Commons Sitting of 13 May 1976

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

  BRITISH TRANSPORT DOCKS (FELIXSTOWE) BILL (By Order)
  Order for consideration read.
  To be considered upon Tuesday next at Seven o'clock.

BRITISH TRANSPORT DOCKS BILL (By Order)

  LONDON TRANSPORT BILL (By Order)
  Orders for Second Reading read.
  To be read a Second time upon Tuesday next.

  WIMBLEDON AND PUTNEY COMMONS BILL [Lords] (By Order)
  Read a Second time and committed.
COUNTY OF SOUTH GLAMORGAN BILL [Lords] (By Order)

  GREATER LONDON COUNCIL (MONEY) BILL (By Order)
  Orders for Second Reading read.
  To be read a Second time upon Tuesday next.

ORAL ANSWERS TO QUESTIONS
  NATIONAL FINANCE

    Inland Revenue (Rights of Entry)
    Mr. William Clarkasked the Chancellor of the Exchequer how many extra civil servants will be required to carry out the extra rights of entry into taxpayers' premises as intimated in the current Finance Bill.
    The Financial Secretary to the Treasury (Mr. Robert Sheldon): None, Sir. As my right hon. Friend said in the Second Reading debate on 3rd May, the proposed powers of entry would be used at the most in a handful of cases annually.
    Mr. Clark: Is the hon. Gentleman aware that this snoopers' charter is deeply resented throughout the country? Will he say whether calling for these powers is part of the preparation for the introduction of a wealth tax?
    Mr. Sheldon: No. I am surprised at the hon. Gentleman trying to seek any connection of that kind. My right hon. Friend the Chancellor of the Exchequer has said that he envisages the powers being used at most in a handful of the most serious cases each year.
    Mr. Jay: Am I right in thinking that any taxpayer who keeps within the law has nothing to fear from these proposals?
    Mr. Sheldon: My right hon. Friend is correct. There are expected to be only a handful of cases. The measure is a means of achieving equity between taxpayers who pay their taxes each year and those who seek to evade their responsibilities.
    Mr. Rathbone: Can the Minister deny my hon. Friend's suggestion that there is a connection between these snoopers and the wealth tax?
    Mr. Sheldon: I have made it clear that the problem is that of increasing evasion of Inland Revenue taxation and that as a result we are taking the measures. required. It is the minimum that ought to be acceptable in view of the problems that are often raised with us.
    Mr. Madden: Does my hon. Friend agree that the enormous cost to the nation

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    of tax evasion is more widely resented by working people than are these powers? Does he agree that when one compares the handful of cases brought against those who evade taxation with the enormous number of proceedings because of abuses of the social security system, abuses which cost the nation less, greater vigilance is needed?
    Mr. Sheldon: My hon. Friend is right. There is increasing resentment at the disparity of treatment between those who claim in excess of what they should receive in social security benefits and those who claim very large sums of money at other taxpayers' expense. Our measures are intended to rectify that wide difference.
    Mr. David Howell: Will the Minister bear in mind the vast army of moonlighters, to which the hon. Member for Tottenham (Mr. Atkinson) rightly drew attention the other day? Is he aware that we find this clause in the Finance Bill deeply objectionable? Will he ask his right hon. Friend about an incident the other day when his right hon. Friend read out a large chunk of a speech which turned out to be a verbatim report of the words of the General Secretary of the Inland Revenue Staff Federation? The right hon. Gentleman owes us an explanation. Please may we have one?
    Mr. Sheldon: My right hon. Friend has commented on that in the House on previous occasions. However, I remind the hon. Gentleman that the whole clause is subject to debate in the House. Proposals have been put forward by the right hon. and learned Member for Surrey, East (Sir G. Howe), and will be discussed in the debate. What we are concerned with here is trying to reduce the amount of erosion of taxpayers' normal responsibilities and I should have thought that in that we should have the support of the whole House.

    Life Assurance (Tax Relief)
    Mr. McCrindleasked the Chancellor of the Exchequer how many representatives he has received since 6th April on the proposed new method of life assurance tax relief.
    Mr. Robert Sheldon: None until the past week, since when I have received about six.
    Mr. McCrindle: Is it not inevitable under the proposed new system that for a period at least there will be a substantial effect on the investment income and the cash flow of insurance companies? What consideration have the Government given to the effect that this will have on bonuses payable under endowment policies, particularly terminal bonuses, which are paid only in the year in which the policies mature?
    Mr. Sheldon: Consultations have been held with the Life Assurance Offices. They are quite content with the arrangements, and I confirm that to the hon. Gentleman. In the introduction of this system, considerable representations were made. There was a request for such representations. The consultations have been extraordinarily effective, and that will be seen, I hope, in the working of the arrangements.
    Mr. Ridley: Why does the Chancellor's meanness extend to the point of stopping people saving more than £ 1,500 a year in life premiums?
    Mr. Sheldon: The whole basis of the scheme was a simplified operation. A figure had to be selected. I should have thought that £ 1,500 was quite generous. It allows many people on an income of less than £ 9,000 a year to get considerable advantages as a result of the introduction of this new scheme. Those in excess of that income will have plenty of time to make arrangements, because the starting date is not until 1979–80.
    Mr. Nott: Many pensions in the public sector are based upon the final year's salary and employees' pension schemes certainly allow much greater contributions than would be allowed under the arrangements now proposed with the limit of £ 1,500. Why is this double standard being used? Surely it is right that there should be comparable arrangements in all fields of savings for pensions. Will the Government look at this matter again, or anyhow make some concessions during our debates?
    Mr. Sheldon: These matters will be subject to the scrutiny of debate. I would not for a moment dream of trying to impinge upon those rights of the Opposition. These arrangements are not only satisfactory but beneficial to the large majority of people who save through the life

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    assurance method. The advantage that we give, not only to those people but, in the simplicity of operation, to all those concerned with it, is very considerable.
    Mr. Hugh Fraser: The hon. Gentleman has not answered the point at all. Even with the present rate of inflation, civil servants have guaranteed pensions related to their final year's salary, but the whole of the private sector is grossly penalised. It is absolute gobbledegook for the hon. Gentleman to talk about its being to the benefit of the large majority. It is to the benefit of only civil servants, not to the private sector at all.
    Mr. Sheldon: No. The life assurance method is not the only method available for saving for the ordinary individual. There are other methods for which tax relief is available. The £1,500 limit is based on a comparison with what happened previously under the old scheme of particular allowances for life assurance. The person who gets £8,000 a year gains considerably as a result of these provisions. The person who has been saving at a higher rate will continue to get the benefit, during the next few years at any rate.
    Mr. Nott: I am sorry to come in again. Will the hon. Gentleman say what are those other methods by which the self-employed and others can set aside money with tax relief? Secondly, is not a permanent secretary on an income of, say, £12,000 to £15,000 a year able to set aside far greater sums in the public sector pension scheme than are allowed to ordinary people through life assurance policies?
    Mr. Sheldon: The hon. Gentleman must surely have heard of self-employed annuity policies, the allowances for which are being substantially increased this year to meet the very point that the hon. Gentleman makes.

    Government Borrowing
    Mr. Peter Morrisonasked the Chancellor of the Exchequer what was the amount that Her Majesty's Government borrowed in the year 1975–76, expressed in £ sterling per head of the population.
    The Chief Secretary to the Treasury (Mr. Joel Barnett): About £157, based
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    on the central Government borrowing requirement of £ 8·8 billion.
    Mr. Morrison: Is the right hon. Gentleman aware that most people will consider that a horrifying figure? Will he confirm that it is now more expensive for the taxpayer to fund the interest on the total borrowed than it is to fund the whole of the National Health Service?
    Mr. Barnett: If the hon. Gentleman will put down a Question on that subject, I shall be happy to deal with it. I say to the hon. Gentleman and the Opposition generally that they have never yet made a single proposal that would seriously reduce the borrowing requirement. What we have had is a series of generalisations about public expenditure cuts to be offset by specific tax reductions. We have never had a serious suggestion that would reduce the borrowing requirement.
    Mr. Crawford: Will the right hon. Gentleman tell the Chancellor of the Exchequer that he will not be able to rely for much longer on the revenues from Scottish oil as collateral for spendthrift borrowing?
    Mr. Barnett: I know about North Sea oil. We are not dependent on that for the borrowing requirement. The borrowing requirement will reduce in the coming years. That is our policy. In 1976–77 the Chancellor has deliberately left the borrowing requirement higher than we should like. But if we did what the Opposition have in mind—if they would spell it out—we should probably reduce the borrowing requirement but increase unemployment substantially.
    Mr. Watkinson: My hon. Friend has mentioned the fact that the borrowing requirement is perhaps higher than the Government would like it to be. Is he confident that in the upturn sufficient funds will be available, given the size of the borrowing requirement, to fund investment without recourse to printing money?
    Mr. Barnett: The answer is "Yes, certainly". This is precisely what we had in mind when we made the cuts in public expenditure programmes in the years after 1976–77. We are confident that there will be sufficient funds available for the crucial investment.
    Mr. Cormack: How can the right hon. Gentleman tell the House that for every family of four £ 600 a year is the sum involved, or more than that, and then justify the Government's grandiose nationalisation plans?
    Mr. Barnett: I am not too sure how the two parts of that question are relevant. There is no question—and the present Government have no intention of doing so in 1976–77—of taking the kind of generalised action about which we have heard from the Opposition. That would do the maximum possible harm economically, financially and industrially.

    Inflation
    Mr. Michael McNair-Wilsonasked the Chancellor of the Exchequer what is the current annual rate of inflation.
    The Chancellor of the Exchequer (Mr. Denis Healey): The Retail Price Index rose by 21·2 per cent. over the 12 months to March, the seventh successive month in which the year-on-year rate of inflation has fallen. The increase of 0·5 per cent. between February and March is the lowest monthly rise since August 1974. The figures for April will not be available until tomorrow, but I am confident that they will show that the year-on-year rate of inflation is continuing to decline.
    Mr. McNair-Wilson: What figure for inflation was used as the basis of the Chancellor's talks with the TUC? Was it sufficiently flexible to allow him to use the same figure that he had in his Budget estimation, despite the fact that wage rises in 1976–77 have been allowed to increase from 3 per cent., as then envisaged, to 4½ per cent?
    Mr. Healey: The hon. Gentleman will know that the result of the agreement between the Government and the TUC will be to reduce the rate of inflation by half once again during 1977. This is an agreement that has been welcomed universally throughout the world. Indeed, so far as I know, the only area from which it has received a sour, sullen and equivocal reception is the Opposition Front Bench.
    As to how far the agreement with the TUC affects the sums that I announced in my Budget Statement, we were assuming in the Budget Statement a rate of
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    wage increase next year of between 5 per cent. and 10 per cent. As the hon. Gentleman will now know, it is likely to be lower, at 4½ per cent., and the rate of wage inflation in Britain during the next wage round will be the lowest in the whole of the industrial world. That is why our achievement has been so widely welcomed, not only in this country but in Germany, the United States and throughout the industrial world.
    Mr. Cryer: Will my right hon. Friend reiterate his view that the 4½ per cent. agreement with the TUC is designed to combat inflation? Will he also tell the House how the 25 per cent. dividend allowance to ICI will convince the TUC of the validity of its sacrifice? Will he say, for example, whether he has a copper-bottomed guarantee from ICI that the money raised in its rights issue resulting from the dividend allowance will be used and invested in this country, and not siphoned abroad by this large multinational company?
    Mr. Healey: I am grateful for the support that I have received from my hon. Friend. It comes as a particular pleasure an hour or two after the National Executive of the National Union of Mineworkers has voted for the new policy by a substantial majority. I hope that we shall have congratulations from the sour Front Bench opposite on this as well. The Opposition are concealing their enthusiasm quite successfully.
    The rights issue by ICI yesterday is further proof that there is no obstacle whatever to industry's raising new money if it wishes to do so.
    Mr. David Howell: Is the Chancellor of the Exchequer aware that when he talks about economic miracles we cannot help recalling the economic miracle he achieved in October 1974 of reducing inflation to 8·4 per cent.? This is bound to be taken into account when assessing his latest rather extravagant claims.
    Has the Chancellor of the Exchequer also noticed Mr. Len Murray calling today for even tighter price control, bearing in mind that that means more loss of jobs and lower investment? Will he say what instructions he has received from the TUC on that matter?
    Mr. Healey: The House and the country will have noticed the grumpy and

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    trivial way in which the hon. Gentleman responds to a great national achievement. [Interruption]. As hon. Gentlemen are addressing me from recumbent positions I am unable to hear what is said. No doubt they will seek to catch your eye, Mr. Speaker, if they wish to make a substantial contribution.
    As I have said, the rate of inflation has been more than halved in the last year and it will be further halved in the coming year. I think that the British people would find it not amiss if Her Majesty's loyal Opposition were prepared to welcome this achievement, because this is an achievement by the British people as a whole and not just by the Labour Government.
    Mr. Adleyasked the Chancellor of the Exchequer what further consultations he intends to have with the TUC about the level of wage increases necessary to bring down the rate of inflation.
    Mr. Healey: I refer the hon. Member to the statement I made to the House on 5th May.
    Mr. Adley: Is the Chancellor of the Exchequer satisfied with the present ad hoc negotiating arrangements with the TUC and others, or does he feel that it would be in the long-term national interest for statutory machinery, such as an annual wage-salary budget, to be set up among the Government, the TUC and the CBI?
    Mr. Healey: My right hon. Friends and I have repeatedly made it clear that we do not believe that any statutory machinery is suitable for the regulation of wages. We believe that it is necessary for the Government, of whichever party, to discuss these problems with the leaders of the trade union movement and of the CBI to reach an agreement which is consonant with the nation's interest. I think that the hon. Gentleman will agree that it is a great deal easier for us to reach an achievement such as we reached last week—an achievement which has been universally welcomed both outside and inside this country, apart from the Opposition Front Bench—because we treat trade union representatives in these discussions as representative of their members. We do not take the view expressed by the Shadow Chancellor of
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    the Exchequer two days ago in this House that the agreement represents an
    "onslaught upon their standard of living and freedom generated and forced down the throats"
    —of the British people—
    "by ageing doctrinaire, prejudiced, Socialist trade union leaders."—[Official Report, 11th May 1976; Vol. 911, c. 375.]
    It would be helpful if the hon. Gentleman asked his right hon. Friend how he reconciled those disgraceful remarks with the very different words he read out in a speech yesterday.
    Mr. Lawson: Is the Chancellor of the Exchequer too smug to be aware that at the launching of the £6 limit at a Press conference on 11th July last year he gave a firm assurance that the next round of the pay policy would allow a widening of differentials? Why has he gone back on his word?
    Mr. Healey: First, I regard the hon. Gentleman as perhaps the leading expert in this House on smugness. But I think that he will recognise that, whereas last year we had a flat £6 limit for all salaries up to £8,500, the new agreement, which has been universally welcomed, except by the Opposition Front Bench, provides for a spread between £ 2 and £4, and the £4 is available at all levels of income.

    VAT Payments
    Mr. John Huntasked Mr. Chancellor of the Exchequer if he is satisfied with the wording of letters sent by Her Majesty's Customs and Excise to small traders whose VAT payments are alleged to be overdue.
    Mr. Robert Sheldon: Yes, Sir. These letters are formal demands for payment of VAT which are by regulation required to be made before distress may be levied to recover the tax.
    Mr. Hunt: Is the hon. Gentleman aware that one of my constituents received a peremptory and aggressive letter from the Orpington VAT office demanding immediate payment of £128 and threatening to levy distress upon his goods and chattels, when the tax had been paid in full five months earlier? Is this not another example of the way in which small traders are being needlessly harried? Will he remind these VAT

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    officials that they are public servants and that they ought to watch their language and their facts?
    Mr. Sheldon: Normally such a letter is sent after two and a half months beyond the time when the tax has become due, and usually when up to three reminders have been sent.>
    I am aware of the case that the hon. Gentleman has brought to the attention of the house, when five months after the tax had been paid a letter was sent. This was, of course, an unfortunate error, and no one would seek to deny that for a moment. But I believe it to be an isolated occurrence, and the Commissioner of Customs and Excise has apologised to the hon. Member in the way clearly required.
    Mr. Loyden: Is my hon. Friend aware of the effects that VAT is having on certain areas of amateur sport? Will the Financial Secretary see what relief can be given for the work usefully done locally by those who organise this type of venture, particularly for young people?
    Mr. Sheldon: I am aware of the problem that my hon. Friend has mentioned. There is a Question on the Order paper with which I hope to be dealing in due course.

    £ Sterling (Value)
    Mr. Ridleyasked the Chancellor of the Exchequer what has been the fall in the value of tthe £ sterling since 5th April 1976 in terms of the United States $.
    Mr. Healey: The sterling/dollar rate at the close last night was $1·8390 compared with $1·8675 at the close on 5th April.
    Mr. Ridley: Will the Chancellor of the Exchequer explain why the marvellous, superlative, miraculous, ecstatic deal which he has made with the TUC has resulted in a fall in the pound of 3 cents.? Could it be that the real problem is the borrowing requirement and that the deal is in fact irrelevant?
    Mr. Healey: The country will notice that the hon. Gentleman regards what has recently happened as a matter for a snigger, but I quote to him the words of the Deputy Governor of the German Bundesbank:
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    "The £ is now undervalued and Britain has an excellent chance for an export-led recovery … Over the last six to eight months the social consensus has been re-established in Great Britain between the Government and the trade unions. The social consensus is the decisive factor."
    As the Shadow Chancellor of the Exchequer has just held up German ways of handling these matters as a model for the United Kingdom, I hope that the hon. Gentleman will have the decency and patriotism to recognise the importance of this statement by the Deputy Governor of the German Central Bank.
    Mr. Molloy: Is my right hon. Friend aware that ordinary people, who have accepted the policies of the Government and have made massive sacrifices, are getting somewhat angry about these folk overseas, whoever they are, who seem to be able to influence and damage the pound and the nation, with the support of some members of the Conservative Opposition?
    Mr. Healey: I well understand the feeling of the British people about what is happening and their contempt for members of the Conservative Opposition who, in the hope of party political advantage, seek to damage our national interest.
    Mr. Nott: When the Chancellor of the Exchequer gets the parity of sterling and the rate of inflation back to the level at which they stood when he took office, he can begin to talk with some justification of a miracle and of being home and dry. So far the Chancellor of the Exchequer is only recovering the consequences of the social contract.
    Is the right hon. Gentleman aware that the way in which he deals with these queries at the Dispatch Box—in the manner of Mr. Brezhnev—and the bullying, hectoring attitude he adopts do not carrying any weight either in the House or in the country?
    Mr. Healey: I well understand the hon. Gentleman's interest in the minutiae of Soviet policies since his own party has been taken over by Conservative Trotskyites, but, since he mentioned sterling, I am bound to draw his attention to the fact that it was his own Government, when he was a Minister at the Treasury, who decided to float sterling in 1972, consequent upon which there was a heavy and rapid fall in its value.
    I draw the hon. Gentleman's attention further to the fact that, according to the

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    right hon. Member for Leeds, North-East (Sir K. Joseph), the inflation in the last two years was caused by the excessive increase in the money supply under the Treasury of which the hon. Member was a Minister in 1973, and that the attempt to make wages keep pace with prices, in spite of the change in import prices in 1974, was attributable wholly to the threshold agreements introduced by his right hon. Friend the then Conservative Prime Minister, under whom he was happy to serve.
    Mr. Cormack: On a point of order, Mr. Speaker.
    Mr. Speaker: After Questions, if the hon. Gentleman would be so kind.

    Public Sector Pay
    Mr. Peter Bottomleyasked the Chancellor of the Exchequer what increase in income tax would finance a 1 per cent. pay increase in the public sector.
    Mr. Joel Barnett: If a 1 per cent. pay increase in the public sector was financed wholly from income tax, this would require an increase of about one quarter of one penny in all rates of tax. In practice, of course, central Government revenue does not bear the whole cost of increases in pay in the public sector.
    Mr. Bottomley: Given that the increase in public and private sector pay is likely to be four times 1 per cent., will the right hon. Gentleman explain why this extra taxation burden will go on so many people who would be better off if they did not work, and why he did not use the funds which appeared to be available to raise child and family allowances, as proposed by the Child Poverty Action Group?
    Mr. Barnett: I find that question quite remarkable. If we had taken the advice of the Opposition, the pay deal would not have been remotely like the one we have obtained, and public sector pay would have been hugely increased, as would the tax burden.

    VAT (Cesspit Sewage Disposal)
    Mr. Michael Marshallasked the Chancellor of the Exchequer what revenue was raised from the 8 per cent.
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    rate of VAT on cesspit sewage disposal during the financial year 1975–76.
    Mr. Robert Sheldon: I regret this information is not available.
    Mr. Marshall: Does the hon. Gentleman accept that, whatever the figure may be, it is likely to be piffling in relation to the resentment felt at the bureaucratic incompetence that brings this particular charge to bear? Will the hon. Gentleman take this opportunity of agreeing to bring in a zero-rating charge level, which would be a fair move and could be recouped by a 10 per cent. rate of VAT, which we have urged for services generally?
    Mr. Sheldon: The hon. Gentleman talks about bureaucratic incompetence. This charge is an essential part of the 1972 Act, which was introduced by the previous Conservative Government. It was they who imposed this tax and the charge is a direct consequence of their measure. Any bureaucratic incompetence can be directly attributable to their action on that occasion.
    Mr. Marten: Will the hon. Gentleman confirm that the Scrutiny Committee was told the other day by officials from the EEC that last November the Government gave an undertaking to the EEC not to extend zero-rating? Was that so? If so, why was a statement not made to the House of Commons?
    Mr. Sheldon: I do not know where the hon. Gentleman gets his information. I can assure the hon. Gentleman that no commitment on zero-rating has been made. If he is thinking about cesspool treatment in the EEC, I can tell him that in that context there is a wide range of variation.
    Mr. Madelasked the Chancellor of the Exchequer how many representations he has had asking him to zero rate VAT on the collection and disposal of sewage from properties unconnected to main drainage.
    Mr. Robert Sheldon: About 15 since the beginning of the year.
    Mr. Madel: Is the hon. Gentleman aware that before the recent House of Lords decision on this matter, the sewage rate was zero-rated because rates themselves are zero-rated? Therefore, the loss of revenue argument cannot be used

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    if we zero-rate sewage collection from unconnected properties. Bearing in mind that gas, electricity and water are zero-rated, essential services for the home, why cannot the Government make this extension and zero-rate as suggested in the Question?
    Mr. Sheldon: The problem, which the hon. Gentleman may well understand, is that when a local authority is in competition with the private sector, it has to be treated in exactly the same way, and the private sector has the standard rate of value added tax applied to it.

    Tax Evasion
    Mr. MacGregorasked the Chancellor of the Exchequer what evidence he has of revenue lost each year both to Her Majesty's Customs and Excise and the Inland Revenue through evasion of tax.
    Mr. Robert Sheldon: It is impossible to make precise estimates of revenue lost through evasion which escapes detection.
    Mr. MacGregor: I recognise that, but does the hon. Gentleman agree that the Chairman of the Board of the Inland Revenue said in a recent interview that tax avoidance certainly and tax evasion probably were on the increase, and that it was the high marginal rates of tax—I would add high marginal rates for all taxpayers—that were causing it? Does the hon. Gentleman agree that it would be better for the Government to concentrate on reducing the marginal levels of tax and to spend rather less time on tax avoidance and evasion, which uses an enormous amount of unproductive labour on all sides which does not help the country?
    Mr. Sheldon: No one can dispute for a moment that high rates of tax are more profitable to the evader. That has always been so, and presumably it is always likely to be so. But that is no reason for our not being concerned with ensuring by appropriate measures that evasion is reduced to the minimum whenever the appropriate measures can be introduced.
    Mr. Cryer: Does my hon. Friend agree that the cost of tax evasion each year must run to millions of pounds? Will he contrast the concern of Conservative
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    Members about tax evaders with their savage attacks on the tiny number of people who abuse the social security system, and their attempts to bring an excellent welfare system into disrepute by their constantly repeated attacks?
    Mr. Sheldon: I must say that I totally agree with everything that my hon. Friend has just said. There is a need for a comparison between the ability of small limited sections of our community to evade their responsibility and the need, as my hon. Friend said, to get into perspective some of the abuses that take place on a smaller scale and involving much smaller amounts. I think that the need for balance should be recognised by the whole House.
    Mr. Alan Clark: The Minister's views on tax evasion are always of interest, but will he tell the House of his reaction to the practice of civil servants, or sabbatical civil servants, who express their own highly divisive opinions on this topic to the Press in interviews? I quote—
    Mr. Speaker: Order.
    Mr. Clark: He refers to "our boys" being granted an opportunity which has been denied them for so long and says that people who squeal are doing so only because they have something to hide. What are the hon. Gentleman's comments on the propriety of that?
    Mr. Sheldon: I must confess that I find it difficult to understand the burden of the hon. Gentleman's comments. However, if he will kindly let me have a copy, or, more appropriately, supply a copy to my hon. Friend the Minister of State, Civil Service Department, it will be looked at. The problem of evasion is one that the whole House must recognise. It is an obvious difficulty. We are faced with a need to reduce evasion and at the same time to maintain the liberties which we have held for so long. There is the problem of achieving the right sort of balance, bearing in mind the responsibilities that we all have.

    Value Added Tax
    Mr. Banksasked the Chancellor of the Exchequer what are the rates of VAT applicable now to burglar alarm equipment and installations.
    Mr. Robert Sheldon: They are 12½ per cent. in the case of burglar alarms which are of a kind suitable for domestic use: 8 per cent. in other cases.
    However, the professional installation of burglar alarm systems in the course of building construction or alteration is normally zero-rated.
    Mr. Banks: Will the hon. Gentleman admit that this is a classic example of the stupidity of multi-rate VAT, which creates confusion, frustration and paperwork, and hinders the work of the police in their campaign to prevent crime?
    Mr. Sheldon: I do not see this as a particular problem of multi-rate VAT. After all, before multi-rate VAT was introduced, such domestic installations were chargeable at the standard rate. I understand that Conservative Members are prepared to accept a standard rate. Some have said that it should be 122 per cent. and others that it should be 15 per cent., which would have been an even greater increase on the rate of VAT for burglar alarms. The Opposition should sort out their own inconsistencies.
    Mr. Jay: Does my hon. Friend regret as heartily as I do the introduction of VAT by the Conservative Government?
    Mr. Sheldon: I remind my right hon. Friend that this was a tax that I inherited, with all its problems and complexities. My duty is to implement the tax. My work would have been very much easier if I had not inherited such a difficult tax. If it had not been introduced I should have had a much easier load, which I should willingly have been able to bear.
    Mr. Anthony Grant: More seriously, regardless of what the position was in the past, in view of the considerable increase in crime, which these installations are intended to combat, will not the hon. Gentleman reconsider whether burglar alarms should be considered more luxurious than ice lollies?
    Mr. Sheldon: I must refute the impression that the higher rate of value added tax is for luxuries. Burglar alarms were always rated at the standard rate. When this batch of articles was looked at again, it naturally fell into the higher rate category. I am willing to receive representations from the hon. Gentleman on this matter, but I have looked at it before and
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    I find some of the problems rather more difficult than perhaps can be explained now. If the hon. Gentleman will agree to have further consultation by letter or by visit, I shall be happy to oblige him.

    Building Society Interest (Tax Assessments)
    Mr. Spriggsasked the Chancellor of the Exchequer why a person who has his tax deducted by a building society at the source for interest earned then receives two separate new assessments for the same interest in the current financial year, together with demands for respective payments and if he will make a statement.
    Mr. Robert Sheldon: Building society interest is treated as received after deduction of basic rate tax, and so an assessment is not generally necessary unless the investor is liable to higher rate tax or to the investment income surcharge. If my hon. Friend has any particular case in mind I will, of course, be happy to look into it if he will let me have details.
    Mr. Spriggs: I thank my hon. Friend for that offer and assure him that I shall let him have the details.
    Is my hon. Friend aware of the deep frustration and loss of confidence in the Inland Revenue because of its new assessments on figures which it already has from year to year? What does he propose to do about that?
    Mr. Sheldon: These arrangements between the building societies and the Inland Revenue have not generally caused serious problems. I shall take the opportunity of having discussions with my hon. Friend. We may be able to clear up the point that he has in mind.

    Exchange Controls (Commodity Markets)
    Mr. Hooleyasked the Chancellor of the Exchequer what action he proposes to take to strengthen exchange control rules especially in relation to dealings on commodity markets, including metals.
    Mr. Robert Sheldon: Certain aspects of exchange control, including dealings in the commodity markets, are currently under special scrutiny. If this should show that the rules need strengthening, the necessary changes will be made.
    Mr. Hooley: I welcome my hon. Friend's statement about special scrutiny. Is he aware that certain specialist journals in the United States have pointed out that the evasion of currency regulations and tax evasion are technically possible because of the methods used on the London Metal Exchange? Will he go carefully into that matter?
    Mr. Sheldon: I assure my hon. Friend that these matters are closely watched. As he may know, participants in these schemes submit monthly returns to the Bank of England. These returns can be scrutinised and, on the basis of those returns, further action can be and often is taken.
    Mr. Hooson: What is the value to the balance of payments of having the Metal Exchange in this country?
    Mr. Sheldon: About £100 million.
    Mr. Lipton: By whom is this special scrutiny being conducted? Is it only the Bank of England, the Treasury, or the police, or any two or all three of them?
    Mr. Sheldon: This scrutiny is undertaken by the Investigation Department of the Treasury, which employs officers for that purpose.

    TUC
    Mr. Atkinsonasked the Prime Minister what was the outcome of his last discussions with the TUC.
    The Prime Minister (Mr. James Callaghan): The agreement of the TUC General Council to make a recommendation to a special TUC conference next month about a further voluntary extension of incomes policy that will meet the Government's objective of ending next year with an inflation rate in line with our foreign competitors.
    Mr. Atkinson: Does the Prime Minister recollect his assurances to foreign holders of sterling that he did not foresee any expansion in the public sector as a means of overcoming the dreadful unemployment position in this country? Is he aware that the same foreign holders of sterling are now saying that British manufacturing industry is still overmanned and that, therefore, investment should not take place without a further fall in the value of the pound? How does he reconcile Labour Party policy of doing
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    all that it can to overcome the unemployment situation with these threats from foreign holders of sterling?
    The Prime Minister: I was referring to the levels of public expenditure, which have been a source of controversy between some of my hon. Friends and the Government for some time, but which were decided a few weeks ago, and not to anything else. Overmanning obviously varies industry by industry. It may be true of some industries, but it is not true of others.
    Mr. Henderson: Will the Prime Minister tell us when he expects to meet the STUC in Scotland? Like most other people in Scotland, it is anxiously waiting to hear what real measures the Government will introduce to deal with the horrifying unemployment situation.
    The Prime Minister: The Scottish TUC will be able to address me directly if it wishes to give me an invitation. I look forward to meeting the STUC, the Scottish Labour Party and, indeed, any other organisation which has anything to offer on this serious matter of unemployment in Scotland. I was very glad to see, and I am sure the hon. Gentleman welcomes the fact, that Govan Shipbuilders yesterday secured a very valuable order. That shows the competitiveness still of British shipbuilding.
    Mr. Speaker: Mr. Grimond.
    Hon. Members: Hear, hear.
    Mr. Grimond: May I ask whether the Prime Minister has registered this scene of enthusiasm for Liberal policy? Has he received any indications that productive investment may now increase?
    The Prime Minister: I should like, on behalf of a great many Members, to congratulate the right hon. Gentleman on his bed of thorns. We recognise that he is taking on the leadership of the Liberal Party out of a sense of public responsibility and duty, but I hope that he will get some enjoyment out of it while he is doing it. [Interruption.] The House should not be so cynical. I really hope he does. As to Liberal policy, when I see the right hon. Gentleman leading the party, I think that the wrapping is very attractive, but I am not sure about the contents.

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    On the levels of public and private investment, I think that the CBI's most recent survey of intentions shows that there is a returning confidence in British industry about the need to invest. I hope that is true. Government policy must be to encourage it in every possible way.
    Mr. Kilroy-Silk: Does the Prime Minister recall that he has spoken a great deal about the need for increased profitability in order to obtain increased investment? But even when there were high levels of profit, this did not invariably mean that they went into increased investment, job creation, or to regions such as Merseyside. If we are to have higher profits in future, we need more public means of controlling them to ensure that they go into socially desirable objectives.
    The Prime Minister: My hon. Friend points to a dilemma. Although high profits do not necessarily lead to high investment levels, the corollary is true also. Profitability in a number of industries at present is not sufficient, assuming the will is there, to enable proper reinvestment or investment at current prices to take place. Therefore, it is essential that there must be an improvement in the rate of profitability. We must go on working at this. In a nutshell the situation is this—today's profits must be tomorrow's jobs. If there are no profits, there will be no jobs.
    Mrs. Thatcher: Now that the Government have introduced a special incentive to encourage investment, as in the case of ICI, will the Prime Minister tell the TUC whether it would be appropriate also to consider introducing a special incentive in pay to encourage productivity and to deal with the difficult problem of differentials?
    The Prime Minister: The House is very good at pointing out some of the dilemmas of Government. The Leader of the Opposition has just touched on another. There is a general recognition that pay settlements of this year's nature or last year's nature will lead to difficulties later. The question of differentials will be very difficult to solve, as is the fact that the new rates have not been consolidated in the basic rates. But that is no reason for trying to destroy the
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    advances which are being made in this direction and which are having a substantial impact on our economy now.
    Mrs. Thatcher: I am not trying to destroy anything. I am trying to say that there will be very considerable difficulties with differentials. Already there has been a suggestion that there should be power cuts to enforce differentials, or so it was reported in the Press. Is the Prime Minister to continue to ignore this, or, as he has allowed a special case for investment, will he allow a special case in pay?
    The Prime Minister: I was not aware of the right hon. Lady's enthusiasm for the TUC's recommendations. As far as I can see, she seems to be damning them with faint praise. If she is in favour of them, I welcome that. What is needed over the next 12 months—which will be difficult when working people find that their standard of living has been reduced—is a common understanding of the reasons which have led to this situation. I hope that the right hon. Lady will lend her authority in support of the Government on this matter.
    On the question of whether the trade unions should exercise their power in the way the right hon. Lady envisages, all I can say is that it would be totally against the national interest, and the long-term interests of the men themselves. I hope that the right hon. Lady will not at any time make it appear to these men that their grievance is of such a character that they are entitled to wreck the whole scheme. I do not believe that is her intention, and I hope that she will make it absolutely clear that it is not.

