§ Order for Third Reading read.
§ 4.6 p.m.
§ The Financial Secretary to the Treasury (Mr. Robert Sheldon)
I beg to move, That the Bill be now read the Third time.
This is the first occasion in this Parliament on which we are having a debate on Third Reading of a Finance Bill. The last time that we had such a debate was on 11th July 1973. Perhaps it might be worth spending a few minutes discussing the way the Opposition have seen fit to have such a discussion on this Bill for the first time in this Parliament.
We know that on previous occasions there has been a need for a debate on Third Reading partly to discuss as a suitable time, the economic issues facing us, partly because there may have been occasions when parliamentary time was a little more readily available then we find at the moment, and partly because it is always useful, given the existence of those two earlier conditions, to have last thoughts on a Bill before it passes into legislation.
During the later discussions that we had on the progress of the Bill there was a certain amount of criticism about the time available for Finance Bills generally. Various comments were made about the way in which the Finance Bill might be split up. I look forward to hearing further discussion in due course on these matters.
These are issues primarily for Parliament as a whole. We know that there is always pressure upon Government and parliamentary time generally. The problem with Finance Bills, even assuming that there are few new measures of substance, lies in dealing with the accumulations of past measures and the changing ways in which these have to be dealt with. This in itself entails a large increase in the number of pages that we have to discuss, arising purely from existing provisions.
As a House, we enjoy our discussions of Finance Bills generally. We note that progress after midnight tends to be greater than before that time. We have seen this 1298 in a heightened form perhaps in recent weeks and months. I have sometimes thought that the importance of a subject has often varied inversely according to the lateness of the hour. It may be that if we had started later in the evening progress would have been that much quicker.
I take issue about the third of my propositions—that this is an occasion for looking back over the progress of the Bill and seeing how it is fitted to deal with some of the important issues of our time. I think that the most important will not be the provisions regarding benefits in kind—useful measure as I believe it to be since it provides for the taxation not only of income but of those benefits most akin to income—or even Schedule 6, which gives powers to enter premises. I fully accept the seriousness and importance of the extension of those powers, even though they are much less than most other Western industrial countries take for granted.
In my view, those are not the most important aspects of the Bill. I regard as most important the conditional reliefs, on which we spent relatively less time, perhaps, than we might have done, and I regard them in that light both because of their constitutional importance and the way in which they reflect the manner in which Governments will have to deal with these issues as they come before us.
In relation to pay increases and the attitude of the trade unions which negotiate them, we have laid down the way in which those who concern themselves with these matters have to consider not the fictional gains which pay increases represent but with the real value of the money in the pay packet of workers, taking into account the price rises and the taxation inevitably resulting from those pay increases if they are not justified by increases in national production.
For many years, there has been a need to establish a link between the actual pay negotiated by members of trade unions and the resulting taxes and prices. Whatever importance we think should be attached to the relation between monetary policy, incomes policy and other aspects of economic and financial management, it is now essential to bring the trade unions into this consultative process, and I believe that that view is coming to be 1299 more widely shared on both sides of the House. What I consider to be of the utmost importance is that the trade unions are concerning themselves with the development of an approach to industry which should command the widest acceptance. Even though some of us knows the extent of future developments, we must not underestimate the importance of the first steps which have so far been taken.
All this ought to be common ground, and the conditional reliefs were designed to be a means for the implementation of the accord which has been reached with the Trades Union Congress. It is worth spending a moment or two to consider the sort of reception which this accord actually received.
Right from the beginning, we noticed the cold reception which it received from the Leader of the Opposition on Budget day itself. We noted also that the right hon. and learned Member for Surrey, East (Sir G. Howe) called these conditional reliefs a devaluing of the Budget. On 7th July, on the other hand, we noted that the right hon. Member for Sidcup (Mr. Heath) fully and unequivocally supported the agreement, and in the same debate the right hon. Member for Lowestoft (Mr. Prior) said:All of us on the Conservative side of the House recognise that the TUC has once more delivered to the Government an exceptional pay deal. I pay tribute to the TUC for what it has done."—[Official Report, 7th July 1976; Vol. 914, c. 1489.]Since then, a wide variety of views has been expressed. I think it is worth recalling the speech of the right hon. and learned Member for Surrey, East when, referring to incomes policy, he said:It is not a subject on which we should be wholly dogmatic"—I am not sure what he meant by "wholly dogmatic" in this context, but let that pass—… on questions of this kind there are divisions of opinion, and always have been, in both parties."—[Official Report, 3rd May 1976; Vol. 901, c. 862.]The right hon. and learned Gentleman is right—there have been divisions within each party—but what is clear is that the Government stand behind this policy agreed with the TUC, and what we find disturbing is that on the central economic 1300 issue of our time nobody, even at this late stage, knows what is the policy of those calling themselves an alternative Government. Some say one thing and some another. To many of us on this side of the House, the Conservative Party seems to be awaiting the prophet of Leeds, North-East (Sir K. Joseph) bringing down the tablets on which all will be made clear.
We look at this state of affairs with some amusement, while the Conservatives work out their own salvation in their own way, but what the country knows is that industry and the Government are now closer together than they have been for some years. I believe that the Bill has played its part in that understanding, and in that spirit I move the Third Reading.
§ Mr. John Page (Harrow, West)
The Financial Secretary was talking about the tablets of stone, and I wonder whether, if the tablets were dropped on the way down after they had been agreed, that would make any difference to the reception at the bottom.
§ 4.15 p.m.
§ Mr. John Nott (St. Ives)
As the Government proudly present their Bill for its last rites this afternoon, I am sure that the Chief Secretary at least must feel that it is a relief to escape from the carnage of the Cabinet Room to the relatively quiet security and sanctity of the House of Commons. Sandwiched as we appear to be today between meetings of the Cabinet to discuss public spending and what I understand from the Press will be tonight's meeting of the home policy committee of the Labour Party, we can feel some sympathy for Treasury Ministers, and I think that we can also excuse the Chancellor's absence on this occasion since it is clear that he has more important matters to deal with elsewhere.
It is a pity, however, that, because of the pressing nature of his engagements in the Cabinet, with the Parliamentary Labour Party and with the home policy committee of the Labour Party, the Chancellor will not be here to see the measure as he originally presented it pass on to the House of Lords in an entirely different form. It has been a long and arduous process. We have said many times 1301 already that great difficulty has been created for us and for the world outside by the delays in publication of amendments for Report. However, I do not think that we need go over that today.
The Bill has been mishandled, but it could not have been mishandled by two more genial, if incompetent, Ministers than the Chief Secretary and the Financial Secretary, who throughout our sittings, though admittedly sometimes heavily tried, have retained their patience and good manners. I can say at least that of them today.
As for the content of the Bill itself, the attack on business men's perks, which has been loudly trumpeted at successive Labour Party conferences for many years, has been transformed during the passage of the Bill into a disorganised retreat—almost a headling flight, indeed—under the combined wrath of the National Union of Railwaymen, the Transport and General Workers' Union and other unions, which suddenly woke up to find that this tax was an attack on their members' pay-packets. It appears that only miners' coal and Ministers' cars have remained unscathed—we know why Ministers' cars have remained unscathed; it would be uncomfortable for Ministers to change the law—but we do not understand the position regarding miners' coal. Why cannot miners' coal be brought within the Bill? We are still wondering why every fringe benefit is within the Bill save miners' coal.
The turning point in the long-heralded attack on fringe benefits will be remembered as the moment when the hon. Member for Ealing, Southall (Mr. Bidwell) rushed into the Chamber to announce that the shop stewards at London Airport were in revolt and that, although they favoured the principle of taxing fringe benefits, they did not like the way it affected them. From that point onwards, the whole of the attack on the business men of this country was reversed and the Government went into headlong retreat.
I am glad, that, as a result of that and other diversions, we have been able to save parts of the British motor industry—notably, Rolls-Royce and Jaguar—from severe damage, and, equally important, we have prevented the Government from further eroding the take-home pay of middle management, which, of course, 1302 would have been severely damaged had the original proposals gone through.
The clause to increase the powers of the Inland Revenue has been substantially amended. We owe something to the belated good sense of the Chief Secretary in that he was prepared to concede amendments in Committee, but it shows something either of the negligence of Treasury Ministers or perhaps the low quality advice that comes to them from Somerset House that the original clauses on the seizure of documents, search and entry ever found their way in to the Bill.
I find it difficult to believe that those clauses were entirely the invention of Treasury Ministers, because although the two Treasury Ministers now on the Government Front Bench are not wholly free of guile, are not as innocent and naive as they would have us believe, these clauses had something of that new aggressiveness that seems to be emanating from the Inland Revenue these days, and I think that some of the authorship of Chapter II derives from the Board of the Inland Revenue itself. I can see that senior officials of that Department in Somerset House are sensitive to political criticism, but if they abandon all resistence to the more outrageous rantings of the Inland Revenue Staff Federation and include disreputable politically motivated clauses in the Bill, they must expect to come into the political firing line.
The debate on powers of entry has been immeasurably damaging to the Inland Revenue for no apparent gain. Certainly it will not be any easier to collect revenue either from honest or dishonest taxpayers as a result of these clauses. We are still somewhat astonished that the Chief Secretary believes that these great big tax evaders, whom we understand he is hell bent on catching, will leave all these incriminating documents lying around their homes now that they know that a tap may come on their door in the middle of the night by the appointed officer of the Inland Revenue. It is stretching our imagination very far to believe that this incriminating evidence will be left there for the Board of the Inland Revenue to find. It must be clear from all that has been said in our debates that future Governments will not leave these clauses in the Bill in their present form, so all these discussions have largely been wasted and have done great 1303 damage to the Inland Revenue in the process.
I suppose that we must count the errors in the life insurance clauses as just an aberration. I think that was an aberration of the Financial Secretary, not the Chief Secretary. I find it difficult to understand how we can have been told that the insurance industry was in full agreement with the proposals that were being made when the opposite was the case, and the Government changed the whole basis of the Bill as it related to the taxation of premiums.
Then there were the bankruptcy provisions in the old Clause 58. These would have changed retrospectively the tax law and driven into bankruptcy many of our senior executives. Here, again, I think that the Financial Secretary, who is traditionally responsible for the Bill, might have read it before he presented it to the House.
I found it very tedious reading the Finance Bill when I was a Minister—even more tedious than I do now—but I think that ministerial office imposes some obligation upon Ministers, when their names are on the Bill, to read it through before they come and make speeches about it. I understand that the briefs that were given to the Financial Secretary did not touch on all those elements of the Bill that had been badly and incorrectly drafted, but he could have found that out for himself.
As the Financial Secretary said in opening the debate, the most important change of major economic principle in the Bill lies in the clauses on personal allowances, and at the time of the Budget we were assured by the Chancellor of the Exchequer and the Paymaster-General that these provisional tax reliefs, as they were then, could be borne by the nation only if the pay deal was concluded at 3 per cent.
When we discussed the Budget Resolutions, the Paymaster-General said:… I emphasise that 3 per cent. is the highest which can be conceded if we are to be able to rely on meeting our inflation target."—[Official Report, 7th April 1976; Vol. 909, c. 467.]I do not know whether the promotion that followed two days later to the Cabinet was connected with that remark, but within 24 hours the Treasury was 1304 back-pedalling on that commitment and, as we know, the deal was finally concluded at 5 per cent. with the provisional tax reliefs that were related to a 3 per cent. arrangement.
We are now told that we should understand that 5 per cent. is the same as 3 per cent. and that there is no difference between the two figures, but we have yet to discover precisely how the Government worked that out. It may be that this is why the Chancellor, according to the Press, is trying to claw back £1,000 million that he is giving away in lower tax reliefs, and he is apparently trying to get it back in lower public spending.
At the time of the Budget debates we warned of the consequences of negotiating in public in this way, and how right we were! Every word that we said during those economic debates has, I fear, proved absolutely true. In winding up the debate on 12th April I said:Because the Chancellor's strategy is seemingly dependent on a promise from the TUC, every statement against the norm by a union leader will be studied with concern, not just in the gilt-edged market but in New York, Zurich, Jeddah, Lagos and Hong Kong, and this period of instability will last until July."—[Official Report, 12th April 1976; Vol. 909, c. 1029.]Indeed, the period of instability arose about one week later when sterling plunged to an entirely new low, and it was only following the borrowing of another $5 billion—the standby credit that we shall very shortly have to repay—that sterling rose again. The whole process by which these tax reliefs and the offsetting pay deal were negotiated has done great damage to this country, and we shall see in October or November—or whenever it is—precisely how the Government will either roll over the standby credit or replace it with a loan from the IMF.
In spite of tax reliefs, the real burden of taxation has increased on the British people, and particularly on the poorer income groups. Some of the sense of outrage felt in the Labour Party at the tax which now falls, for instance, on a war widow's pension was shown the other night. Here we have taxation arising on a weekly income of £18, and it is an astonishing commentary on some members of the Labour Party that on that occasion they protested—and rightly so—that as a result of the Government's 1305 policies the tax threshold had fallen to less than one-third of the national average wage.
Yet some of them seem totally unable to grasp the fact that the tax threshold will be raised only if public spending is cut back. Hon. Members below the Gangway who protested at the lowering of the tax threshold are the very people who are now opposing public expenditure cuts. The dilemma that we face is the interaction between tax and benefits, and I feel sure that if my hon. Friend the Member for Norfolk, North (Mr. Howell) is called to speak in the debate he will have something to say about this problem.
I notice that among the reported alternative put forward by the TUC Economic Committee to the Chancellor's impending cuts is a demand for more job creation, which seems to be the Treasury's chosen way of placing palliatives before the Labour Party. Under the job creation programme in my constituency—and I am sure that this applies in many others—projects there are paying local people £36 a week. Unemployment in my constituency ranges between 16 per cent. and 20 per cent. and people are coming to me and saying that job creation projects paying £36 a week are providing less than a man can earn in social benefits. Indeed, a combination of unemployment benefit, rent rebates, children's dinners—which the person does not have to pay for if he is unemployed—and the cost of travelling to work means that my constituents are better off on unemployment benefit than in a job creation project—and this is in my constituency where the wages are particularly low.
