, Peter

  Hordern, Peter

  Penhaligon, David

  Brittan, Leon

  Howe. Rt Hon Sir Geoffrey

  Peyton, Rt Hon John

  Brown, Sir Edward (Bath)

  Howell, David (Guildford)

  Rathbone, Tim

  Buchanan-Smith, Alick

  Howell, Ralph (North Norfolk)

  Rees, Peter (Dover & Deal)

  Bulmer, Esmond

  Howells, Geraint (Cardigan)

  Rees-Davies, W. R.

  Burden, F. A.

  Hunt, John (Bromley)

  Reid, George

  Butler, Adam (Bosworth)

  Hurd, Douglas

  Renton, Rt. Hon Sir D. Hunts)

  Chalker, Mrs Lynda

  Jessel, Toby

  Rhys Williams, Sir Brandon

  Churchill, W. S.

  Johnson Smith, G. (E Grinstead)

  Ridley, Hon Nicholas

  Clark, William (Croydon S)

  Johnston Russell (Inverness)

  Ridsdale, Julian

  Clegg, Walter

  Kershaw, Anthony

  Roberts, Michael (Cardiff NW)

  Cope, John

  Kilfedder, James

  Rodgers, Sir John (Sevenoaks)

  Cormack, Patrick

  Kimball, Marcus

  Ross, Stephen (Isle of Wight)

  Crawford, Douglas

  King, Evelyn (South Dorset)

  Rossi, Hugh (Hornsey)

  Douglas-Hamilton, Lord James

  King, Tom (Bridgwater)

  Rost, Peter (SE Derbyshire)

  Dykes, Hugh

  Kitson, Sir Timothy

  Sainsbury, Tim

  Eden, Rt Hon Sir John

  Knight, Mrs Jill

  St. John-Stevas, Norman

  Edwards, Nicholas (Pembroke)

  Knox, David

  Scott-Hopkins, James

  Emery, Peter

  Lamont. Norman

  Shaw, Michael (Scarborough)

  Evans, Gwynfor (Carmarthen)

  Langford-Holt, Sir John

  Shersby, Michael

  Ewing. Mrs Winifred (Moray)

  Latham, Michael (Melton)

  Sims, Roger

  Eyre, Reginald

  Lawrence, Ivan

  Sinclair, Sir George

  Fairgrieve, Russell

  Lawson. Nigel

  Skeet, T. H. H.

  Fell, Anthony

  Luce, Richard

  Smith, Cyril (Rochdale)

  Fletcher-Cooke, Charles

  McCrindle, Robert

  Speed, Keith

  Forman, Nigel

  MacGregor, John

  Spence, John

  Fowler, Norman (Sutton C'f'd)

  Macmillan, Rt Hon M. (Farnham)

  Spicer, Jim (W. Dorset)

  Fox, Marcus

  McNair-Wilson, M. (Newbury)

  Sproat, Iain

  Freud, Clement

  Madel, David

  Stanbrook, Ivor

  Fry, Peter

  Mather, Carol

  Steel, David (Roxburgh)

  Gilmour, Sir John (East File)

  Maudling, Rt Hon Reginald

  Steen, Anthony (Wavertree)

  Goodhart, Philip

  Maxwell-Hyslop, Robin

  Stewart, Ian (Hitchln)

  Goodhew, Victor

  Mayhew, Patrick

  Stradling Thomas, J.

  Goodlad, Alastair

  Miller, Hal (Bromsgrove)

  Tapsell, Peter

  Gorst, John

  Mills, Peter

  Taylor, Teddy (Cathcart)

  Gow, Ian (Eastbourne)

  Miscampbell, Norman

  Tebbit, Norman

  Gray, Hamish

  Moate, Roger

  Temple-Morris, Peter

  Grimond, Rt Hon J.

  Monro, Hector

  Thomas, Dafydd (Merioneth)

  Thompson, George

  Watt, Hamish

  Wood, Rt Hon Richard

  Trotter, Neville

  Weatherill, Bernard

  Young, Sir G. (Ealing, Acton)

  Tugendhat, Christopher

  Welsh, Andrew

  Walder, David (Clitheroe)

  Wiggin, Jerry

  TELLERS FOR THE AYES:

  Walker-Smith, tit Hon Sir Derek

  Wigley, Dafydd

  Mr. Jim Lester and

  Wall, Patrick

  Wilson, Gordon (Dundee E)

  Mr. Spencer Le Marcham

  Warren, Kenneth

  Winterton, Nicholas

  NOES

  Allsun, Frank

  Garrett, John (Norwich S)

  Park, George

  Anderson, Donald

  Gilbert, Dr John

  Parker, John

  Archer, Peter

  Ginsburg, David

  Parry, Robert

  Armstrong, Ernest

  Golding, John

  Pendry, Tom

  Ashton, Joe

  Gourlay, Harry

  Phipps, Dr Colin

  Atkins, Ronald (Preston N)

  Grant, George (Morpeth)

  Prescott, John

  Atkinson, Norman

  Grocott, Bruce

  Price, C. (Lewisham W)

  Barnett. Guy (Greenwich)

  Hamilton, James (Bothwell)

  Price, William (Rugby)

  Barnett, Rt Hon Joel (Heywood)

  Hardy, Peter

  Radice, Giles

  Bates, All

  Harrison, Walter (Wakefield)

  Richardson, Miss Jo

  Bean, R. E.

  Hart, Rt Hon Judith

  Roberts, Albert (Normanton)

  Benn, Rt Hon Anthony Wedgwood

  Hatton, Frank

  Robinson, Geoffrey

  Bennett, Andrew (Stockport N)

  Heffer, Eric S.

  Roderick, Caerwyn

  Blenkinsop, Arthur

  Horam, John

  Rodgers, George (Chorley)

  Boardman, H.

  Hoyle, Doug (Nelson)

  Rodgers, William (Stockton)

  Booth, Rt Hon Albert

  Hughes, Rt Hon C. (Anglesey)

  Rooker, J. W.

  Boothroyd, Miss Betty

  Hughes, Mark (Durham)

  Roper, John

  Bradley, Tom

  Hughes, Robert (Aberdeen N)

  Rose, Paul B.

  Bray, Dr Jeremy

  Hughes, Roy (Newport)

  Ross, Rt. Hon W. (Kilmarnock)

  Brown, Hugh D. (Provan)

  Hunter, Adam

  Rowlands, Ted

  Brown, Robert C. (Newcastle W)

  Irving, Rt Hon S. (Dartford)

  Selby, Harry

  Buchan, Norman

  Jackson, Colin (Brighouse)

  Sheldon, Robert (Ashton-u Lyne)

  Buchanan, Richard

  Jackson, Miss Margaret (Lincoln)

  Short, Rt Hon E. (Newcastle C)

  Callaghan, Jim (Middleton & P)

  Jay, Rt Hon Douglas

  Short, Mrs Renée (Wolv NE)

  Campbell, Ian

  Jeger, Mrs Lena

  Skinner, Dennis

  Canavan, Dennis

  John, Brynmor

  Small, William

  Carmichael, Neil

  Johnson, James (Hull West)

  Snape, Peter

  Clemitson, Ivor

  Jones, Barry (East Flint)

  Stallard, A. W.

  Cocks, Michael (Bristol S)

  Jones, Dan (Burnley)

  Stewart, Rt Hon M. (Fulham)

  Cohen, Stanley

  Kelley, Richard

  Stoddart, David

  Coleman, Donald

  Kilroy-Silk, Robert

  Stott, Roger

  Conlan, Bernard

  Lambie, David

  Strang, Gavin

  Cook, Robin F. (Edin C)

  Lamborn, Harry

  Strauss, Rt Hon G. R.

  Corbett, Robin

  Lamond, James

  Summerskill, Hon Dr Shirley

  Cox, Thomas (Tooting)

  Latham, Arthur (Paddington)

  Thomas, Jeffrey (Abertillery)

  Craigen, J. M. (Maryhill)

  Leadbitter, Ted

  Thomas, Mike (Newcastle E)

  Crawshaw, Richard

  Litterick, Tom

  Thomas, Ron (Bristol NW)

  Crowther. Stan (Rotherham)

  Loyden, Eddie

  Thorne, Stan (Preston South)

  Cryer, Bob

  McCartney, Hugh

  Tierney, Sydney

  Cunningham, G. (Islington S)

  McElhone, Frank

  Tinn, James

  Cunningham, Dr J. (Whiteh)

  MacFarquhar, Roderick

  Tuck, Raphael

  Dalyell, Tam

  McGuire, Michael (Ince)

  Urwin, T. W.

  Davies, Bryan (Enfield N)

  MacKenzie, Gregor

  Wainwright, Edwin (Dearne V)

  Davies, Denzil (Llanelli)

  Mackintosh, John P.

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

  Davies, Ifor (Gower)

  Maclennan, Robert

  Walker, Terry (Kingswood)

  Deakins, Eric

  McMillan, Tom (Glasgow C)

  Ward, Michael

  Dean, Joseph (Leeds West)

  McNamara, Kevin

  Watkins, David

  de Freitas, Rt Hon Sir Geoffrey

  Magee, Bryan

  Watkinson, John

  Dempsey, James

  Mahon, Simon

  White, Frank R. (Bury)

  Doig, Peter

  Marks, Kenneth

  White, James (Pollok)

  Dormand, J. D.

  Mrquand, David

  Whitehead, Phillip

  Douglas-Mann, Bruce

  Marshall, Dr. Edmund (Goole)

  Willey, Rt Hon Frederick

  Duffy, A. E. P.

  Maynard, Miss Joan

  Williams, Sir Thomas

  Dunwoody, Mrs Gwyneth

  Millan, Bruce

  Wilson, Alexander (Hamilton)

  Ellis, John (Brigg & Scun)

  Miller, Dr M. S. (E Kilbride)

  Wilson, William (Coventry SE)

  English, Michael

  Morris, Alfred (Wythenshawe)

  Wise, Mrs Audrey

  Ennals, David

  Morris, Charles R. (Openshaw)

  Woodall, Alec

  Evans, Ioan (Aberdare)

  Murray, Rt Hon Ronald King

  Woof, Robert

  Ewing, Harry (Stirling)

  Ogden, Eric

  Wrigglesworth, Ian

  Fernyhough, Rt Hon E.

  O'Halloran, Michael

  Young, David (Bolton)

  Flannery, Martin

  Orbach, Maurice

  Foot, Rt Hon Michael

  Ovenden, John

  TELLERS FOR THE NOES:

  Ford, Ben

  Owen, Dr David

  Mr. Ted Graham and

  Fowler, Gerald (The Wrekin)

  Padley, Walter

  Mr. Joseph Harper.

  Freeson, Reginald

  Palmer, Arthur

  Question accordingly negatived.

  Schedule 4

  LIFE POLICIES, ETC

  Mr. Robert Sheldon: I beg to move Amendment No. 213, in page 102, line 4, leave out 'wife' and insert 'spouse'.

  Mr. Deputy Speaker: With this, we can take Government amendments Nos. 214, 215, 216, 212, 17, 20 and 21.
  Mr. Sheldon: These amendments are purely consequential on Government Amendment No. 212 to Clause 34. We may have the debate on that amendment.
  Amendment No. 17 concerns the premium relief by deduction scheme, which is to be introduced in 1979–80. Under the Bill as originally drafted it was intended that the ceiling for life assurance, one-sixth of an individual's income, should be replaced with a limit of £1,500 per annum. Due to an error in paragraph 10(b) following the decision at the Committee stage to restore the one-sixth of income limit as an alternative, the provisions covering allocation between spouses should now more properly be expressed as one-twelfth, or £750, for each spouse. This amendment carries out that provision.
  Amendments Nos. 20 and 21 enable the industrial assurance companies to adopt schemes relying on the principle of the "increased sum assured." This is one aspect of the giving of premium relief by deduction. Many premiums are payable under industrial assurance policies in very small amounts, and as a result it is not suitable to deduct a certain percentage for the premium relief. It is not practicable because of the smallness of the premium payments. In order to meet their obligations and to provide for relief, it is more convenient to increase the sum assured and thus obtain the relief in that way. These amendments make provision for that.
  Amendment agreed to.
  12 midnight.
  Mr. MacGregor: I beg to move Amendment No. 18, in page 102 line 25, leave out 'of assessment'.
  Mr. Deputy Speaker: With this we may take Amendment No. 19, in line 32, at end insert—
  '(2) In this paragraph "year" means the twelve months beginning with the making of the assurance or contract and any subsequent period of twelve months'.
  Mr. MacGregor: The background to this fairly technical amendment is that, as the House knows, under Schedule 4 a new arrangement is being proposed for the deduction of life assurance premiums
  820
  which will effectively move quite a large part of the administrative burden away from the Inland Revenue and on to the life assurance companies. Anything which can reduce the administrative burdens on the companies is very desirable.
  The amendments help to make some reduction in the administrative burden. They are trying to make the definition of the year for tax purposes that of the first year and subsequent years of the contract, rather than to put it into the tax year itself.
  The importance of this is that, because under paragraph 6 certain changes can be made in the deductions that have to be made by the life offices, this means that in one or two cases where there are policies payable by periodical premiums —that is to say, on a monthly basis—if the premium had been taken out three-quarters of the way through the year and was a premium for more than £1,500 the insurance company would have to make a different deduction from the one it would normally make. In the end the deduction will be the same.
  All that this is seeking to do is to reduce the administrative burden on the life companies so that they effectively have to make only two deductions, either 17½ per cent. or nil. I believe that the amendment would be acceptable to the Government, because they recognise the importance also of doing all that is possible to diminish the burden on the life companies.
  I wonder whether we could not go a little further in assisting the life offices and remove paragraph 6 altogether. I hope the Financial Secretary will give some thought to this. Paragraph 6 was necessary in the Bill as it originally stood because there was a cut-off point of £1,500. We have since had this very welcome change as a result of our pressure, as well as that from elsewhere, which has led to the Government accepting that in cases where the one-sixth income which applies will be higher than the £1,500 it will once again be possible for the taxpayers to go back to the limitation of one-sixth income. With that situation the position in relation to paragraph 6 alters.
  The Bill still contains in paragraph 14 a sub-paragraph which enables the Revenue to order the life office to accept