    BEXLEYHEATH
    Mr. Townsendasked the Prime Minister if he will pay an official visit to Bexleyheath.
    The Prime Minister: I have at present no plans to do so.
    Mr. Townsend: Will the Prime Minister come and have a fatherly word with the Bexleyheath Labour Party? Having opposed Britain's entry into Europe and his election as leader of the Labour Party, the Bexleyheath Labour Party is now opposing the Government's belated expenditure restraints, claiming that they are contrary to the party manifesto.
    The Prime Minister: I would sooner hear the views of the Bexleyheath Labour Party direct than through the mouth of the hon. Gentleman. I fancy that he has plenty of troubles of his own without concerning himself with anyone else's.
    Mr. Madden: Whether the Prime Minister goes to Bexleyheath or anywhere else, he will find that many working people have a great resentment of golden handshakes, which are being paid by private companies to more and more directors. Private companies would have more profits to invest if they paid out less in golden handshakes to directors.
    The Prime Minister: I agree with my hon. Friend. I am sure that this creates a great deal of resentment. On the matter of differentials, we must make sure that energy, enterprise and responsibility are properly rewarded—[Interruption.] Hon. Members opposite cheer, but I do not think that in matters of golden handshakes they have anything at all to cheer about. They and some of their followers have been some of the exemplars of golden handshakes. There is a difference between my hon. Friend's criticism and rewarding responsibility as it should be rewarded.
    Mr. Maxwell-Hyslop: If the Prime Minister is not visiting Bexleyheath, will he pay an official visit to the House of Commons to answer Questions as First Lord of the Treasury on Treasury matters at a time when financial policy is crucial to this country, instead of leaving it to one of his junior Ministers—the Chancellor of the Exchequer?
    The Prime Minister: The intellectual stature and stamina shown by the Chancellor in the recent negotiations deserve the praise of everyone.

    RABIES
    Miss Fookesasked the Prime Minister if he is satisfied with the coordination between the Ministry of Agriculture, Fisheries and Food, the Department of the Environment and the Home Office in moves to combat the spread of rabies to Great Britain.
    Mr. Alan Clarkasked the Prime Minister if he is satisfied with the co-ordination between the Ministry of Agri-
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    culture, Fisheries and Food, the Department of the Environment and the Home Office in combating the threat of rabies spreading to the United Kingdom.
    Mr. Adleyasked the Prime Minister if he is satisfied with the co-ordination between the Ministry of Agriculture, Fisheries and Food, the Home Office and the Department of the Environment in moves to control the entry of rabies into Great Britain.
    The Prime Minister: Yes. There is close co-ordination among all the Departments concerned in the campaign against rabies, and among central Government, local and port authorities, and the police.
    Miss Fookes: Will the Prime Minister consider the possibility of introducing more severe legislation against those who smuggle animals, possibly the destruction of the pets concerned?
    The Prime Minister: I welcome the hon. Lady's concern about this matter. This country has been fortunate to be spared for so many years from this dreadful disease. It is a disease which the country is taking seriously. I should be grateful if the hon. Lady would put Questions about legislation to the Minister of Agriculture, who is better informed about the details than I am.
    Mr. Faulds: Is the Prime Minister satisfied with the promptitude and efficiency of the monitoring of this disease through Europe as it sweeps towards our coast?
    The Prime Minister: I shall draw that to the attention of the Minister of Agriculture. While we have a group of such efficient Ministers, I do not master every detail of every Department.
    Mr. Adley: Is the Prime Minister aware that a group of 12 hon. Members have been waiting for over a week while the Home Office and the Ministry of Agriculture decide between them who should receive a deputation on this matter? This is at a time when the nation faces the threat of this disease with a police force which does not have powers to arrest people who are suspected of illegally importing animals. It does not even have powers to seize such animals. Will the Prime Minister give that his urgent personal attention?
    The Prime Minister: I will inform the Minister of Agriculture and the Home Secretary of what the hon. Member for Christchurch and Lymington (Mr. Adley) has said. I cannot have groups of efficient Ministers and then undertake to do all these things myself.
    That seems to be one of the disabilities of Prime Minister's Questions. They roam over a great many matters with which I am supposed to be dealing. [Interruption.] I ask the House to take this seriously, I want Prime Minister's Questions to be serious and I undertake to give serious answers, but I find time and again that I am asked questions which simply do not arise out of the original Question on the Order Paper. I admit that this one does, but I am talking about the generality of questions. If the House could find some way in which these Questions could be more accurately directed, I would undertake to give better answers.
    Mr. Hooson: Is the Prime Minister aware that Continental experience shows that foxes are the main instruments for distributing this disease? Since, for example, in Wales last year between 7,000 and 8,000 foxes were destroyed by fox destruction societies, will he satisfy himself that the Ministry of Agriculture has tied up the problem of the control of foxes and rabies in our areas?
    The Prime Minister: I am obliged to the hon. and learned Gentleman for calling my attention to this matter. I shall see that the attention of my right hon. Friend the Minister of Agriculture is directed towards it.
    Mr. Adley: In view of the unsatisfactory nature of the answer, I beg to give notice that I shall seek leave to raise the matter on the Adjournment.

BUSINESS OF THE HOUSE
Mrs. Thatcher: Will the Leader of the House tell us the business for next week, please?
The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): The business for next week will be as follows:
MONDAY 17th May—Progress in Committee on the Finance Bill.
TUESDAY 18th May—Supply [21st Allotted Day]: there will be a debate on the sale of council and new town houses to tenants, which will arise on an Opposition motion.
At seven o'clock, the Chairman of Ways and Means has named opposed Private Business for consideration.
Motion on the Counter-Inflation (Price Code) (Amendment) (No. 2) Order.
WEDNESDAY 19th May—Supply [22nd Allotted Day]: debate on an Opposition motion on nationalisation.
A debate on the procedures for handling EEC documents with particular reference to skimmed milk.
THURSDAY 20th May—Remaining stages of the Police Bill.
Motion on the Family Income Supplements (Computation) Regulations.
FRIDAY 21st May—Bills.
MONDAY 24th May motions until seven o'clock.
Afterwards, it is expected that opposed Private Business will be named for consideration.
The House will wish to know, Mr. Speaker, that, subject to progress of business, it will be proposed that the House should rise for the Whitsun Adjournment on Friday 28th May until Monday 7th June.
Mrs. Thatcher: Will the Leader of the House consider the position of Thursday's business when we are to deal with the Police Bill and a motion on family income supplements? The Police Bill has been substantially changed and further changes are in prospect in amendments which have already been tabled. As the Bill is so different from that which went upstairs, may we not have a half-day's debate on the new Bill before proceeding to Report stage on the Floor of the House and take the rest of the day for a longer debate on family income supplements?
May I ask about the form of the motion for the skimmed milk debate and whether the Government will be making their position clear at the beginning of that debate?
Mr. Foot: On the second question, the Government will make a statement at the beginning of the debate. We were proposing that the debate should take place on an Adjournment motion. I think that that would be the most satisfactory way to cover all the different aspects of the problem.
On the suggested rearrangement of the business for Thursday, I doubt whether we could do what the right hon. Lady suggested. If she is concerned about the progress we may make on the family income supplements regulations, she should wait and see how we get on with the Police Bill. I hope that we shall be able to proceed with that Bill in the way I have suggested.
Mr. Heffer: Will my right hon. Friend indicate to the House what is now likely to be the position of the Hare Coursing Bill in view of the decision of the Select Committee in another place against the Government's Bill? It suggests an alternative Bill. What is the Government's position now, and what can this House do about the matter?
Mr. Foot: I appreciate my hon. Friend's special concern on the matter. He has proposed this question on a number of occasions and he played a leading part when the Bill passed through the House of Commons. Although we have had a report from the other place, we have not seen the evidence, and we should look at that. I agree, however, that many of my hon. Friends will wish to see how we can return to this subject, and I am meeting some of them very soon to consider that.
Mr. Lawson: Will there be a White Paper on the second stage of the Government's rigid and inflexible pay policy? Whether there is or not, may we have an opportunity in Government time before the TUC special conference to debate this matter?
Mr. Foot: I do not accept the hon. Member's description of the policy. We have not yet decided whether there will be a White Paper, although that is a probability. As I indicated last week, there will be a number of occasions on which the House will be able to debate the various aspects of this policy.
Mr. Blenkinsop: When are we to get a White, Green or any other Paper on
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devolution as it affects England, and when are we to have a debate on that?
Mr. Foot: I do not know about the colour of any kind of paper, but the Government will be seeking to make fresh statements on the progress with devolution. We wish that to be as speedy as possible, and I hope that we shall be making a statement on the subject in the fairly near future.
Mrs. Bain: In view of the rising disquiet and disillusionment among newly-qualified teachers from Scottish colleges who are joining the ever-increasing dole queues in Scotland, may we have a full debate on this subject before the recess?
Mr. Foot: I cannot promise the hon. Lady a full debate on this subject. I appreciate her anxiety about it and I have no doubt that many other hon. Members will be wishing to raise it in various ways.
Mr. Spearing: Is my right hon. Friend aware that, irrespective of the views of hon. Members about the Community, there is grave dissatisfaction with the procedures adopted last September for scrutiny of EEC documents? Although the motion for next Wednesday's debate may be for the Adjournment, the House might proceed to suggest new Standing Orders related specifically to European legislation. Does my right hon. Friend suggest that this debate should take one and a half hours or three hours? I believe that the House would prefer to have three hours.
Mr. Foot: I suggest one and a half hours for the debate, but there will be an opportunity, as I have mentioned before, for a debate a little later on EEC matters generally. The Select Committee on this subject is issuing a report very soon with suggestions and comments on the way in which the procedure works. I know that there is concern in many parts of the House on this score and that we have to make improvements. The next stage of considering them could advantageously be discussed in the debate next week.
Mr. Sims: Will the Leader of the House reconsider the reply that he gave to my right hon. Friend the Leader of the Opposition about proceedings on the

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Police Bill? Quite apart from the Opposition amendments, many Government and Labour Back Bench amendments have been tabled. The time allocated to this important Bill will be insufficient.
Mr. Foot: I do not minimise the importance of the Bill or the pressure from various parts of the House for amendments. I think, however, that a considerable amount of time will be available, and the House should see how it gets on next Thursday. I hope that we shall make good progress.
Mr. Kilroy-Silk: When will the White Paper on the report of the Expenditure Committee on children in prison be published? Can my right hon. Friend find time for a short debate on the Statutory Instrument on prison rules and the amendment of them as they apply to prisoners' mail?
Mr. Foot: I cannot say when the second matter can be debated, although I shall have a look at it. I shall try to let my hon. Friend know when the White Paper on the subject is to be published.
Mr. Aitken: Does the right hon. Gentleman appreciate that a number of consultative documents related to the Police Bill are to be published and that these will need a substantial amount of debate? This whole Bill is so completely altered in character and there have been so many Government amendments that the Leader of the House must understand the concern which exists, before we embark upon this momentous Bill, for much more time to be allocated to it.
Mr. Foot: I understand the concern being expressed in different parts of the House, but I believe that we have allotted a sensible amount of time. We shall have to see how the debate goes and to assess the position then. There has been considerable time in Committee devoted to discussing these matters.
Mr. Spriggs: A large majority of hon. Members have already taken the decision to abolish hare coursing in this country. What steps will my right hon. Friend take, at an early date, to see that the wishes of this House are respected by another place?
Mr. Foot: I understand fully the views expressed on this subject. I have under-
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taken to look at the report from another place and the evidence on which it was based and to have discussions with some of those especially interested in the Bill to see what response we should make from this House. That is the best I can say at the moment, but I appreciate the concern of many hon. Members who voted for the Bill in this House and their desire to see it translated into action.
Mr. David Steel: When shall we hear more about the Government's plans for devolution to Scotland and Wales? Are we to get a White Paper, a Bill or two Bills and when?
Mr. Foot: I hope to be able to make a statement on this subject at an early date, though I do not want to be tied down to a precise timing. I fully appreciate the desire of the hon. Member and others for a statement at the earliest possible moment. That is also the desire of the Government, and we are seeking to bring it forward in the best way we can.
Mr. Cryer: Following the remarks of my hon. Friends the Members for Liverpool, Walton (Mr. Heller) and St. Helens (Mr. Spriggs), does my right hon. Friend not agree that it is not just a question of the Hare Coursing Bill? Does he not recall that the House of Lords blocked the Trade Union and Labour Relations (Amendment) Bill for a long time? Hon. Members have asked for a debate on the need, or lack of it, for the House of Lords on several occasions and have been told that a long cool look is being taken at the subject. Is it not time to stop looking and have a debate about abolishing the place?
Mr. Foot: I am sorry to disappoint my hon. Friend, but I am afraid that we shall not be able to abolish the House of Lords next week. We shall have to look at this matter on a somewhat longer time scale.
Mr. Maxwell-Hyslop: As millions of families living in council houses long to own those houses and scarcely any care whether the Police Bill passes into law, will the Leader of the House ensure that a full day is given to the debate on tenants' ownership of council houses at the expense of the Police Bill, which matters nothing to the people of this country?
Mr. Foot: The length of time for discussing the sale of council houses was chosen by the Opposition. I cannot say that we should cut down the amount of time devoted to the Police Bill, particularly when so many of the hon. Member's hon. Friends are urging that I should give more time for it.
Mr. Molloy: This House quite properly has debates on the problems of Wales, Scotland and the regions of England, but, for some reason, debates on Greater London are excluded. Will my right hon. Friend do his best to ensure that the problems of Greater London are given some consideration on the Floor of the House in the same way as the problems of Wales, Scotland and other regions?
Mr. Foot: There are pressures from all sides for various debates, but I do not think that it is the case that there are no debates on Greater London. If that were the case, I have no doubt that my hon. Friend would be taking the lead in rectifying the situation. There are occasions when London matters are discussed as fully as any other subjects.
Mr. Peyton: When does the Leader of the House intend that we should have an opportunity to debate that rather odd and romantic document on transport which the Government have produced? We are all fascinated to discover what will be the next chapter in the Government's thinking on this subject. What are the Government's intentions on the motion in the name of the Liberal Chief Whip about the Committee of Selection? At present, the Government's intentions seem shrouded in mystery.
Mr. Foot: On the right hon. Gentleman's first question, I appreciate his eagerness to discuss Government policies at all times. I hope he will have the opportunity of discussing this policy fairly soon, though I cannot promise a debate immediately.
On his second question, I have had some correspondence with the Liberal Chief Whip and other hon. Members and I was hoping that these consultations would have been completed by now and that we could proceed in the way I had suggested with the matter being referred to the Committee on Procedure for a speedy report. This would deal
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with the matter in the best way possible. I hope that this course will be agreeable to the House. If so, I am prepared to put down that motion immediately and to ask the Committee on Procedure to report urgently.
Mr. Peyton: Does not the Leader of the House agree that referring the matter to the Committee on Procedure when all the facts are clear might be more expensive in terms of time than revealing in terms of information?
Mr. Foot: I do not believe that the motion is the best way of dealing with the matter. It would involve some difficult problems. If we accepted the motion, the Government would be in a minority in Committees.
Mr. Maxwell-Hyslop: They are in the House.
Mr. Foot: But that is not the proposition put by the Opposition in this matter. That may be the hon. Member's view on how we should proceed, but it is certainly not our view. There are some problems involved, and I think that it is better that the Committee on Procedure should prepare a report. I am not suggesting this as a delaying procedure but as the most satisfactory way of getting the swiftest answer for the House.
Mr. Beith: While I recognise the good will implicit in what the Leader of the House has said, does he not feel that the objections are so small that they could be dealt with in a short time in a debate in the House? Has he recognised that five minority parties are signatories to the motion?
Mr. Foot: I recognise the strength of feeling of minority parties on the subject, but I would like to get agreement in all quarters, and I believe that my suggestion offers the swiftest way of securing that. I am not excluding other ways, but I think that we shall get a speedy answer if we follow my suggestion.
Mr. Edward Lyons: In view of the current widespread unease about the reliability of identification in certain recent cases, would my right hon. Friend consider a debate on the Devlin Report on identification evidence in criminal cases?
Mr. Foot: I appreciate the feelings expressed on this subject. My right hon. Friend the Home Secretary has answered questions on a previous occasion. I am not saying that we can have a separate debate on the subject, but my right hon. Friend is giving the fullest consideration to the report.
Mr. Stokes: Will the House have an early opportunity to discuss the immigration of Indians from East Africa into this country, which is causing increasing anxiety?
Mr. Foot: I cannot offer the prospect of an early debate on this subject, but there are methods by which the matter can be raised in the House.
Mr. Sandelson: Will my right hon. Friend provide an early opportunity for a debate on the Blennerhassett Report on drinking and driving?
Mr. Foot: I cannot make an immediate offer. We shall be rising for the Whitsun Recess at a fairly early stage and I cannot promise time for any major debates before the recess, beyond those that I have already indicated.
Mr. Burden: Will the right hon. Gentleman discuss with the Home Secretary the possibility of making available to the House information on the number of animals sent abroad for vivisection and the countries to which they go? That information is not currently available, and I understand that this is a growing trade. Hon. Members and the public should know what is happening.
Mr. Foot: The information is certainly not available to me at the moment. However, I shall see whether it can be made available and the best way in which a report on the subject can be made to the House.
Mr. Kershaw: Will the Leader of the House say whether we shall have a debate on the Royal Air Force before the recess?
Mr. Foot: I hope to be able to arrange the debate on the Royal Air Force soon after the Whitsun Recess. I am afraid that I cannot promise it before.
Mr. Luce: In the light of the recent UNCTAD conference in Nairobi, will the right hon. Gentleman arrange for an early
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debate on relations between the developed and the underdeveloped world?
Mr. Foot: This is an extremely important subject. Once again, however, I am afraid that I cannot promise a debate in the period immediately ahead of us.
Mr. Wiggin: Now that the right hon. Gentleman has decided on the Whitsun Recess, presumably he will be considering the Government's programme for the summer. Will he bear in mind that not only hon. Members but peers, staff, civil servants and others have children whose school holidays no longer coincide with the Summer Recess and that, if the House rose in early July, many of us would be very glad to come back in September to make up the lost time and thus unite many families which now are unnecessarily divided?
Mr. Foot: There is a case along the lines that the hon. Gentleman suggests. and it will he taken into account by the Government in trying to fix the programme. How far we can succeed depends not only on what the Government decide but on others and on how we proceed with our business. But it is a factor which the Government will take into account.
Dr. Glyn: Will the Leader of the House consider arranging for a debate on the Council of Europe and WEU, as distinct from a general debate on foreign affairs?
Mr. Foot.Again I cannot promise that in the near future, although associated subjects will arise on one of the EEC debates. But it is very difficult to arrange debates on all these subjects, as I am sure the hon. Gentleman appreciates.
Mr. Marten: Will the Leader of the House yield to the increasing demand from both sides of the House for a short debate and a vote so that we can eliminate this eviscerated chicken nonsense—and in Government time?
Mr. Foot: I am not sure that we could eviscerate the subject by a simple vote. That is one of the troubles. Part of the evisceration of this House took place earlier and, therefore, it is not an easy matter to deal with just by a vote. But I shall see whether an opportunity can be provided for a discussion, although I cannot promise the hon. Gentleman that

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we can rectify the position solely by a vote.
Lord James Douglas-Hamilton: Will the right hon. Gentleman consider allowing time for a debate on the subject of the many millions of pounds going to Mozambique?
Mr. Foot: I do not think that that is a subject for which time can be found in the near future. The Government were carrying out an obligation of which the House had been already made fully aware. We have discussed on many occasions the action taken about Rhodesia, and what the Government did was to carry out faithfully the policy which we had described to the House on numerous occasions.

SERJEANT AT ARMS (RETIREMENT)
Mr. Speaker: I have to inform the House that I have received a letter from the Serjeant at Arms in the following terms:
"Dear Mr. Speaker,
As discussed with your predecessor several months ago, and yourself more recently, I have the honour to make application that you will now be pleased to sanction my retirement on 1st August 1976 from my office by Patent of Her Majesty's Serjeant at Arms attending the Speaker of the House of Commons.
I am now over 65 years old and I feel that the time has arrived when it is appropriate that I should be relieved of my appointment, which I have had the honour to hold since 1962. I make this request with much regret.
I am deeply conscious not only of the great privilege I have had of serving here as Serjeant at Arms and Housekeeper but also of the friendliness and understanding which has been shown to me by Members in all quarters of the House, and which has greatly helped me in my job."
The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): I am sure that the whole House will have heard with regret of the decision of the Serjeant at Arms to offer his resignation. We shall have an opportunity to express our thanks as a House to Rear-Admiral Sir Alexander Gordon Lennox at a later date, when an appropriate motion will be tabled. I therefore propose that we should reserve our expressions of appreciation until that time.
Mrs. Thatcher: I am glad that we are to have an opportunity later to say "Thank you". But perhaps we might now express our appreciation of the years of devoted and distinguished service which the Serjeant at Arms has given to us in the House of Commons.
Mr. Mellish: I am sure that we all wish the Serjeant at Arms well. May I ask who gets his job?
Mr. Speaker: An announcement is being made from Buckingham Palace as I am addressing the House now—
Mr. Mellish: Oh!
Mr. Speaker: —and it will be the Deputy Serjeant at Arms, Lieutenant-Colonel Thorne.
Hon. Members: Hear, hear.
Mr. Mellish: With respect, I thought that this had been discussed before and that it was decided to be a matter for the House of Commons. I am delighted to hear that at long last a deputy is to get the job. It is extremely rare for deputies to get any jobs. But I thought that we ourselves had a measure of control. It is about time that appointments of this kind came under the control of the House.
Mr. Speaker: May I say, first, on the subject of deputies getting jobs, that I am in favour of that system myself.
May I say, secondly, that there has been the consultation which was agreed on a previous occasion. There has been consultation with this House, and the Palace has acted on advice from this House.

RIDGEBACKS CRICKET CLUB (RHODESIA)
Mr. Gow: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration. namely,
"the letter dated 11th May 1976 from the Minister for Sport to the Secretary of the Cricket Council received by the Secretary this morning requesting that he should use his influence to stop the forthcoming tour of the Ridgebacks Cricket Club from Rhodesia—a tour due to start on Saturday, 15th May."
This is a specific matter because this tour of Britain by a Rhodesian cricket team is due to begin on Saturday.

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It is an important matter for two reasons. It is important because we need to establish whether we have government by request or government by the rule of law. It is important, too, because these cricketers are British subjects coming from a British Colony to Britain for a purpose which is not only lawful but also highly commendable, namely, to engage in the game of cricket.
There is the third element on which I have to satisfy you, Mr. Speaker. Is it an urgent matter? I submit that it is urgent, because the letter from the Minister for Sport was received by the secretary this morning, only 48 hours before this cricket tour, which has been arranged for months, is due to begin.
It is very important that the House should have an opportunity to debate now the request by the Minister to the supreme governing body of cricket in this country that the tour should be called off at such short notice.
For these reasons, I submit that this is a proper matter which should be discussed by this House and which should be given priority over this disreputable Finance Bill.
Mr. Speaker: The hon. Member for Eastbourne (Mr. Gow) asks leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
"the letter dated 11th March, 1976 from the Minister for Sport to the Secretary of the Cricket Council requesting him to use his influence to stop the forthcoming tour of Britain by a cricket team from Rhodesia."
As the House knows, under Standing Order No. 9 I am directed to take account of the several factors set out in the Order, but to give no reason for my decision.
I have given careful consideration to the representations which the hon. Gentleman has made, but I have to rule that his submission does not fall within the provisions of the Standing Order and, therefore, I cannot submit his application to the House.

ORDERS OF THE DAY

  FINANCE BILL
  (Clauses 14, 21, 24, 26, 27, 48, 52 and 64; new clauses relating to capital gains tax)
  Considered in Committee [Progress 11th May].
  [Mr. BRYANT GODMAN IRVINE in the Chair]

Clause 26

  ALTERATION OF PERSONAL RELIEFS
  4.1 p.m.
  Mr. Tony Newton: I beg to move Amendment No. 46, page 15, line 8, leave out £1,555, £1,010' and insert £1,600, £1,060 '.
  The Deputy Chairman: With this we shall also take the following Amendments:
  No. 47, in page 15, line 8, leave out £1,555, £1,010 and £3,250' and insert £1,620, £1,040 and £3,375'.
  No. 91, in page 15, line 8, at end insert:
  'and £1,865, £1,210 and £3,600, respectively, in cases where the individual concerned is aged over 70'.
  Mr. Newton: I shall come to the details of the figures in a moment but perhaps I might first of all say that I think this is a very important amendment in justice to many of the older people in our country, and I am particularly pleased that the Front Bench on this side of the House have added their support to it.
  The amendment seeks to raise the age allowance for people over 65—the special fixed allowance which gives them an additional slice of income over and above the rest of us which is exempt from tax. This allowance was introduced last year and we on this side of the House welcomed it very much, having pressed very hard for it in the previous year.
  The figures I have put into the amendment were not just plucked out of thin air. Equally, they were not born out of any kind of general good will towards the older part of the population or out of soft-heartedness, although I for one would not mind being charged with either

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  in relation to the over-65s. Nor is this an inexation amendment of the kind with which we have become fairly familiar in our debates on the Finance Bill over the past year or two.
  What the figures seek to do is remedy what is a clear injustice in the Budget proposals in so far as they affect retired people. I should like to take a moment or two to comment that it seems to me that one of the least remarked features of the Government's actions and some of the Government's financial, economic and social policy is the extent to which they have involved a number of what I would call confidence tricks on many retired people. Some of those have been carried out by neglect—for example, the failure to raise the extra slice of retired people's income which is exempt from the full rate of investment income surcharge. The failure to do anything about that at a time when prices are rising so fast means that the real burden on many old people has been increased.
  But some of those confidence tricks have been carried out by who I can only call, for want of a better phrase and without being too rude, sleight of hand. In the Chancellor's Budget speech, in his remarks about pensioners and retired people, the pensions increase was announced in terms that implied that it was an act of wholly unparalleled generosity. It was only when people started to look at the small print that they found that the formula for the pensions increase, far from containing any element of generosity, succeeded in not compensating old people for the rise in prices in the past for which they had every reason to expect to be compensated. I hope that the Government will pay a proper political price for that piece of what can only be regarded as cheating.
  But the Budget and the Finance Bill themselves contain another piece of action, or inaction, which in my view is closely parallel to that, and that is the feature which this amendment concerns. I am referring to the failure to increase the old-age allowance, that slice which is exempt from tax, by the same amount as the pension itself has been increased, because the effect of that undoubtedly will be to increase the tax on many retired people.
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  In these two respects, what was done over the pensions increase and what is proposed over the tax allowance increase, the Chancellor seems to me to have presented us with a new and rather discreditable version of the iron fist in the velvet glove. Lest anyone think I am exaggerating, I should like to quote what the right hon. Gentleman the Chancellor of the Exchequer said about the age allowance in his Budget speech:
  "I propose to increase the age allowance for single people by £ 60 to £ 1,010 and for married people by £ 130 to £ 1,555 and also to raise the ceiling for the allowance by £ 250 to € 3,250. These increased allowances will be substantially above the rates of retirement pension which will be payable after the up-rating in November, and this will enable old people to continue to supplement their pension without paying tax."—[0fficill Report. 6th April, 1976; Vol. 909, c. 274.]
  The only normal interpretation of these words and that paragraph would be that something generous was being done in respect of retired people. But in fact, because the tax allowance is going up by significantly less than the pension increase, many old people will pay additional tax.
  Let me just spell out the figures. A married couple's pension is going up by £3·30 per week, which on my arithmetic is £171 per year, but the age allowance is going up by only £130 per year. This means that on any additional earnings, any additional pension or any additional savings income which these old people have, there will be tax now falling on £40 that was previously untaxed.
  In the case of single people the figures are an increase in pension of £2 per week, making £104 per year, with an increase of only £60 in the tax exempt allowance. Again there is a sum of additional earnings, additional pension or additional savings income which will fall to be taxed and which would not otherwise have been taxed.
  The only purpose of my amendment is to raise these new proposed figures for the tax allowances by an amount which would mean that at least there would be no additional tax payable as a result of the proposed increase in the pension. That is, if anything, a very modest proposal, because of course it would do nothing whatever to give retired people over 65 any additional help in respect of extra earnings, extra pensions or extra

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  savings income at a time when many of them have been hard hit by inflation.
  Let me make one other thing clear, having made clear the basic purpose and figures of the amendment. The consequence of my amendment not being accepted will be that many retired people, far from getting a benefit from the tax proposals in this Budget, will pay additional tax. If they have any significant amount of additional earnings, any significant amount of savings income, any significant amount of additional pension over and above the national insurance pension, they will find themselves paying additional tax. It will be tax on these additional things, but to many of them it will appear to be a direct tax clawback from the pension increase which they have allegedly been given. That will be seen—rightly, I believe—as an act of meanness and ungenerosity on the part of the Chancellor.
  As an aside, I might observe that this problem will be even worse because of what the Government are proposing to do about the earnings rule and the quite disgraceful way in which they have said that it is the intention to go back on proposals accepted by this House last year for phasing out the earnings rule. We can do nothing about the earnings rule in this Bill, and of course my amendment will not resolve that problem, but it will at least help to avoid the problem being even worse in respect of those elderly and retired people who have earnings over and above their pensions. This is a modest amendment. It does nothing to improve the position of retired people, except in the sense that it seeks to prevent the Chancellor from taking additional tax from them.
  Let me say a few words about the cost of the amendment. I have not been able to carry out a calculation in detail, and no doubt the Financial Secretary will give the House the actual cost, which must be fairly substantial. However, I deduce from the figures given in the Budget speech that the Government's own proposals will cost about £70 million. Any additional cost arising from my amendment must be a good deal less than that, but will certainly be more than a few million.
  If the Financial Secretary wishes to argue about the cost, I shall seek to put two matters to him. First, when the
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  Chancellor in the Budget speech spoke about negotiations with the TUC on a pay deal, the Chancellor was prepared to leave himself about £700 million as room for a manoeuvre. That may be right or wrong, but I am saying that since the Chancellor can allow £700 million worth of leeway to deal with the TUC, surely he can allow less than a tenth of that amount of leeway in doing justice to retired people.
  The second point I wish to emphasise is that my proposal does not mean a tax reduction for old people, but aims only at preventing any increase in the tax demanded of older people. We have surely not reached a stage, whatever the economic situation, where we have to seek to deal with our problems by increasing taxation for the retired section of the community.
  If the Financial Secretary wants to know where we would look for additional revenue, he has only to look at the debate on VAT in the House on Tuesday, when we gave a clear indication where the Government can obtain additional revenue if they feel they need it.
  Let me say a word or two about the general background—and let us leave aside the consideration whether the figure should be £1 or £2 per week, because this amendment seeks to go to the heart of the matter. A growing number of retired people feel that they are being victimised because of the fact that they continue to put something back into the community by the work they undertake, merely because they saved while they were at work and did not go in for some of the consumption which they could have enjoyed. In other words, because they practised the virtues and put something back into the community, the benefits are now being taken away from them in tax.
  The consequences of people's willingness to save, invest and to seek social justice is becoming increasingly damaging. Therefore, it is necessary for this House to respond to the situation. This amendment seeks to help us to respond. It is a simple straightforward amendment which would increase the amount of tax exemption for the retired person. I am sure that the amendment will command' the support of the Committee.
  Mr. Hugh Fraser: I wish to support the hon. Member for

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  Braintree (Mr. Newton) in his cogent arguments on this amendment. I appreciate that the provisions of the amendment will cost a certain amount of money. However, I am sure that my hon. Friend's argument must win accord on all sides of the Committee. It is obvious that elderly people feel hard done by following the increase in inflation. It now appears that if those people—an addition to their modest means from a pension from, say, employment on the railways, a nationalised industry, or whatever it may be—carry out a little extra work to help industry and the nation's productivity, they are to be made to suffer a claw-back of that income.
  The Government can change the situation merely by accepting a proposal along the lines suggested by my hon. Friend The Member for Braintree. That will be greatly to the benefit of the people concerned and will bring a sense of justice to the Government's dealings with elderly people. Elderly people take the view that because they live alone and do not combine, they are attacked on every hand by bureaucracy. They are attacked because they seek to practise the virtues which used to be encouraged, and indeed still are. Those virtues involve thrift, hard work and responsibility, but are being grievously undermined by the principles put forward by the Chancellor. Those deficiencies could be remedied if the Government decided to accept this simple amendment.
  I know that the Financial Secretary to the Treasury, who is to reply to 'he debate, is an honourable man. Therefore, I believe that he will see to it that this injustice is put right for the benefit of the older people in the nation. That means that the Government should accept the amendment.
  4.15 p.m
  Mr. John MacGregor: I warmly support the amendment and congratulate my hon. Friend the Member for Braintree (Mr. Newton) on moving it so eloquently. I feel extremely strongly about the elderly citizen and his difficulties in the current state of the nation. Members of that group have suffered most from the ravages of inflation in the past two years and certainly deserve more consideration than they have up to now enjoyed.
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  I detect a growing sense of unhappiness, bitterness and resentment among those groups as they see what is happening to them compared with other groups. They believe that inflation has hurt them most, particularly in the past year. Undoubtedly inflation and rising prices have hit the elderly with a vengeance. Many of them can no longer afford to run a car. Therefore, they are forced to use public transport, and the great increases in rail fares in the past year have hit them particularly hard.
  Elderly people are especially vulnerable to increases in fuel prices because of the need for extra heat in the home, and so on. It is in that very area that charges have been highest in the past year. I understand why elderly people feel more and more resentment. They resent the fact that although they have taken no part whatever in the discussions on wage policy, not merely in the past year but in the past two years, they suffered the most as a result of the ravages of the social contract because it was that contract which led to an increase in the cost of living in the last two years. They had no part in the consultative process whatever.
  Elderly people also resent the fact that other groups in the community are benefiting from the present events much more than are the elderly. Some groups in the community have been awarded enormous wage increases. Certain groups of immigrants—and I make no comment on the justice of this issue—have been able to obtain substantial benefits by way of social security payments and in other ways in recent months. Therefore, the groups of people for whom I wish to speak in this debate feel that the savings which they built up for their retirement are being eroded and that many people in society receive more in one week than some retired people receive in one year.
  I know that there are arguments on both sides of the problem. However, it is true to say that the sense of injustice among retired people is increased when they see what is happening in individual cases. The Minister will remember the debates on Tuesday evening about the investment income surcharge. It is difficult to justify the present situation to one's constituents, who complain that having worked hard for a lifetime to build up enough capital on which to retire—a sum which they originally thought would