We are now back in the economic debate on the familiar ground of public spending. The Chancellor, who has castigated us in innumerable debates for being evil and wrong-headed about seeking more cuts next year, is now hoping that his right hon. and hon. Friends and Members of the Cabinet will rally behind him in doing the very thing that he has been castigating in debate after debate. It must be hard for his right hon. and hon. Friends, having heard him slate us for our evil views on this very subject, now to rally behind him with enthusiasm when he is trying to do the very thing that he has condemned. It is the way in which he speaks, with two tongues— 1306 to one audience here and another there—which makes his task all the more difficult.
As we go along, the Labour movement creates new heroes. Today's hero is the Secretary of State for the Environment. We all read in Friday's Guardian about his gallant defence of his Department's programme. He is now depicted as a colossus—a handsome, brilliant figure, comparable with the great men of history, defending his programme against the vandals of the Treasury who wish to destroy civilised society. According to the leak, no doubt emanating from his own Department, it has all been done in an underhand way by announcing the cuts publicly without his prior agreement.
We understand that the right hon. Gentleman is prepared to make almost any sacrifice—to use every weapon in his armoury to defend his Department—with the exception of his own job. He will not resign but he will do anything else to defend his Department against the Chief Secretary, who sits there today with such a benign look.
In fact, as every working man knows, the Department of the Environment is an empire of profligate waste, inefficiency and chronic bureaucracy. It does not need a Minister of that Department—the Minister for Transport—to come here to tell us about the workings of the Swansea Licensing Centre for us to know just how bad the Department is. I have never seen such an adequate demonstration of the incompetence of that Department as our debates on the taxing of cherished number plates, a subject which has had more than its fair share of publicity.
Nor do we need my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn), who is not here today, to tell us about the profligacy of the Department in our own backyard. All we need is the Minister for Transport to come here now and again to enlighten us on the procedures under which people apply for cherished number plates.
As I have told the Chief Secretary privately many times before, in my constituency, the South-West Regional Road Construction Unit, which has been busy over the past few years building roads, now has its representatives crawling all over the farmland between Penzance and 1307 Land's End in order to plan a dual carriageway across this virtually empty tract of West Cornwall. All that can happen when the dual carriageway is built is that the motorists will go on to the roundabout at Land's End, turn around and go back up the dual carriageway because there is nowhere to go when one reaches Land's End except back the way one has come. Hon. Members may believe it or not but that is what they are doing.
The idiocies of the Department, the way in which public spending is out of control, have to be seen on the ground to be believed. Yet the Secretary of State is defending this programme against the incursions of the Chief Secretary, who is trying to put the situation right.
§ Mr. Peter Rees (Dover and Deal)
Could it be that the Department envisages a land link between Land's End and the Isles of Scilly in deference to the right hon. Member for Huyton (Sir H. Wilson)?
§ Mr. Nott
I have no doubt that to keep the Department employed it is already preparing plans to build a bridge between Land's End and the Isles of Scilly. Only by such exaggerated means can they keep everybody fully and uselessly employed.
Since the Budget Statement, this nation has continued on its path of long-term economic decline. I do not think that the British people are really deluded by the Chancellor's prospect of an economic miracle. If it is a miracle that the rate of inflation is running rather lower on an annual basis than a year ago, the British housewife still has to meet unprecedented increases in the shops. The Chancellor himself at Question Time last Thursday boasted that he had the rate of inflation down to what he described as "only" 50 per cent. above the OECD average.
If it is a new dawn that the economy is now growing at 5 per cent., or whatever it may be, it is hardly a remarkable achievement when the production base from which that growth is measured is lower than it was during the time of the three-day week. If the balance of payments has improved, it must be unprecedented for this country, and perhaps for any other—even the Argentine, for all I know—to run a deficit of this size in the deepest recession since the war.
1308 We do not even need to question the Chancellor's great handling of the money supply. It is hardly surprising that that has been kept in line when bank advances have hardly been moving forward.
Again and again, we are attacked by the Government for having set off these high rates of inflation and the rising level of unemployment. The Chancellor blames us for having produced what the Government inherited. But we must always remind the Government that the then Prime Minister, the right hon. Member for Huyton (Sir H. Wilson) said on 9th October 1974, the day before the election:Unemployment is beginning to fall. The pace of inflation and price rises are moderating.The Chancellor himself was boasting then of an inflation rate of 8.4 per cent.
So out of their own mouths we know that the blame falls entirely upon the Government. They fought and won the last election on a platform which was false and now they are having to meet the consequences of their own profligacy during the period of the social contract.
For all the achievements about which we hear so much from the Government, the truth is plain. If it cannot be seen by the Ministers on the Treasury Bench, it is perfectly clear to the electors of Thurrock and Rotherham, who have given their views about this Government only recently. The hon. Member for Thurrock (Dr. McDonald) just squeezed past the post but the electors of Thurrock are under no misapprehension about the Government's record.
The country is still slowly clawing its way back from the precipice to which the social contract took us. We still face record unemployment and inflation. If the Labour Party is to be accorded any laurels after two years in office, it can be only for, first, persuading the right hon. Member for Huyton to resign—that was a major achievement of benefit to the country—and, secondly, for uniting with the leaders of the trade union movement in halting that rush towards mutual self-destruction which began when the Labour Party was first in Opposition.
The problem confronting the new Prime Minister—he does not have much competition, but he is an improvement on the last one—and which will confront us 1309 when we come to office is the very scale of our problems. They were bad enough in the early 1970s, but they are now quite daunting. Profits have sunk to nil and public spending has risen in two years by £25,000 million. The rush of people from the wealth-generating private sector into the public sector still goes on apace.
In the present talks in the Cabinet the Chief Secretary no doubt sits mute and uncomprehending—uncomprehending not the figures but the fact that he can have such foolish colleagues who simply do not understand that it is impossible for this country to go on spending 20 per cent. more than it is earning. We are glad that we had the right hon. Gentleman's company during the course of the Finance Bill. We look forward to his winding-up speech, although I do not know what he can say. We sympathise with him in the difficult times he is presently having with his colleagues in the Cabinet and, as always, we wish him well in his latest endeavours.
§ 4.40 p.m.
§ Dr. Jeremy Bray (Motherwell and Wishaw)
In the better tempered passages of his speech the hon. Member for St. Ives (Mr. Nott) referred to the representations which we had in Committee from the Transport and General Workers' Union, railwaymen, lorry drivers and airline employees. He did not bring his representations up to date by suggesting how many Rover 3500 cars would have to go into a raffle to make the prizes from the raffle taxable. No doubt that will be a matter for a future Finance Bill.
My hon. Friend the Financial Secretary said that questions had been raised from time to time during the proceedings on the Bill and earlier whether there might be a means whereby the procedure on the Finance Bill could be made more useful to the House and lead to the better government of the country. We must pursue these thoughts further at an appropriate time.
Suggestions have been made and many times repeated from both sides of the House that Select Committee rather than Standing Committee procedure is appropriate for parts of the Bill or for some stages in the consideration of the Bill. It has also been suggested that fuller 1310 notes on clauses should be made available and perhaps be readable into the record so that they can be widely disseminated to people who follow the proceedings of the Committee inside the House and outside.
Before going too far along these lines, we should consider the difference between the approach on either side of the House to the Finance Bill. It is notable that the Government Benches are empty, whereas the Opposition Benches are adequately filled by the cohorts of the young Turks who wish to win their spurs on the Finance Bill.
§ Dr. Bray
Ageing, and surely Greeks, not Turks. This arises from the innovation of Mr. Iain Macleod who, in his handling of the Finance Bill, instead of having Front Bench spokesmen dealing with the party position and Back Bench spokesmen representing special interests, parcelled round the speaking from the party point of view to members of the Committee on the Opposition side as a whole. This has meant that hon. Gentlemen opposite have been speaking from the Back Benches for the position which their party broadly represents.
I commend this thought to my right hon. Friend the Chief Secretary. I know how hard-pressed he is and how many hours of the night he has to spend reading notes on the clauses and dealing as well with other Government business. I can think of no group of men and women so inefficiently used as Government Back Benchers on the Finance Bill Committee. Woe betide any Government Back Bencher who complains of that. We should rather rejoice in our lot, at being able to stand and wait, but it is not an efficient use of Members' time, nor does it produce efficient legislation. Had we had before us some of the considerations involved in the Finance Bill—for example, benefits in kind—we could perhaps have arranged for the Bill as it emerged to be more acceptable and to have had a greater effect in the intended directions. For example, had the threshold been set not at £5,000 but at £10,000, the balance of representations received would have been very different as, I suspect, would have been the outcome of the Bill as it emerged from Committee.
§ Mr. Lawson
The hon. Gentleman may be right, but why did not he and his colleagues on the Government Back Benches in Committee upstairs say something about it? There was nothing to prevent them doing so. Was the hon. Gentleman scared of the basilisk stare of the Chief Secretary, or of the Government Whips?
§ Dr. Bray
No. We were unaware of the nature of the concessions which were going to be made until they were announced in Committee. It was not for us to know whether the Government would meet the suggestions that some of us had put that the exemption limit should simply be raised, or whether the whole structure of the provisions would be changed.
§ Mr. Peter Rees
Will the hon. Gentleman clarify his views, because some of us are listening to what he says with considerable interest? Is the hon. Gentleman saying on the benefits in kind provisions that he finds the principle wrong, or is he merely saying that the principle should be applied to those earning over £10,000 a year?
§ Dr. Bray
I shall come later to a related point in my speech which will perhaps help the hon. and learned Gentleman.
On the Government side of the House the position is entirely different. Many Members of the party outside complain that Ministers are a weak link between the party's intention as they campaigned for it in the country and the Government's policy as it emerges from Cabinet decisions. Were the matter left to Back Bench Committee work, Select Committees and so on, the link could well turn out to be weaker still, and the contribution that hon. Members have to make from the Government Benches to make sure that the party's intention and the Government's programme are fully implemented calls for a different pattern of behaviour from Back Benchers in Select Committees and Standing Committees.
In Committee on the Finance Bill a Back-Bench view from the Government side on war widows pensions, supported by the Opposition, was adopted and a change was made in the Bill. Inevitably, any change which the Opposition favour 1312 is more likely to get through than is a move from Back Benchers which seeks to strengthen the Government's position. The Government will not necessarily pay attention to that. However, if Government supporters feel that their representations in the Select Committee or in earlier discussion will influence Government policy, they can contribute to working out a stronger and more coherent policy, which might better stand up to detailed criticism in Committee than do some proposals at present.
I support my contention of the need for a stronger attitude from Government Back Benchers and greater attention by Ministers to it by referring to two major problems in the taxation system which undoubtedly are on the agenda for future Finance Bills. The first is the higher rates of income tax and the way in which these are used repeatedly by Opposition Members in calling for concessions for people whom perhaps they represent more strongly than we do. Another is the whole structure of capital taxation.
On the higher rates of income tax, the narrowing of the differentials over the past two years, while we have had an incomes policy effectively restricting higher rates of pay and inflation increasing the cost of living, will build up public pressure for relaxation and changes in the higher rate of income tax much more extensive than those which occurred on the Finance Bill this year.
I am strongly opposed to any attempt to restore the differentials to where they were before the rapid inflation of the last few years. A move to restore differentials after tax to what they were before 1974 would result in a strong, uncontrollable reaction in the country and produce another inflationary wage round at a much earlier date than would otherwise occur. We have to challenge Opposition Members who argue that the effect of higher rates of tax is to lead to all sorts of tax avoidance and undesirable features of the tax law like benefits in kind, and so on. It is up to hon. Gentlemen opposite to deal with how one can adjust pre-tax rates of pay which have been set in the light of taxation at the same time as one can adjust the rates of taxation themselves.
Rates of pay are set on the assumption that people will be taxed at 83 per cent. If one then reduced that tax rate to 75 per cent. or 70 per cent. there would 1313 be enormous increases for very wealthy people.
If hon. Gentlemen opposite can suggest some kind of comparable deal by which the post-tax pay of the best-paid people in the country is effectively frozen while higher rates of income tax are brought down, then they can command serious attention. I do not see the practical possibility of their putting forward any such proposal. I and my hon. Friends warn the Government that we would be very critical of any move to reduce higher rates of taxation to the relativities which prevailed before the current round of inflation.
On capital taxation if the concessions that have now been made on capital transfer tax were applied to a newly introduced wealth tax, that wealth tax would simply not be worth raising. My right hon. Friend the Chief Secretary is well aware of the cost of collecting the wealth tax. I fully expect to hear the Government announce that they will not proceed with the introduction of the wealth tax in this Parliament. I fear that this is a consequence of the way in which the capital transfer tax has not been fully thought out in the terms of what the Government wanted to achieve.
If we tax assets, the ownership of the assets necessarily passes into other hands. I would expect the Government to say what is the pattern of ownership which they wish to achieve and what would be the effect of the different instruments in the redistribution of the assets. I would also expect the Government to say what their policies were for productive assets and for the national heritage. As it is, we have had the pressures on productive assets on national heritage, points have been given away by the Government and now the floodgates are wide open for some concessions to be applied to the wealth tax with the effect of capital taxation as a whole neutered.
The only conclusion that I could draw from this is that like hon. Members opposite, we on this side of the House would also like to see a thorough review of capital taxation as a whole. However, the purpose should be to set up a structure where changes in rates do not produce the most enormous distortions in the market for different types of assets, for 1314 forestry or for land or close companies, or whatever they are. We want to see a capital tax system which has the absolute minimum of exemptions, raised, no doubt, at a minimal rate when hon. Gentlemen opposite are in office, but which when we get into office can be raised at very much higher rates without causing the great instability in the markets for different assets, such as that which we have seen in the property market in recent years.
