§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Frank R. White.]
§ 7.18 p.m.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
I must first declare an interest as a director of a building firm, not, I think, connected with the subject matter of this debate, which is the issue of 714 certificates to self-employed subcontractors and other sub-contractors so that they may be paid gross rather than have 35 per cent. deducted from what they receive.
I want to make it clear at the beginning that we on the Conservative Benches do not condone tax evasion. [Interruption.] We do not want to help it. We are happy to find ways of stopping it up. Indeed, this scheme derives from a scheme introduced by my right hon. Friends a few years ago, and designed for the same purpose. We agree that that scheme had loopholes. It is not part of our case that tax evasion should be made easier.
But, before examining what has happened under the scheme, I should like to ask why these Draconian measures to enforce tax respectability should be concentrated upon one group of people—the builders. It seems as thought they have been singled out. I do not think that they are the only people who are paid gross and practise a certain amount of 1520 tax evasion. I should not mind seeing a scheme of 714 certificates for accountants. The Chief Secretary will soon be back at work. Why should he not have the same treatment meted out to him?
The builders themselves will be able to remember the words of the Minister of State, Department of Defence—the hon. Member for Dudley, East (Dr. Gilbert)—when he was Financial Secretary to the Treasury, when he said in Committee on the Finance Bill:When people see one man get away with it and possibly boasting of doing so, people may think 'If he can get away with it, why should not I?'."—[0fficial Report, 10th June 1975; Vol. 893, c. 352.]That was what the hon. Member for Dudley, East said in his inimitable English, and it is what the builders will be saying about a lot of other professions as a result of this scheme.
The first point that I want to establish is that this scheme has become a licence to work. The 35 per cent. deduction leaves an inadequate amount to the individual. Basically, there are two classes of people who may be receiving only 65 per cent. if they are refused a certificate. The first class is the individual who works on his own and who, if he does not obtain a certificate, will be paid net. He will not be paying tax at 35 per cent., because he will have personal allowances, child allowances and allowances for expenses, so that in the first place he is being made to pay more tax through the deduction scheme than he would probably be liable to otherwise. It is crippling for him, because he cannot 1521 afford to live on 65 per cent., and if he does not get a certificate he is very likely to go out of business.
The matter is much more anomalous in the case of companies. The 35 per cent. deduction makes no sense in relation to a company. It may be a very big company, employing 1,000 people, or it may be a small company employing 10. I do not know how a company can be expected to pay 65 per cent. of what it is owed and also pay taxes, wages, office expenses and the rest, including paying for materials, paying national insurance contributions and all its outgoings, and survive. No company of any size—in other words, any company that employs more than a couple of men—will be able to survive the refusal of a 714 certificate unless it has substantial capital resources to tide it over until it receives the tax back.
Further, although the Government propose that the absence of the 714 certificate should not prevent Government agencies and local authorities giving work to sub-contractors, their publicity on this point has not been very good. There is a circular—I am grateful to the Under-Secretary of State for the Environment for sending me a copy this morning—and I shall he quoting from it so that it is widely understood that local authorities are not under an obligation not to ask people without a certificate to tender.
The circular states thatthere may be excellent contractors who, for one reason or another, prefer to meet their tax liability by having it deducted at source. A certificate is not a 'work permit' and is no indication of reliability of workmanship or financial stability.Therefore, the many local authorities that are already saying that they will not give contracts to people who do not have certificates have no reason for saying it. I hope that the Government will give much publicity to that.
Furthermore, the Property Services Agency has been suggesting that it will not employ non-certificated sub-contractors. The Under-Secretary of State for the Environment wrote to me to say that thePSA will normally employ only firms who have a certificate or who can otherwise satisfy the Agency that they are not likely to evade payment of tax.That statement is not clear enough. The same instruction should go to the PSA 1522 as goes to local authorities. In no sense should the possession or lack of a certificate influence the placing of a contract.
The effect of refusal of certificates on firms or individuals can be very serious. I am satisfied that in 90 per cent. of cases it means that they will go out of business. When we are taking a power as Draconian as this, albeit in pursuit of stopping a tax evasion device, we have a great responsibility to make sure that no one who is blameless is wrongly prevented from working. [Interruption.] The right to work is something that even the hon. Member for Birmingham, Perry Barr (Mr. Rooker), who makes interjections from a seated position, ought to pretend to defend.
The first ground for refusal of a certificate is that one does not have third party insurance to the value of £250,000. There have been a few refusals on that ground. The second requirement is that one must have a bank account. Thanks to the work of the excellent organisation called "Fight the 714 Campaign", we now have details of many hundreds of cases of people who have been refused 714 certificates. I shall read some of these cases to the House, because Labour Members ought to know what their Government are doing through the tax inspectorate. First, I shall give one example of someone who has been refused a certificate under the bank account section. I shall not give the names and addresses unless hon. Members wish me to do so. [HON. MEMBERS: "Give them".] All right. The first example is that of Mr. Christian Leng, of 26 Conway Road, London, N.15. The note I have reads as follows:Refused because not enough money going through bank account, but he is often paid in cash. A bricklayer—self-employed 10 years—he told Revenue that the amount he had signed for on vouchers equalled his income, not amount going through his bank. He had an old certificate, and had for previous certificates declared far greater earnings than amount going through his bank.The mere fact that a man does not put his total income through his bank does not mean that he is fiddling or not paying his tax. It is utterly wrong to take away a man's living for such a matter as that.
Next, under paragraph 1(c) of the schedule, proper records and accounts must be kept. I give two cases in this category. The first is Mr. Stephen Nye. 1523 His accountant was struck off for professional misconduct. Unknown to him, his books were in very bad order. A new accountant has straightened them out. It is not his fault, and as soon as he found out about it he got matters put right. But what did the Revenue do?—it refused him a certificate.
The next case is that of Mr. Light, who has been a plumber for 35 years, for 20 of them self-employed. He has no tax problems. He held his present certificate from 1971 to 1975. The certificate was not renewed last year because he was behind with his book-keeping. The inspector of taxes also raised petty queries over amounts claimed for overheads. According to Mr. Light, these were amounts involving coppers. From 1975 he has had 30 per cent. deduction at source. The Inland Revenue currently owes him £603, which should have been returned by April 1976. The delay in repayment is due to his tax district; the new tax office refused to refund him the money until it received confirmation from the previous office. The tax office currently holds £2,000 of his money—that is, £603 plus deductions for the current year. All his work is for the GLC via a large contractor. It occupies him full-time, and all payments made to him are by cheque. Mr. Light has been refused a certificate.
I could give hundreds of such examples, but I shall concentrate on one or two in each category. The next ground for refusal is that the person must have been in business for three years. This is a much more sinister ground. No one can be in business for three years when he starts his working life. It means that immigrants cannot start because they cannot show three years' work experience in the United Kingdom.
Here is my first example: Mr. Hammond, of 22 Blackwood House, Collingwood Street, E.1. The note on his case reads as follows:18 years a docker; one year self-employed. Got to have work before you get a certificate, but cannot get work without a certificate.That is what Mr. Hammond says.
My next example is Mr. Macey, of Hilltop Court, Love Lane, Woodford Bridge, Essex—a constituent of my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin). The note 1524 I have in his case tells me that he worked for the last three years with a limited company as a director. The company went bankrupt, and therefore he does not have a clear record although he himself owes no tax. He did not fill in the form as the local tax man laughed at him and said "You have no chance". He was laughed at, yet all he had done was to go bankrupt as a director in a company, although he himself never owed any tax. Why on earth was he picked on in that way?
Next, I have a note about a Mr. Reed, who was refused because he was not at work for one year, because he was in prison for one year. He has written to the inspector, and—so the notes reads—he will let us know as soon as he hears from the inspector.We now have this new ground—that a man must not have been in prison. What is wrong with helping those who have been in prison to rehabilitate themselves and get started in life again?
I turn now to a new ground, which is not even in the legislation. The schedule contains no statement that one must have a current contract, yet Mr. Faulkner, of 30 Brookfield Avenue, Mill Hill, was refused a certificate on this basis. He went to the tribunal and was told that in order to obtain a certificate he had to have a current contract, but that a current contract could not be obtained without a certificate. The tribunal was on his side, but it had to uphold the law. It said that between 1973 and 1975 he was not employed for a reasonable amount of time. The Inland Revenue owes him £250, and he has been unemployed for the last year.
Mr. McGullion, of 62 Monkleigh Road, Morden, has five years' records, but he was refused and told that he had to have two current contracts. Where in the legislation does it say that? These people can perfectly well have no work between one contract ending and another starting.
These ridiculous reasons are preventing people from setting up in business. In 50 years' time there will be no labour only sub-contractors. No one will be able to start, because no one will have three years' experience behind him. This is one condition that we want to change.
The main stumbling block occurs when people have tax irregularities behind 1525 them. This is quite clear, and the Financial Secretary has never tried to disguise it. He has always admitted that if someone is a bad taxpayer he will not get a certificate. But why introduce this new idea of a man having to be a good taxpayer before he can get a certificate to work? This does not apply to anyone other han the self-employed. Large numbers of people have been caught evading tax and have been taken to court and fined. But this has not prevented them from working. Even the offence of being late with tax payments and incurring interest has been cause for the refusal of a certificate.
Mr. Gore, of 12 Boyton Close, Hornsey, was refused a certificate. He was a shop-fitter for 30 years and he owned a company from 1960 to 1971. He owes nothing, but the Inland Revenue keeps sending him large assessments. He was refused a certificate because he has not paid the large assessments.
Mr. Barton, of 45 Freedom Street, Battersea, was refused a certificate. He had clear tax for six years, but he tailed to pay his tax properly in 1970. He appealed, but this was not accepted, and he was told to re-apply in 12 months. 1970 is more than six years ago. Is it true that irregularities of many years back will be held against a person retrospectively, even though at that time the legislation was not in force?
The arbitrary way in which the inspectors behave is totally unjustifiable in a free country. There are many instances of inspectors not giving reasons at all. Mr. Green, of Mansford Street, London, E.2, was refused the certificate three months ago. The inspector said that he was not obliged to give reasons for the refusal. Mr. Green owes no tax, he has insurance, and has never been self-employed.
Mr. Maisey, of Cranford, Middlesex, has been self-employed for eight years. He had a difficult first year, but has been all right ever since. He was refused a certificate for no reason. He was turned down about eight months ago and is only just appealing now.
Very often those who are refused are small people who do not understand the processes of law, and perhaps are not particularly clever at book-keeping. It is absolutely monstrous that on the fiat of a tax inspector they can be denied their 1526 living. If a certificate is refused, one can appeal to the commissioners within 30 days. But the commissioners cannot hear a case when the inspector says that the certificate was refused because of tax irregularities. The commissioners cannot question that. They are in no position to find against tax inspectors if they have refused a certificate on that basis. Against this, there is no effective appeal whatsoever.
A tax inspector who dislikes someone or who is totally unreasonable can easily tell the commissioners that he is not prepared to discuss the matter, because the reason for refusal concerns tax irregularities. That means that the man's livelihood is effectively doomed. That cannot be right. I question whether it is right for the commissioners to hear appeals at all. They decide on the niceties of tax claims or whether the defence of a taxpayer is sound in law. Now they are being asked to adjudicate on whether a man's licence to work should be taken away. It would be much better if these cases could go to some other sort of court. It would be more reasonable if the full circumstances were brought out into the open and the inspector was made to justify himself.
Until the Government do something about this highly inefficient and deficient appeals procedure the only proper appeal court is this House. That is why I ask the Financial Secretary to stay a little later tonight to discuss a specific case that I shall raise on the Adjournment. I hope that he gets four or five of these cases a week from now on, because there is no other way in which these people can appeal. Justice must be seen to be done before we can ask people to accept the thoroughly arbitrary nature of this legislation.
Of course the Government have ulterior motives in mind. They are anti-lump. Hon. Gentleman who sit below the Gangway on the Government side, and who are melting away fast tonight, have it in mind to destroy labour-only sub-contracting. They want to bring in legislation to extend direct labour, and they are delighted by the way in which this piece of legislation is being implemented. That was indicated by their cheers and jeers at the beginning of my speech. They would rather see these hard-working citizens on the dole. No wonder our unemployment figures are going up.
1527 The applications for 714 certificates totalled 277,000 in January. Of that number, 23,000 have been refused and 55,000 have not even had an answer. The scheme is due to come into effect on 6th April, and 55,000 firms and people do not know whether they can continue in business in six weeks' time. Another 23,000 know definitely that they cannot go on. Some of these employ a number of people—they are sizeable companies, and the distress and concern being caused by this is totally unacceptable. I appeal to the Government to do one meaningful thing at least tonight—to declare a moratorium on the operation of the scheme until these applications have been dealt with, and the points that I have raised tonight have been adequately put right. This affects nearly 80,000 people. It is not possible for them to go into the next trading year without knowing whether they will be able to get a certificate. The absence of a certificate denies the bulk of them the ability to carry on earning their living.
I beg the Government to take this seriously and come forward with a solution. I urge them to deal with the un-necessary grounds for refusal, the arbitrary and dictatorial powers given to the inspectors, the lack of a right to appeal, and the administrative failure that has led the Government to the point where, with only six weeks to go, 55,000 people have not had an answer, on which their living will depend. If the Government care about ordinary working people they will act now.