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  see them through—they now see their income being considerably undermined and are losing out to younger groups of people. They have had appallingly shabby treatment over the past few years and it is right that we should try to do something for them.
  I recognise that in last year's Finance Bill the Chancellor introduced a new benefit which was greatly welcomed. I hope that he will go a little further. In my constituency, an association has just been formed covering the whole of Norfolk. It is one of those little groups of outraged citizens which is formed from time to time and it is called the Association for the Fair Treatment of Senior Citizens. This was an involuntary gesture by some of those who no doubt felt particularly badly done by. When they planned a meeting in Norwich recently they had such a response from all over the country that they had to move from the hall they had chosen to the largest hall in the city, and they have since been actively working.
  Recently they made certain points to me, one of which I am sure has been made to hon. and right hon. Members on either side of the House, that there should be no taxation of the State pension. I had to explain why, in the current situation, I could not accept that proposal, though I entirely understand their feelings. It is not a practical proposition at this time. We then talked of another matter on which there is a case to be made, about which we could do something in this debate—the position of the senior citizens at the upper end of the age scale, those over 70, or over 75, or whatever band one takes.
  It was for that reason that I put down Amendment No. 91 to which I should like to speak in conclusion. That Amendment seeks to increase the age allowance for the senior citizen over the age of 70. I do not regard 70 as a particularly magic figure. If the cost were too great the age could be 75 or any gradation between. Secondly, the figures I have put in the amendment are not figures to which I would like to hold in all circumstances. I simply added 20 per cent. to the existing age allowance in the present Finance Bill. One could take any figure in between, or a greater figure.
  The reason for the amendment must be clear: older senior citizens have much
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  heavier costs in many respects than those who have only recently retired. Many of their belongings, particularly clothes. shoes and so on, which they were able to have during the latter part of their working life, will have become shabby or worn out over the period, and they face extra costs because the older one gets, the greater one's requirement for extra heating, and there has been an enormous increase in the cost of heating and fuel over the past 12 months. They have greater need for medical treatment and other aids which in many cases cost heavily of their own money where supplementary benefit and other assistance does not meet the full cost. All this means that these groups have extra requirements.
  It was for that reason that I put down Amendment No. 91. I imagine, taking perhaps not the figures here but certain other figures, that it would be a much less expensive amendment than one applying to all senior citizens. I believe that my hon. Friend was entirely right to propose his amendment which I will most warmly support in the Lobby. I do not expect that my own amendment will be pressed today but the arguments for it are strong and I hope that the Financial Secretary will give consideration to some special treatment for that group.
  Mr. Robert Boscawen: I should like to congratulate my hon. Friend the Member for Braintree (Mr. Newton) on this valuable amendment which, in justice, ought to be passed by the Committee this afternoon. He drew attention to the fact that the pensioner had been tricked three times in this Budget, and how very true that is. Scores of times we have had to endure being told by hon. Members opposite, and Ministers, that they intended fully to protect pensioners against the rising cost of living, but the first time it is inconvenient for the Government to do so, the first time they have to face up to the promises they have given over two elections, they renege on it and go back on their word which they have given over and over again. That is the first trick.
  The second trick to which attention has rightly been drawn is the investment income surcharge, and we have the third trick shown in this amendment—the failure to raise the age allowance. This

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  cuts right across the Government's own policy. It is their policy to encourage individuals while working to accept a lower rate of pay and to put more aside, to get later a better occupational pension, or what will be a second State pension. But if they are to do that, why make it harder for them to get the benefit by failing to raise the age allowance in line with the higher basic pension to come in the autumn? That does not make sense.
  As my hon. Friend rightly said, all those who are in receipt of a very small occupational pension of any kind will be paying more tax in the autumn than they would have been paying before this Budget. I sincerely hope the Government will think hard on some of the promises they gave before those two elections in 1974 and have given scores of times since—promises to protect pensions against the ravages of their policies and the highest inflation we have ever had in this country.
  Mr. John Nott: On a point of order, Mr. Irvine. I do not want to delay the Committee but perhaps it would be for the convenience of the Committee, and I hope that it might be for the convenience of the Government, if in debating this group of amendments we could also discuss the two groups of amendments starting with Amendments No. 49 and 58, so that we can go straight on and debate the first three groups now. I have checked this with my hon. Friends, and if that would be for the convenience of the Committee we would carry the debate straight through those three groups of amendments. I do not know whether this is procedurally possible but it would suit my hon. Friends and myself.
  The Deputy Chairman: Before I ask the Government's view I should point out that it is Amendment No. 56 in the third list, not Amendment No. 58.
  The Financial Secretary to the Treasury (Mr. Robert Sheldon): I accept that the amendment is No. 56. I will certainly accept what the hon. Gentleman has suggested and am prepared to discuss the first three groups of amendments together.
  Mr. Newton: I have no personal objection although several of the other amendments are in my name, which would mean my speaking again. I understand that there is no problem about that but I wonder whether there are any means of making this procedure clear to other hon. Members around the House who may have studied the selection list. Unless they keep a very keen eye on the annunciator they may find that subjects in which they are interested have been debated without their even being aware of this change.
  Mr. Nott: My hon. Friend the Member for Braintree (Mr. Newton) has made a very valuable point. In view of what he has said perhaps I should withdraw my suggestion. It was intended to be helpful but perhaps it would be better if we were to continue as we are.
  Mr. Peter Bottomley: Would it perhaps be possible to ring a bell four or five times and have put on to the board a notice which would make the position clear to everyone in the building?
  Mr. Robert Sheldon: Without wishing to comment on these new ideas, I am happy to accept the revised view of the hon. Member for St. Ives (Mr. Nott).
  The Deputy Chairman: I am entirely in the hands of the Committee. It would appear that we go back to square one.
  4.30 p.m.
  Sir John Eden: I should like briefly to support what my hon. and right hon. Friends have been saying on these amendments. I am sure that every hon. Member would like to do so although perhaps, as we shall see towards the conclusion of this debate, some will be required not to do so. However, in the spirit of a debate of this kind it is fair to say that all hon. Members recognise the strength of the case advanced by my hon. Friend the Member for Braintree (Mr. Newton) in moving this amendment.
  4.30 p.m.
  Hon. Members will know from their own personal experience the types of hardship and difficulty with which elderly people in particular have to contend in times of high inflation. Some of these

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  difficulties have been described by my hon. Friends in their speeches and I will not attempt to add to them for that would merely delay the progress of the debate. I would, however, underline one point which I think every hon. Member, particularly those who speak for, or act on behalf of, the Government should have in mind. All too often in this House we tend to respond to pressure groups. We react to effectively mounted and organised lobbies and, obviously, those who are engaged in finding a way through the conflicting, and often competing, claims presented to them tend to pay greater heed to those which appear to have the stronger voice outside.
  From time to time we respond to the mass lobbies organised on behalf of old-age pensioners' organisations of various kinds and, shortly afterwards, there is an increase in the basic rate or some allowance. However, in this case, it is essential to bear in mind the needs and circumstances of the individual. The individual is more difficult to categorise in terms of a Finance Bill.
  I am thinking now of the large numbers of people who have made representations to me in my own constituency, which, as hon. Members know, rejoices in the fact that large numbers of people go there to retire. I have seen the way these people have been adversely affected by the advance of inflation and the persistent rise in prices of all the essential commodities on which they depend for their sustenance and livelihood. I have also seen the dispiriting effect on them of the fall in the purchasing power of their money. As my hon. Friends have said, those who put something aside to serve them in their old age find that it can no longer adequately meet their needs because the value of the currency has fallen to the point at which it is worth much less than it was when they saved it.
  This is having a damaging effect on the morale and even the health of the individual. This, in its turn, puts pressures on other public services which are ill equipped to meet such pressures. We have a national problem here, made up of a multiplicity of individual cases of hardship and distress, accentuated by the increase in inflation, which in turn has been precipitated and aggravated by the policies of this Government. Those people
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  who so often try to avoid having to turn to the State for help deserve some genuine and effective response from the Government. I see no benefit coming to the nation from continually making it more difficult for the individual to look after himself and then taking more from the taxpayer in order that the State can provide for the individual.
  This is an absurd and destructive policy, the pursuit of which has been the particular hallmark of Socialism, but which, I regret to say, has been practised by Governments of all complexions since the war. We must now seek to reverse that trend. The amendment gives us a chance to do so by making it possible for the individual to keep more of his own earnings and savings and to spend more of his own money in his own way, for his own needs, as he chooses. I hope that will be the result of the amendment.
  Obviously, an amendment of this kind involves further expenditure. It costs money in the sense that revenue is forgone. I do not know the order of magnitude of the proposal by my hon. Friend but no doubt the Minister will say what it would be. Perhaps it is about £50 million or £70 million but I do not know. In terms of one's own individual spending that may seem a large sum of money but, as my hon. Friend has said, there are obviously ways and means in which the Government can protect the revenue in a case such as this, particularly by following some of our advice on taxation, especially on indirect taxation and VAT.
  The cost in terms of revenue forgone is not a convincing argument for turning down this proposition. There is a case in equity here which well merits a sympathetic reception. I hope that the Minister will give a clear indication that he understands why we are putting it forward. I hope that he understands how disheartening and deeply worrying it is for individuals to go on seeing their hard-earned savings continually eroded by inflation. I hope that the Government will agree to take this practical, modest but realistic step, which would be of great benefit and encouragement to those we have in mind. For these reasons I have great pleasure in supporting the amendment, and I hope that the Minister will accept it.
  Mr. Douglas Crawford: I support Amendments Nos. 46 and 91. As an industrial journalist, I used to cover the annual conferences of the TUC and the Scottish TUC. A hardy annual on the agenda was a resolution about the need to increase old-age pensions in real terms. I hope that the Chancellor will discuss this subject with the TUC and the Scottish TUC. He seems to have discussed other things with them, and I hope that he will discuss this.
  We all have many retired constituents who write to us about this matter. Many people come to my lovely constituency to retire, as they do in that of the right hon. Member for Bournemouth, West (Sir J. Eden). We all know how inflation eats into increased pensions. We are not just talking about figures in this respect, but about real people. We are talking about human beings, not mindless statistics. We are talking about people who have saved and forgone consumption, as the hon. Member for Braintree (Mr. Newton) has said. We are not talking about speculators and vast amounts of money.
  If I briefly refer to Scotland, I am not making a political point. However, it is well known that people in Scotland save a little more per capita and per pound earned than people south of the border. For this reason people in my country will be penalised relatively more heavily than their counterparts in England. This is another example of the poverty trap for old people.
  Mrs. Margaret Bain: Would my hon. Friend not agree that one of the best things the Government could do to help elderly people is to abolish the earnings rule?
  Mr. Crawford: I agree entirely. That point makes it all the more important for the Minister to give us some figures. I doubt whether they will convince me that the amendment should be withdrawn, however. I doubt whether any figures could convince me or my party that the Treasury has a case for not accepting it.
  Mr. John Wakeham: I congratulate my hon. Friend the Member for Braintree (Mr. Newton) on moving the amendment. Old people are still a minority group but a large and increas-
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  ing minority group and any proposal to give them further relief should be carefully considered, because it will cost money—and an increasing amount. Not only must we do justice; it must be seen to be done.
  In my constituency, there is a growing feeling that we are not treating our old people as well as we should. People recognise that this Government have increased pensions and given additional relief, but these measures have been substantially eroded by inflation. There is genuine concern. I notice that concern in the concessionary arrangements drawn up by those who are concerned about the welfare of old people. I see growing numbers of such arrangements and they are commendable, but I would much prefer schemes which allowed old people to retain more of their own savings. A further relief from tax is much the better answer.
  It is not only helping old people which is important but the way in which we help them. Many of them have enormous pride and wish to maintain their independence. It is perfectly acceptable to assist old people of limited means by giving them tax relief. There is no suggestion of charity about allowing someone to keep what he considers to be the income from his hard-earned savings during his lifetime.
  As this feeling of injustice grows, so the demands for more relief of this kind should be encouraged. If we do not do it today, the Committee will soon have to do something about this problem.
  Mr. Robert Sheldon: The hon. Member for Perth and East Perthshire (Mr. Crawford) said that he doubted whether any figures I gave would convince him that the amendment was not desirable. I know that the irresponsibility of Opposition shows itself occasionally, but the irresponsibility of the Scottish National Party, which is prepared to accept an amendment almost irrespective of the figures, goes further. Perhaps I could give the figures, nevertheless. Hon. Members may not think that they are very large—that depends on how they view these matters. The cost is £28 million.
  As the right hon. Member for Bournemouth West (Sir J. Eden) said, Governments are always responsive to pressure groups and prepared to learn from their

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  arguments. But that means that there is a further responsibility on the Government to achieve equity among the demands placed upon the resources that they must control.
  4.45 p.m.
  Mr. Crawford: I am grateful for the figure of £28 million. That is less than the equivalent of four days' revenue from Scottish oil, or almost nothing.
  Mr. Sheldon: I know that the hon. Member thinks of North Sea oil as an endless gusher which will fill our pockets with liquid gold for ever and ever. But that is not an opinion I share. When the oil becomes attenuated through use, he may share my opinion. A country's wealth increases in geometric proportion year by year. The wealth from oil is a steady flow; it will reach its maximum and thereafter diminish. If the hon. Member compares the one with the other, he may learn that it is unwise to stake all one's future on that argument.
  As always, I listened to the arguments of the hon. Member for Braintree (Mr. Newton) with great interest, because I know the amount of work that he puts into them, but I was sorry to hear him use excessive language about "confidence tricks" and velvet fists in iron gloves. At a time of economic difficulty, the Chancellor raised the age allowance in a way which could not have been taken for granted. I am sure that some Chancellors, faced with the problems of this year, would have been less forthcoming.
  I would take issue with the hon. Member on his statement that the purpose of the amendment is to raise the age allowance so that no additional tax becomes payable. So far as we are all anxious to assist old people with the problems that the hon. Gentleman outlined so well, we would all have the same end in view, if it could be achieved. But part of the problem is the increase in the retirement pension.
  It is precisely because one increases the retirement pension that one frequently increases the tax payable on a person's total income. That should never be used as an argument for not increasing the pension when it is clearly right to do so. If it were to become possible to increase the pension at some stage by much more than the amount by which in fact it has been increased, the argument could be
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  used against that proposal that the amount of tax payable would be even greater. That is a modest, and for those affected an acceptable, price to pay for trying to help them as best we can.
  The hon. Gentleman pointed out the possible leeway in the agreement with the TUC for making money available for tax allowances in other ways. But there are many claims on Government resources. The hon. Member himself has put down amendments suggesting alternative uses for any such money. I welcome his interest and the information he gives, but I am taken by the argument of the right hon. Member for Stafford and Stone (Mr. Fraser), which was also used by the right hon. Member for Bournemouth, West—that the severest problems facing the old have arisen in dealing with inflation.
  Inflation for those with little opportunity for increasing their income in the years to come in the ways open to younger people present particular problems—not just in financing their requirements but in the increasing uncertainties and anxieties which this must cause them. We all know of many such people who have made sensible provision, in some cases generous provision, for their old age and who have found their resources inadequate because of inflation.
  That brings me back to the main argument. The best way to assist not only the economy but those people particularly is by reducing the rate of inflation to the levels which we regarded as acceptable and for which such prudent people made their arrangements. It was laid down unconditionally in the legislation that the age allowance should be increased from £950 to £1,010 for a single person and from £1,425 to £1,555 for the married couple—an increase of £60 for the single person and £130 for the married couple. The incomes ceiling has been increased from £3,000 to £3,250 and the benefit of the age allowance is now to be fully withdrawn only at levels of £3,662 for the single person and £3,955 for the married couple. Those increases are unconditional. Those changes, together with the increase in the retirement pension, have shown that our commitment to assist old people remains undiluted.
  Whereas the retirement pensions help all pensioners, including those with substantial investment incomes, the age

  699
  allowance affects only certain people. They all obtain benefit from the retirement pension and we have continued our commitment to improve pensions in line with earnings.
  I do not want to repeat the argument that there have been three increases while the Labour Government have been in office, or to state the percentage increases since February 1975. But as a result, an increase in funds has rightly gone to these people. The threshold for the elderly, as a result of unconditional tax changes, now stands at 37 per cent. higher than that of the single person of working age and 43 per cent. higher than that for a married couple. That shows how matters which have been brought to the attention of the House have been understood. Changes have not gone as far as some hon. Members wish, but I reckon to learn something from such debates. They are not the least valuable of our debates and the Chancellor of the Exchequer's actions show that he listens to arguments, even if they are not fully accepted.
  Mr. MacGregor: Can the Minister explain the principle behind the proposition that pensioners above a certain age should not get extra relief for the reasons which I have suggested? I am not suggesting that the actual figures in the amendment should be accepted because I accept that they might be too costly.
  Mr. Sheldon: I was about to come to that issue but I am grateful to the hon. Member for Norfolk, South (Mr. MacGregor) for reminding me about it. He dealt with the case for a variety of gradations based on age. It is an interesting proposition which is aired from time to time but it is rarely explained so adequately. I listened to his speech with interest. I had to master a new idea when I first saw the amendment on the Order Paper. Perhaps I gave it more reflection after seeing his name attached to it. But I could not help thinking of the wide variety of the circumstances of the people concerned. There are a number of other instances where gradation might be thought necessary but the tax system is not a sufficiently precise instrument to use in this way. That is a personal view.
  700
  If we are to refine much more the ways in which certain sections of our population are accorded an income greater than they would otherwise receive, it would be better to use the greater precision available to the Department of Health and Social Security rather than the tax system. The tax system can never deal with the multiplicity of cases that are dealt with by the Department of Health and Social Security. I know that the hon. Gentleman feels doubt about that argument. But he will recall the tax credit system, which is relevant. It confuses the need of the person and the means of the person. It is difficult to achieve the right relationship between the two.
  If graduation proved to be desirable, although I am not even certain about that despite the arguments, it would be better to use Social Security. There are many instances of fit and active 75-year-olds and sick and ailing 68-year-olds. The subject has been given a useful airing and perhaps we can return to it again.
  Mr. David Howell: The Financial Secretary to the Treasury has returned to the arguments which both he and his predecessors have used before. The are, broadly, that they do not think that the tax system is useful for meeting the needs and problems about which we have been hearing so eloquently from my hon. Friend's. The Financial Secretary said that the "greater precision" of the Department of Health and Social Security was required.
  That view, which never had any validity, is now completely out of date. It has been made out of date by the interaction of high taxation policies followed by high public expenditure combined with the high inflation rates of the last 18 months. The net effect is that we are now faced with such a preposterous overlapping between income tax and social security benefits that no amount of emphasis on the Department of Health and Social Security and appeals about the greater precision of that Department will begin to untangle the mess.
  We have reached the stage—and it does not arise directly in the case of the elderly although they receive the backwash—where a man on about £32 a week has to pay over £2 a week in national insurance contributions and over £2 a week in

  701
  income tax. That shows more clearly than any statistics—and we have heard some bizarre statistics—how far the tangle between income tax and benefits has gone.
  There has been a modest increase in the age allowance but it has not kept pace with pensions. That means that anyone with a small savings income which takes him into the levels over the age allowance is paying a tax which results from the deeply prejudiced and old-fashioned attitude of the Treasury to investment income. The income from savings takes them into the surcharge level as well, the additional level of 10 per cent. above £30 a week of investment income, raising the marginal rate to 45 per cent., and the level of 20 per cent., raising the marginal rate to 50p in every pound above the £40 a week of investment income for the elderly person. When one considers the bands with which we are dealing, one finds it extraordinary that these levels of tax should be permitted to bite on such people with these levels of income.
  5.0 p.m.
  One often feels that Treasury Ministers and many Labour Members below the Gangway are still living in a world in which £2,000 a year and this even comes over sometimes in the way in which "£2,000 a year" is said by Labour Members—is a lot of money. It is £40 a week. That is considered a very modest wage indeed. It is well below two-thirds of the average weekly wage. Here the Government are proposing these very high levels of tax, and because of the failure of the age allowance to rise by the full amount to compensate for inflation or to keep pace with pensions, levels of tax are beginning to bite only a little above pension level. This situation must be corrected.
  Treasury Ministers have said—we shall hear much more of this in the coming debates—that to correct this requires such a vast lifting of the tax thresholds all along the line that it cannot be done. They do not go on specifically to say why it cannot be done, but there are two reasons in their minds. The first—which is a very proper reason in a sense—is that they already owe all the money elsewhere. There are not the funds available to make the colossal increase in tax thresholds that is required. We are talk-
  702
  ing not merely about the £700 million for the TUC deal. We are talking about much more substantial sums.
  The Government do not have the money because they have spent it or owe it elsewhere. Why do they owe it elsewhere? It is because public expenditure is still being kept at astronomically high levels, with large increases being built into the system for the coming year. It is part of the Government's general balance, attitude and posture towards the deal with the trade unions.
  The other line of thought in their minds is also a cul-de-sac, ending in the same place. They cannot raise thresholds because they cannot shift tax on to indirect taxation. Why can they not do that? They cannot do that because they are nervous of raising VAT, as they said in the debates on VAT. Why can they not raise VAT? They cannot do that because they would upset the Retail Price Index, which would upset the General Council of the TUC, and that, in turn, would imperil the delicate balance that has been achieved on the deal.
  Therefore, one way and another, the Government, by their decision not to cut public expenditure, their reluctance to make major shifts in the tax system necessary to raise the thresholds, and the whole attitude to the place of the deal in the counter-inflation strategy, have locked themselves into a strongly built room, turned the key in the door and thrown away that key. This leaves them in a situation in which they cannot even compensate with the necessary amount for the aged and lift the allowances in the way that we suggest. Also, as we learned on Tuesday, they are still prepared to countenance a situation in which—it is hardly credible—they will administer a 50 per cent. tax rate on an elderly lady with £40 a week of investment income on top of her pension.
  That is an incredible situation. It is a very heavy price to pay for the posture that the Government have taken up on their broad economic strategy. It is, of course, only one of the many prices which are now beginning to appear on the invoice as it rolls out of the machine and we see more and more items as being necessary to throw into the balance to secure the deal.

  703
  For that reason, I suggest to my hon. Friends that, as in other areas in which we think that the price is unfair, too heavy and unnecessary, we should express our view on this matter by pressing the amendment to a vote.
  Mr. Newton: It is always tempting not to reply to the Financial Secretary's endearing flatteries with which he tries to disguise the fact that he has said "No" to what we are proposing. However, I want to make one or two comments as the Member who moved the amendment.
  First, the Financial Secretary suggested that I had used rather strong language. That is a matter of judgment. I can only say that in the autumn, when some of those who will be affected by this proposal discover what is happening to them, the language used in the country will be a great deal stronger than any that I have used here today.
  Secondly, I had made a private guess that the cost would be about £30 million. I was not confident of that guess even to put it forward publicly. However, I am interested to see that the cost turns out to be £28 million. I do not want to spend much time arguing about that, but I have two observations to make. First, that sum is significantly less than the sum that the Government are proposing to spend on abolishing paybeds. Secondly, it is significantly less than what has been tossed away since the Budget on going back on the proposals for school meal charges.
  We need not talk about the £700 million in the Budget leeway for dealing with the trade unions, or the £35 million that has suddenly been plucked out of the desperately tight financial situation in the few weeks since the Budget, to find that when it came to doing a deal with the TUC the Government were in no difficulty about finding another £30 million or £40 million. However, when it comes to fundamental fairness to the retired population, we are told that the country's finances would sink through the floor if something were done.
  704
  Whatever may be said about the tax position of pensions, which we all know are taxable, it has been understood for many years that in practice the tax allowances have invariably—if not invariably, almost invariably been increased in a way that ensures that pensions increases do not necessitate an increase of tax. There has now been a departure from that policy, which is wrong. It will cause great resentment in the country that there has been this departure.
  I pick up something said by my hon. Friend the Member for Guildford (Mr. Howell). We have heard from the Financial Secretary, in debate after debate, about the extent to which he believes that it is better to do these things through the social security system rather than the tax system. Let me tell the Government that people do not regard social security benefits as being the same thing as tax reliefs. They regard a tax relief as allowing them to keep more of their own money, which they have in some way earned or for which they have qualified by their own efforts.
  Believe it or not, and rightly or wrongly, there are still large numbers of people who think that they are entitled to keep more of their own money through the tax system and who feel almost affronted—I am not arguing about whether they are right, but many feel like this—if they are told that what they should do is to claim money in the form of supplementary benefit or social security benefit. They resent that—especially when they feel that if only they were allowed to keep more of their own money they would not need to do that.
  I do not want to argue the morality of this, but that is the social reality of how people feel. The Government should take full account of that. I hope that we shall not hear much more of the Government's argument on the subject, because it does not correspond with people's feelings.
  I am delighted with what was said by my hon. Friend the Member for Guildford. I hope that my right hon. and

  705
  hon. Friends, other Opposition Members and, indeed, Labour Members will come into the Lobby with me to vote for the amendment.
  Question put, That the amemdment be made:—
  The committee divided: Ayes 148, Noes 153.

  Division No. 135.

  AYES

  5.10 p.m.

  Arnold, Tom.

  Hampson, Dr. Keith.

  Penhaligon, David.

  Atkins, Rt Hon H. (Spelthorne)

  Harrison, Col Sir Harwood (Eye)

  Percival, Ian.

  Bain, Mrs Margaret.

  Hastings, Stephen.

  Price, David (Eastleigh)

  Baker, Kenneth.

  Henderson, Douglas.

  Raison, Timothy.

  Banks, Robert.

  Hooson, Emyln.

  Rees, Peter (Dover & Deal)

  Beith, A. J.

  Hordern, Peter.

  Rees-Davies, W. R.

  Bennett, Sir Frederic (Torbay)

  Howe, Rt Hon Sir Geoffrey.

  Reid, George.

  Benyon, W.

  Howell, David (Guildford)

  Renton, Rt Hon Sir D. (Hunts)

  Berry, Hon Anthony.

  Howells, Geraint (Cardigan)

  Ridley, Hon Nicholas.

  Biffen, John.

  Hunt, David (Wirral)

  Roberts, Michael (Cardiff NW)

  Biggs-Davison, John.

  Hurd, Douglas.

  Roberts, Wyn (Conway)

  Body, Richard.

  Jessel, Toby.

  Rodgers, Sir John (Sevenoaks)

  Boscawen, Hon Robert.

  Johnston, Russell (Inverness)

  Ross, Stephen (Isle of Wight)

  Bottomley, Peter.

  Jones, Arthur (Daventry)

  Rossi, Hugh (Hornsey)

  Bowden, A. (Brighton, Kemptown)

  Joseph, Rt Hon Sir Keith.

  Sainsbury, Tim.

  Boyson, Dr Rhodes (Brent)

  Kilfedder, James.

  Scott, Nicholas.

  Braine, Sir Bernard.

  Knight, Mrs Jill.

  Shersby, Michael.

  Brittan, Leon.

  Knox, David.

  Silvester, Fred.

  Brown, Sir Edward (Bath)

  Lamont, Norman.

  Sims, Roger.

  Budges, Nick.

  Lane, David.

  Sinclair, Sir George.

  Burden, F. A.

  Langford-Holt, Sir John.

  Smith, Dudley (Warwick)

  Chalker, Mrs Lynda.

  Latham, Michael (Melton)

  Speed, Keith.

  Churchill, W. S.

  Lawrence, Ivan.

  Spicer, Michael (S Worcester)

  Clark, William(Croydon S)

  Lawson, Nigel.

  Stanbrook, Ivor.

  Clarke, Kenneth (Rushcliffe)

  Lester, Jim (Beeston)

  Steel, David (Roxburgh)

  Clegg, Walter.

  Loveridge, John.

  Stewart, Donald (Western Isles)

  Cockcroft, John.

  Loyden, Eddie.

  Stewart, Ian (Hitchin)

  Cope, John.

  Luce, Richard.

  Stonehouse, Rt Hon John.

  Costain, A. P.

  McAdden, Sir Stephen.

  Stradling Thomas, J.

  Crawford, Douglas.

  MacCormick, Iain.

  Tapsell, Peter.

  Crowder, F. P.

  MacGregor, John.

  Taylor, R. (Croydon NW)

  Davies, Rt Hon J. (Knutsford)

  Macmillan, Rt Hon M. (Farnham)

  Thompson, George.

  Dodsworth, Geoffrey.

  Mates, Michael.

  Townsend, Cyril D.

  Eden, Rt Hon Sir John.

  Maude, Angus.

  Tugendhat, Christopher.

  Edwards, Nicholas (Pembroke)

  Maxwell-Hyslop, Robin.

  Wainwright, Richard (Colne V)

  Emery, Peter.

  Meyer, Sir Anthony.

  Wakeham, John.

  Farr, John.

  Miller, Hal (Bromsgrove)

  Walder, David (Clitheroe)

  Fell, Anthony.

  Mitchell, David (Basingstoke)

  Walker, Rt Hon P. (Worcester)

  Finsberg, Geoffrey.

  Moate, Roger.

  Walters, Dennis.

  Fisher, Sir Nigel.

  Moore, John (Croydon C)

  Weatherill, Bernard.

  Fookes, Miss Janet.

  Morris, Michael (Northampton S)

  Welsh, Andrew.

  Forman, Nigel.

  Morrison, Charles (Devizes)

  Whitelaw, Rt Hon William.

  Fowler, Norman (Sutton C'f'd)

  Morrison, Hon Peter (Chester)

  Wiggin, Jerry.

  Fraser, Rt Hon H. (Stafford & St)

  Neave, Airey.

  Wilson, Gordon (Dundee E)

  Freud, Clement.

  Nelson, Anthony.

  Winterton, Nicholas.

  Gilmour, Rt Hon Ian (Chesham)

  Newton, Tony.

  Wood, Rt Hon Richard.

  Gow, Ian (Eastbourne)

  Nott. John.

  Grimond, Rt Hon J.

  Onslow, Cranley.

  TELLERS FOR THE AYES:

  Grylls, Michael.

  Page, Rt Hon R. Graham (Crosby)

  Mr. Carol Mather and

  Hall, Sir John.

  Pardoe, John.

  Mr. Spencer Le Marchant.

  Hamilton, Michael (Salisbury)

  Parkinson, Cecil.

  NOES

  Abse, Leo.

  Cronin, John.

  Flannery, Martin.

  Anderson, Donald.

  Cryer,Bob.

  Fletcher, Raymond (Ilkeston)

  Armstrong, Ernest.

  Cunningham, Dr J. (Whiteh)

  Foot, Rt Hon Michael.

  Atkinson, Norman.

  Davidson, Arthur.

  Ford, Ben.

  Bagier, Gordon A. T.

  Davies, Bryan (Enfield N)

  Fowler, Gerald (The Wrekin)

  Barnett, Guy (Greenwich)

  Davies, Derzil (Llanelli)

  Garrett, John (Norwich S)

  Barnett, Rt Hon Joel (Heywood)

  Davis, Clinton (Hackney C)

  George, Bruce.

  Benn, Rt Hon Anthony Wedgwood.

  Deakins, Eric.

  Gilbert, Dr John.

  Blenkinsop, Arthur.

  Dean, Joseph (Leeds West)

  Ginsburg, David.

  Booth, Rt Hon Albert.

  Dormand, J. D.

  Golding, John.

  Boyden, James (Bish Auck)

  Douglas-Mann, Bruce.

  Gould, Bryan.

  Butler, Mrs Joyce (Wood Green)

  Duffy, A. E. P.

  Graham, Ted.

  Callaghan, Rt Hon J. (Cardiff SE)

  Dunn, James A.

  Grocott, Bruce.

  Cant, R. B.

  Dunnett, Jack.

  Hamilton, James (Bothwell)

  Cartwright, John.

  Edge, Geoff.

  Hardy, Peter.

  Castle, Rt Hon Barbara.

  Edwards, Robert (Wolv SE)

  Harper, Joseph.

  Clemitson, Ivor.

  Ellis, John (Brigg & Scun)

  Hayman, Mrs Helene.

  Cocks, Michael (Bristol S.

  English, Michael.

  Healey, Rt Hon Denis.

  Colquhoun, Ms Maureen.

  Evans, loan (Aberdare)

  Hooley, Frank.

  Corbett, Robin.

  Ewing, Harry (Stirling)

  Horam, John.

  Cox, Thomas (Tooting)

  Faulds, Andrew.

  Howell, Rt Hon Denis

  Hughes, Rt Hon C. (Anglesey)

  Marquand, David.

  Sheldon, Robert (Ashton-u-Lyne)

  Irvine, Rt Hon Sir A. (Edge Hill)

  Marshall, Dr Edmund (Goole)

  Short, Rt Hon E. (Newcastle C)

  Irving, Rt Hon S. (Dartford)

  Marshall, Jim (Leicester S)

  Silkin, Rt Hon John (Deptford)

  Jackson, Miss Margaret (Lincoln)

  Maynard, Miss Joan.

  Silkin, Rt. Hon S. C. (Dulwich)

  Janner, Greville.

  Mellish, Rt Hon Robert.

  Silverman, Julius.

  Jay, Rt Hon Douglas.

  Mendelson, John.

  Small, William.

  Jenkins, Hugh (Putney)

  Miller, Dr M. S. (E Kilbride)

  Snape, Peter.

  Jenkins, Rt Hon Roy (Stechford)

  Miller, Mrs Millie (Ilford N)

  Spearing, Nigel.

  John, Brynmor.

  Molloy, William.

  Stallard, A. W.

  Jones, Barry (East Flint)

  Moonman, Eric.

  Stoddart, David.

  Judd, Frank.

  Morris, Charles R. (Openshaw)

  Strauss, Rt Hon G. R.

  Kelley, Richard.

  Mulley, Rt Hon Frederick.

  Taylor, Mrs Ann (Bolton W)

  Kilroy-Silk, Robert.

  Newens, Stanley.

  Thomas, Mike (Newcastle E)

  Kinnock, Neil.

  Noble, Mike.

  Thomas, Ron (Bristol NW)

  Lamborn, Harry.

  O'Halloran, Michael.

  Tinn, James.

  Latham, Arthur (Paddington)

  Ovenden, John.

  Tomney, Frank.

  Leadbitter, Ted.

  Owen, Dr David.

  Urwin, T. W.

  Lever, Flt Hon Harold.

  Palmer, Arthur.

  Walker, Harold (Doncaster)

  Lipton, Marcus.

  Park, George.

  Walker, Terry (Kingswood)

  Litterick, Tom.

  Pavitt, Laurie.

  Ward, Michael.

  Loyden, Eddie.

  Peart, Rt Hon Fred.

  Weitzman, David.

  Luard, Evan.

  Prentice, Rt Hon Reg.

  White, Frank R. (Bury)

  Lyon, Alexander (York)

  Radice, Giles.

  Willey, Rt Hon Frederick.

  Lyons, Edward (Bradford W)

  Richardson, Miss Jo.

  Williams, Alan Lee (Hornch'ch)

  McCartney, Hugh.

  Robinson, Geoffrey.

  Williams, Rt Hon Shirley (Hertford)

  Macfarquhar, Roderick.

  Rodgers, George (Chorley)

  Wise, Mrs Audrey.

  McMillan, Tom (Glasgow C)

  Rooker, J. W.

  TELLERS FOR THE NOES:

  McNamara, Kevin.

  Roper, John.

  Madden, Max.

  Rose, Paul B.

  Mr. Alf Bates and

  Magee, Bryan.

  Sandelson, Neville.

  Mr. Donald Coleman.

  Mallalieu, J. P. W.

  Sedgemore, Brian.

  Question accordingly negatived.

  Marks, Kenneth.