If we made major changes in capital taxation rates with the same kind of exemptions for a wealth tax as we now have for capital transfer tax, and the rates were varied from year to year, the results would be quite catastrophic in terms of the losses some would make and the enormous speculative gains that the cleverer people would make.
I hope, therefore, that if, as I fear, the Government announce that the wealth tax is to be postponed for another Parliament, they will use the time meanwhile to rethink the structure of capital taxation which they are trying to achieve, that they will think out what the principles are and then let us stick by those principles in the details of the legislation as it emerges. I hope that my right hon. Friend the Chief Secretary will say something about the view that the Treasury takes on the procedural questions which, as the Chief Secretary knows, have led to some dissatisfaction on the Government side about the procedure for the Finance Bill.
§ 4.56 p.m.
§ Mr. Tony Newton (Braintree)
I do not want to follow the hon. Member for Motherwell and Wishaw (Dr. Bray) at length, particularly in the second part of his remarks. I would just like to observe that his argument about higher rates of income tax, and his suggestion that what we require is a long-term freeze on higher incomes while something is done on tax rates, does not give sufficient attention to the excessive narrowing of differentials in our society; Ministers have recognised this problem far more clearly than he or his colleagues. Far from there being an explosion if something is done, I believe that there will be an explosion if something is not done about differentials, not just for those on higher incomes but for all sorts of people 1315 who are a long way short of being wealthy.
I shall follow to some extent the hon. Gentleman's remarks on our procedures in dealing with the Finance Bill, and not merely with its subject matter, about which I shall say something later. I have been a Member of Parliament for slightly over two years, and this is the fourth Finance Bill with which I have been concerned as a member of the Standing Committee. This one has brought home to me, and I suspect to many hon. Members, more forcibly than any other in recent years just how inadequate our procedure is for dealing with this legislation which is of great importance to many individuals, groups, firms and industry outside. They are finding themselves increasingly disgruntled at the way in which the House deals with their affairs and I do not feel able to quarrel with them. Certainly no one, including the Chief Secretary and the Financial Secretary and everyone on this side of the House, can conceivably be satisfied at the way in which this Bill has been handled.
The underlying problem is the congestion of Government business, and the attempt to force too much business through the House in any one year. But that is only part of the background, not the whole background, to the unsatisfactory way in which we have dealt with the Bill. It has aggravated a problem which would in any case have arisen. The problem is largely caused by the fact that the Finance Bill is not one Bill with one purpose but what would in any normal, sensible world be regarded as several separate Bills doing different things.
Broadly, the Finance Bill seems to me to do three things. First, it sets the general rates of taxation and allowances for the current year, 1976–77—the rates of income tax and allowances, rates of corporation tax, VAT, and so on. Second, it does a good deal of tidying up, closing up loopholes and making minor changes. Third, it introduces major changes or reforms—in this case, two of them.
If we look at this fat jumbo measure we find that it is four separate Bills rolled into one, and I give them separate 1316 titles to illustrate the argument: the Taxation (Rates and Allowances, 1976–77) Bill; Taxation (Miscellaneous Provisions) Bill; Taxation (Benefits in Kind) Bill; Capital Transfer Tax (Amendment) Bill.
The division between the broad categories I have outlined would sometimes be a matter of judgment. But I do not think that there would be serious differences between the two sides of the House on the argument that there are a number of distinct tasks performed by this and most Finance Bills.
The consequences of our failure to divide the different types of proposal into different Bills are quite serious. First, it means that virtually the whole of the fiscal business before Parliament in one year is artificially sandwiched into the period between early April, when the Budget is delivered, and early August, when the Finance Bill must be passed.
It follows from that that all sorts of measures which have no need to be forced through at breakneck speed are subject to the tyranny of the Provisional Collection of Taxes Act. Parts of the Bill must be passed by early August, and Ministers can therefore argue that they must rush the whole thing through. But there are many parts of the Bill which could and should have been considered in a much more leisurely way, and would have been better in consequence. That would have been possible if parts of it had been separated.
A division of Finance Bills roughly along the lines I have suggested would also obviate a small but not insignificant difficulty, and that is the increasingly absurd attempt to divide consideration of the Committee stage of the Finance Bill between the Floor of the House and Committee upstairs. With separate Bills, we would naturally deal with the general taxation Bill fully on the Floor of the House, and we would deal with the other Bills in the ordinary way in Committee upstairs. That would be far more sensible for everybody involved.
With such a proposal, I would couple the need, clearly illustrated in this Bill, especially by the benefits-in-kind clauses, for Governments to undertake a self-denying ordinance that they will not introduce changes of this kind without 1317 first going through a full consultative process. This has happened on a number of occasions in recent years, with value added tax and capital transfer tax, and it helped, even though it did not make the process perfect. It should be a firm rule for Governments that major taxation changes should be prefaced by a Green Paper, preferably with draft clauses, so that people may examine the possible details, and that there should be an examination by a Select Committee before an actual Bill proceeds to the normal form of discussion by the House. That would do more to improve our procedures and the service we do to people outside than almost anything else.
I hope that the Select Committee on Procedure will study these issues, but I emphasise that nothing that I have suggested need await the Select Committee. It simply requires that the Government should think clearly about the various purposes they are trying to pursue in tax matters, and should accept the public benefit which will flow from ensuring proper consideration in advance when they propose major changes.
I turn from those procedural issues to the Bill itself. We spent about 100 hours or more considering it in Committee, and we have spent at least 30 hours on the Floor of the House. We stayed up many nights until two, three or even four o'clock in the morning working on the Bill. For those of us who served on the Standing Committee, it has dominated our parliamentary lives—it has virtually consumed them—for about three months.
Our constituents, and taxpayers generally, are entitled to ask what they have as a result of all this burning of midnight oil. That question has to some extent been answered by my hon. Friend the Member for St. Ives (Mr. Nott), who compared the Bill as it started with the Bill as it is now. Whether or not our constituents and the general body of taxpayers have value for money, we have certainly saved them a good deal of money by the changes which we have made in Committee.
Perhaps one of the most important gains is that we have preserved some possibility of a rethink on the child benefit scheme, and credit should go to both sides of the House for that. We have saved airline employees from a huge 1318 increase in their burden of taxation. We have saved railway employees who have fringe benefits on travel-to-work from a significant increase in their burden of taxation. We have saved season ticket holders who buy season tickets with loans from their firms from an increase in their taxation. We have saved some people from bankruptcy by changing the provisions of the Bill relating to loans for the purchase of shares.
We have significantly eased what would otherwise have been the tax burden on many people putting substantial sums of money into life assurance. We have made progress towards safeguarding Britain's national heritage in the great homes and great works of art which were discussed at length in Committee.
We have given important help to war widows by exempting half their incomes from tax. I have reservations about whether that problem was tackled in the right way, but I am delighted that something has been done for this group of people who were suffering from the squeeze of our taxation system. On child income limits, we have ensured that children and university students can earn more before their parents are subject to the ridiculous clawback from personal allowances.
On the question of the new tax on cherished car number plates, we have made sure that Parliament will have a proper opportunity to scrutinise the tax before it is introduced. On the so-called "snoopers' clause" and Schedule 6, we have managed to drag out of the Government some important safeguards which will have eased the minds of a number of people, even if we have not entirely solved the problem.
All in all, what our constituents have for their money is a Bill which is undoubtedly the most improved Bill which will be passed by Parliament in the present Session, and hundreds of thousands of people will be better off—or at least less hard-hit—as a result.
Nevertheless, it remains a deeply unsatisfactory Bill partly for what is in it, hut perhaps even more for what is not in it. Let me touch briefly on three points concerning what is in it which seem to me to be wrong.
First, there is the extra tax—and that is what it is—on newly married couples where the wife continues to earn after 1319 marriage. This amounts to £60 million in the present year, and it is iniquitous in the form in which it has been introduced. I have made clear that I do not necessarily quarrel with the principle, but this tax measure has deprived 300,000 or 400,000 young couples of up to £250 for which many of them had already planned and had already counted on in arranging their marriages this year. In effect it has taken from them the lounge suite which they planned to buy or part of the deposit on a house. One of the Ministers is giggling, just as Ministers giggled in Committee upstairs. In dismissing this charge, they appear to have relied on the assumption that many young couples will not have realised what has happened to them. That is true, because not all young couples are as sophisticated as those who have done their calculations.
That does not change the fact, however, that additional taxation amounting to £60 million has been levied this year on couples marrying this year, and many of them had planned on the assumption that the tax system would remain unchanged. In view of its effects, this proposal should at least have been delayed in its implementation, and I greatly regret that it remains in the Bill.
Secondly, the Bill goes nowhere near far enough to deal with the problems relating to transactions which attract capital transfer tax and capital gains tax at the same time. We shall have to return to that matter.
Above all, I regret the Bill because of the dog's breakfast which it contains with regard to fringe benefits. Instead of tidying up the question of fringe benefits and establishing a clear pattern of principle and practice, we have a complete mess, namely, the proposals as they were originally introduced minus those proposals about which enough pressure was exerted by pressure groups outside.
There is in the provisions no clear basis of principle. There can be no basis of principle in allowing miners to have free coal, or even a tax-free cash exchange for free coal, when other people are to be taxed on comparable benefits from their employers. There can be no principle in allowing airline employees to enjoy concessionary fares but not allowing bank employees to enjoy cheap 1320 loans from their employers. There is no principle there. Concessions have simply been made in accordance with the extent to which pressure was exerted on the Government from outside the House.
The anomalies in the provisions in respect of cars need no emphasis. Those proposals were introduced primarily to suit the convenience of the Inland Revenue. That is not an unworthy purpose, but is not in itself enough to override all considerations of fairness as between individual taxpayers. We now have a set of proposals that bears no real relation to a fair deal as between one taxpayer and another in terms of fringe benefits.
Finally, I should like to list four points on which I am unhappy because they are not in the Bill—
§ Mr. Deputy Speaker (Mr. Bryant Godman Irvine)
Order. The hon. Gentleman will have to save those four points for another Finance Bill. He must confine himself to talking about what is in the Bill rather than what is not in it.
§ Mr. Newton
I accept your guidance, Mr. Deputy Speaker. I shall relate what I was going to say to proposals which are in the Bill but which, I believe, do not go far enough. That would be a more accurate way of putting what I was saying.
First, we must do more about tax thresholds. The proopsals in the Bill will go some way to help, but nobody in the House will regard it as satisfactory that payments to provide a basic income, such as the family income supplement, war widows' pension, widows' pension and other forms of benefit—are themselves reduced by tax payments, even in the hands of people with little or no other income. We have a whole army of Inland Revenue officials collecting tax and insurance contributions, paying it over to the social security departments whose officials in turn pay out those sums in basic incomes. That same army of the Inland Revenue collects some of that same money back again. This is a crazy situation and we must do something about it.
I see two ways in which the Government can act in this respect. First, the principle of relating incomes policy specifically to taxation reliefs is certainly a fruitful one, and I hope that this course 1321 will be pursued next year whichever Government are in power. If we are to have an incomes policy, a policy which takes explicit account of tax rates and allowances, and enables us to raise the tax threshold, must undoubtedly be the most sensible basis for it.
Secondly, the Minister will have to think of shifting more of the burden of taxation from direct to indirect taxation, if we are to have any chance at all of dealing with the problem of thresholds in the circumstances that will face us in the next few years.
There is another area in which the Bill does not go far enough and in which I should like to see more action taken. I am extremely pleased that something has been done for the war widows, but the problems of the other widows and of single women between the ages of 60 and 65 now stand out even more starkly in our tax system. I shall not repeat all the arguments I advanced in Committee on this point, but I must record my view that something will now have to be done for these two groups if the tax system is to be remotely seen as fair.
I turn finally to a matter which is not only related to the tax burden on many in the middle income group and many young married couples, but which also raises wider issues of social and planning policy. I refer to the subject of tax reliefs for travel to work expenses. The rise in fares and in motoring costs has caused real hardship, and a corresponding resentment at the way in which our tax system takes no account of these problems. This resentment is not going to disappear.
I do not think we can lighly advocate complete tax relief on all travel-to-work expenses, without a wider study being put in hand on the implications. But I believe that we could look at an allowance of some kind for such expenses, including private car travel. After all, if it is right to tax benefits in kind, how can it be argued that it is not right to provide some relief on the other side of the coin—namely, expenses in kind.
I hope that Ministers and some of my Opposition Front Bench colleagues will be prepared to consider the analogy with the proposals advanced on the taxation of cars, with a fairly simple scale for assessing benefits to be taxed.
It would not be beyond the bounds of possibility to devise, a comparable scale 1322 for the travel expenses incurred in earning one's employment income, with tax allowances related to that scale. This would help to tidy up the treatment of expenses and to bring about more fairness in the tax system between expenses and benefits.
These are some of the thoughts that have gone through my mind as I have sat through the proceedings on the Finance Bill. I hope in particular that Ministers will be prepared to look at our procedures for discussing and legislating on these issues. Unless these are improved, there will be continued public dissatisfaction with Parliament's handling of taxation questions and we shall also damage the interests of many people outside the House.
§ 5.18 p.m.
§ Mr. J. Grimond (Orkney and Shetland)
I apologise for the fact that because of another engagement I missed the Chief Secretary's speech.
I wish to make a few remarks on the various themes which have arisen from our discussions on the Finance Bill. I wish first to pick up a theme that was touched upon by the hon. Member for Braintree (Mr. Newton)—namely, the growth of perks and how they should he treated.
One of the worst features of our economy is the fact that it is becoming perk-led. It matters more to people what they can obtain free of tax or provided by the State or by their company than what their salary may be. This leads to waste, certainly to a denial of freedom of choice, and is connected with questions of tax avoidance.