  821
  only gross premiums. Therefore, there is still some safeguard. But the removal of paragraph 6 now would mean further administrative savings for the life offices, in precisely the same way as Amendments Nos. 18 and 19 would achieve, because it would remove some of the need for the life offices to make yet further assessments and deductions other than 17½ per cent. and the nil per cent.
  I recognise that this is a highly technical point but it is of great importance to the life offices. There may well be some savings for the Revenue in removing paragraph 6 as well, particularly bearing in mind that the vast majority of those paying an annual premium on a policy of over £1,500, to which paragraph 6 refers, will be within the one-sixth limit which the Government have now conceded. So I hope that the Minister will be able to accept Amendments Nos. 18 and 19, which, though technical, are helpful to the life offices. It would also be extremely helpful if later the hon. Gentleman could consider going even further and removing paragraph 6 altogether.
  Mr. Hugh Dykes: I wish to support the proposition, which in my view is entirely reasonable and which I hope, therefore, will be acceptable to the Government.
  With regard to the plea for the removal of para. 6 of the schedule, perhaps I might add a point which is germane to it, though perhaps a slight variation on it in respect of such policies and the maximum amount of contribution which may be made.
  If the Minister will cast his mind back to 1956, taking a maximum contribution of £750 per annum limited to 10 per cent. of net relevant earnings, he will recall that special provision was made for persons born prior to 1916. The background assumption behind this was that a man of 40 in 1956 had 25 years to contribute to an annuity before the normal retirement age of 65 and that that should be adequate, given the requisite sufficiency of earnings over that period. The special provisions were, therefore, limited to those born prior to 1916.
  Since then, we all know the familiar story of currency debasement, savage inflation and loss in real monetary values. This has now been recognised, although tardily, in that the contribution limits were
  822
  revised back in 1970 and now again in the present proposals in this Bill.
  But surely the special provisions should also be adjusted. These are still limited to persons born prior to 1916, in accordance with background assumptions made 20 years ago, in conditions of relative currency stability, under a highly successful Tory Government who remained in office for 13 years, which are now totally unrecognisable.
  This could be done easily and be limited to a specified number of years either by advancing the years forward from 1916 or by permitting contributions by older persons in the appropriate category to be made retrospectively up to the adjusted limits.
  Let us take the case of the self-employed person aged 40 in 1956 earning consistently high earnings enabling him to pay the maximum annual contribution. For an annual contribution of, say, £750 —half the maximum now allowed—any leading reputable insurance company in those days would have granted a without-profits policy, which was the familiar way of arranging these matters, giving a gross retirement annuity of £2,860 from the age of 65, guaranteed for five years. This contract would not have made any real provision for a surviving spouse, which is a relevant point. In 1956 it was considered normal and wise to take out a without-profits policy. In the retirement context, people like to know where they stand. In terms of joint and last survivors of retirement annuities, one could not have a with-profits policy in respect of the spouse at that time.
  If we take the following 15 years until the next change in 1970 and 1971, this was all that could be done, whatever the endeavour and success reflected in the earning capacity of the person concerned. Fifteen years is almost two-thirds of the way through the 25-year period envisaged in the original background assumption. The years of age 40 to 55 embrace a person's maximum earning capacity in virtually every case.
  The problem is at last realised by the current proposals to raise the upper age limit for which an annuity must become payable from 70 to 75.
  If the Minister will agree with what my hon. Friend the Member for Norfolk, South (Mr. MacGregor) said and express

  823
  his support for the proposition which I have advanced, I and others will be extremely grateful to him.
  Mr. Robert Sheldon: You would not expect me, Mr. Deputy Speaker, to reply to an amendment which was not selected. I took note of the hon. Members points, I will read them in Hansard tomorrow, and take up the matter with him.
  On Amendments Nos. 18 and 19, I noted the contribution of the hon. Member for Norfolk, South (Mr. MacGregor). He made the perfectly reasonable point that the year of assessment should be the policy year, rather than the tax year. I have a great deal of sympathy with this position, and I think it makes a useful contribution which is to the advantage of the insurance companies and does not disadvantage anyone else. I am happy to accept the precise nature of the amendments as drafted on the Notice Paper.
  Amendment agreed to.
  Amendments made: No. 19, in line32, at end insert—
  '(2) In this paragraph "year" means the twelve months beginning with the making of the assurance or contract and any subsequent period of twelve months'.—[Mr. MacGregor.]
  No. 214, in line 34, leave out paragraph 7 and insert—
  '7. Subsection (7) of section 19 shall be omitted.'.
  No. 215, in line 39, leave out 'wife or husband' and insert 'spouse'.
  No. 216, in line 40, leave out 'wife or husband' and insert 'spouse'.
  No. 17, in Page 103, line 10, leave out from 'substituted' to end of line 15 and insert—
  'in relation to each of them, a limit of £750 or one-twelfth of their coal income, whichever is the greater, plus any amount by which the payments in respect of which relief can be given to the other fall short of the limit so substituted'.
  No. 20, in page 104, line 19, after 'premiums', insert—
  'or that, in the case of such policies or contracts issued or made before 6th April 1979, the amounts expressed as the amounts of the premiums payable are treated as amounts arrived at by deducting 17½ per cent. from the amounts payable and that the amounts of the capital sums assured or guaranteed are treated as correspondingly increased'.
  No. 21, in line 23, at end insert—
  '(3A) Increases treated as made in pursuance of regulations under this paragraph shall not be treated as variations of a policy or contract and shall be disregarded for the purposes of section 332 of and paragraph 4 of Schedule 1 to the Taxes Act and section 7(6) of the Finance Act 1975; and the regulations may include such adaptations and modifications of the enactments relating to friendly societies or industrial assurance companies and such other incidental and supplementary provisions as appear to the appropriate authority necessary or expedient for the purpose of enabling such societies or companies to adopt the schemes authorised by the regulations.'.—[Mr. Robert Sheldon.]

Clause 34

  HUSBAND AND WIFE: INCOME TAX
  Amendment made: No. 212, in page 18, line 38, leave out from beginning to 'after' in line 39 and insert—
  '(5) In section 19 of that Act (life insurance relief)—

  (a) in subsection (2)(b) for the word "wife" there shall be substituted the word "spouse"; and

  (b) in subsection (7)'.—[Mr. Robert Sheldon.]

Schedule 5

  RELIEF FOR INCREASE IN VALUE OF TRADING STOCK AND WORK IN PROGRESS.
  The Minister of State, Treasury (Mr. Denzil Davies): I beg to move Amendment No. 22, in page 107, line 36, leave out
  'the amount of which shall be'
  and insert
  'on whichever is'.
  Mr. Deputy Speaker: With this we shall take Government Amendments Nos. 23, 25, 26, 28, 30, 32, 33, 35 and 36.
  Mr. Davies: These amendments introduce provisions to ease final recovery of stock relief when a business run by an individual or a partnership ceases. The device used to do this is one known as "top slicing".
  In Committee, the hon. Member for Norfolk, South (Mr. MacGregor) proposed an amendment to deal with the problem of "bunching" of income caused by the problem of recovery of accumulated stock relief when a business ceases. Under the Bill as it stands the

  825
  full amount of any previously unrecovered stock relief would be added to income in the year in which the business ceased. This could push the taxpayer into higher marginal rates for that year. I accepted the spirit of the amendment in Committee and I said I would consider the matter further and put down a Government amendment on Report. This fulfils that undertaking.
  The amendment achieves what the hon. Member sought in Committee. He sought to spread the recovery charge over the last three years of the business so that it would not all fall in one year. This would have thrown up substantial difficulties. It would have imposed extra tax charges in certain circumstances on partners who had already left the business and who had no part in the decision to close it down. They would have every justification for complaint. Then, again it would have imposed administrative costs on the Revenue and on taxpayers because of the need to reopen assessments for previous years. Therefore, we have decided that it is much better to use the device of top slicing.
  12.15 a.m.
  Without going into the technicalities, the effect is that the whole of the recovery charge is normally to be taxed at the rate appropriate to the first third of it, and it does not attract the higher rates which would otherwise fall on the top two-thirds. So it allows to be achieved in one year—the year of cessation—what the spreading arrangement would achieve over three. It will be a substantial help to those who could otherwise be liable at the top rates of tax. It is merely another way of achieving what the hon. Gentleman sought to achieve in Committee.
  Mr. Deputy Speaker: I wonder whether the Minister can assist me. Government Amendment No. 25 is not included in this group. Does he wish to include it in this group or deal with it separately?
  Mr. Peter Hordern: May I seek clarification? The Minister of State said that the principal amendment was Amendment No. 22. From what I can see, Amendment No. 22 is simply a paving amendment and the substantive amendment appears to be Amendment No. 25, which I do not
  826
  think we are discussing in this group. Is the Minister of State, therefore, going to explain Amendment No. 25 later, or has he dealt with it already in this group?
  Mr. Davies: I apologise to the House. The principal amendment is No. 25. The other amendments are consequential on that. I have spoken to Amendment No. 25.
  Mr. Deputy Speaker: They are not grouped together. However, it appears that the House does not object to Amendment No. 25 being included in this group. I heard the Minister refer to "top slicing", which is what Amendment No. 25 refers to. We have agreed that we are including Amendment No. 25 in this group.
  Mr. MacGregor: I thank the Minister of State for honouring the commitment he gave in Committee when, as he rightly said, I moved an amendment on this subject. I suppose it is usual that the amendment which the Minister eventually brings forward is several times longer and several times more complicated than the amendment I introduced originally. However, I take the hon. Gentleman's point that there were difficulties about the original amendment, particularly in relation to business partners who have since left the partnership. I record my gratitude to the Minister for meeting this very real point and bringing the amendment forward.
  Amendment agreed to.
  Amendments made: No. 23, in page 108, line 6, leave out third 'of' and insert 'on'.
  No. 25, in page 108, line 37, at end insert—
  'Top-slicing
  3A.—(1) Where a trade has been carried on by a person for more than one year before the discontinuance or other event on which a charge under paragraph 2(2) above falls to be made on him, then, his liability to tax for the year of assessment for which the charge is made shall, on a claim made by him within two years of the end of that year of assessment, he reduced in accordance with the following provisions of this paragraph.
  (2) The reduction is the amount of the difference between—

  (a) the tax on the whole amount on which the charge is made (the "chargeable amount"), calculated on the basis set out in sub-paragraph (4) below; and

  (b) the tax (if any) on the appropriate fraction of the chargeable amount, calculated

  827
  on the same basis, and multiplied by the reciprocal of the appropriate fraction.

  (3) The "appropriate fraction" depends on the period for which the trade has been carried on before the discontinuance or other event and is—

  (a) one-half if the trade has been so carried on for more than one but less than two years;

  (b) one-third if it has been so carried on for two years or more.

  (4) The amounts of tax referred to in subparagraph (2) are to be calculated on the following assumptions—

  (a) that the person's total income does not include any amount in respect of which he is chargeable to tax under section 81, 81 or 82 of the Taxes Act (premiums, etc. treated as rent), section 187 of that Act (payments on retirement or removal from office) or section 399(1)(a) of that Act (gains from life policies, etc.);

  (b) that deductions to be made in computing the tax are so far as possible set against sums other than the chargeable amount (or the fraction of it);

  (c) that the chargeable amount (or fraction), after any deductions remaining to be made after applying paragraph (b), is the highest part of the person's total income (notwithstanding any other provisions of the Income Tax Acts directing any other income to be so treated).