  Shaw, Arnold (Ilford South)

  Question accordingly negatived.
  The Deputy Chairman: Before I call the next amendment, it may be for the convenience of the Committee if I mention that Amendment No. 88 will be grouped with Amendments Nos. 61, 62 and 93.
  Mr. Geoffrey Dodsworth: I beg to move Amendment No. 49, in page 15, line 11, leave out '£365' and insert '£395'.
  The Deputy Chairman: With this it is proposed to take the following amendments:
  No. 50, in page 15, line 11, leave out '£365' and insert '£433'
  No. 51, in page 15, line 13, leave out '£335' and insert '£365'
  No. 52, in page 15, line 13, leave out '£335' and insert '£384'
  No. 53, in page 15, line 15, leave out '£300' and insert '£330'
  No. 54, in page 15, line 15, leave out '£300' and insert £327'.
  Mr. Dodsworth: The amendment refers to the child allowance and seeks to increase the increased figure contained in Clause 26(2)(a). The associated amendments have a similar effect.
  I draw to the Committee's attention an important section of the community, namely, the families who have been incurring particular expense and suffering from
  708
  inflation and from the problems of incomes policies. As an individual, I felt that the proposal for some agreement on incomes was a desirable move and of benefit to the community, but I notice that there has been a change in the terms of the deal that was proposed at the time of the Budget Statement. If there can be a change of one sort there can be a change of another.
  The proposals contained in the clause would increase the child allowances in the three different categories by £60. My proposal is for a further increase of £30, making a total increase of £90. That seems to be entirely consistent with a pay proposal of 3 per cent., which in the event, is likely to be 4½ per cent. We were assured that the pay proposal was a conditional arrangement. That meant that it is open to change. The amendment proposes a change that we should make in the interests of all wage and salary earners.
  The change in differentials that the Minister was kind enough to draw to our attention in the debate earlier this week illustrates the point very well. He referred to the differential between average earnings net and top earners net as a ratio of 3·88:1. We should seize the opportunity to improve some of the differentials, in the interests of all taxpayers and especially in the interests of those who were not included in the pay negotiations. At least half the wage and salary earners

  709
  were not included. Their interests should be taken into account. That can usefully he done by improving their net tax situation.
  We do not have a very happy child allowance record. In 1963–64 the allowance for a child under the age of 11 was £115. It has been increased slowly and reluctantly, in steps of £40. It remained static for eight years under various forms of Labour tutelage until it was increased in 1971–72, to £155. It was increased again in 1973–74, to £200. The last increase was to £240. That in no way reflects the increased costs that the ordinary family has had to bear in bringing up young children at a time of income difficulties.
  The amendment proposes a form of justice that we should propose and maintain. It also assists me in drawing attention to another anomaly that has not been rectified and which, I believe, is much worse. We find that there has been no change—and no change is proposed—since 1963–64, to the income limits which are applied to child allowances. The income limit is £115.
  This is a ludicrous situation. In these inflationary times it is a simple matter for young people over the age of 16 to earn over £115 when they take on temporary jobs. They can be in full-time education beyond the age of 18 and in command of their own affairs and existence, earning money outside parental authority and control, but there is a limitation on the tax allowance that is made available to the parent because of the incomes limit. In these inflationary times there is a need to review the incomes limits on a number of fronts.
  Sir George Young: The Financial Secretary may be alarmed to see members of the Opposition social security team poaching on the Finance Committee, but we have a vital interest in Clause 26, because it relates to child tax allowances. Next year the allowances are to be phased out and replaced by child benefit.
  I shall speak particularly to Amendments Nos. 53 and 54, which deal with the tax allowances for a child not over the age of 11. We understand that these allowances are to be phased out entirely in April of next year, to be replaced by the new child benefit, whereas the other allow-
  710
  ances may be retained as residual allowances to reflect the extra costs of children over 11.
  I endorse what has been said by my hon. Friend the Member for Hertfordshire, South-West (Mr. Dodsworth). The value of the allowances has been eroded over the past 10 years. Next year we shall establish a base level for future debates on family poverty. If the base level established next year is merely the level of the child allowances that are fixed this year, we shall be starting off on entirely the wrong footing. If that is done we shall not have restored the value of the tax allowances for children which were established about 10 years ago.
  This debate is taking place in a vacuum, because neither the Treasury nor the Department of Health and Social Security will tell us what is to be the level of child benefits next year. This is a matter of enormous concern to families throughout the country, because the benefit will replace not only the tax allowances but family allowances. There has been recent Press speculation that the child benefit will be fixed at the level of £2·50, which will involve the Treasury in a small extra cost. If that is to be the level, it appears that many families with children will be. substantially worse off, £2·50 in no way restoring the value of the existing tax allowance and the family allowance combined.
  5.30 p.m.
  We should like an assurance from the Treasury that if the child benefit scheme is to be the means for tackling family poverty, the burden will be borne equally by all taxpayers, not just those who have children. This is an important matter of principle on which we should like some reassurance.
  I hope that the Financial Secretary will assure us that the erosion in the value of the tax allowances, to which my hon. Friend referred will be restored—if not this year, at least next year—so that families which have been discriminated against over the past 10 years may receive the justice to which they are entitled.
  Mr. Kenneth Clarke: I entirely support what was said by my hon. Friend the Member for Ealing, Acton (Sir G. Young). I hope that in his reply the Financial Secretary will put his explanations of the level of child

  711
  allowances fixed by this year's Finance Bill in the context of the changeover to Child Benefits expected from the Government in April next year.
  The Government have committed themselves to phasing out child tax allowances by April 1977 and replacing both tax allowances and family allowances by the new system of child benefit. That declaration by the Government might indicate some clear policy on their part about the financial problems of families and the future of assistance to working families. But the lack of information and clarity on how they propose to set about introducing the new system indicates to me that they have no such clear policy. I suspect that this year's changes in the tax allowances are a small holding operation, as it were, while they contemplate how to get the new child benefit scheme into action by April 1977.
  The Child Benefit Act is outside the scope of this debate. When the Bill went through the House, we expected it to be followed by changes in this year's Finance Bill which would make clear the future of child tax allowances—whether child tax allowances for children under 11 were to be phased out entirely and what residual tax allowances would remain for older children. We hoped to have some important policy decision on the future of child benefits or tax allowances, whatever we have after April next year, for instance, in the case of a child living abroad whose parents are resident in this country.
  I base what I say about the expectation that this year's Finance Bill would shed some light on the Government's policy and intentions after April next year on what was said by the then Minister of State in proceedings on the Child Benefit Bill. The Minister tried to reassure the Opposition that there was plenty of time for full information to be given about the details of the new scheme regarding future support for families. He said:
  "It is nearly two years before the child benefit scheme comes into operation in April 1977. Therefore, there is ample time for this matter to be examined in detail. The Bill is not a rigid instrument and there is considerable flexibility to operate through regulations. The legislation affecting child tax allowances will not come before the House until next year's Finance Bill."—[Official Report, 7th July 1975; Vol. 895, c. 262.]
  712
  The Minister of State was referring to this Bill. It was expected that features in this Bill would make clear the future of child tax allowances. But there are no such provisions in the Bill, and the Government do not seem disposed to take matters much further now.
  I have raised this matter today because my attempts to get it clarified by Questions to the Department of Health and Social Security have got me nowhere. I received a Written Answer today from the Secretary of State in reply to a Question asking when these legislative changes might come, in view of previous assurances that they would come in this year's Finance Bill. The right hon. Gentleman said:
  "I have nothing to add to earlier statements."
  There have been no earlier statements to which I understand that to have any reference. The only statement was by the Minister of State who said that there would be provisions in this year's Finance Bill. There are no provisions. Decisions are delayed. There has been no announcement about the future of child tax allowances or the position of child benefits.
  There have been leaks—probably well-informed leaks—in the Press. Certainly the social services correspondent of The Times seems consistently to know more about the Government's intentions than Members of Parliament do. The leaks indicate that the Government are locked in conflict about what to do regarding the future of child tax allowances and child benefits.
  If, following this Finance Bill, next year's child benefits are introduced at nil cost to the Treasury—that is, using the same level of public expenditure as on the present family allowances and the present child tax allowances—the level of child benefits next year will have to be set at £ 2·34 for each child, including the first. The Times indicates that £2·50 is being contemplated, and that has been supported by a later leak in The Guardian.
  As the Minister will know—I hope that he will acknowledge this in reply—such a figure would be totally inadequate if that were the only change that the Government proposed to make. I say that for two reasons. First, such a figure

  713
  would mean that standard rate taxpayers with more than two children would be worse off than they are under present arrangements. Secondly, standard rate taxpayers with families would have to bear the entire cost of giving additional support to lower income families and to families with fewer than two children. That is clearly unsatisfactory. Leaks are the best information that we have so far. I hope that the Minister will take this opportunity to dispel those leaks or to make clearer what the Government have in mind.
  These are important matters. It is pointless having a short debate on child tax allowances without some indication where they fit into the Government's strategy. If, as I suspect, the Government have no strategy regarding family poverty and do not know what to do about child benefits, I hope that the Financial Secretary will acknowledge that situation. This debate will then have served as a suitable vehicle to make the Government get a move on and to reach clear decisions which must be reached in a short space of time.
  Mrs. Bain: Like the hon. Members for Ealing, Acton (Sir G. Young) and Rushcliffe (Mr. Clarke), I served on the Child Benefit Bill Committee. I am greatly concerned that the Government have not clarified their overall policy and attitude towards a major question—the poverty trap.
  The Scottish National Party is deeply concerned because of the high level of poverty in Scotland. We want the poverty trap to be eradicated. The West of Scotland has 97·5 per cent. of the worst areas of multiple deprivation. We are keen to support measures which will give people there a reasonable standard of living and rid us of the heritage that we have had for so long.
  The amendment goes part of the way to achieving that aim, because it offsets rising costs and inflation. We should bear in mind that children are now staying on at school after the statutory school-leaving age. We support the amendment.
  Mr. Peter Bottomley: I support the amendment. I should declare that I am perhaps slightly in advance of the Conservative Party in arguing that the child tax allowance should be raised by
  714
  not just £60 or £90, but £430. Doing that for the first child would have the effect of bringing all families with working parents up to the level of the FIS allowance.
  In the pamphlet "The New Corporate Interest" issued by the Child Poverty Action Group, using pre-Budget figures, we see how the tax threshold for families with a member of the household at work compares with the FIS entitlement. If the Government take seriously the problem of child benefit and child poverty and the balance between people on supplementary and State benefits and income from work, they must tell us why they are not taking this form of action now.
  Earlier today I asked the Chancellor of the Exchequer about the relationship between the cost to the Government of a rise in State sector pay, which does not take account of a person's family responsibilities. I received an answer that showed that the Government appear not to have acknowledged this matter in public. If they acknowledged in public what the situation now is. they would no doubt fear an uprising or a division in the country which would make it difficult for them ever to be elected again. If any political party had stood up two years ago and said that it was going to reduce the value of the child tax allowance and the age-related allowance in pensions, certainly it would not have been elected.
  In the last General Election all the major political parties, including the five or six represented in the House at the moment, talked about raising the level of child benefits, tax credits, child benefits, or interim benefits. This has not happened. The Government have a great deal of explaining to do. Just to have inflationary pay increases, without any regard to family responsibilities is continuing a system, which we have had for the past six years, of re-distributing resources away from people with children to those without them.
  Mr. Robert Sheldon: I thought that the debate started off on a very good note when the hon. Member for Hertfordshire, South-West (Mr. Dodsworth) said he welcomed the incomes deal. In view of the reluctance of so many right hon. Members on his Front Bench to give that degree of welcome to the deal, I thought

  715
  that the debate had started well. However, my agreement with the hon. Member did not last long.
  The hon. Member then pointed out that there could be some change in the terms, and one of the changes he wanted to see was in child tax allowances. He went on about the income limit of the child, but as there is an amendment on this matter later, I shall wait until then to deal with it.
  The hon. Member for Ealing. Acton (Sir George Young) pointed out that we have one or two Members of the social security team of the Opposition present, and this is not unnatural in such a debate.
  I was asked about the general intention of the Government for future tax allowances and the child benefit scheme. Clearly I am not able to assess these tax allowances, which will not be decided on until next year and will not be coming into force next year, so I must be excused from making any estimates. The allowances will depend on a whole number of factors, many of which will not be known for some time yet. I urge the hon. Member for Rushcliffe (Mr. Clarke) to curb his impatience.
  Mrs. Bain: I am a member of the social security team of my party. There are many of us who are concerned that there should not be a repetition of the situation which we had on interim family benefit with one-parent families when the parents were not, in fact, benefiting.
  Mr. Sheldon: I urge the hon. Lady to be patient. Her patience will be rewarded. However, I note that she and her party have insatiable appetites, and I do not believe that any Government, even one formed by her party, would be able to satisfy them.
  Mr. Crawford: A Scottish one would.
  Mr. Sheldon: I note the dreams of the hon. Gentleman. They are always refreshing, particularly in a Committee which consists of a fair but limited number of realists. I take note of his observation.
  5.45 p.m.
  Mr. Kenneth Clarke: As the Financial Secretary appears to be saying that the timetable has slipped somewhat compared with last year and therefore he cannot help us today, would he confirm
  716
  that there is still adequate time to legislate in next year's Finance Bill about the future of child tax allowances to enable the Government to bring in child benefits by April 1977? Will the delay lead to the introduction of child benefits being put back?
  Mr. Sheldon: There is no question of child tax allowances not coming into force in the Finance Bill. This timing is a common feature of our Finance Bills when we legislate for the introduction or changes of child tax allowances.
  In these child tax allowances there has been a substantial increase of £60 on all the rates. The hon. Member for Blaby (Mr. Lawson), did not speak to his amendment, which had a consequence of varying the relationship between the various age groups, and the tax relief of the age groups of such children.
  Mr. Nigel Lawson: Since the Financial Secretary has mentioned my amendment, I point out that his Government have changed the relationship. The Minister will see it he does his calculations that this amendment increases the various child allowances by the rate of inflation which has occurred since April 1973, when we had the last Conservative Budget. The amount by which child allowances in this year's Budget fall short is the amount by which the Government have cheated—perhaps that is too strong a word—or deprived the children as a result of inflation.
  Mr. Sheldon: That surely begs the question why it was an ideal arrangement in April 1973. Since the hon. Member has put a date of this kind on it, one must infer that he believes that there was a state of, if not perfection, something much more in accordance with his taste in the relationships between the rates.
  Mr. MacGregor: Will the Financial Secretary acknowledge that one of the reasons for doing this is that older children are rather more expensive to keep and look after than younger children? The same applies to older senior citizens.
  Mr. Sheldon: That is what I thought was the intention of the amendment. The arbitrary date is a rather less important reason than the more fundamental one

  717
  put forward by the hon. Member for Norfolk, South (Mr. MacGregor)
  In these matters I find it very difficult to lay certain guidelines as to why these children at certain ages should receive more in the way outlined in the amendment. Social conditions have changed very considerably in the past dozen or so years. One big change has been the increase in the number of women working, even those who have quite young children.
  It seems to me—and I am not an expert in social security matters—that the biggest drop in income arises when the mother leaves her employment and not only loses her income but increases her responsibility and expense on the birth of her first child. For a long time this has not been considered as a matter worthy of support in any way. Those parents who both work—and when the children are older, both work full time—are not necessarily the most difficult cases. There is less justification in some of these cases for an increase because of their parental circumstances and the advantages in having two incomes.
  I certainly do not have enough knowledge of this problem to attempt to say what should be done with any degree of finality. When we are talking about tax allowances, we must bear in mind that we are looking at these problems in a very superficial way. This is one of the arguments which can be made about the problem of tax allowances—so many of the changes appear to be hit and miss affairs.
  Mr. David Price: Does the Financial Secretary admit that one of the great advantages of the tax credit scheme is that it gets nearer than the present system to being less hit and miss and to solving some of the difficulties bothering him?
  Mr. Sheldon: The hon. Member makes a point about tax credits, but that system has disadvantages. The social security system in general—and I am constantly being upbraided by Conservatives about it—is able to produce the much greater precision which is required and which is missing from the hit and miss affair which is involved in income tax allowances.
  Mr. J. Enoch Powell: The Minister is deploying a very difficult argument when he appeals to the assumed
  718
  higher family income when the children are older. Here we are considering the admittedly rough and ready flat-rate tax allowance which theoretically takes account in the broadest possible way of costs and which is based on the assumption of rising costs. It seems to me illogical to invoke into that argument an assumption of rising income, for the essence of a tax allowance is that it is to meet, however crudely, the expenditure which the taxpayer must surmount before he can enjoy his income. We shall be in great confusion in considering the tax system if whenever we are talking about tax allowances we start invoking considerations relating to income itself.
  Mr. Sheldon: I understand the purist nature of that argument perfectly well, but ultimately what matters is not the purity of the argument but how much money people have in their pockets and how that sum accords with justice. If the right hon. Member is seeking to import into this discussion fundamental differences of principle, so be it. My arguments relate to the amount of money which finds its way into people's pockets, and how that money relates to their needs.
  Mr. Lawson: It is the Financial Secretary who is importing a whole new principle into the argument. What does he believe, on the basis of his principle, should he the allowances for these three age groups? Clearly, the allowances which the Government are proposing—£365 for the child over 16, £335 for the child aged 11 to 16, and £300 for the child under 11—cannot possibly follow from the principles he has enunciated.
  Mr. Sheldon: Our present child allowances do not take into account the problems which would arise if we were to go along the way suggested by the hon. Member for Norfolk, South. The hon. Member for Blaby put his name to the same amendment, but for entirely different reasons. His reasons are that there existed at some time in the past a basis which was right and proper and from which everything else must follow. That is not much of a principle. The principle advanced by the hon. Member for Norfolk, South had something to commend it, and I have tried to point out some of the difficulties and obstacles.
  In these child tax allowances we have tried to concentrate help on the families

  719
  with children by including them in the non-conditional part of the Budget package. That, together with the increases in the family allowances undertaken last year, has brought about an improvement in their position over what it would otherwise have been. It should be accepted in these difficult circumstances as showing that my right hon. Friend the Chancellor has undertaken

  Division No.136.1

  AYES

  [5.57p.m.

  Dodsworth, Geoffrey.

  Johnston, Russell (Inverness)

  Stonehouse, Rt Hon John.

  Evans, Gwynfor (Carmarthen)

  Kilfedder, James.

  Thompson, George.

  Fell. Anthony.

  MacCormick, Iain.

  Welsh, Andrew.

  Fookes, Miss Janet.

  Pardoe, John.

  Wilson, Gordon (Dundee E)

  Freud, Clement.

  Penhaligon, David.

  Grimond, Rt Hon J.

  Reid, George.

  TELLERS FOR THE AYES:

  Henderson, Douglas.

  Ross, Stephen (Isle of Wight)

  Mrs. Margaret Bain

  Hooson, Emyln.

  Steel, David (Roxburgh)

  and Mr. Douglas Crawford.

  Howells, Geraint (Cardigan)

  Stewart, Donald (Western Isles)

  NOES

  Abse, Leo.

  Golding, John.

  Morris. Charles R. (Openshaw)

  Anderson, Donald.

  Gould, Bryan.

  MuIley, Rt Hon Frederick.

  Armstrong, Ernest.

  Graham, Ted.

  Newens, Stanley.

  Atkinson, Norman.

  Grocott, Bruce.

  Noble, Mike.

  Bagier, Gordon A. T.

  Hardy, Peter.

  O'Halloran, Michael.

  Barnett, Guy (Greenwich)

  Harrison, Walter (Wakefield)

  Ovenden, John.

  Barnett, Rt Hon Joel (Heywood)

  Hayman, Mrs Helene.

  Palmer, Arthur.

  Bates, Alf.

  Healey, Rt Hon Denis.

  Park, George.

  Blenkinsop, Arthur.

  Hooley, Frank.

  Pavitt, Laurie.

  Booth, Rt Hon Albert.

  Horam, John.

  Pearl. Rt Hon Fred.

  Boyden, James (Bish Auck)

  Howell, Rt Hon Denis.

  Prentice, Rt Hon Reg.

  Butler, Mrs Joyce (Wood Green)

  Hughes, Rt Hon C. (Anglesey)

  Radice, Giles.

  Callaghan, Rt Hon J. (Cardiff SE)

  Irvine, Rt Hon Sir A. (Edge Hill)

  Richardson, Miss Jo.

  Cant, R. B.

  Irving, Rt Hon S. (Dartford)

  Robinson, Geoffrey.

  Cartwright, John.

  Jackson, Miss Margaret (Lincoln)

  Rooker, J. W.

  Castle, Rt Hon Barbara.

  Janner, Greville.

  Roper. John.

  Clemitson, Ivor.

  Jay, Rt Hon Douglas.

  Rose, Paul B.

  Cocks, Michael (Bristol S)

  Jenkins, Hugh (Putney)

  Sandelson, Neville.

  Coleman, Donald.

  Jenkins, Rt Hon Roy (Stechford)

  Sedgemore, Brian.

  Colquhoun, Ms Maureen.

  John, Brynmor.

  Shaw, Arnold (Ilford South)

  Corbett, Robin.

  Jones, Barry (East Flint)

  Sheldon, Robert (Ashton-u-Lyne)

  Cox, Thomas (Tooting)

  Judd, Frank.

  Short, Rt Hon E. (Newcastle C)

  Cryer,Bob.

  Kelley, Richard.

  Silkin, Rt Hon John (Deptford)

  Cunningham, Dr J. (Whiteh)

  Kilroy-Silk, Robert.

  Silkin, Rt. Hon S. C. (Dulwich)

  Davidson, Arthur.

  Kinnock, Neil.

  Silverman, Julius.

  Davies, Bryan (Enfield N)

  Lamborn, Harry.

  Small, William.

  Davies, Denzil (Llanelli)

  Latham, Arthur (Paddington)

  Snape, Peter.

  Davis, Clinton (Hackney C)

  Leadbitter, Ted.

  Spearing, Nigel.

  Deakins, Eric.

  Lever, Rt Hon Harold.

  Stallard, A. W.

  Dean, Joseph (Leeds West)

  Litterlck, Tom.

  Stoddart, David.

  Dormand, J. D.

  Luard, Evan.

  Strauss, Rt Hon G. R.

  Douglas-Mann, Bruce.

  Lyon, Alexander (York)

  Taylor, Mrs Ann (Bolton W)

  Duffy, A. E. P.

  Lyons, Edward (Bradford W)

  Thomas, Mike (Newcastle E)

  Dunn, James A.

  McCartney, Hugh.

  Thomas, Ron (Bristol NW)

  Dunnett, Jack.

  Macfarquhar, Roderick.

  Tinn, James.

  Edge, Geoff.

  McMillan, Tom (Glasgow C)

  Tomlinson, John.

  Edwards, Robert (Wolv SE)

  McNamara, Kevin.

  Walker, Harold (Doncaster)

  Ellis, John (Brigg & Scun)

  Madden, Max.

  Walker, Terry (Kingswood)

  English, Michael.

  Magee, Bryan.

  Ward, Michael.

  Evans, Ioan (Aberdare)

  Mallalieu, J. P. W.

  Weitzman, David.

  Ewing, Harry (Stirling)

  Marks, Kenneth.

  White, Frank R. (Bury)

  Faulds, Andrew.

  Marquand, David.

  Whitehead, Phillip.

  Flannery, Martin.

  Marshall, Dr Edmund (Goole)

  Willey, Rt Hon Frederick.

  Fletcher, Raymond (Ilkeston)

  Marshall. Jim (Leicester S)

  Williams, Alan (Swansea W)

  Foot, Rt Hon Michael.

  Maynard, Miss Joan.

  Williams, Alan Lee (Hornch'ch)

  Fowler, Gerald (The Wrekin)

  Mellish, Rt Hon Robert.

  Williams, Rt Hon Shirley (Hertford)

  Garrett, John (Norwich S)

  Mendelson, John.

  Wise, Mrs Audrey.

  George, Bruce.

  Miller, Dr M. S. (E Kilbride)

  Gilbert, Dr John.

  Miller, Mrs Millie (Ilford N)

  TELLERS FOR THE NOES:

  Ginsburg, David.

  Molloy, William.

  Mr. James Hamilton

  and Mr. Joseph Harper.

  Question accordingly negative.
  to put money where he feels it to be of greatest use. We have been striving to get a kind of balance of advantages between those with children and others, and I believe that we have struck a pretty reasonable balance.
  Question put, That the amendment be made:—
  The Committee divided: Ayes 22, Noes 147.
  6.0 p.m.
  Mr. Newton: I beg to move Amendment No. 56, in page 15, line 15, at end add—
  '(3) In paragraph (b) of Section 8(IA) of the Taxes Act, after "upwards", there shall be added "or by a person who proves that she was at any time in the year of assessment a widow"'
  The Deputy Chairman (Sir Thomas Williams): With this we are to discuss the following amendments:
  No. 57 in page 15, line 15, at end insert—
  '(3) In section 8(1) of the Taxes Act, after paragraph (a) there shall be inserted the following paragraph:
  "(aa) in the case of a claimant who is a widow and an employed or self-employed earner, to a deduction from the income tax with which she is chargeable equal to income tax at the basic rate on £860 ".'
  No. 60, in page 15, line 15, at end add—
  '(3) In section 16 of that Act (dependent relative), for the reference to £ 145 there shall be substituted a reference to £250'
  No. 83, in page 15, line 15, at end add—
  '(3) In section 16 of the Act (Dependent relatives) for "£100" there shall be substituted "£145" throughout'.
  No. 84, in page 15, line 15, at end add—
  '(3) After subsection (2) of section 12 of that Act (Widower's or widow's housekeeper) there shall be inserted the following subsection:—
  "(3) This section shall also apply to any other person entitled to relief under section 14 below".'
  No. 92, in page 15, line 15, at end add—
  '(3) In paragraph (b) of section 8(IA) of the Taxes Act, after "upwards", insert "or in the case of a woman that she was at any time within the year of assessment of the age of sixty or upwards."'.
  Mr. Newton: This group of amendments is essentially concerned with the position of women within the tax system in one guise or another—as widows, single women over 60, or single women caring for dependent relatives.
  I refer first, as it is particularly relevant to these amendments, to what the Financial Secretary said in reply to the last debate about the general problem of tax allowances. I took it that he was accepting the proposition which I would
  722
  support—that the situation regarding personal tax allowances of all kinds within our tax system is on the verge of becoming a complete and utter shambles.
  This is not simply because of the interaction of child tax allowances and the proposed child benefits, or the situation with the main personal allowances, but also because so many of the small personal allowances, some of which are included in the amendments and others, such as the allowance for the blind and the housekeeper allowance, which are not even covered by amendments on the Order Paper, have been amended ad hoc over the last few years in a way which bears no relation to a coherent approach to helping people through the tax system or to a balance between one kind of allowance and another. They seem rather to have been decided by a bias for the groups we are concerned about, or other groups, or by pressure leading to something being done on one of the allowances as, for example, with the allowance for the blind last year.
  Whatever else may be said about our tax system and whether we go along with the argument of the Financial Secretary that we should look to the social security system rather than to the tax system to solve these difficulties, it cannot be sensible to allow this muddle to continue without seeking a coherent look at this set of tax allowances and deciding whether some of them might be scrapped and replaced by social security benefits, as the Financial Secretary believes, or, alternatively, bringing them up to date, putting them into coherent balance and trying to keep them in line with inflation. But we should not allow the present muddle to continue.
  Over the period since becoming a Member of this House early in 1974, I have spoken many times during the passage of three successive Finance Bills on each of the issues raised in these amendments. For that reason, I shall not take up a great deal of the Committee's time today.
  The issues on which I wish to comment are four in number. The first arises in Amendment No. 56, which would extend the existing age allowance which we were discussing just now to widows. The second arises in Amendment No. 57, which again concerns widows and would have the effect of extending to widows

  723
  with earnings over and above their pensions a personal allowance which is in effect half way between the single personal allowance and the married personal allowance after the Chancellor of the Exchequer has implemented his conditional tax allowances later in the passage of the Bill.
  The third issue concerns Amendment No. 60, which would raise from £145 to £250 the allowance for single women caring for dependent relatives. The fourth issue arises on Amendment No. 92, which would extend the age allowance which at present goes only to taxpayers, whether male or female, over 65, to women between the ages of 60 and 65 who are past the normal retirement age for women but who have not yet reached the age of 65 and do not at present qualify for the allowance.
  There are two strands in the argument in respect of widows. One is the broad argument about the social position of widows. This is a matter which divides me and the Financial Secretary, though I suspect that most other hon. Members are of my view. It is that, although widows technically are single people, they are not for any realistic, practical social purposes in the same position as single people.
  They have been married and have acquired a pattern of married life with the housing which has probably gone with married life and with the social commitments and other aspects of their pattern of life related to their status of being married. When they become widowed, they are not back in the situation of a single person.
  That is not recognised by our tax system, and it should be because, especially in terms of housing, many widows will have larger financial commitments arising from their former married state than if they had always been single. It is arguable whether the tax system should recognise this, and it is not a matter which can be proved. But I believe that the tax system should recognise it, and I should like to see it go down this path.
  That brings me to Amendment No. 56, which is the broadest and certainly the most expensive of the amendments. It would extend to widows as a class the
  724
  same benefits at present going to people over the age of 65 as a class. There are strong arguments for this, and they were advanced powerfully on Second Reading by a Government supporter, the hon. Member for Gravesend (Mr. Ovenden). I thought that he put the case very well, and this amendment would implement his suggestion.
  6.15 p.m.
  But I can appreciate, if it is expensive and because it is so broad, that the Financial Secretary may feel that the worries of the country's financial position preclude him from being generous in this respect. That being so, I press on him even harder Amendment No. 57, which is directed to the second strand in the argument about widows. It is not a broad one about their position as widows. It is a narrow and specific argument about their tax position as soon as they earn any additional income.
  What happens is that, if they earn additional income, they go straight into the full standard rate of tax. On every £1 that they earn, they lose the full 35 per cent. Their tax position appears to be markedly worse because of the operation of the tax system than that, for example, of married women or other single people alongside whom they work. It is a situation which causes great bitterness amongst many widows. There is no doubt that it discourages many of them from bothering to work. It leads to many of them feeling that it is virtually pointless to work, and they feel extremely bitter about the way that the system treats them if they decide to work and help themselves rather than rely on social security benefits or whatever else the Financial Secretary sees as an alternative.
  At the risk of being accused again by the Financial Secretary of using excessively strong language, I wish to make a very strong comment about the way that the Chancellor of the Exchequer dealt with this matter in his Budget Statement. I apologise in advance for reading a rather lengthy extract from it.
  The right hon. Gentleman was obviously aware of the kind of argument which I have been advancing, and he sought to meet it. He said:
  "The single allowance is given to widows as well as to single women pensioners under the age of 65 and, if I am able to increase it as I hope, it will be sufficient to cover the

  725
  standard rate of national insurance pension payable in 1976–77. If not, when these women have only the standard pension and no other income, they will still be kept out of tax liability. This is because the Inland Revenue does not in these cases assess small amounts of tax, and to save administrative costs it is now proposing to increase the limit of this assessing tolerance from £10 to £30. The new limit will be sufficient to cover the difference between the standard pension and the single allowance.
  This will mean in practice that, even if I am unable to make the proposed increase in the single allowance, assessments will not be made on this class of pensioners if they have no other income. So these widows and single women pensioners under the age of 65 with no other income will have their tax anxieties relieved."—[Official Report, 6th April 1976; Vol. 909, c. 275–6.]
  The only word for that is "rubbish", and there are three comments to be made about it. The first is that those words bring out more clearly than any other part of what the right hon. Gentleman has said or done the extent to which the TUC, as a result of this pay deal, has been handed power to determine tax allowances which should have been decided on their own merits because they affect people who have no part in the negotiations with the TUC. That their position in this matter should be left dependent on the outcome of these negotiations is one of the more deplorable aspects of the way that this matter has been handled.
  Having put it in that form, for the Chancellor of the Exchequer to say that, if the TUC does not allow widows and single women under the age of 65 to have the necessary tax reliefs to cover the increase in their pensions, as an act of administrative charity by the Inland Revenue the Government will let them off small amounts of tax is to add insult to injury. It is not the kind of approach to which any Chancellor of the Exchequer should lend himself.
  To suppose that this will resolve the tax anxieties of many widows and single women aged between 60 and 65 is sheer nonsense. It will still mean that they will be facing an extremely discouraging burden of tax as soon as they begin to earn a penny over and above their pensions.
  For those reasons and many others, which I will not touch upon, I believe that this amendment, which would extend specifically to widows an additional per-
  726
  sonal tax allowance calculated to be half way between the normal single allowance and the married allowance, should be considered seriously. I hope that it will be received sympathetically by the Government.
  I want to say a word about the other groups covered by my amendment—women with dependent relatives, that group of people in our community who have made great sacrifices, very often over many years, to look after a relative who may be very ill or very elderly, who have forgone many advantages they should have had as a result, and whose position has been recognised in the tax system by the special allowance which is at present £145
  That allowance has not been altered for many years. I have not attempted to calculate my own figure on the basis of inflation. It is simply an increase designed to mark the fact that it has been a long time since there was a change. This group deserves special consideration from this House. It has had it in the past, but not often enough in recent years, and I put forward my view that this allowance should now be increased to mark the passage of time and the erosion of inflation. It is a very modest increase I am proposing. It would by no means solve the problem, but there is a very strong case to be made for it.
  Finally, there is the position of women over 60. Amendment No. 92 relates to the same issue that I discussed when we were talking about the investment income surcharge on Tuesday evening. The Financial Secretary and most people present in the Committee know my view that there is no justification for withholding from women over 60, the normal retirement age for women, the benefits which go to other retired taxpayers at the age of 65. The more I think about this, although the Financial Secretary has resisted it in the past, the more convinced I am that it is right.
  There can be no other justification for this age allowance than the fact of retirement. There is no point in a tax allowance solely related to age. If one argued that, one could say that the problems of young married couples with children are greater than the problems of those reaching the age of 65. It is the fact of retirement, not the age of 65, which justifies an additional tax allowance. Once

  727
  one accepts that the concept of retirement and not the fact of the age of 65 as the retirement age is one of the crucial factors in this, it is impossible to justify a situation in which we are not paying this same benefit to women at their present retirement age of 60
  I am not convinced by the argument that this is something which is wrong with the social security system and that we ought to change the retirement ages. That may be right and I think that we should move towards a common retirement age in time. The biggest piece of discrimination in the whole tax and social security system is the discrimination in favour of women by earlier retirement, but this will not be changed this year or next; it will be some time before we can decide the right way to solve this problem.
  Meanwhile, what we do between the social security system and the tax system is drop single women between the age of 60 and 65 into a sort of hole in the tax system in which they are neglected and forgotten in terms of their real needs until they reach the magic age of 65. I do not believe that this is satisfactory or right, and I hope that the Financial Secretary will find it possible to say something sympathetic about it today.
  Mr. Kenneth Clarke: I have added my name to that of my hon. Friend the Member for Braintree (Mr. Newton) on Amendments Nos. 56, 57, 60 and 92. As he so ably and effectively said in presenting them, the first thing which they have in common is that they all concern categories of women taxpayers—widows, single women with aged dependants, and women pensioners over the age of 60 but below the age of 65. These people also have a further feature in common other than their sex. That is that they have been chosen because they are hit acutely, more than the generality of taxpayers, by the low threshold for tax and the high standard rate of tax from which the whole taxpaying public is suffering to a considerable extent at the moment.
  Another feature which they have in common is that most of the taxpayers within these three female categories are also single, and I should like to relate my remarks first to the choice which the Chancellor and the Government have made in their present Finance Bill between
  728
  the married taxpayer on the one hand and the single taxpayer on the other.
  As I acknowledged in the brief debate we had a few moments ago, I feel there is a very good case to be made for helping further the family taxpayer. One could make a compelling case that in recent years the position of the taxpayer with family responsibilities and children has been changed disadvantageously compared with that of single taxpayers, who have got away comparatively lightly in very difficult times. Therefore I accept that in looking for tax changes and concessions it is right at the moment to seek to give priority to families, but if the whole Committee, or substantial parts of it, agrees with that judgment, that priority is on the whole to go to families and not so much to the single taxpayer, that choice can only be applied in practice if one discriminates very carefully among those who are now treated as single taxpayers, and tries to do something for that minority of them who would be unfairly affected.
  Those single taxpayers who can still take a greater share of the burden than married taxpayers are the young, the unmarried, often living at home with their parents, with smaller commitments, and who on the whole have been less affected than many others by rising economic difficulties and the increasing burden of taxes.
  These three categories—widows, single women with aged dependants, often parents for whom they are caring, and women pensioners over the age of 60 and below the age of 65—are not people to whom to look to take a greater share of the burden. If we are to remove part of the tax burden to the single and young from the family, then that seems to me to make the case for special and careful treatment for these categories of people, who are single taxpayers at the moment.
  My hon. Friend the Member for Braintree made the point about widows, a case he has urged before, indicating why he feels that these people should perhaps not be treated as single taxpayers at all, certainly if the single are not to be favourably treated in the next Budget or two. It seems to me that, in addition to the general case which he has already made, the position of widows does highlight the problem that is arising with the increase in national insurance pensions and benefits now bringing many benefits up to and