Tax avoidance is a phrase of infinite meaning, and no doubt the Treasury officials think they know what it means. Ordinary people believe that it embraces those people who, in evading taxation, put themselves in a privileged position. It is not considered particularly wicked, nor is it confined to the rich. On the contrary, the amount of moonlighting that goes on throughout the country is enormous. It has the obvious purpose of avoiding tax. When ordinary people are told that Ministers do not pay tax on Government cars provided for their use, those people regard that as a form of tax avoidance. Again, when an ex-Prime 1323 Minister is provided with a car worth £10,600 tax free, that again is a form of tax avoidance. There are a great many people who look askance at these matters, and that certainly applies to many of my constituents. We should look at the morality of what in the Treasury is known as tax avoidance. I hope that we shall work towards an economy in which people are paid more and are less prone to look for perks of all sorts as a way of making up for the indecently high taxation from which the country suffers.
We talk about Government expenditure, using it as a portmanteau phrase. It covers many different types of expenditure. What needs to be cut is unproductive Government expenditure. No one can say that this has not been proliferating. We know that it has. The hon. Member for St. Ives (Mr. Nott) gave the example of the dual carriageway which goes nowhere. I have given examples of public authority buildings in my constituency, to be put up at a cost of £1 million. We all know that the grant system positively encourages wasteful public expenditure.
We do not have to leave this building to see a waste of £300,000. We can go to New Palace Yard and look at the rather ugly garden that has been constructed there. The Department of the Environment has only to look at its own building to know that it is a totally inhuman operation. We have only to go to housing estates to see enormous waste in public authority housing. It is this type of waste which has to be cut. It cannot be objected that this will do any harm to anyone. It will be positively beneficial. We are not talking about the essential social services or productive investment. We are talking about the steady proliferation of useless and non-productive public expenditure on all sorts of ugly things. That is what has to be cut out.
Much as I dislike them, it is time that we had some committee or commission which looked at the methods of assessing what people should receive in the public sector. I agree with those who think that inflation will be stopped only by better control of the money supply. This has to be coupled with some sensible salaries and incomes policy in the public sector, especially as the private sector grows smaller.
1324 It is not only middle management that complains about the erosion of differentials. The trade unions complain. Engine drivers, for instance, complain that their differentials have been elided. We have only to compare what pilots are paid with what drivers of express trains are paid to see that things are out of proportion. At some point we have to take a much calmer look at this subject than we have so far done. I got into severe trouble about two years ago for suggesting that the top range of salaries in this country was too high. I agree that after taxation they are not nearly so high as they look. Nevertheless, at the top end, there is a danger that if we suddenly reduced tax we would leave people with an after-tax salary which may be too high.
We have only to look at recent events when considering this problem. If £60,000 a year with very little tax paid upon that sum is considered the right salary for the President of the Commission—and I do not say that it is not, and the British Government subscribe to this—it shows up some of our internal arrangements in an odd light. I put it no higher than that. This is nothing to do with Liberalism, Socialism or Conservatism. It is about running a decent, free society. If we are to stop the trend I agree with the hon. Member for Motherwell and Wishaw (Dr. Bray) that probably we have to put on a freeze at the top end, at least temporarily.
Such a freeze must start in the only place the Government can start, the public sector. We would have to reward in some way those who take less—not those to whom perks are granted, those who get near-free education for their children if they are working abroad, who do not pay capital gains tax if they are abroad and so on. A good deal can be done in the public sector. We can reward the public spirited by giving them honours and in all sorts of other ways. We must take a long, hard look at the principle of remuneration after tax in the public sector and therefore at what sort of gross remuneration we can afford to pay.
I want rather more information about how far the current situation has driven people abroad. I am told that it is not that companies are finding it difficult to recruit middle management but that if, by chance, middle managers go abroad, 1325 they stay abroad. They find the attractions of life there to be considerable. Clearly in the long run that must be harmful to our economy.
One of the difficulties about our Finance Bill procedures arise from this passion for stuffing in every conceivable form of change to deal with some loophole or because someone in the Treasury or the Revenue has decided that something should be put in. This procedure makes life intolerable and lends to large-scale evasion. Taxation today is largely concerned with taking out of demand a sufficient sum to allow for Government expenditure without cataclysmic inflation. It is not a matter of finding the cash to pay for what the Government want to do, although that is no doubt important. It is a question of ensuring that there is room in the economy for public expenditure. Therefore a certain amount of demand is taken out of private expenditure.
In this respect, a lot of taxation is totally irrelevant. For instance, a tax on the very rich—a wealth or capital gains tax—has an infinitesimal effect. We take out most demand with the poor. They are the people who find demand cut more and more by taxes, owing to inflation. In a cruel way this is the purpose of taxation —it reduces demand. But we are not prepared to see widows and the poorer section of society being constantly more heavily taxed to fulfil the purposes of the Government. That is the dilemma.
We have to move away from the idea that taxation is the basic way of managing the economy. I am glad to say that I think we have gone some way from fine tuning. But there is still a feeling abroad that somehow taxation is the main instrument in the Government's hands for running the economy. If that is so, to take up the point made by the hon. Member for Braintree about taking credit for the number of people taken out of taxation, we have probably added to inflation. Control of money supply and of nonproductive Government expenditure are the main priorities.
Next year I would like to see a much shorter Finance Bill, making far fewer changes. I would be content to see no loopholes stopped UP. I hope that the Bill will be accompanied by some evidence about how best to assess salaries in the public sector. There must be an 1326 effort to change from the perks system. And I would like to see all this coupled to an economic policy which relied more on control of the money supply and of unproductive Government expenditure.
§ 5.28 p.m.
§ Mr. Geoffrey Dodsworth (Hertfordshire, South-West)
It is already clear from the course of this debate that a number of hon. Members are concerned about the content of this Finance Bill and its method of production. We are all greatly obliged to my hon. Friend the Member for Braintree (Mr. Newton) for his clear analysis and exposition of the Bill's contents. It appears that via Clause 52 and Schedule 6 we are bringing about a constitutional change which cannot be allowed to pass without mention.
I hesitate to contribute in too detailed a manner to this debate in the presence of so many experts—what I believe were referred to as the "PBI" of the Finance Bill Committee. Having read their contributions on this subject I notice that my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) my right hon. Friend the Member for Crosby (Mr. Page) and my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) all alluded to the fact that they were concerned that there should be a separate debate and a separate Bill on matters of this nature. In Schedule 6 there are sections to be substituted for Section 20 of the old Taxes Management Act.
In my view the procedure resolution is probably inadequate for that purpose. It makes no reference to the Taxes Managment Act 1970, referring only to Sections 19 and 20 of the Incomes and Corporation Taxes Act 1970. We have the problem of ensuring that the measures that come before us are authorised in the proper and right way and that we as individuals are aware of their consequences.
In this instance we have to differentiate between the Bill and its precedents. I am thinking of the provisions which were made in the 1972 Act for value added tax investigation by those responsible in the Customs and Excise. We were then concerned with the rights that registered tax collectors would have on behalf of the Government, but in the Bill we are dealing with individuals. We are provid- 1327 ing that there will be right of access to the households of individuals for the purpose of obtaining private papers.
Let us compare the Bill's provisions with the criminal law. The police have to apply for a warrant, and although there is a judicial safguard as a result of the magnificant efforts that were made in Committee, that does not alter the fact that the tax inspectors will have right of access even if they hardly suspect a crime. I am obliged for the reports that have emanated from another place about the likely effect on proceedings in that place. I find this morning that that view is made clear:Schedule 6, which allows Inland Revenue investigators after an application to a court to enter private premises and take away private papers is clearly a constitutional change in the law of trespass and individual freedom, a section of law-making which the House of Lords law lords and constitutional experts are manifestly suited to help formulate".It was for that reason that I sought to raise with Mr. Speaker the whole question whether the Bill should be certified as a Money Bill. If it is so certified, the opportunity to examine any amendment or detailed clause falls away. We are concerned about the effect on the individual and the liberty of the subject. We are also concerned to maintain our constitutional position. At page 80 of "Erskine May" there is an apposite quotation that reads:'The annexing any clause or clauses to a bill of aid or supply, the matter of which is foreign to and different from the matter of the said bill of aid or supply, is unparliamentary, and tends to the destruction of constitutional government.'That is the position that the House is facing. We have a situation in which Treasury Ministers have a duty to prepare a separate Bill if they are to bring forward rights and opportunities of this nature and to enforce the law as they see it. The Bill bundles everything together. That is entirely unsatisfactory. It reflects the rather authoritarian and arbitrary nature of the way in which the proceedings of Government are now being conducted. Steamroller tactics are being employed. They are being used on the individual taxpayer.
We are in error if we allow such matters to go unmentioned and unnoticed. The proceedings of the 1972 Act went unnoticed as regards the rights of VAT snoopers. That was a certified Money 1328 Bill. In that instance there was no opportunity of reflecting upon the rights of the indivdival or individual tax collector on behalf of the Revenue. That is evidence that we need to be on guard. I notice that nine out of the past 12 Finance Acts have not been certified as Money Bills. That indicates that it is the one that goes through that must be the source of grave concern.
There is a need for the House to record its view that the rights of the inidividual are being reduced. They are being reduced by changing a section of the existing Act through the use of a Finance Bill. That is a very unsatisfactory mechanism. It is the obligation of us all to press the Government to take the opportunity of withdrawing Schedule 6. Let them return with a separate Bill so that the matter can be fully and properly considered. That would be the right way in which to proceed.
My hon. Friend the Member for Braintree made this point lucidly and clearly. Surely it is not right that a matter of this significance should be considered through the hours of the night and in the early morning, along with many other matters involving technical detail, when we are concerned with the right of the individual subject. I hope that even at this late hour the Government will take the opportunity to reflect. I hope that they will remove this offending and offensive clause from the Bill and reintroduce it at a later stage when there will be oupportunity for a proper form of debate and discussion. This is what a matter of constitutional significance deserves.
§ 5.35 p.m.
§ Mr. Douglas Crawford (Perth and East Perthshire)
I do not wish to take up the remarks of the hon. Member for Hertfordshire, South-West (Mr. Dodsworth), save to say that I agree with a great deal of his remarks.
In Scottish Grand Committee last week I was accused by Labour and Conservative Members of making what they called a short speech of some 50 minutes' duration. I was criticised in the harsh way that is typical of that Committee. I see no reason for long speeches having to be equated with parliamentary virility. I have no intention of making needlessly lengthy speeches, a tactic that some Members all too often use to camouflage lack of content. However, I exempt members 1329 of the Committee that considered the Finance Bill from those strictures. I add my tribute to the Chief Secretary and the Financial Secretary for the humour, helpfulness and courtesy with which they treated the Committee.
There is much that is unsatisfactory in the Bill from a general point of view. As the hon. Member for St. Ives (Mr. Nott) has said, we were dealing on Report with virtually a new Bill. We had little time to consider it, little time to table new clauses and little time to study the amendments that had been tabled along with amendments to the new clauses. It was even more difficult for members of minority parties than for members of the Conservative Party in that we have less research hack-up to help us.
A satisfactory feature was the decision of the House to give a 50 per cent. tax exemption for war widows. My party would have liked a 100 per cent. exemption, but I congratulate the hon. Members for Ormskirk (Mr. Kilroy-Silk) and Birmingham, Perry Barr (Mr. Rooker) on tabling a new clause and succeeding in persuading sufficient of their hon. Friends to vote for it. It was rather churlish of one or two of their hon. Friends subsequently to vote against the clause when they had previously added their names to it.
As I have said, there is much that is unsatisfactory from the general point of view. In particular, there is a great deal that is unsatisfactory from the Scottish point of view. That which is primarily unsatisfactory is the increase in whisky duty. I raised this matter in Committee and I shall briefly comment on the figures. The increased duty in previous years has caused a reduction in total production. In 1974, 183 million proof gallons were produced whereas in 1975 production amounted to 151 million proof gallons. That is a drop of about 30 million proof gallons, a fall of 17 per cent. or 18 per cent. Home consumption fell from 70 million proof gallons in 1974 to 60 million proof gallons in 1975. The latest figures are even worse. They show that in January and February of this year only 1,245 million proof gallons were released from bond compared with 1,410 million proof gallons in January and February 1975.
The strange thing about Scotch whisky is that once it is sealed it improves. I 1330 shall quote what was said by my hon. Friend the Member for Moray and Nairn (Mrs. Ewing) in the European Parliament debate on whisky a week or two ago. She said:There is a certain public house in Tobermory, on the Island of Mull, where there are two bottles of whisky over 100 years old which the owner says he does not intend to open until the Spanish galleon which was sunk in the Spanish Armada is recovered from Tobermory Bay. The expectation is when he finally opens these bottles they will be even better than they were 100 years ago.I return to a more serious point. There has been a drop of some 200 million proof gallons taken out of bond in the first two months of this year compared with the first two months of last year. That is a very serious matter.
It is also important for the Government to know that the Governments of other countries tend to put up their duties on whisky commensurate to our duties. The largest export market for whisky is the United States, which imported 132 million gallons in 1974 but only 126 million gallons in 1975, and that is without taking inflation into account.
By now, the Scottish economic case is well known to the House—my hon. Friends have seen to that. I remind the Government and the House that the Department of Employment's regional survey quarterly cost of living report shows that, in the latest quarter for which figures are available, Scotland's cost of living was 9.4 per cent. higher than other areas of the United Kingdom, while the Family Expenditure Survey showed that the income per capita in Scotland was 9.4 per cent. lower than in England. This alone means, in our contention, that Scotland should be immune from the forthcoming public expenditure cuts, which are economically unfair and economically unjustifiable.
It is time that we had at least two Finance Bills in this House, if not three, one for Scotland, one for England and, doubtless, one for Wales as well. Scotland's economy is now different in its psychology, balance and potential. In Edinburgh or Aberdeen one is met with a feeling of bustling enthusiasm for commerce and industry, while in the City of London one tends to be met with gloom. There is a difference between the two economies which is larger than it has been for many years.
1331 The Scottish economy, via this Bill and the public expenditure cuts, is being strangled by the serpent of England's economic constriction. That must stop, and the sooner it does the better for industry, trade unionists, management, bankers and the rest of the people of Scotland.
§ 5.42 p.m.
