HC Deb 30 November 1976 vol 921 cc841-73

10.16 p.m.

The Financial Secretary to the Treasury (Mr. Robert Sheldon)

I beg to move, That a surcharge, payable into the Consolidated Fund, be imposed on secondary Class 1 contributions under the Social Security Act 1975 and the Social Security (Northern Ireland) Act 1975, being a surcharge—

  1. (a) payable together with the contribution by every person who pays or is liable to pay such a contribution; and
  2. (b) equal in every case to 2 per cent. of the amount of the earnings in respect of which the contribution is paid or payable.
The House will recall that the Chancellor's statement on 22nd July dealt with a number of reductions in public expenditure and the introduction—[Interruption.]

Mr. Speaker

Order. It is unfair to ask the Minister to continue until there is something approaching silence in the Chamber.

Mr. Sheldon

In introducing this Ways and Means Resolution. I ask the House to recall that on 22nd July the Chancellor of the Exchequer announced certain reductions in public expenditure as well as the introduction of the new tax which this resolution paves the way for a subsequent Bill to implement. That Bill, the National Insurance Surcharge Bill, is due to be published on Thursday this week, and the surcharge will start to take effect as from 6th April next year. The resolution provides for a new tax which levies a surcharge of 2 per cent. on the earnings covered by the national insurance contribution within the range normally applied at present, that is £13 to £95 a week, and it will be payable by all employers who pay secondary Class 1 contribution in respect of employees.

The reasons for the introduction of the new tax were fourfold. First, there was the need to reduce the public sector borrowing requirement, on which action was required in the summer. The yield from the tax in a full year would be about £1 billion, or £930 million in the year 1977–78; giving a PSBR reduction of about £700 million in 1977–78. This reduction in the public sector borrowing requirement was one of the prime reasons for the introduction of the tax.

The second reason was that it was possible nine months in advance of its implementation to plan for and announce it without the risk of forestalling. This is one of the few types of measure available without the fortstalling difficulties which normally apply in such cases.

The third reason was the move to more indirect forms of taxation, and it has the further effect that, by comparison with other indirect taxes, it has less effect on the retail price index and offers that effect after a longer time lag. I give the House an example. The 2 per cent. national insurance surcharge will feed through into the retail price index only to the amount of 1 per cent., and that by early 1978, or approximately nine months after the introduction of the tax.

The fourth advantage of this form of taxation was its easy introduction and ease of administration.

I mention those as the main advantages which we saw from the tax, but there will be those who say that it will be a tax on employment and, in particular, on the employee's contribution. I remind hon. Members that most other countries have a form of national insurance contribution which bears much more heavily on employers than will anything which we suggest in the Bill.

To show how out of line we have been with most of our industrial competitors, I give some examples. Taking employers' social security payments as a percentage of their wage and salary bill, we find that it is 14½per cent. in Belgium and Germany, 18 per cent. in Italy, 13 per cent. in the Netherlands and 22 per cent. in France. In the United Kingdom in 1973 the latest date for which we have figures —it was 4.8 per cent. against an average ranging between 14½ per cent. and 22.8 per cent. in the other Community countries. We are well below the average of these other countries with whom we are in immediate and direct competition.

Mr. Cyril Smith (Rochdale)

Has the Minister any indication of when the countries to which he referred introduced this sort of percentage level? What was the level of unemployment at the time? Did they have the same level of unemployment as we have? In other words, I am asking whether this is the most opportune time to introduce this proposal.

Mr. Sheldon

The hon. Gentleman may well argue that, but I would remind him that in an effort to reduce the public sector borrowing requirement alternative forms of action would have reduced it in ways which had an even greater effect on the unemployment level. Hon. Gentlemen who have been arguing for a reduction in the public sector borrowing requirement should ask themselves how it will affect the levels of unemployment however we attempted to reduce the levels of public expenditure and the public sector borrowing requirement.

I have made the comparisons internationally but I would also mention the proportion of the total tax revenue. When we look at the total tax revenue we see that receipts from employers' national insurance contributions in those other countries are again very much higher. They form quite a large part of the total tax revenue.

National insurance contributions in most of the countries of our industrial competitors form a much higher proportion than they do in Britain. I would just give a few examples. In Italy it is 33 per cent., France 32 per cent., West Germany 21 per cent., Belgium 20 per cent. and Sweden 16 per cent. In the United Kingdom it is 9½ per cent. That is the percentage of receipts from employers' national insurance contributions as a percentage of total tax revenue That means that those other countries are much more dependent upon taxation obtained in that way than we are.

What is happening under the Bill which will shortly be introduced is that we are moving only slightly in that direction.

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

Is it not true that while employers in other countries pay larger taxes there are also better benefits? No improvements in social security, unemployment benefit or maternity grants will come from this £1,000 million.

Mr. Sheldon

We must also bear in mind the higher prosperity in many of the countries that I have mentioned—[HON. MEMBERS:"Oh!"] Of course. We all know that. That has been part of the economic facts of life for some years now.

We have seen our standards in welfare benefits decline and those of us who tried to improve them received very little assistance from hon. Gentlemen opposite. One of our major problems is how we can retain the level of benefit which we consider acceptable and necessary at a time when our levels of output and growth in the economy are not as high as those of our industrial competitors. Here we are talking about a much more limited objective—the raising of substantial sums of money in a way that will cause the least damage.

We shall have the Bill on Thursday. What I am doing tonight is introducing the Ways and Means Resolution to bring forward the new tax. New taxes are not cause for celebration, whether it is a national insurance surcharge or VAT which was introduced with such approbation by hon. Gentlemen opposite.

Mr. James Sillars (South Ayrshire)

Is my hon. Friend aware that I have had it put to me that with this imposition, on top of very substantial rate increases to come in heavily depressed sections of the West of Scotland economy, a number of people are bound to pitch some employees out of employment? It is noticeable that up to now my hon. Friend has made no reference to the employment effect of the measure he is introducing, Will he now refer to that?

Mr. Sheldon

This has been computed. My hon. Friend will know that I have not got the figures as they apply to his area, but we shall have an opportunity to discuss the Bill on Second Reading and in Committee and he will be able to make his further comments on the detail then and the Minister will do his best to answer.

Given the need to make these changes in the public sector borrowing requirement, given the advantages that it has with its lagged effect on price increases, as well as the ease of introduction and administration, I believe that the Bill will play a useful part in meeting the objectives for which it was designed and I hope that it will receive the approval of the House.

10.26 p.m.

Mr. John Moore (Croydon, Central)

When I entered the Chamber tonight I had not intended to speak, but I do not think I have ever heard such an appalling attempt at a justification for imposing an increased tax burden on the country as that we just heard from the Financial Secretary.

The essence of the case seems to lie in the ease of introduction. That is too fine a rationale for introducing a tax. We are expected to believe that it has as its basis a reduction in the public sector borrowing requirement. This is the most tortuous piece of illogic that I have ever heard, for here what is being talked about is raising additional taxes rather than reducing public expenditure. We are talking about raising additional taxes but, as was so ably pointed out by the hon. Member for Birmingham, Perry Barr (Mr. Rooker), these additional taxes produce no additional welfare benefits of any kind but merely increase employers' tax payments. They obviously reduce the prospects of employment.

We listened to a rather specious Treasury argument containing no moral or intelligent justification for the introduction of this tax. It was an appalling example of how not to argue a case and I hope that the House will not sustain such an argument.

10.27 p.m.