  729
  beyond the level of tax thresholds at which people start paying income tax.
  The gap between national insurance benefits and tax thresholds has narrowed very rapidly, and it is among widows and women over 60 that the gap has almost, if not completely, closed. That means that a widow receiving a national insurance widow's pension finds that the pension exhausts almost her entire tax allowance, so that every penny she earns above her pension, or every penny that comes from savings which may have been set aside, is immediately charged the full standard rate of tax, 35 per cent.; and if she is working she is also subject to earnings-related national insurance contributions, which take the level well over 40 per cent. That is felt as a special injustice by widows.
  The Chancellor tried to deal with the possibility that this Budget would, for the first time, take widows' pensions above the tax threshold. He did so in the absolutely nonsensical passage which my hon. Friend the Member for Braintree has just read and which I had marked as quite the silliest passage in the very long Budget Statement. It is no consolation at all to those who find their national insurance benefit is at the tax threshold or above it to say "If you have no other earnings we will not bother to collect the small amount of tax that your pension has now made you liable for". The pension for widows would have exceeded the tax threshold if the trade union negotiations had broken down completely, and this approach to that situation will not succeed because the problem will recur.
  National insurance benefits are inflation proof; they are related to prices automatically each year by statute; and every Budget includes an announcement that these national insurance benefits are being raised by certain amounts to compensate for inflation. Tax allowances are not similarly inflation-proofed.
  6.30 p.m.
  The result is that widows and women pensioners over 60 are the first of the national insurance beneficiaries who will go through the tax threshold if this process continues. Apart from the punitive effect on widows, since every penny of their earnings above the pension is subject to the standard rate of tax, it is also nonsense because it leads to the State giving with one hand in terms of national
  730
  insurance pension, and with the other hand taking away in tax. They are treated as single people when, in reality, they require special treatment. Since the tax credit scheme is not now to come into operation something must be done to make sure that widows are given special tax allowances to create a gap between the allowance and national insurance benefits.
  My hon. Friend the Member for Braintree has made the general case for special treatment for widows. Widows inherit certain commitments from their spouses and are in no way similar to single people. It must also be remembered that widows of 40 or 50 have been off the labour market for a considerable period of time. If they are suddenly faced with the prospect of having to go back to work following bereavement it is difficult for them to obtain employment and they tend to drift into lower-paid employment. This is the case for paying national insurance widows' pensions. It is not possible to say in logic that there is a case for paying them a pension but no case for giving any special treatment to them on tax. I emphasise that widows are not on all fours with other single people, and the case for special treatment is acute.
  I should like to give one illustration as it affects a widow living in my constituency. Problems of this nature are brought home to me week by week and involve widows who do not understand the tax situation and who are enraged by their treatment. The widow of whom I speak has a widow's pension and a small occupational pension arising from her former husband's previous earnings. That gives her a certain amount of additional income. In 1972, in addition to her national insurance pension, her occupational pension brought her in a sum of £370 each year. In 1972 she paid no income tax whatever because in 1972 she was below the tax threshold. That annuity has now been raised to £591 per year, but she now pays on it income tax of £160 per annum. The result is that in the last four years her occupational pension has been raised by £221, but only £61 has been left to her after tax. The increase in occupational pension is supposedly inflation proof, but the effect of tax thresholds and tax increases has been such that, in reality, she receives no

  731
  benefit from that inflation proofing. I submit that that case, which is not an isolated one, creates great resentment among such widows.
  I do not want to dwell on the case of the single woman and her dependants whose allowance has not risen in line with inflation and who has been badly hit because the case has been so well made and amply illustrated by my hon. Friend the Member for Braintree. Obviously, people whose tax allowances are not keeping in line with inflation find themselves hard hit by the present standard rate of taxation.
  Let us also consider the situation of the pensioner who is over 60. Such pensioners do not receive the age allowance till they are 65. Obviously, the age of 65 is chosen because it is the retirement age for pension purposes. One is saddled with the situation that in this respect difficulties arise because the age of 65 is not the retirement age for women but only for men, so that women below the age of 65 feel themselves quite unfairly taxed on any savings that might supplement their pensions.
  I accept that in all these debates it is possible to single out a category of taxpayer and to emphasise how hard those taxpayers are being hit by taxation. Indeed, the generality of taxpayers at present are being badly affected, and it is easy to pick upon individual cases. Surely, however, in the categories that we are now discussing, particular problems are being experienced and the Government should face them and do all they can to help. The Government surely should seek to help widows as opposed to the single taxpayer in general.
  The truth is that widows are now being forced into that growing number who feel that it is pointless to carry on working in order to provide for themselves or to try to be thrifty. Therefore, I hope that the Government will try to give special help to them and to the other limited categories of people specified in the amendments.
  Mr. Lawson: My hon. Friends the Members for Braintree (Mr. Newton) and Rushcliffe (Mr. Clarke) have spoken cogently on these amendments. I should like to deal briefly with one or two points
  732
  to which they have not addressed themselves.
  I wish to draw attention to Amendment No. 83 which, in turn, bears on Amendment No. 60. My hon. Friend the Member for Braintree suggested that dependent relatives should be assisted by raising the figure from £145 to £250. My amendment seeks to underline the needs of men who support dependent relatives.
  I wish to draw attention to certain anomalies in the present system. I have before me the case of a constituent who happens to be a servant of this House and who is now maintaining his elderly widower father. He feels that it is wrong that he should be given an allowance of only £100 when a woman who maintains an elderly dependent relative receives £45
  It will be remembered that the present Prime Minister in 1967, as the then Chancellor of the Exchequer, introduced the differential rate between men and women who supported dependent relatives. The right hon. Gentleman then said that most of the people who found themselves in this situation were women. That is true to a large extent, but it is a little unfair that no attention is paid to those men in our community who have the task of looking after dependent relatives.
  The other argument deployed at that time was that women's wages were generally less than men's and therefore it was said that women needed the extra allowance. I believe that it is a somewhat odd principle in these days of the Equal Pay Act, the Sex Discrimination Act and the Equal Opportunities Commission, that there should be a differential between the situation of men and women in caring for dependent relatives. Therefore, I hope that the Minister will be able to accept my modest amendment.
  The other amendment to which I should like to draw attention is Amendment No. 84, which the Minister may feel is a trifle obscure. I must reassure the Minister that, if the amendment were to be accepted, on Report we should need to table a consequential amendment to delete Section 12(1)(iv) of the Taxes Act. I am sure that the hon. Gentleman knows what I am talking about.
  Amendment No. 84 is of a probing nature, but its purpose is to extend the

  733
  housekeeper relief to a hard-hit category of people. It includes not merely widows but also single-parent families, divorced parents with children, and so on. I must tell the Minister that the situation in the United States in this respect is very much more generous than is the situation in this country. I understand that in the United States the single-parent family, in cases where the parent is in full-time work, is allowed to deduct from tax the cost of child care. Will the Minister comment on the possibility of such a process being introduced into our taxation system?
  There seems to be a curious anomaly between Section 12 and Section 14 of the Taxes Act, I hope that the Minister will be able to explain it. Section 14 contains reliefs for widows and widowers with children, parents with an incapacitated spouse, divorced parents with children, and single parents in full-time work. Section 12 relief applies only to widows and widowers and is not extended to these other categories, so there is an inconsistency and an anomaly on which I hope the Minister can shed light.
  Finally, on the general point lying behind the amendments in the group, first, we suggest relief for particular categories of people. A good case has been made out for the hardship they suffer, and there should be an improvement for them in money terms, at least in the relief they get, merely to keep pace with inflation. Within our tax system we have a whole range of reliefs for different sorts and conditions of men and women and at the present time, with inflation, in each Budget the Government picks on one or two categories. One year there will be an increased allowance for the blind and another year one for widows, or the age allowance may be increased a little.
  In the Finance Bill we tend to concentrate on those things which have been increased, but, in real terms, in each Finance Bill that comes along a whole group of allowances is cut. We should be focusing on those, because unless they were really necessary they would not be in the tax system. I hope that the Minister will appreciate that this is a very good reason for having a system under which everything is automatically index-linked, with all reliefs, allowances
  734
  and discretionary changes above this being justified by the Chancellor.
  On a general point, the Minister has said that he is in favour of dealing with all these problems through the social security system and not through the tax system because, he says, the tax system is a hit-or-miss affair, whereas the social security system has greater precision. I am not sure what he means. In our taxation system we have a considerable array—a battery—of reliefs for different sorts and conditions of men and women, and this is no less precise than the social security system. I suspect that the hon. Gentleman is thinking about the supplementary benefit system, in which an attempt is certainly made to tailor everything precisely. The hon. Gentleman shakes his head. There is no reason why the tax relief for, say, the blind should be any less precise than a social security benefit other than supplementary benefit.
  The difficulty over precision under the supplementary benefit system has been well set out by the present Chairman of the Supplementary Benefit Commission, Professor Donnison, who said recently:
  "Though supplementary benefits account for only 13 per cent. of all social security payments, the staff allocated to dealing with it at local level accounted for about half of those administering the entire social security system."
  It is not merely the public expenditure involved in the highly complex, very detailed and tailored social security, which we have to bear in mind we cannot afford; there comes a certain point beyond which the more precise and tailored a system is, the more people believe it to be unfair. Few people consider that the tax allowance system for children is unfair, but when they see a system in which everything seems to be very precisely detailed and tailored to a particular instance, and find there are very arbitrary dividing lines, on one side of which benefit is secured under social security while on the other it is not, they feel that the system is thoroughly unfair. There is a great deal of resentment and feeling against the social security system in this country today, much of it justified. The hon. Gentleman and the Government he represents ought to take that on board before considering that the right way to proceed is to have more done through

  735
  the social security system and less through taxation.
  Mr. Richard Luce: I want briefly to support my hon. Friends who have moved amendments seeking to improve the position of widows. The main burden of the argument so well put by my hon. Friend the Member for Braintree (Mr. Newton) is that when a husband dies the widow maintains exactly the same commitments—particularly if there are children—as a married woman, without having the benefit of her husband's salary. In all likelihood she is going to have to maintain a larger house than the ordinary single woman. She is in all likelihood going to have to pay the mortgage, rent or rates of a married woman, electricity and gas bills, insurance for the house, the cost of running a car, and the expenses of a child—which a single woman does not have to undertake. This is really the key part of the argument. It is true that on top of her personal allowance she will get an additional allowance designed for single parents, and if she has a child she will get the child allowance, but then one has to look at the tax threshhold—and, as my hon. Friend the Member for Braintree has said, the moment she starts to work, part-time or otherwise—if she can manage to do so—she is penalised in terms of taxation.
  6.45 p.m.
  The evidence shows that the widow's position in relation to, for example, the working married woman is an extremely unfair one. This is the key part of the argument put forward by my hon. Friends the Members for Braintree and Rushcliffe (Mr. Clarke), because, looking at the position of an earning married woman, we find, first, that the married man's allowance is based on an allowance for two people. We also find—I do not argue against it—that if a married woman wishes to go out to work, she gets an earnings allowance for doing so. Therefore, the widow, particularly if she wishes to go out to work, is unfairly treated compared with the married woman. In all likelihood, she has the same commitments, particularly if there are children, and yet she is penalised in relation to a married woman. For that reason the very powerful argument put forward by
  736
  my hon. Friend should be accepted by the Government.
  Mr. MacGregor: I do not wish to add to the general argument that has been so admirably put by my hon. Friend, except to say that on this point, like my hon. Friend the Member for Rushcliffe (Mr. Clarke), I very much agree that one of the difficulties with which we are increasingly faced is that of the widow trying to stand on her own feet and to earn her own income by going out to work and then wondering why she bothers. Many widows write to me pointing out that they could as easily get from social security almost as much as the net income they get from working. They cannot see the point of a system that brings about such a situation. These women go to work because they have pride and wish to stand on their own feet, but theirs is certainly a problem to which we should address ourselves more and I am glad that the amendments raise this point.
  On Amendment No. 84, the point I wish to make follows one made by my hon. Friend the Member for Blaby (Mr. Lawson), because it is in the context of an age in which equality of sex treatment is to be admired and sex discrimination is to be deplored. I do not expect the Financial Secretary to be able to say much about it at this time, but I hope he will take it on board and think about it. My point relates to widows and widowers, and the housekeeper allowance. Last year I discovered for the first time that a widower's allowance is given if the housekeeper is female but not if the housekeeper is male. In other words, it is not given if a widow has a man living in the home doing the kind of work that the husband had previously done.
  The position was put rather well by one of my constituents, who said a male widow receives preferential treatment in that he gets an allowance for a woman around the house, but a woman does not get an allowance for having a man about the house; she can have only another woman. She adds:
  "You must agree that having two women in a kitchen never works."
  I had not appreciated this. I took the matter up with the Chairman of the Inland Revenue, who explained the historical situation. The housekeeper

  737
  allowance was originally meant for men with families where there was no mother—where a housekeeper was needed to look after the children.
  In this day and age, when there is supposed to be no sex discrimination, this is an anomaly that ought to be put right. I hope that the Financial Secretary will not put it right by withdrawing the housekeeper allowance for widows or widowers. I understand that the Royal Commission on Taxation advocated this in 1955. In an age when many widows and widowers find that they need such help, the allowance enables them to continue to afford it.
  Will the Minister address himself to the point that widows are surely entitled to have a housekeeper, too, and if they choose to have a male one it is reasonable to give an allowance for this? I am sure that such a concession would cost only a minimal amount.
  Mr. Robert Sheldon: We have had a wide-ranging debate and have discussed many amendments. Perhaps I may start by referring to the hon. Member for Rushcliffe (Mr. Clarke), who pointed out a number of problems that followed from the interaction between benefits and tax thresholds. I could not agree with him more. This is a problem that the House has to face when, particularly at times of Finance Bills, it asks for further allowances to meet individual specific cases.
  The hon. Member for Blaby (Mr. Lawson) is guilty of this when he asks in Amendment No. 84 for a housekeeping relief to everyone with single-handed responsibility for a child. He wants the additional personal allowance to be augmented by a household allowance, which was essentially for domestic service. I understand this argument, but the Government have to face the problem that if we were to proceed along this path we could end up having two social security systems side by side, one of which was precise and more exact, because of the greater information that the social security people have on the problems in this area, and the other which was inexact and was concerned only with the tax allowance aspect.
  Mr. Lawson: Not on the general point, but on the narrow point that the Minister raised in regard to Amendment No. 84, he said that there was a danger of
  738
  having two different social security systems side by side. Does he agree that, in a sense, there are two different tax systems side by side, because the coverage of Section 12 reliefs is different from the coverage of Section 14 reliefs? Can he explain why this is so?
  Mr. Sheldon: The hon. Gentleman is trying to obtain both reliefs for the same individuals. That is the problem.
  Mr. Lawson: Why is it a problem?
  Mr. Sheldon: The additional personal allowance was given for precisely the kind of problems covered by the hon. Gentleman—that is, single people with children and responsibility for children. The hon. Gentleman is seeking to provide extra money for such people. If that is his intention there are two simple ways of meeting his objective. He could either do something about the child tax allowance or table amendments concerned with additional personal allowance. These are open to him, but he has chosen not to do so on this occasion.
  This proposal would lead to an incredible increase in complexity. In view of the other kind of amendments that are frequently put forward, we could, if we were not careful, have two parallel social security systems, one of which was extremely imperfect, arbitrary and imprecise in its impact, and the other which was tailor-made.
  When I talked about precision in social security the hon. Member for Blaby said that there was precision only in supplementary benefits. He went on to say that precision is bad and that this is the trouble at the moment, whereas previously he was arguing that there was no precision at all in supplementary benefits. I leave it to the hon. Member to sort out his differences with himself. What I am concerned about is to make sure that we have one social security system which provides for the special needs of these people and, also, a tax system that is organised on the basis of ability to pay tax.
  Mr. Lawsonrose—
  Mr. Sheldon: If the hon. Gentleman will let me get a little further I shall gladly give way. I am always happy to give way to him, but not every two minutes.
  Mr. Lawson: The Minister is attacking me.
  Mr. Sheldon: The hon. Gentleman suggests that I am attacking him. I am only pointing out the inadequacy of his arguments. He has had plenty of time to put them to the Committee this afternoon.
  If I could make some progress, I would turn to the point made by the hon. Member for Norfolk, South (Mr. MacGregor). The hon. Gentleman made a particular point about the historical bases for some of these allowances. I agree with him that many of them are historical, and that some are not quite so relevant today as they were when first introduced. I understand perfectly clearly the problems that the hon. Gentleman has in mind, but a number of the allowances that we have been discussing have to do with the element of domestic service, and this was something that was extremely important and relevant in the years when those allowances were first introduced. Their importance and impact have declined during the passage of the years and, as a result, a number of these allowances have not been increased for this very reason.
  Amendment No. 56 calls for the age allowance to be made available to the widow under 65 years of age. The anomaly is cited of the widow who, at the age of 60, gets her retirement pension but is not eligible for the age allowance until she reaches the age of 65, whereas a man is eligible for both the age allowance and the retirement pension at the same time. I know the problem that this causes. However compassionate we may wish to be, there is a difficulty about discussing matters concerning widows. We all know of extremely difficult and heartrending cases and yet, at the same time, we know full well of the inability of the tax system, as we have it, to meet these precise problems.
  One of the first aspects of this problem arises in making the comparison between widows and widowers. This is the sex discrimination aspect, mentioned by the hon. Member for Norfolk, South. We have all had experience of men who have recently lost their wives and who find it difficut, sometimes impossible, to continue their way of life and to look after themselves. The comparison between the widow and the widower is one that has to be made. There are
  740
  those who say that the final solution must be the narrowing of the gap between the treatment accorded to one and the treatment accorded to the other. We must also consider the problems of divorced, separated and single women and of those whose husbands have left them, sometimes in harrowing circumstances. Our sympathy and understanding for widows is undiminished, but I find it impossible to accept the amendment.
  7.0 p.m.
  Amendment No. 60 would cost only £4 million, but the case for increasing the dependent relative allowance has not been accepted for a long time. There has been no increase for the past nine years, and this allowance is not generally regarded as quite so relevant as it once was. First, the State pension occupies a more prominent part in the income of those concerned. Second, there are more opportunities for work for those concerned. The change in the social scene has had its impact on this allowance. This has impressed upon the present Government and previous Governments the smaller degree of importance that should be attached to it. So there has been no increase during this period.
  Amendment No. 83 refers again to the problem of men being treated the same as women. I referred to this in what I said about the hon. Member for Norfolk, South. There is not much more that I can add. The dependent relative allowance for a claimant other than a single woman who supports a dependent relative will, if the amendment is accepted, increase from £100 to £145 and will be the same as that for the single woman. There is a little more to commend this, because there would be equality of treatment, but the cost would be £12 million, which is rather higher than the arguments for the amendment might have suggested. For that reason, and the general reasons that I have given, it cannot be accepted. I hope that the House will reject all these amendments.
  Mr. Kenneth Clarke: The Minister has not dealt with the case of women pensioners under 65 and their inability to have the age allowance. He began on that subject but immediately changed to talking about widows and widowers—a subject that seemed to relate to a separate amendment.
  Mr. Lawson: The Minister seemed to think that there was confusion in my mind because I said that there was a sense of great unfairness about certain parts of the social security system and that the reason was greater precision. If he is not aware that the greatest sense of unfairness concerns the workings of the supplementary benefits system, which is where the attempt at precision is greatest, he is aware of nothing in the whole area of social security payments.
  Amendment negatived.

  Sir MYER GALPERN in the Chair
  Mr. Lawson: I beg to move Amendment No. 61, in page 15, line 15, at end add£
  '(3) In section 10 of that Act (children), for any reference to £115 there shall be substituted a reference to £300'.
  Mr. Deputy Speaker: I understand that it will be convenient to discuss at the same time the following amendments:
  No. 62, in page 15, line 15, at end insert:
  '(3) In section 10(5) of that Act (children) for "£115" there shall be substituted "£365"'
  No. 93, in page 15, line 15, at end insert:
  '(3) In section 10 of that Act (Children) for any reference to £115 there shall be substituted a reference to £320'
  No. 88, in page 15, line 15, at end insert:
  '(3) For the purpose of paragraph (a) of subsection (2) of section 14 of that Act, subsection (5) of section 10 of that Act shall be interpreted as if "the appropriate amount" were the sum of the appropriate amount and the amount on which the deduction under subsection (2) of section 14 of that Act is calculated'.
  Mr. Lawson: I am delighted that we now have the Chief Secretary in the Chamber. I assume that he will answer this debate. I am delighted not merely because of my affection for him, which I am sure is reciprocated, but also because this is a particular point that was raised by myself at this stage of our proceedings on last year's Finance Bill and by my hon. Friend the Member for Norfolk, South (Mr. MacGregor) in the debates on the Finance Bill of the year before that.
  When my hon. Friend raised the matter, the Chief Secretary replied in a most
  742
  encouraging way. Last year, when the Financial Secretary replied, he was very curmudgeonly. Now, we have the Chief Secretary again, and we can hope that this amendment, for which there is an overwhelming case, will receive the sympathetic welcome that it thoroughly deserves from the Government.
  My hon. Friend the Member for Hertfordshire South-West (Mr. Dodsworth) brought this point into play when speaking on another amendment earlier. As I am sure the Committee will be aware, the fact of the matter is that at the present time, if a child has an income, earned or unearned—I will go into the distinction between the two a little later—of more than £115, which is less than what can be earned in a paper round these days, the parent's allowance for that child is reduced by £1 for every £1 over £115 that that child earns in his earned income.
  This is a most distressing anomaly. Front 1952 to 1963, this amount—the maximum that a child could have in income before the child allowance was reduced—had been exactly the same each year as the allowance for a child under 11. Then it was frozen where it was in 1963–64 for year after year, presumably because we had a Labour Government in for the first six of those years—although I readily concede that the Conservative Government who followed did nothing about this, and now, so far, the Labour Government who followed them have done nothing.
  The child allowance for a child under 11 has risen to as much as £300 in this latest Finance Bill, whereas the amount a child can earn before there is a reduction in allowance is still set at £115. The amendment cannot cost very much—the Chief Secretary will probably tell us that it will cost about £15 million—and it will bring the £115 limit up to £300, in line with the child allowance for children under 11. Had the allowance been increased from 1963–64 in relation to the declining purchasing power of the pound, it would be more than this. It would be £335. But the amendment is modest and seeks to fix it at £300
  The Chief Secretary must be aware—I am talking now particularly of earned income—of the great sense of injustice and hardship that exist in many cases. particularly among those parents whose children are students who try to earn some money during the vaca-

  743
  tion. It is not difficult to earn more than £115 and, as a result, the parent's child allowance is reduced and considerable hardship results. The child feels that he is doing the parents an injustice, or, if he is prepared to reimburse the parent—there would be problems, no doubt, about the capital transfer tax if he did that now—he is being taxed so highly, in effect, on the extra earnings, that it is not worth his doing it.
  It is curious that the whole direction of this Government's policies is to assist those who do not work or do not wish to work, and to hit those who do. In the case of students, those who do not wish to work get looked after very well, in many cases, but those who try to earn a little in the vacation are hard hit, and their parents are. This is thoroughly inequitable and it is something which the Chief Secretary himself has conceded is inequitable. One of the grossest forms of injustice is the student on a sandwich course, because, as part of the course, the student is obliged to work. As a result, hardship follows. The cost and the number of people affected may be small, but for those involved it is a monstrous injustice.
  In earlier debates the Chief Secretary and the Financial Secretary have sought to resist this. They argue that it applies not merely to a child's earned income but to a child's unearned income. I hope that the Chief Secretary will tell us how much of the total cost occurs as a result of earned income and how much as a result of unearned income. We asked for that breakdown last year but did not get it. I am sure that the Treasury must have come up with the answer by now. Even if they are not prepared to accept it for unearned income, I hope that the Government will move an amendment of their own, accepting it for earned income.
  In the case of earned income, one other objection was given last year by the Financial Secretary, when he said that we were just about to go away from child allowances and move to a whole new system of child benefits. That is not an argument for not acting now. Something needs to be done this year. There is no excuse for having an injustice for the whole of this coming year just because something may be introduced in future years.
  744
  The new system of child benefits will be based on the levels of the old system. We know how these things work. If we do not get it right this year, the new system will come in on the wrong basis. The Chief Secretary may wish to separate earned income and unearned income and bring in an amendment of his own, because we know of the loathing for any investment income that is felt on the Government side of the House.
  On unearned income the Government have argued that they are just about to aggregate children's investment income and that therefore they do not want to do anything in the opposite direction now. They said that they were going to do that in the second Budget of 1974, but they did not do it. They then said that they were going to do it in 1975, but did not do it. Last year they said they were going to do it in this Budget, but they still have not done it. It is no good going on saying that. Of course they are not going to aggregate children's investment income, because it would be too iniquitous even for them.
  It would be iniquitous because under the capital transfer tax children are separated from parents. Capital passing from parents to child is a chargeable transfer. It would be illogical and unfair for it to be held that parents and children are two for the purposes of capital but one for the purposes of the income that flows from that capital. The Government can have it only one way or the other, but not both. That is why aggregation is not on.
  The Chief Secretary has been extremely sympathetic to the amendment in the past. I hope that this time, at long last, he will show an even greater sympathy, because of the persistence of the Opposition in raising the matter on each successive Finance Bill.
  In 1974, the Chief Secretary said:
  "I should like to see the allowance increased because it has been well overtaken by inflation over the years."—[Official Report, 10th June 1974; Vol. 874, c. 1287.]
  There has been quite a bit more inflation since June 1974 as the Chief Secretary must be aware. I am sure that he is well aware of our case and that he will see fit to accept the amendment so that we do not have to put it to the vote.
  7.15 p.m.
  Mr. Graham Page: I warmly support the amendment in the name of

  745
  my hon. Friend the Member for Blaby (Mr. Lawson). It is anomalous that the figure of £115 above which it is to be taken into account in the "appropriate amount" has remained for so long. It is significant that the "appropriate amount" for a child not over 10 was fixed at £115 and has gone up over the years. I cannot understand why the figure for earned income has not gone up.
  I shall address my remarks to Amendment No. 88, which is related to the points raised by my hon. Friend but has a specific purpose. It relates not to the ordinary child allowance under Section 10, but to the additional allowance under Section 14. The present entitlement to the additional allowance lies with the person who has care of a child, who is a widow or widower, or any other person not in receipt of the married person's allowance—ple, a divorced or separated spouse or a married man with an incapacitated wife.
  In addition to coming within one of those groups the person has to prove other things. Before such persons receive the benefit of an allowance they must prove that neither they nor anyone else is entitled to any relief under Section 13—that is, for taking care of unmarried persons, such as a brother or sister. They must also prove that they are entitled to child allowance under Section 10. The rub is that if they are entitled to child allowance under Section 10 they must prove that they have living with them a dependant child under 16 or taking full time instruction, and that the child's income does not exceed £115
  If we assume an example of a person not entitled to a married person's allowance, having charge of a child whose income is such that there is no entitlement to the ordinary allowance under Section 10, that person is not entitled to the additional relief.
  What is the figure of the child's income that deprives that person or the person in loco parentis of child allowance? It is calculated by reference to the amount of the child allowances under Section 10 of the 1970 Act. Under the Bill the figures will be—over 16, £365; over 11 and under 16, £335, and in other cases, £300. Section 10(5) of the 1970 Act reads:
  746
  "If the child's income exceeds that £115 the excess is deducted from the appropriate amount".
  Let us take the example of an income of £200 per year for a 10-year-old child. The child allowance would be £200 minus £115, which leaves £85, and £300 minus £85, which leaves £215. If the 10-year-old child's income is £115 plus £300—£415 per annum—the entitlement to the ordinary child allowance has gone. So also, strangely enough, has the entitlement to the additional allowance. This is where the anomaly arises. By losing entitlement to the ordinary child allowance, the person in loco parentis also loses the entitlement to the additional relief. If there is merit in giving the additional relief at all, it should not be cut off just because the child's income comes up to the ordinary child allowance figure plus the small margin of £115
  What the amendment seeks to do is to provide that in such a case, instead of taking that ordinary child allowance as the cut-off figure one should add to it the additional relief figure. Additional relief allowance for 1975–76 is £280. Therefore, taking my previous example and putting it into figures, the cut-off figure should be the £280, plus the £300, plus the £115—making a total of £695. At present, if the child's income is £414 a year, the divorced wife, for example, looking after the child, will get the £280 additional relief. If the child's income is £415, she gets nothing—neither the ordinary child allowance nor the additional allowance.
  If it is right that there should be an additional allowance, it should be taken at a higher cut-off figure than the ordinary allowance.
  Mr. MacGregor: As my hon. Friend the Member for Blaby (Mr. Lawson) said, two years ago I moved an amendment similar to that before us at present, and I supported my hon. Friend last year. I am bound to say, however, that my amendment of two years ago was in the days before Labour inflation, and that the figure that we were looking at then was much more reasonable. I hope that our persistence will gradually win over the Chief Secretary, and not only our persistence but our reasoned and reasonable arguments.
  I want to put three points in favour of the main amendment. As to the figure,

  747
  it may look like a big jump up, but not only is it more nearly indexed to the old figure of £115 as it was in 1963–64; it is a very reasonable figure in relation to the earnings that a child can have. Taking the figure of £115, which is the only figure allowed, it takes only about three weeks' earnings for students in university education to go over the top. When I was at university and working my way through by vacation earnings, perhaps £115 was a figure that one did not very often reach during the six weeks that one was working; but today it is reached.
  My second point is related to the position of parents with children at university. This point is particularly important, because while parents who privately educate their children and make a parental contribution at school level can be said to do so voluntarily, that cannot be said when they get to university level. Then all parents above certain income must make the parental contribution if they want their children to attend university at all. There is no other way out.
  From looking at the figures one begins to see the scale of the problem facing many parents. On Tuesday we were talking of the tremendous difficulties that middle to senior managers were finding because their net income was failing to keep pace, by a long way, with inflation, and beyond that, as compared with those with lower incomes, they very often had to make hidden taxation contributions, as they do with the hidden contribution to university education.
  Taking the first group that the Chancellor has been saying he wants to do so much to help—the £4,500 to £8,500 a year men—many in that position will have children at university and will have to make a parental contribution, which is, in effect, a tax. If one takes what is described under the parental contribution rules as the "residual" income, that adds some £1,000, so one is talking about earnings between £5,000 and £9,000. At a residual parental income level of £4,000, or some £5,000 gross, a person is compelled to pay a contribution of £330 towards the cost of his child's education at university, and if his income level is £8,000 he is compelled to contribute £730. The sum of £730, taken
  748
  out of income that has fallen already because of inflation, is a very large slice. So the money that the child can earn—if it is right to call him a child at the age of 18—is very welcome. It is quite appalling that once they reach a limit of £115, the parents cease to benefit at all.
  The third argument makes the matter so much worse. That is the university student decides not to earn himself but, instead, to go on social security. The difference between our argument two years ago and our argument today is that many more university students, because of the National Union of Students campaign, know the benefits of going on social security. There is additional benefit to the parent, because if the child earns more than £115 the parent immediately loses, but if the child goes on social security above £115 there is no loss to the parent, because social security benefits, being untaxed, are not subject to this clause.
  We are now in a ridiculous situation in which there is positive encouragement to all parents, especially high earning parents, to tell their children not to work during the vacations because the parents' income will be badly affected, and to tell them, instead, to go on to social security. This seems to be absolute nonsense. It is an example of the tax system encouraging people in precisely the wrong direction. This is a further argument, that was not too apparent two years ago, for a change of the sort proposed in the amendment.
  Mr. Dodsworth: I want to refer to the record of the income limit over the last few years. For 10 years the income limit that related to the child allowance was exactly the same sum as the child allowance itself. It was an income limit of £60 in 1947–48. It remained the same as the child allowance until 1957–58, when it was increased to £100. In 1963–64 the income limit was increased to £115, and since then it has remained static. Child allowances have continued to increase. The logic of the original arrangement would be that we had an allowance of at least £300 now. We have slipped behind.
  I very much support the observation of my hon. Friend the Member for Norfolk, South (Mr. MacGregor) about the anomaly that he illustrated. I hope that

  749
  we get some sense from the Treasury on this occasion about this long outstanding problem.
  Mr. Joel Barnett: On this occasion the case has been put rather more briefly than it has in the past, because of the intervention of the Opposition Deputy Chief Whip. I suppose that all of us should be obliged. He has not asked me to make my contribution briefly, but I note his actions over the last few moments.
  The hon. Member for Blaby (Mr. Lawson) opened this brief debate on what was for him an unusually modest note. Amendment No. 61 seeks to increase the limit from £115 to £250. Other amendments seek to increase it to a larger figure.
  Mr. Lawson: I think that the right hon. Gentleman has misread the Notice Paper. Amendment No. 61 would raise it from £115 to £300. That is the amendment to which I spoke.
  Mr. Barnett: I am sorry. I should have realised the position and never expected the hon. Gentleman to be quite as modest as I imagined. I apologise to him.
  The hon. Gentleman presented his case, as ever, so charmingly that I find it very difficult to resist it. The case was supported by the hon. Member for Norfolk, South (Mr. MacGregor). I shall come shortly to the case presented by the right hon. Member for Crosby (Mr. Page)
  The hon. Member for Blaby fairly pointed out that on previous occasions I had indicated that in my view there was some justification for the case for increasing this limit, because it had not been increased for so many years—not only during the course of Labour Governments but under a Conservative Government as well. However, it is important that we should understand the reason why successive Governments have kept this limit as low as it is. The case was made by one of my predecessors—the right hon. Member for Wanstead and Woodford (Mr. Jenkin). He argued that the existence of a child's income limit of £115 for child allowance purposes provided a defence against the abuse of covenants in favour of children. We all know the kind of abuse to which the right hon. Member was referring, with the grandparents making covenants to grandchildren. This meant, when there was no aggregation, a substantial saving of tax.
  750
  7.30 p.m.
  The reason it was felt necessary to have the child income limit at a low level was to remove at that time the provisions for aggregation. I agree that that is very important, because a comparatively small number of wealthy families were able to contrive to put investment income into the hands of children solely for tax saving purposes.
  Mr. Lawson: Not since the capital transfer tax.
  Mr. Barnett: Hon. Members did not realise the foresight of the Government in introducing the capital transfer tax. [Interruption.] I do not know how the hon. Member for Blaby would feel if he sat on these Benches as a Minister and had to put up with the sort of comment we have to accept from him. If he had to deal with them I cannot imagine how long it would take. The Deputy Chief Whip would be at him constantly.
  I accept, nevertheless, that in current circumstances there is a case for some increase in child income limit, but there is the problem of the difference between investment income and earned income of the child. The hon. Member who was asking about the difference in cost between the two, will realise that the reason it is not possible to answer is that we do not have the information. At the moment there is no need to have information as to how the income is divided between investment income and earned income.
  I shall return shortly to the question how it might be possible to deal with the problem raised in this brief debate, but first I want to deal with the point raised by Amendment No. 88, in the name of the right hon. Member for Crosby. It is impossible to state what would be the cost of his amendment, because of the kind of taper arrangement he suggested in the case of the single-parent family, for which we all have the greatest sympathy. His point is a very good one, concerning the way in which the single parent—it is frequently a widow, but it can also be a widower—loses the child tax allowance in the kind of situation he described.
  I cannot say what the cost would be. I recognise that it would not be very costly, but there are practical problems. I am not suggesting that they are insuperable, but I should like to explain them

  751
  briefly so that the Committee will realise the situation.
  The right hon. Gentleman referred to the single-parent family as if we were dealing with the single-parent family with one child. Where there is more than one child there is a considerable difficulty in working out a tapering system on the amount of income. There is a substantial problem here, which I want to examine. I do not believe it is insuperable, and I hope it will be possible to find a way of dealing with it.
  I assure the right hon. Gentleman and the House that, although I cannot give a firm commitment, I shall look very closely at the point he has made in the debate, particularly about the practical problems. If it is possible to do something in this direction I shall see that it is done on Report.
  Mr. Graham Page: I am very grateful to the Chief Secretary for what he has said. Will he be good enough to write to my right hon. Friends and myself a sufficient time before Report? I quite appreciate the difficulties in devising anything, but I should be very grateful if we could have a look at it in time, whatever he decides.
  Mr. Barnett: I am obliged to the right hon. Gentleman, I shall see that that is done.
  I return to the point that I was making earlier on the main amendments, and again I should like to consider some way of helping. I think there is a case for some increase. The point made by the hon. Member for Norfolk, South is perfectly valid. There has been a massive increase in the claims made by students for supplementary benefits during the long vacation, but I hope that the House will be prepared to consider—as we are always having to consider to a greater and greater extent these days—the staff costs as well as the revenue costs involved in any amendment. Particularly in this area the staff costs tend to be comparatively large in relation to the amounts involved.
  The hon. Gentleman seemed to be arguing that there is a more powerful case far raising the limit for earned income only, because then the question of covenant and investment income would not apply. In that case there would be a requirement for an additional 100 staff in 1976–77. I am not suggesting that that is a massive
  752
  figure, but it is for a quite modest scheme. On the other hand, if we were to restrict it in the way that both hon. Gentlemen argued, there would be an additional 55 staff required. In the case of students over 18, which is the strongest case, frequently the students working in the long vacation have an earned income in excess of £115. The hon. Member for Blaby felt, as did other hon. Members, that the strongest case of all was in this area. I agree that that is the strongest case.
  Although I do not wish to give a firm commitment, I would want to consider whether it is possible to deal with this case of the over-18s in this year. It would be a smaller revenue cost and a smaller staff cost. I will, if at all possible, introduce an amendment on Report. With that, I hope it will be possible for the hon. Gentleman to ask leave to withdraw the amendment.
  Mr. David Howell: The Chief Secretary has made helpful noises over both the main amendment and the amendment to which my right hon. Friend the Member for Crosby (Mr. Page) referred. I think the Chief Secretary's words were, "I promise as far as it is possible", so there was some qualification in it. Even so, I think it is fair to us to take this as a fairly firm commitment that he will bring back an amendment designed to ease the situation for students.
  This still leaves the absurdity of the situation in which a young child can easily generate an income of more than £115 per year by doing a newspaper round. That situation is unsatisfactory, and we shall be pressing the matter again. But the Chief Secretary seems prepared to move in the direction that we have sought in the debate. For that reason I suggest that my hon. Friend should not necessarily press the amendment to a vote.
  Mr. Lawson: I heard a few moments ago from the Chief Secretary's lips the magic words "bring forward an amendment on Report", and that makes a great deal of difference. We know the right hon. Gentleman and can accept it as an undertaking. He would not have given it otherwise. He said that it might be difficult to confine it to students over the age of 18. I hope that, if he find it is too complicated, he will bring forward an amendment which covers a wider category of children and will certainly not rule it out altogether.