§ Mr. Nigel Lawson (Blaby)
I do not wish to follow what was said by the hon. Member for Perth and East Perthshire (Mr. Crawford), except to say that he really is deluding himself if he thinks that there is a Scottish economy wholly separate from the English economy. The two economies are intimately interlinked, and until he understands that he will not understand the problems of the economy of the United Kingdom as a whole.
§ Mr. Lawson
That takes the Scottish situation as far as we want to go now.
I want to devote my remarks to those made by the Financial Secretary in opening the debate. Certainly it seems to be true that the most novel feature of this year's Finance Bill has been the insertion on Report of amendments to introduce a number of income tax reliefs—which, incidentally, do not even compensate for the increases in the real tax burden as a result of inflation—as an explicit quid pro quo for trade union acquiesence in stage two of the Government's incomes policy. Yet, already how remote and unreal it all seems. No wonder.
A century ago, Walter Bagehot advanced the cause of political analysis by drawing a distinction between the dignified parts of the constitution, such as the monarchy, and the efficient parts, such as the Cabinet. Today, we see much the same distinction in economic affairs, where the efficient elements of national economic management are monetary policy, tax policy and, above all at the present time, public expenditure policy, while the incomes policy, 1332 with all its solemn processions of trade union barons in and out of Downing Street and Chequers, represents the dignified element.
Thus, even today, as we discuss all this flummery in the Chamber of the House of Commons, we know, as we speak, that the real decisions—the absolute vital decisions—on cuts in Government spending are being argued out between Ministers behind closed doors, with resignation threats flying thick and fast for the benefit of a rather credulous Press.
Of course, as Bagehot explained, the dignified parts of the constitution had a dual rôle—to draw attention away from the efficient parts and to make the decisions taken by the efficient parts more acceptable to the people as a whole. The trouble with the incomes policy on this analysis, quite apart from the doubtful wisdom of elevating Mr. Jack Jones to the status of constitutional monarch—a doubt shared, it seems, by some of his own trade union colleagues—is that while it admirably fulfils the diversionary aspect of the rôle, it does not, in the long term, do anything to enhance the acceptability of the real measures needed for our national economic recovery.
Indeed, if anything, the reverse is the case, as is to be seen all too starkly at present, when the Chief Secretary to the Treasury is being told by the TUC that the cuts he is proposing in public expenditure are contrary to and a breach of the so-called social contract on which the incomes policy is allegedly based.
Nor, of course, is the incomes policy harmless in other ways, too. My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) set out the indictment of incomes policies—an indictment based not on some abstract theory but on the most bitter practical experience over a long period of years—at painstaking length in his important speech to the Bow Group Economic Affairs Standing Committee at the Carlton Club on 12th May.
But of all the disadvantages and dangers—I interpolate that reference to my right hon. and learned Friend's speech in order to spare the House hearing me reiterate those points—the greatest of all 1333 is the invariable tendency of all Governments when the going gets rough and tough to assume that the dignified can actually be a substitute for the efficient. I am afraid that we are likely to see the present Government repeat that error in the fairly near future.
Meanwhile, it is essential, if we are ever to think clearly about this whole subject, and to arrive, as I shall seek to arrive, at a positive and constructive conclusion, that we should tear away the biggest myth of all within which the incomes policy debate is currently enshrouded. This was very well set out in the most odious, complacent and illiterate article it has recently been my misfortune to read. It appeared in The Times of 16th June and was written by the General Secretary of the National Union of General and Municipal Workers, Mr. David Basnett, so I do not think we can blame the editorial staff of The Times. Mr. Basnett concluded wth these words:I end by drawing the contrasts between the sober and disciplined self-sacrifice of the trade union movement in this economic crisis with the behaviour of those in industry and the financial sector who control the deployment of funds…and who…do not appear to have the same concern for the national interest. The contrast with the TUC's position is stark.That is complete and utter nonsense. No doubt, if it were only Mr. Basnett who spoke like that, we could ignore it. But it is not. The entire Cabinet, from the Prime Minister downwards, is apt to echo much the same sentiment at the drop of a hat.
So what is this great sacrifice that we are all called upon to admire? It is a reduction in real personal disposable income, imposed not by the incomes policy but by harsh economic realities. The idea that it is something we can either accept or reject as we please is the most arrant nonsense. It is something imposed upon us, alas, by the facts of our national economic predicament. All that is in question is how the burden of that sacrifice is shared out, and this is where the incomes policy comes into play.
I have taken the trouble to read the latest White Paper on incomes policy very carefully. I have also read with equal care the Remuneration, Charges and Grants Act and the various other 1334 pronunciamentos of various Ministers on this policy. Nowhere can I find any authority whatever for the proposition that only members of trade unions need adhere to the pay guidelines. Indeed, it is abundantly clear that the 55 per cent. of the nation's work force who do not belong to a trade union are intended to be as fully regimented by the statute backed non-statutory policy as are the 45 per cent. who do belong to a trade union. Thus, there is no sense whatever in which the trade union movement has made a sacrifice which those outside have not made.
That is not to say that the Government's incomes policy proposals are in any sense neutral—far from it. As Mr. John Lyons, the General Secretary of the Electrical Power Engineers Association, pointed out at the TUC special conference on 16th June—the same day as Mr. Basnett's nauseatingly self-congratulatory article appeared—this is not so. He said:The TUC-Government deal that we are being asked to endorse specifically discrimininates against the members which my Association represents. Engineers, scientists and managers, working men like everyone else, are specifically discriminated against in the policy.The plain truth of the matter is that the incomes policy was deliberately framed by the leaders of the big general unions, such as Mr. Jones and Mr. Basnett, in such a way as to ensure that their members made the smallest possible sacrifice and the hulk of the burden was shifted on to everyone else—higher-paid workers and middle management in particular.
It may be good Socialism for Mr. Basnett to see to it that his snout is well and truly in the trough, but for him to seek plaudits for his abstinence is nothing but the most arrant humbug and hypocrisy. And for Ministers to praise trade unionists and their leaders for a sacrifice which they have never made and which they are taking great care they will never make is not merely an insult to the majority of people who are not members of trade unions but a profound political error.
In the first place, it makes it appear that the temporary, if painful, decline in the nation's living standards is something proposed by the Government which the unions are free either to accept or reject, 1335 instead of being something imposed by objective reality from which there is no contracting out. Secondly, it makes it appear that the unions as such are entitled to ask for a quid pro quo in return for acceptance of this sacrifice. Hence we have the notorious deal in which all the benefits from moderation in wages claims are outweighed by the wholly unnecessary price that is paid in order to achieve them.
Moderation in wage claims is not, as I tried to make clear at the start of my speech, directly part of the efficient component, either of economic management in general or of the fight against inflation in particular. It is, none the less, for obvious reasons greatly to be desired. But it must be presented, not as a sacrifice for which a heavy price has to be paid but as a positive advantage from which great rewards can be gained, above all, the reward of lower unemployment. One of the most encouraging aspects of the past 12 months has been the increasing awareness of more and more trade unionists that wage moderation is the only route to full employment and that inordinate pay rises simply mean fewer jobs.
The one area in which this realisation has not occurred is the public sector which has been able to export the unemployment caused by its own pay rises into the private sector. In June unemployment in the public sector, according to the latest Written Reply which I have received from the Minister, was a mere 2.4 per cent., compared with 6.8 per cent. in the beleaguered private sector.
It is for this reason some of my hon. Friends believe that a formal incomes policy is necessary. They believe that this is the only means of ensuring wage restraint in the public sector where economic forces do not apply in the normal sense, and therefore the only means of adequately controlling public expenditure, the importance of which we are all concerned about. I believe they are mistaken. A much more useful weapon lies to hand in the application of cash limits to public sector payrolls, which brings home the connection between pay levels and employment in the clearest possible way. Indeed, this is precisely why the Civil Service unions are so opposed to 1336 the Chancellor's decision to introduce cash limit control.
This was revealingly set out in written evidence submitted to the General Sub-Committee of the Expenditure Committee jointly by the Society of Civil Servants and the Civil and Public Services Association. I quote from paragraph 37 of that evidence:Continuation of the cash limit system in the public sector inevitably means a covert system of statutory control of wages and the implications for collective bargaining are such that they virtually remove any freedom to negotiate. If cash limits are set prior to an annual wage/pay settlement, this means moving into a negotiating situation where the overall amount of money available for pay increases has already been set. If wage negotiations take place prior to cash limits being set then the benefits of a substantive pay settlement may be reduced or offset by pressures to reduce resources for expenditure in other areas such as manpower, accommodation, training, etc. Therefore the effects of cash limits will be to put a permanent squeeze on both pay and manpower levels.Exactly so. That is just what the doctor ordered. And no overt incomes policy, with all its rigidities and other nonsenses, is needed.
We shall, no doubt, have the opportunity to debate public expenditure, as such, in the not-too-distant future so I will not go further into that this afternoon. On the less central, but curiously obsessive, subject of pay restraint, what we need is clear. We need cash limits to deal with the special problem of pay in the public sector. Beyond that we need wage moderation that is accepted generally, not as part of some inevitably disastrous deal, as the present Government have chosen to introduce it, but as a commonsense good in itself from which manifest advantages flow and, more starkly, from the absence of which the evil of increased unemployment will inescapably ensue.
But although there must be no explicit deal between the Government and the self-confessed politically motivated trade union bosses, the way ahead for the next Conservative Government—and we shall not have to wait long for that—will require an understanding of a different sort. We shall need an implicit social contract—to borrow a phrase—between the Government and the people as a whole, including the rank and file trade 1337 union membership, according to which the Government gains the popular support for its economic policies that any Government in a free society requires by pursuing social policies such as lower taxation and increased home ownership which genuinely meet the aspirations of the people instead of the prejudices of the Basnetts and the Joneses.
The big bosses of today are the trade union tycoons, and thus the Labour Party has inevitably and inescapably become the bosses' party. By contrast, it is the Conservative Party which is today the people's party. Therein lies its opportunity and its destiny.
§ 6.0 p.m.
§ Mr. Ralph Howell (Norfolk, North)
I shall confine myself to one criticism of the Bill—is its failure to deal with the poverty trap. The Govenment have done something to raise tax thresholds, but they have done nothing to alter the percentage at which tax payment begins. That means that people who are earning only 48 per cent. of the national average wage will still be taxed, and the Bill will serve only to deepen the poverty trap.
Perhaps I may explain what is happening and highlight the absurdity of the situation. A man with a wife and two children would receive £35.85 in supplementary benefit if he contracted out of work for one reason or another. Yet if he earned £35 a week he would pay tax of £1.78 and a national insurance contribution of £2.01. What a totally absurd situation that people whose earnings are below the official poverty line, as fixed by social security benefits, should be taxed.
I am told that this cannot be dealt with at this stage because it would cost £1,230 million in lost taxation. That is the amount currently being taken from people whose earnings are below the supplementary benefit level. I am also told that it would be inflationary to raise tax thresholds to supplementary benefit levels. That means that we are operating a thoroughly rotten society. It is time that the Government recognised that they must change the system quickly if the country is ever to get out of the mess it is in.
It simply does not pay several million people to work, and it is only because 1338 they are conscientious that they do so, even though they know that they are worse off in the process. The Government are taking £1,200 million from them in taxation and at least that much again in national insurance. That means that about £2,500 million is being deducted from the pay packets of the poorest members of the community. It would be unfair to blame the present Government for that, but someone at some time must remedy the situation.
Someone must find the courage to raise tax thresholds not merely to supplementary benefit levels but even higher, to family income supplement levels. It makes no sense to pay FIS to families when the money has been taken away from them in taxation in the first place.
It is a waste of time talking to this dying Government; I therefore address my remarks to my own Front Bench. Our party must change the situation. In the past, we, too, have been guilty of allowing tax thresholds to fall to an absurd level. As soon as we get into office one of our first and most important tasks must be to raise the thresholds in the manner that I have described, so that people are encouraged to work. If we implemented my suggestion we would create a situation in which, in every case, people would be better off if they worked. Until that is done there will be no health in the country's economy.
§ 6.5 p.m.
§ Mr. Peter Rees (Dover and Deal)
My hon. Friend the Member for Norfolk, North (Mr. Howell) has established an enviable reputation in the matters to which he was addressing himself. I do not presume, therefore, to deal also with those matters.
It would be wrong to part with the Bill without reflecting a little on some of its consequences, particularly on the way in which it may be passed into law. The Financial Secretary seemed to project it as some kind of educational tract for the trade unions. I think that the bulk of the country will rather resent the price that has had to be paid for educating the unions. Nor will the country find much enjoyment in the saccharine and reverential tones with which Ministers refer to them. They are an important pressure group, but no more than that.
1339 My hon. Friend the Member for Braintree (Mr. Newton) gave us a lucid and comprehensive summary of the Bill and was disposed to describe it as the most improved Bill that may be passed by the House in this Session. I may add that that is only because it started from such a low base line.
Like many of the Government's Bills, it has been conceived in spite, and I find spite no basis for solid legislative achievement. I can only tell the Prime Minister that if he aspires to be the Baldwin of our era he must apply his talents of conciliation not just to his hon. Friends below the Gangway and to the trade union movement, but to the rest of the country as well.
One aspect of the Bill has hardly been explored. I hope that the Minister who is to make the winding-up speech will deal with it. I refer to the cost of the Bill in terms of administrative manpower. The Conservative Government, to a remarkable degree, held steady the level of manpower in the public sector. When my right hon. Friend the Member for Sidcup (Mr. Heath) gave up the reins of office on 1st March 1974 there were 697,000 civil servants. By 1st April 1976 that number had increased to 747,000. Consequent upon that, the White Paper that we debated in March forecast staff cuts of £140 million in the public sector. That means a cut of 35,000 in the number of civil servants. The Ministry of Defence has cut its staff by 1,500, the National Savings Movement by 97 and the Foreign and Commonwealth Office by 56. The explanation of those cuts can only be that the Government no longer feel that we need armed forces to defend our interests, that no one will be foolish enough to take advantage of the national savings movement, and that our foreign policies are such that it is not worth employing people to present them elsewhere in the world.