§ 7.40 p.m.
§ Mr. Paul Dean (Somerset, North)
I am glad to speak after my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), who put forward a moving and powerful case. It is clear from what he said that we are talking not only about the 714 tax certificate but about the whole attitude of the Government towards self-employment. It is understandable that the self-employed are suspicious that the Government are hostile to them and that the Government regard them as the awkward squad who do not fit in with Socialist planning and who do not like conforming and being forced into a mould. These are people who prefer the small unit, people who do not like paper work and bureaucracy. 1528 Indeed, they are the people in the community who like doing their own thing and being their own boss.
Surely we should be encouraging rather than hounding this sturdy independence which has been a British characteristic throughout the ages and which is a vital buttress for freedom in this country. We need the drive of the man who stakes his savings in his own business. We need the small enterprise, not only for the sake of our economic health but to maintain freedom and the British way of life.
It is hardly surprising that the building and construction industry in particular should feel suspicious about the Government's intentions. After all, that industry realises that the Government are pledged to nationalisation of the industry. We do not know when that will happen or which firms will be involved, but we know that the commitment is there in the background. We know, too, that through the operation of the closed shop and the so-called voluntary register it is becoming increasingly difficult for small builders to get public contracts. They understandably see this system as a deliberate squeeze on their livelihoods. They remember, too, the Government's proposals to extend the power of local authority direct labour organisations.
In this connection, many small builders have read what was said in Labour's "Programme for Britain", published in May 1976. That document stated:We believe that a major public stake must be created within the building and construction industry. In part this need can be met by considerably expanding the use of efficient direct labour organisations, the resources of which should be developed and exploited across a much wider front.Quite rightly, they see all these things as the thin end of a political wedge. This, then, is the background of the controversy over the 714 tax certificates.
Is it any wonder that organisations such as the National Federation of Self-employed and the Association of Self-employed People regard this primarily as a political rather than a fiscal device? Let me quote how this was put in a recent letter from the NFSE. The letter reads:Whereas this Federation certainly does not condone tax evasion, we sincerely believe that the regulations and conditions, laid down in Schedule 12 of the Act, penalise the law-abiding majority of sub-contractors and that 1529 this legislation has been enacted for political as opposed to fiscal considerations. We believe that this legislation may result in eliminating the entire self-employed sector of the construction industry.Can one wonder that the national federation should feel that way? Is it any wonder, that the "Fight the 714" campaign has been born?
Here again I quote briefly from a document, this time by the campaign. It says:The '714' is part of a campaign by the unions and Socialists to get control of our largest and most successful free enterprise industry. The '714' will kill off the small private builder; nationalisation will take care of the larger firms.These are understandable fears which have been created as a result of the deliberate policy of the Government. They are the background to the suspicions which have been aroused.
In the earlier part of his speech, my hon. Friend the Member for Cirencester and Tewkesbury asked whether this was a tax collection instrument, as was originally intended, or whether it had now become a passport to work. That is a very good question. The Financial Secretary has made it clear throughout that it is only a tax collection instrument. Perhaps I should quote what he said. This is his most recent pronouncement on the matter and was given in a parliamentary answer to me. He said:The certificate, I repeat, is not a certificate to work. Income tax can be deducted at source if such a person is unable to obtain a certificate. He is still able to earn his livelihood in just the same way."—[Official Report, 11th November 1976; Vol. 918, c. 650.]But what is happening? The Property Services Agency, which is responsible for construction for the Government, announced that it would generally consider tenders only from contractors who held a current valid tax certificate at the time of tender. That is completely contrary to the clear pledge given by the Financial Secretary. It clearly shows that in the mind of the PSA, at that time at any rate, was the intention that the certificate should be used, no doubt for reasons of convenience, as a passport to work and not merely as a tax collection instrument.
There have been various letters and arrangements and various statements by Ministers to try to explain this apparent conflict. We have had no satisfactory 1530 explanation yet, and we are bound to ask, not only in the case of the PSA but in the case of the local authorities, by what right they can pick and choose in this way. What authority have they so to broaden the intentions of the Government and the intentions of the legislation?
I submit to the Financial Secretary that what is now happening in practice is contrary to the original intention and to the clear pledge given by the right hon. Gentleman in this House. We are dealing here with the abuse of a scheme which has gone far wider than was originally intended. Had the House of Commons had any intention at that time of expanding and using the scheme in this way, I do not believe that it would have accepted the Bill for one moment. The legislation simply would not have been passed.
That is one very good reason among others for the plea advanced by my hon. Friend the Member for Cirencester and Tewkesbury for a moratorium on the scheme until these matters are sorted out. Almost 23,000 certificates have been refused, and my hon. Friend has shown examples of many that have been turned down for no good cause. With the best will in the world, the individuals concerned could not have complied with the requirements. They are being denied the right to work for no adequate reasons and for reasons that are far outside the original intentions of the legislation.
I reinforce the appeal to the Financial Secretary which has been made by my hon. Friend the Member for Circencester and Tewkesbury. The Minister now has sufficient evidence to show clearly that the operation of the scheme is causing hardship and injustice and is adding to the roll of unemployment. The only thing to do now is to withdraw the scheme until these arrangements are sorted out and to introduce something else that will he more satisfactory.
§ 7.51 p.m.
§ Mr. James Dempsey (Coatbridge and Airdrie)
Before I ask my right hon. Friend to consider a matter that is related to the problem that we are discussing, I declare that I am not an opponent of the self-employed. The Opposition have given the impression that everyone who occupies the Labour Benches is such an opponent. We all know that without the 1531 self-employed providing the services that they now provide production not only in the craft and construction industries but even in distribution would be the poorer. That must be accepted, and that is something that I have always understood.
In my constituency there are a number of self-employed persons who employ quite a few other persons. They make a fair contribution to employment in the constituency—and I happen to represent an area of high unemployment. I make it clear that I am not an opponent of self-employment. I am not unfriendly towards them. Indeed, the converse is the truth. I am rather friendly towards such individuals.
I paid close attention to what was said by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). The hon. Gentleman quoted a number of cases that must be examined. But the anomalies did not first crop up this year or the year before; there were just as many anomalies in the days of the Conservative Government in the operation of Inland Revenue certificates of all sorts. I wonder why the Conservative Administration did not do something about them. [HON. MEMBERS: "They did."] Obviously they did not do very much. If they had done more we should not be faced with this problem.
I ask the House to consider the position of a young fellow who enters business as a self-employed person. He might enter self-employment as a craftsman. I am talking of a young person who has worked with his hands all his life. He is the sort of person who is not aware of all the book-keeping requirements of running a small business. He knows nothing of administration matters. He has not sufficient work in hand, or has not worked long enough, to accumulate sufficient resources to employ a clerk or some such person to look after the administration of the business.
Such a person might fail to answer income tax queries. He might even fail to submit his application within the prescribed 30 days to appeal against a decision to withdraw or to cancel the 714 certificate. Here we have a young person who continues to overlook such matters due to his lack of administrative experience and book-keeping knowledge until 1532 he finds himself making application to the inspector and the inspector applying the law of the country. In fact, he applies the Act of Parliament.
It is wrong to condemn the income tax inspectors as they are only doing their job. They are implementing the regulations that we lay down. We should be criticising ourselves, not the inspectors, who are only enforcing the regulations laid down by Parliament.
In the case I have in mind, the inspector enforced the regulations and the young person concerned has been disallowed for three years. Why should that young chap have to wait three years before his case can be reviewed? Why cannot it be reviewed within one year? Why cannot disallowance be for one year only, review taking place when that period has elapsed?
I spent a long time in the licensing courts in my local authority days. If we had withdrawn a licence from someone for three years there would have been hell to pay, not only in my constituency but throughout Scotland. In the case to which I have referred an innocent young fellow, totally inoffensive, who does not have book-keeping knowledge but who has worked all his life as a craftsman, has had his certificate cancelled and has been advised that he cannot possibly have it reviewed until three years have elapsed. That is a long period for a young person. I am not talking about monopoly imperialists or monopoly owners. I am talking of ordinary working-class chaps who have decided to set up a small business to see whether they can make better progress in life.
I am anxious to ascertain why such people should be subject to the mandatory period of three years of disallowance. Have any representations been made to my right hon. and hon. Friends to reconsider the sentence that is imposed on the innocent person who wants to try his luck—this is all that he is doing—as a self-employed person? All that these people can be accused of is trying their luck. Arising from their inexperience of accounting requirements of a small business, no matter how small it is, they sometimes run into difficulties. I regard the disallowance penalty of three years as too severe.
1533 I do not care which Government are in power. Surely the Minister who is responsible should examine this matter. I am sure that the disallowance of three years has been in operation for a number of years. I am sure that it was in operation during the days of the Conservative Government. No matter what Government were in power when this period of disqualification was introduced, I say in all sincerity that it is too long. I ask my right hon. Friend to consider this aspect. I hope that I shall learn from him if he or the Treasury have any ideas or intentions in this respect and whether there is any prospect of the period of suspension being reduced to about a year, which in my view would be more reasonable.
§ 7.59 p.m.
§ Mr. Geraint Howells (Cardigan)
So far, it seems that Members on both sides of the House are in favour of safeguarding the interests of the self-employed. Having been a self-employed person all my life, I declare my interest. Further, I am a member of the National Federation of Self-employed. I feel proud to be a member of that organisation.
It gives me great pleasure to follow the hon. Members for Cirencester and Tewkesbury (Mr. Ridley) and Somerset, North (Mr. Dean). I agree entirely with the sentiments which they expressed. I hold the view that one of the greatest dangers that we face is the constant erosion of freedom by the imposition of rules and regulations that are of no very obvious benefit to the community. The compulsory 714 certificate for the self-employed is a clear example of that and is a flagrant infringement of personal liberty. In that reason, I feel it my duty as a Liberal to oppose the regulation and ask the Government to think again. I see this primarily not as an attempt to prevent tax evasion, as is claimed, but as another attack on the self-employed.
For some time I have felt that the self-employed are under siege and are well on the way to becoming second-class citizens. Their energy and enthusiasm are no longer encouraged but are being strictly curtailed by petty legislation. I believe that the self-employed are an important section of the community with a vital part to play in its economy.
1534 Likewise the self-employed in the building industry, who will be affected by this strange piece of Government thinking, are essential to the well-being of that industry.
I am convinced that an enforcement of this regulation will bring about much unnecessary redundancy and that many small building firms will be made bankrupt within a short time. For a Government who pretend to show concern about the level of unemployment, they are being extremely careless about employment opportunities in this instance.
In 1971 we had the Bolton Committee's report. That Committee, which was set up to look after the interests of the self-employed, produced a very good report. In 1971 we were promised that after five years there would be an interim report by the Government. I tabled a Question asking the Government to produce that interim report on the plight of the self-employed, but they would not do so. I am sorry that the Government are not interested in the plight of the self-employed.
I represent a constituency where 31 per cent. of the electorate are self-employed. I have the largest percentage of self-employed in any constituency in the United Kingdom. The construction industry plays a major rôle in the economy of rural Cardiganshire. If this legislation is carried, it will represent a severe blow to the self-employed in the construction industry and to small businesses particularly in Mid-Wales. I am sure that that is also true of many rural parts of England and Scotland.
The construction industry employs over 1 million people. Of those, 400,000 are self-employed with probably 230,000 being labour-only sub-contractors—known as the "lump". That name came about because those people are paid lump sums rather than wages on an hourly, daily or other basis. Anyone who quotes a fixed price for doing certain work and then honours this contract works the "lump", be he consultant, architect, main contractor, sub-contractor or even labourer. In fact, this fixed price or lump sum contract is the type stipulated by central and local government in public works contracts. To date, no other system has been devised which allows the industry to operate as simply, 1535 accurately, efficiently and competitively as it now does with labour-only sub-contractors.
The mobility of labour plays an important part in the building industry During the progress of a contract the work moves along sectionally and the trades involved live through a series of activity and redundancy cycles. When a contract comes to an end, the labour force moves on to another site. In order to keep costs down, the main contractor does not employ specialist trades in a full-time capacity. He employs them only when they are needed. The specialist tradesmen are shared by several main contractors on a sub-contracting basis.
The frequent accusation that self-employed equals the "lump" equals tax evasion is hotly disputed by Members on the Opposition side of the House, and especially by members of the National Federation of Self-employed, who claim in particular that its members are firmly based in local communities.
In 1975 the right hon. Member for Deptford (Mr. Silkin), the then Minister for Planning and Local Government, announced the creation of the Construction Industry Manpower Board to ensurethat the Government should have the benefit of regular advice from the industry about the effect of Government measures on the lump and about other measures which would increase stability of employment in the industry."—[Official Report, 15th July 1975; Vol. 895, c. 393–4.]The TUC had much the same expectations of the board's functions. The TUC "Economic Review" 1975, Section 154, stated:It will monitor progress under the Act and lead towards the decasualisation of the industry. From a trade union standpoint, outlining the means towards a stable labour force in construction should top the board's priorities once the lump and bogus self-employment have been eradicated.Although the then Minister stated that both sides of the industry would be represented on the board, alas the final members did not include a representative of the self-employed contractors—clearly the most important sector as far as the board's terms of reference were concerned. The National Federation of Self-employed proposed that self-employed workers within the construction industry 1536 must have representation on the Construction Industry Manpower Board. At present only management and unions are represented.