Mr. James Sillars (South Ayrshire)

I too, had no intention of speaking, but I am forced to do so now, because my hon. Friend the Financial Secretary failed to reply to my question about the employment consequences. I will make the point again.

People in my constituency and in the adjoining town that serves my constituency have telephoned me to say that, because of the rate imposition which is to come following the reduction in the rate support grant, they will have to lay off five people here and 10 people there. This comes on top of the Prime Minister's statement at the beginning of the debate on the Loyal Address in reply to the Gracious Speech in which he forecast continuing rising unemployment.

I should like to know what I am to reply if, when I am walking down Ayr High Street in a month's time, a constiuent of mine or someone from a Labour movement in Ayrshire asks me this question: "Why have the Labour Government decided that it is an inappropriate time to introduce a wealth tax when we all know that there has not been a bankruptcy in any of the expensive London restaurants? Why have the Labour Government decided that this is an inappropriate time to raise a wealth tax but an, appropriate time to impose a burden on my employers to such an extent that they will have to lay me off, with the consequence that I shall have to go on the dole—and this is after the Labour Chancellor has said in effect that he will probably be taxing my benefits and indeed cutting them at the same time?

The package deal which was superficially proposed by my hon. Friend the Financial Secretary tonight is unacceptable to me and I shall certainly not support it.

10.30 p.m.

Mr. Giles Shaw (Pudsey)

Last night we debated two European resolutions, and the Financial Secretary then sought to defend the position that he had reached in relation to VAT. Some of us expressed considerable concern about the way in which that tax was being manipulated. Now we have the second example of the way in which the Government seek to manipulate the tax system for ends which at worst can be described as dubious and at best as deeply damaging to those who seek to employ people and to keep them in employment.

The fact that, two nights running, the Financial Secretary should come here to wash the Government's dirty linen in public may qualify him for being an expert washer woman, but here what he is seeking to do, which is to ask the House to give leave for the introduction of a tax, should be questioned.

There can be little doubt that what the Government are seeking to do is tax jobs. That is the object of the exercise. They are seeking to do that in preference to reducing other forms of public expenditure. When the Financial Secretary suggests that this is a convenient way of doing it and that there are not many other convenient ways, we must ask what the Secretary of State for Prices and Consumer Protection is doing about the phasing out of food subsidies, and how many jobs that would save, if job saving is the criterion which this Government apply.

This manoeuvre is designed to tax jobs at a time when the Government are seeking to regenerate British industry and trying at the same time to stimulate the national economy. What stimulus can be given to the national economy if we give leave for the introduction of this tax? It is nothing more than sleight of hand, and we have had that from this Government on practically every motion to have come before this House.

This is a typical example of the way in which the Government seek to tax industry while they are trying to get away with saying "We are not doing anything deeply damaging; it is convenient, we like it, and we want to do it." They have no mandate for this kind of tax, and this House should say so.

10.33 p.m.

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

The Treasury Bench will become aware in the next few weeks that the 22nd July package will not be as easy to get through this House as they first expected. They know that it requires four Bills and six Statutory Instruments to cover the statement by the Chancellor of the Exchequer.

Notwithstanding the arguments which will take place on Thursday's legislation, which the Chief Secretary to the Treasury has now convinced me that I should oppose, I am ready not to give my support to this legislation unless we get some firm answers to straight questions which we have not had so far from my hon. Friend the Financial Secretary.

The effect of this proposal on local authorities, which is the only part that I wish to discuss, will be £145 million on their costs. That figure was given in answer to my hon. Friend the Member for Coventry, South-West (Mrs. Wise) in late July. Bearing in mind that the Government will chip in 60 per cent. of that —say £90 million—the net cost to local authorities, on top of all their other costs, will be about £50 million plus.

If we are prepared to put that additional burden on local authorities—and I am not in favour of it—I cannot see why we could not have put the burden on local authorities of the £40 million necessary to implement Section 2(4) of the Health and Safety at Work Act and fulfilled our commitment to get trade union safety representatives organised throughout the country. The same cost would have been there. The Government say that they cannot go ahead because of the cost that it will impose on local authorities. But here we are imposing almost the same cost.

As for the employment effects, which are most crucial on this, the Chancellor of the Exchequer admitted on 22nd July in answer to a question from an Opposion Front Bench spokesman that 10,000 jobs would be lost directly attributable to this proposal. My right hon. Friend put it more convolutedly than that. He said that the fall in employment would be 10,000 fewer than it would otherwise have been. But he cannot get away from the fact that there will be 10,000 additional people out of work as a result of this Bill.

I am all for taxation. I am not screaming like the Opposition. I want taxation. I want a wealth tax, for a start. But if we took the trouble to collect the income tax and surtax which is due and the capital gains tax which the Treasury has written off in the past few months, we should have more than enough money to meet what is required to be raised for this purpose.

I do not subscribe to the view that we should come here, following the July package, and be told that this is part of the July measures. That is what I was told about the Social Security Bill yesterday. We are told that we have to accept it. But we have never discussed these measures. They are not discussed by the various groups in the Labour Party until there is a crisis such as this week over Thursday's legislation. We have not had a chance to discuss this. Therefore, I do not think that the Bill should be introduced this early in the Session. It can easily be got through before April, when the tax has to be collected.

There should be far more discussion on the employment effects and on the alternative ways of raising the same finance. The alternative ways are there. There are Government supporters who have alternatives to suggest. We are prepared to put them forward if the time for argument is provided.

It is wrong to roller coast the Bill through in this way. When I came to the House yesterday morning, I told the Whips—and this is the first time I have done so—that the Government could not count on my vote on Monday week. I had not read the Order Paper correctly, because at 5 p.m. today I realised that this resolution was to be brought before the House.

I shall be prepared to give the Bill a Second Reading when that occasion arises. It is clear that we shall not have a proper debate tonight on these matters because my hon. Friend the Financial Secretary has not the answers to questions which have been put to him. He will have to come up with those answers—otherwise the Bill may not be given a Second Reading next week.

10.35 p.m.

Mr. David Hunt (Wirral)

I am deeply concerned about the effect of these provisions on employment. It has been estimated in this debate that as many as 10,000 jobs may be jeopardised, but I believe that the impact may be even more serious.

On Merseyside, and particularly on the Wirral, there are a large number of small businesses which are now almost facing the wall. They are finding it difficult to make a profit, they are overtaxed, overdrawn and over-governed. Anybody who seeks the opinion of those who run those concerns is told "How much longer can we go on suffering the present taxation level?"

We are not now discussing just a comparatively trivial measure but a calculation involving a figure of £1 billion. That is the extra burden that is to be placed on employers—not just on local authorities, but on ordinary individual small businesses.

What will happen when those business men are deciding whether to increase the number of people in their employ? I strongly believe that these measures will increase the level of unemployment among school leavers because it will increase the cost of employment, which is bound to hit young people trying to obtain their first job. If employers decide not to take on any more people, those young persons may find themselves among the other unemployed school leavers. The fact that these provisions will cause more unemployment and will make it impossible for small businesses to continue is a good reason for rejecting them.

10.37 p.m.

Mr. Ian Stewart (Hitchin)

My hon. Friend the Member for Wirral (Mr. Hunt) and the hon. Member for South Ayrshire (Mr. Sillars) may well be baffled by the Government's reasons for introducing a tax of this kind. Although the Financial Secretary listed four rather specious reasons why it was a good thing to impose such a tax, does anybody believe any of those reasons?