The Inland Revenue now numbers 80,000—give or take a few hundred. That is 10,000 more than two years ago. On present estimates, it is easy to forecast that it will need another 10,000 by 1977. The Financial Secretary should tell the House frankly what exactly are the implications, in manpower terms, of the measures that he is asking us to pass into 1340 law. He should also say frankly where these £140 million of cuts in the public sector are to be found. I believe that there is considerable scope for cuts in the costs of revenue collection.
It is noticeable that the White Paper projections were that by the end of this decade the cost of collecting the revenue is likely to rise to £480 million. That is one aspect of the Bill that troubles me.
Another point of concern about the Bill is the way in which it has been treated in this House. It has certainly led me, as it has others of my hon. Friends, to reflect on the way in which we treat our Finance Bills. I do not complain that it was a long and complex Bill; this House has frequently had inflicted on it long and complex pieces of financial legislation. I do not say that our debates in Committee were unduly curtailed. It is fair to say, however, that there was insufficient advance exposure of the Bill.
On the evidence of the way the Government behaved in Committee, they had not thought through sufficiently the implications of the measures that they were putting before the House. Beyond that, there was totally inadequate time in which to consider the fundamental amendments and new clauses, which the Government introduced during and after the Committee stage, before we got to the Report stage.
I dare say that my hon. Friends, with considerable expenditure of energy and with their normal mental acuteness, were able to table a range of amendments on Report, but that is not the complete answer. After all, interested bodies outside the House are entitled to have reasonable time in which to consider these measures and to make representations to those right hon. or hon. Members whom they feel may be able to champion their cause in the House.
I believe that it was totally impossible for outside interests to consider the Government's own amendments and new clauses, leave aside anything else, between the Thursday when the Bill was first published, as amended in Committee, and the day when the Report stage started. It was quite impossible for deep and considered examination of the Bill to be given. As a result, the Bill will be the poorer for it.
1341 The Leader of the House, when pressed on this point, was disposed to refer to a very doubtful precedent in 1972. Having searched the record as far as I can, I do not believe that the then Administration of my right hon. Friend the Member for Sidcup introduced during, and, indeed, after, the Commission stage new measures that were absolutely fundamental to an understanding of VAT. The only precedent that I can call to mind is that of the Finance Bill in 1975, when capital transfer tax was introduced.
For the benefit of those hon. Gentlemen who were not privileged to be present at that time—unlike myself, my hon. Friend the Member for Blaby (Mr. Lawson) and others of my hon. Friends who are gracing the Opposition Benches this afternoon—I recall that in the middle of our debates in Committee the Government introduced a fundamental structural alteration. They differentiated between dispositions at death and dispositions during lifetime. To add insult to injury, no new clause was introduced in Committee. A printed circular was put out, and a rather lame explanation was given, as I recall, by the present Financial Secretary.
I believe that that was a totally improper way in which to ask a Standing Committee on a Finance Bill to debate an important measure—but that provides the precedent on which, presumably, the Government hang their case.
Further than that, the Government flinched from tabling a Ways and Means Resolution in the second Finance Bill last year that would have enabled the House to debate fully and to re-explore the darker recesses of capital transfer tax. As a result, 48 clauses and five schedules are included in this Finance Bill. We have been asked, in a very limited space of time, to do the Government's work for them and to consider the various lacunae, errors and misunderstandings that were the hallmark of capital transfer tax when introduced last year.
I now pass to the present Finance Bill. In Committee—it is right that the country should be reminded of this—several crucial and fundamental changes were offered and accented. Beyond that, when we debated the whole question of benefits in kind we were blandly told by the Financial Secretary that he would 1342 listen courteously and graciously to what we had to say but that consultations were going on not with the Opposition and with hon. Gentlemen inside the House but with interested parties outside.
I do not complain of that, but how a Standing Committee can do its work when it knows that parallel consultations are going on outside the House on the precise form of the Bill that it is being asked to debate, I do not know. If the Financial Secretary was so uncertain of the accuracy, fairness and equity of the measures he was putting before the Standing Committee, he was in honour bound to withdraw those clauses and reintroduce them in a later Finance Bill.
Beyond that—it is right to remind interested parties outside the House of this—not in Committee but as late as the Report stage last week, the Chief Secretary said, under pressure from the Opposition Benches, that he would be prepared to receive representations on the scope of Schedule 6.
It is true that under intense pressure from the Opposition in Committee, those provisions were humanised, to a degree, and that a range of fundamental amendments was introduced. But for the Minister, at the eleventh hour, when it was impossible, in legislative terms, for this House at any rate to amend those provisions, to say that he would be prepared to receive representations from interested parties outside, is an insult to the House and likely to bring the whole legislative process into disrepute.
It would be quite wrong for me to add my voice to the very powerful speech made by my hon. Friend the Member for Hertfordshire, South-West (Mr. Dodsworth) and, indeed, to the representations he made to the Chair at an earlier stage, on whether the Bill should be certified as a Money Bill, but I think it right to say that I believe that the only way now for any kind of prober legislative amendment to be made to Schedule 6—and it is implicit in what the Chief Secretary has said that he is prepared to contemplate further amendment to these provisions—would he to allow the House of Lords to re-examine these provisions. But it is nothing short of scandalous that this House has been deprived of a proper opportunity of debating fully and considering in depth both the benefits in kind provisions and Schedule 6.
1343 The behaviour of the Government in this instance has led me, as it has led others of my hon. Friends, to reflect on whether we provide the right kind of scrutiny process for Finance Bills. It may be that others of my right hon. and hon. Friends, who have experience of the Government's behaviour in other fields, feel that the strictures and criticisms ventured from the Opposition Benches may also be applied to other legislative measures. It may well be that we shall have occasion to return to this problem tomorrow, in the three consecutive debates inflicted on the House.
My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) suggested that the Select Committee procedure could be applied. I certainly believe that where any major reform of the fiscal system is in contemplation, it is right and proper that the House, through the Select Committee system, should consider the framework of it.
There is no mystery about Finance Bills. There is no real reason why they should be clothed in such secrecy. One appreciates that questions of rates of tax should be disclosed only during the Budget speech, but where the whole framework of a tax is in contemplation, I believe that leisured scrutiny by a Select Committee, with plenty of opportunity for outside interests to make representations, is the only proper way in which to proceed.
It may well be that there are other complex amendments which do not amount to a fundamental reconstruction of part of the tax system. Indeed, there are many such complex provisions in this Bill—the benefits in kind provisions, the stock relief provisions, and so on—and I have no doubt that in due course we shall be considering the implementation of the Sandilands Report.
In such cases, I suggest that the proper approach would be for the Government to allow a much longer period between the publication of the Bill and the Second Reading, and certainly the Committee stage, so that outside interests can scrutinise the Bill with considerable care, go through it in detail and make representations to the Treasury and to Somerset House. One knows that Somerset House, even now, does a little advance consultation, but it is on a very guarded, partial and limited basis.
1344 There is no reason at all, even when methods of tax avoidance are concerned, why a Bill should not be published in detail in advance. There is a very praiseworthy precedent for this. My right hon. Friend the Member for Chipping Barnet (Mr. Maudling) in 1963 or 1964 published in a White Paper the measures which he was proposing to introduce in order to put us all on a current year basis for taxation. Alas, the fortune of war took him out of office and prevented him from implementing that measure. It may be that the Financial Secretary would say that this would give a chance to the tax avoiders and those who would abuse the system. I can say, I believe without immodesty, that no one has expressed more concern than I have about retrospective legislation—indeed, I may have become a little reptitious on the subject—but I would not object to a Bill published in March or earlier, and not enacted till August, being made retrospective to the point of publication—after all, there are many precedents for that—if it were felt that by giving advance notice people would be able to take undue advantage of it.
There are no practical objections that come to mind. There may be many pressures on Treasury Ministers. They may relish their months in purdah between November and March. It may be that it gives them the chance to discharge their various administrative responsibilities. But they must consider the convenience of the taxpayer. It is quite wrong for them to inflict on taxpayers a mass of detailed, unthoughtout legislation with little time to consider it in detail.
Beyond that, it is nothing short of scandalous when a Government, having announced that they were preparing to change the basis of their Finance Bill, deprive us of a proper opportunity, on Report to consider what they have in mind. It demonstrates clearly the Government's approach to this House.
It is not for me to observe that the Leader of the House has projected himself over the years a great parliamentary figure—a Tiberius Gracchus, the Tribune of Pleba, John Wilkes, the libertarian; it may be that he has other prototypes in mind. But he has done more to damage the standing and processes of Parliament than any person 1345 whom I can recall in post war years. He has demonstrated that his Government regard Parliament as a kind of legislative sausage machine to turn out at command any number of neatly packaged radical measures. He has shown that he has no regard for the Opposition parties whose interests by tradition and practice he is supposed to represent when considering the legislative programme.
I can only say to the Leader of the House and to the Government that there are those who say that power and respect will soon pass from this House, not only, possibly, to devolved legislative assemblies but also to the European Parliament in Strasbourg, or, it may be, in Brussels. I believe that the people of this country, contemplating the way in which we handle complex legislative measures, especially on finance, may feel that it would be no bad thing if we were divested of some of our responsibilities. I say this with profound regret, because I have a great regard for the history, traditions and, I hope, the future of this House. But, if that comes about, the blame will lie fairly and squarely on this Government, and on no member of it more than the Leader of the House.
§ 6.23 p.m.
§ Mr. John MacGregor (Norfolk, South)
I must apologise for the fact that, owing to my being on one of the Public Expenditure Committees today, I was unable to hear all the earlier speeches, although fortunately I was able to hear the admirable speech and the powerful criticisms of this Finance Bill by my hon. Friend the Member for St. Ives (Mr. Nott). Since I want to make only two points, and since they follow the contributions of my hon. Friend the Member for Norfolk, North (Mr. Howell) and of my hon. and learned Friend the Member for Dover and Deal (Mr. Rees), I hope that I shall be forgiven for that.
I want first to say how much I support what my hon. Friend the Member for Norfolk, North said. He is to be greatly complimented on the way in which for many years he has drawn our attention to this problem with admirable persistence. For me, it has been very much due to his probing into the facts and statistics that I have become converted to his line of argument. I knew that there was strong pressure in the country along these lines, but within the past 1346 18 months my hon. Friend has convinced me that there is a serious problem here.
I draw one further illustration to show the difficulty. Since the Department of Health and Social Security refused to answer some of my hon. Friend's Questions, I got the Library to work out certain figures for me taking into account the tax changes in the present Bill and the changes announced recently in social security unemployment benefits.
I take solely the situation in the forty-first week of the financial year where an employed man became unemployed. I take that period because it illustrates graphically the worst situation, although I recognise that at the beginning of the financial year the figures which I am about to give will not be as bad. Nevertheless, many more people are becoming aware of this type of situation, are beginning to take advantage of it, and are not worried too much when they fail to find jobs; indeed, in some cases they refuse to take jobs towards the end of the year.
I take the situation of the married man with two children and that of the married man with four children. The position of a married man with two children earning £60 a week when employed is that he will have a net income of a little more than £38, taking into account certain expenses of travelling to work, and so on, where a reasonable figure has been included, and average figures for rent and rates and any rebates that he might obtain. His net income on becoming unemployed goes up by £9, so that it becomes £47. Taking the position of the married man with four children who earns £60 a week, his net income when employed is £45. When he is unemployed, his net income goes up by £12, to £57.
Whatever we say about the desirability of giving reasonable social security and unemployment benefits and whatever may be the administrative difficulties involved in sorting out the position between the tax and the social security systems, the plain fact is that that type of position cannot be defended. It is nonsense that two groups both with exactly the same requirements for their expenditure should find that when employed they have net incomes of £9 and £12 less than when they are unemployed.
Looking at the possibilities of making short-term unemployment benefits taxed, 1347 we discover that the net income when unemployed does not go dramatically below the net income when employed. In one case, it is £4 less and, in the other, it is £3 less. If we cannot sort out the relationship between tax and social security benefits immediately, one answer that must be looked at seriously is to tax short-term unemployment benefits, and the administrative difficulties in doing it must be overcome.
The real answer, however, is to raise the tax thresholds for the net income when employed. I make no more of that today, because I am aware that I and many other hon. Members have constantly put forward that argument. But that must be the answer to dealing with the problem. We recognise how expensive it is, and we recognise, therefore, that the efforts of the Chief Secretary to cut public expenditure are highly desirable. But they will have to go further if the objective of raising substantially the opening tax threshold is to be achieved.
I wish to add my voice to what has been said by one or two hon. Members who have been participants in Standing Committees on Finance Bills for some time about the procedures in which we have engaged. The Financial Secretary and the Chief Secretary have said at various times in the Standing Committee that they do not defend the present system, but they have gone on to say "This it not the time to discuss such a matter." At the conclusion of one Finance Bill, it may be that this is the time.
I agree with all that was said by my hon. and learned Friend the Member for Dover and Deal. He has great experience not only of our Finance Bill Committee but also of the workings of the tax system. There can be no doubt that the way in which we deal with Finance Bills at present is most unsatisfactory. I do not complain about staying up all night. I find our discussions in the early hours of the morning constructive, helpful and agreeable because of the way in which the Chief Secretary and the Financial Secretary respond. Looking at the Official Report afterwards, I am amazed to find that even debates at 5 o'clock in the morning are quite coherent.
I accept that in one sense the fact that we have so many changes to the last two 1348 Finance Bills demonstrates not only that great credit should be reflected on the Opposition for their arguments, without any voting power to get those changes, but that the parliamentary process works and that changes can be made. However, I believe that no one outside this House finds our rushed processes in the small hours of the morning at all sensible. It seems crazy to them and it means also that they cannot participate in the debates or follow our discussions unless they have the same lunatic perseverence, dedication and energy that we on the Committee have to have.