I could go on at length but I shall not do so. I turn briefly to the new model 715. The new model 715 is now an identity card. But even passports can be forged, as we know from experience. The new 715 is no more secure than was the original. The identity card system has brought a feeling of degradation to subcontractors. The obligation to produce the identity card to a site clerk or union official has sparked off anger which can only have serious implications. The purpose of such documents in other countries, times and places has been to regulate and control those who were considered to be of inferior or second-class citizenship status. The selection of the building trade's sub-contractor for this rôle is no accident. The building trade employs more sub-contractors than any other industry. Once this principle of apartheid is accepted here, the system will have been established and will be open to expansion. Where will it end?
I turn now to the views which have been expressed by the Wales Region National Association of Self-Employed Action Groups. It would be wrong of me as a Welshman representing a Welsh constituency not to take note of what that body has said. The association has said that the certificatesare a 'licence to trade' which may be granted or withheld entirely at the discretion of the Inland Revenue—and as such we consider this to be a new and dangerous innovation and a severe restriction on the freedom of the individual.There is no doubt that a refusal of a 714 certificate will put contractors out of business, for the result will be that, when that builder is employed as a sub-contractor by a local authority or other main contractor, 35 per cent. will be deducted from his cheques—not 35 per cent. of profit, but 35 per cent. of gross turnover—which will put anyone out of business immediately.An example is given by the committee which calls itself "Fight the 714". A labour-only self-employed tradesman with an employee apprentice has a total weekly income to cover wages of £80 for himself and £40 for the apprentice, making a total of £120. There is a 35 per cent. deduction on the gross amount, which totals £42. That leaves £78. If one gives £40 to the apprentice and adds on the 1537 self-employed contribution of £5.93, that leaves the tradesman with a net income of £32.70. How long can we tolerate that situation.
§ Mr. A. P. Costain (Folkestone and Hythe)
Has not the hon. Member overlooked the 10 per cent. maintenance retention which is kept back from the contractor?
§ Mr. Howells
I have overlooked many matters, but the Government have overlooked even more.
The question of appeals has been mentioned by hon. Members on both sides. The tribunal has no power to overrule the Inland Revenue and to direct that a certificate be issued. Apparently the Inland Revenue's decision on tax matters is final. Certificates are to come into effect in April, but the majority of builders have not yet obtained them. A survey by several of the large national construction companies shows that of the 7,000 sub-contractors only 400 have obtained certificates.
It is estimated that the 714 certificates will put 100,000 people out of work throughout the United Kingdom. There will also be loss of work as a result of the spin-off. It is estimated that the eventual loss to the Exchequer will be colossal and far in excess of the £10 million that the Government claim they will lose because of the "lump".
I have come to a definite conclusion—as have many others—that the Government are yet again giving way to pressure from the trade unions. The hidden purpose is obvious. It is to please trade unionists who wish to see the building industry completely unionised. Once again the individual is disregarded, the small man is regimented against his will and 1984 is coming even nearer. We must end this tide. We could start by throwing out the regulations. My colleagues and I will support their rejection.
§ 8.15 p.m.
§ Mr. John Wakeham (Maldon)
I shall deal with only one aspect of the scheme, but it is the central aspect—the reduction of tax evasion. We have been told by the Financial Secretary that about £10 million is involved. He gave no evidence to support that estimate, but for the purpose of the argument I am happy to accept that 1538 figure. It is a significant sum, but it must be kept in perspective.
There are about 360,000 certificate holders and the £10 million estimate is presumably based on that figure. If one assumes that the certificate holder is a person earning average wages and has two children, the amount of revenue involved is about £230 million a year—and that is assuming that the certificate holders have no employees at all. The Government must know that certificate holders have a considerable number of employees. I have not been able to acquire an accurate estimate of the number of employees, but the best estimate is that on average there are about three employees for each certificate holder.
If one takes that figure with roughly the same level of income and therefore the same level of taxation, one is talking in terms of £1,000 million of revenue per year. I suggest that the figure involved is between £230,000 million and £1,000 million. Therefore, the £10 million that we are considering is between 4 per cent. and 1 per cent. of the revenue that comes from this class of employment throughout the country.
Frankly, I do not believe that the Inland Revenue is able to estimate the likely income sufficiently accurately to give me confidence that the £10 million is a genuinely considered figure. One is bound to conclude that the reasons for the regulations are not entirely those of tackling tax evasion. The reasons probably stem more from a hostility to the "lump" and the self-employed than from a straightforward desire to prevent tax evasion.
We have had no evidence of the additional costs of dealing with these certificates. The cost to the taxpayer is more than £25 per taxpayer per year and the Revenue costs cannot be much less than that. The total costs involved in dealing with the problem of tax evasion are divided half between the Revenue and half between the taxpayer, and are likely to be about twice the amount of tax that is supposed to be being evaded. Thus, the cost of this extra bureacracy must be more than the cost of the lost revenue. The Inland Revenue is receiving virtually nothing out of the scheme.
If we are to attempt to deal with tax evasion—and everyone wants a successful way of doing that—we must not set up 1539 tax evasion systems that will cost more to collect than the amount of revenue lost. It is not as if the previous scheme worked that badly. In a Written Answer on 10th May 1976 the Financial Secretary told one of his hon. Friends the number of prosecutions of sub-contractors under the exemption certificate scheme. The original scheme was introduced in 1971, and in 1972–73 there were two successful prosecutions. That number built up steadily over the next four years until, in 1975–76, there were 99 successful prosecutions. That is a substantial increase.
One must examine the figures carefully, because, as anyone who has been involved in advising people knows—and I used to be involved as a chartered accountant—for every tax case that results in a successful prosecution by the Inland Revenue a considerable number are settled by payment of back tax, by penalties and the like. I estimate that in the normal run of tax cases, of failure to declare tax and back taxes having to be paid, there are about five cases in which the matter is settled with penalties and interest as compared with every prosecution. If one then looks at the prosecution figures and says to oneself "There were probably five cases that the Inland Revenue dealt with successfully without taking them to the courts, as compared with every prosecution", one gets a very substantial increase by multiplying by a factor of six. For the years that I have given we find that from about 12 cases in 1972–73, 600 cases in 1975–76 are probably dealt with satisfactorily. On that basis, therefore, it does not seem to me that the previous legislation was working so badly, obviously starting from a very low point.
It is also important to stress, when looking at the success or failure of the previous system, that cases involving tax arrears, back duty inquiries and prosecutions take quite a considerable time before they come to the courts. Therefore, the figures that we were looking at although the cases of successful prosecutions for the five years up to 1976, were probably dealing only with the cases for the first or second year, or perhaps the third year, because there were many more cases having to be dealt with no doubt after the end of 1976 dealing with the tax affairs of taxpayers for the previous year.
1540 Therefore, being as charitable to the Government as one can be, I am bound to say that I am quite unconvinced that on the straight case of tax evasion, this scheme has been shown, on the evidence so far, to be cost-effective in any form. It is costing far more in expenses of the Inland Revenue and of the taxpayers than is being paid.
I believe that the Government have severely overlooked the previous scheme, which was making a substantial inroad into this problem. They would have done better to have modified the previous scheme in the light of experience, rather than to scrap that scheme and bring in this new scheme, which will have all the side effects that have been mentioned in the debate unless the Government do something about it. The self-employed in Britain will take more notice of what the Government do in this matter than they will of any pious words from the Prime Minister about trying to support the self-employed.
§ 8.22 p.m.
§ Mr. J. W. Rooker (Birmingham, Perry Barr)
At one point this evining I thought that I would probably be the only defender of the Government on the Labour Benches. I was a sort of left-over from the previous Division. I thought that I would await with interest the speech of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who is expert in these matters. Looking at the Order Paper over the last few months, I have noticed that he has done his best to raise this issue in the ways that are open to hon. Members. He read out a list of addresses and individual cases. Not for a moment do I believe that all those people are criminals, nor do I believe that there can be justification, perhaps, for their not getting their certificates. Certainly the appeal procedure ought to be examined.
I agree with the hon. Member for Cirencester and Tewkesbury about questioning the income tax commissioners. As we all remember, Mr. Poulson was an income tax commissioner. If nothing else, that should cast a slur over the rest of them.
§ Mr. Rooker
No, I have only just risen to speak. The hon. Gentleman will have a chance to make his own speech later.
Hon. Members have a duty to take up the cases of their constituents who fall foul of the regulations—these or any others, for that matter, irrespective of whether they are self-employed. I have done that for self-employed builders in my constituency. I have made representations to the Inland Revenue and have had the cases dealt with. There has been no problem. I have no complaint to make to my right hon. Friend the Minister. I am sure he will be pleased to hear that.
However, in listening to some Opposition Members one would think that no certificates had been issued. I understand that about 270,000 certificates have already been issued.
§ Mr. Rooker
The hon. Gentleman has the exact figure. Clearly some certificates have been issued. It is not as though at the start of the new tax year the construction industry will fall flat on its face because building will stop straight away. However, there are plenty of reasons why the Government introduced the regulations.
Opposition Members who dismiss tax evasion by saying that it is only 4 per cent., it is not important and it is not worth the cost of collection should look more closely at the aspects of tax evasion. The Tory Governments that we have had have not been very expert at passing Finance Bills which contain no loopholes for those who wish to avoid or evade taxes. Only this afternoon I have been reading the words of the hon. Member for Cirencester and Tewkesbury, in a Standing Committee dealing with the first Finance Bill of 1975 on the matter of the Income and Corporation Taxes Act 1970, when the Government proposed to strengthen part of that Act. The hon. Gentleman was saying, on 29th January 1975, that Government should not tighten up tax loopholes and that he did not believe in the Government policing their tax legislation. That is on record as being said in Standing Committee two years ago.
1542 Clearly, I understand the hon. Gentleman's annoyance at the Government's wishing to tighten up further loopholes that have been discovered in Tory legislation of 1971. Obviously Opposition Members are very annoyed about that. The last thing they would expect a Labour Government to do would be to tighten up loopholes in tax legislation. It is all to the credit of my right hon. and hon. Friends on the Treasury Bench that over the last two years, although they have not shouted about it, they have deliberately sought to tighten up loopholes in tax legislation. This is only one example. There are other examples in tax legislation, such as the artificial transfer prices of multinational companies.
When Labour Governments tighten up tax legislation to ensure that we do not have a great army of scroungers who avoid paying their tax and who are abusing the Welfare State just as much as anyone else who avoids any other payment or abuses any other part of welfare, it is very significant that in a three-hour debate, which is largely based on the Government's attempts to tighten up on tax evasion, we do not hear the muck-raker from Aberdeen, South pontificating on the Opposition Benches about people abusing the Welfare State and benefits. Not for one moment would I condone that, but it is exactly the same situation.
§ Mr. Deputy Speaker (Mr. Oscar Murton)
Order. Although the hon. Gentleman did not use what is ordinarily an unparliamentary expression, he should not refer to an hon. Member in the way in which he did.
§ Mr. Rooker
I only wish that the hon. Member for Aberdeen, South (Mr. Sproat) were present, Mr. Deputy Speaker, so that he could liven up the debate. It would be very interesting to listen to the hon. Gentleman defending tax evasion by the labour-only sub-contractors in the building industry.
§ Mr. Rooker
I do not wish to give way. The hon. Gentleman will no doubt make a speech. I bow to his great and detailed knowledge of the building industry. Time is short, and it is best that he makes his own speech.
1543 It is part and parcel of the same operation—the raising of revenue and the spending of revenue. It is legitimate for the Government to seek to close every possible loophole. In my opinion they have not closed enough of them. This is one of two or three attempts that the Government have made to deal with this problem. Contrary to what has been said, there is plenty of evidence of widespread tax evasion of income tax and capital gains tax, and millions of pounds are outstanding under the old surtax legislation.
There is a breed of accountants who, because the Government wish to tighten up on tax evasion, are making a lucrative living on the side by informing companies and individuals how to avoid and evade paying taxes. I hear someone say that there is a difference. I accept that there is a difference between tax avoidance and tax evasion.
We have arrived at the point at which Mr. I. Stitt, a senior partner in the firm of Arthur Anderson, leading accountants, is running courses on how to avoid and evade paying tax. The course notes say:You should seek deliberately to play off the Inland Revenue against other Government Departments such as the Price Commission, the Department of Health and Social Security and other Government Departments, including Customs and Excise",and others, which implies that they should not truthfully answer questions they are asked. That advice is to be found in the notes for a course run by a respectable senior accountant who goes round the country telling firms and individuals how to avoid and evade paying their rightful dues to society.
§ Mr. Deputy Speaker (Sir Myer Galpern)
Order. If the hon. Member who has the Floor does not give way, the hon. and learned Member must resume his seat.
§ Mr. Rooker
The hon. and learned Gentleman can make his own speech. I do not intend to give way to him. I do 1544 not expect him to agree with what I am saying. I do not expect him to like what I am saying. The fact is that there are people such as Mr. Stitt who are developing a nice little racket because my Government are attempting to close tax loopholes. He may be perfectly legitimately self-employed, but when the Treasury sees the course notes that Mr. Stitt is using and what he is telling people to do I think he will run a mile, or perhaps two miles. In the meantime I hope he will change some of his advice, because it must be contrary to his professional ethics. It must be wrong for a member of a professional organisation to give that sort of advice.