Those who are puzzled about the present situation would do well to recall the advice on which the Government acted in introducing this provision in the July package. Mr. Michael Posner, who was then one of the Government's economic advisers, explained one of the advantages. In addition to the four points listed by the Financial Secretary, Mr. Posner said that these provisions would make it easier for company finances by reducing the public sector borrowing requirement—which, in turn, would reduce interest rates and make company finances that much easier to handle. He implied that it would mean more rather than fewer jobs. If that were such a good thing, why did not the Government put on a 4 per cent., 6 per cent., or 8 per cent. payroll tax? Perhaps interest rates in that case would have been as high as 25 per cent. or 30 per cent. But with the benefit of such advice, is it surprising that the Government have now introduced this daft and dotty measure which will have a perverse effect, as every sensible person knew was bound to be the case.

10.39 p.m.

Mrs. Audrey Wise (Coventry, South-West)

I do not agree with the hypocritical objections on unemployment grounds voiced by the Opposition. Their objection is hypocritical because in the next breath they call for more public expenditure cuts. Do they not appreciate the effects on employment if that were to happen? But they are not interested in the effect on employment. They are looking for a way to bash the Government.

My hon. Friend the Financial Secretary must accept that many of us are deeply unhappy about these provisions. We are not unhappy because we wish to protect employers—far from it—but it is clear that many employers will take advantage of the opportunities given by these measures to increase prices. We are looking at the matter in terms of cost-of-living increases.

When we consider the need to combat inflation, these provisions are somewhat illogical. Furthermore, this is a disguised cut in real public spending because local authorities will have to divert some of their financial resources from spending on services to making refunds to the Government. Whatever we do this evening, there is serious concern on the Labour Benches. This measure as part of a strategy is not good enough. The Government cannot continue to act in this way.

10.41 p.m.

Mr. Norman Tebbit (Chingford)

When the debate started the Secretary of State for Employment was here, but, after hearing a couple of speeches, he quietly folded his tent and snook away— I presume until it is time for him to come and vote for a measure which, it is generally agreed on both sides of the House, will increase unemployment. I do not blame the right hon. Gentleman. Why should he sit here and take the stick for that when his colleagues on the Treasury Bench are willing to do so?

My objection to this new tax is that clearly the revenue will not be used to improve our social services. It will not be used as part of the funds which are normally accepted as being for the purposes of national insurance. It is a straightforward payroll tax which will disappear straight into the funds of taxation. It will be lost for ever. It will not get back to where it should go if it is a national insurance surcharge—namely for the purposes of national insurance.

Why have the Government chosen to impose this extra £1,000 million of tax in this way? It would have been just as simple not to expend £1,000 million in various forms of subsidy to industry. Why not leave the £1,000 million in the hands of industry's managers?

All that we are doing by going through this process of redistribution is taking money away and withholding it for a period and then giving it back not on any commercial grounds but on the criteria of various civil servants at the Department of Industry who do not have the greatest track record of success in picking winners.

In the meantime, as the hon. Member for Coventry, South-West (Mrs. Wise) pointed out, industry's increased costs will inevitably be passed on to the consumer in increased prices. We shall get the worst of all possible worlds; no benefit to the insured workers; one Department taking money in and handing it to another Department which will hand it back on the basis of criteria which are, to say the least, mysterious, if not totally inexplicable; a loss of liquidity during that period on the part of companies, more of which will be forced into standing off or not taking on new employees; and pressure again on companies to raise their prices. What good this will do employers, employees and consumers it is possibly beyond the wit even of the Treasury Bench to explain.

Mr. Dennis Skinner (Bolsover)

Has not the hon. Gentleman forgotten one piece of this scenario, namely, that most of this £1,000 million might be set off against corporation tax before we get to the grants which have been mentioned?

Mr. Tebbit

The hon. Gentleman could be right, which makes the whole scenario even more farcical than that which I have outlined. We have the complete picture of a muddled decision, carried out by muddled Ministers on a muddled brief, probably on the advice of an adviser who, as my hon. Friend the Member for Hitchin (Mr. Stewart) said, has already been fired. All that we have to do is to fire those who took the advice.

10.45 p.m.

Mr. Cyril Smith (Rochdale)

I, like other hon. Members, did not intend to take part in this debate, but I have been brought to my feet by the statement of the hon. Member for Coventry, South-West (Mrs. Wise) that the object of hon. Members on these Benches is to bash the Government. I think I can say in all modesty that the hon. Lady cannot accuse me of taking that attitude, certainly with regard to the Government's economic policy. I abstained in an earlier vote this evening, and therefore I do not believe that the hon. Lady can lay that charge at my door. The hon. Lady says from a sedentary position that I bashed the Government on the question of social security. I advise her to read what I said. I reported what I had been told and said that I was going to inquire into it. I am prepared to send the hon Lady the article.

I support the opposition to the Bill, not because I want to bash the Government but because I am deeply concerned about the present level of employment and because I believe that this measure will make no contribution towards solving the problem but will, in fact, make it worse.

The Bill will levy on industry, which includes local government, a tax of about £1,000 million. If industry is to provide that money it will have to come from one of three sources. First, it could come from profits. I have no objection to industry paying the money from profits if it is making profits, but not all industries are in that situation. I urge Labour Members to realise that the profits that were declared last year will not be available to companies this year. Companies that made substantial profits last year will not be declaring a similar level of profits this year.

There is not the buoyancy in orders in industry this year that was evident last year. I speak as one who has a small factory, and I assure hon. Gentlemen opposite that many employers who last year had no problem in keeping employees in full employment will not be able to do that so easily this year and will not have the same percentage turnover in trade. It would be wrong to take the level of profits last year as the level of profits that will be declared in the next 12 months, because I do not believe that that would give a true picture of the situation. If, however, some industries increase their orders and their profits, I have no objection to their paying more by way of tax.

However, what about companies that are not making profits? They will have to carry this burden in exactly the same way. It is not even to be imposed on a regional basis. It will not be applied only in regions where there is less unemployement, where I would support a payroll tax. If we are to have such a tax, let us have it imposed on a regional basis and let it not be a blanket tax of this character.

If it were merely that the National Insurance Fund was short of money, the Minister has powers to balance the fund. He has power to increase it by about 2.5 per cent. without coming to the House.

This is a direct tax on employment. It has nothing to do with benefits or the National Insurance Fund. This is a way of raising another £1,000 million of taxation in contributions from employers. It is nothing else.

I understand that some Labour Members have expressed reservations about supporting the Bill next week. Perhaps I may give them some advice. It is always as well to cut off the Ways and Means Resolution, because the Bill cannot then be introduced.

I do not look upon political opponents as enemies but as friends with differences of opinion. All that I say to Labour Members is that they should think very carefully whether they should allow the Bill to come forward next week. We can stop it tonight by voting against the Resolution. If the Government can convince us later that they have good reason for introducing the Bill, so be it. The only reason that I heard the Minister advance was that the percentage of certain levies here was less than those in other countries. What he did not tell us was the level of taxation otherwise in those countries, or whether our taxation is higher than theirs. What should concern us is the whole level at which it is set, and not what is being paid out for one particular item.

Mr. Nicholas Winterton (Macclesfield)

While on that subject, will the hon. Gentleman turn his attention to the minimum lending rate, because here smaller businesses in particular are having to find very large sums of money which, combined with this payroll tax, will result in higher unemployment among them.

