Commons Sitting of 17 November 1977

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

PRINCESS ANNE (BIRTH OF A SON)
Mr. Speaker: On Tuesday I told the House that I had sent a message of congratulations to the Royal Family on the birth of Princess Anne's son. I have since received the following telegram:
"I thank you, Mr. Speaker, and the Members of the House of Commons most sincerely for your kind congratulations on the birth of my grandson.
Elizabeth Regina."

ORAL ANSWERS TO QUESTIONS
  HOME DEPARTMENT

    Pornography (Involvement of Children)
    Mr. Luceasked the Secretary of State for the Home Department if he will make a statement on the use of children in pornographic material.
    Mr. McCrindleasked the Secretary of State for the Home Department if he plans to introduce legislation prohibiting the use of young children in pornographic films.
    The Secretary of State for the Home Department (Mr. Merlyn Rees): I share the revulsion of most people at the use of children in pornography. Although the Williams Committee is already reviewing the laws on obscenity, I am looking at the particular problem of child pornography to see whether there are any aspects in which the law needs to be strengthened before the Committee reports. I should add that my information so far does not seem to reveal a significant problem with which the law is powerless to deal.
    Mr. Luce: As there is widespread public anxiety about the long-term effects
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    upon a child of corrupt sexual practices, and as, equally, one such example of that is the exploitation of children in the production of pornographic material, does the Home Secretary agree that this is an area in which he himself can take urgent and immediate action rather than refer it to the laborious procedures of the Williams Committee, which was established to review the laws on obscenity?
    Mr. Rees: That is precisely what I said. The Williams Committee is the long-term approach, but I am prepared to look at the matter again. I am advised by the Director of Public Prosecutions that offences which might not be caught by existing legislation rarely occur and that in the small number in which there are difficulties, at which I am now looking, there are real difficulties of definition. I am advised that if legislation is not properly drawn up—it is not just a question of definition—it would catch a parent taking a picture of his child on the rug in front of the fire when it was a few months old. How on earth one draws up a Bill which exempts normal pictures of that kind is, I am told, a rather difficult matter.
    Mr. McCrindle: Is it not clear that even those of us who take a fairly liberal view of what people may see and do in private feel that there is a special responsibility to protect minors in this loathsome trade? On the question of parents, is it not clear that the need for us to extend protection very often stems from the fact that children are put into such pornographic films and literature with the approval of the parents?
    Mr. Rees: I think that the last point is right. I fully understand the hon. Gentleman's point about liberality, but I have no liberality in this matter. It is wrong and ought to be dealt with.
    Mr. George Rodgers: Is my right hon. Friend satisfied with the level of psychiatric treatment available in prisons in cases where people are sentenced for this ghastly activity?
    Mr. Rees: I shall check on that. When I have made inquiries previously, I have found that there is a problem of people in prison who are mentally ill. That is a problem about which we ought to do something, but that is a wider issue. I have no reason to believe that there is a

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    problem in respect of the issue raised by my hon. Friend but I shall look at the matter.
    Mr. Whitelaw: Does the right hon. Gentleman realise that there will be widespread support throughout the House for his decision that if action has to be taken it will be taken in advance of the report of the Williams Committee? Does he further appreciate that if he finds it necessary to make an amendment to the law the House will be ready to support him, and to do so quickly?
    Mr. Rees: I am grateful to the right hon. Gentleman for saying that. He has it absolutely right about the short and the long term. With regard to the short term, I sometimes receive letters from people who, I think, miss the point. It they have an example of pornography, from a shop or elsewhere, they should go to the police with it. The police are the agents for dealing with this matter under the law. They act in different parts of the country in different ways, because this is a matter for decision by the chief constable concerned.

    Crimes of Violence
    Mr. Wyn Robertsasked the Secretary of State for the Home Department what has been the increase in percentage terms in violent crimes in Wales compared with England since 1960.
    The Minister of State, Home Office (Mr. Brynmor John): The percentage increase in indictable offences of violence against the person recorded as known to the police between 1960 and 1976 was about 520 per cent. in Wales and about 390 per cent. in England. It is not possible to be more precise because the figures are affected by changes in the law and in recording practice over this period.
    Mr. Roberts: I am sure that the Minister, the whole House and the people of Wales will be shocked by that enormous increase in violent crime, especially compared with England. The English figure presumably includes the London metropolitan area. Can the Minister give any explanation? Could he possibly attribute this to the low recruitment to the police force?
    Mr. John: As to the last question, over the same period there has been an increase
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    in recruitment in Wales of 86 per cent. It is somewhat difficult to attribute any steady reason for the disproportionate increase. For example, in the period 1975–76 the rise in crimes of violence in Wales was less than in England.
    Mr. Fernyhough: Assuming that the devolution proposals go through the House successfully, will they have any effect upon the disproportionate amount of crime in Wales as compared with that in England?
    Mr. John: Not unless my right hon. Friend, in a fit of rage, hits me with the Wales Bill.
    Mr. Grist: Is the Minister aware that in the past two months there have been 46 attacks on police officers in the Cardiff area? Is it not time to take the very strongest counter-measures, not least to bring the police up to full establishment, perhaps by raising their rates of pay suitably?
    Mr. John: My right hon. Friend has already dealt with police pay, but the hon. Gentleman displays an ignorance that is shared by a number of hon. Members as to what is the role of the Home Office and what is the role of the courts in this matter. It is for the Home Office to provide laws that lay down the penalties which magistrates can impose. It is for the courts to decide what penalties are imposed according to the facts before them.

    Shoplifting (Prosecution policy)
    Sir A. Meyerasked the Secretary of State for the Home Department whether he will call a conference of chief constables to discuss with them the possibility of adopting a common policy regarding prosecution in cases of shoplifting.
    The Under-Secretary of State for the Home Department (Dr. Shirley Summer-skill): No. Sir. Decisions about prosecutions are within the responsibility of chief officers of police and not of my right hon. Friend.
    Sir A. Meyer: Would not it be better for the police to decide in each individual case—bearing in mind all the personal circumstances—whether prosecutions were justified rather than leave it to some

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    stores to pursue an indiscriminate policy of prosecution in order to provide for the fact that their own security arrangements are sometimes extremely defective?
    Dr. Summerskill: The hon. Gentleman has raised a different matter about the right of stores to undertake private prosecutions. On the original Question, chief officers of police have recently studied their practice in prosecuting for shoplifting and have agreed on some standard procedures that are designed to lead to greater uniformity of practice. The Home Office research unit will be studying the reasons for, and the extent of, variations in prosecution for shoplifting.
    Mr. Adley: Is not the Minister aware that an increasing number of people in the police force, magistrates and probation officers are concerned that the trading methods of some stores are responsible for the spiralling number of allegations of shoplifting? Can she do something towards helping those of us who are interested in the problem to find out how many people who come up on these offences are on a serious criminal charge for the first time in their lives?
    Dr. Summerskill: The research unit is looking into shops, police and the courts and will find out the statistics that the hon. Member has requested. But it is a difficult thing for which to find accurate statistics.

    Urban Problems
    Mr. Steenasked the Secretary of State for the Home Department what administrative arrangements exist within his Department for dealing with urban problems.
    Mr. David Huntasked the Secretary of State for the Home Department what administrative arrangements exist within his Department for dealing with urban deprivations.
    Mr. MacKayasked the Secretary of State for the Home Department what administrative arrangements exist within his Department for dealing with urban deprivation.
    Sir W. Elliottasked the Secretary of State for the Home Department what
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    administrative arrangements exist within his Department for dealing with urban deprivation.
    Mr. John: As announced by my right hon. Friend the Prime Minister on 6th April this year, responsibility for the urban programme and associated work has been transferred to my right hon. Friend the Secretary of State for the Environment and my right hon. and learned Friend the Secretary of State for Wales.
    My Department maintains close liaison with the Department of the Environment and the Welsh Office over those aspects of inner city policy which bear upon race relations and other matters for which my right hon. Friend has a responsibility.
    Mr. Steen: Does the Minister realise that all that is left of the community development project which was set up by the Prime Minister when he was Home Secretary in 1968, and which has spent £5 million in research into urban problems, is a part-time lady selling booklets in his Department? Will he tell the House what recommendations of the community development project, if any, he is proposing to implement?
    Mr. John: The definition of a part-time lady would probably defy statutory analysis. The community development projects have been completed and their results made known. That is what my Department is now considering. That experience has shown that a different approach is probably needed to deal with the problems of urban deprivation. The fact that the previous projects have had a negative result is none the less valuable, because they teach us what not to do, if not what to do.
    Mr. Hunt: Does the Minister know that the comprehensive community programme set up by his Department was supposed to run a multi-million pound experiment in Wirral but that no one has ever heard of it? Can he explain what happened, what is now happening, and what is the connection between the comprehensive community programme and the recent statement by the Secretary of State for the Environment that Wirral is to become a partnership authority?
    Mr. John: The decision to initiate any CCP project was to be taken with the

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    agreement of the local authority concerned. At the stage to which the hon. Member referred we chose to do one pilot programme before entering into a wider area. A CCP-type of approach, whether or not it is so called, is inherent in the inner city programme. Therefore, the partnership approach which the hon. Gentleman mentioned as being dealt with by my right hon. Friend will be adopted in dealing with the partnership agreement.
    Mr. MacKay: Does the Minister agree that what he described in his answer is little more than a comic operation? Will he confirm that he will pass anything that is left of it over to the Department of the Environment, because people in urban areas are becoming very worried that the Government are all talk and no go on this matter?
    Mr. John: I am not sure what the hon. Gentleman is talking about in referring to a comic operation. Is it the part-time lady, or is it the CCP project as a whole? The hon. Gentleman must understand that the Government have devoted a considerable amount of study to the inner city problems this year, and my right hon. Friend will not take lightly the genuine problems of the inner city areas, of which we are aware.
    Mr. Molloy: Can my hon. Friend say whether he or our right hon. Friend intends to hold discussions with members of London borough councils which have not been included in the pairing arrangements in relation to certain aspects of urban deprivation? My right hon. Friend the Secretary of State said that they were not included, but he agreed that they had special problems and said that he was prepared to discuss these with them. May we have an assurance from my hon. Friend that his Department also will be involved?
    Mr. John: Whenever my right hon. Friend is involved in the discussions, my Department will be involved in relation to race relations and other matters for which it is responsible.
    Mr. Budgen: Does the Minister agree that one of the greatest problems of the urban areas is the acceptance of mass immigration? In that connection, will he comment on the remarks made yesterday by Lord Scarman, first, that there is a risk that in seeking to do justice to those
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    who are disadvantaged we run the risk of doing injustice to others, and—secondly, that the race relations legislation should be only temporary?
    Mr. John: In my experience, with the exception of a very few antique Acts, there are not many measures that can be called permanent, so all legislation is temporary in that sense. We believe that the Race Relations Act is an absolutely necessary step to protect minorities in the community from disadvantage and discrimination on the ground of their colour or their race. I hope that that commands general acceptance in the House. To blame immigrants for all the problems of the inner cities is a grotesque travesty which does no credit to the hon. Gentleman and does no good in finding a solution of the problem.

    Fire Brigades Union
    Mr. Durantasked the Secretary of State for the Home Department when he next plans to meet the Fire Brigades Union.
    Mr. Merlyn Rees: My right hon. Friend the Secretary of State for Scotland and I have told representatives of both sides of the National Joint Council for Local Authorities' Fire Brigades that we are ready to meet them at any time.
    Mr. Durant: Is the Home Secretary aware that in my constituency, in the last two months, two firemen have been killed and two have been awarded bravery honours for rescuing somebody from the River Thames? I talked to the picket lines late last night. Does the right hon. Gentleman appreciate that they are looking for some way out of this dilemma? Can he not make some small offer, such as the 2½ per cent. that Ford workers were given, so that negotiations can begin and we can get this strike over?
    Mr. Rees: The hon. Gentleman is suggesting to me—we are not negotiating here—that 2½ per cent. over the 10 per cent. would settle the dispute. I do not think that he is speaking on behalf of the Fire Brigades Union in that sense. It is easy to suggest ways in which it can be done, and I am not at the moment going into the merits of the 10 per cent. guideline which I think are basically important to the future of this country. There is more than that to the discussions which have been taking place.

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    Of course, the Government are concerned about the matter, but, according to the negotiating procedures which are laid down, the local authorities and the Fire Brigades Union are talking together, and to suggest these ways of doing it as though, if only I would think of them, the dispute would be over is to ignore the realities of the situation.
    Mr. Flannery: Will my right hon. Friend accept from me that there is deep and spreading sympathy in the general public for this patient and orderly body of men, and that it is an increasing wish among our people that some major concession should be made to them?
    Mr. Rees: I should be the last to say that the work of the firemen was not held in very high regard. But I had a message last night from other unions that said bluntly "If you give to the Fire Brigades Union, you will give to us as well." Talking about special cases, if my hon. Friend could tell me that every other trade union would say that the Fire Brigades Union was a special case and that it would not be called in aid in any other dispute, that might be a different matter. But that is not the situation.
    Mr. Ian Lloyd: Everyone hopes that this strike will be settled. When the Home Secretary next meets the Fire Brigades Union, will he emphasise the fundamental constitutional importance of the distinction between the exercise of the right to strike, which, though deplorable and regrettable, is legitimate, and the exercise of a power which it is now using to deprive those authorised by Her Majesty's Government to use Her Majesty's property and to obstruct the use of that property by those authorised by means of the illegal use of transmitters?
    Mr. Rees: On the last point, blocking the use of transmitters is evil. Who is doing it is not known, and I think it would be wrong to suggest that it was a member of the Fire Brigades Union. On the other matters, the soldiers are not trained to use the sophisticated equipment, and it is idle to pretend that they are. We have been considering the use of the masks. People cannot learn to use them just by coming in one morning and using them; they are very complicated. We have a small group of trained Service men who can be protected in
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    that way, and they will be used as appropriate. The general approach of the hon. Gentleman that this equipment is not being used because of a block imposed by the Fire Brigades Union is not true.
    Mr. Skinner: Will my right hon. Friend accept from me as someone who is not putting forward the special case principle but who believes that the 10 per cent. rule is a hazard to free collective bargaining and must be removed that it will cost the Government, through the NJC or any other body, a lot more money as long as the strike persists? Will the Home Secretary also acknowledge that he can give a nudge, a nod and a wink to the NJC, even though principally it is a Tory-controlled body, to ensure that renegotiations may start? Would not 18 per cent., the amount which the Royal Family got, be a good starting point?
    Mr. Rees: There is one aspect of the 10 per cent. guideline in the current situation which is being forgotten. On a wage of £70, that is £7 a week. We are not talking about small sums of money, because 10 per cent. is a largish amount of money on anybody's salary or pay, and it is an important factor to take into account in this stage of moving on and developing pay policy. When analogies are made with anybody else in the community or with the Royal Family, I say on behalf of the Government that 10 per cent. is the basis on which to move. The discussions on the 42-hour week are a major breakthrough, and the benchmark for the future is something that the Fire Brigades Union has been talking about for a long time. In my view, it is on this basis and through discussions with the NJC that we shall find a solution.
    Mr. Churchill: Is not the right hon. Gentleman aware that the lives of Service men are being put at stake by their being required to enter blazing premises and dense smoke without the proper equipment? Furthermore, the lives of the public are being put at risk because foam appliances are not available, and in certain cases sufficient fire-fighting equipment is not available. Even accepting the Home Secretary's premise that certain of the equipment is too specialised for Service men to use, I ask him now to give his authority that the people's fire tenders, equipment and breathing apparatus can be made available to the Service men who are fighting the blazes.
    Mr. Rees: No, I shall not do that, because they are not trained to use them. There are occasions, as one has seen from the newspapers, when no fire officer would send soldiers into a blaze or into a smoke-filled building.
    Mr. Churchill: They are going in.
    Mr. Rees: The marginal cases are happening, as can happen in any instance, but Service men are not there to deal with fires for which they are not trained and which they do not have the equipment to deal with.

    Witnesses (Binding Over)
    Mr. Grocottasked the Secretary of State for the Home Department whether he has any plans to bring forward legislation to remove the power of magistrates to threaten witnesses with imprisonment by binding them over to keep the peace.
    Mr. John: We have no plans to introduce legislation on these lines. The power to bind over witnesses called by the prosecution in a case brought by the police is rarely used, as far as we are aware, but sometimes serves a useful preventive purpose, and we should not lightly discard it. In view of the concern expressed following a recent case, we are, however, keeping the position under review.
    Mr. Grocott: Whether or not it is rarely used, is it not entirely unacceptable that people who have never been charged with any offence may go to prison?
    Mr. John: They do so only if they disobey the binding-over order of the magistrates. It is often a great saving in public time and expense in the courts if, for example, neighbours, one of whom is the defendant and another is the witness in a case, can both be bound over so that their long-running feud need not smoulder in the courts every fortnight or so.
    Mr. Stanbrook: Is not one of the injustices of this ancient power which is vested in magistrates the fact that they can impose this obligation upon the complainant as well as the defendant, so that a complainant may well find himself penalised for a perfectly proper and public-spirited action and in those circumstances will not accept a binding over because he has a sense of right and
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    justice and, therefore, is sent to prison quite wrongfully?
    Mr. John: In the case which has been referred to, the person concerned was a witness and not a complainant. But even in the case of complainants the hon. Gentleman will know that people feel very strongly about their legal rights and what they believe is due to them. It is the job of courts to resolve these matters in a way which satisfies the public at large. Sometimes that is not done best by giving to the complainant all that he thinks is due.

    Broadcasting
    Mr. Rathboneasked the Secretary of State for the Home Department when he intends to issue a White Paper on the Government's proposals on the future constitution, structure and organisation of broadcasting in the United Kingdom.
    Mr. Merlyn Rees: I hope to be able to present a White Paper setting out the Government's proposals for the future constitution, structure and organisation of broadcasting in the new year.
    Mr. Rathbone: I am grateful to the Home Secretary for the assurance that it is coming soon. There have been reports recently that in the meantime he will have to consider extending the BBC Charter and IBA Licence. Can he reassure the House that, when he considers that, he will require of the BBC reconsideration of its misconceived plans to realign frequencies in its radio spectrum, particularly for Radio 3 and Radio 4?
    Mr. Rees: The Annan Report was published in the middle part of the year. There have been many suggestions put to me, but there is only one way to deal with the problem, and that is to produce a White Paper. Legislative proposals will eventually be put forward which will affect broadcasting for the next 15 years. I do not accept suggestions about delay. We shall have to see what the White Paper says. In view of the date of renewal of the BBC Charter and the extension of the life of the IBA, there may well be a time—it depends on the legislative programme—when we shall have to deal in different ways with the Authority and the Corporation for a time. It would not be appropriate to deal with the question of broadcasting wavelengths in the way that the hon. Gentleman suggests.
    Mr. Greville Janner: While we await the White Paper, will my right hon. Friend assure those who do such tremendous work in BBC local radio stations, such as Radio Leicester, that their future is assured and that they will continue to receive resources sufficient to enable them not only to maintain but to extend those services?
    Mr. Rees: Obviously, until the White Paper with the Government's first proposals is published it would be wrong for me to give my thinking on that matter. However, as regards Radio Leicester and also the excellent station in Leeds, if I may say so I am very interested in what they do. I know that the BBC, too, is very interested in what goes on in Radio Leeds.
    Mr. Grist: When drawing up his White Paper, will the Home Secretary bear in mind the considerable ill-feeling in Cardiff because, when the Annan Committee was established, it robbed Cardiff of its right, as the twentieth station in the IBA network, to have its own independent radio station?
    Mr. Rees: I am not sure about the "robbing" part of the hon. Gentleman's supplementary question, but, whatever eventually happens, there will be an extension of local broadcasting. The Government must ask the House to decide the way in which that will be done. There is no doubt that local broadcasting will expand in the years to come. Since it is a new development, the decision on the structure through which it will work is another matter. Whether Cardiff should have a BBC or independent station is also another matter.

    Police (Pay)
    Mr. Dykesasked the Secretary of State for the Home Department when he next plans to meet representatives of the Police Federation for further discussions on pay and conditions of police officers.
    Mr. Merlyn Rees: Following my meeting with representatives of the Police Federations on 27th October, agreement was reached on an immediate increase of 10 per cent. in pay and an independent inquiry into pay and other matters. I have no plans at present for further discussions but am, of course, ready to
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    meet the federations again should the need arise.
    Mr. Dykes: I thank the Home Secretary for that reply and I appreciate that, in view of the inquiry which is now commencing, it is difficult for him to answer specific points. However, may I ask him to be tentative, provisional and speculative and to agree that, at long last, the case for a premium for police officers in the Metropolitan area is established and proven by all the extra work that police officers have to do in the Greater London area? I refer to demonstrations, extra traffic duty, lobbies, emergency duties and all the rest. Is there not now an overwhelming case for extra premium pay?
    Mr. Rees: I think that it would be wrong, given the developments that have taken place, to go into that. Lord Edmund-Davies' inquiry will consider the matter. As matters stand, there is a Metropolitan allowance and a larger rent allowance, which is effectively tax-free. As I have said, it is a matter for the inquiry.
    Mr. Carlisle: Does the Home Secretary agree that the most disturbing aspect of the matter is the substantial increase in the number of qualified police officers who leave the force earlier than their normal full retirement age? Does that not underline the urgency of the Edmund-Davies Report?
    Mr. Rees: There is a problem not so much of recruitment but of wastage. I cannot make a definite statement now, but I hope to announce the other members of the Lord Edmund-Davies inquiry next week.

    Terrorism
    Mr. Aitkenasked the Secretary of State for the Home Department if he is satisfied with his Department's contingency plans and measures for dealing with terrorist activity.
    Mr. Merlyn Rees: These are kept under continuous review in the light of intelligence and other information regarding terrorist activities and incidents.
    Mr. Aitken: Will the Home Secretary consider having talks with representatives of the media to seek to establish a voluntary code of conduct about the way in

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    which terrorist episodes are sometimes publicised? Is he aware that the whole of the recent German commando rescue operation at Mogadishu could have been put seriously at risk by the deplorable decision by two British newspapers to publish advance information about the commando unit's movements, in defiance of a request by the German Government? Can steps be taken to ensure that that does not happen here?
    Mr. Rees: There is no doubt that when such an incident occurs problems arise from the media in general. However, all I should say on this matter is, yes. I cannot say that I will consider doing what the hon. Gentleman suggests, because the matter is already in hand.
    Mr. Fletcher-Cooke: Will the right hon. Gentleman tell us something about his recent meetings with the other Ministers of the Interior of the European Economic Community? Is it correct that these Ministers meet regularly, and is the right hon. Gentleman satisfied with the degree of harmonisation of administrative measures, as well as that of the signature and ratification of the conventions, to deal with this urgent problem?
    Mr. Rees: There are various methods of co-operation between countries, particularly those within the EEC. I chaired a meeting earlier in the year when we talked about what should be done. A variety of panels—not Ministers—are discussing various aspects of this problem, and all the matters quite properly mentioned by the hon. and learned Gentleman are considered.
    While this is basically necessary, any schemes that one has prepared must be sufficiently flexible to deal with those incidents which might not arise in the way that the exercises that we hold anticipate.
    Dr. M. S. Miller: Does my right hon. Friend recognise that he has the gratitude of most people in this country for making sure that members of the biggest terrorist organisation that the world has known for many years have been deported from the country?
    Mr. Rees: One problem that arose is that two of the now three people arrived in this country before I knew of the publication of the book and that aspect of their visit.
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    From the information I now have, I believe that two arrived before I made the orders. One person has gone back, and another is shortly to go. The third who appeared is shortly to be on his way too.
    Mr. Brittan: Does not the Home Secretary agree that there is likely to be continued anxiety over the case of Zohair Akache, who was deported from this country, then allowed to re-enter the country, was suspected of committing in broad daylight the murder of three prominent North Yemenis, was then able to leave the country again and is now suspected of being responsible for the hijacking which ended in Mogadishu?
    Does not the Home Secretary agree that it is extraordinary that, after all this time has passed, it is still not possible for him to confirm or deny that this man Akache, who entered and left the country in those circumstances, is in fact none other than the Captain Mahmoud responsible for the Lufthansa hijacking?
    Mr. Rees: If I were basing my information on the newspapers, and only on them, I would be able to confirm that. But it is not my business to confirm a story when the police do not have the basic information on which I can be absolutely sure.
    On the other issue, what the hon. Gentleman says is right. I see in the newspapers from time to time that I am accused of being devious about it, but there is no clever stuff behind the events. The man came into the country and went out again. He was using a false passport and so on, and I have the details. If the hon. Gentleman wants me to say it, a mistake was made, but it certainly was not by design. If the hon. Gentleman wants me to run around all the time saying that an error was made—well, I have said it now, and I hope that the hon. Gentleman is satisfied.

    Public Marches
    Mr. Silvesterasked the Secretary of State for the Home Department what proposals he has to regulate the procedure to be followed on public marches.
    Mr. Merlyn Rees: I am considering arrangements for control of processions and meetings as part of my examination of the Public Order Act 1936 and other relevant law.
    Mr. Silvester: Will the Home Secretary, in his review, consider that it is necessary that there should be advance warning of public marches and that chief constables should have power to control the routes? Does he not feel that it should lie within his responsibility, rather than with the chief constable, to decide on an absolute ban of a party political march
    Mr. Rees: Certainly one of the matters to consider is advance knowledge, and that I am considering. The control of the route is in the hands of the chief constable or the Commissioner.
    On the hon. Gentleman's last comment, I ask him to beware. At the moment my rôle in this matter is extremely limited. The initiation comes from the Commissioner or the chief constable on the grounds of public order and whether the police estimate that they can keep public order. If that is changed and the decision is taken by me on straight political grounds on the basis of whether I approve of the views of the people in the marches, we should, in my view, be moving in the wrong direction. The direction to look at in considering this aspect is, I suggest, in the area of race relations. But I do not want the power. There would be no question of taking advice from anybody. It would be a question of whether the march should take place as the Home Secretary says that it should not because he does not like the views of the people marching. I should not want that power.
    Mr. Bidwell: Does my right hon. Friend agree that this country has a longstanding tradition of peaceful demonstration and peaceful processions in our High Streets which should not be impaired, but that the central provocation at the moment is the efforts made by a handful of people who base themselves on the barbarities of the German Nazis and seek to stimulate race hatred in this country? Does not that call for the activating of that part of the Race Relations Act which seeks to outlaw the stimulation of race hatred?
    Mr. Rees: That part of the legislation which was passed earlier this year and came into force on 13th June has been activated. I want to gain evidence of how that legislation is working and to see whether this is the right way forward.
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    That part of the legislation has been activated and I think that that is the direction in which to think, especially in this review.
    Mr. Ian Lloyd: Would not the enthusiasm of those who seek to express their political convictions in this way be somewhat diminished if they had to make a contribution roughly proportional to the cost of the additional police who have to be allocated to their portection?
    Mr. Rees: That raises a much wider issue in all parts of the country, namely, the question of additional police required for various matters. It is a dangerous thought—not a dangerous one, but one at which we should look carefully—because, as my hon. Friend the Member for Ealing, Southall (Mr. Bidwell) said, we have a tradition of marching on the basis of a political view. I suggest that people have a right to do that. It is a traditional way in which views are expressed.
    Mr. Rose: My right hon. Friend is refusing to accept political responsibility, but does he not accept the overriding right of ethnic minorities not to be insulted, harassed and made objects of incitement to violence as against the question of free speech? On the question of the Manchester march, does my right hon. Friend agree that the cost to the public was £250,000, that he kept the march secret, and that in doing so he acted in conjunction with the Chief Constable of Manchester?
    Mr. Rees: I assure my hon. Friend, on the last part of his supplementary question, that I certainly did not keep the march secret, because it is none of my business to do the job of a chief constable. If the Home Secretary did so, he would be overstepping the mark. The Chief Constable of Manchester decided to act in that way. I went up to see him afterwards. In my view, it was the right thing to do because otherwise the trouble would have been far worse. But it illustrates the nature of the problem of decision-making by the police in this respect.
    Of course, on the first part of my hon. Friend's supplementary question, it is implicit that the new communities here—the immigrant communities, or the people who are born here but whose parents came from abroad—have a right to live

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    here without being abused. That is, I suggest, what we are talking about.
    Several Hon. Members rose—
    Mr. Speaker: Mr. Christopher Price. Question No. 16.
    Mr. Christopher Price: As the Member for Lewisham, West, I had hoped, Mr. Speaker, to ask a supplementary question on Question No. 15. However, I pass to Question No. 16.