§ Mr. Rooker
I have as much right to come here and make representations to the Minister about what they are doing when I criticise them as when I support them. It does not happen often enough, and I am trying to get back into the Prime Minister's good books after what he did to me two weeks ago. I resent the hon. Gentleman's remark. I have no need to make my comments other than in the House of Commons. The Lord President pontificates and says that we should use this Chamber more often. What better opportunity is there to make the comments that I have made than when we are debating a matter which involves tax scroungers and tax evaders?
My criticism does not apply to all those in the industry, but there is a criminal element that has abused the system under the 714 procedure. I hear a few gasps from Conservative Members. It has been said that there was little or no evidence of abuse under the old system. I remind the House that in September or October of last year there was a major court case in the West Midlands, in the West Bromwich-Dudley area, at which there was plenty of evidence about the criminal activities of people who were abusing the system. Several gaol sentences were handed out. If that is not evidence, I do not know what is.
The hon. Member for Cardigan (Mr. Howells) said that the tightening up of the regulations represented an erosion of freedom. I do not see how it can be 1545 regarded as an erosion of freedom if the Government set out, quite legitimately, to see that citizens pay their rightful taxes. On the basis of past evidence, there is no doubt that a small minority has soiled the good name of many tradesmen. That is the tragedy of the situation.
I am not attacking the self-employed, who make a great contribution to every community in which they operate, be it rural or a large urban area such as that which I represent. But that is no excuse for not doing anything about this abuse and not tightening up the regulations in a way that every honest citizen will accept is fair. There should be a proper appeal procedure. There is, however, no great erosion of freedom.
I have said before in this House that I do not think it would be a bad thing to avoid all this rigamarole of income tax inspectors, social security inspectors and other inspectors who are part of the bureaucracy. We could avoid all that quite easily by making available, as they do in other countries, the tax returns submitted by everyone. All applications for any State benefit would be subject to similar treatment. Everything would be open to the public. That would ensure that all the returns were accurate, and it would be a self-regulating system.
A few of my hon. Friends do not share my views, and I suspect that that applies to many Tory Members, but the system works well in Sweden, and has done for the best part of this century. Many aspects of that system have operated there for the past 200 years. There is no personal abuse in the Press about people's private affairs, because the society does not operate like that. One does not find people such as the hon. Member for Aberdeen, South operating in Sweden. We should have everything in the open. However, I cannot rely on the fact that no hon. Members will abuse that extension of freedom when there are people like the hon. Member for Aberdeen, South.
I know that the Minister will answer all the charges of Opposition Members, concentrating most on the tax evasion aspect. We do not wish to put people out of work. I do not see that any rule which requires someone to have had a good income tax and national insurance contribution record for two years is putting 1546 too much of a burden on him. This provision should not be a barrier to starting up in business. If it is operating as a barrier, I should be the first to say that it should not be operated so as to stop a man from starting up on his own. That would be a tragedy. [An HON. MEMBER: "But it does."] That is what we are here to debate.
If there are examples showing that the regulations need to be flexible in that respect, I would support the Minister if he says that the Treasury and the Inland Revenue will extend the flexibility. But I should not want him to seek to slacken the tightening of the screw on these tax scroungers. That is what they are—they are abusing me and my constituents, employed and unemployed. My constituents would not be happy if they realised that figures of —10 million have been quoted for tax evasion through abuse of the 714 certificates. Other estimates have ranged up to —100 million of lost taxes through the use, misuse and abuse of the 714 certificate.
I pay credit to my right hon. and hon. Friends on the Treasury Bench for once more coming along with a suggestion for blocking the loopholes which arose under Tory legislation, which I have no hesitation in saying was deliberately drafted so that there would be loopholes.
§ Mr. Rooker
Of course it is "Shame": I do not expect the hon. Gentleman to agree with me. It is not in the Tories' interests to have a situation in which every citizen, including the self-employed and the professions, paid every penny he owed. I should like the 714 regulations extended to many other professions. No profession would be better to start with than the legal profession. I can say this now because I have got the sack. I was always prevented before from saying much about the legal profession, which in my opinion is one of the most corrupt professions in this country in terms of abuse of the law regarding tax—next to the doctors. They, too, should have the screw turned on them by the Treasury.
If the operation of the regulations can be shown to bring in some extra millions to the Revenue which would pay for new 1547 hospitals, better pensions and other benefits, no one on this side would oppose it. I hope that the Minister will consider extending the 714 certificate system to many other professions which seek and so achieve the avoidance and the evasion of their tax dues. That is the only aspect on which I refer to these professions. There are others, but I would not say that they were corrupt in other ways, because that could be misinterpreted. I am talking about tax-paying and tax-raising.
It ill becomes Tory Members to raise this sort of subject. It is their subject. They have chosen to spend three hours of the time of the House, in effect, debating the army of people who wish to avoid paying tax. It is a sad reflection on them. In a way, I wish that we had lost the last Division. It would have served the Tories right. But our victory has at least enabled us to hear Tory Members defending tax evasion—and that is what they are doing. They are defending scrounging on the Welfare State.
I want to know why the hon. Member for Aberdeen, South has not been present tonight. He will have some questions to answer. [An HON. MEMBER: "Where are all your hon. Friends?"] My hon. Friends have not waged a scurrilous and untrue campaign over the past months against people who cannot defend themselves. That is what the hon. Member for Aberdeen, South has done. Those people are in no position to defend themselves. On the other hand, we know that there are advocates of those who scrounge or who avoid or evade tax. We have heard something on those lines tonight. I believe that it is a thundering disgrace that the Tory Party has chosen to spend three hours debating such a topic tonight.
§ 8.40 p.m.
§ Mr. Ian Gow (Eastbourne)
I understand that the hon. Member for Birmingham, Perry Barr (Mr. Rooker) is involved outside the House as a lecturer in industrial relations. I tremble to think of the consequences that would follow in industrial relations if the hon. Gentleman were taken notice of by very many people.
The hon. Gentleman was critical of my hon. Friend the Member for Aberdeen, South (Mr. Sproat), who is not present in the Chamber. I wonder whether the hon. Gentleman gave notice 1548 to my hon. Friend that he intended to make a disgraceful attack upon him. I regard it as an abuse of the whole doctrine of privilege in this House for an hon. Member to make serious allegations, under the protection of privilege, against a senior partner in a distinguished firm of chartered accountants.
§ Mr. Gow
We believe that there is a direct connection between the way in which these regulations on the 714 certificate were drafted and the hostility of the Labour Party and the Government towards the self-employed. We believe that these regulations were made onerous partly because it is a matter of no consequence to the Labour Party if those who are engaged in the building industry in a small way go out of business. Indeed, there is ample evidence to suggest that the Labour Party is hostile to the small business man and to the man who provides the service so often demanded by the customer.
I wish to turn specifically to a matter that has not yet been raised in this debate. I refer to paragraph 15(2) of the Statutory Instrument 1960/75 which requires a photograph of an applicant applying for a 714 certificate. On 19th October last year the inspector of taxes in my constituency wrote to one of my constituents in the following terms:Paragraph 15(2) of the Income Tax (Subcontractors in the construction industry) Regulations 1975 requires the certificate to show full-face photograph—being a true likeness of the applicant—and as the photographs supplied by you with your original application dated 24th August 1975 are not true likenesses of you at present I have no alternative but to cancel the certificate and accordingly to enable a fresh one to be produced I require a fresh photograph not larger than 63 mm by 50 mm and not smaller than 50 mm by 38 mm.Let me tell the House what had happened to my constituent between the time when the photograph was taken and the time when the inspector wrote the letter. He had grown a moustache. That is nothing unreasonable or improper. 1549 Indeed, it may even be that you, Mr. Deputy Speaker, have a moustache, which confirms that there is nothing improper in that.
§ Mr. Deputy Speaker
The hon. Member's eyesight is pretty good. Perhaps he will be glad to know that my wife does not like it.
§ Mr. Gow
I shall relate that observation to my constituent. I wrote to this inspector of taxes on 10th November in the following terms:When Mr. Nishotis came to see me on Saturday, he had a moustache. When he submitted his original application to you on 24th August 1975, he had no moustache. It is possible—or even probable—that he will shave off his moustache shortly; thereafter, it is possible that he will grow it again. Such is the fashion of the age.I would have thought that a reasonable interpretation of Regulation 15(2) would be that the full face photograph 'being a true likeness' of the applicant, means that it should be a true likeness of him at the date of the application.If the regulation is interpreted otherwise, it could mean that a sub-contractor would be required to submit a fresh photograph every time he altered his hairstyle, or the length of his sideboards, or the amount, if any, of his moustache or beard. This would make a mockery of the regulations. It is a requirement which does not even exist in the case of a passport.I shall refer now to the requirements for a passport. The Financial Secretary to the Treasury will know that in the case of a passport—I invite him to agree—the photograph is more important than the photograph on a 714 certificate. The Passport Office says, concerning the accuracy of the passport photograph:It is up to the individual to decide whether the existing photograph is recognisable from the point of view of an immigration officer.It is up to the individual to decide. I wonder whether the Financial Secretary would care to produce his passport, show it to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and let him decide, or let Mr. Deputy Speaker decide, whether there is a likeness between the passport photograph of the Financial Secretary and the Financial Secretary as he appears now, three years after he became a Member of this Administration.
To serve as he has done for three years under the Leader of the House and the Chancellor of the Exchequer and to have 1550 survived intact, bearing any resemblance to his photograph taken three years ago, would be a feat that would be impossible for any Minister to achieve, notably a Minister serving in the Treasury.
Let us continue with the saga, for it is one very revealing of the extent to which the bureaucracy is leading us into a situation that would have done credit to the great inventors of nonsense. I am sure that Lewis Carroll and Edward Lear would not have believed that this could go on.
The inspector of taxes replied to my letter. I want to make clear that I am not in any way criticising the inspector in Eastbourne. It is not the bureaucrats who are to blame for these regulations. It is not their fault that they are being invited to adminster that which is ridiculous. The blame rests upon the Government. It was they who introduced the Finance (No. 2) Act 1975. It was they who introduced these regulations, and the responsibility for the regulations rests entirely with them.
I must make it clear that I make no attack upon or criticism of the staff of the Board of Inland Revenue. This is what the inspector replied, under instructions, of course, from the Board of Inland Revenue:I share your dislike of regulations and, indeed, when the regulations concerning subcontractors appeared I think that all inspectors working in districts were somewhat aghast …Departmental instructions appear to have gone out of their way to be absolutely precise on this point and issuing inspectors have been told to only hand over the certificate if the intended recipient bears an absolute true likeness to the photograph presented.Those were the instructions issued by the Board of Inland Revenue, for which the Financial Secretary bears special responsibility. The last paragraph of the inspector's letter of 12th November is as follows:It is, therefore, with deep regret that on this occasion I must advise you that there is nothing further I can do in the matter unless, of course, Mr. Nishotis is prepared to present fresh photographs to me. I am sorry that I cannot be more helpful.The inspector was sorry. The question is whether the Financial Secretary is sorry. In the presence of my right hon. Friend the Member for Crosby (Mr. Page), who am I to assert that I am fast losing my hair?
§ Mr. Gow
The absurdity of these regulations was brought home to me when I reflected that if I were a subcontractor in the building industry making application for a 714 certificate, a week later my appearance would be changed, of course for the worse, by the continual erosion of hair from my head. If this applies to hon. Members, does it not also apply—we must not think we are so special in this regard—to some of the citizens upon whose behalf we were sent here to speak up in the name of individual freedom and liberty against a new tyranny that emanates from the Government Front Bench?
I wrote on 15th November to the inspector of taxes:Would you be kind enough, please, to let me have a copy of the departmental instructions to which you refer in the fourth paragraph of your letter so that I can, if appropriate, take this up with the Treasury?I concluded:The whole saga would do credit to the late Mr. Lewis Carroll. This is in no way to criticise district inspectors of taxes. It is to remind myself of the truth of the proposition that those whom the gods wish to destroy they first make mad.The inspector wrote again on 17th November, as follows:I regret that the conditions under which departmental instructions are issued to me prevent me from quoting them verbatim to you, but I do not wish to appear unhelpful nor indeed anxious to seek cover from the terms of my employment and I have therefore written to my Head Office to explore the possibility of the release of the text of the instructions to you. I trust you will hear from Somerset House or me again in the very near future.The saga continued a month later, on 15th December, when a further letter came from the inspector of taxes in which he said, happily, that he had reconsidered the matter and that in the special circumstances of this case he was prepared to allow Mr. Nishotis himself to decide what should happen.
One last point deserves to be made. On 21st January, the inspector of taxes wrote as follows:The Departmental Instructions concerned—these are the words to which I draw your attention, Mr. Deputy Speaker—(which are about 80 pages long) deal in detail with the security aspects of the new subcontractors' scheme. …My head Office 1552 have confirmed that these instructions are for Departmental use only and I am afraid that I cannot send you a copyEighty pages of Departmental instructions; 80 pages designed to add to the burdens of those who are struggling to make a living in the construction industry; 80 pages that hon. Members are told they cannot see, although we are sent here to protect the people against the tyranny of the new bureaucracy.