Mr. Smith

That is absolutely true. Indeed, there are Labour Members who know of that in the case of Courtaulds' closures of two places in my constituency. I was told by the Chairman of Courtaulds that it was purely the interest rate which had closed a small factory in Rochdale. I do not believe that that is the argument in relation to the whole of Courtaulds, but it was that which determined whether that factory was to remain open or to close.

I urge the Government to think again about this matter. To be fair, the present Government are making efforts to stimulate employment. I do not believe that they create unemployment for the joy of doing it. I believe that they want to reduce unemployment. I have said so in economic debates. I do not attribute to the Government the use of unemployment as an economic weapon. Of course they want to reduce unemployment. But it is no good getting down the figures on one hand and increasing them on the other.

Apart from giving the Treasury another £1,000 million to do away with, or allowing the Treasury to borrow £1,000 million less—that is all that it does; it does not mean that the Treasury has to stop borrowing—the only other effect that this proposal will have is to increase unemployment. I believe that that is a very good reason for refusing the Bill.

10.55 p.m.

Mr. Leslie Spriggs (St. Helens)

I wish to raise a point about a question that has already been raised but has not been answered by the Minister. It appears that the Minister will not be making any effort to answer it. My hon. Friends the Members for Birmingham, Perry Barr (Mr. Rooker) and Coventry, South-West (Mrs. Wise) have both raised the question of the unemployment and the increased cost of living which this further levy of £1,000 million on industry will create. It certainly will have to be paid for by the people. The consumer will have to pay for it.

Where employers cannot afford to meet this surcharge, it will affect employment. The smaller the business, the fewer the number employed but the sooner will the employer have to shed the load. This is simple economics, the law of the jungle all over again.

Unless the Financial Secretary goes to the Dispatch Box and starts to give intelligent answers, Labour hon. Members from Merseyside and other parts of the country will not put up with it. We shall not march through the Division Lobbies to vote in favour of Bills which will affect employment, depressing it still further in places such as Merseyside.

The hon. Member for Wirral (Mr. Hunt) referred to small businesses in my part of the United Kingdom, the type of business which is bound to be affected by this 2 per cent. surcharge on employment. Before we go to the Division Lobby tonight we have to have far more assurance from my hon. Friend. There will be a repeat of last night if he is not careful.

10.57 p.m.

Mr. Nicholas Fairbairn (Kinross and West Perthshire)

This has been a fascinating evening, listening through the economic debate and into this one, for this reason: we have heard from Labour Members that they regard what they call public expenditure as being so sacred that it must not be diminished but that any attempt to finance it cannot be countenanced.

This is merely an attempt to finance what they demand as public expenditure. I agree that it is a rotten bad way of attempting to finance it but that is what it is. I should like hon. Members opposite to understand that, as the hon. Member for St. Helens (Mr. Spriggs) has just said, there is no such thing as public expenditure. It is private expenditure. It is hon. Member's constituents, their jobs, their income, their families, which pay for this fantasy of public expenditure.

One other way in which this sacred cow of public expenditure, which is always supposed to be paid for by Mr. Nobody, has to be paid for is by taking another £1,000 million out of the industry which pays for public expenditure in the first place.

I represent one-thousandth of the people of this country and therefore this measure is a surcharge on my constituents of £1 million. Let us remember that each of us represents between a 700th and a thousandth of the people so that this is a surcharge on each of our constituencies of between £700,000 and £1 million. Apparently the hon. Member for Bolsover (Mr. Skinner) thinks that is funny.

Mr. Skinner

We think the hon. Member is funny.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

Order. It is a pity that the Chair is not able to benefit from some of these exchanges.

Mr. Fairbairn

I always thought that one-thousandth of £1,000 million was £1 million, but perhaps the hon. Member for Bolsover thinks differently.

The Government say that they are interested in investment in manufacturing industry—it does not matter for the moment whether it is private or public. That is what creates wealth. Yet we are taking out of industry another £1,000 million to fund public expenditure, which is non-productive wealth. That is not public expenditure; it is private expenditure. Each of our constituents has to pay. Nothing is more fundamentally false and wrong than that the Government should say "Let us add to the bill". As the hon. Member for Wolverhampton, North-East (Mrs. Short) said, there are still little puddles of wealth from which to suck up the money to fund this wretched totalitarian régime.

Mrs. Renée Short (Wolverhampton, North-East)

Has the hon. and learned Member read in tonight's Evening Standard that one of his friends—about whom Conservative Members try to wring our hearts—has to find £2 million for racing and gambling debts? There are many other areas available to the Chancellor for raising money.

Mr. Fairbairn

I do not understand the hon. Lady's intervention. I do not think that £2 million is an area to which the Chancellor could look for funds.

Mrs. Renée Short

His name is Sir Hugh Fraser.

Mr. Fairbairn

He is not one of my hon. Friends.

Mrs. Renée Short

He is one of your business men.

Mr. Deputy Speaker

Order. The House is doing itself no credit by these sedentary exchanges.

Mr. Fairbairn

I am not responsible for those on the Scottish national Benches who are not present, but if Sir Hugh Fraser wishes to fund the Scottish National Party on the basis of gambling debts, it is up to him, and if the Labour Party wishes to keep itself in office in Scotland on the gambling debt of devolution, it is up to the party. It was the English Labour Party which pushed devolution down the unwilling throat of the Scottish Labour Party, whatever may be the position now. Let us have no more rubbish about the Evening Standard and Sir Hugh Fraser.

Mrs. Renée Short

What has that to do with devolution? How about the £2 million gambling debt?

Mr. Deputy Speaker

Order. I have appealed to the House on three occasions for order and fewer sedentary observations.

Mr. Fairbairn

I know it is late and that hon. Members want to go home, but the Government are being dishonest when they say that they are interested in the survival of industry and investment in productive industry but casually put down £1,000 million of tax to fund something which is non-productive. They are being even more dishonest if they allow those below the Gangway who demand that expenditure to say that they will not allow it to be funded in a manner that might upset unproductive areas such as local authorities which have to provide part of the cost. If they only knew what it did to productive industry, they might be more understanding.

11.4 p.m.

Mr. John MacGregor (Norfolk, South)

It seems to me that the Financial Secretary did not come clean with the House. His arguments were less than honest, except for the one argument that the measure was necessary to reduce the already over-swollen public sector borrowing requirement. When he moved into the sphere of European comparisons he left the House and the country behind. For him to produce false reasons for what he is doing does not help the country to understand its plight. He knows as well as anyone that this is a straight payroll tax on industry as well as on local authorities.

As one of my Friends said, this tax has nothing to do with national insurance contributions, or anything of that sort, in the sense of financing benefits. The Chancellor must know that if he is to make European comparisons, he should make them over the totality of the case. It is no good picking out one difference and comparing that with what we do in this country. Our systems are in many cases totally different.

I wish that the Government would take more notice of comparisons with direct taxation where we are out of line with other European countries. We are also out of line on indirect taxation. We in this country should switch more taxation back from direct to indirect.

It is no good justifying a new measure brought forward by the Government on the basis of false European comparisons. This is another example of the Government failing to tell the truth to the country. We all know—and I follow the case made by the hon. Member for Birmingham, Perry Barr (Mr. Rooker)—that this tax is an extra imposition on local authorities. For my county council in Norfolk this will add £1 million to the cost of labour, without any additional benefits being given to the people of Norfolk. If that burden is to be imposed, the Government should come clean and say that cuts will have to be made.

At the same time the Government are reducing, in real terms, the rate support grant. I make no complaint because that grant has to bear its share of the cuts, but at the same time the Secretary of State for the Environment has said that this should mean no redundancies for local authority staffs because this will be taken care of by natural wastage.