  (5) Where a claim under this paragraph for any year of assessment is made in respect of more than one trade, the paragraph applies to each chargeable amount individually as if there were only one charge in that year.
  (6) For the purposes of section 400, paragraphs 3 and 4 of Schedule 3 and paragraph 8 of Schedule 8 of the Taxes Act (other top-slicing provisions) a person's total income shall not be treated as including any amount as a result of a charge under paragraph 2(2)'.
  No. 26, in page 109, line 48, leave out "of that charge" and insert:
  'on which the charge falls to be made'.—[Mr. Denzil Davies.]
  Mr. Denzil Davies: I beg to move Amendment No. 27, in page 110, line 42, leave out from 'then' to end of line 52 and insert:
  'effect shall be given to this paragraph in relation to that claim only with the consent in writing of every other person engaged in carrying on the trade between the end of that year and the making of the claim, except that where the claim is for a loss sustained before an event treated as the permanent discontinuance of the trade, the consent is not required of a person so engaged only since the discontinuance.
  (8) If a person whose consent is required under sub-paragraph (7) has died, the consent in writing of his personal representatives is required instead.'.
  828
  This is a small drafting amendment designed to correct an error in connection with claims by the members of a partnership to set unused stock relief against other income.
  Paragraph 5 of Schedule 5 provides that for individuals and partnerships, where profits in a period of account are insufficient to cover the available stock relief, or where there are no profits, the surplus relief goes to create or augment a loss, which can then be set off against income for the year of assessment in which the period of account ends or for the following year.
  Where a person carries on a trade in partnership, however, effect cannot be given to a claim to set his share of a loss, as augmented by stock relief, against other income unless there is the written consent of the other partners. The amendment clarifies the rules which apply in these circumstances. Where one of the partners has died and the partnership trade is treated as having ceased for tax purposes, the written consent of that partner's personal representatives is acceptable. Where a partner has been involved in the business only since the period for which the claim is made, his consent is not required. It is a drafting amendment to ensure that the consents can be given. Consent is necessary in the case of a partnership to give the taxpayers the necessary relief.
  Amendment agreed to.
  Amendment made: No 28, in page 112, line 7, leave out 'the amount of which shall be' and insert
  'on whichever is'.—[Mr. Denzil Davies.]
  Mr. Hordern: I beg to move Amendment No. 29, in page 112, line 11, at end insert—
  'Provided that where the charge is made on the company ceasing to carry on a trade, paragraph 13 of Schedule 6 to the Finance Act 1972 shall not apply to the said amount'.
  The Minister of State will know that this is an amendment which we discussed in Committee. It seems to me to rank in importance exactly with the amendment which we have just discussed, which dealt with the position of a sole trader and the clawback for stock appreciation relief.
  The present amendment deals with the position of participators in a close company, and I see no reason in principle

  829
  why those participators should not be treated on the same basis as sole traders. Happily, the Minister of State has gone to some trouble in giving them relief under Amendment No. 25, and I know that he has proposals to make concerning the position of participators who are in precisely the same position.
  I shall not weary the House by giving a full description of the position of participators, but, briefly, they are expected to pay tax on the accumulation of the clawback on stock appreciation relief when the business is being closed, and the situation is made far worse in the event of death because then the tax position can be extremely onerous, even to the point of wiping the company out altogether, making the position of the executors very difficult.
  This case deserves every bit as much considerate treatment as the sole trader has been given by Amendment No. 25, and I hope that the Minister of State will give a sympathetic reply.
  Mr. Denzil Davies: I undertook, without commitment, to look at this matter when the hon. Member for Horsham and Crawley (Mr. Hordern) moved his amendment in Committee. I have looked at it, but I had to write to the hon. Gentleman to say that, unfortunately, I could not accept that the position was on all fours with that of the sole trader or partnership.
  I cannot accept the amendment. The main reason is that for a sole trader or partnership there is no way of disposing of the business apart from disposing of the business, if I may so put it, whereas with a company, if the shares are disposed of, there is no problem in relation to stock appreciation relief. That is the basic difference. We are here concerned with only a small area of disposal of the business of a close company, whereas in the case of an individual or partnership there is no other way to dispose of the assets.
  Moreover, in the case of a close company, if the business is disposed of as a going concern or if it runs down, it is quite possible for shareholders to spread their liability on any stock appreciation relief in the final year by declaring dividends which fall to be treated as income in two or three different years. With a little forward planning, all companies
  830
  can arrange to pay dividends falling into two different years, and most can so arrange for three years. When the income is distributed in this way, apportionment under paragraph 13 is avoided, and a company can by its own actions go a long way towards solving the bunching problem. It is possible, therefore, for a company to declare dividends for two or even three different accounting periods when faced with this problem, provided that it plans ahead a little, and that avoids the difficulty of bunching. That opportunity is not open to sole traders or partnerships because, of course, they do not declare dividends.
  I am sorry to have to tell the hon. Gentleman that, having looked into it, I cannot go along with his amendment, although on the surface it appears to be on all fours with the previous one. In fact, it is different, and I am not convinced that there is a problem.
  Mr. Hordern: I see the point which the Minister makes and the distinction which he draws. None the less, there is real hardship here for close companies when the business is being wound down or in the event of death of the participators. I shall have to study what the Minister said in reply, but I am not sure that the alternative arrangements which he suggested the participators in a close company can make are satisfactory.
  After consultation, we may have to return to this matter on next year's Finance Bill. Let us see how it goes. I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Amendment made: No. 30, in page 112, line 17, leave out third 'of' and insert 'on'.—[Mr. Denzil Davies.]
  Mr. Denzil Davies: I beg to move Amendment No. 31, in page 112, line 31, at end insert—
  '9A.—(1) Where there is a change of ownership of a company and section 483 of the Taxes Act applies so as to restrict the carrying forward of losses incurred before the change, then, relief to which those disallowed losses are attributable shall, although unrecovered in periods of account ending before the change of ownership nevertheless be disregarded in ascertaining the amount of unrecovered past relief in later periods of account.
  (2) Relief to which disallowed losses are attributable is that which was not given effect in the period of account or base period for

  831
  which it was allowed or in a subsequent period of account.
  (3) For the purposes of sub-paragraph (2) relief is assumed to be given effect before capital allowances and profits or gains are assumed to be set against losses attributable to relief before other losses.
  Section 483(5) of the Taxes Act has effect subject to this sub-paragraph.
  (4) For the purpose of ascertaining the extent to which relief to which disallowed losses are attributable has been recovered in periods of account ending before the change of ownership, it shall be assumed—

  (a) that relief is recovered from earlier periods before later periods; and

  (b) that effect is given to relief from earlier periods before later periods.'

  This relieving amendment ensures that where Section 483 of the Taxes Act prevents the carrying through of losses on a change in the ownership of a company, the later owners should not be liable for recovery in respect of stock relief which has been accumulated but not used by the earlier owners and which has gone to help to create these losses. Under Section 483 of the Taxes Act the normal carry-forward of losses is not allowed in certain circumstances, where there is a change in the ownership of a company followed by a modification of its trading patterns.
  Section 483 of the Act is an anti-avoidance device to prevent loss buying. Representations have been made that the situation might arise when a company had had stock relief which created losses but because of Section 483 the losses could not be carried through on a change of ownership, although the accumulated past relief continued under the Bill to be recoverable from the new owners.
  Section 843 of the Act already contains provision to deal with capital allowances. This amendment ensure that the taxpayer is not damaged. It ensures that the fact that he cannot carry forward the losses under Section 483 does not act to his detriment. This is a relieving provision designed to help the taxpayer. I recommend the amendment to the Committee.
  Amendment agreed to.
  Amendment made: No. 32, in page 112, line 39, leave out 'of the charge' and insert
  'on which the charge is to be made'.
  No. 33, in line 42, leave out 'relief or charge' insert 'amount.'—[Mr. Denzil Davies.]
  Mr, Denzil Davies: I beg to move Amendment No. 34, in page 115, line 30 at end insert—
  Time limit for claiming Schedule 10 relief
  14A. A claim by a company for Schedule 10 relief may be made at any time before 1st January 1977 notwithstanding that the time limit imposed by paragraph 6(3) of that Schedule has expired.'
  This amendment extends until the end of 1976 the time limit for companies to claim last year's stock relief where this is later than the existing time limit provided by Schedule 10 of the Finance (No. 2) Act 1975.
  The amendment is proposed in response to a point made by the right hon. Member for Crosby (Mr. Page) in Committee. I undertook to bring forward the amendment on Report to deal with his point.
  The amendment deals with companies. It does not deal with individuals or partnership, as the problem does not arise in relation to individuals and partnerships. They have a longer time limit, anyway. This is a relieving provision. I commend it to the Committee.
  Mr. Graham Page: I thank the Minister for this amendment. I appreciate that the proposal does not extend to partnerships. The Minister is right. I am grateful for the fact that he has brought forward the proposal.
  Amendment agreed to.
  Amendments made: No. 35, in page 120, line 37, leave out from 'amount' to 'amount' in line 38 and insert:
  'on which the charge to be made is the'.
  No. 36, in page 121, line 16, leave out from second 'aggregate' to 'made' in line 17 and insert:
  'of the amounts on which charges by way of recovery of relief have been'.—[Mr. Denzil Davies.]

Clause 36

  CAPITAL ALLOWANCES: WRITING-DOWN ALLOWANCES
  Mr. Denzil Davies: I beg to move Amendment No. 37, in page 21, leave out lines 7 and 8.
  Mr. Deputy Speaker: With this we may take Government Amendment No. 38.
  Mr. Davies: Amendment No. 37 is a drafting amendment to correct a technical flaw. The point we raised by the hon. Member for Guildford (Mr. Howell). He said that there seemed to be a danger that certain words in Clause 36(4)(b) might negative the intention of the clause as a whole by removing a considerable range of assets from its scope. I said that it was not the intention to remove those assets from its scope. The hon. Gentleman was right. The clause may be read as having that effect. However, that was not the intention. Amendments Nos. 37 and 38 put the points right. I am grateful to the hon. Gentleman for raising the point.
  Amendment agreed to.
  Amendment made: No. 38, in page 21, line 10, at end insert:
  '(c) expenditure in respect of which an allowance or allowances have been made in accordance with section 21 of the said Act of 1968 (alternative method of calculating writing-down allowances);'.—[Mr. Denzil Davies.]
  Mr. Denzil Davies: I beg to move Amendment No. 39, in page 21, line 15, at end insert—
  '(d) expenditure to which the person by whom it was incurred elects that subsection (1) above shall not apply.
  (5) Any election under subsection (4)(d) above shall be made by notice in writing to the inspector given within two years from the end of the first new chargeable period of the person concerned.'.
  12.30 a.m.
  This amendment gives the taxpayer the opportunity to choose whether or not to adopt the simplified system of dealing with capital allowances for expenditure incurred before 27th October 1970 by providing an election to be excluded in whole or in part from the effects of the clause.
  This point was raised in Committee by the hon. Member for Hertfordshire, South (Mr. Parkinson). I undertook to look at the point and, if practicable, to include an option. It has proved to be practicable. This amendment fulfils the commitment that was made in Committee.
  Amendment agreed to.

Clause 40

  CLOSE COMPANIES: LOANS TO PARTIC- IPATORS
  Mr. Peter Rees: I beg to move Amendment No. 40, in page 24, line 20, after 'makes', insert
  'within two years of the making of the loan'.
  Even at this hour of night, the House will recall that Section 286 of the Income and Corporation Taxes Act 1970 provides that, where a close company makes a loan to one of its shareholders, that loan shall be treated as though it were a dividend and so attract advance corporation tax. Therefore, it is a provision of a semi-penal nature. Presumably, some ingenious person in the Inland Revenue has thought of all kinds of ways in which that provision may be circumvented by loans being made by open public companies which are in some measure controlled by close companies or by public companies which subsequently pass under the control of close companies. As a result, we are saddled with Section 287.
  As often happens in these situations, Section 287 goes for an overkill and a whole range of innocent transactions may be caught by section 286. Realising this, the Minister of State, with his usual generous nature, has caused to be inserted subsection (4), which is what I call a let-out provision. But it is rather tightly, not to say circumspectly, drawn. A person will not be able of take advantage of that let-out provision and so escape the provisions of Section 286 if he is unable to show that there is no connection

  "(a) between the making of the loan and the acquisition of control; or

  (b) between the making of the loan and the provision by the close company of funds for the company making the loan".

  The draftsman has then gone on, determined to stop every possible loophole, by providing
  "the close company shall be regarded as providing funds as aforesaid if it directly or indirectly makes any payment or transfers any property to, or releases or satisfies (in whole or in part) a liability of, the company making the loan."
  It seems to me, as I hope it will seem to the House, that that goes too far. It will he difficult for anyone to pass through the eye of that needle.

  835
  This modest amendment, which is not technical in character, is designed to limit those words to the provision of funds by a close company to an open company
  "within two years of the making of the loan."
  Otherwise there might be some tenuous connection between the making of the original loan and the provision of funds by the close company for the open company.
  This is a modest and reasonable amendment. I hope that the Minister of State, having briefed himself thoroughly on what underlies it, will feel disposed to accept it.
  Mr. Denzil Davies: We discussed this matter in Committee. I said then that I certainly could not accept a two-year period. I thought that it was too short. One can envisage tax avoidance transactions where the making of the loan and the provision of the funds would be within two years and one day, thus making it easy to avoid the provision.
  I said that I was prepared to consider inserting a time limit. I thought that at least six years on each side would be the best time limit from the point of view of ensuring that there was not tax avoidance.
  Having considered the matter again, I think that on balance it is better not to have a time limit in the provision, but to leave the matter to be decided by the events of the particular case. The longer the time between the making of the loan and the provision of the funds, the easier it will be to show that it was not a tax avoidance but a commercial arrangement. In that respect the taxpayer is protected.
  I think that to lay down an arbitrary time limit, even of six years, would not be helpful, but would make the operation of the clause more inflexible. It is far better to leave it as it is.
  Obviously, if the transactions are very close together, it is often more likely that they will be tax avoidance transactions. If they are wider apart, it will be more difficult to show that they are tax avoidance transactions. The time limit would inhibit genuine commercial transactions rather than allow them not to be caught.
  Mr. Graham Page: That is a very disappointing reply. Usually the Minister of State is so helpful. My hon. and learned Friend the Member for Dover and Deal (Mr. Rees) has put forward a helpful amendment to a clause which is fairly reasonable up to this point. Then in these lines it becomes very restrictive.
  At this stage it is hopeless to try to make any amendments which are not approved by Treasury Ministers but I forecast that we shall come back to this point next year with another amendment to put it right. It cannot work satisfactorily as it stands.
  Mr. Peter Rees: With leave of the House, I, too, am very disappointed with the Minister's reply. He seems to shy away from precision in these matters. When quasi-penal provisions of this nature exist, the taxpayer is entitled to know exactly what he faces. The Minister of State is too prone to say that this is a matter for the courts. One appreciates that, but the taxpayer is entitled to know, without the trouble and cost of going to the courts, what he faces.
  The Minister has signally failed to meet the challenge thrown to him. As my right hon. Friend said, if we cannot extract anything from him this time, we shall have to return to the subject on other and perhaps more fortunate occasions.
  Amendment negatived.