    Confait Case (Report)
    Mr. Christopher Priceasked the Secretary of State for the Home Department whether he has now received the report by Sir Henry Fisher into the Confait case; and when he intends to publish it.
    Mr. Merlyn Rees: My right hon. and learned Friend the Attorney-General and I have received Sir Henry Fisher's report, and we propose to publish it in full as soon as possible.
    Mr. Price: I thank my right hon. Friend for the statement that he is willing to publish not merely the findings, as he had promised, but the full report. Is he aware that it is now five years since this miscarriage of justice took place under which three of my constituents were sentenced for a murder which they did not commit and that they are still waiting for their compensation? That is a very long period. Is he aware that it is four months since he announced the setting up of the Royal Commission into pre-trial procedures and that he has not yet announced the names of either the Chairman or the members of that Royal Commission? Will he tell us when we shall have those names?
    Mr. Rees: On the last point, although I should like to do that quickly, there are problems in appointing members to Royal Commissions which make it difficult to move quickly. All I can say on the first part of the question is that I intend to publish it. I know the part that my hon. Friend has played in this matter, and I know that when the report is published he will not complain in any way about the content of it.

    REIGATE
    Mr. George Gardinerasked the Prime Minister whether he will pay an official visit to Reigate.
    The Prime Minister (Mr. James Callaghan): I have at present no plans to do so.
    Mr. Gardiner: When the Prime Minister does come down our way, will he travel by British Rail, second class, in rush-hour conditions that he would not inflict on an animal—[HON. MEMBERS: "Do you?"]—yes—and explain to my commuter constituents why, after the so-called efficiency drives, they are being asked to pay a 16 per cent. rise in fares at the same time as they are being asked to restrict their own earnings to the region of 6 to 7 per cent.?
    The Prime Minister: I have not been into this question in detail, and I suggest that the hon. Gentleman tables a Question to the Secretary of State for Transport. What is quite clear is that the railways as a whole, like other nationalised industries, will be restricting their increases to the level of inflation. That makes it doubly important that we should keep down the level of inflation.
    Mr. Tim Renton: Is the Prime Minister aware that many of my constituents work in Reigate? [Interruption.] What is coming is not funny. In the light of the present firemen's strike, my constituents would very much like to know whether the Prime Minister now regrets his gross irresponsibility in backing the miners all the way throughout February 1974 in order to bring down the Conservative Government. Was it not from that time that there flowed three years of appeasement to the big unions from which the smaller unions, such as the firemen's, have suffered so much?
    The Prime Minister: I do not believe that what I said in Aberdare in 1974 arises out of a possible visit to Reigate in the future. But I suggest to the hon. Gentleman that he takes the following factors into account. First, he should read the whole of that speech, which I have done with great care. Secondly, he should recall that at that time the rate of inflation under a Conservative Government was beginning to soar. [HON. MEMBERS: "What was it?"] That, too, is contained in the speech at that time. Thirdly, Lord Barber had allowed the money supply to get wholly out of control. That, too, was contained in the speech. Finally, I objected very strongly

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    to the miners being called "extremists", and it was against that background that I said that the former Prime Minister had little chance of succeeding.
    Mrs. Thatcher: But does the Prime Minister recollect that he actually referred to the rate of inflation in that speech and complained about it as being 12 per cent? This Government have now been in power for as long since 1970 as the Conservative Government. When has the rate of inflation been as low as 12 per cent. under a Labour Government?
    The Prime Minister: I recall this very well. That was the point against which I was saying that inflation was steadily going up under the Conservative Government, and it continued to rise very steadily. Now, of course, the background is that inflation is steadily coming down. This makes a great deal of difference to the psychology and background of wage claims.

    SECRETARY OF STATE FOR EMPLOYMENT
    Mr. Michael Lathamasked the Prime Minister whether he will dismiss the Secretary of State for Employment.
    The Prime Minister: I refer the hon. Member to the reply which I gave to the hon. Member for Brentwood and Ongar (Mr. McCrindle) on 8th November.
    Mr. Latham: Is not unemployment the fatal electoral dagger at the heart of the Government? [Interruption.] It is no laughing matter. Is not the crude political reality of "Back to Work with Labour" that in February 1974 550,000 people were unemployed in this country, and that now there are 1·4 million out of work?
    The Prime Minister: Whether or not it is an electoral dagger, it is a figure that is totally unacceptable to any Member in this House or anyone in this country —and that goes far wider than electoral considerations. That is why the Government's policies, both internally and internationally, are directed towards trying to get action that will reduce these figures. Internally, as the hon. Gentleman knows, we have taken a great many measures that have had the effect, even
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    at the present time, of saving more than 300,000 jobs.
    I would say in conclusion that, with respect, it does not lie in the mouths of the Opposition Front Bench to attack us on matters of this kind when the right hon. Member for Leeds, North-East (Sir K. Joseph) says that all rescues and all subsidies do great harm, because if that policy were adopted the unemployment figure would be a lot higher.
    Mr. Pavitt: May I, in complete opposition to the question asked by the hon. Member for Melton (Mr. Latham), ask my right hon. Friend to convey the thanks of the Government and Back Benchers to the Secretary of State for Employment and his Department for the way in which, quietly and determinedly, for 12 months he has dealt with the Grunwick dispute, and, secondly, to thank him on behalf of the people in the area for the efforts he has made to cool down and conciliate a very difficult situation?
    The Prime Minister: Yes, Sir. My right hon. Friend has done a great deal in everything that he has tackled in relation to the Grunwick dispute to try to get a fair and reasonable settlement of it. I think that what he has done commands the support of nearly everybody in the country, except, perhaps, some prejudiced Opposition Members.
    Mr. Prior: How does the Prime Minister reconcile his statements now about increases in wages of over 10 per cent. leading to increasing unemployment with the reality of 1974–75 when wages were going up by 20 per cent. and 30 per cent. and when, apparently, according to the Government, that had nothing to do with the rate of unemployment?
    The Prime Minister: That is not what has ever been argued on this matter.
    Mr. Pardoe: I recognise that the Prime Minister is right in saying that the present level of unemployment is unacceptable, but does he recognise that there is a mood of defeatism about the level of unemployment throughout the Western economies? Has he considered President Carter's proposals for changing welfare and unemployment benefits, which would mean that the Government would pay people to work rather than for unemployment? Does he recognise that the Governments

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    of Western economies, including the British economy, have to become the employer of last resort if unemployment is to be defeated?
    The Prime Minister: I think it is the case that the leaders of the industrialised Western countries do not yet have a clear view of how to overcome the problem of 16 million unemployed, which I think is to a large extent caused by having large OPEC surpluses combined with a large and rapidly increasing Japanese surplus, both of which are having a seriously deflationary effect in the Western world. It is a problem to which we have to turn our attention, but it is easier to analyse than to prescribe a solution.
    Mr. Heffer: Is my right hon. Friend aware that many of us on the Government side—most of us, I think—feel that my right hon. Friend the Secretary of State for Employment has done a first-class job within the limits of the policy of the Government in relation to these matters, and that my right hon. Friend, through the imaginative schemes for job creation and so on, has helped considerably to put people to work but that, nevertheless, that in itself is not enough? Can my right hon. Friend indicate what further steps the Government intend to take to bring down the levels of unemployment?
    An Hon. Member: Give him a job.
    The Prime Minister: No, that would not do it either—hardly at all. I agree entirely with my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) about the work of the Secretary of State for Employment. The Secretary of State for Employment has done a remarkable job. Indeed, the new training schemes have aroused a great deal of interest in other Western industrialised countries, especially the scheme to provide for young people to have either further training or further education. We shall continue to do what we can as regards the future levels of unemployment. As my hon. Friend knows, there has been an addition of public expenditure—with which I assume the Tory Party would not agree —of £400 million to help the construction industry. We shall continue to take whatever measures are necessary, consistent with reducing the rate of inflation.

    PRIME MINISTER (ENGAGEMENTS)
    Mr. MacKayasked the Prime Minister if he will list his official engagements on 17th November.
    The Prime Minister: This morning I presided at a meeting of the Cabinet. In addition to my duties in this House, I shall be holding further meetings with ministerial colleagues and others.
    Mr. MacKay: Bearing in mind the tragic deaths of which we have learned today, and bearing in mind, too, the chaotic and inadequate state of our firefighting services, will the Prime Minister spend a little time today considering whether he is still satisfied that the Home Secretary is capable of producing a quick and satisfactory solution to the negotiations with the firemen's union?
    The Prime Minister: Negotiations with the Fire Brigades Union are being conducted by the local authorities, not by my right hon. Friend. They are acting within the pay guidelines which the Government have prescribed. Clearly, that is one of their difficulties. But I do not believe that all the figures about pay have yet got across, or, indeed, the figures of what would be received in gross pay by a number of firemen. That will have to be publicised pretty soon so that we have a better indication of how firemen compare with other industrial workers.
    Mr. Spearing: Will my right hon. Friend, on his way back to Downing Street, call at the European Movement in Whitehall Place and tell it that its statement last year that the historic decision for direct elections represents the first step towards the creation of a United States of Europe is incorrect? Although he said that the Assembly would have the same powers as it has now, does not my right hon. Friend agree that it has increased powers since July over the budget and, therefore, his statement of last summer is perhaps not as correct as it might have been?
    The Prime Minister: No, Sir; I do not intend to call at Whitehall Place on my way back to No. 10. I have a rather busy schedule. As regards the statements about the development of the European

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    Community, I think that I have made my position clear, including the statement I made at the Lord Mayor's Banquet last Monday.
    Mr. Gordon Wilson: Will the Prime Minister take time today to read the evidence of the TUC to the Energy Commission disapproving of the over-rapid depletion of the offshore oil resources? Will he, as a consequence and in view of the remarks in that evidence, call a meeting with the Secretaries of State for Industry and for Energy to discuss the possibilities of using oil for petrochemical investment, since the international oil companies do not seem to be investing much in that direction at present?
    The Prime Minister: The question of depletion is an important national question, and the Government have given a lot of consideration to the proper rate of depletion. For the first few years during which the oil will be flowing, the rate of depletion will be governed by agreements with the oil companies. That will take us up to a level of perhaps 100 million tons a year. After those first few years, it will be possible for us to review the rate of depletion and see whether it is better to keep more of the oil under the North Sea and import more, or whether we should seek to be self-sufficient or, indeed, over-self-sufficient. All these questions come up for decision during the discussions that we shall have during, I hope, the next few months. For the first two or three years, however, we are bound by the agreements already made.
    Mr. Whitelaw: Reverting to the firemen's strike, if, alas, the strike is not settled by the negotiations, as I am sure that the House very much hopes it will be, will the Prime Minister discuss with his right hon. Friend the Home Secretary again the position of the equipment available to the troops? They are being asked to undertake a very dangerous and difficult job. We accept what the Home Secretary has said—that certain parts of the equipment probably cannot be used without training—but we question whether that goes for all the equipment, in particular the, breathing equipment. Will the Prime Minister and the Home
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    Secretary look very carefully at this matter again?
    The Prime Minister: Yes, Sir, most certainly. In fact, the Home Secretary and I and other Ministers have had discussions on this matter. There seems to be a difference of view about the breathing apparatus, because the information we have is that it is not easy to use without proper training. But, as regards other apparatus, we would have to balance two considerations. One is that the best equipment that is available in the fire stations should be used to stop an outbreak of fire or to bring it under control. On the other hand, if it seemed likely that we were on the edge—I hope that the right hon. Gentleman will agree with me—of a negotiated settlement, and the use of that equipment was likely to start the whole of the friction—[Interruption.] Perhaps the Opposition do not agree with that, but that at least would be my view about it. Perhaps they will allow me to state my view, whether Members of the Opposition agree or not. If we were on the edge of a negotiated settlement and rushing into fire stations and taking out a lot of equipment were to set back that settlement by two or three weeks, it would simply not be worth it. The Government must judge the matter on the basis of getting the best use out of the apparatus and getting a negotiated settlement.
    Mr. Whitelaw: While I would not wish to argue with the Prime Minister about anything that might make the settlement of the strike more difficult, I wish to return to one point about the breathing equipment. There is no difference of opinion. I am asking the Prime Minister whether he and the Home Secretary will look again at the matter to make absolutely certain that the breathing equipment cannot be used. If it is proved that it cannot be used, we ought to know, but our troops deserve every possible protection that can be given.
    The Prime Minister: I agree entirely with the right hon. Gentleman about that. I will certainly have another look at it with the Home Secretary to see whether breathing apparatus can be used by untrained soldiers. If it can, they should have it.

BUSINESS OF THE HOUSE
Mrs. Thatcher: May I ask the Lord President to state the business for next week?
The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): The business for next week will be as follows:
MONDAY 21st November—Supply [1st Allotted Day]: there will be a debate until about 7 o'clock on industrial tribunals, on a motion for the Adjournment, and afterwards on transport policy on an Opposition motion.
Motion on the Counter-Inflation (Price Code) Order.
TUESDAY 22nd November and WEDNESDAY 23rd November-Progress in Committee on the Scotland Bill.
At the end on Wednesday, motions relating to the Artificial Insemination of Cattle Regulations.
THURSDAY 24th November-Second Reading of the European Assembly Elections Bill.
Motion to approve the new Highway Code.
FRIDAY 25th November-Private Members' motions.
MONDAY 28th November-Consideration of Private Members' motions until 7 o'clock.
Afterwards, motion on EEC Documents R/77 Nos. 2147, 2428 and 2429, 2434, 2521 and 2642 on fisheries.
Mrs. Thatcher: As the situation in the steel industry is becoming serious, will the Leader of the House say when he will be in a position to provide a whole day to debate the matter?
Mr. Foot: I cannot say that there will be an opportunity for a full day's debate in the near future, and certainly not next week on the business that I have announced. I agree with the right hon. Lady about the seriousness of the situation in the industry. Discussions are still proceeding. We shall see whether there should be a debate at a later stage, but I cannot give her any promise on that subject now.
Mr. Skinner: Would my right hon. Friend urge upon the Select Committee dealing with public accounts to look into a matter which has never been brought before Parliament in any way but nevertheless is a matter of great public importance, namely, the operation of the lifeboat scheme to rescue the sleazy secondary banks and property companies that were on the verge of collapse or in a state of collapse, starting in 1973? Will he ensure that the Chairman of the Public Accounts Committee—the right hon. Member who is Chairman of the Back-Bench 1922 Committee on the Tory side, the right hon. Member for Taunton (Mr. du Cann) does not take part in these proceedings, because Keyser Ullmann—in which he played a fairly prominent part —was one of these banks? Will he bear in mind that it has already cost the Bank of England—
Mr. Speaker: Order. Would the hon. Gentleman be kind enough to relate it to the business for next week.
Mr. Skinner: Will my right hon. Friend bear in mind that it has already cost the Bank of England—in other words, the taxpayer—£120 million?
Mr. Speaker: Order. The hon. Gentleman cannot argue the case now. It is a question of business for next week.
Mr. Hordern: On a point of order, Mr. Speaker. May I ask whether the hon. Member for Bolsover (Mr. Skinner) gave my right hon. Friend the Member for Taunton (Mr. du Cann) any notice of what he was going to say about him, and should it not be his duty to do so?
Mr. Speaker: I cannot answer that.
Mr. Peter Mills: Does the Leader of the House realise the very real concern felt by the European Legislation Committee on the persistent imbalance between the Guarantee and Guidance Fund in the Community and, indeed, the Regional Development Fund? Will he bring it to the attention of the Ministers who are meeting in Brussels next week that they should deal with this subject as a matter of urgency, and will he also inform those Ministers that the Committee feels strongly that there can never be an improvement in the problems

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of surpluses until this imbalance is dealt with?
Mr. Foot: I shall certainly bring the hon. Gentleman's question to the notice of my right hon. Friend.
Mr. Greville Janner: Will not my right hon. Friend provide time for a debate on this morning's incredible travesty, when an SS officer who was under an order for deportation made by the Home Secretary was allowed out of his cell in order to attend a Press conference to propagate the criminal views of his organisation? Does he not think that holding such a debate is even more important because of the allegation, first, that there is one of these officers still in this country who can presumably do the same and, secondly, that a representative of the Daily Express was allowed into the cell so as to buy this man's evil story from him?
Mr. Foot: I shall certainly ask my right hon. Friend to look into all the points that my hon. and learned Friend has raised. Although I am not criticising his statement in any sense, some of those statements have been, I believe, made in some sections of the Press but are not necessarily true. But I shall certainly ask my right hon. Friend to look into the matter. I think that the action that he has already taken indicates the view that the Government take of this matter.
Mr. Marten: As we are now in a new Session of Parliament, could the Leader of the House get hold of his Front-Bench colleagues and ask them to come here after meetings in Europe and make statements in the House of Commons? Some Ministers are getting away with ducking the rather nasty things that they have to talk about—[HON. MEMBERS. "Such as what?"[—the Common Market. Could we have an assurance that the Secretary of State for Foreign and Commonwealth Affairs will come here on Wednesday after a two-day meeting of the Council of Ministers of Foreign Affairs and make a statement about the matter which he has been discussing?
Mr. Foot: I can assure the hon. Gentleman that my right hon. Friends who go to Brussels are certainly not seeking to duck coming back to the House of Commons and reporting. Neither my
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right hon. Friend the Minister of Agriculture—
Mr. Marten: He is good.
Mr. Foot: I agree, he is very good indeed. Nor the Foreign Secretary, and I think he is pretty good, too. I will certainly give him the suggestion that he should make his report on Wednesday. I am sure that is what he himself would like to do, and that is the practice we are seeking to follow as regularly as we can.
Mr. John Garrett: Does my right hon. Friend agree that there is now a pressing need for debates on the machinery and management of Government, principally the report of the Central Policy Review Staff on the Diplomatic Service and the Expenditure Committee's report on the Civil Service?
Mr. Foot: I quite agree that these are subjects which we should like to debate. I cannot promise the House that we shall have much time before Christmas for extended debates on many of the subjects that will be raised, but I hope that we shall have more opportunity later. However, I agree with my hon. Friend that those are two strong candidates.
Sir Bernard Braine: Bearing in mind the widespread anxieties over the increase in alcohol abuse, especially among the young, which has been underlined by the Expenditure Committee's Report on preventive health, the Government's Advisory Committee on Alcohol and my own working party report on industry and alcohol, will the Leader of the House not recognise that this grave and growing social problem is a fitting subject for urgent debate in the House, and will he not provide time for it before Christmas?
Mr. Foot: I must reply to the hon. Gentleman in very much the terms that I used to my hon. Friend the Member for Norwich, South (Mr. Garrett), although I am not relating the different subjects. I am aware of the hon. Gentleman's great interest in this subject, which I am sure is widely shared. However, for the reason that I have already indicated, the chances for a debate on it in the next few weeks are not very high.
Mr. Wrigglesworth: Is my right hon. Friend aware that many right hon. And

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hon. Members, on all sides of the House, I think, were disappointed that, following the Bottomley Report, there were no proposals to introduce legislation? Can the Leader of the House tell us what proposals he has for introducing legislation to reform the administration of the House, and will he find an opportunity to make a statement on what steps are being made to implement some of the recommendations that do not require legislation?
Mr. Foot: I believe that as many as possible of the recommendations that do not require legislation are already receiving attention and that some of them have been put into operation.
Certainly, I am eager that the House should carry into effect the legislation on the subject that has been proposed, but it will take up a little parliamentary time and, of course, the House, Back-Bench Members especially, will want to discuss it. I cannot promise to introduce legislation in the immediate future, but we are hoping to introduce it this Session.
Mr. Pattie: Has the Lord President seen the latest report from the European Legislation Committee, in particular the second item in the report calling for an urgent debate by this House on the subject of an action programme for aeronautical research throughout Europe? Can he promise an urgent debate on this matter, relating, as it does, to an Instrument which has to do with an industry employing more than 200,000 people?
Mr. Foot: I shall look at the dates of the particular Instrument and see what the Scrutiny Committee recommends on the subject. I cannot give the hon. Gentleman a special date now for debate, but I shall look into the matter that he has raised.
Mr. Faulds: As my right hon. Friend suggested last Session that there would be progress on the Public Lending Right Bill this Session, what is afoot?
Mr. Foot: I think that it would have been much more satisfactory if that Bill had been carried through the House of Commons. Certainly that was the Government's view. They remain firmly convinced that the principle of the Public Lending Right Bill is the right principle, and we should like to see legislation car-
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ried into effect. Unfortunately, we were not able to get it through the House, and it is not included in the legislative programme at the moment. However, we are looking for some other way legitimately to approach the matter and to make proposals on the subject, and I am eager to have the assistance of all hon. Members—I am sure that it would be the majority in the House—in seeing whether we can make such proposals effective.
Mr. Maxwell-Hyslop: Since the last day on which the House can entertain a Prayer against the dismissal of Sheriff Peter Thompson is 6th December, will the Leader of the House now tell us whether, in the coming week, he will make time for that Prayer and, beforehand, move above the line on the Order Paper the motion to admit Sheriff Peter Thompson to the Bar of the House, so that hon. Members can hear what he has to say for himself before using the vestigial powers of the old High Court of Parliament to decide whether he should be dismissed from his office?
Mr. Foot: As I told the House last week, I am sympathetic to having a debate on these subjects. I am doubtful whether we could have a debate on the aspect of the matter raised by the hon. Gentleman, although I understand the reasons why he has proposed it. I understand also the reasons why the Prayer was put down in the name of my hon. Friend the Member for West Stirlingshire (Mr. Canavan). In a reply to my right hon. Friend the Member for Kilmarnock (Mr. Ross) several months ago I said that I thought that the matter should be debated. We shall try to see whether some time can be provided for a debate before the date suggested by the hon. Gentleman, but not necessarily in the form that he has suggested.
Mr. Strauss: Does my right hon. Friend remember that in the summer the Select Committee of Privileges brought forward proposals for bringing up to date its procedure and the principles on which it operates, that these proposals require parliamentary endorsement, and that it was hoped to have them before the House before the Summer Recess? Can my right hon. Friend give any indication when these proposals will come before the House for consideration?
Mr. Foot: Because of the pressure of time on the House, I am sorry that I cannot give my right hon. Friend a firm indication of a date when we could discuss the recommendations. However, I accept what my right hon. Friend has said about the high desirability of the House looking at these matters and passing its judgment upon them. The recommendations were made unanimously by the Privileges Committee that looked into the question. Hon. Members from all parts of the House said that they would be a great improvement in the procedures of the House. I shall certainly see in the new year whether we can have a debate and get some final action on the matter.
Mr. Boscawen: Is the right hon. Gentleman aware of the disappointment of the shoe manufacturing industry that it is now over five months since his right hon. Friend the Secretary of State for Industry received the report of the sector working party and that he has not yet published his recommendations?
Mr. Foot: I shall certainly see whether my right hon. Friend can make a statement at an early date on the matter.
Mr. Corbett: Can my right hon. Friend arrange for an early statement to be made in the House on the outcome of the rate support grant negotiations? Will he accept from me that it would be wholly improper if the first announcement of the outcome were made outside the House, where we do not have the facility to question my right hon. Friend the Secretary of State for the Environment?
Mr. Foot: I understand the importance of the subject raised by my hon. Friend. My right hon. Friend the Secretary of State for the Environment is not eager to escape any questions. I shall discuss the matter with him and see how we should proceed best, in the interests of the House and the country generally, on what is a matter of great importance.
Mr. Baker: May I press the Leader of the House to have a debate before Christmas on the Expenditure Committee's Report on the Civil Service? This matter involves not only the efficiency of central Government but the powers as between the Treasury, the Civil Service Department and the Cabinet Office. As the appointment of the head of the Civil Service is pending, it would be useful to
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have the views of the House on all these matters before such an appointment is made.
Mr. Foot: I understand the special point about the appointment, and I shall have a look at it. But, for the reasons I have put forward previously, I cannot promise a debate on that report in the next few weeks. That will take us near to Christmas, if not actually into Christmas. I suggest to the hon. Gentleman that he should set his sights on the New Year and not on the old one.
Mr. Molloy: Bearing in the mind the grave apprehension spreading throughout the Greater London area because of the failure of the emergency warning systems relating to all sorts of matters which endanger life, will my right hon. Friend consider a debate on this very serious issue, which is causing extreme anxiety among millions of Londoners?
Mr. Foot: My hon. Friend raises an extremely important question, but it underlines again the many strong candidates competing for time in the House.
Mr. Clegg: Will the Lord President ask his right hon. Friend the Secretary of State for the Environment to make a statement in the course of next week on Government help for those areas of the Lancashire coast that have been badly damaged by floods and gales?
Mr. Foot: My right hon. Friend the Prime Minister commented on this matter earlier this week in the House. I am not sure that my right hon. Friend the Secretary of State can make a statement on the subject next week, but I am sure that he will seek the earliest possible opportunity of communicating with the House when he has been able to look at it all.
Mr. Mark Hughes: In view of the complexity of the proposals from the Commission on fishing matters and their great interest and importance, will my right hon. Friend consider giving an additional hour for the debate on fishing on Monday week, extending it to, say, 11 p.m. instead of 10 p.m.?
Mr. Foot: Under the arrangement we have made, I think there is already an additional amount of time to that which would have been available had the debate started after 10 p.m., but I shall certainly

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consider what has been suggested by my hon. Friend to see whether we can give further time for debate then. I cannot give a promise now.
Mr. Michael Hamilton: Does the Leader of the House believe that the majority of right hon. and hon. Members wish mass lobbies of Parliament to continue?
Mr. Foot: Yes, Sir. I think it would be a great infringement of the rights of the people if we were to say that mass lobbies should be forbidden.
Mr. Robert Hughes: May I reinforce the point made by my hon. Friend the Member for Durham (Mr. Hughes) about fishing? The second half of Monday's debate is to be on fisheries, including, I understand, some EEC documents. Since the future of the fishing industry is in such disarray and there are such important issues to be discussed, could not the Ten o'clock Rule simply be suspended to allow hon. Members to make their points of view fully and give full opportunity for Ministers to reply?
Mr. Foot: I accept what my hon. Friend says about the importance of looking at the matter, but I cannot give a promise until I have considered some of the consequences. I recognise my hon. Friend's strong interest in the matter and the strong desire of right hon. and hon. Members in all parts of the House to contribute to that debate.
Several Hon. Members rose—
Mr. Speaker: Order. I shall call only those hon. Members who have been rising all the time, seeking to catch my eye.
Mr. Rees-Davies: As the lifts in the Palace of Westminster have been out of order for 10 days or more, and clearly some of those lifts were deliberately put out of order by industrial action, including two up to the Upper Corridor, North floors, what action is the Lord President taking to ensure that they are now put back into use, bearing in mind that there are some hon. Members in this House who need to be able to go to the upper Floors and whose health can be severely affected by the industrial action of only four men? When does he
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propose, if they do not return to work, that they should be dismissed and replaced by some others? Are they receiving pay at the present time in respect of the lack of work they are doing?
Mr. Foot: I greatly deplore the invenience for all hon. Members caused by the absence of the lift service. I do not think that the best way to solve the problem would be to do what the hon. and learned Gentleman suggested. Meetings are continuing to see whether a settlement can be reached. This is another dispute in which it has to be accepted that the pay policy of the Government should also be upheld.
On the subject of any deliberate damage, I have no evidence of any malicious damage by the men concerned.
Mr. Michael Latham: Will the Lord President ask the Secretary of State for the Environment to make a statement next week about his conclusions on the Housing Policy Review following the period of consultation which has taken place? It is getting quite urgent.
Mr. Foot: Yes. I understand that the House uses the opportunity today to press for many statements from Ministers on a variety of different subjects. But sometimes the House itself does not wish to have too many statements made throughout the week because that can interfere with the time allotted to other debates. Given all those limitations, however, I shall certainly talk to my right hon. Friend on the matter.
Mr. Wyn Roberts: If not next week, when will the Lord President find time for a Welsh day debate, as we have not had one on the Floor of the House for a very long time and as the condition of the Welsh economy is now deplorable?
Mr. Foot: The precious word "Wales" has cropped up a time or two during the past few days. I am not, however, quite sure what subject the hon. Gentleman had in mind when he asked the question. References to the economy were also made in the past few days.
I agree that we should have the normal arrangements for debates about Wales. Towards the end of the last Session, discussions took place about whether we should have the day's debate

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then, although it was not considered convenient by all that we should have it then. I shall look at the possibilities of a future debate on Wales. I cannot promise it within the next few weeks, for the reasons I have already given.
Mr. Dykes: With the new Session now under way, will the Leader of the House turn over a new leaf in respect of European scrutiny and the scrutiny of EEC legislation by promising a much more rational and sensible regime for the scrutiny of all those Instruments coming before the House, including using the Committtee upstairs which was used before but which may well necessitate the possibility of proper substantive motions—which would certainly be acceptable, and indeed overdue—and more full-day debates on the Floor of the House on the commanding heights of EEC policies?
Mr. Foot: We have made some improvements in the way in which the House deals with EEC business. However, I fully acknowledge that the way in which it is dealt with is far from satisfactory to the House and to the country. There is to be a debate on this subject on Monday week on a motion presented to the House by my hon. Friend the Member for Newham, South (Mr. Spearing), and that will be a convenient time to discuss some of these issues.
The questions were also referred to in a letter from my right hon. Friend the Prime Minister to the Secretary of the Labour Party recently, which received prominent publication, and I believe that the views expressed there will also enter into that debate. It may take some time to improve further the way in which we debate these matters, but it certainly is an issue of first-class importance for the House of Commons.
Mr. Sainsbury: In view of the disturbing reports in the Press about the National Theatre, will the Leader of the House provide an opportunity for the House to discuss the theatre's financial situation, and also the general situation regarding assistance to the arts?
Mr. Foot: I cannot promise such a debate, for the reasons that I have indicated, although I certainly accept that that, too, is an important subject. The
774
House has a multitude of opportunities, apart from the time that is provided for Government business, to raise these important questions, and I am sure that the hon. Gentleman will find them.