I believe that this is a very serious matter, and I ask the Financial Secretary to place a copy of these departmental instructions, all 80 pages of them, in the Library. The refusal of the Board of Inland Revenue, under the instructions of the Financial Secretary, flies in the face of every undertaking we have had from the Government that they would try to take the people into their confidence and give us open government. I can promise the Financial Secretary that when he has put those 80 pages in the Library many of us on the Opposition Benches will go on and on, and will require further debates on this subject either Supply days or on the Adjournment.
I hope that the Financial Secretary will tell us that this kind of situation, involving a facial change in the appearance of a sub-contractor in the building industry, will not mean that such people will have to go through the whole paraphernalia and expense of having other photographs taken. I hope that he will issue a new instruction to the Board of Inland Revenue so that this kind of experience, which drives still further a wedge between people and Parliament—between the Government and the governed—will never happen again.
§ 8.58 p.m.
§ Mr. Gwilym Roberts (Cannock)
I am sure that the hon. Member for Eastbourne (Mr. Gow) will forgive me if I do not follow him through his voluminous correspondence, but I hope that he will accept that there is on both sides of the House genuine feeling for the small business man and the sub-contractor. Many of us are aware of the considerable difficulties that sub-contractors and small businesses in general face at this time. I am sure that we would also all agree that there must be a blocking-up of loopholes that allow tax evasion.
As far as I see the certificate in its basic form, the changes are designed to 1553 tighten the net against tax evasion. It has been suggested that £10 million in taxation is lost each year in this way, and the TUC has talked in terms of £100 million. I agree that this is a serious matter. Indeed, the problem of the building industry has been serious for many years. It has caused a great deal of resentment among building workers and people working in other industries. It must be treated seriously, and something must be done about it.
It may well be argued that there is a need for basic and drastic changes in the building industry. I am also aware that particular difficulties are created by the latest regulations. A short while ago a constituent came to see me. He is a stalwart trade unionist and a sub-contractor who has worked and paid his taxes honestly for a number of years. He felt somewhat offended by the photograph problem that applies to the new regulations.
There is some validity in that argument. While we are anxious to close the loopholes, we must also think about those sub-contractors who pay their whack consistently over many years.
I appreciate the difficulties, but I hope that my right hon. Friend will bear in mind the point that my constituent made to me. He asked whether it would be possible to provide alternative arrangements for people who had fixed addresses and paid their taxes regularly from the same address for many years. I appreciate that there would be difficulties in providing special arrangements for such people, but I agree with the hon. Member for Eastbourne that there is some feeling among such people—who are genuine sub-contractors, who pay their whack and are good trade unionists—about having to produce a photograph.
Some of the arguments that the Opposition have put forward are quite untrue. One such argument was that this Government have all along undermined the small business man. In fact, the claims on the Government Benches on behalf of small businesses and sub-contractors are far greater than the claims of the Conservative Opposition, who, in the main, represent very large businesses and organisations that are often detrimental to the interests of small businesses. I do not want to dwell on that point.
§ Mr. Roberts
I shall not give way at this stage. I am sure that the hon. Gentleman will forgive me.
I do not wish to go into the long record of this Government, or the great number of steps that they have taken on behalf of small businesses. But they have tried to tackle the problem with ideas such as offering corporation taxpayers additional relief by raising the ceiling. The Government have also taken into account the management problems faced by small businesses, including sub-contractors.
A real problem that the small business man faces is that, ideally, he is a specialist but at the moment he is being asked to be a Jack of all trades, covering a wide range of management specialities. The Government have moved in that direction and have started the new consultancy service. Conservative Members may laugh, but at least the Government have taken steps in that direction, and it is early days yet. I am sure that my hon. Friend the Under-Secretary of State for Industry, who is peering at me, looks forward to the day when this consultancy service will be extended across Britain.
The Government have also considered the problem of small businesses and have said that if small business men can come together they are prepared to support their corporate efforts. The Government are also embarking on the problem of management training. Therefore, one cannot say that this Government have done nothing; they have done far more in that respect than the Conservatives. The Government have started helping small businesses. But I ask my right hon. Friend to consider the difficulties caused to genuine sub-contractors and see whether he can do something.
I know that Conservative Members will pooh-pooh my saying this, but the real answer to the needs of small business is to move taxation more from income to wealth. The problem in this country is not the death of small firms. Their death rate in Britain is lower than in Germany, the United States and many other Western countries. What is bad in Britain is that their birth rate is so much lower. We can have a higher birth rate of small firms only if taxation is 1555 moved away from income, so that new ideas can be generated by small firms.
I hope that in the very near future the Government will move in that direction. If they do, they will make a considerable contribution to the future of small firms and sub-contractors.
§ 9.6 p.m.
§ Mr. Andrew Welsh (South Angus)
I shall try to speak with my usual brevity and swiftness.
The good thing about this debate is that it gives the House an opportunity to look in detail at a specific problem affecting a specific part of the category of self-employed, which is a useful exercise, showing that the House is awakening to the problems of the self-employed. The debate is one of a series over the past two years. That is a good sign. I congratulate the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) on introducing it and allowing the House an opportunity to consider the problem.
The bad thing about the debate is that there is an accusation that the Government and the Labour Party in general do not know about, care about, or even understand, the problems of the self-employed. It is a great pity that tonight there is an example of that in the scarcity of Labour Members present and of speeches by Labour Members.
There certainly was a need for changes in the 1971 tax certificate system, which was far too loose and open to abuse. There was a need to stop the abuses caused by the very nature of the construction industry, some of which brought disrepute even to the genuine self-employed and to good small firms. There was a need to stop the cowboys and fly-by-night tax-dodgers. A strong case can be made for a tax certification and registration system designed to defeat those abuses.
Because of the peculiar nature and history of the construction industry, there is in addition a great general need for action to raise standards to provide stable employment structures in the industry, to encourage better conditions and to implement, for example, higher education and training for management and for the work force. The genuinely self-employed person need not necessarily fear such developments, if they encourage rising 1556 standards in management, book-keeping and the running of businesses, if they are above-board enterprises.
Any improvement must allow for reasonable entry into the industry. If certification is the price of that, so be it. The cowboys and fly-by-night operators, the tax dodgers, are the real enemy of all who are genuinely concerned about the good of the construction industry.
There is, however, much in the Government's policy and approach that I find disturbing. If the 1971 regulations were far too loose, the 1975 version goes too far in the opposite direction. The self-employed are right to complain about certain aspects of the 714 certificate regulations. For a start, the regulations are excessively bureaucratic in terms of inspection and paperwork. For example, the need to have photographs attached to the applications produces a gut reaction. I do not like it. It makes me think of an identity-card-carrying system, which goes totally against the philosophy and history of this country. I ask the Minister to take this opportunity to explain the need for photographs, and to justify their introduction.
The regulations involve far too much totally unproductive paperwork. The Gestapo-type fears on this subject can be overdone—and have been overdone in certain quarters—but there is a multiplicity of inspectors badgering the self-employed and small businesses. In my constituency I have had plenty of examples of over-officious inspectors and officials. This, in its turn, produces an obvious and understandable reaction from a highly independent breed of people who simply want to be allowed to go on running their own businesses in a legal way. This is an important point, because it affects the morale of a highly important section of our economy.
I ask the Minister to exercise the utmost care in the operation of the scheme, and I hope that he will promise to watch over the inspectors and allow quick redress and appeal in cases where inspectors have been over-zealous.
There are immediate problems in the implementation of the regulations. I am informed that the Government's record in issuing these certificates leaves much to be desired, and a large backlog of applications has built up. Various figures have been bandied about, and I hope 1557 that the Minister will give an accurate assessment of the figures involved. If it is true that about 199,000 certificates have taken more than one year to process, and there are twice that number still awaiting eventual decision, it is obvious that the scheme is breaking down. If it is correct that 50,000 applicants are awaiting a reply, something must be done to beat the backlog. It gives credence and great urgency to the request that a moratorium should be imposed.
The deadline of 6th April is drawing closer. I ask the Minister to say something about this and give a lead. I am told that if the 6th April deadline is adhered to strictly it may produce a cash flow crisis for certain firms, and may drive some smaller firms out of business altogether.
The regulations may create two different types of person. Already in the trade journals advertisements are appearing for certificated sub-contractors, so there is already a bias away from the non-certificated person whose application has simply been held up in the pipeline. The Minister should take the needs of these people into account, because the situation is becoming more and more desperate.
I want the Minister to explain the criteria for refusing certificates. I am informed that over-strict interpretation of the rules is causing problems, as well as considerable bitterness and hardship. We have heard examples tonight about the three-year rule. Surely, more reasonable flexibility could be applied to allow such people to be given certificates.
The Minister should realise that the self-employed feel that they are being discriminated against by the Government. I shall give one example, which could easily be met by the Government. An hon. Member from the Liberal Bench has already spoken of the Construction Industry Manpower Board, where self-employed people have deliberately not been included. I ask the Government to reconsider this decision and to give the self-employed a voice in matters affecting their own industry.
Because of all the problems involved in the present regulations, I ask the Minister to consider a moratorium on the present timetable so that the Government and all concerned can think the 1558 whole thing through again and iron out the flaws in the present system. Without such an assurance, in view of all the problems inherent in the present system, I shall recommend my hon. Friends to vote against the Government tonight.
§ 9.14 p.m.
§ Mr. Peter Rees (Dover and Deal)
In view of the lack of time left for debate, I hope that the hon. Member for South Angus (Mr. Welsh) will forgive me if I do not comment on the points he made, although broadly I am very much in agreement with what he said.
There was, however, one contribution to the debate which cannot be passed over in silence, the contribution of the hon. Member for Birmingham, Perry Barr (Mr. Rooker), who came in and delivered one of the most disgraceful speeches that I have heard in the House and then rapidly left. The Prime Minister did the House a good service when he lifted the gag on the hon. Member, because it has enabled us to appraise afresh the quality of the representation at Perry Barr in this House. I find it quite outrageous that he should attack a professional person with an unblemished reputation who is in no position to defend himself here. The hon. Member for Perry Barr will be too cowardly—I choose my words carefully—to repeat his remarks outside this House. I challenge him to do so.
§ Mr. Deputy Speaker
Order. I ask the hon. and learned Member for Dover and Deal (Mr. Rees) to get on to the subject of the debate. Also, I think that he should withdraw the words "too cowardly".
§ Mr. Rees
Of course, Mr. Deputy Speaker, I shall always bow to your ruling. Perhaps I could say that the hon. Member's courage is not so notable that he is likely to repeat his allegations outside the House.
I shall not comment on what the hon. Member said about my hon. Friend the Member for Aberdeen, South (Mr. Sproat) because he is quite capable of taking care of himself. No doubt he will do ample justice to what was said about him tonight by the hon. Member for Perry Barr.
1559 It is right, however, that the House should glance sideways at the obsession with tax avoidance demonstrated by the hon. Member for Perry Barr. It is a theme which occasionally runs through speeches from that side of the House. In this kind of debate we are all apt to say that we hold no brief for tax evasion, as distinct from tax avoidance. Avoidance is a question of degree and we all hold views on that. Evasion is something we are not prepared to defend. But I wonder whether we are right to take that smug attitude on all occasions. It must be within the knowledge of the House that a whole economic stratum in this country depends on tax-free labour.
I ask hon. Members on both sides to search their consciences and ask themselves whether their wives are not assisted by charladies who are paid gross wages and who probably do not make tax returns. From time to time their houses may be decorated by a self-employed decorator. I wonder whether that man really returns the remuneration paid to him by, possibly, the Financial Secretary under Schedule D. I do not want to be led into the disclosures of what happens in the Cabinets of Labour Governments, but I wonder whether Cabinet Ministers who own considerable establishments in the Home Counties ever have the tax-free assistance of old-age pensioners to dig their gardens? These are matters on which we should ponder from time to time, but perhaps tonight is not the occasion.
§ Mr. Rees
I am happy to look in the mirror, and I am very ready to admit that my conscience is perhaps not quite as clear as it should be.
We are concerned tonight with what is condemned as a very gross abuse in the construction industry. I do not believe that contractors need to be defended by me, but we should recognise their difficulties. If they sought to deduct tax of 30 to 35 per cent. from people who offered labour to them, they would find this source drying up very quickly. It is not their difficulties on which we should focus tonight, but people who have perhaps unwittingly been hit by the measures 1560 which the Financial Secretary introduced in 1975. I do not think that the hon. Member for Perry Barr took on board the fact that the original measure was introduced by a Conservative Administration in 1971. It may or may not have been defective, but we can consider that on another occasion.
We are concerned tonight with the specific and detailed measures introduced in the Finance (No. 2) Act 1975 which, I believe, are open to considerable abuse. I have no particular criticism of the Inland Revenue itself. It may be that this was a burden which it took on willingly, which the Inland Revenue induced the right hon. Gentleman the Chancellor to put upon its shoulders, but that is a matter of speculation and perhaps it is wrong for me to probe too deeply the source of this legislation. What is clear, however, is that the individual inspector has had a very difficult task put upon him.