Clause 41

  CLOSE COMPANIES: NOTICE OF LIABILITY
  Mr. Denzil Davies: I beg to move Amendment No. 41, in page 25, line 12, at end insert
  'and for the words "shall thereupon be payable by the company" there shall be substituted the words "shall be payable by the company upon service of the notice."'.
  Clause 41 amends paragraph 6(2) of Schedule 16 of the Finance Act 1972 so as to make permissive rather than mandatory the power to use a notice of liability to tax on a close company in respect of the apportionment of its undistributed income. The amendment makes it clear that the company becomes liable to pay tax only if a notice of liability is actually served.

  837
  This arises from the debate in Committee on a similar amendment moved by the right hon. Member for Crosby (Mr. Page). I said then that I did not think that the clause was ambiguous, but that if doubt arose in the right hon. Gentleman's mind, it could arise in the minds of other people and that therefore I would look at the matter. Having done so, I believe that the safe course is to amend the clause in this way.
  Amendment agreed to.

Clause 42

  EFFECT OF ADVANCE CORPORATION TAX ON PREFERENCE DIVIDENDS ETC.
  Mr. Denzil Davies: I beg to move Amendment No. 42, in page 25, line 33, leave out
  'any obligation to make good an'
  and insert—
  ' the obligation arising from this section to make good any'.
  The amendment is designed to make it clear that in respect of shares with cumulative rights, the clause sets an obligation to make good an under-payment arising from the payment of a lower dividend, in accordance with the Sime Darby judgment. It is a technical amendment to clarify the effect of the clause on dividends arising from cumulative rights. Some doubts had been expressed and the amendment puts the matter beyond doubt.
  Amendment agreed to.
  Amendments made:
  No. 43, in page 25, line 37, at end insert—
  '(3A) In the case of shares carrying both non-cumulative and cumulative rights, subsections (2) and (3) above apply respectively according as dividend is payable by reference to the one category of rights or the other.'
  No. 44, in page 25, line 38, leave out 'subsection (3)' and insert 'subsections (3) and (3A)'.—[Mr. Denzil Davies.]

Clause 50

  CAPITAL GAINS TAX: MAINTENANCE FUNDS FOR HISTORIC BUILDINGS
  Mr. Esmond Bulmer: I beg to move Amendment No. 207, in page 32, line 15, after 'transfer', insert
  838
  'and to disposals by trustees of property comprised in settlements on which the Treasury have given directions under subsection (1) of section 78 below.'.
  Mr. Deputy Speaker: With this we may take the following amendments: No. 208, in page 32, line 22, at end insert—
  '(3) Any disposal by the trustees of a settlement on which the Treasury have given a direction under subsection (1) of section 78 below shall be deemed to be a disposal made for such a consideration as will secure that on the disposal neither a gain or a loss accrues to them but the person acquiring an asset from them shall be treated as having acquired it at the open market value as defined under section 44 of the Finance Act 1965 at the time of acquisition.'.
  No. 249, in page 32, line 22, at end insert—
  '(A) A capital distribution of any property which is, within one month, made the subject of a transfer of value to a settlement which, by virtue of section 78 below, is an exempt transfer shall be deemed to have been a disposal made direct to the settlement for the purposes of the tax'.
  Mr. Bulmer: Amendments Nos. 207 and 208 seek to exempt maintenance funds from capital gains tax both on the rearrangements of investments and on the realisation of any gain that may have arisen since the inception of the fund. We believe that without these provisions capital gains tax, especially in a period of inflation such as we suffer at present, would much reduce the value of a fund.
  Amendment No. 249 deals with a different problem—namely, the assets, and very often the fund associated with the maintenance of the assets where they are heritage assets, particularly in a discretionary trust. The amendment would allow the transfer to an individual, which is a necessary step on the road to transfer to a maintenance fund.
  It is almost always the case that a discretionary trust does not permit the transfer of assets to a maintenance fund direct. The proposal in the amendment is that it should be done within one month. We believe that this is an essential further measure to protect the heritage.
  In Committee the arguments for the maintenance fund and the defence of the heritage were fully debated. I am a member of the Executive Council of the National Trust but I emphasise that I

  839
  do not speak for the trust, only for my hon. Friends and myself.
  In the past five years there has been a two-way squeeze. Inflation has meant that the value of an asset that has kept pace in money terms is theoretically forfeit to the extent of one-third. Similarly, building costs have risen by up to 100 per cent. At a time when the resources that might be put to the maintenance of buildings have come under pressure, so the demand on them has doubled. It has not been possible to provide income to match the increase in costs.
  Therefore, we believe that it is essential to provide incentive for the creation of maintenance funds. Under the pressures that now exist, the majority of owners cannot see their way to divert sufficient of the family resources to the maintenance of the house, or whatever other heritage asset it may be. If the amendments were accepted by the Treasury Bench, they would powerfully reinforce the incentive to establish a maintenance fund.
  The Treasury already accepts that in terms of tourism it is desirable that the family of the historic house should be kept together. The amendments would make that more likely. I hope, too, that in considering these problems the Treasury will look at the whole problem that was exemplified, perhaps, by the sale of Battle Abbey the other day, where we had to rely upon outside funds.
  The funds that are available in this country seem to come in a most haphazard fashion. If we could have contingency planning to protect all our historic assets, assets that must be preserved for posterity, we could all feel more confident for the future. The National Trust and other bodies have warned what will happen if no further action is taken. The Treasury already experiences the cost of maintaining seven properties at an annual cost of £300,000 a year. If the necessary steps were taken now, we could do much to forestall the increases that will otherwise inevitably occur.
  There is no doubt that taxation is the dry rot in the fabric of the heritage. Further steps must be taken to reduce its impact. If the Treasury works together with all the other bodies to maintain
  840
  the heritage, we could all feel a great deal more confident for the future. I hope that the amendments will have the sympathetic attention of the Minister.
  12.45 a.m.
  Mr. Denzil Davies: Amendments Nos. 207 and 208 seek to extend the relief which is given in respect of the disposal of qualifying assets into a maintenance fund. There is at present under Clause 50 relief from capital gains tax when assets are put into the fund. The amendment seeks relief when assets of the fund are disposed of by the trustees, so that there is no capital gains tax at that point. The hon. Member for Kidderminster (Mr. Bulmer) is asking for a considerable extension of already substantial reliefs.
  When the assets are disposed of by trustees, the trustees have money to pay tax, and I do not see why they should not pay tax. When they put assets into the fund, relief is given under Clause 50 because at that point of time there are no assets to pay the tax. Clause 50 already gives substantial relief, and I cannot recommend the House to go further.
  Amendment No. 249 is slightly different. It deals with assets by way of capital distribution coming out of a fund which are settled within a month. Again, the hon. Gentleman wants no tax to be charged when the assets come out of the fund. When the assets come out of the fund, tax is charged at 121 per cent. of the total charges which would otherwise apply. The transitional provisions go up to 1980—we have gone a considerable way by giving tapering relief going up to 20 per cent. in 1980. We have been generous. I take some of the hon. Gentleman's general points about the need to preserve historic buildings, but we have been very generous. I cannot accept Amendment No. 249.
  Mr. Graham Page: Amendment No. 249 seems to be merely machinery for building up the maintenance fund. It applies to a settlement, and no gain is being made out of the transaction. It is just machinery to get the money into the right fund. Even l2½ per cent. is an unnecessary imposition.
  My hon. Friend the Member for Kidderminster (Mr. Bulmer) put forward strong

  841
  arguments on Amendments Nos. 207 and 208, which I shall not repeat. I am sorry that his arguments cannot be accepted.
  Mr. Denzil Davies: The hon. Member for Kidderminster, and the right hon. Member for Crosby (Mr. Page) have made points which require further consideration. The charge is only 12½ per cent. I accept that the amendment is machinery, and if the property is settled within one month, it goes back into an exempt fund. Without giving any undertaking or commitment, I am prepared to look at this again within the next nine months or so to see whether problems are created. It is not an immediate, pressing matter, but I shall look at it.
  Mr. Graham Page: I suggest that it is an admirable subject on which to make an extra-statutory concession.
  Amendment negatived.

Clause 51

  CAPITAL GAINS: DISPOSALS ON TRUST FOR BENEFIT OF EMPLOYEES
  Amendments made: No. 48, in page 32, line 29, leave out "subsection (2)" and insert subsections (2) and (2A)".
  No. 49, in line 42, at end insert—
  '(2A) Where the disposal is by a close company, paragraph 18(1) of Schedule 7 to the said Act of 1965 (assets disposed of for less than market value) shall apply to the disposal as if for the reference to market value there were substituted a reference to market value or the sums allowable as a deduction under paragraph 4 of Schedule 6 to that Act, whichever is the less.'.
  No. 50, in line 23, leave out "or has been".
  No. 51, in line 25, leave out "or has been".
  No. 52, in line 31, leave out paragraph (c) and insert—
  '(c) any other person who has been a participator in the donor company of any such company as is mentioned in paragraph (b) above at any time after, or during the ten years before, the disposal made by that company; or
  (d) any person who is connected with a person within paragraph (a), (b) or (c) above.'.—[Mr. Denzil Davies.]

Clause 52

  INVESTIGATORY POWERS
  Amendments made: No. 53, in page 34, line 3, leave out "and 20B" and insert "20B, 20C and 20D".
  No. 54, in line 4, at end insert—
  '(2) In section 118(1) of that Act (interpretation), in the definition of "tax", after the words "those taxes" there are inserted the words "except that in sections 20, 20A, 20B, 20C and 20D it does not include development land tax.".'.—[Mr. Denzil Davies.]

Schedule 6

  SECTIONS TO BE SUBSTITUTED FOR SECTION 20 OF TAXES MANAGEMENT ACT 1970.
  Amendments made: No. 55, in page 124, line 7, at beginning insert Subject to this section'.
  No. 56, in line 10, at beginning insert 'reasonable'.—[Mr. Joel Barnett.]
  Amendment proposed: No. 57, in page 124, line 13, leave out from beginning to 'an' and insert:
  '(1A) Subject to this section, the Board may by notice in writing require a person to deliver, to a named officer of theirs, such documents as are in the person's possession or power and as (in the Board's reasonable opinion) contain, or may contain, information relevant to any tax liability to which he is or may be subject, or to the amount of any such liability.
  (2) Subject to this section'.—[Mr. Joel Barnett.]
  Mr. David Howell: On a point of order, Mr. Deputy Speaker. You are now going at some speed through Government amendments which arise at least in part from points raised in Committee. We are coming to very important issues—not that previous issues have not been important—and we are dealing with highly sensitive matters leading to fundamental proposals about constitutional powers. We expect a little more explanation from the Government, certainly on this amendment.
  Mr. Peter Rees: And Amendment No. 56.
  Mr. Deputy Speaker: We have disposed of Amendments Nos. 55 and 56.
  Mr. Peter Rees: On a point of order, Mr. Deputy Speaker. These are matters