BILLS PRESENTED
  HOUSING (FINANCIAL PROVISIONS) (SCOTLAND)
  Mr. Secretary Millan, supported by Mr. Hugh Brown and Mr. Robert Sheldon, presented a Bill to make new provision for Scotland with respect to grants for housing authorities and grants and loans to voluntary organisations concerned with housing; to provide for grants and loans by local authorities to meet expenses of repairing houses in a state of disrepair; to make further provision for the improvement of houses below the tolerable standard; and to make minor amendments of certain enactments relating to housing; and the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 10.]
  SHIPBUILDING (REDUNDANCY PAYMENTS)
  Mr. Secretary Varley, supported by Mr. Secretary Mason, Mr. Secretary Millan, Mr. Secretary John Morris, Mr. Secretary Mulley, Mr. Secretary Booth, Mr. Secretary Dell, Mr. Joel Barnett, Mrs. Judith Hart, Mr. Gerald Kaufman and Mr. Les Huckfield, presented a Bill to provide for the making of supplementary payments to or in respect of employees of certain shipbuilding and other companies in respect of redundancy or transfer to less well-paid employment; and the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 11.]

  BUSINESS OF THE HOUSE
  Ordered,
  That, notwithstanding the practice of the House relating to the interval between the various stages of Bills of aids and supplies, more than one stage of the Finance (Income Tax Reliefs) Bill may be proceeded with at this day's sitting.—[Mr. Robert Sheldon.]

  STATUTORY INSTRUMENTS. &c.
  Ordered,
  That the draft Development of Tourist Traffic (Northern Ireland) Order 1977 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Foot.]

ORDERS OF THE DAY

  FINANCE (INCOME TAX RELIEFS) BILL
  Order for Second Reading read.
  3.57 p.m.
  The Financial Secretary to the Treasury (Mr. Robert Sheldon): I beg to move, That the Bill be now read a Second time.
  The important factor that we have seen over the past few months has been the huge increase in confidence in the United Kingdom. On looking at the events of the past few months we can see the astonishing and unparalleled change that has taken place in the financial outlook for our country.
  In October last year we had a MLR of 15 per cent., but today it stands at 5 per cent., the lowest, I remind the House, since 1972. We have a falling rate of inflation. It is 13 per cent. for this quarter, and it is continuing to fall. The price of materials and fuels today is lower than in January of this year and, as we all know, we have official reserves of the unparalleled sum of 20 billion dollars. The balance of payments—we normally associate a Labour Government with putting right the balance of payments—is expected this year to be a surplus of more than £250 million, as opposed to the deficit of £1,405 million last year.
  At the Lord Mayor's banquet on Monday the Prime Minister referred to the transformation that had taken place and drew attention to the two extreme views that were held last year and until fairly recently. He contrasted the excessive gloom of last year gloom clearly in excess of the situation as it then was, with the almost dangerous position a month or two back when, as he put it, the joybells were ringing rather too loudly. There is a need for a balance in the assessment of our position as we come to this further aspect of the change of our financial fortunes, as illustrated by this Finance Bill.
  Of course, we know that we have brought about some fundamental improvements in our financial position. The task now is to translate those improvements to the more general

  777
  economic sphere by means of the control of pay increases so that, as the water level of inflation falls, the dam of pay rises is preserved, at least in some respects, through the responsibility of those who are implementing these matters. It is important to ensure that, as time passes and people see the level of inflation falls, pay increases take account of the changes in price levels that we have seen and will continue to see.
  Mr. Dennis Skinner: Did I hear my right hon. Friend correctly? Did he say that the pay policy must be preserved "in some respects"? If he did, can I assume that what he and the Treasury have in mind is that there will be some relaxation in some direction for some people? Notwithstanding those who have already managed to break the 10 per cent. dam to which he referred, will there be something for some other people? Perhaps he could name a few—such as, say, firemen?
  Mr. Sheldon: The levels of inflation are related very closely to the levels of pay increases. If the level of earnings increases over the next few months can be maintained at no more than 10 per cent. we can have a level of inflation that will not only fall but continue to fall. That is the important element of our future policy. As the level of inflation falls, so it allows for the increase in employment opportunities which lies at the very heart of what we shall have to consider in our economic policy as one of the major aspects of our future changes in that direction.
  As regards industrial improvements, we know that they will have the advantage of reducing costs, which I mentioned earlier, and we hope that the forecasts for investment will be borne out and will lead to the industrial improvement which will eventually show in the levels of employment and of industrial activity.
  But part of the transformation that we have seen in our financial situation has taken place against the background of a weakness in world economic activity. The important aspect of this is that in 1973 the large increase in oil prices showed all of us—regrettably—the instability of the world economic order, when we had operated so very largely on the assumption that when they acted
  778
  together Governments were always able to dominate and control events.
  That price rise set off a chain reaction which showed that those happy assumptions which we had made over so many years had an insecure basis. Now we can see the limitations of that optimism. We see, further, the need to encourage those countries which are able to expand, because of their advantages in matters of inflation and exports, to make use of their financial and economic advantages and undertake responsibility such as was undertaken by the United States in not dissimilar circumstances in the late forties and early fifties.
  But as for the recovery of world trade in manufactured goods, the world position is not strong at all. In 1975 there was a reduction in world trade in manufactures of 4 per cent. That was attributable to the oil price rise. In 1976 world trade increased by 9½ per cent. In the first half of this year we have seen the level of world trade increasing at an annual rate of only 4 per cent.—half the expected trend to which we were looking forward.
  We see not only the halting of the increase in world trade but its diminution. This has led to the call by a number of countries for those with industrial and economic advantages to play their part in improving the prospects for world trade expansion. I believe that it is right that we should play our own modest part—it is bound to be modest—in providing some encouragement to world trade expansion. The Government's policy is to accept that we can provide for some expansion of manufacturing industry of a kind that we can maintain. This is the essential part of our programme for expansion.
  Investment in machinery and plant requires the confidence of those investing that the goods produced can be sold. Other factors, such as the level of interest rates and the availability of funds, of course play their part. But fundamentally investment will not take place unless those concerned are convinced that the goods manufactured will not be surplus goods but will be sold.
  The strategy of which this Bill forms a part is that of a steady and sustained recovery in production, improvement of living standards and increase in employment opportunity. Within that total

  779
  strategy, which continues, there is scope for these measures, costing about £1 billion in the current year. Under the provisions of the Bill, this sum will be spent on raising tax allowances, the advantage of which is that the effect will be early. There will be money in people's pockets. If this action had not been taken, a further 900,000 people would have become liable to tax.
  Mr. Nicholas Ridley: If this is an expansionary measure, why has the Chancellor taken up only £1 billion of the extra £2 billion available to him through the overestimation of income tax, because the borrowing requirement is forecast to be £2 billion less than expected in April? Surely it is a contractionary measure.
  Mr. Sheldon: The hon. Gentleman will know that we shall have a Budget next spring. He may have some of his answers then. But for the present we have seen the opportunity for a modest level of expansion. Following this, we shall naturally be keeping a close look on developments to see how industry has reacted to these changes.
  Mr. Ridley: The right hon. Gentleman said that this was an expansionary action designed to create greater industrial activity. He now says that I must wait until April to find out whether we get it then. Surely he should recant on his earlier statement and admit that this is a contractionary action.
  Mr. Sheldon: In the past the hon. Gentleman frequently objected to what he called "fine-tuning". To tune as finely as that would hardly commend him to many of his hon. Friends on the Conservative Front Bench. These broad moves are the right kind of moves to take, and they are within what we feel sure we can afford. The position allows us to move further. The hon. Gentleman will see the solution in the Budget next year.
  The decision to adjust the 1977–78 tax liabilities, announced in the autumn package, came on top of a year of exceptionally disrupted work patterns for the Inland Revenue. It has brought to a head certain feelings of frustration among the staff. We have had meetings and discussions with the Inland Revenue
  780
  Staff Federation to find ways of easing the problem. Following these, there were a number of well-attended consultative meetings within the federation. I am pleased to see that, despite the deep feelings of those concerned, the Inland Revenue is now able to go ahead with the recoding.
  Where coding adjustments are not involved, our hope is that the great majority will receive their refunds on, or close to, the date in the timetable originally proposed, with repayments beginning after 23rd November. Most of the remainder will have their adjustments before Christmas. Most of the weekly-paid coded cases will be dealt with before Christmas, but there may be a minority of those paid monthly who cannot be given their repayments before then. Taking into account the problems posed for all concerned, it is encouraging that a group of civil servants, sufficiently aggrieved to attend their union meetings in large numbers and at short notice, felt that, on balance, they were able to live with the situation.
  We hope that most of the repayments will be made within the timetable that has been put to the House. The repayments will be about £20 for a single person and £35 for a married couple. After that there will be a 65p a week reduction for a single person and £1·05p for a married couple.
  All the changes will, of course, maintain the real value of personal allowances and create a gap between them and the main social security benefits. I hope that it will be possible to go further in 1978–79 if the economic position allows. I think that it will be necessary to go further if the harmful effects of the poverty trap are to be reduced for so many people at the threshold level.
  There are, of course, two causes of the poverty trap. First, there is the overlap between taxation and benefits. As taxation thresholds have risen in the past by less than the retail price index and as benefits have increased more than the retail price index, overlap has occurred. However, we hope that this instalment is an indication of the way in which we intend to move.
  Mr. Nigel Lawson rose—
  Mr. Sheldon: Perhaps I may just give the second cause of the poverty trap.

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  The high initial tax rate of 34 per cent. together with the benefits rules means that net incomes tend to fall off as the gross incomes of the lower paid rise.
  Mr. Lawson: Will the Financial Secretary confirm that what he is saying to the House is not just that he expects to be able to go further in the next Budget in raising allowances in monetary terms but that he expects to go further in raising them in real terms?
  Mr. Sheldon: Certainly that is our hope. However, we shall obviously have to wait upon events. Nobody has viewed with pleasure the reduction in real terms of personal allowances. The reduction has not only produced an excessive taxation of those who ought not to have been brought into tax but has created problems for the administration of the revenue.
  Mr. Peter Bottomley: May I ask how it is possible to talk about reducing the poverty trap, which, in the main, affects people with children, without also talking about raising the value of child benefit and child tax allowance?
  Mr. Sheldon: That is obviously part of the whole story, but not the part that is being discussed here. We are talking about tax allowances, but that does not mean the ending of the poverty trap. A number of measures are required to do that. However, we are reducing the extent of the poverty trap in the two ways that I suggested.
  We are correcting some of the anomalies. The tax paid by the average man, as it reduces in real terms, will lessen the effect of the poverty trap. It is certainly our hope that we shall continue on that course.
  Mr. Patrick Jenkin: Is not my hon. Friend the Member for Woolwich, West (Mr. Bottomley) absolutely right? The figures that have repeatedly been published by Ministers show that the effect of the poverty trap is at its worst, and the overlap of benefit and taxation is at its worst, for families with children, yet this Bill does nothing to help such families. Therefore, the Minister is entirely missing the point when he says that that has nothing to do with the poverty trap.
  Mr. Sheldon: The right hon. Gentleman will know that we are not discussing child benefits and the way in which they can be used. [Interruption.] The right hon. Gentleman wants to talk about child benefits in the Finance Bill and the way in which they will be changed. I must ask him to conceal his impatience more effectively and wait until those occasions when the increases in child benefits are announced.
  Mr. Peter Bottomley rose—
  Mr. Sheldon: I have given way considerably. I hope that the hon. Gentleman will forgive me if I do not give way to him.
  I wish to say something about the tax paid and the benefits for the average man. I do not believe that the position is generally understood, because of the various muddled exchanges that we have recently seen. If one takes into account income tax, the national insurance contribution. with family allowances and child benefits and the changes that have taken place between these two and applies them to the married man on average earnings with two children under 11, one sees that in real terms, in 1977–78 prices, the position in 1973–74 was that he paid £902 whereas in 1977–78 he is paying £904. This is what has been happening unbeknown, it would seem, to very many hon. Members.
  Mr. Ridley: Those are highly misleading and bogus statistics. Is the Financial Secretary not aware that average earnings are 9 per cent. lower in real terms? Therefore, he is admitting that the average man is paying exactly the same amount of tax on very much lower earnings, which means that taxation is much more onerous.
  Mr. Sheldon: I accept that fully, and I have never sought to conceal the decline, but some of the very misleading statements that have been made ought to be corrected, and I was attempting to do that.
  Mrs. Barbara Castle: Is my right hon. Friend aware that I believe he is perfectly correct in taking child benefit into account in these calculations, because child benefit is an amalgam of child lax allowances forgone and cash allowances being brought into play? But, that being so, how can he say, as he did

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  earlier, that child benefit has nothing to do with the fiscal policy of this Bill?
  Mr. Sheldon: My right hon. Friend perhaps did not understand what I was seeking to explain, and perhaps I did not make it entirely clear. But, of course, it has to do with the total received and paid by any citizen with children.
  Mrs. Castle: This is fiscal policy.
  Mr. Sheldon: That is absolutely right, but the level of child benefits, because of the conventions under which we operate, is treated as public expenditure, and this will be available for debate.
  When the hon. Member for Blaby (Mr. Lawson) was a Whip, he spoke vociferously—I see that his transfer to a different position has not altered that—but I should explain to him that, whereas in the past child tax allowances were clearly part of fiscal policy, because it deals largely with tax allowances, in moving over to child benefits there is a problem because child benefits are seen within the context of public expenditure as a whole.
  I confess that this is not wholly satisfactory, and there are many unsatisfactory aspects, but that is the present position, and to move in the direction that my right hon. Friend the Member for Blackburn (Mrs. Castle) and many others might wish would bring about certain changes that we have not been ready and able to make at this stage— [Interruption.] I note the assurances of the right hon. Member for Wanstead and Woodford (Mr. Jenkin). He has given a number of assurances of a different kind concerning what he intends to do about transfer payments, and we have noted that with great interest, too. When his consultations are fully effected, we look forward to hearing how he intends to reduce all these public expenditures and bring about the happy state of affairs that he assures us will happen.
  I turn now to pensioners and widows. One of our main tasks—and this has been evident in the sacrifices that have been made in so many areas to provide the money for pensioners and widows—has been to preserve their living standards. The increase in age allowances in the spring and summer legislation, as well as the increases in this Bill and
  784
  the exemption from tax of the pension increase from November, means that earnings or income before any tax liability can be up to £455 for a single person and £701 for a married couple.
  These changes that we are bringing about in raising the threshold mean that there will be a benefit to 2½ million pensioners who will be paying tax. For widows and women pensioners under 65 the single tax allowance of £945 is now £100 more, and more than the taxable standard pension. Under the original Budget proposals the personal allowance was just below the taxable pension level, although the tolerances ensured that no pensioners with pension as their only source of income were liable to taxation. There has thus been a fundamental improvement in their position.
  I believe that it is desirable to adjust the balance between direct and indirect taxation, and this is only the first move in that direction. Under successive Governments there has been an increase in direct taxation.
  Mr. Peter Tapsell: Not successive Governments.
  Mr. Sheldon: The hon. Gentleman may say that, but I shall be presenting figures in a moment, and if he wishes to challenge them, I shall be pleased to listen to him.
  With direct taxation, if nothing is done people come into tax, and they come into tax frequently and at a higher rate. That is quite apart from increases in the rate of income tax by itself. This is the mechanism by which more people come into tax, and more come into tax at the higher rate. That is due to the progressive nature of the tax system.
  Under indirect taxation, if one does nothing revenue falls, apart from value added tax. To maintain the level of indirect taxation in real terms, we have to get legislation through the House of Commons. That has proved difficult not only this year but in previous years, too. The failure to revalorise has brought about some fundamental changes in the shift from indirect to direct taxation. We know the problems that we had this year on hydrocardon oil, but let me say something about one or two of the other duties.

  785
  In order to bring the taxation on beer, for example, to the same level as it was in 1968, there would need to be an increase in the duty of 31·6 per cent. To bring spirits to the same level in real terms as in November 1968 there would have to be an increase of about 70 per cent. To bring the tobacco duty to the real level of November 1968 there would need to be an increase of 36·2 per cent. Thus, the failure to revalorise indirect taxation has on its own contributed to the move towards higher direct taxes and lower indirect taxes. That is purely the mechanism of inflation and the result of not taking steps to counter that movement.
  Mr. Lawson: The Financial Secretary has made a strong argument for indexation, which some of us in the Opposition are always advocating and to which the right hon. Gentleman is opposed. But I cannot let him get away with charging that under successive Governments income tax has increased. Is not the right hon. Gentleman aware that under the previous Conservative Government the basic rate of income tax was reduced from the equivalent of 32 per cent. to 30 per cent., and that under the present Government the basic rate of income tax has gone up from 30 per cent. to 34 per cent.?
  Mr. Sheldon: I note the hon. Gentleman trying to claim praise for what his Government did, but he will recall that the result of that move was to increase the public sector borrowing requirement and increase the money supply. That is how those things were paid for. The hon. Gentleman ought to know that the enormous printing of money caused most of the troubles that we inherited from them. They paid for that tax reduction very dearly indeed. I am surprised at the hon. Gentleman, who has shown himself consistent on this point, trying to claim credit for that move, which was one of the precursors of the printing of money that we saw under the previous Government.
  Let me say something about the intention of the Inland Revenue, which is to achieve the twin aims of efficiency and, where possible, simplification. Efficiency is very largely a matter for the Inland Revenue itself. The computerisation that eventually we hope to see will
  786
  lead to some improvements, and these are now under discussion.
  Concerning simplification—
  Mr. John MacGregor rose—
  Mr. Sheldon: May I carry on with this matter for a moment? Simplification is much more the responsibility of the House of Commons. We all know that every hon. Member calls for greater simplification but at the same time his amendments invariably complicate the tax system. I plead guilty to that as, indeed, I am sure does every hon. Member who has ever sat in a Finance Bill Committee. Our task is to try to find some resolution of this problem between the natural concern that we have for justice, fairness and equity, and, at the same time, realising what we are doing to the tax system itself. When we look at the numbers of staff at the Inland Revenue, we see a mirror image of some of the activities that we have introduced at the time of Finance Bill Committee stages.
  Mr. MacGregor: Buried away in a recent Public Accounts Committee report was an important statement by the Chairman of the Inland Revenue that all tax options would have to be sorted out before 1979 if computerisation was to go ahead. Can the right hon. Gentleman confirm that? If so, what opportunities will there be in the House of Commons to discuss exactly what options will be required so that we may have an opportunity to comment before decisions are taken?
  Mr. Sheldon: There are a number of other matters that will need to be considered long before that. I am sure that the hon. Gentleman will have plenty of opportunity to make further comments, as these matters reflect the way in which the taxpayer will be affected. Naturally the House will be kept closely involved.
  Perhaps I may say something about some of the simplifications, as they are seen by many people, or changes or improvements that have been suggested. I turn to the matter of self-assessment, because it has concerned me and it has been concerning the Inland Revenue itself.

  787
  Among the problems that I see in connection with the automatic penalties in the United States, the powers of enforcement of a kind that this House could only with great difficulty accept, and some that it would positively turn down, are the right of entry into premises, the summoning of taxpayers to the Internal Revenue offices—in the United States—the way in which those penalties are assessed, and their automatic nature.
  These are great problems for any revenue service that tries to introduce a self-assessment system. The actual ability of the Internal Revenue Service in America to go into business firms at will and plug their programmes into computers in business firms to extract the information it required is a step beyond anything that we have previously imagined.
  But I think it would be wrong to work on the assumption that self-assessment leads to greater simplification. The United States personal tax system can be extraordinarily complicated, with reliefs multiplying almost without number. The American authorities give reliefs for casualties, reliefs for thefts, and they have proposals to give reliefs for the purchasing of gardening implements and the sharing of cars to go to work. The difficulty of the system is that it allows such reliefs in a way that our system does not allow, and because they are allowed, automatically a number of such proposals creep into legislation.
  I therefore beg the House to realise that that is not necessarily the way to greater simplification and that the cost that people pay in the United States and other countries with self-assessment is largely borne by the taxpayer. There is, therefore, an enormous hidden cost. It is reckoned that more than half of all taxpayers actually need to use accountants or tax return preparers to prepare their own assessments. That is an enormous cost, compared with the four-fifths of the people of this country who not only need no assistance but find their tax correct at the end of the year without any change.
  When one considers the further complications which can arise when one finds oneself with these professional tax preparers, some of whom, being unscrupu-
  788
  lous, are even prepared to purchase the tax repayment of their client at a discount because they reckon that they are more professionally equipped to get the higher repayment, one can see some of the problems to which this approach might lead us. We can see some of these problems, but the major advantage that it provides unquestionably is the flexibility to produce a system where the rates of tax can vary more widely, and the Inland Revenue is looking at various aspects of this. It is also looking at various aspects of efficiency, and I intend to keep the House informed of further developments in this area.
  This Bill makes a modest advance in using the opportunities presented to us to bring about a reduction of the income tax burden. It is a small step, the importance of which is indicated perhaps more by the direction in which the Government are proceeding than by the actual reliefs provided. As such, I am sure that it will command the support of the House.
  4.32 p.m.
  Mr. Peter Rees: The Financial Secretary opened by referring to the increase in confidence in the country. I think he may find that this increase in confidence is a fragile plant. I respectfully point out to him that it depends not only on an increase in demand but also on some kind of assurance on profitability. Nowadays, entrepreneurs make their profit calculations taking account of tax, including direct taxation.
  I would, however, like to congratulate the Financial Secretary and his right hon. and hon. Friends on the revival of their confidence. I note the distinct difference between the morale they exhibited last autumn and the morale they exhibit now. May I tell him that if we showed enthusiasm on this side of the House for gardening relief under the United States tax system, it was only to mark the contrast with an Administration which has imposed VAT at 25 per cent. on lawn mowers in this country.
  I think that possibly the House and the country will approach this, the Chancellor's thirteenth Budget and sixth Finance Bill, with a slightly different emotion. We will share with Mr. Anthony Christopher and the members of the Inland Revenue Staff Federation, particularly those of us who have been