But there are much more serious objections. The first is the one which my hon. and learned Friend the Member for Dover and Deal made, which is, in so many cases, the lack of time for Opposition Members to receive outside representations. It is often difficult enough to have sufficient time for the amendments that we wish to table, let alone to consult outside bodies and to decide which arguments and amendments we wish to press. We complain about the lack of time for many others, apart from the dedicated and important outside bodies of observers who follow our proceedings, like scores of accountancy firms and others throughout the country who are crucially affected even to look at what is proposed by the Government in their amendments.
The other serious aspect of the way in which we have to deal with so many Finance Bills in an ill-organised manner is that we end up with an excess of ill-digested fiscal legislation, which needs amendment in succeeding Finance Bills. The CTT is an example.
In addition, we have a severe effect on the efficiency of industry, accountants and others who constantly have to cope with the changes we make. We should be greatly concerned that many informed outside observers have this criticism of our present procedures.
Many hon. Members feel that one of the best ways of proceeding in the future would be by way of the Green Paper technique, effectively deployed by my hon. Friend the Member for St. Ives when in Government, and/or the Select Committee procedure, though this will not cut the amount of parliamentary time. It will put the same pressure on us, but it will remove the rush and give 1349 outside bodies time to put their case effectively and give us a better chance to get it right the first time round.
I should very much like to see the Inland Revenue given the opportunity for greater openness before it goes to Ministers with proposals. In the general sub-committee of the Expenditure Committee we have been investigating the extent to which the Revenue and the Treasury consult outside bodies or even other Departments about the industrial and economic effects of any proposed measures.
It has been clear to those of us on that Committee, as it is clear from the fringe benefit clauses in the Bill, that there is very little outside consultation. It would greatly assist our procedures and help industry and outside bodies if the Revenue were allowed this greater openness. I understand the reasons for Budget secrecy, but they are outweighed by the desirability of a better process for considering Finance Bills.
We need less fiscal legislation. I recognise the difficulties. I accept that many of the amendments of my hon. Friends and hon. Members opposite would add to the legislative process and result in longer, more complex Finance Bills, but we must be firm in our resolve to have less legislation.
We need at least an ordnance of self-restraint on major changes to the system. We need such changes least of all at present.
We should also separate those matters in Bills involving major structural changes from those involving fiscal changes in rates for economic or other reasons.
I do not mind our exchanges upstairs—I find them agreeable and constructive—but they are not the most sensible way to conduct the nation's fiscal affairs, and are increasingly being recognised as not being so by all the outside interests affected.
§ 6.33 p.m.
§ Mr. Cecil Parkinson (Hertfordshire, South)
Some of my hon. Friends have pleaded for less fiscal legislation. There is a general feeling that Finance Bills are brought forward too frequently and are both too long and too complicated.
They tend to become a self-generating exercise. For instance, 37 clauses were 1350 devoted to the capital transfer tax last year and there are 48 clauses dealing with the tax this year.
In the current Bill, several of the measures will be discussed and amended for years to come. We are constantly putting right the mistakes of previous years while, at the same time, creating more mistakes. We can see that a number of mistakes and injustices of previous years are being tackled in this Bill.
Last year, we argued time and again that a 25 per cent. rate of VAT on cottage industries like boats, caravans and other small business industries would be criminal and would destroy them. The Government ignored our arguments. This year they have returned to the subject and reduced the rate to l2½ per cent.
We have had three changes in three years because the Revenue cannot admit that we should never have abandoned a single rate VAT. First, we had the single rate, then the dual rate, which resulted in so much damage, then the return to a situation which approached a single rate, while not actually going back to it.
We argued on CTT last year that the tax was ill-conceived and badly thought out and that it should be deferred and considered in more detail by a Select Committee. The Government used their majority to ride roughshod over our arguments and this year they had to include 48 new clauses on the tax to try to put right some of the mistakes which need never have been incorporated in the legislation if they had listened to our arguments and given a little thought to their own ideas.
We must welcome some of the reliefs in the Bill and I am glad that the Government have admitted that it was a mistake to get rid of the industrial hereditaments relief built into estate duty. That was our argument last year and the Government have brought forward a variation of that relief, but there is a gap between the time the CTT legislation was introduced and now. When we point out that some people will not qualify for the relief, the Government say that that is too bad.
We say that if there was a need for this relief in the old estate duty and there is a relief now, because jobs may be threatened, what is wrong with admitting that the Revenue made a mistake and 1351 giving Parliament the opportunity to put it right? However, that has not been done and no doubt changes will have to be made to CTT for years to come and the tax will result in a flourishing industry to deal with it.
The Government have further amended stock appreciation relief. This is becoming a legislative nightmare. Even if one devoted a lifetime to try to understand it, one would find it virtually impossible.
Why was it introduced? The Chancellor of the Exchequer made speeches about obscene company profits and increasing the taxation on the corporate sector, but when he tried it, he found himself threatened with an industrial collapse. Instead of admitting that he was wrong and reversing his proposals, he introduced this relief. Huge sections of the Finance Bill are now devoted to this over-complex, totally unnecessary piece of legislation which was introduced because the Chancellor could not bring himself to admit that he had made a mistake. So much for the mistakes and injustices of earlier Bills.
This Bill will provide considerable work for Parliament in the years ahead. The benefits in kind provisions have been badly thought out. Chapter II was virtually withdrawn by the Government and has been reintroduced in bits. We now have Mr. Joe Gormley boasting about the extra-statutory concessions he has obtained for the miners. Their perks will not be taxed. The Government dare not tangle with them, he implies.
Extra-statutory concessions will be made for the miners, whether the case is just or unjust. There has been no argument about the justice or injustice of giving the railway and airlines workers their reliefs. The only argument has been that they have the power to do the Government tremendous damage and they will use it unless they get their way.
The salesman who uses his car for private purposes will be more heavily taxed, although the Government have halved the amount of taxable benefit, following pressure from us and the motor industry but only for those driving over 25,000 miles on business. The salesman will still not receive anything like the reduction of taxation of benefits that the more powerful groups will receive. I had a conver- 1352 sation at lunch-time today with the chairman of a very large company. He said "I have no complaints about the legislation. My chauffeur-driven Rolls will cost me far less than it has in the past. I am grateful to the Government. But my salesmen, espcially the promising salesmen who are too busy selling to be driving round the country clocking up 25,000 miles a year, will be hit by the Bill and will have to pay more tax. Their wages have already been frozen and we have been unable to do much for them. They are being penalised. However, I am getting the benefit because my chauffeur-driven Rolls will cost me less in future."
The Chief Secretary has said "This is a well-thought out piece of legislation." He introduced it two months ago. He has already withdrawn it twice and in the years ahead Parliament will need to make major changes if this legislation is to be fair and just and to produce the results that the Government want.
Major injustices have been perpetrated in two other areas this year—the snoopers' clauses and the capital gains tax on compensation stock. The Government, in a vindictive way, have introduced Schedule 6. The clause on compensation stock is unfair and the Government know it, but they have been trying to pretend that they are doing a favour to the owners of shares in industries which are to be nationalised. They are, in fact, doing an injustice and they will damage British industry.
Many of us are increasingly alarmed about the power of the Trades Union Congress and the deferential attitude adopted by the Government to that body—an attitude which day after day they seem to expect Parliament to adopt.
Whose view predominated on pay? The TUC's. The TUC was consulted. Parliament was not allowed to discuss the deal until the TUC General Conference had been held to approve it. Who had the first and major word on tax reliefs for individuals? It was not Parliament, but the TUC. Only if a deal could be done with the TUC were the rest of us to get our reliefs.
With whom are the Chancellor and the Prime Minister having major discussions about public expenditure? Is that discussion taking place here? No. It is taking place with the TUC. The Cabinet will be allowed to discuss it after 1353 the Prime Minister and the Chancellor have found out what the TUC will finally wear. It may be a way of producing a kind of peace to say "We shall not do anything that the TUC will not bless and we shall let it have the last word on any proposals that we put before Parliament", but many of my constituents are not members of the TUC. Only about 40 per cent. of the work force are members of the TUC. Many people resent the fact that the TUC's view on what is best for its members is to predominate. The Government are scared of the TUC. They dare not stand up to it and they have the majority to railroad this legislation through Parliament.
One point that worries many of us is that the CBI seems to be prepared to give its blessing to agreements and to act as if it had been consulted. We know that if the CBI is called in, it is called in not to be asked, but to be told. However, Lord Watkinson seems to be developing a strong taste for the corporate State. Many of us would urge that he should cast his mind back to the Chequers talks when he left thinking that he had reached an agreement with the Government to which the TUC was also a party, but found out only a short time afterwards that what he thought had been agreed had not been agreed. I warn Lord Watkinson to be careful about giving the CBI's blessing and giving the appearance of the CBI having been consulted when he knows that it has been consulted only about the very fringes and that the real decisions are being taken by the Government and the TUC.
Another aspect of the Bill that perturbs me—I mentioned this matter on Thursday—is the growing militancy of the Inland Revenue. Many of us see the hands of an ever more vindictive and militant Revenue in pieces of this legislation. When we read speeches in which the Inland Revenue Staff Federation announce that war will be declared on the taxpayer and we see some of the legislation that is coming through, we feel that the Government have lost their grip and are allowing the Inland Revenue Staff Federation and the TUC to have too much sway.
This is a better Bill than it was, but I hope that the Chief Secretary will not make the mistake of thinking that is a compliment to the Bill. I hope that he will accept from me that a growing num- 1354 ber of people hope that in drawing up future Finance Bills the Government will start to consider what is best for the nation, not what the Inland Revenue Staff Federation and the TUC will accept.
§ 6.46 p.m.
§ Mr. David Howell (Guildford)
There is one sense in which this Bill is not typical of Socialist financial legislation. It is that hitherto, in the last two and a half years, we have never succeeded in completing the Committee and Report stages of any Financial Bill without the whole thing being overwhelmed by yet another Government U-turn on economic policy, another statement in the House of Commons by the Chancellor and, in one instance, the beginnings of yet another Bill. Admittedly, this time it is a damned close run thing. Within a few days, or hours even, we shall see the next U-turn. That we have arrived at Third Reading without, for once, the whole thing being overturned by a complete reversal of policy is, I suppose, a small mercy, for which we should be grateful.
This constant overlapping over the last few years, as the Labour Government scramble to undo the effects of proposals of one Budget and one Bill in the next Bill, has placed a colossal load on those concerned with financial legislation. It has meant that Opposition Members on the Finance Bill Committee—they make a formidable debating cadre—have been in almost continuous session. Indeed, they have had to adopt the motto of the old Windmill Theatre "We never closed". That is the only way in which the Bill has been different. For the rest, it has been familiar to those of us who have participated in Finance Bill Committee proceedings.
This Bill has had the two main features of other Finance Bills from this present stable. The first is the feature of backtracking on every front, a few weeks out from the Budget, on some of the most rumbustiously proposed plans and suggestions in the Bill. The second is the gross overload of the whole Bill, so that it creaks and groans its way through Committee, unable to bear the enormous legislative weight placed upon it. I want to deal with those two features which are so familiar to those of us who have served with this Government on Finance Bill Committees.
1355 First, there is the overload on the whole legislative machine. When we have raised this matter—my hon. Friends have rightly raised it again this afternoon—the Chief Secretary and other Ministers have been apt to take upon themselves the lofty tone "It is a valid point, but nothing to do with the Bill. We shall need to look at the whole procedure.", and so on.
I am not sure that I accept that. There may well be broader arguments for changing the procedures by which we handle Finance Bills. But there is a narrower, more precise and immediate argument for changing the way in which this Finance Bill has created so many difficulties for the Committee and the House. That argument can be dealt with here and now.
My hon. Friend the Member for Blaby (Mr. Lawson) pointed out the way in which the Government have begun to use what he called the built-in guillotine in the Finance Bill—the fact that it has to be got through by 5th August because of the Provisional Collection of Taxes Act—as an opportunity for throwing into the Bill as it rolls by any difficult propositions and plans for legislation which happen to be to hand. For example, Schedule 6 should never have been in a Finance Bill at all. It should not have been loaded on and thereby given the benefit of being rushed through, with Treasury Ministers confident that it would never have detailed scrutiny, that everything would be all right, and it would be hurried through without any problems.
Much the same sort of argument applies to Chapter II, to which most of my hon. Friends have referred again today. Without doubt, if the Government want to set about the business of taxing fringe benefits and perks, as, perhaps they do, the best way to go about it is through sensible and full debate, with, ideally perhaps, a Green Paper beforehand, so that we could look at some of the snags. Instead of that, they have shovelled the whole thing into the Finance Bill, hoping that it can be pushed through by 5th August, with all the pressures on both this and the other House, and hoping also, no doubt, that nothing awful will be noticed.
1356 If that is the spirit of the present Government's approach, I can only say that it is extremely damaging. If things go on as they are, we shall be driven to the point where the Government will start popping nationalisation measures into the Finance Bill, too. In fact, they have come precious near to it in Clause 49, anyway. I do not know why they bother with all the agony and angst of guillotine motions when they could put the nationalisation of the shipbuilding and aircraft industries into the Finance Bill and have it rushed through by 5th August. That may be thought a parody of events, but it is a likely development if we continue to have this abuse of the Finance Bill and the insertion of measures which have nothing to do with it.
There was another description of this practice in The Guardian, which warned against the dangers of using the Finance Bill as a Christmas tree on which to hang any little "goodie"—or "baddie" is probably a better description—which the Government wish to push through. This is a thoroughly unhealthy development, and I am glad to see that their Lordships have been looking at it very much askance. There is no doubt that it is an abuse of the Finance Bill procedure as we have known it over the years.
Naively, as it turned out, we on this side hoped that Ministers had learned something from the capital transfer tax legislation—a classic example of trying to cram enormous tax changes into a rushed procedure which had to be completed in a given number of months. But they did not learn. They pushed it through. The result was that 31 clauses then, I think, became 43 clauses in the present Bill, and, on that rate of growth, no doubt, there will be 50, 60 and 70 clauses in the years to come.