  843
  of great importance. We are rushing through far too fast and are not doing justice to a very important schedule. I am sure that the Chief Secretary will agree that it is only courteous to the House that he should explain the import of these provisions. It would be a grave affront to the public, who are concerned with these matters, if we did not have a proper explanation.
  The Chief Secretary to the Treasury (Mr. Joel Barnett): While I am dealing with Amendment No. 57, perhaps I might en passant refer to Amendments Nos. 55 and 56.
  Mr. Deputy Speaker: The amendment was clearly moved formally. If the hon. and learned Member for Dover and Deal (Mr. Rees) had anything to say about it, he should have said it at the time. Nevertheless, the Minister is doing the correct thing. He will refer to Amendments Nos. 55 and 56, although we have already agreed to them.
  Mr. David Howell: My hon. and learned Friend the Member for Dover and Deal (Mr. Rees) has a point. We are dealing with very important matters. I think that we can get round the difficulty in the way which the Chief Secretary suggests. In case we suddenly get on the skids again and go rushing on, I give notice that we shall want an explanation of Amendment No. 58, which is on a similar point to Amendment No. 56.
  Mr. Deputy Speaker: If an hon. Member rises, even though the Minister moves an amendment formally, he will be called. I am not responsible for hon. Members failing to rise.
  Mr. Barnett: I am very sorry if by some mishap the hon. and learned Member for Dover and Deal (Mr. Rees) did not know that you were moving rather speedily—though not too speedily—Mr. Deputy Speaker.
  Amendment No. 57 gives the Board of Inland Revenue power to call for documents from a taxpayer relevant to his tax liability, and to do so without having to obtain the consent of a general or special commissioner beforehand. This preserves the Board's existing freedom, which is contained in the existing section
  844
  20, to issue a notice without reference to anyone else.
  Amendment No. 56 provides that an inspector's opinion that the documents he is seeking from the taxpayer
  "contain, or may contain, information relevant to any tax liability"
  is to be a "reasonable opinion". The word "reasonable" was suggested to me in Committee upstairs, and, being the reasonable chap that I am, I agreed to table a Government amendment to that effect. I moved it formally because I assumed that the hon. and learned Gentleman had noted it and recognised that there was no need for me to speak at length on it.
  Mr. Peter Rees: This is a matter of some importance, and I am grateful to the Chief Secretary for having met some of the points that we made in Committee
  As I read Schedule 6(20), it appeared that the word of the inspector was sufficient and that it would be impossible to challenge the reasonableness or otherwise of his request for documents. He may ask for documents which, in the opinion of most right-thinking people, are irrelevant. Therefore, we tabled amendments on this matter in Committee and I appreciate that the Chief Secretary has sought to meet our objections.
  Is the amendment now in such form that if a taxpayer feels that the inspector has gone a little further than is necessary for the purpose of the provision, the taxpayer may go before a body of commissioners and say "No, this is unreasonable"? In that case the commissioners would be entitled to go behind the certificate or statement of the inspector and consider whether the inspector had been reasonable in asking for the document or documents in question. If the commissioners are bound by the inspector's statement, "I behaved reasonably", it would appear that this protection is illusory.
  This is a point of some refinement and the Chief Secretary may need the assistance of the Solicitor-General, We were privileged upstairs in Committee to have the attendance of the Solicitor-General, but tonight the Chief Secretary is battling on alone. If he cannot answer the point now, no doubt we can return to it tomorrow.
  Mr. Joel Barnett: I am happy to respond to the hon. and learned Gentleman. I assure him that appeal commissioners can go behind documents to ensure that demands for information are reasonable.
  Amendment agreed to.
  Amendment made: Amendment No. 58, in page 124, line 21, after 'inspector's' insert 'reasonable'.—[Mr. Joel Barnett.]
  Mr. David Howell: I beg to move Amendment No. 59, in page 124, line 27, at end add
  'over the age of 16 years'.
  Mr. Deputy Speaker: With this amendment, it may also be convenient to take the following amendments:
  No. 61, in page 124, line 47, leave out paragraph (5).
  Government Amendment No. 62.
  Mr. Howell: This amendment relates to the provision in Schedule 20 (3) (a) under which the inspector of taxes may seek information and papers from any son or daughter of the taxpayer. We debated this matter in Committee and some distaste was expressed at the possibility of a situation arising in which an inspector of taxes, for justifiable reasons, could be put in a position of harassing young children of a taxpayer in whose affairs the inspector was interested. My hon. Friends in Committee sought to make some decent modification of that situation by limiting the power only to a son and daughter over 16 years of age. This is a reasonable provision, and I am sure that the Chief Secretary will be able to accept it.
  1.0 a.m.
  Amendment No. 61 seeks to leave out paragraph (5) of Schedule 6. It would take out of the Bill a number of other circumstances which we find potentially distasteful and rather complicated and curious. They are, in a sense, the "beyond the grave" provisions of the schedule, those by which the inspector of taxes is empowered, with the safeguards which have been put in, to search into the affairs of someone who has died and, indeed, to seek from the widow or the widower the necessary papers and information.
  846
  There is also the curious circumstance—I think graphically described by my right hon. Friend the Member for Crosby (Mr. Page)—in which we are asked to legislate to give powers to the inspector of taxes to inquire into the affairs of a company which has ceased to exist. That, too, is included in paragraph (5) and that, too, raises the curious prospect of demands being made for papers belonging to organisations which may long since have been wound up and liquidated, the papers being bound away in safes or destroyed altogether.
  These provisions caused us considerable worry, particularly the item dealing with the demands placed upon a widow after the death of the taxpayer. In Committee we sought reassurance and, more than that, we asked that these measures should be modified. These amendments would go further still and remove all our worries simply by removing the paragraph altogether.
  Mr. Lawson: It would be helpful if we could have some explanation from the Chief Secretary of the significance of Government Amendment No. 62, which seems to be a very mysterious amendment. I wholly concur with the strictures of my hon. Friend the Member for Guildford (Mr. Howell) on the harrying of young children and of widows by the tax authorities, because there is a possibility that some taxpayer may not have filed a correct return. This is going too far.
  What is extremely mysterious and baffling is the full significance of Government Amendment No. 62, the main word in which seems to be "immaterial"—in which case it seems to be immaterial whether the word is there.
  Mr. Peter Rees: I wonder whose fevered imagination was responsible for the proposed Section 20. It cannot have been the Chief Secretary's, because we know him to be a sunlit, genial figure. As one looks about the Treasury Bench—although perhaps one does not do so at this hour of the night—one is pleased to see the figure of the learned Solicitor-General. He was obviously called in to give moral support to his right hon. Friend. It could not have been his imagination which was responsible for the proposed section either, because we

  847
  know him to be a man with broad and humane sympathies.
  I can only conclude that it is the Chancellor of the Exchequer who seeks to bring into the rapacious net of the Inland Revenue the widows and orphans of taxpayers who might by some conceivable stroke have defaulted on their obligations. Can it be right that children under the age of 16 are to be subjected to the intolerable pressures of the Inland Revenue? Can it be right that a widow, recently remarried, should be snatched from her marirage bed to be subjected to the loathsome attentions of the Inland Revenue? These are serious matters and I am sorry that they have attracted a certain levity from the Labour Benches.
  The hon. Member for Keighley (Mr. Cryer), who has not graced our debates up to now, might be about to intervene and mention the case of Mr. Deevy. Whether he would be in order in doing so is a different matter.
  I wish to confine myself to the exorbitant powers with which the Chief Secretary apparently wishes to clothe the Inland Revenue. A modest restriction on those powers would be at least to exempt from the attentions of Somerset House children under the age of 16, children barely above the age of criminal responsibility. I should like a full and sympathetic explanation from the Chief Secretary before I could go along with Amendment No. 62. Why should a widow, on remarriage, still be subject to this odious attention, these hideous pressures from the inspectors of taxes, or the Board of Inland Revenue?
  In a humane society these provisions would be regarded with utter detestation. I find them so uncharacteristic of the Chief Secretary that I can only conclude that it is the unwholesome pressure of the Chancellor that has compelled him to ask us to sanction them. I await with a little trepidation, and a certain amount of distaste, the Chief Secretary's explanation.
  Mr. Graham Page: Schedule 6(5) is so shockingly badly drawn that it is almost unintelligible. It sets up mysterious things. For example, it talks about "a company". It says that:
  "a company which has ceased to exist"
  848
  is to be a taxpayer under the previous subsections. Then the taxpayer's spouse and son and daughter are brought into it. How can there be a spouse or a son and daughter of a company which has ceased to exist?
  A few words later there is reference to
  "an individual who has died".
  Are we really to suppose that a young daughter, of any age down to a few months, can be questioned about the deceased taxpayer's affairs? It was on this schedule, or a related clause, that I raised in Committee the point that the spouse of a widow or widower remains such only until remarriage. This is the reason why the Government have suddenly realised that they have to put in a little bit to say that such people remain a widow or widower, quite contrary to the English language, if they remarry. This little bit in parenthesis is sought to be added in Amendment No. 62. It makes the whole paragraph even more ridiculous. I hope that the Government will accept Amendment No. 61 and get rid of this mysterious little provision which will cause immense trouble. It is stupid.
  The important amendment in this group is that which endeavours to fix an age below which the children of the taxpayer shall not be questioned and asked to produce their father's papers to the tax inspector, who breaks into the house. There must be some age inserted. The Government have not come forward with an age. I believe that the age might have been set at 14.
  The Chief Secretary cannot envisage that an inspector entering a house—and he can force his way into it—should question young children. Let us have this figure in the Bill to make it certain that that is not allowed. The whole situation is so revolting to imagine, with children being cross-examined, that it makes the whole of the proposed Section 20 repugnant to anyone who tries to understand what the Government are seeking to do.
  Mr. Joel Barnett: I do not think that hon. Gentlemen who have spoken are quite as naïve as they would have me believe. We are dealing here with potential tax evasion, possibly on a quite large scale. It is not unknown for persons seeking to evade tax to put money in the names of their children under the age of 16 or in a wife's name. In some cases,

  849
  after a company has gone into liquidation it may be necessary to go beyond it to the former directors and shareholders. It is hard to believe that hon. Gentlemen are not aware of that kind of situation.
  When I am told that what we are doing is distasteful and that we are harrying young children, going behind companies which have ceased to exist and snatching widows from their beds, I really wonder what we are talking about. What is evident, however, is that hon. Gentlemen are seeking to ensure that it will be possible for tax evasion to go unfound. If the amendment were carried, a person evading the payment of tax on a substantial scale could put money in the names of his children below the age of 16 and no tax inspector would be able to—
  Mr. Peter Rees: Is the Chief Secretary seriously suggesting that, if equipped with these powers, the Inland Revenue could make demands on children under the age of 16 for their savings books? This is ludicrous. Is he seriously suggesting that in practice the Inland Revenue will wish to use these powers on children under 16?
  Mr. Barnett: Is the hon. and learned Gentleman seriously suggesting that there will not be cases where a taxpayer who has been avoiding tax, sometimes on a very substantial scale, will not have put money into a bank account in the name of his children below the age of 16? There is, in fact, a very substantial safeguard to avoid a situation where tax inspectors could harry young children, snatch widows out of their beds and get hold of widows and widowers who used to belong to a company which has ceased to exist. I really wonder where hon. Gentlemen think they are.
  There is a very considerable safeguard. Before an inspector of taxes can obtain the notice required under this provision, he has to go before a general or special commissioner and the general or special commissioner has to give his consent, having heard the inspector state his case. The general or special commissioner has to be satisfied of the case that is being presented. In those circumstances, to remove that from the statute book would leave a situation which I hope, on reflection, hon. Gentlemen will be prepared to recognise would be quite wrong.
  It was put to me that Amendment No. 62 is very mysterious. It is nothing of
  850
  the sort, as the right hon. Member for Crosby (Mr. Page) would have told his hon. Friends if they had asked him. I am surprised at the lack of consultation on the Opposition Benches. In Standing Committee it was suggested to me very helpfully by the right hon. Gentleman that the term "widow" and "widower" were not apt where the surviving spouse had remarried. The amendment makes the position clear. I said in Committee that I was obliged to the right hon. Gentleman and I am. I have now put down an amendment which rectifies the situation.
  1.15 a.m.
  Mr. David Howell: With the leave of the House, I should perhaps point out that, although we feel strongly, this is very much the less controversial section of our debates on these matters.
  It is a little unfortunate that the Chief Secretary, at the start of the runway, has already put on all engines and seems to be waxing very indignant about our questioning of his amendments and about the proposals behind our own amendments. I am sorry if the right hon. Gentleman objects, but we find it uncivilised that there should be this prospect of harrying children under 16 years of age.
  We hear how potential tax evaders will transfer hundreds of thousands of pounds into their children's bank accounts. I do not know quite how they will do that without incurring capital gains tax, but no doubt the right hon. Gentleman will explain to us—
  Mr. Nicholas Winterton: He will advise us.
  Mr. Howell—how these things are done as he goes along. As to the amendment—
  Mr. Joel Barnett: On a point of order, Mr. Deputy Speaker. I thought I heard the hon. Member for Macclesfield (Mr. Winterton) suggest that I would advise someone how to evade tax. I shall be glad if he will withdraw that statement.
  Mr. Nicholas Winterton: The Chief Secretary has given plenty of advice to the House, and no doubt he will continue to do so.
  Mr. Joel Barnett: The hon. Gentleman accused me of profferring advice on an

  851
  illegal matter. I shall be obliged if he will withdraw his remark.
  Mr. Peter Rees: Further to that point of order—
  Mr. Deputy Speaker (Mr. Oscar Murton): Order. Did the hon. Member for Macclesfield (Mr. Winterton) make a remark about tax evasion? If he did, he should withdraw it, because it is not an appropriate parliamentary expression. It is an aspersion on the Chief Secretary.
  Mr. Nicholas Winterton: I should expect the Chief Secretary to give professional advice from the Dispatch Box, and I merely repeat what I said a moment or two ago.
  Mr. Deputy Speaker: Did I understand the hon. Gentleman to say that the Chief Secretary would give that advice from the Dispatch Box—to evade tax?
  Mr. Winterton Mr. Winterton rose—
  Hon. Members: Withdraw.
  Mr. Deputy Speaker: I repeat, did the hon. Member for Macclesfield make the suggestion that the Chief Secretary at the Dispatch Box would use his powers to advise anyone how to evade tax?
  Mr. Winterton: I suggest that we look at Hansard tomorrow.
  Mr. Deputy Speaker: No. The hon. Gentleman must inform me what in fact he said.
  Mr. Winterton: I said that I was sure the Chief Secretary would give whatever advice he thought appropriate, or words to that effect. As far as I know, there is nothing illegal in evading tax. It is tax avoidance which is illegal. Tax evasion certainly is not.
  Mr. Joel Barnett: The hon. Gentleman should take advice from his hon. and learned Friend the Member for Dover and Deal (Mr. Rees). He accused me of giving advice on evasion, which is illegal, and I shall be obliged if he will withdraw what he said.
  Mr. Deputy Speaker: I think that the hon. Member for Macclesfield misunderstood the implication of his remark. He should withdraw it. The Chief Secretary
  852
  has made it clear that advice on evasion is illegal.
  Mr. Winterton: Then, if I put it the other way, I am sure the House will have it straight.
  Mr. Deputy Speaker: No. The hon. Member for Macclesfield should now understand the implication of his remark, and withdraw it.
  Mr. Winterton: I have the highest respect for the Chief Secretary. If he has taken in any unfortunate sense a remark which I made from a sedentary position, most certainly I will say to him quite happily that I withdraw the remark if he took it incorrectly.
  Mr. Deputy Speaker: Very well. I take it that the remark is now withdrawn.
  Mr. David Howell: I think that the Chief Secretary had something to be indignant about there, and I am glad that my hon. Friend has withdrawn his improper accusation about tax evasion.
  Before that little diversion, I was saying that the Chief Secretary did not have very much to get indignant and excited about at this stage. We are putting forward amendments on what is a highly controversial part of the schedule, and we are arguing an eminently civilised and reasonable case.
  If we are to give these Draconian powers to inspectors of taxes, with appropriate safeguards, it is reasonable to suggest that children under 16 should be protected from harassment. I do not see anything extreme in that. I do not think the Chief Secretary has any reason to think that we are "trying it on" or that we are being naive.
  I note the Chief Secretary's comments about Amendment No. 62 and the explanations which were prompted by the observations of my hon. Friend concerning the definition of "widow" and "widower". As the Bill stands a woman ceases to be a widow when she remarries, and the inspectors would not be able to harass her. The amendment means that harassment will follow her through her subsequent marriage. When she has settled down to a new family life, and forgotten her bereavement, she is then asked for information and documents concerning her previous marriage

  853
  to a man who is dead and concerning a past life. This is verging on the uncivilised. What is more, it is nothing compared with what is coming. It is a little odd that hon. Members below the Gangway should be asked to pass legislation to harass young children. Yet this is peanuts compared with what comes later in the schedule. The powers will be given to allow Government officials to break into homes at all times of the day and night, to search for docu-
  Question accordingly negatived.
  Amendments made: No. 60, on page 124, line 44, after "inspector's", insert "reasonable".
  ments and information and to seize anything they like.
  I hope that the Chief Secretary will answer our points, but not in an excitable way. I hope he will realise that we have put forward reasonable points which require a reasonable response if we are to make progress on the Bill.
  Question put, That the amendment be made:—
  The House divided. Ayes 17, Noes 119.