In other words, the Government impose the extra burden of payroll tax, cut back the rate support grant, and then say that if local authorities have to lay off staff it will not be the Government's fault because, they say, the cuts can be accomplished by natural wastage and therefore any cuts must be the fault of the local authorities.. In fact, local authorities must look at the specific departments and services that they wish to cut back. That may well mean redundancies, because natural wastage will not take care of the problem.

The Financial Secretary missed an opportunity tonight of being straightforward and honest about why this measure is necessary. This shows that the consequences of overspending and encouraging the Labour Party and the country to believe that over spending could be financed are now coming home. The chickens are coming home to roost. Politically, from the debate tonight we have seen the difficulties that the Government will face with their own Left wing because of the measures that the Government will have to undertake to clear up the mess they have got us into over the last two years. Economically, we shall have measures that will impose burdens on industry and the private sector because the Government have got the balance between the public and private sectors out of kilter during the last two years. Do the Government believe that this measure will not have serious consequences?

The whole House will recall the circumstances in which the tax was announced. The Government had produced an industrial strategy with CBI agreement and then suddenly imposed this extra burden on industry to the astonishment of the CBI.

Many industries, particularly small firms, retailers, and so on, will find that this extra imposition will prevent them from taking on extra staff and may make them increase the unemployment problem by not replacing natural wastage. This will be a particularly severe problem for small business men.

I believe, therefore, that there will be serious consequences for the productive sector of the country from this type of approach to dealing with the public sector borrowing requirement. I hope that the lesson will be learned. I hope that it will be made clear that we in the Opposition and, I believe, many people in the country, as well as industry as a whole, do not want to see this type of approach in any measures which the Government are contemplating to deal with the PSBR in the next few weeks, and will strongly oppose any further imposition on industry, through this measure or through increases in VAT, instead of a direct attack on overspending in the public sector.

11.10 p.m.

Mr. Michael Shersby (Uxbridge)

I strongly oppose this measure because of the effect it will have on small businesses. I am glad to see the Under-Secretary of State for Industry in his place. After his visit to my constituency a few days ago, he will perhaps be aware of some of the small firms which will have to face the effects of this measure.

I shall quote a couple of paragraphs from a short letter from a small but excellent firm of precision engineers in Uxbridge: It appears that the Socialists in Westminster are still intent on a policy of extracting every last penny out of private enterprise. The planned increase of 2 per cent. on employers' contributions to the social security fund is effectively a payroll tax. It will further cripple small businesses already over-burdened by taxation, legislation and general State interference. The man in the street is led to believe that this is a mere 2 per cent. increase, and will probably disregard it as insignificant. It is, in fact, an increase representing over 22 per cent. on the contribution currently payable. In our own small business this will load our overheads by a further £2,500 next year. That letter shows the sort of effect that the measure will have on a small firm of precision engineers in my constituency—the kind of firm which is the seed corn of British industry, upon which the country depends for expansion, for innovation and for all the other attributes which we expect from the best in British industry. For that reason, I strongly oppose the measure, and I shall vote against it.

11.12 p.m.

Mr. John Nott (St. Ives)

I doubt that I can match the gravitas with which the Financial Secretary introduced this Ways and Means Resolution, but I do not think that my hon. Friends have had much difficulty in demolishing his arguments.

First, the Financial Secretary said that the measure was necessary to reduce the public sector borrowing requirement. We can go along with that, but, of course, its effect on the PSBR will be relatively slow-acting as the contributions come in over a period from April next.

Next, the hon. Gentleman said that the tax could be introduced in such a way that there would be no forestalling. That conjures up a picture of the housewives of Britain rushing out to buy washing machines and other consumer goods as soon as the Government introduces their next indirect tax. I cannot believe that the idea of forestalling in indirect taxes quite meets the current economic situation or, indeed, the trend of consumer expenditure which the Chancellor described in his speech today.

Third, the Financial Secretary said that it was a move to indirect taxation but it would have less effect—these were his words—on the price index than would other indirect taxes. I had always understood that throughout the arguments on this measure the Chancellor and other Ministers had repeatedly stressed that it would find its way through into prices over a period of time and would have a relatively small effect on jobs and on investment. This was one of the main reasons for its introduction—that it was effectively not much different over a period of time from an increase on VAT.

I take the hon. Gentleman's comment on indirect taxation in the context of what the Chancellor himself said today, when he was answering a point made by his hon. Friend the Member for Luton, West (Mr. Sedgemore) about the regressive nature of indirect taxation. The Chancellor said "No, these indirect taxes such as VAT are not really regressive any more, because of the zero rate, so we want to switch to indirect taxation and to take advantage of zero rating". But here the Government have introduced an indirect tax for which there is no zero rating whatever. It covers all products. It will find its way through into the price of food, housing, fuel, rents, transport—all those items which the Chancellor himself, in his speech this afternoon, said would not be affected by a switch to indirect taxation.

The Minister of State finally said that it was an easy tax to introduce and that it would be easy to administer. I only wish that we could find the Government taxes which were difficult to introduce and difficult to administer. Then we would have fewer of them.

The House will have the opportunity to debate the new Bill next Monday. I think the Second Reading is down for next Monday. Therefore, I shall comment only briefly tonight. The Bill is entitled the National Insurance Surcharge Bill. In a way, that is appropriate because it has absolutely nothing to do with national insurance. It is not, as the hon. Member for St. Helens (Mr. Spriggs) said, a 2 per cent. surcharge on the employers' national insurance contributions. It is really a 23 per cent. increase in the tax on jobs.

To talk about a 2 per cent. surcharge on national insurance does not emphasise the fact that it is an increase of about one-quarter—nearly 25 per cent.—on the only tax that we now have on jobs and particularly on the productive, wealth-creating part of the private sector.

Like all taxes—it has nothing to do with national insurance or other benefits —it will no doubt find its way out of peoples' pockets into the Consolidated Fund where the Government will use it to employ more people in the public sector, to finance further extravagant projects and to ensure that the parasitic public sector continues to suck the lifeblood out of the wealth and job-creating private sector of the community.

The Financial Secretary's comparison with overseas countries is completely irrelevant. What is the relevance of stating that employers' contributions in Germany or France are 14 per cent., 18 per cent., or 20 per cent.? The fact is that those employers' contributions are used to finance considerably higher social benefits in those countries than we have here.

The Government's proposed increase will not finance higher benefits. It will go straight into the Consolidated Fund where it will be used as part of the general pool of taxation and it will destroy jobs in the process. With that nice sense of timing, which the present Chancellor deploys so well, this measure will start to have its impact on the profits, investment and jobs in businesses just at the time when unemployment is again beginning to rise.

Almost all of the arguments used by the Chancellor in his speech on 2nd August, following his July measures, have been proved completely faulty. He then said that the national insurance surcharge, as he called it, would not have any adverse impact on jobs. He said that the economy was growing at 4 per cent., that we were looking forward to a rise in exports and that investment was beginning to pick up.

This afternoon we had the Chancellor telling us—only a few months later—that the growth rate was now going down from 4 per cent. to a projected 2 per cent. The whole basis upon which the measure was constructed has proved erroneous.