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  In the light of the Chief Secretary's assurance, I beg to ask leave to withdraw the amendment.
  Amendment by leave, withdrawn.
  Mr. John Hannam: I beg to move Amendment No. 90 in, page 15, line 15, at end add:
  '(3) In section 10(5) of the Income and Corporation Taxes Act 1970 after the words "or other similar education endowment" shall be added "or of a mobility allowance awarded under section 37A of the Social Security Act 1975"
  (4) After section 16(5) of the Income and Corporation Taxes Act 1970 shall be added the following subsection:—
  "(6) In calculating the income of any such person as is mentioned in subsection (1) above, no account shall be taken of a mobility allowance awarded under section 37A of the Social Security Act"'.
  The previous debate related, to some extent, to the amendment. If the Chief Secretary had intimated that the £115 disregard was to be lifted for all age groups of children to a figure above the level of the mobility allowance, I should have had some difficulty in supporting the amendment. However, a point of principle arises, regardless of the level to which the disregard is adjusted, that relates to the mobility allowance. The objective of the amendment is to correct what seems to be an apparent error on the part of the Government.
  When the Government decided to provide the mobility allowance for disabled people, be they drivers or passengers, the decision was given a general welcome throughout the country. The Government obviously intended to provide enough cash to enable dependence upon Government issued vehicles to be phased out. Without going into all the pros and cons of the subsequent restrictions placed upon the mobility allowance, it is generally agreed that the amount payable of £5 per week is insufficient to provide for the purchase of a vehicle or its upkeep. It is also generally agreed that its removal at pensionable age is harsh and cruel to people whose disabilities are becoming worse at that age.
  The fact that the allowance is taxable means that the worthwhile objective of encouraging the disabled to get out to work will be defeated, the taxation being applied to the small allowance itself. However, those are all arguments for another time and another day.
  The argument employed by the Government in defending the taxation of the mobility allowance was that if any taxation was to be applied it would be applied only to the income of the recipient child or adult, and only if that disabled young person's income exceeded the usual level of personal allowances. But that is not the case, for unless the amendment is accepted all that part of the mobility allowance which exceeds the £115 childs disregard—that means £145 of the £260—will be deducted from the parent's child allowance of £300 as proposed in the Bill.
  The exact amount of tax payable depends on the father's or parent's tax status, but the present state of affairs makes nonsense of any statement that the £260 mobility allowance is being given each year to help with the needs of a disabled child.
  As an example, I shall describe the effect of taxation on the low-income parent earning £40 a week when the mother is not earning. If the father has an income of £2,000 a year, and there is a child under the age of 11 in receipt of the mobility allowance, with no other taxable income, there is a salary of £2,000 plus the mobility allowance, making a total of £2,260. The married man's allowance and the child's allowance is £1,195. The married man's allowance plus the child's allowance produced by the mobility allowance is £1,050. The net family income without the mobility allowance is £1,718·25, and the net family income with the mobility allowance is £1,83650, a difference of £118·25. That is because of the application of taxation to the mobility allowance.
  The Central Council for the Disabled is receiving a flood of complaints from the parents of disabled children who are receiving their tax forms with a requirement that they must state any mobility allowance that is paid to their child. That is the requirement, regardless of the statement on the Government's own leaflet on the mobility allowance—Leaflet 211—which states:
  "children will qualify in their own right"
  A specific case was referred to me only a few moments before the debate started—a case involving a self-employed man living in Hounslow with a severely disabled dependent adult of 25 who is eligible for the £260-a-year mobility

  755
  allowance. He finds that his son's income from the allowance is being included in his own parental assessment, resulting in £65 being lopped off the mobility allowance. That reduces the minimal £5 a week allowance to under £4 a week, despite the fact that his son is unable to work and is not earning any taxable earnings. The effect is a very high rate of tax both on unemployable disabled adults and on disabled children.
  7.45 p.m.
  I could quote many other cases, but I hope that the Financial Secretary will concede the inequality of the present situation and accept the principle of the amendment, which would ensure that the mobility allowance is taken into account in assessing the income of a child or adult dependent relative for the purposes of calculating the tax allowances of the supporting relative.
  I know that my final argument does not seem to carry much weight in these bureaucratic days, but when we consider the cost of administering the complex mobility allowance, making it taxable and bringing in all the disregards, surely those costs far outweigh the cost of relieving the allowance from taxation. I hope that the Minister will take into account the fact that he is creating an anomaly with the allowance by making it taxable, and I hope that he will accept the amendment.
  Mr. Newton: I rise briefly to support my hon. Friend's amendment. It seems that there is a scandalous situation on the facts that he has put before us. Surely it cannot have been the intention of anyone concerned that a family which has a child receiving the mobility allowance should be subject, assuming it is paying tax, to a marginal tax rate of over 50 per cent. on the child's mobility allowance. I do not see how anyone can defend the present situation. I hope that the hon. Gentleman will undertake to look at this matter again.
  It is a pity that the Chief Secretary has left the Chamber because it is clear that this problem arises partly from the self-same cause that we discussed in the previous debate—namely, the low limit on the income of children. If that limit was set, for example, at the same level
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  as the mobility allowance, the problem would vanish and we would have done something. The Chief Secretary went half-way towards accepting the argument put forward on the income limit, which would eliminate the problem altogether as the mobility allowance would be within the new limit.
  The more I have listened to these debates the stronger the case seems to be for resolving the problem by taking the action that the Chief Secretary was talking about in the previous debate—namely, by creating a general increase in the child income limit and, perhaps, taking the mobility allowance as the new reference level.
  Mr. David Weitzman: I express support from the Government side of the Committee for the amendment moved by the hon. Member for Exeter (Mr. Hannam). I know that Oppositions always move amendments of this sort and that Governments always say that they are terribly sorry but they do not have the money, or that there are other ways of dealing with the problem. They always take that approach in opposing this sort of amendment.
  The amendment is important for the disabled. In my view the hon. Member for Exeter has made a powerful case. I hope that the Government will be a little more sympathetic towards this matter than Governments generally are, and will not put forward the usual excuses.
  Mr. Robert Sheldon: I am always happy to listen to a plea from my hon. and learned Friend the Member for Hackney, North and Stoke Newington (Mr. Weitzman), especially when he points out the nature of Government and Opposition. They are frequently changing sides on a number of provisions in the social security sphere that are covered by tax allowances.
  It was decided by the House of Commons that the mobility allowance should be taxable. The net cash benefit has been fixed at £5 a week for providing greater mobility. That is taxable. That was the decision of the House of Commons. The problem is that if the amendment were accepted it would provide that the mobility allowance remains taxable in the hands of the recipient. But if the person for whom the mobility allowance was paid happened to be a child, and it

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  was paid into the hands of the parent, that would be taken into account in assessing the child's tax allowance.
  Perhaps I should mention the cost to parents. We know from the debate on an earlier amendment that the child tax allowance starts off at £115. Up to £115 the child tax allowance is payable in full. It is only when the child's income, from whatever source, increases to about £450 a year that the child tax allowance is withdrawn by stages on the basis of £1 for each £1. It runs out at £450. At that level the benefit of the child tax allowance is extinguished. Unless the child's income is above that sum, there is still some benefit. It is sometimes large—sometimes less large—depending on the child's income.
  It would be a mistake, without further investigation, to say that the child tax allowance should take account of the taxable features of the mobility allowance and at the same time maintain that the mobility allowance should remain taxable. We could be in danger of setting at cross-purposes the two features. That might be the intention of the House of Commons.
  I believe that most of these allowances, if they are not taxable, will meet problems of the kind that we discussed previously concerning the differences between social security payments, on the one hand, and tax allowances, on the other.
  I believe that it would be wrong to make that change. However, this is an amendment of a kind which has not previously been considered. I should be happy to receive further representations on this matter. For reasons known to the Committee, we are under pressure of time. I understand that the Opposition want to make some progress. If, because of that, the debate has been shortened rather more than it would otherwise have been, and has not, therefore, allowed sufficient time for all the points which hon. Members would have made, I am prepared to consider further representations on the matter. With those comments, perhaps we might make further progress.
  Mr. Hannam: This is an important matter, which should be looked at again by the Government. I do not think that they are fully aware of the implications of taxation on the child mobility allow-
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  ance. I have not been arguing the principle of taxation on the adult allowance, but purely of applying it to the child recipient. The tax should be applied to the income of the recipient, not the parent. We feel strongly about this matter. Exemption is already given under the 1970 Act for education endowments, for example. I hope that the Minister will look at this matter and enable us to pursue it on another occasion.
  Mr. Graham Page: Before my hon. Friend leaves this matter, I want to put one point to the Financial Secretary. Earlier we discussed the one-parent family. The one-parent family that is receiving a mobility allowance for a child is in an extremely difficult position. I hope that the Minister will include that matter in his further consideration of the amendment.
  Mr. Hannam: I should certainly like to take the opportunity of bringing the full details of this matter to the Minister's notice. In view of his assurance that he will consider this matter carefully, I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 26 ordered to stand part of the Bill.

Clause 27

  RETIREMENT ANNUITIES.
  Mr. David Mitchell: I beg to move Amendment No. 64, in page 15, line 23, leave out "£2,250" and insert "£3,000".
  The Deputy Chairman: With this amendment we will take Amendment No. 66, in page 15, line 23, leave out "£2,250" and insert "£5,000".
  Mr. Mitchell: This amendment concerns the amount which a self-employed man may spend on an annuity for his retirement. I shall not detain the Committee very long, but this is an important matter for the self-employed. Therefore, we must have a fuller reply from the Financial Secretary than we had in the previous debate. The hon. Gentleman indicated that he felt under some constraints due to pressure of time. I do not think that he need worry about that.
  Until this year a self-employed person was permitted to spend a maximum of

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  £1,500 a year or 15 per cent., if the lesser amount, which was allowed for tax. That figure was fixed in 1971
  Why, in 1976, do the Government propose to increase that figure by only 50 per cent. when since 1971 prices have gone up by 89–9 per cent.? I think that my figures are probably two to three weeks out of date and the percentage will now be greater. No doubt it can now be rounded up to 90 per cent. When prices have gone up so much, why do not the Government increase the allowance for those who are contributing to their pensions by at least as much?
  We are dealing with pensions which will be drawn many years hence. A man may be contributing over perhaps 10 or 15 years of his working life, starting possibly at the age of 48 or 50 until he retires at 65. Therefore, we are considering contributions paid now for a pension to be drawn in 10 or 15 years.
  I believe that the Government ought, at least in part, to take a much longer view of the effects of inflation on the self-employed and the money that they can contribute to their pensions. I suggest that the allowance ought to be increased by more than the increase in the cost of living. Old-age pensions and other national insurance benefits over which the Government have control have moved broadly in line with inflation. It seems wholly unfair and unjustifiable that the self-employed should be put in a different position. Indeed, since this Government came into office the self-employed have been hammered on every possible occasion and in every direction..
  Only yesterday the economic progress report from the Treasury indicated that average disposable income rose by 22 per cent., but by only 12¼ per cent. for the self-employed. That is one indication of how the self-employed are falling behind.
  As a group, the self-employed—whether it he the man running a plumbing or wood sawing business, those engaged in country crafts, doctors, artists, musicians and a whole host of other people who supply ancillary services to industry through their various skills—are suffering from the effects of inflation. They find that they have to put more money into their businesses. Yet, the Government are always taking more away from them.
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  We cannot fail to consider the very unhappy position of the self-employed in relation to the national insurance contribution. For a man on the higher limits of earnings this contribution has gone up by £104 this year. He has to pay £104 more. In order to have that net extra £104 in his pocket, it would take three-quarters of the permitted increase of £6 a week which is allowed under the restraint of wages and salaries.
  8.0 p.m.
  Sir John Hall: The increase in the wage related contribution of £104 more than swallows up the maximum tax concession given by the Chancellor for a married man with two children. That amount is about £86.
  Mr. Mitchell: I think the amount is £87.50, but my hon. Friend is right—whichever way one looks at it, the self-employed have to find this extra amount of money. They are being ill-treated. This is part of a pattern in which the self-employed are constantly overlooked or damaged.
  Mr. Powell: The hon. Member referred to the limit on the increase of income. In what possible sense could this limit be applied to or be binding on the self-employed? There is no contract or agreement made on their behalf by the TUC, and there is no legislation whatsoever which controls or limits the increase in remuneration available to them.
  Mr. Mitchell: While it may be true that some sections of the self-employed are free to some extent, there are many areas of self-employed people who are not only adjured to conform to the Government's prices and wages control legislation, but whose net income is fixed by the Government in one form or another. Doctors are a good example.
  We are dealing in this amendment with someone who is self-employed and whose increase in earnings has been limited by the Government. Such a self-employed person gets very little in the way of additional benefit from the substantial increase in national insurance contributions which he has had to find out of his post-tax income. There are 13 benefits given to the ordinary employed man which do not go to the self-employed, and this fact is generally overlooked. There are other benefits to which a self-employed man is

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  entitled but which he does not claim or from which he does not get value for money. I refer to sickness benefit.
  A self-employed person is entitled to sickness benefit in the same way as an employed person, but a self-employed person with backache or a cold does not go to the doctor and lay up for a week. He carries on working and does not make a claim. In any estimation of the relative merits of the benefits to which he is entitled, he does much worse than the ordinary employed man.
  This strengthens the case for the Chancellor of the Exchequer to do something to help such a person by making the national insurance contributions of the self-employed, at least in part, allowable for tax. The employer's contribution to the national insurance stamp is allowed for tax, so it is quite wrong that a proportion of the self-employed contribution should not be allowed for tax as well.
  The figures in the amendment of permitted contribution to a self-employed person's annuity go up to £2,250, and some people might think that is a large sum. But a typically self-employed small business man is someone who through many years of his life has been unable to afford to contribute to a pension fund because he has been ploughing all his spare money into his business in order to try to build it up. Only when he is in his 50s is he able to say "I have to do something about my old age"
  In order to do something which will give him a relative retention of living standards in his old age, he then starts to contribute to a self-employed person's annuity. In order to get a reasonable return, he needs to be able to make a large contribution, as he will be starting in the later days of his working life.
  We are dealing here with small business men who have been harmed by the Government, who have actively discouraged the older man from building up his business by introducing their capital transfer tax. With the death grip of capital gains tax and capital transfer tax as well, it is virtually impossible for the older business man to make it worth while to build up a business to transfer to the next generation.
  Automatically he is going to think "I will safeguard my future by paying into a pension fund". But the Government
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  have limited the increased contribution he can pay into that pension fund to the point where it does not keep pace with inflation. In the name of logic and justice the Government should allow this amendment.
  Mr. Wakeham: I support this amendment because it is a move in the right direction. But even the amendment is wholly inadequate for dealing with the problems of the self-employed. I say that not necessarily because I believe that the figure in the amendment is wrong, but because I think this is a wrong way of looking at the problem. It is a misconception of the problem of the self-employed.
  That misconception arises because we look at this problem of a self-employed person's income on an annual basis. It is reasonable for most people on salaries to look at their income on an annual basis. For the self-employed man, while for purposes of taxation it is practical to look at it on an annual basis, his income is what is left over after he has paid the expenses of running a business.
  Most self-employed professional people, builders, shop-caterers and traders, have good years and bad years. Some years their profits are up, other years they are down; so provision for retirement arrangements for the self-employed need to be more flexible than they are.
  While I accept that the amendment is a move in the right direction, even that is not sufficiently flexible. It is not necessarily correct to say that when a self-employed person has had a particularly good year, has had a high income and is able to go up to the maximum on the arrangements made, this is the year he is best able to make provision for his retirement. In fact, it is probably the year in which his cash flow problems are worst. He has his debtors to pay and his stocks are up. While on paper he has made a good profit and may seem able to take the maximum advantage of it, in fact this is probably the most inconvenient year for him to do so.
  It may well be a year in which things have not gone so well and his cash resources are under pressure so that he is unable to put quite so much into a self-employed retirement premium. The

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  whole system of considering self-employment on an annual basis, while it might be convenient in some respects, is not therefore necessarily the best way of dealing with the situation. It would be better to take an average of the income of three years in order to determine what a self-employed person earns.
  Perhaps in future we should look at this matter by fixing a limit on a percentage basis to allow the taxpayer to carry forward any relief that he has been unable to use in a given year, so that he can use it against his income for a subsequent year. There is an argument for reversing that process, but tonight I restrict myself to carrying the reliefs forward.
  That would be more flexible and would give greater justice to the self-employed. It would show a greater understanding of the realities facing this group of people.
  Sir John Hall: I have a great deal of sympathy with my hon. Friend's amendment. As he pointed out, one of the problems facing the self-employed is that in the early days of their careers they are probably putting all their spare money into developing and furthering their business and they have very little to spare to put by for the future. It is probably not until they reach middle age that they begin to think about making some provision outside the normal provision which they make through building up the value of their business which they hope to sell on retirement, thus realising a reasonable capital sum for investment on which they hope to live.
  The changes in the tax structure have made that difficult. Capital transfer tax and the investment surcharge make it difficult for the self-employed man to safeguard his future and his pension period in that way.
  Mr. David Mitchell: I hope that my hon. Friend will not overlook the enormous importance of the capital gains tax in this respect. It levies heavily on a man who has spent his lifetime building up a business. The Government have so far done nothing to offset the effects of inflation here. Not only is he taxed at 30 per cent. on the increase in the real value of what he has built up, but he is taxed
  764
  on the paper increase in that value, so that he ends up with very little for so much hard work.
  Sir J. Hall: I apologise to my hon. Friend for having overlooked the capital gains tax among the many additional taxation burdens imposed upon the self-employed.
  Let me compare the position of the self-employed with that of other groups. We have heard a great deal in recent debates about the pension arrangements for civil servants. I do not object to those arrangements. I have always favoured indexing, although I should warn the Government that to index only some things will impose great strains on the economy. For indexing to be successful it must be applied across the board. The pension arrangements for the Civil Service give protection, so far as it can be given. against inflation.
  Many private enterprise employees participate in their employers' pension schemes and generally find that their retirement pension is related to the last two, three, or five years of service, depending on the conditions of the scheme. That in itself safeguards them against inflation, because their pension is related to their retirement salary.
  It is not, however, a complete safeguard. Those in the higher income bracket are not safeguarded, because their increases have been curtailed by the Government's pay policies and their pay has not maintained its true value. To a large extent employees are safeguarded against inflation. Many large companies have over recent months put large sums into their pension schemes in order to make sure that their cover is maintained.
  8.15 p.m.
  However, that is not so with the self-employed. I share the amazement expressed by my hon. Friend the Member for Basingstoke (Mr. Mitchell) that the increases proposed by the Government should be so out of line with the trend of inflation over the period. I do not understand why the Government have been prepared to go a little way towards compensating the self-employed for the fall in the value of money but have not been sufficiently courageous to go the full way towards complete indexation.

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  That is in complete contrast to the way in which we as Members of Parliament have treated our pension scheme. Our system is that, although it has been decided that Members of Parliament should not receive the £8,000 plus as recommended by the Boyle Committee because that is too big an increase, our pension is to be calculated on the basis that it has been paid. I know of no other case in this country where a pension scheme is calculated on the basis of a mythical higher salary. I do not object to the system because I could be one of the beneficiaries in the course of time. But our behaviour there contrasts with the way in which we are prepared to treat thousands of self-employed people who make such an enormous contribution to our economy.
  I hope that the Minister will take our argument seriously. I know that he normally does, but he is hamstrung by the brief that he has been given. I beg him to depart from that brief—to tear it up. I ask him to respond as the intelligent and warm-hearted man I know him to be. Let him give the concession which I know is in his heart to give. He should forget what he is told by his Department—the representatives of which are watching him from the Box.
  This is a very modest amendment. With the present rate of inflation it does not go far enough. That is especially so in view of the inflation we are likely to experience over the next 12 months.
  Mr. David Mitchell: There are other more generous amendments on the Order Paper. I chose the figure in my amendment because I was anxious not to make it difficult for the Minister to say "Yes". My figure involves the Government in no extra expenditure. This is an occasion when we can encourage a deserving sector of the community. I think that the Financial Secretary could accept such a moderate amendment. I hope that he will take my hon. Friend's advice, tear up his brief and speak from the heart.
  Sir J. Hall: I am grateful for that explanation. I hope that the Minister will accept one of the more generous amendments, though I have no great hopes of that. No doubt we shall get the usual sort of answer with the old threadbare arguments against accepting the amendments.
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  However, we should not be discouraged. We should go on pressing the Minister to accept the justice of the case and perhaps at a later stage of the Bill's passage we may be able to effect a change of heart.
  Mr. Boscawen: My hon. Friend the Member for Wycombe (Sir J. Hall) is not optimistic that the Minister will tear up his brief. Neither am I, because the Labour Party does not care for the self-employed. It has hit the self-employed very hard both above and below the belt.
  I very much welcome this modest amendment, which would help self-employed people to put aside a little more money for their retirement. It is particularly important for those aged over 50 who are starting to think of retirement and have been unable previously to start making provision for that time. They do not have many years left in which to make contributions towards a reasonable pension. It is vital that they should be allowed to put aside a little extra so that they can catch up with inflation.
  We must remember that what would have been a reasonable provision for old age a few years ago has become "peanuts" as a result of the massive inflation of the past few years. I hope the Chancellor, who has recognised the problem and raised the limit a little, will go the whole way and raise the limit by the amount by which the cost of living has increased since the last adjustment.
  The self-employed have been hit extremely hard, particularly over national insurance contributions. I add my plea, though it is not the subject of this amendment, for tax relief to be given on the employer content of these contributions.
  Treasury and Social Security Ministers have given many explanations in attempts to prove that the self-employed are not doing too badly under the present arrangements. But the self-employed do not believe it. They see their contributions have been increased enormously in the past few years and they do not see much benefit from these increases—certainly not the amount of benefit gained by employed people.
  I wish that the amendment had gone even further. Let the Minister consider the case of people aged over 50. If they

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  lose this opportunity to catch up on inflation by making extra contributions over the next 10 to 15 years, they will never be able to catch up.
  Mr. Peter Rees: I support the amendment and declare a personal interest. I am a member of the self-employed and have made my own contributions to a personal retirement benefits scheme under the provisions of the 1956 Act. I am not sure whether my declaration in the Register of hon. Members' Interests covers this point but I place on the record that I have a personal interest. If I tend to wax a little partisan in my short intervention I know the House will discount a little of it because of my personal interest.
  This debate takes some of us back to the debates we had last summer, when this matter was first ventilated in Committee on an amendment to the Finance Bill moved by one of my hon. Friends. After a certain amount of pressure, the Financial Secretary conceded that there was a problem to be reviewed. He did not appear entirely to understand the basis on which this small measure of relief was introduced in the Finance Act 1956. He called it a concession. Let us not play with words. It was a measure affecting self-employed people and even one or two directors and employees. We are not talking only of the self-employed. There were other categories for whom provision had to be made in the 1956 Act.
  I did not regard what was introduced in the 1956 Act as a concession. It was a belated recognition of the fact that certain classes in the community had been disadvantaged in pension schemes and that the considerable tax reliefs and advantages which had been conceded over the years were of no value to them. Self-employed people are permitted to defer during their working lives only a small proportion of their taxable income so that they may enjoy it after retirement.
  The Financial Secretary was inclined to play this up as a massive concession, and he told us that the pensions were treated as earned income. What an amazing concession! Even in 1956, it was a long-overdue measure of justice, and the position has altered considerably since then. That is why my hon. Friends
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  and I raised the matter last summer. The Financial Secretary undertook to view the matter sympathetically and, on that undertaking, we withdrew our amendment. Today we are judging in Clause 27 the measure of the Financial Secretary's sympathy and generosity. I hate to say this, but I have found his sympathy and generosity a little constricted and a little mean. My hon. Friend the Member for Wycombe (Sir J. Hall) was tempted to see that constriction and that meanness as being introduced by forces mobilised behind and beyond the Financial Secretary in his Department. Well, we shall see.
  Clause 27, to which the amendment is directed, is defective. It fails to meet the justice of this case for a variety of reasons. First, it comes into operation only in 1976–77. I need not point out the effects of inflation over the past year. It would have been a very small matter for the Financial Secretary to have made his clause retrospective for a year to allow people to "top up" in relation to the past year the contributions that they had already made. I commend that idea to him.
  8.30 p.m.
  He has increased the ceiling from £10,000 to £15,000, but the percentage remains the same. I contrast Clause 27 unfavourably with the measure of relief introduced in 1971 by Lord Barber. On that occasion, the ceiling was increased from £7,500 to £10,000, but the percentage was increased from 10 per cent. to 15 per cent., and that against a background of inflation which was minimal compared with what we have had to endure in the past two years.
  I support the amendment warmly, although it could go a great deal further, and there are various other amendments which we shall reach later that amplify it. But, as a first break into this problem, I commend the amendment warmly.
  [MR. VICTOR GOODHEW in the Chair]
  Mr. David Mitchell: I hope that I shall be in order in drawing my hon. and learned Friend's attention to Amendment No. 71, which has not caught your eye, Sir Myer, as being appropriate for selection. That amendment would have met many of the points being made by my hon. and learned Friend, in that it would

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  have suggested that the Chancellor of the Exchequer should in each subsequent tax year review the level of tax relief available for approved retirement annuity contracts for the purpose of determining whether it had retained its value in relation to the general level of earnings and prices. I believe that if the Government were to accept that principle it would go a long way to take account of the matters raised by my hon. and learned Friend.
  There are other matters in that amendment which might or might not meet with the approval of the Government, but one very important item of it which I hope will appeal to my hon. Friend the Member for Guildford (Mr. Howell) is that it would provide for the Minister to have to lay a draft uprating before the House and, if he did not intend to uprate it, he would have to give his reasons. Too often decisions are made by Governments without reporting to the House their reasons for doing so.
  Mr. Rees: I would never accuse my hon. Friend the Member for Basingstoke (Mr. Mitchell) of a want of generosity or a want of perception. I have not read the amendment in the context of the other amendments tabled by him and by others of my hon. Friends. However, the points to which I am directing my criticisms would not be covered by that amendment, although I recognise that inflation lies at the heart of so many of the problems that we are debating and will debate on this Bill.
  Perhaps I may come to the matters which I feel the Financial Secretary should consider. This debate inevitably must be a comparative exercise. The retirement annuities of the self-employed cannot be viewed in isolation. The Government must consider whether a fair amount of justice is being done to the self-employed by comparison with the reliefs, the advantages and the benefits which are extended under a tax system to other sections of the community.
  My hon. Friend the Member for Wycombe was right to draw attention to the pensions which we have voted ourselves, based on a rather curious formula. I shall not open up the debate to defend or to attack the basis of that formula, but it is right to observe that perhaps this House has been a little more
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  generous to its own Members than the Financial Secretary is disposed to be to the self-employed.
  Again, employees who have the benefit of retirement benefit schemes are in a considerably more advantaged position. In the first place, there is no ceiling to the contributions made on their behalf. That is a crucial point. Again, it is quite possible for the companies, institutions or organisations which employ them to make up the position of late entrants. I shall come to the case of the self-employed. But it is difficult for a person wanting to start on a retirement benefit scheme on his own, that he is in his 40s or 50s, to make up the ground which has been covered already by his friends and neighbours who are in pensionable employment.
  Again, it is always possible, and indeed there have been very many cases over the past few years, for an employer to top up such pension schemes to protect them from the ravages of inflation, and these topping up contributions will always be tax deductible in calculating the employer's profits for tax purposes. So is the employee, provided his employer remains solvent, is potentially in a much stronger, sounder position.
  Coming to the pensions of civil servants, this is a delicate subject and always arouses strong emotions. It is perhaps unfair to single them out when those who enjoy them, or will potentially enjoy them, are unable perhaps to answer for themselves on the Floor of the House, but the Financial Secretary is well aware of their position because it has been raised in other debates. Let me remind the Committee that a civil servant, if he serves long enough, may enjoy a pension of two-thirds of his retirement salary, so immediately it is geared to the inflation that has been persisting up to the point of his retirement. Thereafter, under an Order passed a few years ago, it is inflation-proof.
  Beyond that, the civil servant may enjoy a lump-sum tax-free payment roughly equivalent to one and a half times his retiring salary. I remember making this point in Committee and challenging the Financial Secretary, who showed a certain reluctance to accept it. But evidence was given on this point to the Select Committee on Wealth Tax

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  and never challenged. This very day the Prime Minister was disposed to say that there was nothing more inflammatory and more irritating to the country than the golden handshake. What, in principle, is the difference between the lump-sum retirement figure paid to a civil servant and the golden handshake given to an employee or director who retires? If we are going to attack golden handshakes, we must reconsider the principle of the lump-sum tax-free gratuities.
  I should like to see a broad, even measure of justice. Let there be golden handshakes in genuine cases where people's expectations have been cut short, and let civil servants have lump-sum tax-free gratuities. But if narrow, partisan points are to be made from the Government Benches about golden handshakes, let us view the problem in the round and not be too selective in the examples we choose to bolster our cases.
  I am sure the Committee will agree that by these standards in pensionable employment, whether in the public or the private sector, what is proposed for the self-employed is mean. Indeed, some interesting figures have been prepared to show just what kind of percentage allowance would be needed to provide an inflation-proof pension for a self-employed person on retirement, on certain assumptions. I know that the Financial Secretary has had a copy of these figures. They have been prepared with a wealth of actuarial evidence and submitted to him, and therefore I shall draw liberally on them, but on the assumption that other members of the Committee in general have not been given them, I hope that the Committee will bear with me if I read them out.
  If one starts with the assumption that inflation may run at a rate of 71 per cent. per annum—and I remind the Financial Secretary and the Committee that the Government Actuary, in certain recent calculations he has made in the social security field, has been budgeting for inflation at the rate of 8 per cent.—if a self-employed person is to start making contributions at the age of 25 and is to equip himself with a retirement annuity to cover such a rate of inflation he will have to make contributions at the rate of 17 per cent. I put it to the Committee that there are not many mem-
  772
  bers of the self-employed who are in a position to start making such contributions at the age of 25. If I may inflict on the Committee my own experience, I was certainly in no position to do so and was probably showing a negative income for a few years after that, such are the hazards of life in my profession. I should certainly not have been in a position to contribute 17 per cent. of anything I was earning.
  Let us suppose that such a person started a scheme at the age of 35. The percentage contribution required from such a person would be 22 per cent.—way above the figure that the Government, in their generosity, are prepared to concede under the Bill. if a person enters into a scheme at the age of 45, at which age many people probably are at the peak of their earning power and their children are not making so many demands upon them—the percentage contribution required to secure an inflation-proof pension would be 30–5 per cent. If a person is so unlucky as to defer his entry into the scheme to age 55, his contribution would need to be at a rate of 47 per cent.
  Measured against those figures, what the Government now propose is niggardly in the extreme. The Financial Secretary will say that under the wise and beneficent rule of the Chancellor of the Exchequer the rate of inflation will be nothing like as high as it has been, and we must bear that point in mind.
  Let us assume that the pension will not increase at all after retirement but will remain static—in other words, at a fixed figure, year by year. It must be against the Committee's experience that there is likely to be no inflation at all in the coming years. For a person entering a scheme at the age of 35, the percentage contribution will need to be at a rate of 9 per cent.—well within the Government's margin. A person entering the scheme at the age of 45 would need to make contributions at a rate of 121 per cent. A person entering at the age of 55 would need to contribute at a rate of 32 per cent.
  Let us contrast their position with that of a person who is employed in the private sector. His employer could make adequate provision for him, because there is no ceiling on contributions. The provision would be tax-deductible for the