  789
  scarred by service on six separate Finance Bill Committees, a feeling of Budget fatigue. I can only assume that perhaps it is in deference to those sentiments that the Financial Secretary has introduced a particularly narrow Bill.
  I should like to comment on the drawing of the Ways and Means Resolution in such a way as effectively to preclude any debate at the Committee stage. This is in marked contrast to the first faltering steps towards open government that the Treasury team has perhaps shown, following in the footsteps of my noble Friend Lord Barber. We are pleased to note the discussion papers circulating at the moment on capital gains tax and VAT. We can only conclude that the Treasury team is drawing on the experience of the noble Lord and, indeed, taking the moral made by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) in his very notable speech to the Addington Society on the preparation of fiscal legislation.
  On this particular Finance Bill, I propose to concentrate on three main questions. Why are we having a Finance Bill now? Why these particular proposals? What do they tell us about the Government's fiscal and electoral strategy? If the House concentrates for a moment on why we are having these budgetary proposals now, it will see that one can describe an almost Hogarthian course which each Labour Chancellor follows.
  Immediately after a General Election at which, regrettably, the Labour Party is returned to power, the rates of direct taxation go up. In 1964 the level went up from 7s 9d to 8s 3d in the pound. In 1974 it went up from 30 per cent. to 35 per cent. In the heady aftermath of the election, intoxicated by the cheers of the party faithful and perhaps inflamed by the howls of anguish which they anticipate, Labour Chancellors tend to introduce a battery of new taxes—capital gains tax in 1965 and capital transfer tax in 1975. It is as well to remind the country that the Prime Minister's formative ministerial experience was as a Chancellor of the Exchequer introducing capital gains tax in 1965.
  After that comes the pause for breath or for indigestion. The Chancellor remarks on the waning of investment, the
  790
  decline in living standards, the drift of talent abroad and the record number of insolvencies. With the approach of a General Election come the expressions of remorse. I remind the House of what Mr. Roy Jenkins, of happy memory, said in 1968:
  "there is the alleged disincentive effect of high direct taxation … the mere fact that it is so widely believed is of itself significant, and means that further substantial increases in taxation on earned incomes could well have a stultifying effect upon the development of the economy".—[Official Report, 19th March 1968; Vol. 761, c. 276.]
  Or perhaps one prefers what was said by the present Chancellor of the Duchy of Lancaster, when he had just been appointed to the post which he now occupies:
  "I regard the tax and surtax rates as very seriously excessive in this country. "—[Official Report, 20th June 1966; Vol. 730, c. 204.]
  Now we come to 1977, and the same expressions of regret and remorse are starting to form on the lips of right hon. Gentlemen opposite.
  Mr. John Cronin: This is an interesting point, but is it not possible to reduce taxation now because the economy is in a much better condition whereas it was necessary to increase taxation in 1974 to mop up some of the money supply so profligately expended by the Conservative Government at that time?
  Mr. Rees: That argument might commend itself to the House if it were not for the fact that the Chancellor's first steps in 1974 were to cancel the cuts in public expenditure of £1½ billion which Lord Barber had announced at the end of 1973. If the Chancellor had curbed his profligate tendencies, it would not have been necessary, except out of political spite, to impose the increases in direct taxation which he imposed in his first Finance Bill in 1974.
  Mr. Russell Kerr: Try a bit harder.
  Mr. Rees: Since the hon. Gentleman encourages me to try a bit harder, let me take up the allegation made by the Financial Secretary that we misunderstand the weight of direct taxation in this country. I do not want to weary the House with figures, but let us look at the percentage of the gross national product

  791
  taken by direct taxation in various countries with comparable economies. In 1970 in the United Kingdom it was 37 per cent.; now it is 33 per cent. In 1970 in Japan it was 17·6 per cent.; now it is 17 per cent. Does that satisfy the hon. Gentleman? Or let us take France, which is a little closer to home.
  Mr. Ridley: Can the hon. Member for Feltham and Heston (Mr. Kerr) understand figures?
  Mr. Rees: I pay the hon. Gentleman the tribute of assuming that at least he is numerate. I do not know whether he can be articulate except from a seated position. Let us press on for his benefit.
  In France, in 1970—after it had had seven years of Labour Government—25 per cent. of France's gross national product was taken by direct taxation; now it is 24·6 per cent. Let me remind the hon. Gentleman that 33 per cent. of our gross national product is now taken by direct taxation. The hon. Gentleman's standards and mine may be a little different, but I feel that the country will recognise that there is a vast difference between this country and other countries in one major and significant respect—the weight of direct taxation taken by Labour Administrations.
  To counteract this, as we aproach a General Election titbits are thrown out so that we may salivate like Pavlov's dogs—nothing substantial, of course, because there is always the promise of more to come. The Chancellor of the Exchequer has described this as a Budget of reward—reward for years of sacrifice, apparently, under a Labour Administration. We do not want to be rewarded. We would prefer to go without the sacrifice and to maintain the rates of direct taxation that we enjoyed under a Conservative Administration.
  I move on to consider why the measure took this particular form. I welcome any relief in taxation, even from a Labour Chancellor of the Exchequer. But why are the reliefs concentrated on the personal allowances? I suppose that the first reason is administrative convenience. When the Financial Secretary tells the House that most people will get their relief before Christmas, he conveniently overlooks the 5 million mortgagors who will not be recoded until the early months
  792
  of next year. Perhaps, if he catches your eye to wind up the debate, Mr. Deputy Speaker, the Economic Secretary will refer to that, because 5 million mortgagors are not an inconsiderable proportion of the taxpayers of this country.
  Let us consider for a moment the increase in personal allowances that is proposed. To put it in perspective, to take the real value of personal allowances back to 1973–74, the last year of the Conservative Administration, would cost about £1,430 million. The real value of the single person's allowance in 1973–74 would now be £1,199, whereas the Financial Secretary is proposing £945. The real value of the married allowance then would be £1,562 now, whereas the Financial Secretary proposes £1,455.
  I assume, as I imagine the House will assume, that the Financial Secretary has been moved to introduce these reliefs only in expectation of the total indexation next year which was introduced in this year's Finance Bill.
  The Prime Minister, in an uncharacteristic breach of his Baldwinesque geniality, said:
  "We shall destroy the Conservative Party with regard to this matter."—[Official Report, 3rd Nov. 1977; Vol. 938, c. 40.]
  Far be it from me to imagine that any words of mine could destroy a public figure who has survived a disastrous tenure of No. 11 Downing Street and a moderately unsuccessful tenure of the Home Office and the Foreign Office. If he has anything to teach the House, it is about the politics of personal survival. But it is clear that he did not understand the note put in front of him by his assiduous civil servants. I can only assume now that he is becoming insulated from the pressures of real life on his broad Sussex acres.
  The Chief Secretary to the Treasury (Mr. Joel Barnett): Would the hon. and learned Gentleman like to have them?
  Mr. Rees: The Chief Secretary suggests that I should be responsible for the Prime Minister's broad Sussex acres. That is no concern of mine. If the Chief Secretary would like to explore that aspect of the Prime Minister's activities, I shall leave it to him and listen with relish.
  What the Prime Minister did not understand at the time—I understand the pressures on him and he may not have

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  read the note with particular care—and what his right hon. and hon. Friends have had to concede subsequently, is that even people on the average industrial wage are now paying a higher proportion of their reduced earnings in tax. The Chief Secretary has admitted it, the Financial Secretary has admitted it, and no doubt, if he seeks to return to this point, the Economic Secretary will admit it when he winds up. The Chancellor of the Exchequer himself said he had never disputed that there had been a cut in net take-home pay. That is the point which my hon. Friend the Member for Chingford (Mr. Tebbit) sought with some success to elicit and which the Financial Secretary cannot controvert.
  Mrs. Castle: Is the hon. and learned Gentleman aware that, when the child benefit scheme comes fully into operation, wage earners will pay a higher proportion of their incomes in tax than they otherwise would have paid? Does he therefore oppose the introduction of child benefit, which is designed to reduce take-home pay but to increase the family income overall?
  Mr. Rees: The right hon. Lady, who, we know, takes a keen interest in these matters, may have overlooked the fact that the Prime Minister's figures take account of child benefits in any event.
  Mrs. Castle: Take-home pay is not the only measure.
  Mr. Rees: The proof of the matter, as the right hon. Lady will no doubt know, is that someone on the average industrial wage will be paying a higher proportion of his income by way of direct taxation than he ever paid under a Conservative Administration. That is a simple political truth which the country understands, and it will not be fobbed off by glib explanations by the Prime Minister or, indeed, by the right hon. Lady.
  The question to which I now wish to address myself is why there has been no proposal to cut the basic rate of tax. When I ventured to ask the Chancellor of the Exchequer that question in his most recent Budget Statement, he quoted a little ponderously from "The Right Approach". I should like to quote back at him the main features of our ap-
  794
  proach. They are lower taxation on earnings, capital and savings to increase the rewards of skill and enterprise, and paving the way to more secure jobs, particularly for the young.
  The reason why I am a little surprised that the Treasury Front Bench has not chosen to cut the basic rate is that as late as April this year—it is churlish, perhaps, to remind the Government of that now—it was proposing a cut in the basic rate from 35 per cent. to 33 per cent. The Chief Secretary, with his customary geniality and perseverance, defended that position with extreme care and pertinacity.
  I should like to remind the House and the right hon. Gentleman of what he said on that occasion:
  "I want to turn to the question of the erosion of differentials. I have said on numerous occasions that we recognise that the combination of the incomes policies of successive Governments, together with tax increases and inflation, has considerably eroded the differentials between the highest and the average paid, between the unskilled and the skilled, and between those in work and those out of it. I have never hidden the fact that I recognise that that is a problem with which we must deal.
  I am also bound to say that the reduction in real net income is not simply due to the level of direct taxation; it is due to the underlying reason that we have done so badly as a nation."—[Official Report, 3rd March 1977; Vol. 927, c. 666.]
  It could not have been put better by the Opposition.
  We are entitled to ask the right hon. Gentleman why, in the face of that, he has flinched from going to that extra 1 per cent. this autumn. Two reasons come immediately to mind, and no doubt the Minister of State, Treasury will enlarge further on them when he winds up the debate. The first reason, I suspect, is that those on the Treasury Front Bench no longer want another searing wrangle with their hon. Friends below the Gangway.
  We recall with a certain wry pleasure the encounters with the hon. Member for Coventry, South-West (Mrs. Wise) and the hon. Member for Birmingham, Perry Barr (Mr. Rooker). I am sorry that they are not here to contribute to our debate this afternoon, but perhaps the Minister of State, Treasury has been able to square them. Perhaps in the next Finance Bill we shall be promised a cut in the basic rate.

  795
  However, more than that, I suspect that it is because of the administrative complication. The Financial Secretary has paid a glowing tribute to the members of the Inland Revenue Staff Federation, but I wonder whether they would have been able to cope with a further reduction in the basic rate. Is the reason administrative, or is it political?
  That leads me on to consider what clues the Financial Secretary and the Bill have to offer for the future. The Chancellor of the Exchequer said last Thursday that any future reliefs would be concentrated on personal allowances and the intermediate rate band. The Financial Secretary said today that it would be necessary at some stage to revalorise indirect taxation. I suggest to him that if he were to approach the whole system in that way he would be able to do considerably more in other spheres.
  I remind the House that the intermediate rate band was abolished by Mr. Roy Jenkins in 1969, when the standard rate of income tax was 41·25 per cent. and the sharp progression from a zero tax bill to that became intolerable. The progression was, perhaps, concealed for some time because of a lower average industrial wage.
  My noble Friend Lord Barber approached the problem from a different angle and cut the basic rate to 30 per cent. That, perhaps, is the more sensible way of smoothing out the progression. The Financial Secretary may find—I do not know whether he has had consultations with Mr. Anthony Christopher and the members of his federation—that the introduction of an intermediate rate band, far from creating budget fatigue, will introduce a mood of nervous collapse in the Inland Revenue. We shall find the Inland Revenue asking to raise its staff from 84,000 to 100,000—the equivalent of 20 infantry battalions. Therefore, we await with keen interest the proposals for introducing an intermediate rate band in the next Finance Bill.
  The promises have been liberal. There are to be sops to small businesses, in both income tax and capital transfer tax. Small businesses appear now to have replaced middle management as the dar-
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  lings of the Labour Party, but I think that small businesses will find, as middle management has discovered, that the promises are rarely implemented. We shall wait with interest. [Interruption.] The pressure of the hon. Member for Cornwall, North (Mr. Pardoe) may deflect the Government from their normal course, but, all the same, I rather doubt that he wields enough political muscle at present to ensure a measure of substantial relief. If relief comes, I have no doubt that we shall welcome it and seek to improve on it.
  Then we have been promised some profit-sharing schemes. This is a belated conversion to this concept. I remind the House that two successive liberalising measures to give tax fiscal relief for share option schemes have been killed off by Labour Chancellors of the Exchequer. The Prime Minister, when he was in No. 11 Downing Street in 1966 or 1967, made it impossible to proceed thereafter with any reasonable share option scheme, and the present Chancellor did precisely the same as soon as the present Government came to power.
  Perhaps there is a slight good omen in that the only entrepreneurial member of the Cabinet, the Chancellor of the Duchy of Lancaster, has been put in charge of this side of the Government's fiscal planning. But I note with regret that all the fine words that fell from him in 1967 and 1968 came, alas, to nothing, so I am not over-optimistic of anything worth while being introduced in the next Finance Bill.
  The Financial Secretary ranged wide on the subject of simplification, and I notice an interesting divergence of opinion between him and the Foreign Secretary. Perhaps the Minister who is to wind up will tell us whether the Foreign Secretary has now assumed responsibility for this aspect of the Government's fiscal policies.
  We listened with keen interest to what the Financial Secretary had to say on the problems of self-assessment. I say only this to him. Self-assessment must be preceded by a process of simplification and will not of itself lead to simplification. While I am on this point, I hope that the Treasury team will appreciate that the investigatory powers with which the Revenue has now been equipped as a result of the Finance Act last year are

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  comparable with those operative in the United States and will deserve close supervision. I hope that we shall have a report to the House in due course on how those powers have been wielded in the past year.
  Let me summarise what is introduced in this Bill. There is nothing for the 1·4 million higher rate taxpayers. There is nothing for the skilled worker. There is nothing for middle management. Even the higher rate bands have not been indexed. There is nothing for those in retirement living on what are laughably called investment incomes. The Government's electoral strategy is clear. Such reliefs as they are forced to give will be concentrated grudgingly on those on and below the average industrial wage, with a further erosion of differentials. But even those taxpayers will not forget, as the rest of the body of taxpayers will not forget, that their real living standards have dropped relentlessly over the past three years.
  For all taxpayers, the verdict on the Chancellor's year of repentance must be too little, too thinly spread and too late. They will know why, because they have learnt the simple political truth—and no wise words from the Prime Minister will persuade them to the contrary—that a Labour Government's heart is not in the business of cutting direct taxation.
  4.55 p.m.
  Mr. John Sever (Birmingham, Lady-wood): The people of Ladywood have traditionally demanded that their Member of Parliament should be particularly concerned about constituency matters, which, of course, is not unreasonable, and I thought it useful to take the opportunity today to join in a debate on money matters. It is essential, irrespective of who people are and where they live, that they should have sufficient funds to be able to get through the week. We have heard so far in the debate today about certain matters which have come to the attention of the House because of the measures introduced by the Chancellor a few days ago. If I may, I shall dwell on those matters a little later.
  The Ladywood constituency includes most of the city centre of Birmingham, and during the recent by-election campaign the Labour Party asked the electors of Ladywood to keep the heart of Bir-
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  mingham Labour. That was, for want of a better slogan, the one that I used in my campaign and, naturally, I was delighted that the electors in the constituency took my advice and conferred on me the privilege and the pleasure of representing their interests in this House.
  There is a great tradition in Ladywood, as I have indicated, that the Member of Parliament who comes here to speak for Ladywood should have regard to the fact that the constituency contains a very large proportion of members of the public who earn below the national wage, who are not well off, and who find it very difficult to get along from one pay day to the next. Therefore, some of the matters that we are discussing today will have a direct effect on them. I know, from living in the constituency with my constituents, that they will want me to say something about that. As I have said, this may be a good opportunity to do so. There are a number of matters that concern everyone who is a taxpayer and everyone who is a retired person receiving a pension.
  If I may, I should like to refer to one of my most distinguished predecessors, Mr. Victor Yates, who served the constituency with distinction for a long period and who was a Member who was very well respected by his colleagues in this House. I may add that Mr. Yates was always a Member of Parliament who found it necessary, because of his own political convictions and because of the knowledge that he had of the people for whom he spoke, to come here and speak about people who were less well off than some others. I hope, therefore, in some small measure to be able to follow, with some degree of enthusiasm, anyway, in his steps. It is important for people who are earning below the national wage and not making much progress through what is generally regarded as social life in Britain to have someone to speak for them.
  It is disturbing to me that 32 years after Mr. Yates came to this House to make his maiden speech some of the matters about which I wish to talk this afternoon have not been corrected. He spoke with considerable eloquence, far more than I shall be able to muster, about deprivation in our large cities, particularly at that time in Ladywood, about housing and about living conditions.

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  I hope that, as we see measures coming from this Administration implementing their fiscal and financial policies, we shall have the ability to provide money to our large cities and to do something about the problems of the inner cities and especially housing.
  In his maiden speech, Mr. Victor Yates spoke with considerable passion about correspondence that he had received from a constituent concerning a housing problem. It seems to me that that sort of thing is what we are about in this House. If we are not, I do not know why we are here. It is often easy to be able to make grand speeches or grand gestures about matters which may not be vital to the interests of the people who send us here or the interests of those who pay our salaries.
  I want now to refer to housing in the inner cities, and I hope that I shall be allowed some degree of latitude. This is a matter to which we must pay some regard in discussing the distribution of State money. I refer to inner city housing because we in Ladywood do not have enough money to do the job that we are anxious to see fulfilled—and I am sure that that problem exists in all constituencies.
  If we are to give all families in Britain the chances that they need, we must initially provide them with decent homes in which to bring up their families. There has been an enormous housing programme in the middle of Birmingham, largely instigated by such people as Victor Yates. We want to improve that programme and to institute one in which the faults have been corrected. We must find the money to do that and to speed progress.
  I welcomed the statement a few days ago by the Chancellor of the Exchequer and, subsequently, by the Secretary of State for the Environment. There was in that some degree of recognition that the inner cities, having received a considerable amount of support during the last few years, need more funds to be made available to them. The Government seemed to be moving in that direction, and I am sure that my constituents will welcome the Government's moves.
  There are particular housing problems in my constituency concerning those who live in high-rise developments that were
  800
  built because there were not sufficient funds available to build the houses that were desperately wanted and that it was hoped would be provided. That is history. There is not a great deal we can do about what exists, but there is much that we can do about what we provide in future.
  There are various people living in high-rise flats who would want me to speak on their behalf today. There are young married couples with families who find that there is no joy in life in trying to contain a young family 20 storeys up in the sky in a filing cabinet. People cannot cope with that easily and they are turning in greater numbers to medicines to help them with the distress and conflict of such a life.
  Another group is the elderly who have, as they say "Done the whole bit". They tell me, "We have done it. We have lived here in multi storey blocks since they were constructed and first put into the large cities." Such people have seen their families grow up to leave home and take their own chances in the world, but the elderly are left behind and they say, justifiably, with reason and fairness "Is it not now about time we had our chance and that you took us out of this sort of accommodation and gave us the sort of housing that we have long sought and desperately need in our old-age?" I should welcome such measures as may be forthcoming from the Government that would make money available to do that.
  Those who live in inner urban areas—and my constituents are certainly representative of such people—live in close proximity to industry, commerce and trade. They do not have the social facilities that many of us seek for ourselves. Therefore, in discussing housing policy and the way in which the nation's money should be spent, we should pay regard to the preservation of the environment—which is a vital matter to those who live in city centres. My constituents have already asked me to do whatever I can to encourage the Government to provide money for the protection of the environment and society.
  If money is to be made available for such things, naturally I and those of my hon. Friends who agree with me will jump up in the House to support such measures and encourage the Government.

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  Some of my hon. Friends have said that the economy is improving, and I hope that it does such measures will be brought forward and money made available. If that does not happen, the troubles that so many people talk about today—vandalism and crime in the big cities, for instance—will not abate but worsen and cause further difficulties. If we wish to contain the problem, a substantial amount of Government money will be needed.
  We must recommit ourselves—and I hope that Members opposite as well as my hon. Friends will do so—to measures that will protect those members of our society who are least able to look after themselves. That will, in part, be helped by the measure that we are discussing today. The elderly are pleased that the Government are able to consider such measures as the re-introduction of the pensioners' Christmas bonus, and I welcome that belated decision. It will encourage people to believe that the nation's fortunes are improving. I believe that that point is particularly in the minds of Ministers in view of the comments that were made from the Government Front Bench a short while ago. The country believes that the situation is improving somewhat and that the measures that I have advocated are likely to be forthcoming in the not too distant future.
  In the political sense, I can well appreciate that hon. Members opposite may wish to argue that these measures may be put forward to win votes. That is a debate in itself. However, that is not an opinion to which I subscribe. In that respect it is helpful to my argument that I was returned at a by-election that took place before the measure that we are discussing today was made known.
  There is another group of people in my constitutency on whose behalf I want to use my time in my maiden speech. That is the substantial immigrant population. There is an extremely large immigrant community in Ladywood representing all parts of the world. We have a large number of Asians, West Indians and immigrants from Europe. Such people have come to our big cities primarily to make their way in the world and to do an honest day's work for an honest day's pay. Those who are doing so are being encouraged to continue in that way.
  802
  I am reluctant to be critical, but a number of immigrants are concerned about the attitude of the British who were here first. They are concerned that the host community should welcome them and do whatever it can to ensure that society is friendly and operates in a fair and non-discriminatory way. Community leaders, particularly the more articulate, approach many hon. Members to ensure that whatever protection may be afforded to them will be forthcoming.
  Immigrants in my constituency were particularly alarmed by the scenes during my by-election campaign. Those who came into the constituency to foment racial hatred—although there was a big disturbance on one day—fortunately went away without having disrupted the harmonious and well-balanced community that existed before their arrival. They got their answer in the derisory vote that they received in the election.
  Nevertheless, we are doing all we can in my constituency—as I am sure is happening in other constituencies—to promote everyone's interests. There are too many gaps in society that should be filled by representatives of ethnic minorities. Too much talent, expertise, and natural good will are being wasted among the immigrant community. We should do whatever we can to take that good will and expertise into our community and promote it wherever possible.
  We are all looking for the advancement of the British economy, and to secure that we need to encourage small business men, trade, industry, and skilled labour. Much of what is needed, particularly skilled labour, is to be found among our immigrant friends, and they are only too willing to play their full part.
  On another financial matter I want to say that in the big cities a situation is developing where crime and the lack of certain protection to certain individuals is causing some concern. In the big cities it is easy for people who want to come in and to foment racial hatred and other difficulties to point to the shortcomings in our society. It is easy for such people to argue that unemployment, urban deprivation and a lack of caring in society are reasons for the growth in crime and vandalism.
  In the big cities these problems are reflected in crime ranging from petty

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  vandalism to grand larceny, armed robbery and so on. It can be argued that the way to work towards combating these problems is to put the taxpayers' money into the provision of facilities for young people, facilities for the community and facilities for the development of those sorts of social projects for which my hon. Friends have always argued and which my predecessors have always demanded. If we put that sort of money into the city centres, we might find that, contrary to popular and inaccurate belief, we are able to encourage young people to take an interest in their society and to make a valuable contribution, particularly in the big towns.
  In conclusion I want to refer to the former representative of Birmingham, Ladywood, Mr. Brian Walden. He was always able to bring a degree of good humour and expertise to his work. I also understand from colleagues in this House that he brought from Ladywood a freshness of approach and a degree of social conscience to the debates in which he took part. I hope to do that also.
  It is a two-way road between us and the constituents whom we represent. I hope to be able to bring to this House the views and aspirations of the people of Ladywood in order that it might give them consideration in the great debates in which I hope to participate. In turn I hope to be able to take from this House the expertise that I shall require to look after my constituents' best interests. Brian Walden and his distinguished predecessors did that.
  We in the heart of Birmingham like to think that we have sent to this House distinguished representatives who have been able to do that two-way job effectively. I hope that I shall be able to join their ranks and to play my part in debates and discussions in this House.
  5.12 p.m.
  Mr. John Pardoe: It is a great pleasure to follow the hon. Member for Birmingham, Ladywood (Mr. Sever) and to be the first to congratulate him on a notable maiden speech. The hon. Gentleman will understand if I say that neither he nor any of us in this House can hope to achieve the reputation of his predecessor for sheer parliamentary oratory. That is not given to any of us and we do not look to the hon. Gentle-
  804
  man necessarily to better his predecessor on that account. What the hon. Gentleman gave us was an indication that, rather than bring a eulogy of his constituency, which is in some ways the custom in this House, he would bring a tour of the very real social and economic problems.
  I particularly welcomed his remarks about low income earners. I did not immediately think that there would be too many things in common between his constituency and mine in far off Cornwall. One is a very urban and the other a very rural seat. But we both represent constituents who are at the low end of the income scale. I welcome what the hon. Gentleman said on that account and I shall welcome his advocacy of the underprivileged communities of our society in future. I look forward to many contributions from him on this and other matters.
  May I briefly refer to the speech—one could almost say the maiden speech—of the hon. and learned Member for Dover and Deal (Mr. Rees)? He seemed to be looking back with nostalgia to the golden age when Conservatives presided over our tax affairs as if all was glory and peace in the land. I would remind the hon. and learned Gentleman that if we are taking as the end of this new consensus on direct taxation only that we should get back to where the Conservatives left us in 1974, that would not be a satisfactory target. I therefore think that we must set out quite clearly exactly what our targets on income tax are. [Interruption.]
  The hon. and learned Member for Dover and Deal extolled the Conservative record. He seemed to think that income tax was very much lower when the Conservatives left office in 1974 than I remember. Indeed, the standard rate of income tax under the Conservatives was still 30 per cent.
  Mr. Robert Kilroy-Silk: Is that a normal reaction to the hon. Gentleman's speeches?
  Mr. Pardoe: No, I do not always cause that kind of trouble. It might have been more appropriate if there had been a protest in the Strangers' Gallery on behalf of the Cornish language rather than on behalf of the Welsh language.