I have tried to find out how many jobs the Government estimate will be lost by this national insurance surcharge. It has been difficult to follow because the Secretary of State for Employment told the Tribune Group in July that it would lose about 110,000 jobs. However, Treasury Officials who appeared before the Expenditure Committee's sub-committee on 28th July, with a very convoluted argument, seemed to suggest that the figure was even higher. Indeed, Mr. Posner, the former Deputy Chief Economic Adviser to the Treasury, about whom we now read in The Times, rather implied, as I am sure the Financial Secretary will agree, as he was present, that the July measures would involve a loss of about 120,000 to 150,000 jobs. The Chancellor himself gave the figure of 60,000 jobs for the measures as a whole and 10,000 for this surcharge. I therefore think that the Financial Secretary should make clear just how many jobs the Chancellor intends to destroy with this measure.

The Chancellor has already destroyed 1 million jobs since he took over the Chancellorship in March 1974. It would be interesting to know how many additional jobs on top of the 1 million he has already destroyed since he became Chancellor he intends to destroy with this measure.

One of the proudest edifices in the Chancellor's policy is the Job Creation Schemes. These have cost the Exchequer about £500 million so far. It is hard for the country to understand, and indeed perhaps for some hon. Members opposite to understand—I am sure that the hon. Member for St. Helens thinks this way how £500 million can be spent on job creation schemes, on the one hand, and a £1,000 million tax imposed on jobs, on the other. It is an increase of 23 per cent. on the only tax we have on jobs. The two things are utterly contradictory and make no sense.

It is absolutely certain that what this measure will do is in absolutely direct contradiction of the Chief Secretary's speech last week when he made—in my view rightly, though no doubt wrongly in the view of hon. Members below the Gangway opposite—the very reasonable point that it is very much overdue for us to get jobs out of the public sector back into the profitable wealth-creating private sector. I know that some hon. Members do not agree with that, but that is clearly the policy of the Treasury Bench. That is the policy that the Chancellor and the Chief Secretary advocate.

Local government was referred to by my hon. Friend the Member for Norfolk, South (Mr. MacGregor). It is very difficult to understand a policy that imposes a tax on local government at a time when, as I understand it, the rate support grant is to be reduced for next year. As I understand it, jobs will have to be shaken out of local government as a result of this measure—something which I accept as desirable.

It is hard to understand how the Chancellor could have said in his statement about this measure on 2nd August 1976 that it would not affect the non-trading public sector. It clearly will affect the non-trading public sector. If the rate support grant is to be pegged by the Government—I am not complaining about that—and local authorities are to have to bear the extra tax upon those they employ, it will do precisely what the Chancellor claimed it would not do —it will shake jobs out of the non-trading sector.

Generally speaking, however, its impact will be upon the private sector. That is in absolute contradiction to the Government's policy, because they say that they want people to move back into the private sector.

So once again we have not the remotest idea what the Government's strategy is or what they intend to do about jobs. Even after having heard the Chancellor's speech today, we do not know. If the Financial Secretary is to say anything more tonight—he should answer a number of these points—may I ask him a specific question? What is to happen to retailers? The measure was announced in July. We were told that there was no worry about jobs because it would find its way through into prices. We were told that the Price Code had been changed so that there was nothing to prevent employers from pushing this amount into prices. That is different from what the Financial Secretary said tonight, but that is what was said when the measure was introduced. The Financial Secretary said that this increase would have less effect on the price index than other indirect taxes. I took that to mean that it would on the whole affect jobs and investment and not wholly prices.

I should like the Financial Secretary to answer this point. Retailers do not operate under allowable costs. It is now November. The measure was introduced in July and still the whole of the retail industry does not have the slightest idea whether employers will be able to push the increase through into prices. Four months have passed and one major section of the economy has not the slightest idea how it will be affected.

I conclude by telling the Government that this is a tax involving smaller profits for industry, less investment, higher prices and fewer jobs. Most hon. Members will not contradict me. When on Monday we debate the Second Reading of the Bill, I hope that the Government will have a better explanation that we have heard tonight. The hon. Member for St. Helens, whose views I respect and who made a modest contribution to the debate, said that the smaller the business, the more quickly would the employer discharge employees, and of course that is right.

Because this is a 23 per cent tax increase on jobs and because we consider this measure to be utterly inappropriate in the present economic conditions, in due course I shall ask my hon. and right hon. Friends to vote against this Ways and Means Resolution.

11.26 p.m.

Mr. Robert Sheldon

The hon. Member for St. Ives (Mr. Nott) said that this tax was a burden on jobs and that to make comparisons with other countries was no answer to his question, which was whether an increase in unemployment would be the result. What I sought to establish was that, given that any tax of this nature is a tax on employers, there were other countries with very much larger burdens. In the countries with which we compete, whatever the reason for the tax, the burden is of precisely the same character but much larger.

Those who advocate moving towards indirect taxation have had a difficult time in this debate, because they have been deploring this change on account of its effect on employment while refusing to understand that it was the indirect effect of working through into prices much less quickly and with much less certainty than other forms of indirect taxation available to the Chancellor of the Exchequer. That is a major difference.

My hon. Friend the Member for Coventry, South-West (Mrs. Wise) mentioned the hypocrisy of many Opposition Members. They are calling for £5 billion cuts in public expenditure—how official that figure is we are not very clear at any time—with all the consequences for employment of such cuts compared with the effects of this measure, which has so little effect with long time lag on prices and which has a public sector borrowing requirement effect not so delayed as the hon. Member for St. Ives asserted but right from 6th April. It is a measure of its value that it will produce £1 billion in a way that will cause much less damage than many of the solutions advocated by the Opposition.

My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) wants the Health and Safety at Work Act implemented. He mentioned the problems of the collection of outstanding taxes. These are all matters with which we can deal, but I am sure that my hon. Friend understands that they do not have a great deal to do with this measure. I understand my hon. Friend's grievance, and I share his anxiety. But we have to bear in mind that there is this need to obtain the £1,000 million in order to carry out the plans of my right hon. Friend the Chancellor of the Exchequer, and if any hon. Member can suggest better, more effective and less harmful ways of doing that. I shall be very pleased to listen to him.

Mrs. Renée Short

My hon. Friend has been told. The answer is a wealth tax.

Mr. Sheldon

A wealth tax could not be put into operation in 1977–78, and it would not produce the necessary income. I am all in favour of the introduction of a wealth tax at the earliest possible moment, but I am sure that my hon. Friend will understand the reasons for its deferment at the moment, even if she does not agree with them.

My hon. Friend the Member for South Ayrshire (Mr. Sillars) and many others are concerned about the employment effects of any tax. All I say about the employment effects is that calculations are not easy to conclude with any degree of certainty. I cannot bring myself to restate some of the estimates that I have seen, including the 10,000 jobs figure which has been quoted tonight—[HON. MEMBERS: "Why not?"] Because I have little confidence in the ability of people to make assessments of this kind. Such assessments need, for example, to take account of the relationship between industries and their attitudes to the tax. Frankly, we have no immediate direct experience of these matters and, therefore, I cannot offer my support to any of the estimates which have been provided. However, work is continuing on this, and it may be that by Second Reading I shall have an estimate to offer my hon. Friend.

Mr. Tony Newton (Braintree)

What the hon. Gentleman says amounts to saying that he is going ahead with the imposition of hundreds of millions of pounds of taxation on industry without having worked out the consequences. Does he not recall that that is exactly what he told us 18 months ago about his 25 per cent. rate of VAT? Does not he remember the damage that that did?

Mr. Sheldon

The hon. Member for Braintree (Mr. Newton) talks about other taxes and their consequences. On the introduction of a new tax, I find myself having to show a certain amount of modesty about the forecasts that one quotes with certain assumptions. It is necessary to understand that the consequences that one foresees cannot be determined with complete accuracy.