All this creates a vast amount of work and vast complications, with grotesque difficulties for business and everyone else, and all because the Government persist in using the Finance Bill procedure, with the Provisional Collection of Taxes Act guillotine built into it, to cram in major reforms which should never be put into a Finance Bill.
There is a serious case now for the present Government not only to review, with the co-operation of the Opposition, 1357 the whole process by which we handle financial legislation but also, in the shorter term, to get back to the habit of using the Finance Bill for tax regulation, tax adjustment and other such matters, and using a different Bill for major changes in the administration of taxes and other constitutional issues only dimly related to tax matters.
That would be no new procedure. It would do no more than go back to the old procedure which was familiar in the House at one time. Let me remind the Chief Secretary of what used to happen. Before the First World War, there was the practice of having both Finance Bills and Revenue Bills. In 1913 and 1914 this was introduced, and its introduction at that time was merely going back to a practice which had been familiar many years before. On 22nd April 1913, Mr. Lloyd George said in the Budget debate:We have therefore decided this year to recur to a practice, which was only abandoned in view of the controversy between the two Houses, of having two Bills. One will be a Bill dealing with the taxes which we propose, and the other will be a Bill dealing with all the amendments to the law which the Government propose, or which any Members of the House propose."—[Official Report, 22nd April 1913; Vol. 52, c. 279.]He then went on to review the divisions between the two types of legislation.
What was in Lloyd George's mind was that one type of Bill would be treated very narrowly as a Money Bill, a Bill far narrower than the sort of Bills which we now see, certainly from this Government, which would be governed by the Provisional Collection of Taxes Act timetable. The other would deal with fundamental matters affecting people's rights, the administration of the tax system and other financial matters, which could be dealt with in a less rushed and more civilised fashion.
I believe that to be the right approach, and the Government should have adopted it. We do not need elaborate Select Committees and more reports from the Procedure Committee to take us back to that practice. All we need is a bit of common sense on the part of the Government in handling their legislation and a readiness not to abuse the Finance Bill procedure any further. If that is done, at least we shall have a slightly less neurotic procedure for dealing with these 1358 colossal blocks of legislation, and slightly less chance of seeing whole Chapters of the Finance Bill wheeled in, with great clarion calls to the Left about the wonderful benefits there will be through squeezing the rich, only to be wheeled out again a few weeks later.
The great wheeling in and wheeling out has been done with Chapter II of the present Bill. Why has there been this great back-tracking? Several of my hon. Friends have suggested reasons, and I think that they all have some validity. I do not believe that it was just the complexity which the Government found when they began to hear from my hon. Friends in Committee and from others outside about the appalling consequences of what they were doing. It was more than that. I believe that it was the discovery of the huge numbers of people who would be caught by their proposed legislation, and I do not mean just those in trade unions who, of course, were quick enough to express their views, as my hon. Friend the Member for St. Ives (Mr. Nott) reminded us.
I believe that the principal reason was the realisation that the old £5,000 limit, which sounded like a figure relating to the world of senior management, in fact affected an enormous proportion of the working population. Today, probably about 26 per cent. of the working population have a gross income plus benefits of various kinds which put them in the £5,000 range. This means that we are dealing with the weekly or monthly pay packets of the entire skilled work force the semi-skilled, the junior executives, middle-rank professionals and, of course, senior management and directors—although, of course, that applies to by no means all directors—in the United Kingdom. We are dealing with vast numbers, not with a tiny group who could be hunted down but with an enormous number of people who would be directly affected.
As my hon. Friend the Member for St. Ives said, one turning point came when the hon. Member for Ealing, Southall (Mr. Bidwell) came in to announce that the shop stewards at Heathrow agreed with the idea in principle but did not like the way it affected them. Another equally telling moment came on Report when the hon. Member for Birmingham, Selly Oak (Mr. Litterick) intervened during the 1359 speech of my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) to express amazement and bewilderment—this is reported in column 707 of Hansard—at the idea that skilled workers were earning anything like £100 a week. He found it almost impossible to accept that that was the truth.
The hon. Gentleman's incredulity was, I think, understandable because minds get stuck with certain figures and in certain ruts; the mental adjustment simply had not been made either by Ministers or by enthusiastic supporters of the attack on fringe benefits, and they had not appreciated the change in differentials, in income distribution and the arithmetic of money values which had taken place over the past two years or so.
The basic reason for the back-tracking was that the Government found that they were legislating not for a minority but for something approaching a majority in the skilled and semi-skilled areas, and a majority who, quite properly, intend to hang on to their fringe benefits. If anyone is in doubt about that, he should read the words of Joe Gormley, for whom I have a high respect, who has had no reluctance in stating strongly that he believes in the fringe benefit approach and intends there to be more fringe benefits for his members.
According to the Sun newspaper on 6th July, he is reported as saying that miners are well on the way toa standard of living never before dreamed of…this would come from improved productivity bonuses and the increasing value of fringe benefits like concessionary coal, subsidies, subsidised transport, and other things.He went on to say thatHuge rises in basic wages only fuelled inflation and were self-defeating.and elsewhere he pointed out with equal accuracy that the virtue of fringe benefits was that as the value of money went down the value of benefits went up, and they were not taxable.
There is the voice of realism, and it is a pity that that voice did not penetrate to the Government earlier in the year. Had it done so, it would have saved us a great deal of trouble. We should have been saved a lot of sweat and bother, 1360 and the Chief Secretary would have had more time with his expenditure cuts and less time to salvage the wreckage of the Finance Bill, and particularly Chapter II. That was the back-tracking feature of the Bill and most of us realised the moment the Chancellor stood up full of vigour and confidence that it was inevitable that he would back away, or ask his Ministers to do the dirty work for him, before a few weeks were out.
Now we come to the point where we normally expect the next U-turn in Government policy, usually at the end of July and the ending of the Finance Bill. The next U-turn will be on public expenditure. As my hon. Friend the Member for St. Ives said, the very matters about which we have been castigated and the proposals that have been denounced as unthinkable will become thinkable and the Chancellor will be arguing that this is his essential next move. Not everyone may like the Chancellor all that much. He may not be the best Chancellor that we have had, as some argue, but if there is a man in this Administration who is suitable to shout simultaneously "Hard Astern" and "Forward" he is the man to do it, and no doubt he will perform in his usual way when he comes to utter the simultaneous calls to go forward and back. That is the U-turn of the present time.
The next U-turn will be to do with management and realising that management matters. It is a U-turn that many hon. Members have not found it easy to make, but it will come next, and then we shall have the necessary changes brought in by this Government, if they are still there, to restore differentials and incentives in the economy.
As for public expenditure, the best thing that one can say is that "public expenditure cannot continue to grow at its present pace without imposing high levels of borrowing and unacceptably large increases in taxation". The Chief Secretary will recognise those words, because they are his. He uttered them in a speech on Friday, and he was kind enough to send me a copy. I read the speech with great interest. It contained many sound points, and I hope that the right hon. Gentleman will send copies of his speech to his hon. Friends, because it says some things that have needed to be said—and, indeed, have been said by 1361 my hon. Friends for a long time—by Labour Ministers.
My only criticism of the right hon. Gentleman's speech on Friday is that it was a shade defensive. I do not think that he need be so defensive about cutting public spending. The argument of his hon. Friends below the Gangway is that it is a negative thing, but it is not. It is a positive thing, because the cutting of public spending can make a major contribution to increasing social justice, welfare and prosperity in this country. I think that the right hon. Gentleman would probably do even better—he is doing very well so far—if he put the point that profits are the engine of social progress with some vigour and enthusiasm to his hon. Friends below the Gangway.
There is something deeply negative about the present pattern of expenditure and the present levels of taxation. The Chief Secretary gave examples, and these are examples of something that is deeply negative in the present pattern of expenditure. It must be going backwards rather than forwards when we learn that the Civil Service grew by 48,000 between June 1974 and March 1976. It must be going backwards when we learn that local authority manpower increased by more than 110,000 in the same period. This is not carrying social progress forward, but taking it backwards. It must be going backwards and not forwards when we learn—the Chief Secretary did not say this, but it is a fact—that both in the Inland Revenue and in the Customs and Excise there has been an increase of 5,000 in the last 18 months.
That is not bringing greater benefits to the working people of this country. And it cannot be right—again I am going with the Chief Secretary—that 57 per cent. of housing costs come from public expenditure and the public budget. Reducing that would greatly advance housing conditions in this country, and heaven knows, as my hon. Friend the Member for St. Ives said, what the Secretary of State for the Environment thinks he is fighting about when he tries to resist cuts in the overall environment expenditure, which includes the housing budget. If we are looking for better housing, better conditions, better schools and a better environment generally, the fact is—and the Chief Secretary should have no hesitation about saying this to 1362 his hon. Friends—that that will be found by cutting spending and reordering the priorities with better spending, more efficient spending and higher profits in the private sector. It will come from a stronger private sector with a livelier and better rewarded management cadre to invest, innovate and create the prosperity from which those things should be financed.
The Chief Secretary has plenty to apologise for about this Finance Bill, and so has his master the Chancellor of the Exchequer, but on the matter of public expenditure he should carry on with the kind of speech that he made, and not apologise, because he is making a case for a better deal for working people in this country rather than for the ever-growing burdens of taxation and lower standard social and public services that they face now.
The apology for this Finance Bill should go mainly to the higher-paid and middle management levels, because they are the people whom this Bill forgot, just as they were forgotten in the White Paper "The Attack on Inflation". The White Paper is full of assertions that productive enterprise must expand and that resources must be channelled from here to there, but there is no mention of its being done by human hand atnd brain. There is no understanding that it is management, the technicians and the skilled and semi-skilled who will act to create the greater wealth in this country. There is no recognition of that in this Finance Bill, except to give them a few more kicks in the teeth in Chapter II and elsewhere.
This is the Finance Bill that forgot the people. It forgot the management, and it forgot the workers. It is another inglorious chapter in Socialist legislation. I have no doubt that Ministers would like to forget it, but the country will not forget it, and we will not let it forget.
§ 7.8 p.m.
§ The Chief Secretary to the Treasury (Mr. Joel Barnett)
Almost everything has been said in this debate, and I shall not take too long.
The hon. Member for St. Ives (Mr. Mott) began by paying a compliment to my hon. Friend the Finance Secretary and myself by saying that we were both genial, but perhaps incompetent. I accept the former, but repudiate the latter. Having 1363 listened to the hon. Member for Guildford (Mr. Howell), I would say that nobody could ever accuse him of geniality, at least not when he is delivering a speech in the House. I shall not accuse him of that, nor would I be so rude as to accuse him of incompetence—
§ Mr. Barnett
He can be incompetent even if he is not a Minister.
As the hon. Member for St. Ives went on to say, we have had long and arduous debates and I am obliged to the Opposition for their help and co-operation in putting the Bill on the statute book. I do not know why they should apologise because they heiped to improve the Bill. After all, I thought that that was the function of the House of Commons. I am grateful to them for their help, even when it has been inadvertent.
My hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) and a number of other hon. Members raised the important question of the method by which we handle our Finance Bill legislation and indeed all our legislation. My hon. Friend made the perfectly valid point that it is an appalling misuse of Government Back Benchers to insist that they should never speak in Committee because that simply takes up more time.
It is not only under this Government that that happens. I remember debates on the Finance Bills during the period 1970–74, which included the 1972 Finance Bill, on which there was some tacking similar to Schedule 6 in this Bill and which was different from normal Finance Bill legislation. [An HON. MEMBER: "It was not a Finance Bill."' It does not matter what one calls it. The House of Lords could not amend it. My point is that hon. Members have waxed eloquent about all kinds of measures in debates on this Bill but were not such frequent speakers on the Finance Bills between 1970 and 1974.
§ Mr. Barnett
Better Bills? On the 1970 Finance Bill, my hon. Friend the Financial Secretary and I put down a thousand amendments. Yet Tory Members were very quiet. I do not blame them.
1364 There is a serious point here about how we handle our legislation. My hon. Friend the Member for Motherwell and Wishaw is absolutely right. Although this is not the time to discuss how we might better handle our legislation, certainly no one could pretend that this is the best way. I hope that the Select Committee on Procedure will be able to consider this matter.
Whatever view one takes of the search and entry powers in Schedule 6, most democratic countries will find it astonishing that the Opposition have been so eloquent in trying to deny this provision entry to the statute book. Many democratic countries and most people outside the House will find astonishing the two different voices with which the Opposition have spoken about offences against social security and offences against taxation, particularly when we are talking generally in Schedule 6 about suspicion of criminal offences namely, tax evasion—which mainly concern much larger sums of money than any offences normally committed under social security legislation.
I therefore find such speeches remarkable to say the least, particularly as we have provided many more safeguards in the search and entry powers in this legislation than apply to virtually any other search and entry legislation on our statute book. We therefore have no need to apologise for those powers.
We have had long and arduous debates on the Bill. I understand the problem of the hon. Member for St. Ives today. This was made crystal clear for us by the hon. Member for Blaby (Mr. Lawson) in an unusually laboured and prepared speech when he spelled out for his Front Bench how they must avoid at all costs pinning themselves to any incomes policy. Because the hon. Member for St. Ives could not do that, he had to have a bit of fun and complain about the conditional tax reliefs and the rest. We understand that.
I recognise that the hon. Member and the Opposition Front Bench have some problems on incomes policy. That is why he could not spell out for us the policies that the Opposition have. On the one hand he has the hon. Member for Blaby and the right hon. Member for Leeds, North-East (Sir K. Joseph) and he and 1365 his other Front Bench colleagues still vaguely have to pay a little regard to the right hon. Member for Sidcup (Mr. Heath). We understand those little local difficulties. That is why they cannot make any constructive comments on this Bill or any other.
Meanwhile, however, the Budget and this Bill which forms the legislative part of the Budget, as well as previous Finance Bills and Budgets and others to come during this Parliament, will help to transform the economic and industrial fortunes of this country. It is in that hope that I commend it to the House.
§ Question put and agreed to.
§ Bill accordingly read the Third time and passed.