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  The hon. and learned Member for Dover and Deal seemed to be extolling the glories of Conservative taxation. I would remind him that in 1974 we did not get out of the 30 per cent. range for the standard rate of income tax. If we are to capitalise on the new consensus on income tax in this House—and it is at last emerging as a consensus—we must surely now aim for a reduction in the standard rate of income tax to something substantially below 30p in the pound.
  A figure of 30p in the pound is clearly far too high for people going into the income tax bracket. It is far too high to be spread right across that band—the first band of £6,000 taxable income. I therefore say that we have to make a much more determined attack to switch from income tax, and all other taxes on income, to expenditure taxes than has so far been indicated by the speeches which we have heard from either Front Bench.
  The hon. and learned Member for Dover and Deal also stated that to get back to the thresholds which we had under the Conservative Government would cost about £1½ billion. But, of course, if we were to revalorise the borrowing requirement 1973–74 we could afford to get back to those thresholds more easily. In fact, the borrowing requirement in 1973–74 of over £4,000 million was a substantially higher figure in real terms than the borrowing requirement in this financial year. Therefore, if we are to increase the borrowing requirement by £1½ billion and thereby reduce—
  Mr. Nick Budgen: Is the hon. Gentleman saying that he approved of the borrowing requirement in 1973?
  Mr. Pardoe: That was not the argument that I was making. I am not saying that I approved of the borrowing requirement at any point in time. It depends on the situation of the economy. But where I would agree with the hon. Gentleman is that to increase the borrowing requirement from nil to £4,000 million between 1970 and 1973–74 was bound so to distort the economy as to create the most appalling tensions and stresses. That was the grotesque mismanagement of the economy by the hon. Gentleman's former colleagues. I know that the hon.
  806
  Gentleman shares very little of their views but, after all, we have to judge a future Conservative Administration on the last one. [Interruption.] We should have to go far back to judge my party, but I would not mind being judged on what happened in 1911 or thereabouts.
  Mr. Tapsell: Would not the hon. Gentleman agree that if the public expenditure cuts announced by the last Conservative Chancellor in December 1973 had not been reversed by the subsequent Labour Administration the whole of this argument would have even less validity than it appears to contain?
  Mr. Pardoe: Just a minute. As I understand the argument of the hon. and learned Member for Dover and Deal, the Conservative Government had whipped up the level of public spending, and thereby the borrowing requirement, to a very high and quite unsustainable level. They then decided that it was too high and they announced in December 1973 cuts of £1·5 billion. But those cuts would not have taken effect until the financial year 1974–75. It is true that if those cuts had been made in 1974–75 the borrowing requirement would not have been £6 billion, but £4 billon. But even if it had been £6 billion it would have been a higher proportion of the gross national product than the borrowing requirement is today.
  Mr. Peter Rees: I am grateful to the hon. Member for Cornwall, North (Mr. Pardoe) for considering my propositions, but he must get them correct. The public sector borrowing requirement for 1973–74 was projected at £4 billion in March. Cuts to take effect in the next financial year, by contrast with what had been proposed by the Labour Administration, of £500 million were proposed, followed by cuts in December of £1 billion. The result would have been a PSBR of £2·5 billion. I asked the hon. Member to contrast that with the PSBR under this Administration of £8 billion. Does he support the Government in that?
  Mr. Pardoe: Of course I do not, but the fact is that the Government are not now running a PSBR of £8 billion. It will be quite a bit below that and it may be much nearer £7 billion. In the present circumstances of the economy that is too low, and with 1·5 million unemployed

  807
  it is perfectly correct to have a high borrowing requirement. Yet the economy is running at well below the sort of levels it should be reaching, because the Government have got the borrowing requirement wrong.
  I do not criticise the Government, however, for having their borrowing requirement at its present level. But if it were at the same percentage as in 1973–74 the economy would be working at a much higher level of capacity and unemployment would now be lower.
  The hon. and learned Gentleman came into the Chamber while I was half way through my argument and he has not heard my entire speech. The Government would not be able to revalorise the thresholds to what they were when a Conservative Government were in office simply by returning the borrowing requirement to the same proportion of the GNP as it was under the Conservatives. If they are to revalorise thresholds they have to revalorise the borrowing requirement. The one cannot be done without the other.
  The hon. and learned Gentleman seemed to be arguing that it would be legitimate for the Government to have made much greater concessions on income tax out of borrowing. Is he saying that that would be right? He does not appear to be sure. If he is not saying that it would have been right—and he may not be saying that—he has to find the money from some other source.
  Let us take the Conservatives at their word and suppose that they mean business in reducing the standard rate to an unknown level. The hon. and learned Gentleman was saying today that the standard rate has to be reduced. I suppose that the reduction must be 2p or 3p if it is to provide any kind of incentive. My personal view is that it should be reduced to 25 per cent. in the next financial year.
  The hon. and learned Gentleman is saying also that thresholds should be higher, that the top rates of tax must come down and that the bands must be adjusted. We know that that last matter will not cost a great deal of revenue, but it must cost something. My proposals on the higher rates for the next financial year would cost about £250
  808
  million. All this money has to be found and it must either come from increasing other taxes or by reducing public spending.
  The Conservatives have consistently called for cuts in public spending. The hon. Member for Guildford (Mr. Howell) in a previous incarnation seemed to have reached the point of saying that the Government had made the cuts that the Conservatives were calling for. If they believe, however, that the Government have not made enough cuts—I believe they have made substantial cuts—what additional cuts would the Conservative Party make in order to finance the kind of reductions in income tax that it is calling for? They should tell us.
  Mr. William Hamilton: Far from advocating reductions in public expenditure the Conservatives have gone out of their way to say that they will increase expenditure—for instance, on defence.
  Mr. Pardoe: It is extraordinary that there is a conflict in Conservative Governments between spending Ministers and those who are responsible for trying to balance the budget. The hon. Member for Wanstead and Woodford (Mr. Jenkin) earlier urged the Government to increase public spending on families. That is most worth while and we should like that. Then there are arguments for substantially increased defence spending. The Conservative spokesman on education continually parades around the country saying, that the Government are neglecting children. He is promising all sorts of increases there. Every Shadow Minister is arguing in detail for specific increases, but in general the Conservatives are saying that they would not make any increases and that they would make reductions.
  Mr. MacGregor: Will the hon. Member give way?
  Mr. Pardoe: Not at the moment. The trouble with answering questions from Conservative Back Benchers is that they are free to say what they like, and they do. But we must be told from the Conservative Front Bench specifically where it would find the revenue to make these income tax cuts. I want to know what the public spending cuts would be, and I want to know tonight. We want to know

  809
  what the Conservatives will forfeit in the Budget so that we may know what can be done about thresholds, the standard rate and the rest.
  If the Conservatives refuse to tell us that, we have to assume that they agree with the Liberal Party that it is impossible to make those cuts and that the reductions in income tax have to be financed almost entirely out of increases in taxes on expenditure. If that happens, what taxes will the Conservatives increase? To increase VAT from 8 per cent. to 10 per cent., as the Tories have advocated, would bring in in 1978–79 a further £700 million. I know that that is not peanuts, but it is not enough to do much on the standard rate, on thresholds, or even at the upper end, although that would not be expensive. Conservatives have to come clean on this and spell out explicitly, as we have, which taxes they would be prepared to increase.
  The only really efficient revenue raiser in the whole canon of expenditure taxes is the insurance contribution by employers. It is the social security tax in Europe. There it is levied at a much higher level than in Britain and it brings in a great deal of money. An increase of £3 on that would bring in £2,000 million in 1978–79, and with that kind of money substantial cuts in income tax are possible. Unless we can find that kind of money we shall be unable to make such cuts.
  Mr. MacGregor: The hon. Member has talked about £2 billion. He made the sterile argument about a static situation and having to get an extra yield from some other tax or through cutting expenditure in the last Finance Bill debate only six months ago. But has he noticed the changed situation with this Finance Bill, which is that the forecasts of revenue yield were wrong and the figure of almost £2 billion that he is seeking has come from a new forecast on the PSBR, all of which has come from the income tax changes of six months?
  Mr. Pardoe: The trouble with income forecasts is that they can be wrong both ways, and we must see how the revenue forecasts turn out. If the Conservatives are back in the old game of promising to finance cuts in income tax out of false forecasting at the Treasury or by that mythical factor called growth which we
  810
  must hope we shall get but about which we make no promises, that is totally phoney. Let us be honest and say which taxes we will increase or which types of public expenditure we will reduce. If the Conservatives will do that, I shall believe them.
  5.30 p.m.
  Mrs. Barbara Castle: I am very glad to have the opportunity of congratulating my hon. Friend the Member for Birmingham, Ladywood (Mr. Sever) on his maiden speech. He told me before he got up to speak that he was feeling nervous, but I do not think that any of us would ever have suspected it. He spoke with remarkable fluency. He spoke about his predecessor Vic Yates making his maiden speech nearly 30 years ago—that is exactly when I made my maiden speech. I assure my hon. Friend that I was absolutely petrified with terror and could not speak in the fluent way that he has spoken this afternoon. Above all, I think that we were all moved by my hon. Friend's patent sincerity.
  What particularly pleased me was that my hon. Friend's maiden speech happened to be the perfect answer to the other maiden speech we have had this afternoon from the hon. and learned Member for Dover and Deal (Mr. Rees) speaking from the Opposition Front Bench. I think that my hon. Friend helped quite brilliantly, even if inadvertently, to illuminate the obscurantism of Conservative policy. We were treated by the hon. and learned Member for Dover and Deal to a peroration in which he condemned the Government for what he considered to be their sinister Budget strategy, namely, that they were going to concentrate the major part of their help on those below average national earnings. One would have thought that the hon. and learned Gentleman was talking about national scum.
  The hon. and learned Gentleman is actually talking about the majority of male wage-earners, 60 per cent. of whom earn less than the average male national earnings. He was certainly talking about the majority of people in the constituency of my hon. Friend the Member for Lady-wood. I am grateful to my hon. Friend for having chosen this debate to remind us of those people and their needs, and of how imperative it is that they should

  811
  have priority. In doing so he also illuminated the dangers of the sort of argument that we had from the hon. and learned Member for Dover and Deal, which we shall have increasingly from the Conservatives.
  I warn Opposition Members that they will never cure inflation in this country if they spend their time harping on the exclusive importance of take-home pay. That is what the union negotiator does. Opposition Members should not talk as if the money taken in taxes never, in any way, came back into the wage-earners' own homes. To talk about take-home pay as being something that should be reduced in any circumstances, and at all times and at the same time to press for the sort of social reforms to which Opposition Members pay lip service is to make it impossible to finance those social reforms within a reasonable level of pay policy.
  The child benefit scheme is a perfect example. Those who have taken part in this campaign had to convince the Government, the trade union movement and men in this House of the importance of child benefit. We have had to convince them that take-home pay should be reduced to finance a switch of money, in the form of a cash allowance into the mother's purse. If we merely want to increase take-home pay we shall have to abandon child benefit. I say advisedly that there are many hon. Members in the House—many male Members—who would secretly be glad to do just that.
  Mr. Tapsell: I have considerable sympathy with the argument that the right hon. Lady is advancing, but would it not be right to say that this is precisely the battle which she fought with her own Government and lost?
  Mrs. Castle: The hon. Gentleman is well out of date because that battle is now being won again. It is being won, not only against male chauvinist obscurantism, but against the fiscal obscurantism of the Conservatives, who always exaggerate the exclusive importance of take-home pay. How are we to help the constituents of my hon. Friend the Member for Ladywood with their housing problems, their pensions, their environment, their education, their child benefit,
  812
  except through the taxation system, which reduces take-home pay?
  The most important weapon we could use in the battle against inflation would be an educational drive among working people telling them their taxes do not just go into the pockets of the Government for the Government to have a bonanza. They go back to the working people in the form of the services that they have asked us to provide. If we dodge that educational campaign we lose the battle against inflation, just as we nearly lost the battle for child benefit.
  The hon. Member for Horncastle (Mr. Tapsell) is quite right in saying that we nearly lost the battle on child benefit. But some of us rebelled and some of us dragged this House and the Government back from the brink. Now we have a situation in which the TUC, in its advice to the Government about what should be in the autumn Budget, asked for an additional £1 increase in child benefit—above the increase already promised for next April—raising the benefit then from £2·30 a week per child to £3·30 a week. It urged that that should be one of the Government's priorities.
  Of course, that does not mean that we do not all welcome the increase in personal allowances that we are discussing this afternoon. Of course it was urgent to raise the tax threshold, and of course the trade union movement has been pressing for that. However, two issues arise on this matter we are discussing today.
  The first is whether the Government have done enough in reflating the economy. I say decisively that they have not. Indeed, I found myself—to my shocked surprise—agreeing with the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) who said that this is not a reflationary Budget. It is still not bringing us to a level of tax relief or overall expenditure that will begin to expand the economy. The deflationary policies applauded so much by the Opposition have brought our economy almost to stagnation point. There was and still is more headroom, and I am convinced that the Government will have to be bolder and do more.
  Secondly, in disposing of any money that my right hon. Friend the Chancellor of the Exchequer says that he now feels

  813
  is available how do we divide it among our priorities? Once again, I draw the attention of the House to the fact that, by failing to listen to the TUC in time, the Government have presented us with a situation in which we have an increasing reduction, relatively, in family support.
  Let us pay tribute to the trade union movement, because it knows that in pressing for increased cash for the mother instead of increased tax relief to the wage-earning father it is facing up to the problem of take-home pay. The trade union movement has honesty and guts and does not behave hypocritically in the manner of Opposition Members. It is prepared to do an educational job, and therefore—
  Mr. Peter Bottomley: Is it not right that the right hon. Lady led Government Members into the Lobbies on the Child Benefit Bill against Conservative amendments which would have given an early date for implementation and, secondly, might have indexed the benefit, which would have solved the problem that she is talking about?
  Mrs. Castle: I do not think that indexing will solve a problem of the size of the one I want to discuss this afternoon. Certainly in regard to the scheme —[Interruption.] I believe in indexing and I am coming to that, but that is not the first battle. The main battle is to secure a reasonably level of child benefit.
  When I was in the Government the committed policy was to start the child benefit scheme in 1977. It could not be done in 1976. That was the policy in which I believed and which I secured intact, but, because of the delays and because of the fact that we have had to adopt the compromise formula for phasing in the scheme in three stages up to April 1979, as the House knows full well, we are phasing out child tax allowances and only gradually phasing in the increased child benefit. But as we are phasing out child tax allowances, the ordinary formula available in the normal way to the Chancellor of the Exchequer for increasing child tax allowances when he increases other personal allowances is not available to him at the present time.
  That is why the Trades Union Congress asked this autumn for another £1 to be given next April in child benefit. I pay
  814
  tribute to the TUC for that, because it has its difficulties under the pay policy, as we well know. It shows that the battle for the mind of the TUC has been won, and I am still keeping up the battle for the mind of my right hon. Friend the Financial Secretary to the Treasury, in whom I can see some flickers of reform emerging.
  Let us look at the position that we are in this year owing to this compromise arrangement. There have been three bites at the increases in personal allowances. First, in April the Chancellor increased them by £1,800 million. Then in the summer, thanks to the successful fight of my hon. Friends during the Committee stage of the Finance Bill, the Chancellor accepted another increase of £490 million. Then again in this Finance Bill we are being asked to vote for another £940 million this year to increase the personal allowances of the single person and the married couple. That is £3,250 million a year going to married couples or single persons, but the only extra money voted this year for the children is £95 million.
  What will happen next April? The Chancellor has already told us. He will index the personal allowances. The single man will get his 12 per cent. increase and so will the married couple, whether childless or not. That is another £1,200 million. For the children, who have waited all this time, there will be £330 million. I say advisedly to the Government and to the House—because we must all enter into this battle of take-home pay and stand up and be counted if we really mean what we say—that this disastrous treatment of the country's children cannot continue unchanged for another 18 months.
  I know perfectly well that I shall be told this afternoon that it is now administratively too late to add a penny to the £2·30 a week of child benefit that is due to be paid next April, because the books are already printed. I accept that. I agree that there would be administrative chaos if we tried to stick another £1 or so on it now.
  Actually, it ought to be more than another £1. Does anyone deny that if it had not been for the phasing in of the child benefit scheme, the Chancellor would have increased child tax allowances this year? When he has increased child tax allowances in recent years, of

  815
  the total sum he was spending on allowances he has either spent 99 per cent. on the children or come down to as low as 24 per cent. Taking the lowest figure, 24 per cent. of the £3,250 million being spent in personal allowancees this year, on my calculation that means another £800 million ought to have gone on child benefit, because it could not have gone on child tax allowances.
  That would have given another £1·30 on child benefit this year. We shall not even get that next April, and we shall not get it for another 18 months unless we all say that this position is desperately dangerous for the nation's families and must not go on. My right hon. Friends may not be able to add anything next April, but there will have to be a second uprating of child benefit next year.
  In any case, it is only right—actually more sensible—that child benefit should be linked with other benefits and increased in November along with them. In future, when it is indexed, it ought to be part of the normal uprating. I know that it is too early yet to talk of indexing and that first we must get the figure up to a realistic level. The importance of these increases goes beyond any issue of indexing.
  I give my right hon. Friends my support this afternoon conditionally, and I hope that in replying to the debate my right hon. Friend the Financial Secretary to the Treasury will say "Yes, I agree that this is a very serious situation, and in some way or another we pledge that we shall remedy it next year".
  5.47 p.m.
  Mr. Ian Stewart: I find myself in the unusual position of agreeing on one particular point with the right hon. Member for Blackburn (Mrs. Castle) and with my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). The fact that they agree is perhaps more surprising than the fact that I agree with either or both of them.
  A very important point has been raised in the introductory remarks of the Financial Secretary to the Treasury, which ranged a great deal wider than most of the issues we might have thought we were able to discuss on the Bill. He repeatedly suggested that the measures being brought in now were of an expansionary kind. He was asked by my hon. Friend in an inter-
  816
  vention whether this was what he meant to say, and the right hon. Lady picked up this point. Even the hon. Member for Cornwall, North (Mr. Pardoe) wondered whether the degree of expansionary force in the economy at the moment was yet appropriate.
  I did not mean to dwell on this point but it needs emphasising that the Financial Secretary really must explain the Government's posture. Is it the intention of the Government by these measures to produce an economic expansion greater or less than that which they were intending at the time of the spring Budget? As most hon. Members understand it, on the evidence available to us, it is now the intention that the public sector borrowing requirement for this year should be lower than it had then been intended to be, and yet the Financial Secretary said more than once in his opening remarks that the Government had brought these measures forward because it was necessary to start the process of expansion in the economy. It is very dangerous to say one thing and do the opposite.
  I will give the Financial Secretary one example of how historically this can have such adverse effects. Last year, at the beginning of 1976, the Chancellor announced that there would be stringent cash limits on public expenditure. Indeed from the evidence available from the Government Departments, it is apparent, particularly with the benefit of hindsight, that such stringent control of expenditure was brought about at that time. However, the Chancellor went on saying for many months that the cuts were not really very serious, and that this was just a housekeeping measure to keep tabs on what was going on. By underplaying the extent of their intentions on cash limits the Government lost the advantage of the actual steps that they had taken. As a result, they were forced into the emergency measure in July and further emergency measures, at the behest of the IMF, towards the end of that year. That was because the Chancellor had said one thing and done the opposite.
  There is real danger now of a different kind of confusion, but nevertheless damaging, if the Financial Secretary goes about saying that this is an expansionary budget when set against the intentions of the Chancellor as expressed at the time of the spring Budget. I hope that, in

  817
  reply to the debate, the Chief Secretary to the Treasury will make clear exactly what is the Government's economic posture at present and deal with the point, put by hon. Members on both sides of the House, that we believe that there is a fundamental contradiction between the facts and what the Financial Secretary has said. The right hon. Gentleman owes it not only to the House but to the world outside to explain the Government's exact intentions.
  The two points I wish to raise are more closely related to the Bill. First, the way in which we are now having the third change in the calendar year 1977 in the basic terms of the taxation of individuals brings into qeustion whether the present PAYE system is suitable for operating personal tax deductions. I was interested to hear what the Financial Secretary said about these matters being under review, and the point will not have been lost upon him.
  First of all, in the spring Budget, there were alterations to the threshold. There was then the Committee on the Finance Bill, at the end of which we had further alterations of the threshold, resisted by the Government but finally accepted as a fait accompli. There was also a change in the basic rate of tax. So two further kinds of change had to be introduced in mid-term, as it were. Now, two-thirds of the way through the financial year, we are faced with yet another substantial change in the tax arrangements of the great majority of people who pay income tax.
  This will impose a severe extra burden of work on the staff of the Inland Revenue. Indeed, the problem of mortgages has complicated the matter still further. In the summer the Inland Revenue had to introduce yet another change because interest rates are moving around so rapidly these days that the coding system of mortgage reliefs which was operating at the beginning of the year was no longer valid when sharp reductions of interest rates took place in subsequent months. So a new sort of noncumulative code had to be introduced for certain taxpayers, adding further complication, but making it possible for the threshold operations in the Bill to be built into the coding in time for several million taxpayers next year.
  818
  Not only from the Inland Revenue point of view is it inappropriate to assume that the existing PAYE system must be the vehicle for dealing with individual taxation, but the individual taxpayer is going to find it almost impossible to know where he stands. If he has any complications at all—and most taxpayers have some over allowances of one kind or another—the situation becomes progressively more and more difficult for him to understand and to know whether he is being correctly coded according to the allowances available to him. When taxpayers also have the basic rate of tax changed in the middle of the year, and when there are further complications about coding changes which are non-cumulative, it is almost impossible to keep track of what is happening.
  I do not know whether it would be convenient, practical or possible to reconstruct the PAYE system, but the greater volatility of the income tax system now developing calls into question whether we can carry on assuming that the tax tables we have got to know so well over the years in different circumstances are really going to work in future.
  Mr. Peter Viggers: Perhaps I can supplement the point being made so well by my hon. Friend. A number of my constituents have made representations to me about the complication of their tax affairs. Even a simple tax matter like the affairs of a retired widow now needs professional assistance, and in some cases such assistance can cost up to £100 a year—merely for simple matters of taxation.
  Mr. Stewart: My hon. Friend illustrates my point. I do not want to sound too complaining—no one wants to complain about amelioration of taxation—but it is getting too complicated to know what is going on. Not only is the Inland Revenue baffled, but the taxpayers are baffled as well. No one knows where he stands.
  There is a further complication. Because of the cumulative effect of the PAYE coding system, if the Chancellor makes sharp changes in the middle of the year he produces for many taxpayers quite a substantial lump sum at a particular point in the year, rather than a general easing of their tax payments week by week for the remainder of the tax period.

  819
  This is uneconomic, and disruptive to the economy as a whole, because it means a short sharp burst followed by a change of gear backwards. It is disruptive also for personal finance, and housekeeping for individuals, to receive a substantial adjustment of arrears of tax, after which they have to rein back their expenditure again.
  I raise this point because the matter deserves more debate. The fact that the Bill brings in this yet further complication in an already complicated year means that we should start the process of reconsideration fairly soon.
  My second point concerns the question of the choice that the Government have made in the form of tax relief. I was surprised when they decided to act purely on the threshold for income tax. I can see why they want to do it. There are positive arguments for it. The starting rate is still absurdly low. It is surely the intention of all parties to raise it. On the other hand, it is not long ago that we heard noises from the Government about the importance of differentials. It started last year when the Chancellor said that he had the intention of doing something for middle management—the chap on something between £4,000 and £8,000 a year. Then, I think, the Government were receiving representations from the TUC about the squeezing of differentials, and they appeared to be lending a ready ear to that.
  In Committee on the Finance Bill the Chief Secretary to the Treasury made a number of interesting remarks about differentials. He said:
  "That brings me to the reason why we chose 2p off the basic rate rather than take the whole of the sum available—about £2½ billion—and do it all on the thresholds, much as we should have liked to. We have the problem of differentials which is constantly brought to our attention by those whom my hon. Friends have asked me to take note of, namely, the members of the TUC.
  I ask my hon. Friend to appreciate what the consequences would have been had we done it all on the threshold. … one does nothing whatsoever to help. Indeed, one makes the differential slightly worse. A decrease of 2p in the basic rate will do more for the man on £120, £80 or £90—the skilled or semiskilled man—than for the man on a lower wage. We split the amount that we had available between doing something on the threshold and taking something off the basic rate, and I believe that … that was the best
  820
  way of dealing with it."—[Official Report, Standing Committee D, 14th June 1977; c. 482.]
  That was the time when the Government's proposals were to reduce the basic rate of tax by 2p and to do rather less on the threshold than actualy emerged at the end of that Committee.
  What has happened now? If the Government find that they have a bit more money in hand, one would have thought that they would do something, if not to correct it, at least to redress the balance; but no, they have made the position worse. They have forgotten all about differentials and they are now going overboard on the threshold. It is a very interesting change of policy. I think that taxpayers need to have an explanation.
  What has changed since the proceedings on the Finance Bill in June of this year? Could it by any chance be that phase 3 of the incomes policy never materialised, and so the question of the reduction in the standard rate ceased to be of such political importance and the voice of the TUC in that respect was no longer so powerful in the ear of the Government?
  Mr. J. W. Rooker: This is an important point. I should like to think that the reason is that the Government have taken on board the fact that that their original argument did not actually hold up, because the argument about 2p off the basic rate affecting differentials does not hold up when one then compares four skilled craftsmen on the same gross wage but one being a council tenant, one having a mortgage, one having an endowment mortgage and one having five children. The take-home pay of all of them is totally different. Therefore, because their personal taxation situation is totally different, starting to muck about with differentials has no meaningful effect. Anyway, I should like to think that the Government have taken on board the arguments that I put forward during the Committee on the Finance Bill.
  Mr. Stewart: If that is so, the hon. Gentleman was obviously very persuasive. It may be so. However, my point is that if the Government were saying last year and all through the first half of this year that it was their intention to deal with the problem of differentials—because their friends in the TUC and

  821
  many others had pointed out that this was an increasing problem with an incomes policy and a high rate of inflation, without an indexation of bands for operating tax, and at the lower level with a quite large band covered by the basic rate, and something had to be done —it is very strange that in this short space of time their policy has entirely changed. I am doing the same as the hon. Gentleman. I am asking for an explanation. We ought to know.
  Is it now deliberate policy that the Government are not going to deal with the problem of differentials? Do they regard it as less important than the question of the starting point for tax? Governments change their minds on taxation from time to time. The present Government have changed their minds 12 or 13 times in three and a half years, and they are quite entitled to change it again. However, they should not change their minds on a very important point without giving an explanation to taxpayers, who had been given to believe that they would receive this relief, of why the Government have changed their minds. Why are they not prepared to say what they are doing? Otherwise, we are entitled to draw the interpretation that all the talk about differentials, middle management and skilled workers was a lot of crocodile tears in advance of the negotiation of phase 3.
  Now that phase 3 has disappeared—we do not hear much about it nowadays—the only possible explanation seems to be one of administrative convenience, to which my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) referred. However, on a matter which up to that time the Government felt so important, I cannot believe that they would allow a technical matter to deflect them from deeply held beliefs about the taxation structure in this country. That is another point on which the Government owe us an answer.
  What is the Government's attitude to differentials? Is it their intention to implement as soon as possible the policy that they had announced until June of this year as being high on the list of priorities, or have they changed it? I hope that we shall have an answer to that question, as well as an answer regarding the expansion of the economy.
  6.5 p.m.
  Mr. John Cronin: The hon. Member for Hitchin (Mr. Stewart) made an interesting speech. He asked, somewhat plaintively, whether the Government would indicate their economic attitude for the future. I should have thought that it was fairly plain. However, I think that what puzzles practically all of us on the Government side of the House is what is the attitude of the Opposition Front Bench. We hear ceaselessly that the Opposition will cut taxation and expenditure, but we never have any indication of what public expenditure is to be cut and how the money will be found to reduce taxation.
  I notice that the hon. Member for Horn-castle (Mr. Tapsell) is taking a note of what I am saying. I hope that he will give some clear indication later of how the Conservative Party will achieve some of its electoral aims of reducing taxation and reducing public expenditure and where the money is to be found and where the cuts are to come.
  I am sure that my right hon. Friend the Financial Secretary had great pleasure in introducing a Finance Bill containing a substantial reduction in income tax. I thought that the hon. and learned Member for Dover and Deal (Mr. Rees) gave my right hon. Friend a rather lugubrious reception on this score. He rather suggested that it was in some ways merely a method of compensating for the increase in taxation that took place in 1974. But, of course, taxes had to be increased in 1974 to mop up, as far as possible, the extraordinary expansion of the money supply that had taken place during the last two years of the Conservative Government. There were increases in the money supply then of 26 per cent. and 28 per cent., figures totally unprecedented in times of peace.
  If that increase in the money supply had done anything for the economy, perhaps one could look at it with a little more satisfaction. However, it was used almost entirely by property speculators and fringe banks. People were making money out of financial deals without making any contribution to the economy. Those last years of the Conservative Government were the heyday of Slater Walker and of making money by financial manipulations. That is what we have

  823
  had to pay for in the increased inflation since that time.
  Mr. Ridley: Will the hon. Gentleman explain, in that case, why the Labour Party spoke and voted, under the leadership of the present Chancellor, against the Government of that day to urge them to increase Government spending and to cut taxes even further, thereby leading to an even bigger deficit and bigger increase in the money supply? I at least opposed what my Government did, but the hon. Gentleman took the opposite view. Why is he now discovering how wrong he was?
  Mr. Cronin: There is no question of the Government being wrong in increasing public expenditure. This is a difference of philosophy. An essential part of improving the standard of living of the whole community is increasing Government expenditure. It cannot be compared in any way with the way in which the money supply was increased and used during the last days of the Conservative Government.
  What we have to think about now is what is to happen to the money in circulation when the economy is reflated as a result of the Government's present cuts in income tax. Theoretically, if more money is pumped into the economy and there is more money to spend, business will expand and there will be an increase in investment in the economy. However, I sound a small note of warning. That does not necessarily follow.
  One of the features that has been noteworthy over the last few decades is the reluctance by the industrialist to invest. It by no means follows that when this extra money is pumped into circulation, industry will expand—in a manner, anyway, commensurate with the additional money in circulation.
  Therefore, I should have thought that this mini-Budget might have approached the matter more helpfully by giving some direct fiscal incentives, in addition to the cuts in taxation, to induce industrialists to invest and to expand their output. I have in mind, of course, fiscal incentives of a type by which the money would be refunded in the form of reductions in corporation tax for actual investment in more plant or more machinery, or any-
  824
  thing that would improve the efficiency of a firm.
  For instance, anyone who visits factories in Britain and factories in, for example, the United States, Germany and Japan, will be appalled by the complete difference in the amount of machinery and technology that is available in factories in those other countries as compared with what is available in our factories. One of the most pressing matters for our economy and for the reduction of unemployment is to get more investment. I appreciate that this is a very difficult matter. It is very difficult to induce industrialists to invest when they do not wish to do so, but it is becoming more and more urgent.
  I cite the example of the General Electric Company, which is one of biggest industrial companies in the country. At the moment GEC has more than £400 million, according to the annual report, either in cash or money in the bank or short-term securities. This is one of our most successful companies and it is run by Sir Arnold Weinstock, who is considered to be an industrialist of very high quality. Yet the company has £400 million plus to invest and it is not prepared to do so.
  Mr. John Ryman: My hon. Friend has quite rightly drawn attention to the need to encourage industrial investment. Would he not agree that the whole economic strategy of the Government is wrong? The Goverment are not willing to make substantial tax cuts which will give industrialists sufficient profitable return on their capital. That is why many companies, particularly United States companies, are refusing to invest in this country on a sufficiently large scale. They get a better return on capital in Western Europe or America itself. Unless the Government have the sense to cut direct tax and corporation tax substantially, the realities are that companies simply will not invest.
  Mr. Cronin: I am afraid that I shall have to disappoint my hon. Friend if he is asking me to suggest that the Government's economic strategy is entirely wrong. I think that it is an excellent strategy. I merely suggest that there are certain ways in which the lily should be gilded and further improvements made.