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  employer and could be topped up at any time against the ravages of inflation. One is led to the ineluctable conclusion either that the Financial Secretary is not applying himself to the problem or that he is working under some constraints, which I hope he will uncover when he replies to the debate.
  I do not wish to wax sentimental about the virtue of contributions for the self-employed; they have their own distinctive place in our national life. But it is fair to say that without the salt and savour that they give, something would go from our national scene. It is fair to to point out that for this important debate there is a very low attendance on the Labour Benches; and there is a total absence of minority parties. I hope that the country will note who are the champions of the self-employed.
  Do the Government recognise that there is still a place for the self-employed in our social and economic structure? Does the Financial Secretary believe that they have an important contribution to make, or does he see us all eventually as State employees in one form or another?
  Amendment No. 64 seeks to bring a small measure of justice to a much-oppressed class. Amendment No. 66 seeks to explore the problem of late entrants, whose difficulties do not appear to have been brought into focus by the Financial Secretary.
  Some of my hon. Friends have emphasised how much the self-employed have suffered in the past two years, whether it be in terms of social security provision, inflation levels, or pressures of business or professional life.
  The Chancellor of the Exchequer is prone to talk about equality of sacrifice. When he does so, I am not certain what he means. He appears to believe that we are about to enter a period of difficulty. In the past two years the self-employed have suffered a sharp drop in their standard of living. It is not a question of their tightening their belts for the cold winds to come; they have already tightened their belts over the past two years. All that my hon. Friends are asking, and what I am pressing for, is a small measure of justice for them—some recognition of what they have had to undergo and what they will have to
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  endure in retirement against accelerating inflation. All we are asking tonight from the Financial Secretary is a modest measure of relief, which will cost the Exchequer very little. We shall await with interest the reply to this debate.
  8.45 p.m.
  Mr. Cecil Parkinson: I rise to support my hon. and learned Friend the Member for Dover and Deal (Mr. Rees). In Committee on the Finance Bill last year I moved the amendment which led to the undertaking from the Financial Secretary that he would review the position of the self-employed and the controlling director. I must thank him for honouring that undertaking and coming to the House tonight with an amendment which improves the position of the controlling director and the self-employed. But I must say that we have to be extremely careful when we discuss the arrangements which we are prepared to allow other people to make for their pensions.
  There is tremendous resentment outside the House of Commons that we as Members of Parliament have agreed that our pensions should be based on a figure of £8,000, the figure which we would have been paid had we accepted the recommendations of the Boyle Review Body; but we did not accept them. As we all know, our pension arrangements are now based on a figure which is much higher than our income and it is perfectly possible to argue that if we had taken the £8,000 recommended by Lord Boyle, although there would have been rows about it, our pension arrangements at least would be consistent.
  The public at large does not see it like that and says that as we did not accept the Boyle recommendations, we must accept the consequences and must not start making special arrangements allowing Members of Parliament to protect their pensions from the consequences of their own action.
  Mr. Andrew Bowden: I would submit to my hon. Friend that he is not being absolutely fair to us as MPs. After all, can he think of any other body of people who have had their salaries reviewed by a totally independent group, consisting of a wide range of people from very distinguished positions

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  in industry, the trade unions and professions, who, having looked at the salaries being paid and the responsibilities and duties of the job, said "Members of Parliament should be paid £8,000 now", Members who then said, "Our salaries having been considered by an independent group, we decide suddenly that Members of Parliament should not take the £8,000 and that the amount should be reduced to £5,750"?
  Can my hon. Friend think of that having been done in any other case? I should have thought that that was a great example. Is it not fair and reasonable that for the future, when many of us will retire either voluntarily or not quite so voluntarily, and earn the full pension—and we have to be here well over 20 years to do so—there should be a reasonable pension in return for long and hard service to the nation?
  Mr. Clement Freud: May I point out to the hon. Gentleman that a Member must serve for 40 years to earn a full pension? Would he not agree that the time to say that—
  Mr. Robin Maxwell-Hyslop: One a point of order, Mr. Goodhew. Is it not a little unusual to permit an intervention in an intervention?
  The Temporary Chairman: It is somewhat unusual, but I hope that this intervention is connected with the previous one so that the two can be asked together, and I hope that it will be short.
  Mr. Freud: I am grateful, Mr. Goodhew. The hon. Member did give way to me. My point is simply that obviously the time to say that we would not accept the full wage increase to £8,000 but that we would take the pension was at the time when we said that £5,750 would do us at that moment, but that our pensions should be based on the notional £8,000 which we were refusing. The controversy has come as a result of the time lag between the non-acceptance of the Top Salaries Review Board's recommendation and our subsequent decision to base our pensions on it.
  Mr. Parkinson: I find myself in the difficult situation of being tempted to agree with both hon. Members. The
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  point which the hon. Member for Isle of Ely (Mr. Freud) has made is a very fair one and boils down to the fact that we are appallingly bad at handling our own affairs. We are diffident about making arrangements which appear to benefit us. I have a great deal of sympathy with the point of my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden), but, as he has seen in leaders in the newspapers and probably in his own postbag, many people do not take that view. They feel that once again Members of Parliament have reserved for themselves a privilege which is not available to other people.
  Sir Edward Brown: A second part of the report has yet to come. The Prime Minister and his predecessor have had it in their office. That is the part dealing with pensions. This has not yet appeared although it has been notified to every hon. Member since November last year. That is another consideration which should be taken into account.
  Mr. Parkinson: I do not want to strain your good nature, Mr. Goodhew. We are not debating Members' pensions; we are debating the self-employed. It would be adding to our insult to the self-employed if we seemed to prefer to debate our own affairs.
  Mr. Bowden: I too, do not want to strain your good will, Mr. Goodhew, but in both cases we are dealing with natural justice. However, if we do not have the courage to say that in both cases we do not think justice is being done, we do ourselves no service.
  Mr. Parkinson: We can all feel better for this brief excursion into the problems of Members of Parliament, but the fact is that the public do not understand us. I believe this is the constant complaint of the husband to his attractive girl friend—that his wife does not understand him. Perhaps we shall also get into that dilemma in referring to ourselves.
  The only point I was making is that, having set up a most unusual situation for ourselves by preserving our pensions, we have to be careful when we discuss arrangements which we are prepared to allow other people to make for their own pensions—in particular, the self-employed and controlling directors. Civil servants and those who advise Ministers must also

  777
  feel a little intimidated when they examine amendments of this kind.
  The Civil Service has inflation-proofed its pensions and is in a highly privileged position. My hon. and learned Friend the Member for Dover and Deal pointed out that the golden handshake is not something known only to commerce; it affects top civil servants and the Civil Service generally. They have the power to commute part of their pension entitlement and take it as a tax-free lump sum. Golden handshakes and inflation-proofed pensions are available to civil servants.
  We have voted large sums to nationalised industries to eliminate losses supposedly incurred through price restraint. We once gave the Post Office a subvention of about £132 million. When one of my hon. Friends investigated the Post Office accounts, it turned out that the reason was not price restraint. The largest element in the deficit was over £100 million for the Post Office Pension Fund, which had been ravaged by inflation. Parliament helped to sustain the pensions of postmen. Many of us thought it was sharp practice to use price restraint legislation to slip through huge sums to prop up a pension fund.
  So a variety of arrangements are made in the public service, the Civil Service and in the House to enable some of us to look forward to a satisfactory pension. Under the Government's pension scheme, the nation will be issued with an inflation-proof IOU dated 1992. The right hon. Member for Blackburn (Mrs. Castle) promised that if we paid our contributions and behaved ourselves, we should get this IOU when we retired. The Conservative pension scheme, which this Government abandoned, was far more realistic and sensible.
  No Government can promise that the working population of the 1990s will treat pensioners more generously than ever before and yet not set aside money to meet the commitment. It would have to be met from the revenue of the day. The mind boggles at the arithmetic involved in that kind of guarantee. The pensioned population is increasing and the working population is shrinking, yet our pensions are to be inflation-proofed.
  This Government have a fixation about the poor old self-employed. They regard them as a bunch of untrustworthy
  778
  fiddlers to be persecuted in every possible way. The self-employed pay more than the rest of us in national insurance contributions yet receive smaller benefits. The reasoning is that they are not trustworthy, they are on the make, and must be penalised.
  Once against, thanks to the Treasury, this group will be entitled to pay increased contributions, to get tax relief but to have no guarantee of inflation proofing. The figures do not reflect the effect of inflation even since the last review. To do so they would have to be nearer £3,000 than £2,250. Yet we are saying that we will be broadminded and generous and will allow them to make an additional contribution for themselves. Who knows, in a few years' time, if some Government can pluck up the courage, they will allow them to come back and press us for another review. We are not extending to them the same privileges which civil servants have arranged for themselves, which those in the nationalised industries can expect, and which can be expected by many others when they retire.
  9.0 p.m.
  We are saying that this is a very special, suspect group and that we reserve the right to look at their contributions from time to time. If the Labour Party is in power, it is likely that the group will fall back in the race against inflation. If inflation continues, it is likely that the self-employed will not be able to provide an adequate pension for themselves. We are saying that that is their bad luck because they have committed the unforgiveable—they have chosen to work for themselves and therefore they are a group against whom we are entitled to discriminate.
  Conservative Members do not see the self-employed and controlling directors in that light. Even the right hon. Member for Bristol, South-East (Mr. Benn) made a point of exempting small businesses from his criticism when he was Secretary of State for Industry. Whatever plans he had for nationalisation, he always said that he would do nothing to damage the prospects of small businesses because they created the dynamism and the growth, were the giants of the future, and must be looked after. The right hon. Gentleman often paid tribute to small businesses.

  779
  The subject is becoming almost a bore. We are making the small business man and the controlling director big-headed as we sing their praises. But when we have a chance to allow them to make better arrangements for their pensions, we talk of them as a dodgy group. We are happy to sing their praises and to admit that one-third of the population relies on them for jobs, but when it comes to practical arrangements, we revert to type and refuse them the privileges which everyone else enjoys. We say "Why should we take inflation into account?"
  Conservative hon. Members do not accept that thinking. We believe that the self-employed and controlling directors are important and deserve the same treatment as others.
  Mr. Bowden: I apologise to the Committee for not being in the Chamber earlier in the debate but a series of other engagements kept me away from the House.
  The principal amendment is modest.
  Mr. Freudrose—
  Mr. Bowden: I note that the Liberal spokesman is about to leave the Chamber, which is a pity, because I hoped that he would stay. The Liberal amendment is more generous than the principal amendment, and the Committee should support it. The main Opposition party felt that it did not want to ask for too much, and hoped that by keeping its request at a fairly reasonable level the Government would feel able to accept the amendment to increase the sum from £2,250 to £3,000
  None of us would deny that the position and the life of the self-employed person today is far from easy. Indeed, life is not easy for any of us under the present Government, but it is probably more difficult for the self-employed than for most sections of the community. We really shall be suffering very greatly as a nation, both in terms of the spirit and the enterprise that the self-employed show and in the context of our economy, if we continue to drive more and more of these determined, hard-working and able people out of business.
  In my own town, Brighton, we have a substantial number of self-employed
  780
  people—small shopkeepers and people in small businesses—all geared to providing vital services to the people of Brighton and for the hundreds of thousands of people who visit the town each year during the holiday season. Some of those self-employed are geared particularly to the holiday industry for six or seven months of the year. They work extremely long hours, literally from first light until it is dark. Some use their Sundays, if they are not open for business on Sundays—although many still provide their services on Sundays—to do mountains of paper work and form filling to keep the Government happy and to ensure that their VAT returns are kept up to date, along with the requirements of the other Regulations.
  Unless they get a fair and reasonable return for these long and gruelling hours, and for being unpaid tax collectors, as so many self-employed people are—unless we give them a fair return for their efforts and their work—they will not continue as self-employed people. Many small shops and small businesses, which provide such a vital part of the economy and such excellent services to the community as a whole, will disappear completely.
  It is no exaggeration to say—though some Labour Members may dispute this—that the spirit that motivates the self-employed man is exactly the opposite of Socialism and the dogma and creed for which Socialism stands. The self-employed man can build up a business through his own determination and effort. How many companies have started as one-man or two-man businesses and have grown into great firms providing jobs for thousands of people? In their hearts, however, Labour Members really want to see the self-employed disappear completely, because the self-employed do not fit into the system. They do not fit in with the Socialist dream, in which we would be controlled by the State from the day we were born to the moment when we go into a little box in the ground. It is the complete opposite of the whole creed of Socialism that a person should be able to build up a business, to make profits and to earn a great deal of money—at the same time, however, paying a great deal of tax, which benefits the nation and provides jobs for thousands upon thousands of people.

  781
  Therefore, I hope that on this occasion, if on no other occasion in Committee on this Bill, the Government will look with a little sympathy and understanding at this group of amendments, or we shall drive these hard workers out.
  When we look at the situation in the context that one of the great problems in the trade union movement today—particularly in relation to wage freezes and wage restraint—can be centred around differentials, we know that this is a problem which will increase, for inevitably differentials are based upon different and various skills, and upon the quality of those skills.
  Unless we make due allowance for people who are fortunate enough to have exceptional abilities and skills, for which they should rightly receive extra remuneration, they will go somewhere else in the world, where those skills and hard work will be duly rewarded. Therefore, we are talking not merely of driving out the self-employed but of the inevitable consequences of Government policy in driving out those who are prepared to work long and hard hours.
  I do not regard it as a crime, as some hon. Members obviously do, for a person to work far beyond the average working week in order to provide extra standards for himself, for his wife and for his family. I appeal to the Treasury Ministers to reconsider these amendments and to see whether, in common justice, they can agree at least to accept the one that would raise the level to £3,000.
  Mr. Nott: The debate on my hon. Friend's amendment arises out of Clause 27, which in its small way we are glad to see in the Bill. The Government undertook last year to review sympathetically the problems of the self-employed with regard to their capacity to put aside money for their retirement. Having done so, the Government have come forward with this very modest increase in the provision which these people may make for their retirement.
  I shall outline quickly the history of the arrangements. As my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) said, the system stems back to the Finance Act 1956 which allowed the deduction from relevant earnings of premiums up
  782
  to 10 per cent., with an earnings ceiling of £7,500. In the Finance Act 1971, the then Chancellor of the Exchequer, Lord Barber, increased the relief to 15 per cent. of relevant earnings for those under 40, and to 20 per cent. of relevant earnings for those over 48 in 1956, with an earnings ceiling of £10,000 a year. Then there was a graduation in between those ages whereby the percentages moved up in 1 per cent. steps.
  As my hon. and learned Friend the Member for Dover and Deal said, we are talking here in these new arrangements of a ceiling of £15,000 a year, but the circumstances are entirely different from those prevailing in 1971. Inflation at that time was a mere fraction of what it has been in the past two years. It is the case that members of the professions, those who are not in company pension schemes, and those who are not working in the public sector, have had their past contributions enormously eroded by the rate of inflation over the past couple of years.
  To a very large extent, therefore, these people, who have been putting aside money for their retirement, find themselves back not entirely at square one but, having had a great proportion of their past savings eroded, they need to make much greater contributions than they could have imagined would have been necessary in 1971
  The proposal before us raises the earnings ceiling to £15,000, and we are glad of that. My hon. Friend the Member for Maldon (Mr. Wakeham), in his very interesting speech, raised a rather general point of principle about the manner in which we deal with these things. He said that he was not sure at all that it was right to look at the pensions of self-employed people on the basis of an annual contribution.
  My hon. Friend made the valid point that the provisions must take account of the good years as well as the bad in private business. I think that he sounded a note to which we shall want to return when we review the arrangements, when we consider whether they should be made more flexible. He said that the good years should be taken with the bad, and that may be we should take an average of three years, for example, for deciding the limit of the contribution.

  783
  9.15 p.m.
  My hon. Friend made the interesting point that if a company has an especially good year it may mean the opposite of the proprietor having more money to put aside for his pension, as the good year might have brought a considerable cash strain upon his business. It may be that in a good year the proprietor has less to put aside for his pension than in a bad year.
  My hon. Friend made the valid case that we should look at the whole system again with, first the idea of concentrating on a percentage rather than on a ceiling. That is the basis of the next amendment that we shall be discussing. Secondly, he felt that an average of three years should be taken for deciding relevant earnings. Thirdly, he made the interesting suggestion that if we are to operate on an annual basis, we should allow the self-employed person to carry forward that element of the unused limit that he could not use in one tax year because his business or profession was not generating sufficient income for him to come up to the full limit at that stage.
  I believe that my hon. Friends feel some passion on this subject. The present arrangements offend their natural sense of justice. We are talking of discriminatory arrangements against certain sections of the community that are unacceptable. There is no place in equity for those who are self-employed, such as those who run their own businesses, those who are members of professions, such as accountants, solicitors and barristers, and those who are small shopkeepers, to be treated differently in our tax system from those who are in company pension schemes and those working in the public sector.
  In economic terms there is something more to be said for those who are contributing to funded schemes. Clearly, there is greater benefit to be derived from the normal pension contributions made by a man in a profession, or by a self-employed person, by those who are actually contributing to a funded scheme where the savings are channelled out into investment. Clearly those contributions are of greater benefit than the public sector scheme, when one is talking about a pay-as-you-go arrangement.
  I am sure that it is not right that there should be one set of tax arrangements
  784
  for those in pension schemes and those in the public sector, and a far less favourable set of arrangements for those working for themselves. I am sure that there is no disagreement across the Committee that the process of saving out of earned income for retirement is highly to be commended. Such saving helps counter-inflation policies and provides funds for investment. Indeed, our legislation in many areas admits of its beneficial effects. Yet as my hon. Friends have said, starting with my hon. Friend the Member for Basingstoke (Mr. Mitchell), who moved the amendment, the contributions are treated very differently. As my hon. and learned Friend the Member for Dover and Deal has said, pensions in the public sector are now inflation-proof. But more importantly—this is a matter that has been raised by others of my hon. Friends—the schemes normally taken account of final salary. That is of enormous benefit to those in public sector schemes compared with the self-employed, because if final salary is taken as the basis on which subsequent pensions are paid, at least there is some protection against inflation up to the moment when the individual retires from the public sector.
  There are arrangements in the private sector, as many of my hon. Friends have suggested, including my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson), whereby companies are able to top up their employees' pension funds when inflation is running at a higher level than was anticipated. But there is no way that the self-employed man over 40 can make up for the devaluation of his past contributions in the time remaining before his retirement.
  My hon. and learned Friend the Member for Dover and Deal referred to some very interesting figures. I noted them down. My hon. and learned Friend said that if we made certain assumptions—I understand that the assumptions that he made were those made by the Government Actuary, who last year took a figure of about 8 per cent. as being the likely inflation rate for the purpose of calculating Government pension schemes and an interest rate of about 9 per cent.—it would be necessary for somebody aged 45 to be able to set aside over 30 per cent. of his earnings to provide protection against inflation or, if aged 55, over 47 per cent. of his earnings.

  785
  We have here a 15 per cent. rate applying to the self-employed. That is in total contrast to the situation if the man were an employee. If a man joins a firm at the age of 55, his contributions need to be 47 per cent., but, through his company's pension scheme, he can get the whole of that 47 per cent. approved for tax purposes. It is allowable if he is an employee, but not if he is self-employed.
  The situation is even worse for young people starting out in the professions at, say, 25 years of age. At that young age they will not be making contributions which can protect them against inflation with a limit of 15 per cent. At 25, making the assumptions which my hon. and learned Friend made—the same assumptions as the Government Actuary made—a man would need to make a contribution of 17½ per cent. of his earnings to keep pace with inflation or, at 35, he would need to make a contribution of 22½ per cent. When we consider that a young person entering a profession or starting his own business is almost certainly not going to be able to put aside large sums in the early years, it becomes all the more clear that, under present arrangements, making the same inflation assumptions as the Government Actuary, there is no way that he can keep pace with inflation.
  The amendment seeks to increase the cash ceiling. This is a modest amendment, because the cash ceiling proposed goes nowhere near to meeting what we consider to be the essential point. I emphasise that there is no cash ceiling for Government superannuation schemes or approved private employee schemes. Several civil servants and private employers now have overall remuneration exceeding £15,000 per annum, which is the limit with which we are dealing, especially if we include in their remuneration the contributions which would be required to fund their pensions. We are not referring specifically to a salary of £15,000 in the public sector, but to a salary which incorporates sufficient money to fund pensions as well.
  Although these arrangements stem from the Finance Act 1956 and were increased in 1971, we are operating in an entirely different environment, because inflation has greatly eroded the contributions already made under these schemes. Unless we have a figure somewhere nearer
  786
  to 30 per cent. or 40 per cent. of income, there will be no way in which a man in middle age will be able to protect himself in his retirement against the ravages of inflation. We are seeking to bring the tax arrangements for the self-employed more into line with those which exist for the private and public sectors. It is not asking a great deal.
  I conclude by commenting on the speech made by my hon. Friend the Member for Wells (Mr. Boscawen). He raised a number of questions about contributions to the national insurance scheme and pointed out that these were out of line with the arrangements for the employed person. I do not want to move into that area because here we are dealing specifically with pensions for the self-employed.
  We are not happy that the Government have sufficient understanding of the very special position of the self-employed and we see this as a good example of how they are undoubtedly, under existing tax arrangements, worse off than their contemporaries in the public sector or in companies with private pension schemes. I hope that the Financial Secretary will do his best to answer these points.
  Although we prefer the higher limit in the amendment, what we are seeking even more than that is what is embodied in the next amendment—not a cash limit at all, but a percentage limit. Only with a percentage limit will the self-employed be protected against inflation. Only with a percentage limit—and there are no cash limits for private schemes or for the public sector—shall we be able to put this whole thing on a fair and comparable basis.
  Mr. Robert Sheldon: I apologise to the Committee for dealing with the previous amendment rather briefly. I understood that the Committee was anxious to move on to the next clause.
  I shall give the details of the amendment and its intentions and results as I see them. The present position was that relief is given on premiums not exceeding 15 per cent, of earnings, up to a total of £1,500, or the equivalent of £10,000 in earnings. In the Committee stage upstairs of last year's Finance Bill I gave a commitment to look at this matter sympathetically. I did so and came to the House with what I thought would be

  787
  received not with ecstasy but with reasonable appreciation. Having undertaken to consider the arguments that were adduced in Committee, I thought there should be some increase, and the increase that I have suggested in this Finance Bill is an earnings limit of £15,000 a year, which means relief up to £2,250
  The hon. Member for Basingstoke (Mr. Mitchell) wanted some form of indexation in this year as opposed to previous years. We have not had as many indexation debates as we had last year. The hon. Member for Blaby (Mr. Lawson) has restrained himself considerably throughout our debates, although he has given indications that he is still dedicated to that solution. Even without speaking he had made his view well felt in this Committee.
  If we were to accept the indexation argument in general, it would be a matter of great importance, and one that I would not be prepared to accept, for reasons that I have given many times. I need not repeat them. The point was made by the hon. Member for Basingstoke in respect of pension arrangements now being made. He said that pensions should be reasonably in proportion up to 10 or 15 years from now. He said that inflation had to be seen in the long-term context that he envisaged and that as a result there needed to be an increase in the limits of the kind that he had explained to the Committee. Obviously we need to take a long-term view of inflation, but that is one of the most difficult things to do at present. All of us who are dealing with economic matters have been through a quite traumatic year, in which we saw inflation at levels we never dreamed could exist in this country. We are now seeing a rapid reversal of that trend. It would be wrong to make too many assumptions based on experience of the past year.
  Mr. David Mitchell: Since the £1,500 limit was set in 1971 there has been an 89 per cent. increase in the rate of inflation. The Financial Secretary's "generous" uplift is only 50 per cent. My argument for looking two years ahead at the rate of inflation was to indicate that the amendment was too moderate and that we should have a much more generous scale.
  9.30 p.m.
  Mr. Sheldon: I understand the hon. Member's point, but that may not necessarily be the whole picture. If inflation were to grow at the levels he might consider reasonable to assume, reasonable adjustments could be made, in the same way that adjustments were made this year following earlier representations.
  The hon. Member said that the Government's actions were unjustifiable and that the Government were—I think he said—the hammer of the self-employed. He was guilty of immoderate language and he failed to take account of the real concern that is being expressed so frequently by the Government for the problems of the self-employed and small businesses.
  The wheel has come full circle, where people interested and engaged in the activity of our industries are trying to afford every possible assistance to small firms and to understand the contribution that they make. I always held that view, but it is now becoming more widespread and the hon. Member for Basingstoke has played his part in that process. He said that the self-employed were frequently unable to make a contribution to their pension arrangements until they reached their late forties or early fifties. I agree that there is a great deal in what he says. Such people frequently are engaged in building up their businesses and making sure that all the profits are ploughed back. It is a pity that we do not still have the old corporation tax, which enabled them to do that—
  Mr. David Mitchell: Hear, hear.
  Mr. Sheldon: I am glad that the hon. Member agrees with me. That was one of the most valuable aspects of the old corporation tax system, which, unfortunately, the last Conservative Government abolished. One of the consequences of the very natural interest of the self-employed in building up their own business is that at the end of it all they have a valuable asset which they can sell or which will produce an income. That is something that the person in private employment does not have. That is one of the reasons for previous Governments' having accepted the need for both the premiums ceiling and the percentage limits of annuity arrangements.

  789
  If the arguments put by hon. Members tonight are so conclusive, why have all previous Governments not been persuaded of the need to abandon either total or percentage limits? The reason may be found in the Tucker Committee on the Taxation Treatment of Provisions for Retirement, which led to the 1956 provisions. It produced recommendations that were the precursor of the retirement annuity provisions that we are now considering. The Committee recommended that there should be a restriction on relief for earnings because they usually include an element more in the nature of a return on capital than of reward for work performed, which should not be included in pension provisions.
  Not only is there this underlying capital value which must be taken into account in some way—and the method could be subject of a debate—but also the self-employed can decide their own future more readily than employees who have an arm's length transaction with their employers. Restrictions have been devised to meet the differences in the way I have described.
  In the end, we realised that there must be some restriction on annuity relief, and the argument becomes how much and in what way.
  Mr. Peter Rees: The Financial Secretary has attributed certain motives to the Government who introduced the 1956 provisions, but might they not have done so on the basis that pension schemes for employees were not nearly so widespread, and does he not concede that there are many occupations in respect of which there are no great capital assets to be disposed of when a person retires?
  Mr. Sheldon: Both those statements are true in certain respects. Some self-employed people do not build up capital assets, but many do.
  The provision of pension schemes has increased, but with that has gone an improvement in the total and percentage limits by which self-employed people can make provision for their retirement.
  The hon. and learned Member for Dover and Deal (Mr. Rees) asked me to view this matter sympathetically. I did not expect enthusiasm, but I thought a welcome would have been justified when I returned to the Committee this year with a 50 per cent. increase in the limit. Apart
  790
  from one or two instances, our proposal was not accorded that welcome.
  The hon. and learned Member for Dover and Deal reverted again to the regular replay we have on the question of pensions of civil servants. The Civil Service pension is one-half—not twothirds—of final pay. It is only the lump sum that brings it up to the equivalent of the two-thirds pension. That is the position as I stated it last year. If the hon. and learned Gentleman checks on it this time, he will see that that is correct.
  The hon. and learned Gentleman gave some very interesting figures from the Senate of the Inns of Court and the Bar. I am sorry that the large number of figures that he necessarily had to give this Committee were in such a form that they were not readily digestible. My office received these representations only yesterday, and I had the full details only today. For that reason, I have not had time to go into them. They were part of the response which I have had when I announced that I was happy to receive personally observations on the technical and practical provisions of the Finance Bill. I am happy to say that a number of representations have been made to me which obviously will receive close scrutiny. Unfortunately, that scrutiny was in this case not possible before today. Within the time available to me, I was not able to go into them in detail, but it may be that another opportunity will avail itself for me to do so.
  Mr. Peter Rees: I am sorry if the hon. Gentleman has not had a chance to digest that important material. If the conclusions are found to be soundly based, will he defer to the recommendations, if not in Committee, at least on Report?
  Mr. Sheldon: I can always give an undertaking that if information comes to me as a result of which my mind is changed in any important respect, so far as it is practicable to do so I shall bring changes into the legislation before the Committee; but obviously I can give no undertaking at the moment, given the state of my knowledge of these detailed comments.
  Perhaps I may refer to the activities of the Government Actuary in this connection. In his latest report on the

  791
  National Health Service, he has assumed an earnings increase of 7 per cent. annually and average annual price increases of 5 per cent. That may set the record straight, in comparison with the assumptions of the hon. and learned Member for Dover and Deal.
  Perhaps I shall be forgiven if I quote what I said last year about retirement annuity relief limits:
  "Clearly, as time goes on, these limits are subject to change as all limits in taxation, due to inflation, are subject to change. I am inclined to look at the proposal"—
  the proposal then before the Committee—
  "sympathetically. I have to bear in mind the general review of tax allowances which the Chancellor is at present undertaking and I shall be happy to look at the matter in that light."—[Official Report, Standing Committee H, 3rd July 1975, c. 935.]
  When I brought forward these proposals, they were a direct result of the observations that I made on that occasion.
  I think that right hon. and hon. Members have seen some improvement here. Obviously these matters are always kept under review. I hope that they will accept that this has been a useful step forward.
  Mr. Lawson: The sparkling oratory of the Financial Secretary has moved me to intervene in a debate in which I had no intention of speaking.
  I was surprised by the hon. Gentleman's suspicion that some of my right hon. and hon. Friends might have lost their interest in indexation. That is not the case. I think that we have a little explaining to do to the Financial Secretary—and we have plenty of time in which to do it in this Committee stage—of the difference between what he calls "revalorisation" and what we mean by "indexation"
  At this stage, I do no more than draw the hon. Gentleman's attention to the speech of my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) on Tuesday when he made it clear that what was needed at the very least was that the indexed figures should be printed and published in the Finance Bill so that we should all know where we were and what the new datum point was from which the Government could then make their discretionary changes.
  Mr. David Mitchell: Does not my hon. Friend agree that, whether it is called "indexation" or "revalorisation", it is unacceptable if the cost of living has gone up by 89 per cent. to have a concession of only 50 per cent.?
  9.45 p.m.
  Mr. Lawson: My hon. Friend is of course right; that is unacceptable. Although the difference between indexation and revalorisation is an important one, we shall have plenty of time in Committee to discuss it.
  To pass on to a point which I do not think the Financial Secretary has covered in his contribution to this debate so far, there is something to which I should like to draw his attention. It came to me in the guise of a constituency case and it is very germane to this point of saving for retirement among the self-employed.
  It must be realised that not every self-employed person starts his working career as self-employed. There are many who will be employed to begin with and will then want to branch out on their own. If they are working for a company to begin with and are in a pension scheme, under the 1970 Finance Act—I have the Revenue document on "Occupational Pension Schemes: Notes on Approval under the 1970 Finance Act"—and the Financial Secretary will know paragraph 13.16—there is the £5,000 rule. If an employee who is a member of a pension scheme happens in any one year—and it may be an unusually good year if, say, he is a salesman and gets a lot of commission—to earn more than £5.000, when he leaves the scheme he cannot take any of his money out. That test should clearly be indexed and I hope that on Report the Government will table an amendment to that effect, because the £5,000 rule, even if right in 1970, is certainly not right now.
  This leads on to the self-employed person. What an employee can do in certain conditions is have the deferred pension transferred to a pension scheme of a new employer. But if he becomes self-employed, there is no transfer that he can make. He cannot transfer it to one of these retirement annuities in Clause 27 that we are talking about. This is a further clear example of discrimination in effect against the self-employed, although maybe that was not the intention.

  793
  I am surprised that the Financial Secretary has at no time brought the wealth tax into this. He will know that the Diamond Commission in its report on income and wealth has pointed out that the wealth of this country is to a large extent in pensions of one kind or another—savings for retirement, pension rights, and so on. This is a very important aspect of the total wealth.
  Those who were on the Select Committee on the Wealth Tax, on both sides—and I am glad to see our distinguished Chairman, the right hon. Member for Battersea, North (Mr. Jay) on the Benches opposite—will know that we spent a great deal of time discussing this subject. One thing that caused us great difficulty was deciding whether all forms of saving for retirement should be treated equally for the purpose of wealth tax, or whether it should be the case that the valuable inflation-proof indexed Civil Service pension rights should not be chargeable for wealth tax, but that the self-employed man saving for retirement—maybe in this kind of retirement annuity, but maybe not; it may consist in the assets he has saved up, everything may be ploughed back into the shop, or whatever it is he owns—should be chargeable for wealth tax. Many of us on both sides of the Committee felt that there was an unfairness here.
  I hope, therefore, that we shall be able to get an assurance from the Financial Secretary on two things. First, we should like to learn that the Government have dropped their ideas for a wealth tax, having read very carefuly the many reports of the Select Committee and the voluminous evidence that it took. But I hope the Financial Secretary will also give us an assurance that if there is ever going to be a wealth tax, in elementary fairness all forms of saving for retirement will be treated alike. Either all forms are brought within the charge of the tax or no forms are brought within it.
  Our fear is that, judging by the track record of the Labour Government, there is a grave likelihood that some of this wealth—the savings for retirement in the form of public service pensions—will be regarded as being outside the tax and that, as usual, the self-employed will be penalised in terms of the wealth tax as in other forms of taxation. I hope that we can be given either or both those
  794
  assurances. If we get the first assurance, we shall not need the second, but if we cannot get the first, let us at least have the second.
  Mr. Nott: If my hon. Friend the Member for Basingstoke (Mr. Mitchell) seeks to press his amendment, I shall certainly advise my hon. and right hon. Friends to support him in the Lobby.
  Although the Financial Secretary was in some respects sympathetic to our comments, I do not think that his reply was satisfactory in every respect. He made a number of comments on the situation, one being that it would be wrong to make assumptions about inflation since the last year had been somewhat traumatic. I hope that he is correct in that forecast.
  Assuming that there is no inflation at all, it is still not possible, under the 15 per cent. set aside, for a self-employed person adequately to protect himself against inflation to the same extent as a person working in the public sector is protected by public sector schemes.
  It has also been said that if a man enters a pension scheme at age 55, there is no reason under existing approved pension scheme arrangements why the contribution for tax purposes should not rise to 47, 57 or 67 per cent. They are all allowed for tax, even if somebody joins a scheme late in life.
  We want the arrangements to be put on a comparable basis. It is not good enough for the Financial Secretary to say that many self-employed people have an asset which is saleable at the end of their working life and that they can live on the income from that asset. That may be true, but there are many people who do not have a saleable asset.
  We are extremely glad to learn that the Minister is to study closely the representations from the Senate of the Inns of Court and the Bar. I hope that he will take due note of those representations and report back to the House on the memorandum to which my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) referred and which I have read with some care. I believe that document puts forward an irrefutable case for reviewing these arrangements again and for bringing them more into line with the tax arrangements available to those who work in other sectors of the economy.