I should say at once that I derive such knowledge as I have of the operation of that Act not only as a constituency Member but as a member—dare I refer again to the speech of the hon. Member for Perry Barr?—of a corrupt profession which has occasionally been asked to advise on the intricacies of these provisions. The more closely I look at them, the more I am concerned at them. There will be insufficient time for me to uncover every ambiguity and difficulty in the Act, but I should like to refer the Financial Secretary to four points on which I should like specific answers.
The first question concerns Schedule 12(1). It requires that the Revenue must be satisfied before it issues a certificate that various conditions are met. The last is that:the business is carried on from proper premises and with proper equipment, stock and other facilities.What if the person concerned is a self-employed plasterer operating on his own? In that situation, what are the proper premises for him to occupy? Is it enough for him to say that he works from his own home? What proper equipment, stock or other facilities must he demonstrate that he has to the inspector of taxes?
I believe that this provision puts an intolerable burden on the ordinary self-employed person who has probably been 1561 working bona fide in this field. I am sure that even the hon. Member for Liverpool, Walton (Mr. Heffer) concedes that there is a place for such a person and that life should not be made intolerably difficult for him.
My next precise question concerns paragraph 3 of the schedule. That says that the applicant must demonstrate that he has compliedwith all obligations imposed on him by or under the Income Tax Acts or the Taxes Management Act 1970 in respect of periods ending within the qualifying period and with all requests to supply to an inspector accounts of, or other information about, any business of his in respect of periods so ending.What if the plasterer whose case I have instanced has several assessments of tax outstanding for past years, maybe over quite trivial questions? Nothing that impugns his bona fides or his integrity may be outstanding, but the inspector may still be bombarding him or his accountant with letters. How can he show the inspector that he has met all the requests made of him? I have encountered cases where this is so, and it has imposed an intolerable burden. The inspector can go back over six years asking questions which it is impossible to answer quickly and satisfactorily, and that will prevent the self-employed person from obtaining a certificate.
§ Mr. Graham Page
Many inspectors have taken the attitude that they do not need to disclose to the applicant their reasons for refusal of a certificate. The applicant may never know how he has transgressed under the income tax law. Is it not a denial of natural justice to deprive a man of his livelihood and not tell him why?
§ Mr. Rees
I entirely agree with my right hon. Friend. He has, with his usual precision, gone straight to the heart of the matter. If time permits, I shall touch on one other facet of this matter in relation to appeals.
The third point on which I require reassurance from the Financial Secretary derives from paragraph 6 of the schedule. It is all very well the Financial Secretary tapping his wrist-watch, but if he had induced the Patronage Secretary to muzzle the hon. Member for Perry Barr, who made no constructive contribution to the debate, I should have concluded a long 1562 time ago. However, as long as I have sharp and detailed points to put to the Financial Secretary I shall continue to hold the Floor.
The Financial Secretary will note that paragraph 6 requires that an applicant has to demonstrate that he is insured in no less a sum than £250,000. What sort of liabilities is the plasterer whom I have instanced likely to incur that will come within one-tenth of that figure? Why should he be saddled with exorbitant premiums? Under the cover of a fiscal measure, it seems that there is an attempt to impose on people such as the plasterer I have instanced obligations that are no concern of the Inland Revenue.
In deference to the Financial Secretary I move on to my last precise point—namely, the question of appeal. In section 70(6) of the Act it is said that appeals can be taken to the general or special commissioners. I cannot remember who it was, but a Labour Member cast aspersions on the general commissioners because they once happened to include Mr. Poulson in their ranks. Those aspersions were unworthy. For the moment, I forget who made them. [HON. MEMBERS: "It was Perry Barr."] Was it Perry Barr? If so, I should have recalled it.
The commissioners are a public-spirited body of persons who give a great deal of time and service at no cost to the public. If the hon. Member for Perry Barr cannot retract any of his other allegations, he should at least retract his remarks about the commissioners.
The jurisdiction of the commissioners—this can be extracted from Section 70(6)—isto review any relevant decision taken by the Board in the exercise of their functions under this section".However, they cannot call in question the decision of the Board as to whether a self-employed person has met the conditions set out in Schedule 12. That is as I read the subsection. It may be that the Financial Secretary or, if time permits, the Attorney-General will be able to offer us reassurance. As I read it, it means that whether it discloses this fact or not, the Board can turn down an application for a certificate on the ground that one of the conditions in the schedule has not been met because there were queries by an inspector or because the self-employed person did not have premises, facilities or 1563 adequate insurance cover. That cannot be challenged in a court of law. I believe, as does my right hon. Friend the Member for Crosby (Mr. Page), that this is a denial of justice.
I am conscious that the two front Benches wish to have adequate time to deal with these matters. I shall sit down after making the general observation that in dealing with this matter we are really dealing only with symptoms. The real questions to which we should be addressing ourselves, which with the permission of the trade union movement we may yet do this summer when considering the Finance Bill, is whether the burden of direct taxation is too high, whether the net has not been spread too wide and whether the rates are not too crushing. However, time does not permit me to enlarge on those matters.
I only hope that with your benevolent connivance, Mr. Deputy Speaker, and that of the leaders of the trade union movement, with maybe a little subsidiary support from the Financial Secretary, we shall be able to return to those subjects this summer.
§ 19.28 p.m.
§ Mr. David Mitchell (Basingstoke)
I am grateful to my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) for giving way. The case that I want to put to the House is a simple one. The Government intended to deal with tax evasion by labour-only sub-contractors in the building industry, and they have got it wrong. I think that it has been shown throughout the debate, from hon. Members on both sides of the House, that the Government have got it wrong. The effect will be to destroy many innocent small business men and to jerk up the rate of unemployment. My colleagues and I call on the Government to withdraw the scheme and to think again. If they are not prepared to do that, we ask them to introduce a moratorium for at least a year and to announce it tonight.
The Government's original intention was perfectly reasonable, namely, to catch the cowboys—the bogus labour only sub-contractors who took a gross wage and paid no tax. We support that. It is no part of our policy to support tax evasion. If there is tax evasion, it 1564 is upon the rest of the community that the extra tax has to be levied. Therefore, we have a vested interest in seeing that evasion does not take place.
I am bound to ask the Financial Secretary whether he is aware that large numbers of holders of the existing certificates are being refused 714 certificates when no charges and no prosecutions have been proposed against them. That seems to raise a serious fact in relation to substantial companies.
I should like to discuss what has gone wrong and why. Originally it was labour-only sub-contractors. Now it is every contractor, large or small, who contracts for a public authority, housing association, local government and the like. It even comes down to getting a contract for tree felling, or installing lifts in an office block. The numbers involved are between 400,000 and 450,000; we do not know exactly. The latest position is over 23,000 refused, 53,000 under consideration and another 120,000 or 170,000 to come in in the next six weeks, with no reasonable likelihood of being processed in that time.
Last week, one of the largest contractors in this country, with 7,000 subcontractors, carried out a survey and found that only 411 had their 714 certificate. What is more, every one of its sub-contractors dealing with demolition—clearing sites before the main contractor can start work—had not got a certificate. I put it to the Financial Secretary that we shall have a far more chaotic situation than was intended or envisaged when these proposals were put forward.
The Financial Secretary and other Ministers have given repeated assurances that the certificate is not a passport to work, but that is exactly what it has become. If a man employs more than three men and he has not got a certificate, he will go bust, for reasons that I shall show later. If he has not got a 714 certificate, he cannot get a contract anyway.
Let us consider those two matters. If a man does not have a 714 certificate, 35 per cent. is deducted from his weekly payments. But, out of his weekly payments, he has to pay wages and the tax and national insurance on his employees. If he has 10 men working for him at 1565 £60 each and £100 for himself on a contract, that is £700 a week. But he will get only £455, because the rest will have been deducted. How does he pay £600 to his men out of £455? That goes on, on average, for 34 weeks, accumulating that weekly deficit. No one can continue in business on that basis. He is bound to go bust. That is why this proposal is so damaging.
The other point is that local authorities as well as the Property Services Agency are saying "714, or do not bother to tender." A new and serious threat to the self-employed has therefore emerged. I do not know whether the Minister is aware of that matter. The Property Services Agency is now banning the self-employed from Government contracts.
I was astonished to learn of this ban. Indeed, had I not seen it with my own eyes and got it before me I should not have believed it. The circular that I have, which was brought to me by the Smaller Business Bureau, goes out with contract applications from the Property Services Agency. It states that it is a condition thatThe contractor shall not sub-let any part of the contract without the previous consent in writing of the Superintending Officer …that the Superintending Officer will not approve …unless the contractor has provided …written assurance that the subcontract work will be executed by directly employed labour, not by self-employed gangs or individuals".That is a direct ban on self-employed and small business labour contractors by the Government's own agency. It is a disgraceful situation.
The position is that for the self-employed there is no work in the Government sector and that if a self-employed person does not have a 714 certificate he will get no work and will go bust.
The Government have a special responsibility on their shoulders. They must proceed with great care if these certificates are to be passports to working. The House must ask whether the certificates are being issued fairly. I have to say to my hon. Friends and to the three or four hon. Members on the Government Benches who have bothered to attend the debate, that the certificates 1566 are at present being withheld unfairly, unreasonably and arbitrarily.
The Government claim that the purpose of the certificates is related solely to tax. If that is so, I have some questions to ask about the 23,000 people who have been refused the right to work in the building industry. I pay tribute to the research that has been done by the Association of Self-employed People, which has gone in great detail into a number of cases.
I shall give the House some examples. People have been banned from having 714 certificates because they have not worked continuously for three years. One man suffered a bereavement in his family and went away for three weeks to settle his children with distant relatives. He was banned. A man was out of work for 2½ months with a broken hand. He was banned. Another man had parents who were ill—one of them died—in the Hebrides. That man went to look after his parents. He was banned. Another man had been working in Germany because of unemployment in this country. He came back, and he is not allowed a certificate. A man emigrated to Australia and came back. He is not allowed a certificate. Is it now a sin to be unemployed? A man who has been unemployed cannot get a certificate. The purpose of the certificate relates solely to tax? The Minister should be ashamed of himself for claiming that.
My hon. Friend the Member for Eastbourne (Mr. Gow) drew attention to the tyranny of the new bureaucracy and gave the example of one of his constituents who was denied a certificate because he had grown a moustache. If I were to shave off a moustache, grow a beard, become bald, or go grey, I presume that I should be denied a certificate.
We are told that the purpose relates solely to tax, but what about national insurance? I have a copy of a letter from the inspector of taxes which refers toThe fact that National Insurance contributions instead of being paid when due were paid as follows: 1964–65 and 1965–66 on 27 April 1966.That was three years back. Tax only? What is this? It is a degree of bureaucratic interference that truly deserves to be called tyranny.
1567 What about not having a public liability fund cover for £250,000? Is that not a matter for tax? What about the phrase "mainly through a bank account"? A small business man is paid cash, and on a Friday when the banks close at 3.30 p.m. he must give cash to his men when they finish work. All such business men take the cash that they are given and pass it on to their men in wages. Only that which is left over goes into his bank account. That is a respectable way of doing business. One cannot do anything else, because of the banking hours.
What does "proper records" mean? Does the Minister expect the small business man to be as good at book-keeping as the Inland Revenue would be at bricklaying? Many honest men get behind with their tax affairs but they do not lose their right to work as a result. That is what is happening in this situation. Because of the fault of an accountant, because of illness, or because a wife keeps the books, a business man may fall behind with his records and he is denied the right to work, without any right of appeal.
We then reach the Catch 22 situation. No contract—not allowed to have a 714. No 714—not allowed to have a contract. That position is wholly unacceptable.
I do not want to eat into the Minister's time. I want to make one final precise and exact point, which is much more urgent than the other things about which I have talked.
This will cause a very sharp rise in unemployment. It has already risen from 700,000 to 1,400,000, and it is on its way towards 1¾ million. In the building industry 250,000 are unemployed already. There are 23,000-odd applicants refused here, and 18,000 expected to be refused out of the 53,000 applicants. Another 30,000 are expected to be refused out of the remaining applicants. That adds up to between 70,000 and 80,000 more people who will be put out of work as a result of this requirement.
We have a Government of unemployment led by a group of unemployables. I urge hon. Members on both sides of the House to have that in mind when they vote tonight.
§ 9.46 p.m.
§ The Financial Secretary to the Treasury (Mr. Robert Sheldon)
Tribute has been paid from all parts of the House, and quite rightly, to those who are self-employed and who, through their initiative, independence and innovation, are a value to the community. I certainly wish to endorse everything that has been said on that account.
The hon. Member for Basingstoke (Mr. Mitchell) mentioned some of the disadvantages that arise from the introduction of the 714 certificate. I would say two things at the outset. First, that was a natural consequence of the previous legislation. Secondly, in the steady progression of speeches that followed the introduction by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), we saw a considerable and improving moderation of language, which I found congenial to me in so far as it affected the work of the inspectors of taxes.
The hon. Member for Cirencester and Tewkesbury talked about the arbitrary way in which those inspectors carry out their work. I see that he nods his head. He made his condemnation of their actions quite explicit in what he had to say. I was at any rate satisfied by the hon. Member for Maldon (Mr. Wakeham), who is very experienced in these matters as a former accountant, and the hon. Member for Eastbourne (Mr. Gow), who said that he had no criticism to make of the inspectors of taxes or of the Inland Revenue. I appreciated that. I noted, too, the statement by the hon. and learned Member for Dover and Deal (Mr. Rees), who again endorsed that particular viewpoint, and I appreciated that, too.