  825
  I consider that Government strategy is on the right course, but the problem we must face is the reluctance of British industrialists to invest. This is becoming a crisis for the whole capitalist system in this country. In Japan, Germany, France and the United States industrialists will invest, but they are very reluctant to do so here. If capitalism continues to be proved a failure in this country, drastic changes and alterations will need to be made in the whole political system.
  People talk a lot about unemployment being due largely to inflation. It is, but it is also due to the reluctance of industrialists to invest. It is unfortunate that as our economic system is at present regulated no Government can effectively insist on a high level of investment.
  It is very important that we keep inflation under better control. Indeed, this is a cloud on our horizon. Control of inflation depends at present on the Government's wages strategy and I hope that in winding up the debate the Minister will make it clear that the Government intend to take the firmest possible line on their wages strategy, at least until next summer. I hope that the Government will make it quite clear that any union or group of workers intending to use their industrial power to hold the nation to ransom, or, in effect, to mug the nation will not be encouraged or even allowed to do so. One appreciates that a lot of groups of workers are having difficulties at present. Responsibility and sensitivity are required in dealing with these matters, but there must be an underlying note of firmness in Government strategy.
  There is a different sort of discontent with this present Budget. Here I would agree with my right hon. Friend the Member for Blackburn (Mrs. Castle). I think that the Government could have done something more to help the children of this country by increasing child benefit. The Financial Secretary to the Treasury said the total being pumped into the economy by reduced taxation was of the order of £1 billion. It is unfortunate that none of that could be used directly for child benefit.
  Sir Brandon Rhys Williams Sir Brandon Rhys Williams (Kensington) indicated assent.
  Mr. Cronin: I am glad that the hon. Member agrees with me. I do not think
  826
  he is the only Conservative who does. A lot of hon. Members on both sides of the House feel rather unhappy about the way in which we are treating children.
  Everybody knows how expensive it is to bring up young children. Very few of us who, in our younger days, were having difficulty finding the money for our children's clothes and food did not feel only limited enthusiasm for our wives' reproductive propensities. But however difficult we found it, the cost of bringing up children is even greater for those people in lower income groups.
  The Child Poverty Action Group published some interesting figures about food in its latest pamphlet. Using the most economic diet, based on the absolute minimum of necessity for health and growth, the pamphlet estimates that children between the ages of 1 and 2 need about £2·39 a week spent on their food. Those in the 7 to 10 age group need £4·76, while those in the 11 to 14 age group require £6·90 a week. These figures make the present child benefits look derisory.
  The Government deserve credit for increasing the child benefit to £2·30 a week for all children from next April. Even that indicates a great discrepancy between the benefit and the actual amount needed just to feed a child. When one considers clothing needs as well, the expenses are even higher. When children become teenagers they need adults' clothes and the benefit from the zero rating of VAT is no benefit at all. Bringing up children is an expensive business and a particularly heavy burden on lower income groups.
  An additional circumstance which hits these lower income groups is the loss of earnings brought about by having children. Once a wife has young children, she is obliged to stop going out to work. This is a very heavy source of increased poverty for low earners. The Family Expenditure Survey of 1974 showed that 83 per cent. of childless wives earned more than £20 a week. But only 21 per cent. of wives with children of pre-school age earned more than £20 a week. This gives an indication of the grinding effect on the economy of households in the lower income groups when children start to appear.

  827
  A lot has been talked about the circumstances in which some workers are better off on the dole than they are if they work. I think the Press reports are probably exaggerated, but nevertheless this is a real hard-core problem. One reason is that the worker on the dole with a family gets £4·50 a week for each child. If he is working at present he receives £1 for the first child and £1·50 for subsequent children. I suggest that this is completely indefensible and the Government should take the matter seriously in hand.
  The difference between how we treat our children in this country and how children are treated in countries abroad, from the point of view of child benefit, is striking. I have in mind the comparative figures for the EEC countries. These figures are recorded in the Official Report of 28th February this year. The figures relate to monthly child benefits and the date to which they relate is October 1976, which is the nearest date to the present one can obtain.
  The figures vary in most countries according to the position of the child in the family—whether it be the first, second, third or fourth child. Taking the position of the second child, a family in Germany received at that date £17 a month; in France the figure was £18·48p per month and in Belgium £32·72p per month, whereas in the United Kingdom the figure was £6·50p. Taking the situation of the fourth child, a family in Germany would have received £29 per month; in France, £31 per month; in Belgium, £45 per month; and in the United Kingdom, £6·50 per month. It is disgraceful that in our country we should give such small child benefits compared with those in the other EEC countries. I appreciate that it is difficult to make comparisons between countries because there are varying situations in respect of the value of money, but I suggest that we should consider these figures seriously.
  One of the most important factors is that the present Government must be a Socialist Government. So far it has been a Socialist Government in every sense of the word. But at present the Government find it difficult to introduce Socialist policies as a result of the
  828
  numerical situation in the House and the impossibility of getting through most Socialist legislation. We all know that the Government are surviving on such a small majority with the assistance of our Liberal friends.
  I recommend the Government to take action to increase child benefits because it would be a Socialist measure which would have a good deal of support on both sides of the House and I am sure that there would be no difficulty in getting such a measure through Parliament. Here is an unrivalled opportunity for the Government to take a step which would be a Socialist measure and would gain the applause of the Labour Party and certainly have support in our constituencies I suggest that the political, economic and humane indications for increasing child benefits cannot be doubted for a moment.
  6.23 p.m.
  Mr. Nicholas Ridley: I should like to refer briefly to three speeches, and I shall deal last with the speech of the hon. Member for Loughborough (Mr. Cronin)
  I wish first to deal with the remarks of the hon. Member for Cornwall, North (Mr. Pardoe), who, alas, has left the Chamber. He said that he would like to raise additional revenue to pay for reductions in income tax by very much larger national insurance surcharges. Why, then, did he and his hon. Friends vote against the 1976 measure which brought in the present national insurance surcharges? I have never heard a more blatant piece of hypocrisy. It is strange to think that the hon. Gentleman could seriously base his whole policy, when speaking for his party on economic matters, on something which only a year ago he totally opposed. That is no way for the Liberal Party to conduct consistent policies.
  Secondly, I wish to refer to the excellent maiden speech of the hon. Member for Birmingham, Ladywood (Mr. Sever) and congratulate him on being one of those rare people who can win a by-election for the Labour Party. There are not many of them left. I also congratulate him on an excellent and fluent maiden speech and on having one of the smallest electorates in the country. When the hon. Gentleman spoke of his constituents being

  829
  in particularly difficult circumstances, he forgot the important fact that most of his constituents have moved into my constituency, which is three times the size of his.
  It is odd that a constituency in the centre of the great city of Birmingham should have a population one-third the size of constituencies in the Cotswolds. That appears to be an anomaly. I am sure that the hon. Gentleman, with his sense of burning righteousness, would wish to set that right in due course, but we have a Prime Minister who is consistently on record as seeking to stop any democratic redistribution.
  Before leaving the subject of Lady-wood, I must say that we all remember with pleasure the hon. Gentleman's predecessor, Brian Walden, who once made a famous speech about the pointlessness and futility of fine tuning in economic affairs. I suggest that this Budget is only fine tuning. It has dealt with only £1 billion in relation to total revenue of £53 billion, and it was totally unnecessary to bring it in half-way through the financial year because it causes a great deal of upset and change and achieves little economic effect.
  I shall deploy that argument a little further, but I wish to point to the fact that there have been protests by the Inland Revenue staff about extra work and confusion caused by the changes in allowances. Indeed, Mr. Cyril Plant, as he sits in his barge on British waterways, must feel cross with the Government, because not only is there more work for the taxman but that work involves giving back tax, neither of which, I am sure, Mr. Plant would applaud.
  Why have the Government taken this course? When we examine the economic effects, that question becomes even more relevant, because the Chancellor found in October that his prediction resulted in the fact that the public sector borrowing requirement was to be not £8½ billion but £6½ billion because of the increased revenue from income tax. As to the majority of the £2 billion difference, £1¾ billion extra revenue will come from income tax. Instead of saying "I shall cut £2 billion off tax or add it to spending", the right hon. Gentleman has put back only £1 billion. Therefore, the effects of what he has done have been mildly re-
  830
  strictive compared with the predictions at the time of the March Budget. It was wrong for the Financial Secretary to talk of an expansionary Budget, because it is mildly contractionary.
  I accept the comments of the hon. Members for Loughborough about the cost of feeding children, and I appreciate that he has carried out a good deal of research, but his economics were not so good. It is no good uttering the standard Socialist parrot cry in economic affairs "The last Conservative Government expanded the money supply, which has hampered us". It is true that they expanded the money supply, and at the time I said that they should not have done so. The hon. Gentleman did not say that at the time. He said that they should have expanded it more, since the criticism among the then Opposition was that the Chancellor of the Exchequer had not gone far enough.
  The hon. Gentleman had some bright ideas about giving more reward to investors and managers and about spending a great deal more on child benefits, but he never said that there should be any retrenchment elsewhere. He made it clear that he will urge the Government to increase the money supply, but if there is a Tory Government he will blame them for having accepted his advice. That is a typical piece of Socialist hypocrisy.
  Mr. Cronin: May I ask the hon. Gentleman to deal with a point of information? There has been no occasion when I have applauded Conservative Governments for increasing the money supply, and I do not think that any of my colleagues have done so. If the hon. Gentleman wishes to make these sweeping assertions, he should verify them with quotations.
  Mr. Ridley: I have promised to be short, but if the hon. Gentleman wishes me to do so I can go off and find some copies of Hansard containing reports of Budget debates and read at length from them.
  Mr. Deputy Speaker (Sir Myer Galpern): I do not think that at this stage I am prepared to change the request I made to hon. Members.
  Mr. Ridiley: I am relieved to hear that, Mr. Deputy Speaker. Although the hon. Gentleman would have benefited

  831
  from that exercise, I feel that the House would have been bored.
  I support this measure as this is a mildly restrictive Budget. I support the Government in that respect. I also support them because they have used such money as has been used to raise the allowance rather than to reduce the rate. It is necessary that we remove people from the tax net at the lower end of the scale. When we reach the stage that thresholds for paying tax are above social security levels, I should be in favour of concentrating any further reliefs at the top end of the scale or of reducing the rate. I believe that the Government have chosen the right priority, although we have to hear from them why they have changed their strategy from the time of the proceedings in Committee on the Finance Bill. At that time they were in favour of the alternative strategy. We want to know the reason for the change.
  I believe that the Government have chosen the right strategy. It was right to have a restrictive Budget—if we must have one at all—leading probably to higher unemployment and a restriction on business activity, which is what the Government appear to be planning. I shall say why I think that it is right.
  The borrowing requirement is still greatly too large. It is interesting that we have £1¾ billion of excess income tax revenue during the current year. That misestimate of £1¾ billion must represent over £5 billion of earnings greater than the estimate. That is because of the tax that would have been paid on the earnings if we assume that it was paid at the basic rate of 35 per cent. It means that £5 billion was the underestimate of the income of the people during the financial year.
  I wondered how that mistake could have been made. I asked during the proceedings of the General Sub-Committee of the Expenditure Committee for more details and on what the forecasts of tax on earnings had been based. After repeated questioning I received the answer from Mr. Anson, who said:
  "The forecasts are based on Ministers' policy."
  That means that the forecasts for the whole of our economic performance for the future, including earnings, revenue
  832
  and the rate of inflation, were based on £6 a week two years ago, 4½ per cent. last year and 10 per cent. during the coming year. It is not because the Treasury thinks that those are the right forecasts; it is because it has been told "If we say in public that no one can have more than 41 per cent., you cannot include in your estimates anything more than 4½ per cent. because the inconsistency would be seen and observed."
  Rather than coming clean and admitting that there is a difference between the estimates of the officials and the economists and what the Government would like, the Government have forced the forecasters to base their forecasts on Ministers' policy. That is why the revenue was so much higher in the current year than was originally forecast. It is because the forecasts were based on Ministers' policy. We all know that even during stage 2 there were considerably greater earnings than were ever allowed for under the policy.
  How much greater will be the outturn of earnings in stage 3 than Ministers' policy, which is 10 per cent.? It was confirmed to the Select Committee that it was at 10 per cent. that they wished to put in their estimates for the growth of earnings. I had a charming answer from the Under-Secretary of State for Employment when I asked what was meant by the term "self-financing wage increase". He replied:
  "A self-financing productivity scheme is a scheme whereby the savings achieved in unit costs outweigh the costs of the scheme such as the extra payments to those directly or indirectly involved, and any extra capital or running costs. Such schemes do not raise prices. The scheme must be demonstrated to be self-financing and be subject to regular checking that it remains so."—[Official Report, 16th November 1977; Vol. 939, c. 180.]
  That is within the 10 per cent., but it is still an increase in earnings. Even if those concerned manage to double their productivity and earnings, it is self-financing and it does not exceed the 10 per cent. It would be fun to ask to whom it must be demonstrated that it is self-financing and who carries out the "regular checking" that it so remains, but that would be a red herring.
  It seems that the growth of earnings is currently very much greater than we have been allowed to believe and that in the year that lies ahead it will be much

  833
  greater still. One of the pieces of economic good luck that the Government have had is that in a situation of malforecasting—probably deliberate and probably political—the result is that the borrowing requirement is reduced because of the extra revenue that comes from the extra earnings.
  The Government are thus in the position of being able to pretend to be generous and to give away money while at the same time being restrictive and slowing down the growth of the economy. They can do so for the good reason that they know that they must not exceed their money supply targets. We now have the prospect of a second bite at the cherry when, in the spring, we shall be told about the bonanza to be introduced by an electioneering Labour Government. The real truth will be that they will once again have tightened slightly the screw on the economy, thereby causing a greater increase in unemployment and a greater slowing down of the business economy. I support them in that, but I ask that future Budgets should be presented, both by the Chancellor and by the Financial Secretary to the Treasury, whose speech this afternoon was a disgrace, with a greater degree of accuracy and honesty as to what they are doing.
  6.38 p.m.
  Mr. Robert Kilroy-Silk: First, I congratulate my hon. Friend the Member for Birmingham, Ladywood (Mr. Sever) on what I thought was an eloquent and sincere speech. Indeed, that has been said by many others who have taken part in the debate. Strange as it may seem, my hon. Friend was a colleague of mine at school many years ago. When we were plotting against various schoolmasters, I never thought that we would be on the same Bench some years later prosecuting the same cause. I am sure that we shall hear from my hon. Friend on many occasions in future. We shall expect to do so. He spoke with great eloquence and sincerity. He had a command of his subject and the capacity to put his case clearly to the House. I am sure that Members on both sides will welcome him frequently to our debates.
  We have had a great deal of talk of optimism from Ministers. That has been the case even in the occasional outburst
  834
  of hysteria from Opposition Members about our rosy economic and financial propects. My right hon. Friends the Chancellor and the Chief Secretary to the Treasury have on several occasions congratulated themselves and the country on the economic situation and the more secure financial base.
  It is true that our balance of payments is now moving into surplus, that the Stock Exchange, ironically, is having an unprecedented boom and that sterling is having to be revalued upwards. However, what everyone seems to have forgotten and what virtually every Opposition Member has omitted to mention today is that we still have the glaring and shaming fact of 1½ million people unemployed. The hon. and learned Member for Dover and Deal (Mr. Rees), who today made his maiden speech from the Opposition Dispatch Box, talked at the end of his speech, if I remember him correctly, about needing to act on differentials and to help small business managers. He mentioned virtually every category as if he were at the election hustings looking for votes. He mentioned virtually every category of individual, but not once did he mention the unemployed—and no wonder. At least, his is the sin of omission.
  The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) mentioned the unemployed. I hope that I misheard him or that it was a slip of the tongue when he said that he supported the Government's measures, which he knew would increase the level of unemployment—increase unemployment, not create more employment. The hon. Gentleman does not take the opportunity to deny my interpretation of his words. He is at least one of the honest men on the Opposition Benches, being prepared to say that he wants an increase in unemployment—and he a former Minister in a Tory Government and by all accounts a putative Minister in any future Tory Administration. The hon. Gentleman's welcome for an increase in the level of unemployment should be well remembered in the country.
  This Budget, with the £900 million that the Government are giving away in one form or another, will be welcomed by those who benefit from the new tax allowances and who receive tax rebates. But it does not try to make any significant

  835
  contribution to bringing down the level of unemployment. It certainly does not attack the chronic level of unemployment in the regions, such as Merseyside, which I represent, where unemployment is now about 12 per cent. We are touching 20 per cent. male unemployment in Kirkby in my constituency. There are 12,000 school leavers unemployed on Merseyside. The rate of unemployment there is as high in the good times when the country is supposed to be experiencing bouts of prosperity as it is now in times of recession and depression in the West Midlands and other parts of the country. People in the West Midlands are rightly complaining bitterly about a rate of 4 per cent. to 5 per cent. unemployment.
  Mr. Rooker: Six per cent.
  Mr. Kilroy-Silk: It is now the norm for Merseyside to have such unemployment even in the best times. Therefore, priming the economy, welcome though it may be, is not an answer to the problems of the North-East, the North-West, Merseyside and the regions in general.
  It is easy for a Chancellor to pump money into the economy to prime it and to do the fine tuning that some hon. Members seem to believe this Budget is attempting to do, although this fine tuning seems to be being done with a blunt instrument. But it is not an effective means of grappling with the real economic problems faced by our declining regions, which have very fragile economies and have suffered a rapid job loss in recent decades. That applies not only to Merseyside, the North-West and the North-East but to the inner cities, to the West Midlands, Birmingham and London.
  What we need is a much more finely tuned regional policy that will allocate resources not across the board, not indiscriminately, but to where they are most needed—the areas of neglect, decay and need. More important, it is still one of the failures of our present regional policy to place those resources in a way that will enable them to match the needs of the areas to which they are allocated.
  There is a good case for scrapping regional policy, for saying that we shall no longer have special development areas, intermediate areas and depressed
  836
  areas. We should instead identify, by whatever criteria, the areas with special needs and special circumstances where there have been declining traditional industries and tremendous job loss. The areas would be immediately identified. Beginning with the worst, they are Kirkby, Sunderland and Skelmersdale. Perhaps we could extend the criteria and bring in slightly larger areas. We certainly need to devote far more of our regional policy directly to the most neglected areas rather than, as now, making virtually the whole United Kingdom a development area, a special development area or an assisted area where grants, loans and subsidies are available virtually across the board, with no sensitivity shown in trying to get to the roots of the problems in those areas and tackle them effectively.
  In that sense the Budget will not help. It will not help in reducing the level of unemployment. I say that with regret after all that the Government have done with their other measures—the job-saving schemes, the job-creation schemes and temporary employment subsidy, which have all been very beneficial in my constituency and have saved many jobs. It is still not enough for a Labour and Socialist Government to be presiding over 1½ million unemployed. It is a terrible waste of the lives of men and women and young people, a waste of their future, that they should have no better prospect than more dole queues day after day. It is even worse that young people should face them immediately upon leaving school.
  A great deal is being done, but we can never rest. However much we are supposed to be grateful to the Government, we shall never be grateful and never be satisfied until not one person is involuntarily unemployed.
  I move on to an issue that is even slightly more important. Many hon. Members, not least on the Labour Benches and certainly on the Opposition Benches, have pressed the Government to reduce the burden of individual taxation. They have made persistent and frequent pleas for that trend to continue, and my right hon. Friend the Chancellor is already holding out hopes of that happening in his proper April Budget next year. I want to introduce a caveat. It is important that we also take into

  837
  account what we are likely to scrifice when we make big demands to reduce the level of personal taxation. I am in favour of high levels of individual taxation as long as they correspond with high levels of public expenditure and of the quality of that expenditure.
  However I am in favour of reducing the level of taxation of the lower paid. There is no justification for the narrow differential between those who are unemployed and in receipt of social security benefits and those who are working but who, as a result of our tax system, are perhaps not taking home much more pay. That gap must be widened.
  The need is for a lower-rate band of taxation in order to reduce the burden of taxation on the lower paid. There is no reason why reductions in taxation should be made across the board, because when we ask for reductions in taxation we are asking for reductions in expenditure on social services—on hospitals, schools, roads, the police and the firemen, the case for whom has been vigorously put by hon. Members on both sides of the House, including Opposition Members, who call in their next breath for reductions in income tax so that personal income tax will not be as burdensome as it is now.
  With their traditional hypocrisy, Conservative Members today asked in almost the same breath for reductions in personal taxation and increases in public expenditure for special groups, special categories, special cases. There are no special cases and no special groups. I plead with the Government not to give way to the pressure, whether from the Opposition Benches, the Labour Benches or the public at large. I accept that it is an extremely popular cause, and there is a great deal of pressure behind it, but we should not give way to the demand for reductions in taxation if they are to be made, as would be inevtiable, at the cost of the quality of our public services and of public expenditure. As my right hon. Friend the Member for Blackburn (Mrs. Castle) pointed out, we are talking about the social wage rather than individual take-home pay.
  In any event, it is strange that all the demands for taxes to be reduced come largely from people who are relatively highly paid, highly rewarded and highly privileged. On its front page on Tuesday
  838
  this week, the Daily Mirror had the headline:
  Isn't Life Tough! says the boss who's hard up on £30,000 a year".
  The report underneath began:
  "A boss complained yesterday that he was a 'pauper'—on £30,000 a year.
  Self-made tycoon Alf Gooding was hitting out at the tax system, which, he said, leaves him only"—
  I emphasise "only"—
  "£11,800 spending money."
  About 60,000 people live in Kirkby, which is only half of my constituency. I have a large electorate. I defy anyone here or outside the House to bring me one person in that town who has "only £11,800 spending money". There will be not one such person. Opposition Members are murmuring amongst themselves. I say to them that not one person in a town where there is 20 per cent. male unemployment would have that amount of money. My God, they would not be complaining if they had it. They would not complain if they had even half that amount of spending money.
  Mr. Tapsell: Is it not a terrible indictment of the economic policies of the Government and the economic record of the country since the war if what the hon. Member says is true, when one considers the wealth in so many of our competitor countries?
  Mr. Kilroy-Silk: I accept that. It is a condemnation of successive Governments for constantly bowing to the kind of pressure that we have from the Opposition, who speak for the well-off and are more able to exercise pressure than are the people whom I and my hon. Friend the Member for Birmingham, Ladywood represent. Our constituents have always had the rough end of the stick.
  The only way in which we can deal with the kind of social inequities and disparities of income and wealth that exist between the regions and individuals is by the proper and full implementation of Socialist policies. They have never been fully implemented.
  I return to the question of Mr. Gooding. Out of his £11,800 he pays £4,500 in school feels for his three children. That is perhaps one explanation for his pauperism. He says:
  "You cannot get a decent package holiday for under £2,000."