My hon. Friend the Member for Birmingham, Perry Barr pointed out the consequences for employment in local authorities. However, he will realise that the national insurance surchage counts for rate support grant, and in so far as there is an obvious adjustment this clearly has to be taken into account, too.

The hon. Member for Rochdale (Mr. Smith) made a number of points about the levels of profit and the effects upon certain industries. This money is being made available to the Government. It will go into the Consolidated Fund and will be paid by the employers concerned. However, the hon. Member for Rochdale makes a wholly unwarranted assumption about the burden of the tax when he assumes that there will be big changes in his constituency and elsewhere. I believe that it is a useful tax.

Mr. Tebbit

The Minister says that there is a range of estimates in existence in none of which he believes. He mentioned the figure of 10,000 as being the lowest of the estimates in which he does not believe. What is the highest of the estimates in which he does not believe?

Mr. Sheldon

The figure I have seen is 10,000 for the fourth quarter after

introduction of the tax. I do not hold myself to that figure because there is a degree of uncertainty.

I believe that the tax will produce a saving in the public sector borrowing requirement and will produce revenue more easily than the equivalent amount of revenue to be obtained if we were to follow Opposition suggestions. It is a measure that accords with the July decisions that were taken by the House. Since this measure is a consequence of those decisions, I commend it to the House.

Question put:—

The House divided: Ayes 232, Noes 195.