It is quite wrong of the hon. Member for Cirencester and Tewkesbury to make those statements. If he has any complaint, his redress is open to him, as, indeed, it is open to any hon. Member. Except in so far as there is maladministration, about which the hon. Gentleman has the kind of recourse of which he knows, what we should be discussing here is the legislation that is due to be implemented and the problems that hon. Members may foresee as the result of that legislation.
We know that in the 1960s there was clear evidence of growing tax evasion by sub-contractors. An attempt was made 1569 by both Governments of that time to trace those who were not meeting their income tax liabilities. Because of the nature of the occupation and the movement around the country, substantial sums of money were not being collected. This led in due course to the special scheme that was introduced in 1971 and which came into effect in 1972. The object of that legislation was to secure deduction from those self-employed sub-contractors. There was to be a tax certificate, and the introduction of the certificate and voucher was to be the means by which this abuse was to come to an end.
Had that worked, of course, there would have been pleasure and delight in all parts of the House. But it did not work. There was forgery, theft and impersonation. That legislation covered all the sub-contractors—I remind the hon. Member for Basingstoke of that—as well as labour-only sub-contractors. It excluded companies, and it did not deal with those who went in and out of self-employment. It did not include those who had just begun to pay tax. There was widespread evasion by those who claimed, unjustifiably, to be in one or more of those categories.
The evasion continued, and the hon. Member for Maldon rightly asked for evidence of the way in which the present legislation was failing in its purpose. I can give him two sets of figures which might help to convince him of the position. In 1975–76 there were 99 prosecutions by the Inland Revenue and 167 prosecutions by the police. I am informed that it was only because of the limited resources available for prosecutions that the number was as low as I have stated.
The new scheme provided for certificates and proper security documents. There was the requirement of proof of reliability as a taxpayer over three years, and that issue has been discussed during the debate. There was the necessity to establish a bona fide business, and, most important of all in some respects, companies were brought into the picture.
The present position, about which the hon. Member for Basingstoke asked, is as follows. There have been 277,000 applications, of which some 200,000 have been approved, about 23,000 have been refused and 53,000 are under consideration. 1570 I propose to say something about the applications under consideration because the criticism has been made that they are the result of excessive delay by the Inland Revenue. The present state of affairs is due not to delay by the Inland Revenue but, in the main, to the Inland Revenue asking for certain information and accounts and for the payment of taxes over the preceding three years. Consideration of those cases is incomplete, and I ask the House to accept what I have said in that light.
§ Mr. Graham Page
Will the right hon. Gentleman see that instructions go to inspectors to tell applicants why certificates are refused? Many of the cases quoted by the right hon. Gentleman are outstanding because the inspectors have said that they are not obliged to give reasons for refusal. As I have said before, that is a denial of justice.
§ Mr. Sheldon
I shall come to refusals and the ways open to an individual who has been turned down to carry out his appeals procedure. I think that I shall be able to do that in a way that will satisfy the House.
Nearly 200,000 certificates have been issued, and 145,000 of those were isued to individuals. This is the nub of the whole problem. We are dealing largely with individuals who claim the right to regard themselves as self-employed. Nobody has any difficulty in accepting that, although it is an unusual situation in industry generally that so large a proportion should claim to be self-employed. There is no objection to that, but, naturally, one has to ensure that when there is such a large number the due tax will be collected at the end of the year. That did not happen under the previous legislation, just as it did not happen during the operation of the legislation passed by the Opposition when they were the Government.
Let me now say something about the certificates that were refused. Of the 23,000 cases that were refused, there were 6,000 appeals. Of those appeals, some 3,000 resulted in the persons concerned putting their affairs in order and being granted certificates. The other 3,000 appeals were heard by the commissioners, and 2,750 of those were rejected and 250 were accepted.
1571 If any hon. Member has any case in which he feels that harsh treatment has been accorded to a constituent or to someone of whom he has personal knowledge, I shall be happy to look into it and inquire into the reasons adduced for the action that was taken.
§ Mr. David Mitchell
Is the Minister saying that in the cases to which he has referred, where appeals have been made, half of the appeals have been allowed? If so, does that not imply that in cases where it has not been possible to make an appeal because the matter is not appealable about half of them would have been allowed also?
§ Mr. Sheldon
Certainly they could have appealed in the other cases to the commissioners on the facts adduced to them. The trouble with most of these cases, however, is that the people have not brought their tax affairs up to date.
It is not true to say that the certificate is a work permit. I have inquired whether major local authorities are prepared to deal with uncertificated sub-contractors. I find that local authorities operate over 200 deduction schemes, and I have a list of large local authorities which are all prepared to make these deductions. About 50,000 private contractors are also prepared to engage sub-contractors outside the scheme. In every area, schemes are operating for those who for some reason cannot obtain the certificate. Of course, there are many other kinds of jobs that a sub-contractor can do for firms or individuals engaged in building operations and for which no deduction is required.
In the case of sub-contractors who have committed a minor or technical offence and have been refused a certificate, I have said that I am prepared to look at individual cases. As the Inland Revenue has made clear, however, minor or technical offences are not a bar to obtaining a certificate.
It has been contended that there has not been enough time for the self-employed sub-contractors to bring their tax affairs up to date. This proposal was announced in the Budget and enacted in the Finance Bill of 1975. Therefore, for almost two years, and, I suppose, 1572 for a period before that, sub-contractors knew the kind of thing that would happen. They had only to bring their tax affairs into order in the same way as every other taxpayer has to do. Those who did not do so are in some difficulty in claiming that these matters were unknown to them.
We are also talking about the difficulties of an industry in which there is great mobility of labour, with only slender ties between employer and employee and without the geographical ties that exist in other industries. In this legislation we have not tried to change the operation of the industry. We accept the way in which it works. Obviously, it is necessary to tailor tax measures to the industry rather than chain them to any preconceptions that we might have.
The scheme is a new one. I take the point made by the hon. Member for South Angus (Mr. Welsh). I undertake to survey closely the operation of the new scheme and to keep an open mind as to the changes that might be felt to be desirable following the experience gained in the last six months.
A large number of people have called themselves self-employed for reasons we well know and accept, but it means that they have to be contrasted with those who work in the same industries outside but who are employees. Although we have no objection to the self-employed being treated in this way, we have the right and the duty to ensure that we collect the taxes that are due.
Let me say a few words about the way in which the general commissioners work If the conditions are satisfied when an individual or a sub-contractor goes to the Inland Revenue, a certificate is granted. However, if the conditions are not satisfied, if the tax paid in the previous three years does not match up with what is required, if the accounts have not been adequately prepared or there is some other technical reason, those concerned may be issued with a certificate at the discretion of the Inland Revenue. If the Inland Revenue does not exercise that discretion, those concerned can appeal to the general commissioners. If they do, the appeal can be accepted by the commissioners, in which case a certificate will be granted. If it is not accepted, it is still up to the Inland 1573 Revenue to make its own decision in the end.
§ Mr. Sheldon
So much time has already been taken from me that I cannot give way. The hon. Gentleman should have ensured that I had sufficient time to reply to the debate.
§ Mr. Sheldon
The inspector can go even further if the person applying for a certificate is three years in arrear and brings himself up to date, he can obtain a certificate. If the accounts are contested, even if something is paid on account of the contested accounts it may be sufficient to obtain a certificate. It is not the intention of the Inland Revenue or of Treasury Ministers to harass the taxpayer. The disputed assessment will not be use as an artificial reason for denying certificates to self-employed sub-contractors.
The claim has been made by many Opposition Members that there is a disadvantage to those who do not meet their obligations. By that, they mean that they should not pay their rightful taxes, as do all other taxpayers. But what about the taxpayers and building operatives
§ who work full time for an employer? Indeed, what about the building employers who are meeting their obligations in full? They have to be considered too, and the relationship between the one and the other needs to be fair.
§ I believe that the self-employed have never claimed that their existence depended on tax evasion. They have valuable skills and determination, they play their rôle as innovators and they make their due contribution to the economy. We have taken a failed Opposition scheme and made it workable. The Opposition are defending not so much the self-employed as the abuses that have existed for far too long. Our aim is to end those abuses, and we believe that the scheme will help to achieve that end.
§ Mr. Speaker
Order. If the hon. Gentleman's point of order continues until 10 o'clock, he will talk out the motion.
§ Question put, That this House do now adjourn:—
§ The House divided: Ayes. 269, Noes 278.1577
|Adley, Robert||Bulmer, Esmond||Eyre, Reginald|
|Aitken, Jonathan||Burden, F. A.||Fairbairn, Nicholas|
|Alison, Michael||Butler, Adam (Bosworth)||Fairgrieve, Russell|
|Amery, Rt Hon Julian||Carlisle, Mark||Farr, John|
|Arnold, Tom||Carson, John||Fell, Anthony|