  Division No. 251.]

  AYES

  [1.23 a.m.

  Bain, Mrs Margaret

  Montgomery, Fergus

  Wigley, Dafydd

  Brotherton, Michael

  Morrison, Charles (Devizes)

  Wilson, Gordon (Dundee E)

  Dykes, Hugh

  Page, Rt Hon R. Graham (Crosby)

  Winterton, Nicholas

  Fairgrieve, Russell

  Penhaligon, David

  Gilmour, Sir John (East File)

  Reid, George

  TELLERS FOR THE AYES:

  MacGregor, John

  Tebbit, Norman

  Mr. Nigel Lawson and

  Maxwell-Hyslop, Robin

  Warren, Kenneth

  Mr. Peter Rees.

  NOES

  Allaun, Frank

  Fowler, Gerald (The Wrekin)

  Miller, Dr M. S. (E Kilbride)

  Anderson, Donald

  Garrett, John (Norwich S)

  Morris, Alfred (Wythenshawe)

  Archer, Peter

  Golding, John

  Morris, Charles R. (Openshaw)

  Armstrong, Ernest

  Graham, Ted

  Murray, Rt Hon Ronald King

  Barnett, Guy (Greenwich)

  Grocott, Bruce

  Ovenden, John

  Barnett Rt Hon Joel (Heywood)

  Hamilton, James (Bothwell)

  Owen, Dr David

  Bates, Alf

  Hardy, Peter

  Palmer, Arthur

  Bean, R. E.

  Harper, Joseph

  Park, George

  Bennett, Andrew (Stockport N)

  Harrison, Walter (Wakefield)

  Parry, Robert

  Blenkinsop, Arthur

  Hart, Rt Hon Judith

  Prescott, John

  Boothroyd, Miss Betty

  Hatton, Frank

  Robinson, Geoffrey

  Brown, Hugh D. (Provan)

  Heller, Eric S.

  Roderick, Caerwyn

  Buchan, Norman

  Horam, John

  Rowlands, Ted

  Buchanan, Richard

  Hunter, Adam

  Skinner Dennis

  Callaghan, Jim (Middleton & P)

  Irving, Rt Hon S. (Dartlord)

  Small, William

  Canavan, Dennis

  Jackson, Miss Margaret (Lincoln)

  Snape, Peter

  Carmichael, Neil

  Jeger, Mrs Lena

  Stewart, Rt Hon M. (Fulham)

  Clemitson, Ivor

  John, Brynmor

  Stoddart, David

  Cocks, Michael (Bristol S)

  Johnson, James (Hull West)

  Stott, Roger

  Cohen, Stanley

  Jones, Barry (East Flint)

  Strang, Gavin

  Coleman, Donald

  Jones, Dan (Burnley)

  Thomas, Mike (Newcastle E)

  Cook, Robin F. (Edin C)

  Kilroy-Sllk, Robert

  Tierney, Sydney

  Cox, Thomas (Tooting)

  Lamborn, Harry

  Tinn, James

  Craigen, J. M. (Maryhill)

  Lamond, James

  Urwin, T. W.

  Crawshaw, Richard

  Latham, Arthur (Paddington)

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

  Crowther, Stan (Rotherham)

  Leadbitter, Ted

  Walker, Terry (Kingswood)

  Cryer, Bob

  Litterick, Tom

  Ward, Michael

  Cunningham, G. (Islington S)

  Loyden, Eddie

  Watkinson, John

  Cunningham, Dr J. (Whiteh)

  McCartney, Hugh

  White, Frank R. (Bury)

  Davies, Bryan (Enfield N)

  McElhone, Frank

  Whitehead, Phillip

  Deakins, Eric

  MacFarquhar, Roderick

  Wilson, Alexander (Hamilton)

  Dempsey, James

  McGuire, Michael (Ince)

  Wilson, William (Coventry SE)

  Dormand, J. D.

  Maclennan, Robert

  Wise, Mrs Audrey

  Douglas-Mann, Bruce

  McNamara, Kevin

  Woodall, Alec

  Dunwoody, Mrs Gwyneth

  Magee, Bryan

  Woof, Robert

  English, Michael

  Mahon, Simon

  Wrigglesworth, Ian

  Evans, Ioan (Aberdare)

  Marks, Kenneth

  Young, David (Bolton E)

  Ewing, Harry (Stirling)

  Marquand, David

  Fernyhough, Rt Hon E.

  Marshall, Dr. Edmund (Goole)

  TELLERS FOR THE NOES:

  Flannery, Martin

  Maynard, Miss Joan

  Mr. A. W. Stallard and

  Ford, Ben

  Millan, Bruce

  Mr. John Ellis.

  No. 62, in page 125, line 3, at end insert
  '(the circumstance that she or he may have re-married being immaterial for the purposes of those subsections)'.
  No. 63, in page 125, line 4, leave out from beginning to "with" in line 5 and insert—
  '(6) Notices under this section are not to be given by an inspector unless he is authorised by the Board for its purposes; and—
  (a) a notice is not to be given by him except'.
  No. 64, in page 125, line 6, after "and", insert "(b)".
  No. 65, in page 125 leave out line 9 and insert "this section".
  No. 66, in page 125, line 10, after "(1)", insert "(1A)". "(1A)".
  No. 67, in page 125, line 12, leave out "inspector's notice" and insert "notice in question".
  No. 68, in page 125, line 20, after "inspector" insert
  '(or, as the case may be, the Board)'.
  No. 69, in page 125, leave out lines 21 to 40 and insert—
  '(8) To the extent specified in section 20B below, the above provisions are subject to the restrictions of that section.'—[Mr. Joel Barnett.]
  Mr. Joel Barnett: I beg to move Amendment No. 70, in page 126, line 2, leave out from beginning of line to end of line 14 and insert—
  'an inspector authorised by the Board for the purpose of this section may by notice in writing require the person to deliver to him such documents as are in his possession or power and as (in the inspector's reasonable opinion) contain information relevant to any tax liability to which any client of his is or has been, or may be or have been, subject, or to the amount of any such liability.
  For this purpose section 20(7) above applies, substituting "the client" for "the taxpayer.".'.
  This amendment is concerned with the provision under which an inspector may issue a notice to a tax accountant who has been convicted of a criminal offence. It provides that a notice may be issued only by an inspector authorised by the board for the purposes of the schedule. Previously, any inspector could issue a notice. I hope that the amendment will be acceptable to the House.
  Amendment agreed to.
  Mr. Joel Barnett: I beg to move Amendment No. 71, in page 126, line 30, leave out from "of" to "is" in line 31 and insert
  'the appropriate judicial authority; and that authority'.
  856
  As the Bill stands, a notice cannot be issued to a tax accountant without the consent of a general or special commissioner. The effect of the amendment is that, instead of the consent needed being that of a general or special commissioner, it will be the consent of a circuit judge in England and Wales, a sheriff in Scotland or a county court judge in Northern Ireland.
  Amendment agreed to.
  Mr. Joel Barnett: I beg to move Amendment No. 72, in page 126, line 39, at end insert—
  '(6) To the extent specified in section 20B below, the above provisions are subject to the restrictions of that section.
  20B.—(1) Before a notice is given to a person by an inspector under section 20(1) or (2), or under section 20A, the person must have been given a reasonable opportunity to deliver (or, in the case of section 20(2), to deliver or make available) the documents in question; and the inspector must not apply for consent under section 20(6) or, as the case may be, section 20A(4), until the person has been given that opportunity.
  (2) A notice under section 20(1) does not oblige a person to deliver documents relating to the conduct of any pending appeal by him; a notice under section 20(2) does not oblige a person to deliver or make available documents relating to the conduct of a pending appeal by the taxpayer; and a notice under section 20A does not oblige a person to deliver documents relating to the conduct of a pending appeal to the client. "Appeal" means appeal relating to tax.
  (3) An inspector cannot under section 20(1) or (2), or under section 20A(1), give notice to a barrister, advocate or solicitor, but the notice must in any such case be given (if at all) by the Board; and accordingly in relation to a barrister, advocate or solicitor for references in section 20(2) and (3) and section 20A to the inspector there are substituted references to the Board.
  (4) To comply with a notice under section 20(1) or section 20A(1), and as an alternative to delivering documents to comply with a notice under section 20(2), copies of documents may be delivered instead of the originals; but—

  (a) the copies must be photographic or otherwise by way of facsimile; and

  (b) if so required by the inspector (or, as the case may be, the Board) in the case of any documents specified in the requirement, the original must be made available for inspection by a named officer of the Board (failure to comply with this requirement counting as failure to comply with the notice).

  (5) A notice under section 20(2), if given to a person who is carrying on a business or was doing so at any time material to the subject matter of the inspector's (or the

  857
  Board's) enquiries, or (whether carrying on not oblige the person or make available any which originates more date of the notice.
  (6) But subsection (5) does not apply where the notice is so expressed as to exclude the restrictions of that subsection; and it can only be so expressed where—

  (a) the notice being given by an inspector with consent under section 20(6), the Commissioner giving consent has also given approval to the exclusion;

  (b) the notice being given by the Board, they have applied to a General or Special Commissioner for, and obtained, that approval.

  For this purpose the Commissioner gives approval only if satisfied, on the inspector's or the Board's application, that there is reasonable ground for believing that tax has, or may have been, lost to the Crown owing to the fraud of the taxpayer.
  (7) A notice under section 20(2) in relation to a taxpayer who has died cannot be given to a person by virtue of her or his being the taxpayer's widow, widower, son or daughter if more than 6 years have elapsed since the death.
  (8) A notice under section 20(2) or section 20A(l) does not oblige a barrister, advocate or a solicitor to deliver or make available, without his client's consent, any document with respect to which a claim to professional privilege could be maintained.
  (9) A notice under section 20(2) does not, in the case of a person who (in the course of a business carried on by him) has stood in relation to another as tax accountant, oblige that person to deliver or make available documents which are his (the accountant's) property and originate as working papers of that relationship.'.
  Mr. Deputy Speaker: With this, we may take the following amendments to it:
  Amendment (a), in subsection (3) leave out from first 'solicitor' to end of line 18.
  Amendment (b), in subsection (7), leave out '6' and insert '3'.
  Amendment (c), leave out subsection (8) and insert—
  '(8) No notice under sections 20 or 20A shall oblige any person to deliver or make available any documents with respect to which he or any other person could or could if legal proceedings were pending maintain a claim to professional privilege (unless in the case of a claim which could be maintained by some other person that other person consents)
  (9) Any claim that documents are or would if legal proceedings were pending be the subject of professional privilege for the purposes of sections 20 or 20A shall be dealt with subject to rules of Court by such judge of the High Court as the Lord Chancellor may select for the purpose'.
  Mr. Barnett: Amendment No. 72 is slightly longer than the previous amendments. It introduces a new sections, 20B, which sets out restrictions on the powers to issue notices under Clause 20(1) and Clause 20A. Most of the restrictions are new and follow from undertakings I gave in Committee to reconsider certain points. I shall he happy to deal with any points that may arise on Amendments (a), (b) and (c) or any other points that the Opposition wish to raise.
  Mr. Peter Rees: I am delighted that this group of amendments holds—indeed rivets—the attention of the House, even at this late hour. It is reassuring to note the presence of so many Government supporters who were not privileged to take part in the debates in Committee upstairs. We are glad to see those hon. Gentlemen here, even at this late hour. We hope that they, like me, will make their modest contribution. Government supporters were notable by their absence from the Standing Committee. They are now untrammelled by the Whips. With the whole of the night before us, I have no doubt that we shall hear constructive, illuminating and agreeable speeches from the. [Interruption.] Government supporters who are now making interventions from a seated position were not present in the Standing Committee. They will not have followed with close attention the thread of our debates, which are of great importance to the country.
  I thought that the Solicitor-General had vanished. I was wrong. However, I notice that with his customary modesty he is sitting low down on the Government Front Bench. I say that since the amendment to which I wish to speak is related to what he said. In Committee we discovered a range of points which we thought it necessary to raise. We shall be obliged to explore those in the later hours of the morning. We cannot leave Schedule 6 without a great deal of close exploration.
  We notice that there has been a softening in the attitude of the Chief Secretary. I stress "in his attitude". In no other of his faculties have we detected any softening. If anything, they have grown more acute and sharper as the night has gone on. But the right hon. Gentleman