  839
  It costs him another £800 to insure his Rolls-Royce. That is his world. It is not my world, nor is it the world of my hon. Friends. It may be the world of some, if not all, Members on the Opposition side, but it is not the world that is known by my constituents. It is a world that is well beyond their horizons. My constituents do not have even £2,000 a year to live on.
  Many thousands of my constituents—those in one-parent families or who are mentally ill, mentally handicapped, disabled, unemployed or in receipt of a pension—have nowhere near £2,000 to spend, let alone £800 to insure a Rolls-Royce. According to the article, Mr. Gooding paid £200 for a suit. After a long category of woes, the Daily Mirror says:
  "Mr. Gooding went bankrupt as a jobbing builder after starting in work as a draughtsman."
  He is now back in business.
  Mr. Gooding said that he refused to give himself a rise because the Government would have taken most of it in tax. He has the ability to choose whether to give himself a rise. The people whom I represent have no choice over their incomes. They do not have the ability to decide how much they will pay themselves. Many thousands of my constituents would give their right arm simply for the opportunity to pay tax.
  It ill becomes someone in Mr. Gooding's position to complain about cuts in living standards and that he cannot get a decent package holiday for less than £2,000. The 1½million unemployed would give their right arms to have the opportunity to pay a little in taxation.
  Hon. Members should not succumb to this type of blackmail, which is damaging to the fabric of our society. They should have the courage of their convictions. The Labour Party is a party of high taxation. Let us admit that and defend it. At the same time, we are a party of high public expenditure and good public services. One cannot have the level of equity in our public services that we all desire while operating at the same time a low level of taxation. The choice has to be made. On this side of the House we have made that choice,
  840
  and it is in favour of public services rather than giving way to low taxation and wealth.
  We must make further inroads towards uncovering those who do not pay their taxes—those who have not paid their VAT, corporation tax, capital transfer tax and capital gains tax. That cost the country £900 million last year. We gave away £900 million. These are the people who have stolen money from the taxpayer. Let us recover that money and introduce a wealth tax and thereby introduce a greater degree of fairness and equity into our society.
  6.58 p.m.
  Mr. John Wakeham: I agree with the hon. Member for Orsmkirk (Mr. Kilroy-Silk) in one respect. It is not becoming for anyone, whether from the Government Front Bench or anywhere else, to speak in terms of glowing optimism about the recovery of the economy when 2 million people are either unemployed or are receiving employment through Government assistance. No one can be in any way complacent or satisfied with the present position.
  Some of us believe that until we have some real growth in the economy we shall never bring the unemployment figures down. We also believe that the self-employed and small businesses have a significant part to play in that growth. If each small business could take on one more employee, we would go much of the way towards solving the unemployment problem.
  The significance of the Bill rests on how little it measures up to the great problems of the taxation of, and assistance to, less-well-off people. Obviously any reduction in taxation is to be welcomed. The Chancellor of the Exchequer says, as I understand it, that he has £1,000 million to give away in tax relief. I find it hard to believe that he has very much more to give away at present, even accepting the arguments of my hon. Friends, who have rightly pointed out that it indicates a more jaundiced view of the economic situation than was apparent in the Chancellor's statement last April.
  In part, that is due to the number one problem of inflation and the danger that it may well take off again in spite of the

  841
  current situation. It is clear that the proposed 10 per cent. wage increases will come out at about 15 per cent. It is pretty clear from Government statements and speeches that this is not what the Government intended. In my view, the Government have little chance of bringing inflation down to single figures by the end of 1978 on anything like a continuing basis if wage settlements remain, as they seem likely to do, at the present level of about 10 per cent. Inflation may well fall to single figures at some time in 1978, but, unless there is a fairly substantial rise in the value of the £ sterling, any long-term reduction to single figures will, I believe, be very difficult.
  Therefore, when there is £1,000 million of tax relief to be given—and without arguing at this stage that in present circumstances there is much more to give away—we ought to consider the options open to us. I shall direct attention to three of them: doing something to help the low paid; doing something to increase incentives and to improve the differential in after-tax incomes, which was at one time very much in the Chancellor's mind; and doing something about the levels of tax borne by those who might plough back into their businesses some reduction in direct taxation, that is, the self-employed, people running small businesses and professional people. Many in this latter category rely upon their after-tax income to finance their business, and at a time of high inflation this is a major problem for them.
  With those options in mind, I ask whether the Chancellor has taken the right steps. As regards the low paid, I believe that he still has a major problem, with social security benefits rising substantially faster than tax thresholds. I understand that the limit for family income supplement is now about £2,500 a year for a married man with two small children, and the same person's tax threshold stands at £1,800. Thus, there is still a major problem for any Chancellor to tackle, and in the year 1978–79 it will become worse by £166 as a result of the change to child benefit.
  In these circumstances, one has to view with some scepticism the Chancellor's assertion that he has honoured his pledge about adjusting for inflation in personal allowances, unless he intends in
  842
  his next Budget to make the poverty trap worse rather than better, which I should regard as disastrous.
  We have already discussed the question of taxation and incentives at length. It is now established that a person on average earnings is in real after-tax terms worse off today than he was in 1973. But one has only to look at those on above average earnings, the sector in which the question of differentials principally arises, to see that their position is substantially worse. The trouble with our tax system is that when a person begins to move from average earnings to slightly above average earnings the rate of increase in direct taxation is what matters most to him. Moreover, many such people, especially in my constituency, have had substantial increases in their rates and commuter fares, and these people have been some of the worst affected over the past few years.
  The third option I presented was doing something to help the self-employed and the small business man. Here, the tax structure has an even more important function. Not only do the self-employed have to live off their after-tax income, not only are they entitled to look to us for fairness, but they have to find the extra cash flow to keep their businesses going and prospering. There is a problem here. Business profits have fallen in real terms from about 7·4 per cent. in 1973 to about 3·6 per cent. return on capital employed in 1976. Thus, with a marginal rate of tax of about 50 per cent. the self-employed and the small business man is left with less than 2 per cent. to finance expansion, to meet inflation and to fund risk-taking and all the other things which go with it. No one could justify that pathetic basis for financing this country's trade and commerce.
  In this context, the working of our taxation system is crucial for the unincorporated business. The Government have made some proposals here. They are rather vague in detail, but some of them seem encouraging. First, I gather that they propose to raise the level of earnings of a close company which are exempt from apportionment on its members. That is not in the present Bill, but it should be brought into consideration. In other words, this is to increase the level at which shortfall assessments apply.

  843
  It is right that the Government should do something in that respect as soon as possible, but I put two points to them. It is not, in fact, a concession to small businesses. It is the ending of a discrimination which small businesses have suffered for some time. Second—this will apply to all such changes of taxation—it is bound to increase somewhat the Inland Revenue's worries about avoidance.
  I have no doubt that the Inland Revenue will rightly tell the Government about that, but it is up to the Chancellor and the Government to make a judgment. How much abuse will there be, and how much of a burden will be put on the great bulk of taxpayers as a result of the extra restrictions which the Inland Revenue will almost certainly try to introduce for the sake of stopping what may well be only a small measure of avoidance? The Government have to consider the revenue loss, but they should consider also the cost to the Inland Revenue of collecting the tax and, more especially, the cost to the taxpayer of complying with the legislation.
  All the Government's answers on a number of taxation questions raised during the past few months have, in general, exhibited one weakness. They have been highly unconvincing in their approach to compliance by the taxpayer and the view which the Inland Revenue will take. They ought to look more carefully at this and elicit more substantiation from the Inland Revenue in he matter of these costs, and they ought also, I suggest, to consult the professional bodies, which could give them some guidance on the heavy burden of compliance costs under our tax system.
  There is a second proposal worthy of some thought. Consideration is being given to help for small traders so that they can carry back losses against earlier income, such as income they may have had from employment before becoming self-employed. I am sure that that is an improvement, but the argument is just as strong in respect of existing small traders being able to carry back losses further than they can at the moment against existing income. As I say, that applies to this type of trader just as much as it does to one who moves from employment to self-employment. It is
  844
  worthy of greater study, and that study should include also the question of carrying back capital allowances as well as just losses.
  I cannot say that the Government are wrong in their present proposal to direct the bulk of this small amount of tax relief to increases in personal allowances, but the fact that one has to come to that conclusion when there are many other sectors urgently in need of tax relief is the biggest condemnation of this Government that one could bring to bear. Therefore, any talk of a spectacular improvement in the economy is moonshine.
  The biggest criticism of the Chancellor is that he finds himself in this position after the Government have been in office nearly four years and when in 10 out of the past 40 years there have been Socialist Governments. That is a damning indictment of the Socialists' management of our economy.
  7.10 p.m.
  Mr. John Ryman: I have listened with astonishment to part of this debate. I have been astonished by the Government's complacency and I have been astonished by the Opposition's impertinence.
  I listened with very great interest to the speech of the hon. and learned Member for Dover and Deal (Mr. Rees). I congratulate him on having made what was, I believe, his first appearance on the Front Bench as a Shadow Treasury spokesman. He is a gentleman who is very learned and is a most distinguished member of the Bar, specialising in Revenue matters. There are very few distinguished members of the Bar in the House at present.
  I have great respect for the hon. and learned Gentleman's learning and erudition, but the partisan political flavour which he injected into his speech towards the end deprived the House of the value of some of his comments, because we were left with the distinct impression that he was seeking to make cheap party political points rather than a serious contribution and a critical, constructive view of the Government's attitude on tax relief.
  I was astonished by the Government's complacency because they, having made a derisory effort in income tax reduction, have left the most serious problems of

  845
  our time untouched. It is most important to try to focus attention on some of these problems now devoid of partisan political speeches but bringing pressure to bear upon the Government to channel help where it is most needed.
  Lack of encouragement for investment has been spoken about and it is a key to the unemployment problem in the North-East, where my constituency is. Business men will never be persuaded to invest unless they get a decent return on their capital. That is a good Socialist policy which I strongly support. There are many companies in my constituency which have made men and women redundant because the companies are not getting a sufficient return on their capital. There are many multinational companies in the North-East, particularly American companies, and it is not worth their while commercially to invest in the North-East because they do not get a sufficient return on their capital. They are going to Europe, to California, to South America, to the Near East. They are not investing in the United Kingdom. It is simply not worth their while to do so. The result is that there will be fewer jobs than ever in the North-East.
  I have had talks with industrialists from many reputable companies and they say that they have serious thoughts about not investing next year when they had originally planned to do so. The North-East is now one of the areas of the country where the problem of unemployment is greatest.
  What is now required—surely we can all agree on this—is to cut the level of direct taxation to such an extent as to provide an encouragement and a stimulus for all taxpayers to work harder because at the end of the day they will keep more money. People work for money. It is as simple as that. It is no use fiddling around with a 1 per cent. reduction of income tax, because that is absolutely footling.
  The trouble about this Government and their awful complacency is that one gets ridiculous letters from the Chancellor and from the Financial Secretary, but they are completely lacking in flair and originality. They are not only prisoners of the International Monetary Fund. The Chancellor is the prisoner of the Treasury. Any remedy that is introduced by this Government, as on previous
  846
  occasions by the Tory Government, totally lacks in imagination.
  This Government must have the guts to cut direct taxation substantially. That can be done in a number of ways. Also, the Government must have the courage to abolish the ridiculous distinction, which I have never understood and which I still do not understand after about 12 public speeches, between unearned income, so called, and earned income. I do not understand what merit there is in an investment surcharge which seeks to tax at a higher rate money from investments which has been earned either by the receiver of that money or by somebody else. I cannot see any distinction between so called unearned income and earned income, because unearned income has been earned either by the recipient or by somebody else.
  I know dozens of cases in my constituency of elderly people in dire financial straits living on small incomes from investments. They are taxed to the hilt and do not have sufficient money to pay for the necessities of life.
  Mr. Budgen: The hon. Gentleman described his views earlier as being good Socialist views. Will he tell the House whether that particular view, which will certainly be warmly embraced by most hon. Members on this side of the House, is also to be described as a good Socialist view, and, if so, when he expects to see it in the Labour Party manifesto?
  Mr. Ryman: I am indebted to the hon. Gentleman, whose intervention was articulate, if not particularly helpful. I have sought to make the point that we should try to take partisan party politics out of this debate and try to approach the matter on merit. I would encourage the Government and the Tory Party to do so.
  The Tory Party I describe as impertinent because the hon. and learned Member for Dover and Deal, in his penultimate peroration from the Front Bench, talked about the necessity to reduce taxation—capital gains tax, capital transfer tax and other forms of taxation. Yet it was his party that introduced capital gains tax in the first place.
  The Finance Act 1962—a copy of which I have in my hand, quite by chance—introduced the short-term capital gains tax in table 10 of a schedule to that Act.

  847
  It was a Conservative Administration—I believe that the Chancellor was then that distinguished gentleman Mr. Selwyn Lloyd—who introduced a short-term capital gains tax for the first time in the history of this country.
  It is absolute nonsense for the Tory Party to criticise tax on capital gains—which in my opinion are far too high, anyway—at 30 per cent. when it was the Tories themselves who introduced the tax in the first place in a different form.
  Mr. Nicholas Edwards: In the interests of non-partisanship, accuracy and so on, may I urge the hon. Gentleman carefully to study the Finance Act 1962, which he has with him? He will then see that what Mr. Selwyn Lloyd, as he then was, introduced was an extension of income tax to cover certain limited classes of short-term speculative gain. That is a totally different thing from an overall capital gains tax which makes no allowance for inflation, which lasts for ever—the gains can be taxed, however old they are—and which covers virtually every class of asset. That is a capital gains tax itself, whereas what the former Mr. Selwyn Lloyd introduced was a limited extension of income tax because the Revenue had had difficulty in collecting tax on certain speculative gains. The opinion of the Revenue—whether it was right or not is another matter—was that there was a certain loss of revenue from avoidance in this way.
  Mr. Ryman: With great respect to the hon. Gentleman, he is not quite right. Of course there is a distinction between the short-term capital gains tax introduced by Mr. Selwyn Lloyd and the capital gains tax introduced by the Chancellor in the 1975 Budget, but the principle is the same. In 1962, for the first time in the history of this country, certain capital gains were treated as income for tax purposes if made within a certain period of time and were not allowable for relief against tax liability. That is what it comes down to. I shall not engage in this esoteric argument much longer, although I am sure that the hon. Member for Pembroke (Mr. Edwards) has many valuable points that he could make. Capital gains tax—although, I agree, in a distinguishable form that was different from the 1975 tax—was introduced by a Tory Government.
  848
  I want to make a point about something quite different. What are the Government doing about the many tax anomalies that exist? What about widows? Appalling hardship is suffered by widows, whether war widows, industrial widows or any other widows, under the present tax system. The Chancellor has received many representations from widows' organisations, many individuals and hon. Members. I have had endless correspondence with my right hon. Friend about it. The only reply that one receives, year in and year out, is that there is generally Treasury sympathy for widows, but there is no specific action of any kind. Only yesterday I received a letter from the Financial Secretary to the Treasury saying that the Government were not willing to put widows in a different tax position from that of the ordinary taxpayer.
  The Government must act in this matter now. There is no need for me to go into detail, because the facts are only too well known. The hardship suffered by widows as a result of the present tax system is impossible to describe sufficiently well. We hear stories of hardship, deprivation and poverty suffered by widows in many parts of the country, and particularly in the North-East.
  There will be more widows as the years roll by because, according to the insurance companies, women live longer than men and the development of modern medicine means that there will be an ageing population. In any event, there will be more widows around. Therefore, if the policies of this Government and their predecessors are pursued, widows will be poorer. That will be a disgraceful state of affairs.
  It is extraordinary that, in spite of the partisan speeches that we have heard from both sides of the House—and we have heard a lot of twaddle from both sides—there are still a lot of rich people about. In spite of the incidence of high taxation, which I deeply deplore, there are still people about who can spend a great deal of money. How is it that in 1977, when the Government are grinding the faces of the poor and the workers, there are still people swanning up and down the country living in enormous opulence?

  849
  I suggest that there are several reasons why certain people are still living extremely well when the majority of us cannot manage within the ambit of the present tax system. It is unfair, and it causes disparity and great hardship to the general taxpayer. One of the reasons is that as often as not anybody in a cash business is, to put it bluntly, "on the fiddle" with the inspector of taxes. The Government and the inspectors of taxes should address their minds much more forcibly to tax evasion, because cash businesses—whether launderettes, greengrocers, horse dealers or second-hand car dealers—are often involved in an absolutely astronomic amount of tax evasion. My limited experience in revenue matters leads me to the view that the Inland Revenue is well aware of the problem with cash businesses which avoid the tax net and that there must be enormous loss to the Revenue as a result of such evasion. Yet tax inspectors are not doing anything effective. If they need further powers, they should say so and come to the House. If not, they should enforce the existing laws more rigidly. If a large body of people avoid tax illegally, it inevitably means that the other taxpayers, who pay their taxes lawfully and whose tax is deducted through PAYE, have to pay more.
  Mr. Budgen: Will the hon. Gentleman explain what encroachments on individual liberty he has in mind? Is he suggesting that there should be a right for the Inland Revenue to enter houses without warrant, to demand to see the books at any time, to go to a citizen's house at night and get him out of bed? Perhaps he could explain how that would be consistent with some of the views he has put forward.
  Mr. Ryman: The hon. Gentleman, who is on the right of his party, always comes along with such extraordinary suggestions. I do not know whether he is trying to be naive or whether he cannot help it. I am advocating only that the Inland Revenue should scrutinise more carefully the returns that are made by cash businesses and, if necessary, challenge them more rigorously. None of the Draconian or Gestapo-like powers advocated by the hon. Gentleman are necessary. More common sense and a more realistic approach by tax inspectors is necessary.
  850
  I do not know whether the hon. Gentleman has ever had experience of running a fish and chip shop or such an enterprise as a fruit and vegetable market stall, a taxi or a horse-dealing business. Such businesses make negligible returns, and no tax inspector should accept such figures without further investigation. It is jolly unfair that there are many people who fiddle their tax returns so that the rest of us have to pay more.
  Another category of people who swan around and live like kings these days, while the rest of us are all grinding away and paying huge sums of tax is those who own their own companies. They live off their companies instead of for them, and the companies subsidise the directors and provide private comforts for them. There are dozens of cases known to the Inland Revenue in which directors of private companies, particulary in industries such as construction, spend a great deal of money on their own pleasures, comforts and standard of living that they would not be able to spend if they were not using the resources of the company—whether those resources are company cars, company workmen doing up their houses, or expensive accounts in connection with entertainment. A step was made several years ago to try to control this more rigorously.
  Companies have people on the payroll who are, in fact, girl friends or the wives of owners and who do not contribute a single sensible thing to the welfare of the company. It I were a shareholder in such a company, I should object strongly. The Inland Revenue knows of a wealth of such devices and schemes, yet often the tax inspector merely raises an eyebrow and does nothing about it whatsoever. Why is that? On the one hand, inspectors of taxes are tyrants who hound small people in an extraordinary way. This is not a laughing matter, because I have heard of cases at my constituency surgeries of widows and poor people who have been hounded over negligible sums while, on the other hand, company directors are swarming around at the Carlton in Cannes and in Rolls-Royces at Ascot, living in a way that they could not possibly afford if they were paying their proper rate of tax. It is all most unsatisfactory and it is not funny, because the tax system will work only if it is fair and is seen to be so. The disparity of

  851
  treatment of taxpayers by inspectors of taxes is inherently unfair.
  This country is now, unfortunately, developing an attitude rather like that held by the Poujadistes in France at one time, because it is becoming clever to diddle the taxman. We are basically an honest people. Tax attitudes of this sort are encouraging normally honest people to become dishonest. That is a most undesirable state of affairs.
  What is the Treasury doing about it? The Treasury is utterly wet and feeble and does absolutely nothing. The Government are utterly wet and feeble. They have no imagination, no flair and no guts. They simply have conventional attitudes to taxation—drinks, cigarettes and things of that kind.
  Why on earth cannot the matter be tackled vigorously and with imagination? Why on earth cannot we cut direct taxation substantially and reward the people who work hard? Men and women in my constituency are in an intolerable position. Women work hard because they have to. If they do not work, the household does not have sufficient money coming in for the necessities of life. It is not pin money. It is not luxuries that they buy. They work because without the wife's income there is insufficient money coming into the household to pay for the essentials of life.
  Yet one has this ludicrous position where husbands and wives, whether jointly or separately assessed, are lumped together for the purpose of direct taxation. What possible incentive is that for a women to go out to work or for a married woman, perhaps when she has had her children, to go back to work? She might be a teacher whose service and experience is invaluable to the community. But what incentive does she have to go out to work when at the end of the day the taxation burden is so terribly high?
  I do not want to take up any more time. I am sorry that I have spoken so long already. I am not an expert on these matters. I am simply reflecting the views of the ordinary oppressed taxpayer. We are now in a situation where it is high time that the Government pulled out their finger and dealt vigorously with these abuses.
  7.32 p.m.
  Mr. Nick Budgen: Much though I enjoyed the vigorous and uniquely Socialist contribution—I am sure he would describe it as such—of the hon. Member for Blyth (Mr. Ryman), I shall not take up the point that he makes, even though it would be in my interest to do so. I understand that the hon. Gentleman wants some form of differential treatment by the Revenue as between those who are at the Bar and those who may be directors of companies. None the less, perhaps the hon. Gentleman will forgive me if I return to the arguments touched upon briefly by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) which were dealt with at more length, but with much greater inconsistency, by the hon. Member for Cornwall, North (Mr. Pardoe).
  It was, I recall, the staple diet of politicians during the period from 1974 to 1975 and, indeed, the early part of 1976 to be talking incessantly about the size of the public sector borrowing requirement. It is remarkable, when we look at what was said by the Chancellor on 10th November, that there was very little serious discussion about the best and most safe size of the public sector borrowing requirement.
  I agree with my hon. Friend the Member for Cirencester and Tewkesbury. I, too, would wish to see the public sector borrowing requirement reduced. It was remarkable that throughout 1974, 1975 and 1976 the great debate was whether it was safe to cut the public sector borrowing requirement quickly, or whether the difficult financial situation in which we found ourselves necessitated a gradual and phased reduction of the public sector borrowing requirement.
  The oddity is that when we were in difficult times it was said that it was too difficult then to cut dramatically the public sector borrowing requirement. Now, of course, with trumpets blaring the Chancellor is saying that everything is going well in the financial sector. He is saying that he has obtained the support and approval of the financial markets and of those who run the great banks of the world. Now, he says, there is no need to reduce the public sector borrowing requirement. I contend that he is wholly wrong.

  853
  He is as unhappily inconsistent as the hon. Member for Cornwall, North. The hon. Member for Cornwall, North, is so inconsistent—and so inclined to read with approval the latest article which happens to tie in with his current political position—that he brings no distinction and no consistent thread to anything which he says about the economy. On the one hand, the hon. Gentleman bashed the monetarist line and the mistakes made by Lord Barber. With that I entirely agree. But at the same time he says with the voice of a vigorous Keynesian "I want to see the public sector borrowing requirement revalorised and expanded this year."
  The hon. Gentleman did not explain how that is safe or consistent with the view that he put forward in the earlier paragraphs of his speech when bashing Lord Barber. But, of course, it is consistent with the pact. It is consistent with what he wants to say in support of the present Administration. It may be very consistent if we find that in the spring the Chancellor is expanding the public sector borrowing requirement with a view to winning the next General Election. Then, no doubt, if he decides that he wishes to see a pact between the Liberals and the Labour Party renewed, the hon. Member for Cornwall, North will be able to say "Look back to my tremendously far-seeing speech of 17th November when I, too, said that there was a prime necessity to increase the public sector borrowing requirement." Indeed, the hon. Gentleman might say next Spring "I want you to know that I have made representations to the Chancellor". If the Chancellor increases the public sector borrowing requirement, the hon. Member for Cornwall, North will be able to say "The Chancellor is doing it because I told him to do it." The fact is that the hon. Gentleman, with all the vigour and vulgarity of his political debate, is wholly inconsistent. There is no sort of philosophy or consistent theme in any of his comments with regard to the way in which the economy is managed.
  Let me say a word or two about the way in which the Chancellor is at present contending that he has done so well. Yes, he has done very well. Yes, he has demonstrated that much is possible. It is remarkable the way in which public
  854
  expenditure has been brought under control by the cash limits which for so long and so consistently were advocated by Opposition Members who take an interest in these matters. Yes, the Chancellor has been remarkably successful in reducing the subsidies that were previously paid to the public services with the exception of the nationalised industries, such as steel and British Leyland.
  In a number of areas the Chancellor has been remarkably successful in cutting public expenditure. But more could be done. For instance, he is not prepared to increase the level of council house rents. He is not prepared to do anything about the continuing subsidies to the steel industry and to British Leyland. He is not prepared to say what he no doubt knows to be the case, that most of the jobs which are being conjured out of nowhere in non-productive activity, such as cleaning up graveyards, will have no real effect upon the wealth of this country and will not provide opportunities for continuing employment for our young people.
  The reality of the situation is this. We are now up to the outer edge of the IMF money supply constraint of an increase of between 9 per cent. and 13 per cent. There is a real danger that the money supply may once again get out of hand, possibly before next spring. The crucial point is whether the PSBR will be allowed to get substantially out of hand in the period after next spring.
  I urge the Chancellor to say now that he has a plan for a reduction of the PSBR. I do not ask him to say that he will necessarily do it in one year, or even in two years. But one of the constituent parts of encouraging confidence in our financial markets has been to say that there will be a money supply constraint, and for the Bank of England to say that it regards the money supply constraint as a highly important factor in the management of the economy. So in the same way confidence would be vastly increased if the Chancellor were prepared to say that he had a definite plan for the gradual and consistent reduction of the PSBR. That would make it clear to everyone that the money supply promise was going to be kept.
  In the next few months there will be a substantial cut in direct taxation. It would be done, I suspect, whichever party was in power. If the Conservatives were

  855
  in power, I am sure that there would be an immediate cut in the present levels of income tax. The Minister is mumbling about the danger of reflation, and he is right. It is safe to reduce direct taxation only if there is in prospect a substantial reduction in public expenditure.
  The situation is even more dangerous because when there is that reduction in direct taxation it will probably bring eventually in its train a substantial stimulus to the economy. As the hon. Member for Blyth said, in what he no doubt would characterise as a Socialist speech, people at least partly work for money. If there is a stimulus by extra effort throughout the country, so there will be an increased demand for financial resources.
  So the Government will find it more difficult to borrow money from the non-banking public. We shall then be back in the old dilemma of deciding whether to increase interest rates or print money. As the hon. Member for Blyth so wisely said, investment decisions are taken on the basis of what is a proper net return on capital. That is decided partly by the cost of borrowing money, but partly also on the reduction of return by taxation.
  I urge the Chancedllor to announce now that it is his continuing prime responsibility to reduce inflation and that it is his desire and intention to do this by gradual and continuous reduction of the PSBR.
  There remains one great uncertainty that the Chancellor relies upon as though it were a total certainty. Everyone has trumpeted the importance of North Sea oil. Of course, it is important for the way in which it gives us a great potential surplus on our balance of payments. But to those of us who believe in free and floating exchange rates that is not so important. It is most important, however, for the increased revenue that it brings in.
  All the calculations that are made about the revenue and the balance of payments effects of North Sea oil are based upon a continuance by OPEC of its present pricing policy. At the end of 1973 the nation was totally caught out by the quadruple increase in oil prices. It went completely against the conventional wisdom which believed that cheap oil was
  856
  here for ever. I wonder whether we might be caught out again. Will the OPEC cartel break? Might we be back in a world of cheap oil? If so, we have to face the fact that we as a nation are just as dependent upon a high world price for oil as are the Arab States. In that way all our calculations could go wrong.
  Our PSBR could be increased by £2 billion overnight by a change in the price of oil. I hope that I am wrong about that. But the only safe posture is to reduce gradually and purposefully the PSBR. We do not need to go as far as Mr. Roy Jenkins went and have a budget surplus, as we had just before the 1970 General Election, of £1 billion. But if we get back slowly and steadily to a balanced budget the proud boast that all Labour Chancellors think that they are more conservative than the Tories will have been honoured and we shall be back in a posture from which we can properly say that inflation has been halted.
  7.48 p.m.
  Mr. William Hamilton: We on the Labour Benches are always amused when the Conservatives launch their attacks on our Liberal friends. I was interested when the hon. Member for Wolverhampton, South-West (Mr. Budgen) attacked the hon. Member for Cornwall, North (Mr. Pardoe) on various propositions that he put forward, and complained about his inconsistency. I do not think that any hon. Member can afford to attack any other on those grounds. If we consider the matter, most of us, whether on devolution, the Common Market, or any other major issue, have changed our minds in one way or another. It is not a bad thing to change one's minds. The evil is to refuse to concede that one has.
  Mr. Budgen: The hon. Member for Cornwall, North (Mr. Pardoe) changed his mind in the same speech.
  Mr. Hamilton: Yes, and the hon. Member for Wolverhampton, South-West has done precisely that, too. Let me pose a problem to him. He talked about subsidies to the steel industry, to British Leyland and on council house rents and building. The implication of that is surely that the Conservative Party would eliminate or substantially reduce those subsidies in some or all of these areas. I hope that the Conservatives will spell

  857
  that out very clearly and follow it through in all its implications. Those implications are substantially increased council house rents and substantially increased unemployment in the steel industry and the car industry, and in several other ways. There would be very important and wholly unacceptable social, economic and political side effects.
  This is one of the dilemmas that we are facing in this country. Most of us agree that there is evidence of substantial over-manning, not only in the public sector of industry but in the private sector. It is very easy to pose the problems but extremely difficult to suggest any socially and politically acceptable solutions to them, because we are dealing with the lives and livelihoods of ordinary working me and women and their families.
  It is extremely difficult to solve these problems. My right hon. and hon. Friends do not need any lectures on how to deal with industrial relations, problems of investment, and so on. Every Opposition Front Bench speaker speaks with a forked tongue. At every Question Time, from Monday to Thursday, Back Bench and Front Bench Opposition Members complain about shortages of hospital facilities, shortages in road provision and, individually and collectively, they demand more public expenditure in one form or another, as do my hon. Friends. At the same time Opposition Members, while they are in favour of all these things, urge more substantial reductions in taxation. The two simply do not go together.
  We can tell the public that if they do without new hospitals and make do with slum schools, if they do without all the things that my right hon. Friend the Member for Blackburn (Mrs. Castle) called the social wage, we shall be able to reduce taxation. But we cannot do both. The public must choose in these matters. It is a great pity that more hon. Members do not take the opportunity that this Bill provides to encourage a much broader discussion of taxation and the whole economy. Everybody welcomes the Bill—
  Sir B. Rhys Williams: No.
  Mr. Hamilton: I am glad that the hon. Gentleman says that he does not welcome the Bill. I should like to hear what amendments he would like. He will prob-
  858
  ably say that more should have been done or that the money should have been spent in other directions. It comes back to the principle of priorities. This is a matter of political judgment, not only between the two sides of the House but between individuals within the political parties.
  On one subject on which I hope to speak my priorities differ violently from those of the Government. It can always be argued that the money that has been made available by tax concessions might have been spent to better advantage in other directions. My right hon. Friend the Member for Blackburn indicated that that was her belief, too.
  On this point I would accept that the Government have erred on the side of caution. When my right hon. Friend the Chancellor of the Exchequer made his announcement, the criticism was made that he had not been over-generous and could have gone much further. But we were at the beginning of a crucial phase of incomes policy and it was right to say "We have given the amber light and if we get a responsible commitment by trade unions and employers on wages and prices, we can be a mite more generous come the April Budget." Surely this was a sensible course to take, not only on the basis of incomes but—probably more important—on the basis of productivity.
  Several hon. Members have talked about the need for investment, but that investment is no use unless it results in increased productivity. There is not much evidence that our investment record is much worse than that of our competitors in terms of total investment. The big difference is that the productivity resulting from investment in this country is very bad compared with productivity in Germany, Japan and most of our other competitors.
  I wish to refer to what the hon. Member for Kensington (Sir B. Rhys Williams) said when he disapproved of the way in which the available money is to be spent by this Bill. I believe that for the Labour Party the redistribution of the national wealth in favour of those at the lower end of the scale must be the motivation of every Budget and every fiscal measure that we take. That redistribution exercise is not achieved by fiscal measures alone. One does not simply juggle with the tax system to achieve that end.