Division No. 4] AYES [11.37 p.m.
Archer, Peter Dunn, James A. Jones, Barry (East Flint)
Armstrong, Ernest Dunnett, Jack Jones, Dan (Burnley)
Ashton, Joe Dunwoody, Mrs Gwyneth Judd, Frank
Atkins, Ronald (Preston N) Eadle, Alex Kaufman, Gerald
Atkinson, Norman Edge, Geoff Kelley, Richard
Barnett, Guy (Greenwich) Ellis, John (Brigg & Scun) Kerr, Russell
Barnett, Rt Hon Joel (Heywood) English, Michael Kilroy-Silk, Robert
Bates, Alf Ennals, David Kinnock, Nell
Benn, Rt Hon Anthony Wedgwood Evans, loan (Aberdare) Lamble, David
Bennett, Andrew (Stockport N) Evans, John (Newton) Lamborn, Harry
Bidwell, Sydney Ewing, Harry (Stirling) Lamond, James
Bishop, E. S. Fernyhough, Rt Hon E. Latham, Arthur (Paddington)
Blenkinsop, Arthur Flannery, Marlin Leadbitter, Ted
Boardman, H. Fletcher, L. R. (Ilkeston) Lee, John
Booth, Rt Hon Albert Fletcher, Ted (Darlington) Lestor, Miss Joan (Eton & Slough)
Bottomley, Rt Hon Arthur Foot, Rt Hon Michael Litterick, Tom
Bray, Dr Jeremy Ford, Ben Loyden, Eddie
Brown, Hugh D. (Proven) Forrester, John Luard, Evan
Buchan, Norman Fowler, Gerald (The Wrekin) Lyon, Alexander (York)
Buchanan, Richard Fraser, John (Lambeth, N'w'd) Lyons, Edward (Bradford W)
Callaghan, Jim (Middleton & P) Freeson, Reginald Mabon, Dr J. Dickson
Campbell, Ian Garrett, John (Norwich S) McCartney, Hugh
Canavan, Dennis George, Bruce McDonald, Dr Oonagh
Cant R. B. Gilbert, Dr John McElhone, Frank
Carmichael Neil Golding, John MacFarquhar, Roderick
Carter, Ray Gould, Bryan MacKenzie, Gregor
Cartwright, John Gourley, Harry Maclennan, Robert
Clemitson, Ivor Graham, Ted McMillan, Tom (Glasgow C)
Cocks, Rt Hon Michael (Bristol S) Grant, George (Morpeth) Madden, Max
Cohen, Stanley Grant, John (Islington C) Magee, Bryan
Coleman, Donald Grocott, Bruce Mahon, Simon
Colquhoun, Ms Maureen Harper, Joseph Mallalieu, J. P. W.
Conlan, Bernard Harrison, Walter (Wakefield) Marks, Kenneth
Cook, Robin F. (Edin C) Hart, Rt Hon Judith Marquand, David
Corbett, Robin Hattersley, Rt Hon Roy Marshall, Dr Edmund (Goole)
Cowans, Harry Hatton, Frank Marshall, Jim (Leicester S)
Cox, Thomas (Tooting) Heffer, Eric S. Maynard, Miss Joan
Crawshaw, Richard Hooley, Frank Meacher, Michael
Crosland, Rt Hon Anthony Horam, John Millan, Rt Hon Bruce
Crowther, Stan (Rotherham) Howell, Rt Hon Denis (B'ham, Sm H) Miller, Dr M. S. (E Kilbride)
Cryer, Bob Hoyle, Doug (Nelson) Moonman, Eric
Cunningham, G. (Islington S) Hughes, Rt Hon C. (Anglesey) Morris, Alfred (Wythenshawe)
Cunningham, Dr J. (Whiteh) Hughes, Mark (Durham) Morris, Charles R. (Openshaw)
Davidson, Arthur Hughes, Robert (Aberdeen N) Moyle, Roland
Davies, Bryan (Enfield N) Hughes, Roy (Newport) Oakes, Gordon
Davies, Denzil (Llanelli) Irvine, Rt Hon Sir A. (Edge Hill) Orme, Rt Hon Stanley
Davies, Ifor (Gower) Irving, Rt Hon S. (Dartford) Ovenden, John
Davis, Clinton (Hackney C) Jackson, Colin (Brighouse) Padley, Walter
Deakins, Eric Jackson, Miss Margaret (Lincoln) Palmer, Arthur
Dean, Joseph (Leeds Welt) Janner, Greville Parry, Robert
Dell, Rt Hon Edmund Jay, Rt Hon Douglas Pendry, Tom
Dempsey, James Jenkins, Hugh (Putney) Prescott, John
Doig, Peter John, Brynmor Price, C. (Lewisham W)
Dormand, J. D. Johnson, James (Hull West) Price, William (Rugby)
Douglas-Mann, Bruce Johnson, Walter (Derby S) Radice, Giles
Duffy, A. E. P. Jones, Alec (Rhondda) Rees, Rt Hon Merlyn (Leeds S)
Roberts, Albert (Normanton) Snape, Peter Watkins, David
Roberts, Gwilym (Cannock) Spearing, Nigel Weetch, Ken
Robinson, Geoffrey Spriggs, Leslie Weitzman, David
Roderick, Caerwyn Stallard, A. W. Wellbeloved, James
Rodgers, George (Chorley) Stewart, Rt Hon M. (Fulham) White, James (Pollock)
Rodgers, Rt Hon William (Stockton) Stoddart, David Whitlock, William
Rooker, J. W. Stott, Roger Williams, Alan (Swansea W)
Rose, Paul B. Strang, Gavin Williams, Alan Lee (Hornch'ch)
Ross, Rt Hon W. (Kilmarnock) Summerskill, Hon Dr Shirley Williams, Rt Hon Shirley (Hertford)
Rowlands, Ted Swain, Thomas Williams, Sir Thomas (Warrington)
Ryman, John Thomas, Jeffrey (Abertillery) Wilson(Alexander (Hamilton)
Sandetson, Neville Thomas, Mike (Newcastle E) Wilson, Rt Hon Sir Harold (Huyton)
Sedgemore, Brian Thomas, Ron (Bristol NW) Wilson, William (Coventry SE)
Selby, Harry Tinn, James Wise, Mrs Audrey
Shaw, Arnold (Ilford South) Tomlinson, John Woodall, Alec
Sheldon, Robert (Ashton-u-Lyne) Tomney, Frank Woof, Robert
Shore, Rt Hon Peter Torney, Tom Wrigglesworth, Ian
Short, Mrs Renée (Wolv NE) Varley, Rt Hon Eric G. Young, David (Bolton E)
Silkin, Rt Hon John (Deptford) Wainwright, Edwin (Dearne V)
Silkin, Rt Hon S. C. (Dulwich) Walden, Brian (B'ham, L'dyw'd) TELLERS FOR THE AYES:
Silverman, Julius Walker, Harold (Doncaster) Mr. James Hamilton and
Skinner, Dennis Walker, Terry (Kingswood) Mr. Frank R. White.
Small, William Ward, Michael
Alison, Michael Gow, Ian (Eastbourne) Meyer, Sir Anthony
Amery, Rt Hon Julian Gower, Sir Raymond (Barry) Miller, Hal (Bromsgrove)
Arnold, Tom Grant, Anthony (Harrow C) Mills, Peter
Atkins, Rt Hon H. (Spelthorne) Gray, Hamish Mitchell, David (Basingstoke)
Baker, Kerneth Grist, Ian Moate, Roger
Banks, Robert Hall, Sir John Monro, Hector
Beith A. J. Hall-Davis, A. G. F. Montgomery, Fergus
Bennett, Dr Reginald (Fareham) Hamilton, Michael (Salisbury) Moore, John (Croydon C)
Berry, Hon Anthony Hampson, Dr Keith Morris, Michael (Northampton S)
Biggs-Davison, John Hannam, John Morrison, Hon Peter (Chester)
Blaker, Peter Harvie Anderson, Rt Hon Miss Neave, Airey
Body, Richard Hastings, Stephen Neubert, Michael
Boscawen, Hon Robert Havers, Sir Michael Newton, Tony
Bottomley, Peter Hayhoe, Barney Nott, John
Boyson, Dr Rhodes (Brent) Heath, Rt Hon Edward Onslow, Cranley
Braine, Sir Bernard Hicks, Robert Oppenheim, Mrs Sally
Buchanan-Smith, Alick Higgins, Terence L. Page, Rt Hon R. Graham (Crosby)
Budgen, Nick Hodgson, Robin Pardoe, John
Bulmer, Esmond Holland, Philip Parkinson, Cecil
Burden, F. A. Hooson, Emlyn Pattie, Geoffrey
Carlisle, Mark Hordern, Peter Penhaligon, David
Chalker, Mrs Lynda Howe, Rt Hon Sir Geoffrey Percival, Ian
Clark, Alan (Plymouth, Sutton) Howell, David (Guildford) Peyton, Rt Hon John
Clark, William (Croydon S) Howells, Geraint (Cardigan) Price, David (Eastleigh)
Clegg, Walter Hunt, David (Wirral) Raison, Timothy
Cooke, Robert (Bristol W) Hurd, Douglas Rathbone, Tim
Cope, John Hutchison, Michael Clark Rawlinson, Rt Hon Sir Peter
Craig, Rt Hon W. (Belfast E) James, David Rees, Peter (Dover & Deal)
Crouch, David Jenkin, Rt Hon P. (Wanst'd & W'df'd) Renton, Rt Hon Sir D. (Hunts)
Crowder, F. P. Johnson Smith. G. (E Grinstead) Renton, Tim (Mid_Sussex)
Davies, Rt Hon J. (Knutsford) Jopling, Michael Rhys Williams, Sir Brandon
Dean, Paul (N Somerset) Kaberry, Sir Donald Ridsdale, Julian
Dodsworth, Geoffrey Kilfedder, James Rifkind, Malcolm
Douglas-Hamilton, Lord James Kimball, Marcus Rippon, Rt Hon Geoffrey
Drayson, Burnaby King, Tom (Bridgwater) Roberts, Michael (Cardiff NW)
du Cann, Rt Hon Edward Kirk, Sir Peter Roberts, Wyn (Conway)
Eden, Rt Hon Sir John Kitson, Sir Timothy Robertson, John (Paisley)
Edwards, Nicholas (Pembroke) Knight, Mrs Jill Ross, Stephen (Isle of Wight)
Eyre, Reginald Knox, David Rossi, Hugh (Hornsey)
Fairbairn, Nicholas Langford-Holt, Sir John Rost, Peter (SE Derbyshire)
Fairgrieve, Russell Latham, Michael (Melton) Royle, Sir Anthony
Finsberg, Geoffrey Lawrence, Ivan Sainsbury, Tim
Fletcher, Alex (Edinburgh N) Lawson, Nigel Le St. John-Stevas, Norman
Fletcher-Cooke, Charles Merchant, Spencer Shaw, Giles (Pudsey)
Fookes, Miss Janet Lloyd, Ian Shaw, Michael (Scarborough)
Forman, Nigel Loveridge, John Shelton, William (Streatham)
Fowler, Norman (Sutton C'f'd) MacCormick, Iain Shepherd, Colin
Fox, Marcus McCrindle, Robert Shersby, Michael
Freud, Clement Macfarlane, Neil Sillars, James
Galbraith, Hon. T. G. D. MacGregor, John Silvester, Fred
Gardiner, George (Reigate) McNair-Wilson, M. (Newbury) Sims, Roger
Gardner, Edward (S Fylde) McNair-Wilson. P. (New Forest) Skeet, T. H. H.
Gilmour, Sir John (East Fife) Madel, David Smith, Cyril (Rochdale)
Glyn, Dr Alan Marshall, Michael (Arundel) Sproat, Iain
Godber, Rt Hon Joseph Marten, Neil Stanbrook, Ivor
Goodhart, Philip Mather, Carol Stanley, John
Goodlad, Alastair Maxwell-Hyslop, Robin Steel, David (Roxburgh)
Gorst, John Mayhew, Patrick Steen, Anthony (Wavertree)
Stewart, Ian (Hitchin) Vaughan, Dr Gerald Wiggin, Jerry
Stradling Thomas, J. Viggers, Peter Wilson, Gordon (Dundee E)
Taylor, Teddy (Cathcart) Welder, David (Clitheroe) Winterton, Nicholas
Tebbit, Norman Walker-Smith, Rt Hon Sir Derek Younger, Hon George
Thatcher, Rt Hon Margaret Wall, Patrick
Thomas, Rt Hon P. (Hendon S) Watt, Hamish TELLERS FOR THE NOES:
Townsend, Cyril D. Weatherill, Bernard Mr. John Corrie and
Trotter, Neville Whitelaw, Rt Hon William Sir George Young.
van Straubenzee, W. R

Question accordingly agreed to.

Resolved, That a surcharge, payable into the Consolidated Fund, be imposed on secondary Class 1 contributions under the Social Security Act 1975 and the Social Security (Northern Ireland) Act 1975, being a surcharge—

  1. (a) payable together with the contribution by every person who pays or is liable to pay such a contribution; and
  2. (b) equal in every case to 2 per cent. of the amount of the earnings in respect of which the contribution is paid or payable.

Bill ordered to be brought in upon the said Resolution by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Stanley Orme, Mr. Joel Barnett, Mr. Robert Sheldon and Mr. Denzil Davies.