  859
  is still the robust and genial character that we knew upstairs.
  The point to which I wish to direct attention concerns professional privilege. I am sure that I shall carry the whole House with me—even perhaps the hon. Member for Bolsover (Mr. Skinner)—when I say that the foundation of a civilised society is the right of a person who tangles with the Administration or the law to have access to professional advice and, when he does, to have that advice immune from the prying eyes of those with whom he may be litigating, whether private litigants or a Government Department.
  I am sure that the personal intervention of the Solicitor-General caused a considerable relaxation in this area. However, I must tell him and the Chief Secretary that the amendment, far though it goes, does not go far enough. I should like to consider at a later stage why the Government have resiled so far. I should like to feel that a modest measure of credit for this position can be taken by the Opposition. Perhaps we can explore that aspect later. For the moment, I am concerned with the main issue of professional privilege.
  Dripped through these new provisions is a measure, but only a measure, of protection for those who may be involved professionally in these matters. The Government do not appear to have understood that it is important that not only those who may be called upon to advise taxpayers professionally but the persons to whom they tender advice should be protected by privilege. It would be idle to say that there is a measure of professional protection of privilege here if the Revenue can bypass the barrister, solicitor or accountant and go straight to the taxpayer and say "we want you to disclose all the professional advice you have received on your tax affairs over the past three, four or five years".
  I am sure that the House, now that it appreciates what is at stake, will accept that our amendments are not trivial or frivolous. I hope that the Chief Secretary and the Solicitor-General will approach them with deep seriousness.
  I should like to draw attention particularly to Amendment (c). It attempts to extend professional privilege to docu-
  860
  ments not only in the hands of the professional people who may have advised the taxpayer but in the hands of the taxpayer himself.
  A point of some technicality is involved here. It may be that the Solicitor-General will feel it appropriate to advise the House on this matter. It is difficult to know how questions of professional privilege can be determined if there is no litigation pending. Privilege is essentially envisaged in the context of litigation when one can go to the court and say "This document is privileged. I do not propose to hand it over". Therefore, the second part of Amendment (c) reproduces a provision which is to be found in the Patents Act, because it designates the court which can determine the question of privilege.
  The questions of privilege that the Government have sought to introduce arise only where an appeal is pending. I believe that it is equally important that a taxpayer should enjoy the benefit of privilege in advance of an assessment being raised against him. These exceptional and unprecedentedly wide powers can be exercised in advance of an assessment having been raised and in advance of any appeal having been lodged. In that kind of situation, it is important that the taxpayer should be able to say "No, I am not going to disclose to you the advice I have received from this or that professional person or firm." I suggest that privilege should extend to that kind of situation. The defect in the Government's amendment is that the privilege is restricted only to the professional person concerned and to documents which are called into being or are connected with a pending appeal.
  Now that I have pointed out these considerable defects, I feel sure that Ministers will look benevolently on Amendment (c).
  1.45 a.m.
  Amendment (b) is of a different character. It relates to the new Section 20B(7), which enables the Revenue, in relation to a taxpayer who has died, to give notice to his or her widow, widower, son or daughter—I shall not reopen the debate we have just had—if more than six years have elapsed since the death. I am sure that unprejudiced hon. Members will agree that to have this kind of thing hanging over the family of a

  861
  deceased taxpayer for six years after his death is too long.
  I have put down an amendment to limit the period to three years. In some circumstances, the Revenue can raise an assessment on a deceased taxpayer by reference to his income within three years after his death. That is why I chose three years. If the Chief Secretary prefers three and a half or two years, I shall not quibble, but six years is far too long. These matters must be cleared up within a measurable time of a taxpayer's death. That is a smaller but no less important amendment, and I commend it to the House.
  Mr. Joel Barnett: I hope that the hon. and learned Member for Dover and Deal (Mr. Rees) will accept that it would not be reasonable to allow a legal adviser to assert his client's privilege when the inquiry is into his own tax affairs. Such a claim would not prevail against the Law Society's own statutory powers. A legal adviser cannot assert his client's privilege if, under the existing Section 20, the board served the legal adviser with a notice for documents relating to his professional practice. He is, therefore, in just the same position under the new Section 20(1) as under the existing Section 20.
  The effect of Amendment (a) would be that no one—neither the inspector nor the board—could serve a notice on a barrister, advocate or solicitor requiring him to produce documents relating to the tax liability of a third party. It would prevent any notice from being served on a barrister, advocate or solicitor requiring him to produce documents relating to someone else's tax affairs.
  The new Section 20B(3) contained in Amendment No. 72 prevents an inspector from issuing a notice to a lawyer for documents relating to his own or anyone else's tax affairs. That leaves the board as the issuing authority in respect of the lawyer's own affairs under the board's power in the new Section 20A(1) to issue notices to taxpayers relating to their own affairs, but it has to go on and specifically substitute the board for the inspectors in relation to notices to a lawyer for documents relating to someone else's affairs. Amendment (a) would delete the substitution, leaving no issuing authority at all for notices to lawyers relating to other people's affairs.
  862
  I hope that the hon. and learned Gentleman will accept that that would not be justifiable. Where a lawyer is served with a notice requiring him to produce documents relating to someone else's tax affairs, the Bill as amended provides full protection for documents in respect of which a claim to professional privilege could be maintained. If that is not the case and the hon. and learned Gentleman can show me that it is not the case, I shall be happy to look at it, but I understand that that is the case as it now stands.
  A lawyer may also be a tax accountant as defined in the Bill, and there should be the same right to call on him for documents relating to his tax clients in the, I hope, very rare case in which the lawyer has been convicted of a tax offence himself as there is to call on any non-lawyer tax accountant—subject, of course, to any plea of privilege that the Bill as amended will protect. I therefore hope that the hon. and learned Gentleman will accept that Amendment (a) is not justifiable.
  Amendment (c) relates to subsection (8) of the proposed Section 20B in Amendment No. 72. It excuses a lawyer who is served with a notice requiring him to produce documents relating to someone else's tax liability from having to produce, without the client's consent, any document with respect to which a claim of professional privilege could be maintained. The hon. and learned Gentleman's amendment proposes that any person, whether a lawyer or not, when served with a notice to produce documents should be excused from having to produce, first, any document in respect of which a claim to professional privilege could be maintained and, second, certain documents in respect of which there would be no privilege—namely, any document in respect of which a claim to professional privilege could be maintained if legal proceedings were pending but to which no privilege attaches in the absence of such proceedings being contemplated or pending.
  I hope that the hon. and learned Gentleman will be more aware than I am of the question of privilege, but I believe, on the advice I have received, that what has been put into the Bill more than adequately protects lawyers. However, I am happy to assure the hon. and learned Gentleman that if there is any doubt

  863
  about the matter we shall have continuing discussions with his profession—
  Mr. Peter Rees: I think that the right hon. Gentleman has missed the purpose of the amendments. Maybe he has done so because of the lateness of the hour or because I was not very clear. I am not introducing these provisions to protect lawyers, as they can look after themselves. I say that as a lawyer myself. It is to the lawyer's clients that the amendments are directed. They are the people who can claim professional privilege in respect of advice tendered to them and in respect of all sorts of documents that are called into existence not necessarily for the purpose of litigation. Perhaps the right hon. Gentleman will take that on board. Perhaps he will beat that in mind in what I hope will be the fruitful conversations that he will have with the various professional bodies that are still extremely interested in this problem in spite of the amendments that the Government have brought forward.
  Mr. Barnett: I am always happy to have a chat with lawyers at any reasonable hour. I believe that Amendment (c) goes rather further than the hon. and learned Gentleman claims. I believe that he is claiming rather more privilege for the lay client than should be written into the Bill, but I am happy to give the matter consideration.
  Amendment (b) seeks to reduce the rime limit in a case where inquiries are made to a third party in relation to a taxpayer who has died. A notice cannot be given to the widow, widower, son or daughter of a deceased taxpayer if more than six years have elapsed since the death. The hon. and learned Gentleman seeks to reduce that to three years. As he said, there are other precedents in legislation for three years.
  In straightforward cases, no doubt a three-year time limit would work very well, but in this schedule we are dealing with anything but straightforward cases. Matters could be so delayed as to make it rather difficult for the Revenue to obtain the necessary information. I am not saying that six years is absolutely right, but I believe that three years is too short. I think that we should keep the six years and see how it goes. In due course I shall consider how the provi-
  864
  sions are working and consider whether it is necessary to reduce the period.
  Mr. Peter Rees: I take it from the right hon. Gentleman's remarks that he will consult the interested professional bodies, not only lawyers. I understand that his own profession as well as others is interested in professional privilege. I recognise that at this late hour it is not possible to explore these matters in any constructive manner, and I am not concerned to hold up the business of the House. If the right hon. Gentleman will give an undertaking that he will consult the interested professional bodies, I shall be quite happy.
  Mr. Barnett: I am perfectly happy to give that undertaking. I have had many discussions with the professions with my hon. and learned Friend the Solicitor-General. I can give an undertaking that I shall have further discussions with them.
  Mr. Graham Page: I am not sure what can result from those discussions at this late stage of the Bill. We cannot amend the Bill further after we have dealt with proposed amendments to the schedule. I rise more to press the Chief Secretary about the change from six years to three years. We must balance the arguments. In some cases it may not be easy for the inspector within the period of three years to discover what he wants to search out. Set against that is the case where the taxpayer has died and the inspector is endeavouring to get information from the taxpayer's family. That searching out should not continue for six years. In many serious legal cases action is precluded after three years. There is no restriction on the age of the members of the family who can be questioned. Three years is sufficient.
  The Chief Secretary in talking about privilege in reference to proceedings contemplated. I stress what my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) said in an intervention. We are talking not about professional privilege—the privilege of the solicitor, barrister or accountant—but about the client's privilege. Perhaps it is wrong to refer to that as professional privilege. It is the privilege of the client who seeks advice and is entitled to have that advice kept confidential. As I understand that privilege, it does not

  865
  apply in general to advice obtained by a client. It applies to any advice and any documents prepared when proceedings are contemplated as well as when they are pending or in process. Therefore, Amendment (c) may be necessary.
  Even though an assessment may not have been made, even though proceedings may not have been started, if proceedings are in contemplation and the client has gone to his solicitor or accountant for advice the point would be covered. To that extent I am grateful to the Chief Secretary for the very extensive Amendment No. 72. It covers many of the points we raised earlier. I hope that it covers my definition of professional privilege.
  Amendment agreed to.
  Further consideration of the Bill, as amended, adjourned.—[Mr. Joel Barnett.]
  Bill, not amended (in the Committee) and as amended (in the Standing Committee), to be further considered this day,

  HOUSE OF COMMONS (SERVICES)
  Ordered,
  That, notwithstanding the Order of the House of 15th November in the last Session of Parliament relating to nomination of Members of the Select Committee on House of Commons (Services), Miss Janet Fookes and Mr. James A. Dunn be discharged from the Committee and Sir Edward Brown and Mr. Andrew Faulds be added to the Committee for the remainder of this Parliament:
  Ordered,
  That the Order be a Standing Order of the House.—[Mr. Frank R. White.]

  PRESTWICH HOSPITAL (SECURITY UNIT)
  Motion made, and Question proposed, that this House do now adjourn.—[Mr. Frank R. White.]
  2.0 a.m.
  Mr. Jim Callaghan: I am grateful for this opportunity to raise a matter of great importance to my constituents.
  Because of the mischievous and misleading statements in the Press recently that Myra Hindley, who was convicted in the Moors murder trial, was to be transferred to the proposed security unit at the Prestwich Hospital in my constit
  866
  uency, malicious rumours swept the area. As rumour fed upon rumour, public feeling was high throughout the region, despite denials from me that there was any basis for such misleading statements.
  Nevertheless, public attention was focused upon the proposed security unit. Several large public meetings were held in the area and great fears were expressed about the type of patient to be treated in the hospital. A petition has since been organised objecting to the siting of the security unit in the Prestwich Hospital. To date the petition bears about 5,000 signatures.
  Despite the fact that I have been in regular consultation with the Department of Health and Social Security and with Mr. Eddie Lawson, the regional secretary of the Confederation of Health Service Employees, and have published in the local Press—the Prestwich Guide and the Bury Times—the details of the correspondence which related to the setting up of the security unit, it went largely unnoticed by the public. It was the Myra Hindley story that raised fears for the safety and security of the public in my constituency. As that story is circulated annually in the region, I shall be grateful to my hon. Friend the Minister if he will make a statement tonight confirming that there is no possibility of her ever coming into the security unit at Prestwich.
  This emotive story highlighted the difficulties which have arisen in connection with the proposed new security unit. Because of the fears of my constituents, it is necessary to list the events behind, and the reasons for, the setting up of the security units, with particular reference to Prestwich Hospital.
  In September 1972 the Butler Committee was set up to consider among other things what changes were necessary in the powers, procedure and facilities relating to the provision of appropriate treatment in prison, hospital or the community for offenders suffering from mental disorder or abnormality, and to their discharge. Since that committee's report has been published I have been informed that the type of patient who will be admitted to the Prestwich security unit is similar to those who have been treated in the hospital for many years. But I am also informed that the security unit will include patients referred by the