  795
  I echo the point made by my hon. Friend the Member for Maldon (Mr. Wakeham) about a broader and much more radical suggestion for reviewing the manner in which an annual contribution is now taken for the purposes of limits and percentages. When we come to make a more fundamental review—a review of the kind undertaken by the Tucker Committee—we should examine whether it will be wiser to take average earnings over the years so that good years can be taken with bad years.
  Since the Conservative Government in 1971 increased the limit to £10,000—and we are glad that the Financial Secretary has gone as far as he has—the contributions of the self-employed have been greatly eroded by the fantastic rate of inflation in the past few years. The situation now is nothing like the situation in 1971
  We want to recapture, to revalorise, or whatever term one likes, some of the contributions actually lost through the rapid inflation since 1971. We wish to bring this whole basis more into line with existing arrangements in the private company and the public sector. Although I must ask my hon. Friends to divide on this amendment, I hope that the Financial Secretary will look at this sympathetically between now and Report, because I believe that we have put forward a very fair case.
  Mr. David Mitchell: I am grateful to my hon. Friend the Member for St. Ives (Mr. Nott) for the support he has given to this very modest amendment and I greatly regret that the Financial Secretary to the Treasury has not felt able to accept it. I had hoped, as I believe my hon. Friend had hoped, that on this occasion he would have thrown away his brief and allowed himself to do what I know he believes to be right and to accept this amendment.
  The Financial Secretary spoke of regretting the lack of warmth with which
  we had received the small concessions he has made, but they have to be set against the background of the level of inflation. I can only say that in politics gratitude is a recognition of the anticipation of further benefits to come and I regret that those further benefits have not been greater than they have appeared in the Bill.
  The self-employed, the small business man and people of this type have very often gone many years at the end of their working lives before being able to contribute to a fund for their old age. The allowance which the Government are now giving is wholly inadequate for the needs, against the level of inflation as it has built up, and is wholly unfair by comparison with the treatment of civil servants and those in private company schemes.
  The Government have not accepted the arguments of my hon. Friend the Member for Blaby (Mr. Lawson) for indexation. If the Government do not accept indexation, there is imposed upon them a double duty—to make sure that at those times when they move the figures, if they are not moving them automatically with indexation, they move them sufficiently adequately to cover inflation since the previous occasion when they were moved. Adequately to cover the movement in inflation since 1971 would require the figure to be lifted by 89·9 per cent.
  Because the Government have failed to do this and have let down the self-employed on this occasion as on so many others, I urge all my hon. Friends who support the case for the self-employed to join me in the Lobby in opposing this treatment.
  Question put, That the amendment be made:—
  The Committee divided: Ayes 119 Noes 127.

  Fookes, Miss Janet.

  MacGregor, John.

  Roberts, Wyn (Conway)

  Forman, Nigel.

  Macmillan, Rt Hon M. (Farnham)

  Ross, Stephen (Isle of Wight)

  Fowler, Norman (Sutton C'f'd)

  Mather, Carol.

  Ross, William (Londonderry)

  Freud, Clement.

  Maude, Angus.

  Rossi, Hugh (Hornsey)

  Gilmour, Rt Hon Ian (Chesham)

  Maxwell-Hyslop, Robin.

  Sainsbury, Tim.

  Goodlad, Alastair.

  Mayhew, Patrick.

  Scott, Nicholas.

  Grimond, Rt Hon J.

  Meyer, Sir Anthony.

  Shersby, Michael.

  Hall, Sir John.

  Miller, Hal (Bromsgrove)

  Sims, Roger.

  Hamilton, Michael (Salisbury)

  Mitchell, David (Basingstoke)

  Sinclair, Sir George.

  Hastings, Stephen.

  Moate, Roger.

  Smith, Dudley (Warwick)

  Hayhoe, Barney.

  Molyneaux, James.

  Speed, Keith.

  Henderson, Douglas.

  Moore, John (Croydon C)

  Spicer, Michael (S Worcester)

  Hordern, Peter.

  Morris, Michael (Northampton S)

  Steel, David (Roxburgh)

  Howe, Rt Hon Sir Geoffrey.

  Morrison, Charles (Devizes)

  Stewart, Donald (Western Isles)

  Howell, David (Guildford)

  Morrison, Hon Peter (Chester)

  Stewart, Ian (Hitchin)

  Howells, Geraint (Cardigan)

  Heave, Airey.

  Stradling Thomas, J.

  Hunt, David (Wirral)

  Newton, Tony.

  Tapsell, Peter.

  Hurd, Douglas.

  Nott John.

  Thompson, George.

  Jessel, Toby.

  Onslow, Cranley.

  Tugendhat, Christopher.

  Kilfedder, James.

  Page, Rt Hon R. Graham (Crosby)

  van Straubenzee, W. R.

  King, Tom (Bridgwater)

  Pardoe, John.

  Wakeham, John.

  Knox, David.

  Parkinson, Cecil.

  Welder, David (Clitheroe)

  Lamont, Norman.

  Penhaligon, David.

  Weatherill, Bernard.

  Lane, David.

  Percival, Ian.

  Welsh, Andrew.

  Lawrence, Ivan.

  Powell, Rt Hon J. Enoch.

  Whitelaw, Rt Hon William.

  Lawson, Nigel.

  Price, David (Eastleigh)

  Wiggin, Jerry.

  Le Merchant Spencer.

  Raison, Timothy.

  Wilson, Gordon (Dundee E)

  Lester, Jim (Beeston)

  Rees, Peter (Dover & Deal)

  Winterton, Nicholas.

  McAdden, Sir Stephen.

  Rees-Davies, W. R.

  MacCormick Iain.

  Reid, George.

  TELLERS FOR THE AYES:

  McCusker, H.

  Rippon, Rt Hon Geoffrey.

  Mr. W. Benyon and

  Macfarlane, Neil.

  Roberts, Michael (Cardiff NW)

  Mr. Fred Silvester.

  NOES

  Anderson, Donald.

  Graham, Ted.

  O'Halloran, Michael.

  Armstrong, Ernest.

  Hamilton, James (Bothwell)

  Ovenden, John.

  Atkinson, Norman.

  Hardy, Peter.

  Owen, Dr David.

  Bagier, Gordon A. T.

  Harper, Joseph.

  Palmer, Arthur.

  Barnett, Guy (Greenwich)

  Harrison, Walter (Wakefield)

  Park, George.

  Barnett, Rt Hon Joel (Heywood)

  Hayman, Mrs Helene.

  Peart, Rt Hon Fred.

  Bates, Alf.

  Heffer, Eric S.

  Perry, Ernest.

  Blenkinsop, Arthur.

  Hooley, Frank.

  Prentice, Rt Hon Reg.

  Booth, Rt Hon Albert.

  Horam, John.

  Radice, Giles.

  Boyden, James (Bish Auck)

  Howell, Rt Hon Denis.

  Robinson, Geoffrey.

  Butler, Mrs Joyce (Wood Green)

  Irvine, Rt Hon Sir A. (Edge Hill)

  Rooker, J. W.

  Cant, R. B.

  Jay, Rt Hon Douglas.

  Roper, John.

  Castle, Rt Hon Barbara.

  Jenkins, Hugh (Putney)

  Rose, Paul B.

  Clemitson, Ivor.

  John, Brynmor.

  Sandelson, Neville.

  Cocks, Michael (Bristol S)

  Judd, Frank.

  Sedgemore, Brian.

  Coleman, Donald.

  Kelley, Richard.

  Shaw, Arnold (Ilford South)

  Corbett, Robin.

  Kilroy-Silk, Robert.

  Sheldon, Robert (Ashton-u-Lyne)

  Cox, Thomas (Tooting)

  Kinnock, Neil.

  Short, Rt Hon E. (Newcastle C)

  Cryer,Bob.

  Lamborn, Harry.

  Silkin, Rt Hon John (Deptford)

  Davidson, Arthur.

  Latham, Arthur (Paddington)

  Silverman, Julius.

  Davies, Bryan (Enfield N)

  Lestor, Miss Joan (Eton & Slough)

  Snape, Peter.

  Davies, Denzil (Llanelli)

  Lipton, Marcus.

  Spearing, Nigel.

  Davis, Clinton (Hackney C)

  Litterick, Tom.

  Stallard, A. W.

  Deakins, Eric.

  Lyons, Edward (Bradford W)

  Taylor, Mrs Ann (Bolton W)

  Dean, Joseph (Leeds West)

  Macfarquhar, Roderick.

  Thomas, Mike (Newcastle E)

  Dormand, J. D.

  McMillan, Tom (Glasgow C)

  Thomas, Ron (Bristol NW)

  Douglas-Mann, Bruce.

  McNamara, Kevin.

  Tinn, James.

  Duffy, A. E. P.

  Madden, Max.

  Tomlinson, John.

  Dunn, James A.

  Magee, Bryan.

  Walker, Harold (Doncaster)

  Dunnett, Jack.

  Mallalieu, J. P. W.

  Walker, Terry (Kingswood)

  Edge, Geoff.

  Marks, Kenneth.

  Ward, Michael.

  Ellis, John (Brigg & Scun)

  Marquand, David.

  Weetch, Ken.

  English, Michael.

  Marshall, Jim (Leicester S)

  Weitzman, David.

  Evans, Ioan (Aberdare)

  Maynard, Miss Joan.

  Wellbeloved, James.

  Ewing, Harry (Stirling)

  Mellish, Rt Hon Robert.

  Whitehead, Phillip.

  Faulds, Andrew.

  Mendelson, John.

  Willey, Rt Hon Frederick.

  Flannery, Martin.

  Miller, Dr M. S. (E Kilbride)

  Williams, Alan (Swansea W)

  Fletcher, Raymond (Ilkeston)

  Miller, Mrs Millie (Ilford N)

  Williams, Alan Lee (Hornch'ch)

  Foot, Rt Hon Michael.

  Molloy, William.

  Wise, Mrs Audrey.

  Fowler, Gerald (The Wrekin)

  Morris, Charles R. (Openshaw)

  Garrett, John (Norwich S)

  Moyle, Roland.

  TELLERS FOR THE NOES:

  George, Bruce.

  Mulley, Rt Hon Frederick.

  Mr. David Stoddart and

  Gilbert, Dr John.

  Newens, Stanley.

  Mr. Frank R. White.

  Golding, John.

  Noble, Mike.

  Question accordingly negatived.
  Mr. Nott: I beg to move Amendment No. 87, in page 15, line 23, leave out '£2,250' and insert '15 per cent.'
  The Temporary Chairman: With this we may take the following amendments:
  No 63, in page 15, line 21, leave out '£1,500' and insert '15 per cent.'
  No. 65, in page 15, line 23, leave out '£2,250' and insert '20 per cent.'
  No. 67, in page 15, line 24, leave out '£500' and insert '5 per cent.'
  No. 68, in page 15, line 25, leave out '£750' and insert '7 per cent.'
  No. 69, in page 15, line 25, at end insert:
  '(bb) paragraph (a) of subsection (1A), paragraph (a) of subsection (1B), and subsection (1C) of section 227, subsections (1), (2) and (3) of section 228, and the references to subsection (1C), subsections (1) and (2) and £1,500 in subsection (4) of section 228, and the column headed "Sum" in the Table in the last-mentioned subsection, shall be omitted'
  No. 70, in page 15, leave out lines 28 to 31 and insert:

  Division No. 138.

  AYES

  10.10 p.m.

  Atkins, Rt Hon H. (Spelthorne)

  Hordern, Peter.

  Powell, Rt Hon J. Enoch.

  Baker, Kenneth.

  Howe, Rt Hon Sir Geoffrey.

  Price, David (Eastleigh)

  Bennett, Sir Frederic (Torbay)

  Howell, David (Guildford)

  Ralson, Timothy.

  Benyon, W.

  Howells, Geraint (Cardigan)

  Rees, Peter (Dover & Deal)

  Bitten, John.

  Hunt, David (Wirral)

  Rees-Davies, W. R.

  Body, Richard.

  Jesse], Toby.

  Reid, George.

  Boscawen, Hon Robert.

  Kilfedder, James.

  Rippon, Rt Hon Geoffrey.

  Bowden, A. (Brighton, Kemptown)

  Knox, David.

  Roberts, Michael (Cardiff NW)

  Bradford, Rev Robert.

  Lamont, Norman.

  Roberts, Wyn (Conway)

  Brittan, Leon.

  Lawrence, Ivan.

  Ross, Stephen (Isle of Wight)

  Brotherton, Michael.

  Lawson, Nigel.

  Ross, William (Londonderry)

  Brown, Sir Edward (Bath)

  Le Marchant Spencer.

  Rossi, Hugh (Hornsey)

  Churchill, W. S.

  Lester, Jim (Beeston)

  Sainsbury, Tim.

  Clark, William (Croydon S)

  McAdden, Sir Stephen.

  Scott, Nicholas.

  Clarke, Kenneth (Rushcliffe)

  MacCormick Iain.

  Shersby, Michael.

  Clegg, Waiter.

  McCusker, H.

  Silvester, Fred.

  Cope, John.

  Macfarlane, Neil.

  Sims, Roger.

  Costain, A. P.

  MacGregor, John.

  Smith, Dudley (Warwick)

  Davies, Rt Hon J. (Knutsford)

  Macmillan, Rt Hon M. (Farnham)

  Speed Keith.

  Dodsworth, Geoffrey.

  Maude, Angus.

  Spicer, Michael (S Worcester)

  Eden, Rt Hon Sir John.

  Maxwell-Hyslop, Robin.

  Steel, David (Roxburgh)

  Edwards, Nicholas (Pembroke)

  Mayhew, Patrick.

  Stewart, Donald (Western Isles)

  Emery, Peter.

  Meyer, Sir Anthony.

  Stewart, Ian (Hitchin)

  Evans, Gwynfor (Carmarthen)

  Miller, Hal (Bromsgrove)

  Stradling Thomas, J.

  Farr, John.

  Mitchell, David (Basingstoke)

  Tapsell, Peter.

  Finsberg, Geoffrey.

  Moate, Roger.

  Thompson, George.

  Fisher, Sir Nigel.

  Molyneaux, James.

  van Straubenzee, W. R.

  Fookes, Miss Janet.

  Moore, John (Croydon C)

  Wakeham, John.

  Forman, Nigel.

  Morris, Michael (Northampton S)

  Walder, David (Clitheroe)

  Fowler, Norman (Sutton C'f'd)

  Morrison, Charles (Devizes).

  Weatherill. Bernard.

  Freud, Clement.

  Neave, Airey.

  Welsh, Andrew.

  Gilmour, Rt Hon Ian (Chesham)

  Newton, Tony.

  Whitelaw, Rt Hon William.

  Goodlad, Alastair.

  Nott John.

  Wiggin, Jerry.

  Griffiths, Eldon.

  Onslow, Cranley.

  Wilson, Gordon (Dundee E)

  Grimond, Rt Hon J.

  Page, Rt Hon R. Graham (Crosby)

  Winterton, Nicholas.

  Hall, Sir John.

  Pardoe, John.

  TELLERS FOR THE AYES:

  Hamilton, Michael (Salisbury)

  Parkinson, Cecil.

  Mr. Anthony Berry and.

  Hastings, Stephen Hayhoe, Barney.

  Penhaligon, David.

  Mr. Carol Mather.

  Henderson, Douglas.

  Percival, Ian.

  NOES

  Anderson, Donald.

  Booth, Rt Hon Albert.

  Corbett, Robin.

  Armstrong, Ernest.

  Boyden, James (Blsh Auck)

  Cryer,Bob.

  Atkinson, Norman.

  Butler, Mrs Joyce (Wood Green)

  Davidson, Arthur.

  Bagler, Gordon A. T.

  Cant, R. B.

  Davies, Bryan (Enfield N)

  Barnett, Guy (Greenwich)

  Castle, fit Hon Barbara.

  Davies, Denzil (Llanelli)

  Barnett, Rt Hon Joel (Heywood)

  Clemfitson, Ivor.

  Davis, Clinton (Hackney C)

  Bates, Alf.

  Cocks, Michael (Bristol S)

  Deakins, Eric.

  Blenkinsop, Arthur.

  Coleman, Donald.

  Dean, Joseph (Leeds West)

  '"1914 or 1915", "1912 or 1913", "1910 or 1911", "1908 or 1909", and "1907" there shall be substituted respectively "1933, 1934 or 1935', "1930, 1931 or 1932", "1927, 1928 or 1929", "1024, 1925 or 1926", and "1923", and for "16", "17", "18", "19" and "20" there shall be substituted respectively "22", "24", "26", "28", and "30"'.
  Mr. Nott: We had a full debate on this clause when we discussed the amendment tabled by my hon. Friend the Member for Basingstoke (Mr. Mitchell) and, subject to the views of my hon. Friends, I do not think that there is any need to debate the subject further. If my hon. Friends agree, we shall just divide on the amendment.
  Question put, That the amendment be made:—
  The Committee divided: Ayes 114, Noes 124.

  Dormand, J. D

  Lestor, Miss Joan (Eton & Slough)

  Roper, John.

  Douglas-Mann, Bruce

  Lipton, Marcus

  Rose. Paul B.

  Duffy, A. E. P

  Lyon, Alexander (York) H

  Sandelson, Neville.

  Dunn, James A

  Lyons, Edward (Bradford W)

  Sedgemore, Brian.

  Dunnett, Jack

  Macfarquhar, Roderick

  Shaw, Arnold (Ilford South)

  Edge, Geoff.

  McMillan, Tom (Glasgow C)

  Sheldon, Robert (Ashton-u-Lyne)

  Ellis, John (Brigg & Scun)

  McNamara, Kevin

  Short, Rt Hon E. (Newcastle C)

  English, Michael

  Madden, Max

  Silkin, Rt Hon John (Deptford)

  Evans, Ioan (Aberdare)

  Magee, Bryan

  Silverman, Julius.

  Faulds, Andrew

  Mallalieu, J. P. W

  Snape, Peter.

  Flannery, Martin

  Marks, Kenneth

  Spearing, Nigel.

  Fletcher, Raymond (Ilkeston)

  Marquand, David

  Stallard, A. W.

  Foot, Rt Hon Michael.

  Marshall, Jim (Leicester S)

  Stoddart, David.

  Fowler, Gerald (The Wrekin)

  Maynard, Miss Joan

  Taylor, Mrs Ann (Bolton W)

  Garrett, John (Norwich S)

  Mellish, Rt Hon Robert

  Thomas, Mike (Newcastle E)

  George, Bruce.

  Mendelson, John

  Thomas, Ron (Bristol NW)

  Gilbert, Dr John.

  Miller, Dr M. S. (E Klibride)

  Tinn, James.

  Golding, John.

  Miller, Mrs Millie (Ilford N)

  Tomlinson. John.

  Graham, Ted.

  Molloy, William

  Walker, Harold (Doncaster)

  Hamilton, James (Bothwell)

  Morris, Charles R. (Openshaw)

  Walker, Terry (Kingswood)

  Hardy, Peter.

  Moyle, Roland

  Ward, Michael.

  Harrison, Walter (Wakefield)

  Mulley, Rt Hon Frederick

  Weetch, Ken.

  Hayman, Mrs Helene

  Newens, Stanley

  Weitzman, David.

  Hooley, Frank.

  Noble, Mike

  Wellbeloved, James.

  Howell, Rt Hon Denis.

  O'Halloran, Michael

  White, Frank R. (Bury)

  Irvine, Rt Hon Sir A. (Edge Hill)

  Ovenden, John

  Whitehead, Phillip.

  Jay, Rt Hon Douglas

  Owen, Dr David

  Willey, Rt Hon Frederick.

  Jenkins, Hugh (Putney)

  Palmer, Arthur

  Williams, Alan (Swansea W)

  John, Brynmor

  Park, George

  Williams, Alan Lee (Hornch'ch)

  Judd, Frank

  Pearl, Rt Hon Fred

  Wise, Mrs Audrey.

  Kelley, Richard

  Perry, Ernest

  Kilroy-Silk, Robert

  Prentice, Rt Hon Reg

  TELLERS FOR THE NOES:

  Kinnock, Neil.

  Radice, Giles

  Mr. Joseph Harper and

  Lamborn, Harry.

  Robinson, Geoffrey

  Mr. Thomas Cox.

  Latham, Arthur (Paddington)

  Rooker, J. W

  Question accordingly negatived.
  Clause 27 ordered to stand part of the Bill.
  To report progress and ask leave to sit again.—[Mr. Coleman.]
  Committee report progress; to sit again tomorrow.

  STATUTORY INSTRUMENT.
  Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments, &c.)

  AGRICULTURE.
  That the Hill Livestock and Young Cattle (Compensatory Allowances) (Scotland) Regulations 1976, a draft of which was laid before this House on 7th April, be approved.—[Mr Walter Harrison.]
  Question agreed to.

  HOUSE OF COMMONS.(SERVICES)
  Ordered,
  That notwithstanding the Order of the House of 15th November in the last Session of Parliament relating to nomination of Members of the Select Committee on House of Commons (Services), Mr. Edward Short be discharged from the Committee and Mr. Michael Foot be added to the Committee for the remainder of this Parliament:
  Ordered,
  That this Order be a Standing Order of the House.—[Mr. Walter Harrison.]

  PUBLIC EMPLOYEES (MEMBERSHIP OF LOCAL AUTHORITIES)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Coleman.]
  10.24 p.m.
  Mr. Geoffrey Rippon:The matter I am raising tonight arises out of a particular case affecting my own constituency but raises a general issue of considerable importance.
  The village of Kielder, in my constituency, was mostly built by and is largely owned by the Forestry Commission. Its inhabitants are not only the commission's tenants but nearly all get their livelihood directly or indirectly from the commission.
  Kielder has a parish council, and not unnaturally a number of people who serve on the council are employees of the Forestry Commission. From time to time issues arise which affect the Forestry Commission and upon which the com-
  804
  mission has a view. A case arose—I think that the facts are known to the Minister as they have been discussed in another place—affecting the relationship between the chairman of the parish council, who is also the head forester in the area, and his employers, the Forestry Commission. Mr. Weir was summoned to a meeting 60 miles away in Newcastle on 19th January, and two days later he resigned. He wrote a letter of resignation in which he said:
  "Following my interview on Monday, 19th January 1976, the conditions imposed by the Commission make it no longer possible for me to carry out my duties as chairman or councillor in the manner expected by the electorate. Therefore, with great regret, I tender my resignation from the Kielder Parish Council with effect from the above date, and wish to thank all members of the council for their full and loyal co-operation."
  That gave the impression, not unnaturally, that influence had been brought to bear by the commission upon an employee carrying out his public duties as a councillor. This caused considerable concern locally and eventually nationally. When the matter was raised in another place some misunderstanding arose because the Minister who replied to the debate spoke of the rules which bind civil servants. He said that civil servants.
  "are classed into three groups—broadly those who are free to take part in national and local political activities, subject of course to moderation and discretion"—
  and I should like to repeat "subject to moderation and discretion"—
  "because it has a very important bearing in this particular case. Secondly, there are those who make take part in such political activities subject to certain conditions; and, thirdly, those who may not take part in national political activities but may seek permission to take part in local political activity. I must say that the chairman of the parish council in question comes in the first category; that is to say, he could take part in local politics subject to moderation and discretion. It is one of the distinctive features of our Civil Service that civil servants do not mix politics with business. That is a restriction which civil servants accept when they accept employment in the public service."—[Official Report, House of Lords, 4th March 1976; Vol. 368, c. 1193–4.]
  It is true that public employers may lay down certain conditions of service, but there are many people who work for various public authorities who are completely politically free. Mr. Weir was one of those persons. As head forester he fell into the class of politically-free employees under the Forestry Commission

  805
  Staff Code. As such he was not even required to notify his employers that he had been elected a parish councillor. The only conditions imposed upon his parish council activities, which were not breached at any time, were that he should observe the Official Secrets Act—that is a condition that applies to a great many of us—and that his activities should not take place while on duty, while in uniform or while on official premises. There is no question of those conditions requiring this public employee of the Forestry Commission, and no doubt this applies to other public authorities, to exercise moderation or discretion.
  I believe that it will be helpful if the Minister, or the Secretary of State, in due course, if it cannot be done tonight, makes it clear by way of circular, or in some other appropriate form, that once someone is eligible to be a member of a local authority, and is a member, he should be free to act in the interests of the electorate without any sort of pressure being brought to bear on him.
  This matter was first raised in another place on 4th March. The disturbing feature of the case is that on 25th March the personnel officer of the Forestry Commission wrote to J. Sheldon, Esq., of the Civil Service Union. He wrote.
  "Following the resignation of Mr. Weir, the Bellingham Courant"—
  in fact, he means the Hexham Courant—
  "of 6th February carried a fairly full report of the episode and Mr. John Wharam, the.Conservancy A & FO, is quoted as follows: 'We welcome, and indeed encourage, any of our employees to serve on parish councils or as magistrates, and provide facilities for them to do so. We asked Mr. Weir to consider where his responsibilities lay, and whether there was not a clash of interests with his parish duties and those of his job as a head forester. We certainly did not want him to leave the meeting with the impression that we wanted him to resign.' He said it was not the Forestry Commission's intention to 'muffle' opinion at parish meetings and added: 'It is not our business to interfere in Parish Council business—that would be a monstrous suggestion. But we do feel that our employees owe us some sort of responsibility.' I think this quotation sums up fairly well our general feelings about the problems which arose at Kielder and I can only repeat what I said in my 10 March letter, that I think both the Commission and the Parish Council have to accept that there is a special relationship in Kielder and that both sides have to try to establish an effective working relationship, and that it is incumbent on both sides to avoid any extreme action."
  806
  I challenge two of those statements. There can be no question, it seems to me, once it is accepted that an employee is entitled to be a member of the council, that he owes any sort of responsibility to his employer as such. If any private employer who allowed or encouraged one of his staff to become a member of a council subsequently brought any pressure on him to look after the employer's interests in any shape or form, there would be a public outcry. Therefore, it is important, when dealing with public bodies, that they should bring no sort of pressure on their employees.
  I submit that no sort of special relationship can exist between any local authority and any employer, public or private. It would be helpful to all those who serve on local authorities who are employees of public bodies if that were made clear beyond any doubt. That is the nub of the matter that I want to raise tonight.
  I am concerned not so much with the particular case though that was regrettable and I think that the Forestry Commission must realise that it made an error of judgment—as with the fact that it is important to lay down some kind of general guidance for the benefit of local authorities generally on the relationships which should exist between public employees and the local government bodies on which they serve. With such a large number of people employed by one public authority or another, this matter has very wide implications.
  In the case of Kielder, a large proportion of the inhabitants' jobs are affected, directly or indirectly, by the Forestry Commission. There are many mining villages or steel towns in which the same kind of conditions are likely to arise. Many people are directly or indirectly employed by or affected by the operations of large public corporations. However, if they are free to serve on their local authorities they must equally be free to speak and to vote in what they consider to be the interests of the electorate, without any pressure being brought to bear upon them.
  I spent many years in local government. When I first went on the Surbiton Borough Council there was a senior civil servant—the Accountant General at the Ministry of Pensions at the time—who also served. No doubt it could be said that a senior civil servant should behave

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  with moderation and discretion. But that cannot apply in the majority of cases. Of course, such people must declare an interest, if they have an interest, just like any other member of the local authority, but on matters of general policy they should be free.
  I recall that when I was the Secretary of State for the Environment there was a good deal of public controversy over Maplin. One of the main objectors was a civil servant. I made it clear—I hope that my successors would also make it clear—that, having accepted that a public servant had the right to take part in a political activity and was not precluded, by the nature of his employment or the terms and conditions of his service, from taking part in a political activity, we must let him carry out his civic duty fully and freely without any possible interference.
  I think I can indicate the strength of feeling on this matter by referring to a powerful leader in the Local Government Chronicle dated 30th April, which concludes:
  "All employers will have to learn to live with the requirements put upon them by law and to take the rough with the smooth: in no circumstances are they justified in using disciplinary measures to impose their own wishes on members of a public authority. "
  I would like the Minister to clarify the position tonight, and to emphasise that members of local authorities must be allowed to be free. I hope the Secretary of State will consider the possibility of issuing a circular, or taking some other action in order to clear up some of the misunderstandings which have arisen in recent weeks.
  10.37 p.m.
  The Under-Secretary of State for the Environment (Mr. Guy Barnett): The House will be grateful to the right hon. and learned Member for Hexham (Mr. Rippon) for raising this important subject in the debate tonight. I would like to express a personal interest, for two reasons. First, before I came into the House I was employed by a grant-aided institution and was personally involved in some of the restrictions of which the right hon. and learned Member has spoken. Secondly, before I took up my present appointment I was consultant to the Society of Civil Servants, which is
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  very concerned about the issues he has raised. Another reason why I am glad to answer this debate is the long personal interest I have had in the Forestry Commission, among whose staff I number several close friends.
  I am aware of the issue that the right hon. and leared Member has put before us this evening. I was interested in what he had to say about Kielder, and the number of people who live there who are employees of the Forestry Commission. That illustrates the dilemma in which we are placed as a consequence of the Civil Service rules which govern the behaviour of civil servants, and grant-aided and other public service organisations and their employees.
  Unfortunately, it is very difficult for me to give the kind of undertaking that the right hon. and learned Gentleman asked for. He wanted the Secretary of State to issue some kind of circular on this subject. I must explain the difficulties involved in this. A Royal Commission has been set up—the Salmon Commission—to study the standards of conduct in public life, and it is dealing with the very subject that the right hon. and learned Gentleman raised tonight. I accept everything that he said. Certain individuals do find themselves in a difficult situation, and the Royal Commission will give full attention to their position. But in view of the fact that the Royal Commission is studying this matter, it would be very difficult for me to comment in detail, and I am sure he would not expect me to do so. In view of the case that he has raised, I undertake to consider it carefully from the point of view of the Department of the Environment and write to him, giving whatever assistance and guidance I can.
  I have no doubt that the right hon. and learned Member has a certain measure of fellow-feeling for me, having no doubt answered similar debates when, many years ago, he was my predecessor in this post. And, as an ex-Secretary of State in this Department, and with his own experience in local government, the House will of course have listened with great interest to his remarks. Indeed, had it not been for the good fortune of the 1974 elections, one of his colleagues might now have been replying in not dissimilar terms to me. His right hon. Friend the Member for Crosby (Mr.

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  Page) promised, in answering my hon. Friend the Member for Stalybridge and Hyde (Mr. Pendry), in a debate some three years ago, that he would look into this subject.
  Perhaps one way in which I could illustrate the sort of difficulties that we are facing is by looking at the situation of local government employees. The situation is raised in an acute form for them.
  The whole question of employee participation in the running of the affairs of the body for which the employees work is of course a very important one, with wide-ranging implications, and I would not like to suggest that there are not strongly held political differences of opinion. As the right hon. and learned Gentleman will know, it is something to which this Government are committed. My right hon. Friend the Secretary of State, when at the Department of Trade, said in a statement to the House on 5th August last year:
  "The Government are committed to carrying through as soon as possible a programme for the radical extension of industrial democracy in both the private and public sector."
  He went on:
  "…development in industrial democracy, particularly below board level, are now taking place and more are planned. It is desirable these should continue."—[Official Report, 5th August 1975; Vol, 897, c. 245.]
  He then announced the setting-up of the committee of inquiry, under Lord Bullock, which is to advise on questions relating to representation at board level in the private sector—a move that was welcomed by hon. Members on the Opposition Benches—as, indeed it is broadly welcomed in British industry. He also announced that industrial democracy in the nationalised industries was to be reviewed—a review that is now under way.
  Industrial democracy in public services is, however, a rather different matter, and that we are studying separately. I can illustrate the difficulties that we face. On 11th February my hon. Friend the Minister of State, Civil Service Department, in a reply to my hon. Friend the Member for Thornaby (Mr. Wrigglesworth), said
  "a co-ordinated series of studies is now proposed, in consultation with the appropriate
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  unions and management, into the scope for the extension of industrial democracy—within the accepted principle which governs the operation of elected bodies—throughout the public services, including both central and local government and related bodies."—[Official Report, 11th February 1976; Vol. 905, c. 241.]
  I want to stress that central phrase,
  "within the accepted principle which governs the operation of elected bodies"
  Industrial democracy in the public sector presents special problems, because of the role of Parliament and local authorities as representatives of the electorate. It is fundamental to the working of democracy as we know it that elected representatives take decisions and act in the interests of the community as a whole. That principle cannot be breached. I noted the hon. and learned Gentleman's comment on that. But the Government feel that, within the need to safeguard accountability of elected representatives and the requirements of the public interest, local government employees and their representatives should be given the maximum opportunity to contribute their views on matters of legitimate staff interest.
  I want to deal with the question of the position of local authority employees vis-à-vis membership of the council by which they are employed. As the right hon. and learned Gentleman will know, the long-standing and fundamental distinction between the roles of the elected member and the appointed employee was preserved in the Local Government Act 1972. Under that Act, Section 116 debars a member of an authority from becoming its employee whilst he remains a member, and for 12 months thereafter. Section 80 disqualifies an employee of an authority from election to it.
  As the House will know, this subject was studied by Lord Redcliffe-Maud, in his report on conduct in local government. He heard the arguments of those who want to maintain the existing disqualification. His Committee endorsed the present position and argued the need to avoid a conflict of interest between an individual's public duty as an elected member and his personal interest as an employee; the need to preserve political impartiality of officers; and the need to maintain sound working relationships at all levels in the authority and to avoid divided loyalties.

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  However, as the right hon. and learned Gentleman will know, the party to which I belong, and the TUC, have argued that this "disenfranchisment" is anomalous in modern conditions and that the rule should be relaxed. That is the view of my party and the TUC. But this whole issue is being examined by the Royal Commission. We shall await its report with great interest: until we have received and considered it, I can assume the right hon. and learned Gentleman that the Government will not reach any conclusion on this matter.
  I hope that the Royal Commission will consider the many subjects raised by the
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  right hon. and learned Gentleman tonight.
  I thank the right hon. and learned Gentleman for raising those interesting and very important matters. I have listened with great interest to the views that he has expressed. I am sorry that I have been unable to say anything more specific. I shall write to him if there is anything I can add which would assist him in the difficult cases he has raised and the dilemmas he has presented.
  Question put and agreed to.
  Adjourned accordingly at fourteen minutes to Eleven o'clock.