CHARGE OF INCOME TAX FOR 1976–77

HC Deb 14 July 1976 vol 915 cc703-53

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 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. 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 (Surrey, East)

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 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 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 (Birmingham, Selly Oak)

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 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 (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 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- 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 (Nelson and Colne)

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 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 (Aberdeen, North)

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 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 (Norfolk, North)

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- 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 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 (Norfolk, South)

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 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 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 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 (Ormskirk)

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 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 (Coventry, South-West)

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 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 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 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 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. MacGregorrose—

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 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 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 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 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- 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 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- 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 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 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 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 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 (Birmingham, Perry Barr)

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 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 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 (Hertfordshire, South)

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 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 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.

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 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 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 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 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 (Maldon)

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 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, 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 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 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.