  867
  courts and admitted under Part V of the Mental Health Act 1959 because they need psychiatric treatment but do not require the high degree of security provided by the special hospitals such as Broadmoor.
  The Department of Health and Social Security working party is reported to have said that in general the units are required for patients who present severely disruptive behaviour who may be mentally ill or mentally handicapped, or those who suffer from psychopathic or severe personal disorders, alone or in conjunction with mental illness or handicap. However, there have been criticisms expressed in the correspondence in the columns of the British Medical Journel about the lack of precision about the type of patient for whom the new security units should cater and about the relationship of the units to the special hospitals. Because of this lack of precision, fears have been expressed locally about the possibility of patients who are dangerous, violent or criminal being transferred from the special hospitals to the Prestwich security unit. Therefore, there would inevitably be an immediate danger to the public if they absconded.
  In the light of these fears, could the Minister state precisely the type of patient who will be admitted to the security unit in the Prestwich Hospital? I am informed that as part of the new arrangement in the Prestwich Hospital for the provision of treatment in conditions of security, an existing ward, known as Elton Ward, is to be used as an interim secure accommodation of 30 beds pending the establishment of the proposed new unit elsewhere in the grounds of the Prestwich Hospital. I am told also that it is the intention of the regional health authority to submit plans to the Department of Health and Social Security for an 88-bed adult unit and a 20-bed adolescent unit.
  In my discussions with Mr. Eddie Lawson, the regional secretary of the Confederation of Health Service Employees, about Elton Ward he indicated to me that there will be a high ratio of skilled staff, including three doctors, 30 nurses, a social worker, a clinical psychologist and an occupational therapist for the patients of the ward. Mr. Lawson has said that all the professional and trade unions concerned with the hospital
  868
  have agreed on the staff security and staff consultation and are happy with the arrangements for the unit. This I do not doubt, but my purpose tonight is to bring to the Minister's notice the alarm and anxiety, fears and distress that the proposal to site a unit in Prestwich Hospital has caused in my constituency.
  In doing so, I realise that any site designed to accommodate criminal or dangerous patients will meet with local opposition, wherever it is proposed to place such a unit. Nor do I wish to see a reversal of the trend towards more open care and treatment of the great majority of patients in hospitals for the mentally disordered. I realise that places need to be available in each region for patients with varying degrees of supervision. I also know that, because of the urgency and importance attached to the establishment of regional security units, special financial allocations have been given to the regions to meet the capital costs of providing units. The initial aim is to provide 1,000-plus places in England in 1980.
  I know that we need a flexible service with patients moving in and out of security as the need for close supervision arises and recedes and that we must be careful not to isolate the patients and the units from the rest of the psychiatric service of the region. But while not inhibiting patient rehabilitation, units should be sufficiently secure to enable staff to provide care and treatment without the public in the area being worried about custodial problems.
  Dr. Campbell, the consultant in charge of the unit—incidentally, a man whom I greatly admire—has informed me that he is happy with the custodial arrangements for the Prestwich unit. He has sought at all times to allay the fears of the public in the Prestwich area and he has attended many public meetings.
  Despite these assurances, there is no doubt that the establishment of the security unit has caused great alarm, anxiety and fear among certain sections of the public living close to the hospital. They need to be reassured that the patients in the hospital unit will not include dangerous prisoners who are rightfully candidates for special hospitals. They want reassuring that those patients who are referred by the courts because they need psychiatric treatment but who are

  869
  too disturbed to be managed on open wards cannot obtain release into the community. Although Dr. Campbell has shown to councillors, the public and myself the security arrangements in the Elton ward, the public needs reassuring that the doors, the windows and fencing of the security unit will give maximum security consistent with maximum treatment facilities. I call on the Minister to give these assurances.
  My constituents also need the Minister's assurance that the patients who come to the unit will not be those who are so dangerous that they will require the high walls of a prison, a special hospital, or the security guards that go with them. What is sought is a workable and fair solution acceptable to all parties concerned—patients, staff and the general public.
  2.15 a.m.
  The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins): I am grateful to my hon. Friend the Member for Middleton and Prestwich (Mr. Callaghan) for raising this matter, as this provides a further opportunity to discuss the general policy of regional security units and the unit at Prestwich in particular which, unfortunately, as my hon. Friend has pointed out, has caused considerable anxiety among his constituents.
  The proposed provision of regional security units at Prestwich Hospital, Bury, has to be viewed in the context of the policy considerations governing the provision of such accommodation generally. Levels of security for the treatment of some patients under the National Health Service, short of those secure conditions provided by the special hospitals, have always to some extent been necessary. Since its inception the National Health Service has had a responsibility to provide facilities to treat all types of patients with mental disorder, the only exception being those who require to be treated in conditions of maximum security. The Mental Health Act 1959 did not change this fundamental responsibility.
  In recent years there has been a growing problem as a result of an "open-door" policy being progressively applied in psychiatric hospitals, often without alternative provision for those continuously difficult and behaviourally
  870
  disturbed patients who were formerly contained in locked wards. The Department would not wish to see a reversal of the trend towards more open care for the great majority of patients of hospitals for the mentally ill, but within this policy it is essential for provision to be made in each region for those patients requiring treatment in conditions of security short of that provided by the special hospitals.
  In 1961 a departmental memorandum was issued to hospital authorities in which it was made quite clear that no region should be without facilities for treatment in National Health Service hospitals of patients who were continuously difficult and therefore needed security. It was not considered necessary for every hospital to have such facilities, but each region should develop special units to which patients from other hospitals should be sent. A departmental working party was established in 1971 to consider the present and future need for security and to make recommendations.
  Following receipt of the working party's revised report and the interim report of the Committee on Mentally Abnormal Offenders, chaired by Lord Butler, both of which emphasised the urgent need for regional security units, a circular was issued in July 1974 asking all regional health authorities to take urgent action to establish such units. The initial aim is to provide 1,000 places, either by adapting existing buildings or by constructing new purpose-built premises. In the interim before new security units can be provided, authorities have been asked to make arrangements to designate certain hospitals to provide treatment for this group of patients.
  The definition of this group was set out in the circular. It refers to the need to provide services:
  "for those mentally ill and mentally handicapped patients who, although not having the dangerous or violent propensities which would require their admission into a special hospital, cannot satisfactorily be managed in the ordinary wards of psychiatric hospitals."
  I can assure my hon. Friend that the patients at these units will not be those who need the treatment given in special hospitals.
  Because of the urgency and importance attached to the establishment of regional security units a special financial allocation will be made to regions to meet the

  871
  capital cost once proposals have been agreed.
  The final report of the Committee on Mentally Abnormal Offenders published in October 1975 criticised the lack of progress in the provision of units and recommended that, to achieve more speedy progress, the running costs as well as the capital costs should be met from Government funds. This recommendation has been accepted and regional health authorities were notified on 24th February last of the amounts which would be allocated to them in the financial year 1976–77. We are providing £5·2 million in 1976–77 which is the bulk of the estimated revenue cost—the balance will be expected to cone from revenue savings. Because of the importance of understanding the role of these units I think it would be helpful to turn now to the question of which patients will be accommodated in them.
  It is not intended that regional security units should take all patients who cause difficulties in local psychiatric hospitals and units, either by their behaviour or occasional absconding, but only those who so consistently present such problems as to make their local management impracticable in the facilities available. They will not be expected to cater for patients who are rightful candidates for special hospitals. I emphasise that for the benefit of my hon. Friend and his constituents.
  Local hospitals are expected to deal with patients who occasionally exhibit difficult behaviour and violence, and there will be a continuing need for places to be available throughout the regions for patients requiring varying degrees of supervision and security. I understand that the Home Office has written to my hon. Friend assuring him that there is no question of Myra Hindley being admitted to the new unit at Prestwich.
  We have not attempted to give any detailed guidance as to the proportion of places that will be needed for the mentally ill, the mentally handicapped or the personality disordered—psychopath—primarily because we feel that the regions will know their own requirements. What we have done however, is to indicate that all these three broad clinical groupings need to be catered for.
  872
  Some regions may choose to have a single "all-purpose" security unit covering all types of patients, but in other areas—particularly where the unit is to be associated with existing mental illness or mental handicap hospitals—the region may find it better to have two units, one primarily for the mentally ill and one primarily for the mildly mentally handicapped/personality disorder cases.
  We have, however, indicated that we do not regard these units as being suitable places for severely mentally handicapped patients. The severely mentally handicapped with very disturbed behaviour are, in general, few in number, and the departmental view is that special provision should be made for their management within ordinary mental handicap hospitals.
  As far as the ages of patients are concerned, we have indicated that the units would, in general, be expected to admit adults and older adolescents but that it may exceptionally be necessary to admit the very disturbed younger adolescent—that is, aged 12–16 years—or, even more rarely, the occasional child who has proved unmanageable elsewhere in the National Health Service. Both sexes will, of course, be catered for, but the number of women is expected to be fairly small. We would not expect units to take large numbers or prisoners on transfer from penal establishments, although, of course, if it seemed appropriate in an individual case, this would be possible.
  All regional health authorities have been investigating the needs in their regions, and although progress in establishing regional security units has been slow, regional health authorities are now well aware of the priority we attach to their establishment. We realise the need which staff in regional security units may have for additional training in order to provide this type of service. The joint Board of Clinical Nursing Studies is setting up a panel to prepare an outline curriculum for training courses for nurses, and a course for doctors in forensic psychiatry is available in Birmingham. The Department is considering whether and what additional arrangements for training might be needed to supplement these and local arrangements for training already within regions.

  873
  It is against this background that the North-Western Regional Health Authority, in consultation with the Salford Area Health Authority (Teaching) and Bury Health Authority have drawn up proposals for interim and permanent regional security unit provision at Prestwhich Hospital. The North-Western Regional Health Authority's proposals for permanent regional security units include an 88-bed adult unit and 20-bed adolescent unit for mentally ill patients at Prestwich. It is planned to provide the adult unit by upgrading existing accommodation, and a start on site is anticipated for December 1978, and for completion and commissioning in October 1980. The adolescent unit will be a new purpose-built unit, and a start on this is planned for November 1978, with completion and commissioning expected in September 1980.
  In the meantime accommodation in particular hospitals throughout the region has been designated for provision of treatment in conditions of security until such time as proper regional security units can be provided. As part of these arrangements an existing ward, Elton Ward, which was originally intended to be used as a forensic unit after upgrading, is proposed to be used as interim secure accommodation, with about 30 beds for male patients, pending establishment of the proposed permanent new units. The patients to be admitted into this ward are in the main those already admitted to Prestwich Hospital, and who will be brought together in more suitable accommodation.
  Some concern has been expressed—I understand my hon. Friend's point of view and that of his constituents—about the adequacy of the hospital's security arrangements. I understand that the hospital authorities have been looking closely at what might be done and they are now considering whether the number of hospital entrances can be reduced. They have decided to erect a gatehouse lodge and employ gate-porters to keep a watch on patients leaving the hospital so that any patients intending to leave improperly dressed or in an obviously disturbed condition can be stopped. Arrangements have also been agreed with the local residents' committee for the hospital to pick up quickly any patients
  874
  who may cause a disturbance outside the hospital.
  My hon. Friend will be aware from correspondence he has had with the Department of the delays in opening the interim regional security unit at Prestwich Hospital. The regional health authority and the other health authorities concerned had hoped to open the Elton Ward as an interim regional security unit early this year, but the proposals met with resistance from some staff and other interests.
  Some professional staff are genuinely doubtful about the merits of providing secure accommodation in existing psychiatric hospitals and feel that such a move is both retrogressive and might harm the good name of the hospitals in which they are working. It must also be conceded that whether or not a person's disorder requires or will respond to medical treatment is a matter of clinical judgment, and differences of opinion between doctors in individual cases can and undoubtedly do arise from time to time. This is particularly relevant in the difficult field of personality disorder, and the final decision must rest with the doctor who would carry out treatment if the patient was admitted to hospital.
  The Butler Report stresses that psychopathic offenders present particular difficulties to the health services. Where treatment and facilities are offered but repeatedly rejected and where any future law-breaking is likely to be minor or of nuisance value only, the Committee thought that it may be right to accept that the offender was not susceptible to rehabilitation and that the official services should consider whether continuing attempts to help would serve a useful purpose.
  As we said in our recent White Paper "Better Services for the Mentally Ill" we need to think very carefully about this whole field, and we are currently considering the need for further research and new approaches to this very difficult problem. Some nursing and other stall who have the extremely taxing and difficult task of coping day by day with these difficult patients feels that the task is too onerous and at times risky and, along with some doctors, feel that such patients should be accommodated in the

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  special hospitals. However, we consider that only patients with continuously and seriously disturbed behaviour who pose a serious threat to public safety require the very high degree of security of the special hospitals, which are already under very severe pressure of numbers. Some nursing staff have also expressed concern that the high level of staffing required for interim security accommodation would place further heavy demands on the present staff available.
  Difficulties over nurse staffing of the interim regional security unit at Prestwich Hospital have, I understand, now been overcome following recent discussions on staffing levels and implementation of the agreement reached last year by the Nurses and Midwives Whitley Council which, among other things, provided with effect from 1st April 1975 for a new allowance to assist the staffing of security units. Meetings with other staff interests, including ancillary staffs, have been arranged locally, and it is hoped that from the staffing point of view the way will soon be clear to open the interim regional security unit in the next two months.
  So far as the local community is concerned, the North-Western Regional Health and the area health authorities concerned have been anxious to allay any public fears or misunderstanding about the purpose of the proposed units. As long ago as
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  ford Area Health Authority (Teaching) and the North-Western Regional Health Authority convened a conference at the Prestwich Conference Centre to discuss the implications of the regional security unit and the tentative plans. This was attended by a wide range of staff and by Press representatives who were given as much information as was then available.
  More recently, the area health authorities involved have been consulting the local community health councils and local authorities on the proposals. A first meeting has been held with a local residents' committee and a second meeting is planned this month. It is also intended that another meeting will be held on 20th July with all the hospital staff.
  In conclusion, I hope that from what I have said my hon. Friend will be able to reassure his constituents on the wisdom of these units. We would hope that they would recognise the trend towards more open care and treatment for patients who form by far the great majority of those in hospitals for the mentally ill and regard the provision of regional security units as a means for the better protection of the community in respect of those few patients who require treatment in conditions of security less severe than those found in the special hospitals.
  Question put and agreed to.
  Adjourned accordingly at twenty-eight minutes past Two o'clock.