|Atkins, Rt Hon H.(Spelthorne)||Chalker, Mrs Lynda||Fisher, Sir Nigel|
|Awdry, Daniel||Channon, Paul||Flelcher-Cooke, Charles|
|Baker, Kenneth||Churchill, W. S.||Fookes, Miss Janet|
|Banks, Robert||Clark, Alan (Plymouth, Sutton)||Forman, Nigel|
|Beith, A. J.||Clark, William (Croydon S)||Fowler, Norman (Sutton C'f'd)|
|Bell, Ronald||Clarke, Kenneth (Rushcliffe)||Fox, Marcus|
|Bennett, Dr Reginald (Fareham)||Cockcroft, John||Fraser, Rt Hon H. (Stafford & St)|
|Benyon, W.||Cooke, Robert (Bristol W)||Freud, Clement|
|Berry, Hon Anthony||Cope, John||Fry, Peter|
|Biffen, John||Cordle, John H.||Galbraith, Hon T. G. D.|
|Biggs-Davison, John||Cormack, Patrick||Gardiner, George (Reigate)|
|Blaker, Peter||Corrie, John||Gardner, Edward (S Fylde)|
|Body, Richard||Costain, A. P.||Gilmour, Rt Hon Ian (Chesham)|
|Boscawen, Hon Robert||Crltchley, Julian||Gilmour, Sir John (East Fife)|
|Bottomley, Peter||Crouch, David||Glyn, Dr Alan|
|Bowden, A. (Brighton, Kemptown)||Dean, Paul (N Somerset)||Godber, Rt Hon Joseph|
|Boyson, Dr Rhodes (Brent)||Dodsworth, Geoffrey||Goodhew, Victor|
|Braine, Sir Bernard||Douglas-Hamilton, Lord James||Goodlad, Alastair|
|Brittan, Leon||Drayson, Burnaby||Gorst, John|
|Brocklebank-Fowler, C.||duCann, Rt Hon Edward||Gow, Ian (Eastbourne)|
|Brotherton, Michael||Dunlop, John||Gower, Sir Raymond (Barry)|
|Brown, Sir Edward (Bath)||Durant, Tony||Grant, Anthony (Harrow C)|
|Bryan, Sir Paul||Eden, Rt Hn Sir John||Grieve, Percy|
|Buchanan-Smith, Alick||Edwards, Nicholas (Pembroke)||Griffiths, Eldon|
|Buck, Antony||Emery, Peter||Grimond, Rt Hon J.|
|Budgen, Nick||Evans, Gwynfor (Carmarthen)||Grist, Ian|
|Grylls, Michael||Mather, Carol||St. John-Stevas, Norman|
|Hall, Sir John||Maude, Angus||Scott, Nicholas|
|Hall-Davis, A. G. F.||Maudling, Rt Hon Reginald||Shaw, Giles (Pudsey)|
|Hamilton, Michael (Salisbury)||Mawby, Ray||Shelton, William (Streatham)|
|Hampson, Dr Keith||Maxwell-Hyslop, Robin||Shepherd, Colin|
|Hannam, John||Mayhew, Patrick||Shersby, Michael|
|Harvie Anderson, Rt Hon Miss||Meyer, Sir Anthony||Silvester, Fred|
|Hastings, Stephen||Miller, Hal (Bromsgrove)||Sims, Roger|
|Havers, Sir Michael||Mills, Peter||Sinclair, Sir George|
|Hayhoe, Barney||Miscampbell, Norman||Skeet, T. H. H.|
|Heath, Rt Hon Edward||Mitchell, David (Basingstoke)||Smith, Dudley (Warwick)|
|Henderson, Douglas||Moate, Roger||Speed, Keith|
|Heseltine, Michael||Monro, Hector||Spence, John|
|Hicks, Robert||Montgomery, Fergus||Spicer, Michael (S Worcester)|
|Higgins, Terence L.||Moore, John (Croydon C)||Sproat, lain|
|Hodgson, Robin||More, Jasper (Ludlow)||Stainton, Keith|
|Holland, Philip||Morgan-Giles, Rear-Admiral||Stanbrook, Ivor|
|Hooson, Emlyn||Morris, Michael (Northampton S)||Stanley, John|
|Hordern, Peter||Morrison, Charles (Devizes)||Steel, Rt Hon David|
|Howe, Rt Hon Sir Geoffrey||Morrison, Hon Peter (Chester)||Steen, Anthony (Wavertree)|
|Howell, David (Guildford)||Mudd, David||Stewart, Rt Hon Donald|
|Howells, Geraint (Cardigan)||Nelson, Anthony||Stewart, Ian (Hitchin)|
|Hunt, David (Wirral)||Neubert, Michael||Stokes, John|
|Hunt, John (Bromley)||Newton, Tony||Stradling Thomas, J.|
|Hurd, Douglas||Nott, John||Tapsell, Peter|
|Hutchison, Michael Clark||Onslow, Cranley||Taylor, R. (Croydon NW)|
|Irving, Charles (Cheltenham)||Oppenheim, Mrs Sally||Taylor, Teddy (Cathcart)|
|James, David||Page, John (Harrow West)||Tebbit, Norman|
|Jenkin, Rt Hon P. (Wanst' d & W'df'd)||Page, Rt Hon R. Graham (Crosby)||Temple-Morris, Peter|
|Johnson Smith, G. (E Grinstead)||Page, Richard (Workington)||Thatcher, Rt Hon Margaret|
|Jones, Arthur (Daventry)||Paisley, Rev Ian||Thomas, Dafydd (Merioneth)|
|Jopling, Michael||Pardoe, John||Thomas, Rt Hon P. (Hendon S)|
|Joseph, Rt Hon Sir Keith||Parkinson, Cecil||Thompson, George|
|Kaberry, Sir Donald||Pattie, Geoffrey||Thorpe, Rt Hon Jeremy (N Devon)|
|Kilfedder, James||Penhaligon, David||Townsend, Cyril D.|
|King, Evelyn (South Dorset)||Percival, Ian||Trotter, Neville|
|Knight, Mrs Jill||Peyton, Rt Hon John||van Straubenzee, W. R.|
|Knox, David||Pink, R. Bonner||Vaughan, Dr Gerard|
|Lamont, Norman||Price, David (Eastleigh)||Viggers, Peter|
|Langford-Holt, Sir John||Prior, Rt Hon James||Wakeham, John|
|Latham, Michael (Melton)||Pym, Rt Hon Francis||Walder, David (Clitheroe)|
|Lawrence, Ivan||Raison, Timothy||Walker, Rt Hon P. (Worcester)|
|Lawson, Nigel||Rathbone, Tim||Wall, Patrick|
|Lester, Jim (Beeston)||Rawlinson, Rt Hon Sir Peter||Walters, Dennis|
|Lewis, Kenneth (Rutland)||Rees, Peter (Dover & Deal)||Watt, Hamish|
|Lloyd, Ian||Rees-Davies, W. R.||Weatherill, Bernard|
|Loveridge, John||Renton, Rt Hon Sir D. (Hunts)||Wells, John|
|Luce, Richard||Renton, Tim (Mid-Sussex)||Welsh, Andrew|
|McAdden, Sir Stephen||Rhodes James, R.||Whitelaw, Rt Hon William|
|MacCormick, Iain||Ridley, Hon Nicholas||Wiggin, Jerry|
|McCrindle, Robert||Ridsdale, Julian||Wigley, Dafydd|
|Macfarlane, Neil||Rifkind, Malcolm||Wilson, Gordon (Dundee E)|
|MacGregor, John||Rippon, Rt Hon Geoffrey||Winterton, Nicholas|
|Macmillan, Rt Hon M. (Farnham)||Roberts, Wyn (Conway)||Wood, Rt Hon Richard|
|McNair-Wilson, M. (Newbury)||Rodgers, Sir John (Sevenoaks)||Young, Sir G. (Ealing, Acton)|
|McNair-Wilson, P. (New Forest)||Ross, Stephen (Isle of Wight)||Younger, Hon George|
|Madel, David||Rossi, Hugh (Hornsey)|
|Marshall, Michael (Arundel)||Rost, Peter (SE Derbyshire)||TELLERS FOR THE AYES:|
|Marten, Neil||Royle, Sir Anthony||Mr. Spencer Le Marchant and|
|Mates, Michael||Sainsbury, Tim||Mr. Michael Roberts.|
|Abse, Leo||Bray, Dr Jeremy||Cook, Robin F. (Edin C)|
|Allaun, Frank||Brown, Hugh D. (Provan)||Corbett, Robin|
|Anderson, Donald||Brown, Robert C. (Newcastle W)||Cowans, Harry|
|Archer, Peter||Brown, Ronald (Hackney S)||Cox, Thomas (Tooting)|
|Armstrong, Ernest||Buchan, Norman||Craigen, Jim (Maryhill)|
|Ashley, Jack||Buchanan, Richard||Crawshaw, Richard|
|Atkins, Ronald (Preston N)||Butler, Mrs Joyce (Wood Green)||Cronin, John|
|Atkinson, Norman||Callaghan, Rt Hon J. (Cardiff SE)||Crowder, F. P.|
|Barnett, Guy (Greenwich)||Callaghan, Jim (Middleton & P)||Cryer, Bob|
|Barnett, Rt Hon Joel (Heywood)||Campbell, Ian||Cunningham, G. (Islington S)|
|Bates, Alf||Canavan, Dennis||Cunningham, Dr J. (Whiteh)|
|Bean, R. E.||Cant, R. B.||Davidson, Arthur|
|Benn, Rt Hon Anthony Wedgwood||Carmichael, Neil||Davies, Bryan (Enfield N)|
|Bennett, Andrew (Stockport N)||Carter, Ray||Davies, Denzil (Llanelli)|
|Bidwell, Sydney||Carter-Jones, Lewis||Davies, Ifor (Gower)|
|Bishop, E. S.||Cartwright, John||Davis, Clinton (Hackney C)|
|Blenkinsop, Arthur||Castle, Rt Hon Barbara||Dean, Joseph (Leeds West)|
|Boardman, H.||Clemitson, Ivor||Dell, Rt Hon Edmund|
|Booth, Rt Hon Albert||Cocks, Rt Hon Michael||Dempsey, James|
|Bottomley, Rt Hon Arthur||Cohen, Stanley||Doig, Peter|
|Boyden, James (Bish Auck)||Coleman, Donald||Dormand, J. D.|
|Bradley, Tom||Colquhoun, Ms Maureen||Douglas-Mann, Bruce|
|Duffy. A. E. P.||Lambie, David||Roderick, Caerwyn|
|Dunn, James A.||Lamborn, Harry||Rodgers, George (Chorley)|
|Dunnett, Jack||Lamond, James||Rodgers, Rt Hon William|
|Eadie, Alex||Latham, Arthur (Paddington)||Rooker, J. W.|
|Edge, Geoff||Leadbitter, Ted||Rose, Paul B.|
|Edwards, Robert (Wolv SE)||Lee, John||Ross, Rt Hon W. (Kilmarnock)|
|Ellis, John (Brigg & Scun)||Lestor, Miss Joan (Eton & Slough)||Rowlands, Ted|
|English, Michael||Lever, Rt Hon Harold||Ryman, John|
|Ennals, David||Lewis, Ron (Carlisle)||Sandelson, Neville|
|Evans, Fred (Caerphilly)||Lipton, Marcus||Sedgemore, Brian|
|Evans, loan (Aberdare)||Litterick, Tom||Selby, Harry|
|Ewing, Harry (Stirling)||Lomas, Kenneth||Shaw, Arnold (Ilford South)|
|Faulda, Andrew||Loyden, Eddie||Sheldon, Rt Hon Robert|
|Fernyhough, Rt Hon E.||Luard, Evan||Shore, Rt Hon Peter|
|Fitch, Alan (Wigan)||Lyon, Alexander (York)||Short, Mrs Renée (Wolv NE)|
|Fitt, Gerard (Belfast W)||Lyons, Edward (Bradford W)||Sillars, James|
|Flannery, Martin||Mabon, Rt Hon Dr J. Dickson||Silverman, Julius|
|Fletcher, Ted (Darlington)||McCartney, Hugh||Skinner, Dennis|
|Foot, Rt Hon Michael||Mc Donald, Dr Oonagh||Small, William|
|Ford, Ben||McElhone, Frank||Smith, John (N Lanarkshire)|
|Forrester, John||MacFarquhar, Roderick||Snape, Peter|
|Fowler, Gerald(The Wrekin)||Mc Guire, Michael (Ince)||Spearing, Nigel|
|Fraser, John (Lambeth, N'w'd)||MacKenzie, Gregor||Spriggs, Leslie|
|Freeson, Reginald||Mackintosh, John P.||Stallard, A. W.|
|Garrett, John (Norwich S)||Maclennan, Robert||Stewart, Rt Hon M.(Fulham)|
|Garrett, W. E. (Wallsend)||McMillan, Tom (Glasgow C)||Stoddart, David|
|George, Bruce||McNamara, Kevin||Stott, Roger|
|Gilbert, Dr John||Madden, Max||Strang, Gavin|
|Ginsburg, David||Magee, Bryan||Strauss, Rt Hon G. R.|
|Golding, John||Mahon, Simon||Summerskill, Hon Dr Shirley|
|Gould, Bryan||Mallalieu, J. P. W.||Swain, Thomas|
|Gourlay, Harry||Marks, Kenneth||Taylor, Mrs Ann (Bolton W)|
|Graham, Ted||Marshall, Dr Edmund (Goole)||Thomas, Jeffrey (Abertillery)|
|Grant, George (Morpeth)||Marshall, Jim (Leicester S)||Thomas, Mike (Newcastle E)|
|Grocott, Bruce||Mason, Rt Hon Roy||Thomas, Ron (Bristol NW)|
|Hamilton, James (Bothwell)||Maynard, Miss Joan||Thorne, Stan (Preston South)|
|Hardy, Peter||Meacher, Michael||Tierney, Sydney|
|Harrison, Walter (Wakefield)||Mellish, Rt Hon Robert||Tinn, James|
|Hart, Rt Hon Judith||Mendelson, John||Torney, Tom|
|Hattersley, Rt Hon Roy||Mikardo, Ian||Tuck, Raphael|
|Hayman, Mrs Helene||Millan, Rt Hon Bruce||Urwin, T. W.|
|Healey, Rt Hon Denis||Moonman, Eric||Varley, Rt Hon Eric G.|
|Heffer, Eric S.||Morris, Alfred (Wythenshawe)||Wainwright, Edwin (Dearne V)|
|Hooley, Frank||Morris, Charles R. (Openshaw)||Walden, Brian (B'ham, L'dyw'd)|
|Horam, John||Morris, Rt Hon J. (Aberavon)||Walker, Harold (Doncaster)|
|Howell, Rt Hon Denis (B'ham, Sm H)||Moyle, Roland||Walker, Terry (Kingswood)|
|Hoyle, Doug (Nelson)||Mulley, Rt Hon Frederick||Ward, Michael|
|Huckfield, Les||Murray, Rt Hon Ronald King||Watkins, David|
|Hughes, Rt Hon C. (Anglesey)||Newens, Stanley||Watkinson, John|
|Hughes, Robert (Aberdeen N)||Noble, Mike||Weetch, Ken|
|Hughes, Roy (Newport)||O'Halloran, Michael||Weitzman, David|
|Hunter, Adam||Orbach, Maurice||Wellbeloved, James|
|Irvine, Rt Hon Sir A. (Edge Hill)||Orme, Rt Hon Stanley||White, Frank R. (Bury)|
|Irving, Rt Hon S. (Dartford)||Ovenden, John||White, James (Pollok)|
|Jackson, Colin (Brighouse)||Owen, Rt Hon Dr David||whitehead, Phillip|
|Jackson, Miss Margaret (Lincoln)||Padley, Walter||Whitlock, William|
|Janner, Greville||Palmer, Arthur||Willey, Rt Hon Frederick|
|Jay, Rt Hon Douglas||park, George||Williams, Rt Hon Alan (Swansea W)|
|Jeger, Mrs Lena||Parker, John||Williams, Alan Lee (Hornch'ch)|
|Jenkins, Hugh (Putney)||Parry, Robert||Williams, Rt Hon Shirley (Hertford)|
|John, Brynmor||Pavitt, Laurie||Williams, Sir Thomas (Warrington)|
|Johnson, James (Hull West)||Pendry, Tom||Wilson, Alexander (Hamilton)|
|Johnson, Walter (Derby S)||Perry, Ernest||Wilson, William (Coventry SE)|
|Jones, Alec (Rhondda)||Prentice, Rt Hon Reg||Wise, Mrs Audrey|
|Jones, Barry (East Flint)||price, C. (Lewisham W)||Woodall, Alec|
|Jones, Dan (Burnley)||price, William (Rugby)||Woof, Robert|
|Judd, Frank||Radice, Giles||Wrigglesworth, Ian|
|Kaufman, Gerald||Rees, Rt Hon Merlyn (Leeds S)||Young, David (Bolton E)|
|Kelley, Richard||Richardson, Miss Jo|
|Kerr, Russell||Roberts, Albert (Normanton)||TELLERS FOR THE NOES:|
|Kilroy-Silk, Robert||Robinson, Geoffrey||Mr. Joseph Harper and|
|Kinnock, Neil||Roberts, Gwilym (Cannock)||Mr. Joseph Ashton.|
|Question accordingly negatived.|