  859
  I wish to re-emphasise a point made by my right hon. Friend the Member for Blackburn, namely, the importance of the social wage, not only for workpeople on the factory floor but for middle-class people. Far more important than tax concessions—or as important—is the quality of the school to which one sends one's children, the quality of the hospital to which one goes when one needs hospital treatment, or the quality of provision for old people who have no bargaining power.
  The quality of the social services, which we have taken far too much for granted for far too long, costs increasing amounts of cash. These are the things which, more than most, safeguard and improve the quality of life of most people who simply could not go into the market and buy these things on a private basis. This is the great gulf, the great ideological gap, between the Tory Party and the Labour Party. We in the Labour Party believe passionately that we have to provide more and more facilities and more public housing, education, hospitals, health services and the like. Less and less should these services be dependent on the depth of one's purse.
  The Tories take the opposite view, and say so consistently. They say that more money should be left in the pocket of the private individual, because the less one taxes people, the more they can spend on the education of their children and on health provision. But that means the law of the jungle. The Tories are entitled to that view, but they cannot expect us in the Labour Party to accept it.
  On the contrary, I believe that there is great merit in increasing public expenditure. I have told the Government that one of the first things that should be done in the next Budget is to get rid of the public expenditure cuts in health services, in education and in the other sectors of which I have spoken, because the people who support us depend more than supporters of the Tory Party on the provision of those services. People who depend on the National Health Service and on the State sector of education cannot be classified as rich but, unfortunately, they have been clobbered most by inflation, by the very high marginal rates of tax and by the public expenditure cuts.
  860
  This Bill is exclusively about tax concessions. I do not complain about that. That is the purpose of the exercise.
  But the Tory Party as a whole—I presume that the hon. Member for Kensington is the odd man out in the sense that he is complaining about the priorities—is complaining that the tax cuts are either not big enough or are going to the wrong people.
  One of my hon. Friends referred earlier to the man who, at the conference in Brighton of the Confederation of British Industry, was complaining about the penal taxation on his income of about £30,000 a year. He was left with £11,000 net, out of which he could not afford a £2,000 package holiday. I grieve for him but I suppose he will have to endure his lot as best he can. But the Tory Party pays more attention to him than to the kind of people I represent. The Tory Party's dishonesty is blatant, and it is seen through by most of the electorate.
  The Tory Party cannot talk about tax concessions at the same time as it is arguing vehemently for enormous increases in defence expenditure. When the police were agitating for their pay increase, the Tory Party said "Give them what they want." I am not quite sure where the Tory Party stands in relation to the firemen. I was among the 58 who voted for the motion for the Adjournment of the House when the firemen's strike was debated. It was partly because I think they have a case and also for a reason that I shall come to in a moment. But the Tories simply cannot say honestly that they will increase public expenditure on defence and in other areas while at the same time pretending that they can enormously reduce taxation.
  At my weekend surgeries the most common complaint is about taxation. Ordinary working people come to me partly because their tax forms are incomprehensible to them and also because of the enormous delay in dealing with them by the computer at East Kilbride. They also come to me because of the high rates of taxation, which start at a very low level of income.
  It makes my blood boil when I have to listen to widows and married women, or separated people, complaining about enormous tax burdens, and then I find that some people in this country are not

  861
  paying either taxes or rates. There are some people who are fortunate enough to be in that position, and I shall refer to them in a moment. I shall not make any criticism of the individuals concerned. If I did, I should immediately be called to order. I am criticising the Government for what they have done.
  I received a Written Answer to a Written Question on the Civil List on 8th November 1977. The information would not otherwise have been available from the Government. I find that in itself quite sinister and quite unacceptable. When these increases are made, the Government should feel a commitment to make a public statement that they have been made, without a curious fellow such as myself having to put down a Question.
  I make no assertions against the people concerned, but these are the figures that were given to me in the Written Answer. The Queen Mother received £95,000 a year tax-free in 1975. That has gone up in 1977 to £155,000 a year. That is £3,000 every week, and a 60 per cent. increase in two years by a Labour Government committed to redistributing the national wealth on some basis of equity.
  The Duke of Edinburgh—he is always telling us to get our fingers out and to increase our productivity and the rest—was labouring on £65,000 a year in 1975. That figure has now gone up to £85,000 a year—a 30 per cent. increase in two years. We should remember that in these two years the Government were asking all the workers in the country to restrain themselves to a £4 increase.
  I think that we are all glad that Princess Anne has been safely delivered of her child. Perhaps that is why she received a £5,000 increase. She was getting £35,000 a year in 1975, and this year she is getting £55,000 a year, tax-free. That is an increase of 57 per cent. in two years.
  Mr. Peter Bottomley: It is £50,000, not £55,000.
  Mr. Hamilton: I am sorry. The hon. Gentleman is quite right. It is £50,000. I was looking at the wrong person. I was being too generous to her. The Government saw fit to give her only £50,000. It was an increase of £5,000–30 per cent.—over the previous year.
  Princess Margaret received £35,000 a year in 1975. That figure was increased
  862
  to £55,000 in 1977—an increase of 57 per cent. Princess Anne's was only a measly 30 per cent. in two years.
  Princess Alice, the Duchess of Gloucester, was paid £20,000 in 1975 and she received £25,000 in 1977—an increase of 25 per cent.
  When we look at the amount payable by the Royal Trustees under Section 3 of the Civil List Act 1972, we find that the Duke of Gloucester was getting £15,000 completely tax free, as all these sums are, in 1975. He is now in receipt of £26,000—an increase of 70 per cent. in two years.
  The Duke of Kent received £35,000 in 1975. That was increased to £48,000 in 1977—an increase of 38 per cent.
  Princess Alexandra is a charming young lady, but who would not be charming on these figures? She received £30,000 in 1975, and £50,000 in 1977—an increase of 66 per cent.
  Mr. Peter Bottomley: Will the hon. Gentleman do the House the courtesy of reading out the note in relation to these figures?
  Mr. Hamilton: I wish that hon. Members would not be so predictable. Every time that these increases take place it is said that the Queen hands out these fiddling little sums to the Duke of Gloucester, the Duke of Kent, and so on out of her public pocket. But where does she get it from? She gets it from the public purse and from the enormous tax concessions given by the Government.
  I believe that it is obscene and indefensible for my Government, my party, to be doing this when trying to redistribute the national wealth in the cause of equity. I do not believe that it is done under pressure from these people. I do not believe that they are greedy. There is no need for them to be greedy when they have a silly, soppy Government like mine ready to dole out the money.
  But at the same time the Government are telling the miners, the firemen, the steelworkers and the police that they cannot have what they want because the country has to get out of its difficulties. I accept that there is great merit in that argument, yet at the same time the Government pay out these large sums of money to these other people. Psychologically, it does a great deal of damage

  863
  to what we are trying to do for the economy as a whole.
  Let my hon. Friend the Minister of State convey this message to the Prime Minister, who sought to get cheers from the Tory Party at my expense when I put a supplementary question last week. He said that 70 per cent. of these increases were due to the wages of the staff. Of course they were, and I do not object to that. I am objecting to the annuitants. Let not the Prime Minister or any other Minister every try to make a cheap jibs at my expense and get cheers from the Tory Party, because I shall not stand for it without public protest in this House and outside.
  Mr. Kilroy-Silk: In fairness, my hon. Friend should recall that the Prime Minister also pointed out that some of the money given to the Royal Family this year was to cover the expenses of the Jubilee. Fine! But if that is the case, my hon. Friend has to watch carefully to ensure that expenses for the Jubilee are not given next year as well.
  Mr. Hamilton: The point is well made. I suspect that it will not happen. Indeed, I would bet my last halfpenny that it will not. But the present Government are even more generous than a Tory Government in these matters.
  All this will not do. All the letters that I have received on the matter indicate that there is a vast volume of opinion in the country supporting these views. The Prime Minister and the Chancellor of the Exchequer should not assume that the great mass of the public are in favour of these sums. Whatever might be said about the Head of State, there is no defence for sums of the size paid to the particular individuals I have indicated.
  I can let the Minister of State see the letters I have had on the matter. They rate about 80 per cent. in my favour. I am not surprised. A lot of them come from constituencies represented in this House by Tory Members, although I concede that the writers may be Labour voters.
  But some of the most radical people in these matters are country vicars. They are a radical element in the country mainly because they find it difficult to make ends meet and find this sort of payment obscene in the present situation of
  864
  the country. They regard it as their task to encourage the spirit, and yet they find the materialists on this list putting their hands deep into the public purse. It is indefensible.
  If there had been a vote on this Bill tonight, I would have voted against it because of these provisions. Whenever I get a chance to vote against the Government, so long as these obscenities prevail—
  Mr. Peter Bottomley: What about last night?
  Mr. Hamilton: The hon. Gentleman must leave it to me to choose my targets.
  A very important principle is involved here for a Labour Government. If we want to get the ordinary working people behind the policies we are pursuing, we have to be consistent in everything we do, and these huge increases to the Royal Family are a scandalous and indefensible inconsistency that has done a lot of damage out of all proportion to the sums involved.
  It is no use the Minister of State saying that the sums involved are infinitesimal. That misses the whole point of the argument. It is the philosophy behind it which is important, and I hope that my hon. and learned Friend will not dismiss it as the meanderings of some kind of eccentric individual in this House—as I suspect that he may—brushing me off as someone who does not really matter and who has a bee in his bonnet. I have a bee in my bonnet, and until it is removed I shall not be supporting the Government very much.
  8.14 p.m.
  Mr. John MacGregor: I do not wish to follow the last remarks of the hon. Member for Fife, Central (Mr. Hamilton), except to say that I thought that the Prime Minister, and other Ministers who responded to his Questions last week, caught the mood of the House much more than he did—and I say that not only of my right hon. and hon. Friends but, judging from the reactions that I could see, of hon. Members opposite as well.
  But the hon. Gentleman's earlier remarks were more fundamental and fascinating and followed the same broad theme of many of his hon. Friends who have spoken in the debate. He said that it had

  865
  to be appreciated that one could not look for higher public expenditure and a reduction of taxation at the same time, as though there were a generally static situation which meant that better public services, or higher income standards for the below-average earners could be achieved only by a further redistribution of wealth. He said that the redistribution of the national wealth must be the objective of every Budget.
  In this he followed the right hon. Member for Blackburn (Mrs. Castle) when she talked about the necessity of a Labour Government reducing take-home pay. She asked "How do you provide all the public services, such as health, housing and education, except by reducing take-home pay?" That is a marvellous slogan for the Labour Party in the next General Election "Vote Labour and reduce your take-home pay again."
  Mr. Kilroy-Silk: My right hon. Friend the Member for Blackburn (Mrs. Castle) is not here to defend herself, but I heard her clearly. She said nothing about reducing take-home pay. She made the relevant point that one should concentrate on making comparisons on take-home pay, not on gross pay. In no way did she say that we should attempt to decrease take-home pay.
  Mr. MacGregor: We shall see from Hansard tomorrow. The right hon. Lady certainly gave the impression that reductions in take-home pay could be justified because with the social wage added on top it would be to the benefit of lower income groups. I thought that she also specifically said that reducing take-home pay was not therefore necessarily unreasonable.
  That is certainly what has been happening in the last three and a half years. The hon. Member for Ormskirk (Mr. Kilroy-Silk) said, fairly, that he believed that Labour was the party of high taxation. Over the past three and a half years it has also been the party that has achieved much higher unemployment, reduced living standards, deterioration in certain public services, and no growth. We are still at the growth levels of the three-day week.
  All hon. Members who put such a case should realise three things. The first is that, overall, over a period, we
  866
  shall not achieve higher living standards all round unless we get extra wealth created—and that is one of the fundamental things missing in the last three and a half years, in accordance with the strategy of so many people speaking from the left wing of the Labour Party, and in their speeches today.
  The second point is relevant to what was said by the hon. Member for Ormskirk about the gentleman who spoke at the CBI conference. The key point about redistribution of national wealth is that, at the top, there is very little room for further distribution of wealth if we are to create much additional revenue for extra public expenditure. That is apparrent from the yield figures—I leave aside comment about the effects of incentive and, therefore, on the creation of new wealth and new jobs.
  The third point is a dilemma which has been facing the Government in the last year or so. If we go on increasing public expenditure—and we all want to see better public services—without getting the extra wealth, it is inevitable because there is little room left for redistribution of wealth, that the burden of the higher taxation will be felt by the average wage-earner and the below-average wage-earner, because that is where the great yield comes from. This point has been grasped by the Chancellor of the Exchequer and other Treasury Ministers in the past year, but it seems that the right hon. Member for Blackburn and others have still failed to recognise it.
  This situation explains why the hon. Member for Fife, Central is getting in his surgery, as I am getting in mine, so many people who are by no means well off and who are frequently on very low incomes and who find the burden of taxation unacceptable. It disturbs me greatly also.
  That is why I believe that those hon. Members who now think that we can go on concentrating on the social wage, irrespective of where the funds are raised to achieve it, are on the wrong course in the context of electoral response. So many people now say that it is the burden of high taxation that is affecting them—and that burden has been achieved by the failure to get extra growth. I am fascinated that we should have had the same old theme from hon. Members opposite in this debate. It must be very

  867
  disturbing to the Treasury Ministers, for a reason to which I shall refer.
  Before coming to my main theme, I want to put to the Minister of State two points which I hope he will be able to cover. The first is in relation to computerisation, to which I would not have referred had not the Financial Secretary done so. I had the impression that the Financial Secretary might not have been aware of what the Chairman of the Board of Inland Revenue said to the Public Accounts Committee.
  According to the timetable set by the chairman, 1979 is the critical date for deciding the main elements of the tax system if there is to be computerisation. But 1979, in fiscal planning terms, is not very far away—as we know as we try to prepare for different tax changes every year. Therefore, it is critical for all of us in the House who are interested in these matters to know whether that timetable is correct and to know what kind of options are to be excluded from consideration of future major tax reforms by the end of the period in which we have had to make up our minds.
  Some of us have been spending some considerable time looking at the future of the taxation system. I agree with the hon. Member for Fife, Central in his reference to the East Kilbride computer, because I know the problems that it has created for Scottish taxpayers. If the computer system is to be programmed correctly after 1979 and no major changes are thereafter possible, we need a major series of debates in the House about the implications before that date.
  The second point that I wish to put relates to the matter to which my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) referred. That is the discovery that the yield this year from direct taxation mainly, would be £1·75 billion greater than was thought at the time of the March forecast. I think that we are due a more detailed explanation from Treasury Ministers than we have had so far. Indeed, we have had no explanation whatsoever from them, although we have had a brief explanation from some Treasury officials at the General Sub-Committee of the Public Expenditure Committee.
  868
  Such a large difference as this is of great importance to the House. It means, as I tried to point out to the hon. Member for Cornwall, North (Mr. Pardoe), that when one talks at the start of a tax year about the impossibility of introducing a tax change at Finance Bill Committee stage because of the cost of another £15 million, or the implications for public expenditure proposals in achieving savings here, there and everywhere of £50 million or £60 million a year, such changes are dwarfed by the fact of such fundamental changes in the forecasts about revenue yield within such a very short time.
  Of course I accept that the £1·75 billion is a very small percentage of very large figures in the tax system. Nevertheless, whilst so much emphasis is put on the public sector borrowing requirement, if we get a situation within six months in which that key factor, the PSBR, is shifted by £1·75 billion simply because of a change in revenue forecasts about yield, obviously it is very important that we should understand why it has happened.
  It may be that my hon. Friend the Member for Cirencester and Tewkesbury is quite right and that the Government have deliberately manipulated this situation in order to put themselves into a better posture both in this Budget and later on. If so, I think that we need to have that clearly put before the House. If not, we deserve a better explanation than we have had so far.
  Incidentally, in passing I say that the hon. Member for Cornwall, North thought that to be able to introduce Budget changes on the basis of a change in forecasts in revenue yields was a "phoney" practice. If so, it means that this Budget, to which he is supposed to be allied through the Lib-Lab pact, is a "phoney" Budget.
  I did not originally intend to participate in this debate, because I have spoken in many other Finance Bill debates. However, as I am about to take the same monastic vow of silence as my hon. Friend the Member for Blaby (Mr. Lawson) took last year, I should like now to make one or two comments on my experience. My hon. Friend took a very good monastic vow of silence which I hope to follow.

  869
  I want to comment on how the Budget looks in relation to the experience of many of us who have been through the proceedings of Finance Bills in the past three and a half years. I want to ask two questions. First, how permanent is the conversion of the Chancellor of the Exchequer, in his public comments and now in this Budget, to restoring some incentive to small businesses and to containing increases in direct taxation—I put it no higher than that, because that is all it is, to containing increases in direct taxation? How much has the leopard changed his spots? How much does the "tax till the pips squeak" Chancellor actually repent?
  The only sign of even slight repentance that we have seen so far came from the Financial Secretary when he said that the Budget would "correct some of the anomalies that have arisen." Whose fault was it that the anomalies were created? Is the matter not very much wider than simply anomalies? Has the Chancellor been warned time and time again of the obvious final results which we are now experiencing of policies pursued by himself and his Treasury colleagues during these past three and a half years?
  My second question is whether what the Government are doing is enough to remedy the current defects of the tax system and the disastrous economic effects of the course pursued on tax in the last three and a half years.
  Dealing with the first question about a permanent conversion, we have almost implicitly had the answer to that question in the debate, because, whatever Treasury Ministers say, whatever the Chancellor has been trying to say, in public and here in the House, it is clear that a very large number of their own colleagues on the Back Benches do not go along with them.
  Concerning help for small businesses, in the mini-Budget and to come later in legislative form, all that the Chancellor has been doing so far is to undo the damage of previous taxes introduced by himself and to remedy the ravages of inflation. I recall all the debates that we have had on the implications for small businesses of the capital transfer tax over the past two and a half years. I recall the Chief Secretary's constant resistance to the amendments that we were putting forward and his constant claims that what
  870
  we were saying would be the ultimate effects in terms of damage was pie in the sky and that it would not have such effects. Gradually, bit by bit, we have seen some of the changes for which we have been calling, as he begins to realise the implications.
  What worries me is that after a General Election, should the country have the misfortune of having the present Government returned, the hostility of so many of the right hon. Gentleman's colleagues on the Back Benches towards small businesses, wealth creators, and towards allowing anyone who has built up a business and created employment to retain some of that wealth, will again come out in full and we shall again see the attitude that we saw earlier in capital transfer tax debates.
  There is, admittedly, some change. Some Labour Members have now realised that one of the major areas in which unemployment will be reduced is through extra jobs being created by small businesses. That realisation may mean that they will not, perhaps, be quite so hostile to small businesses in the future as they have been in the past. But I suspect that that realisation is not sufficient to outweigh the hostility which we have always seen and, therefore, that we shall not only not see the extra measures required—which I believe are not enough to help the small businesses—under a future Labour Government, but we might even see the extra measures already introduced cut back.
  What has been done so far is not enough to deal with the problem for two reasons. First, in the past so many small businesses have obtained their original risk capital from individuals who had the wealth to invest, to take the risk and to hope for a higher rate of return in the long run. That kind of risk capital has not been replaced by the funds, but it is still necessary and these measures will not provide it. Secondly, extra measures are needed also because what has been done to raise the thresholds on apportionment is not enough to deal with the cash flow implications created for small businesses in times of high inflation.
  I am even more alarmed about the proposal of changes in direct tax and the allowances as we have them in this Finance Bill. It may well be, and I

  871
  accept this, that in the future a Labour Government will, for a period, continue indexing the basic personal allowances because they have become aware, as they have found from their surgeries—although we have been telling them for a long time—that unless this is done, the poverty trap problem will remain. Maybe we shall see that one element of direct taxation keep pace with inflation.
  But I do not believe that we shall see in practical terms of policy the real changes in direct taxation elsewhere, the need for which the Chancellor has publicly said he recognises. There are two fundamental reasons for this.
  First, Labour Back Benchers, especially on the Left, have made it clear that they are opposed to any increase in indirect taxation which would be required to make the real changes necessary in direct taxation, even given that public expenditure cuts are also achieved. Secondly, reductions in taxation at basic rates and higher rates, and increases in thresholds at the higher rates, which are necessary to restore the whole direct taxation system to some form of sanity, will simply be opopsed by large numbers of Labour Back Benchers, as hon. Members are acknowledging.
  This is why I believe that this is not a permanent conversion and that the country cannot expect from any future Labour Government, after the election is out of the way, the achievement of the Chancellor's objectives in practice. These can only be achieved by a future Conservative Government.
  Is what the Chancellor has done enough? Certainly it is not enough to keep pace with inflation. My hon. Friend the Member for Dover and Deal (Mr. Rees) quoted the figures in his opening speech. On the basic marriage allowance along another £107 would be required to restore the allowance to its 1973 level in real terms. We know that the changes are not enough to deal with the problem of direct tax rates in this country for the crucial managers, doctors, hospital consultants and even the university teachers whom we need so desperately. They are not enough to put us in a comparative position with our major competitors overseas. They are not enough to deal with current problems either.
  872
  I turn to the question of the poverty trap and those on below-average incomes. I recognise the changes made in tax allowances here will help to some extent. If one takes account of the 10 per cent. probably increase in earnings, the combination will help reduce the gap between those in work and those out of work. However, the changes are nowhere near enough yet to overcome the fundamental problem. They are only cushioning the allowances against inflation—that is, cushioning lower incomes groups against inflation. The differential is not sufficiently reduced, particularly taking account of the extra factors involved in being in work which have nothing to do with taxation.
  For example, there is the cost of getting to work. I was talking recently to a Forestry Commission worker who had to travel 25 miles in his own car to work each day. That had to come out of his take-home pay which had been taxed. This expense alone in fact almost make it not worth his while to go to work. When I asked him why he did he said he went because he felt that he should do a job when it was offered to him. The failure to push the allowances up far enough means that this sort of problem still exists.
  When, moreover, the enormous range of tax-free benefits which come with FIS and unemployment benefit or supplementary benefit are taken into account, the real differential in earnings and standard-of-living terms between somebody on £70 a week and someone on £44 or £45 a week is very little. This is the next problem looming up on this poverty trap question which will soon have to be tackled in some form or another.
  The second major group one must consider in this context is the skilled workers. The Chancellor's strategy of appealing to them not to require too much restoration of differentials in terms of earnings because he is giving tax reliefs has not worked. I do believe that 4p off the basic tax rate—going back to the 30p basic rate which the Chancellor had when he came into office—would be a greater psychological benefit and would give much more real help in dealing with the problem of differentials of skilled and unskilled workers than anything else. This would be much better for his reason than all the changes in allowances on which this Bill

  873
  is concentrating. So still have the bitterness, the higher wage demands, the moonlighting and the tax evasion that we have had in the last few years.
  I turn next to the higher income groups, the managers in industry, the doctors and the rest, on whose behalf the Chancellor claims to speak. Nothing has been done for them at all, except that they will get a few more extra pounds in their pockets through the increase in allowances than will those on the basic rate. But it is not good enough to look only at cash figures. The key is to look at the heavy relative decline in their living standards and see how tax changes have ameliorated the situation. The answer is very little indeed.
  Mr. Robert Sheldon: I do not want to make too much of the fact that the hon. Gentleman is shortly to become a Whip, but I am interested in how the hon. Gentleman reconciles his preference for a 4 per cent. reduction in basic rate compared with the need, as expressed by the Conservative Opposition, for the indexation of allowances to be the first and most important call on our resources.
  Mr. MacGregor: I accept that not everything can be achieved in a single Budget. However, we Conservatives have not been responsible for the course of tax affairs and economic and public expenditure policy in the last three-and-a-half years, and these things cannot be done immediately. I was trying to make the point that if the Government feel that they have done a great deal to reverse the harm of the tax difficulties created in the last three-and-a-half years, they are wrong. They still have an enormous problem in overcoming the differentials as between the skilled and the unskilled, and that will be overcome only by dealing with the basic rate.
  On the higher rates, even compared with 1974, it is clear that all the higher tax thresholds must be doubled, and this was revealed in a recent parliamentary answer. I accept there is nothing sacrosanct about going back to 1974, although when I examine some of the thresholds and the higher tax rates among our competitors overseas suspect we must do better than that. But the comparison with 1974 shows how far the Chancellor still has to go to get anywhere near the
  874
  situation then. So the difficult problems for this group still exist.
  Finally, there is the pension group. I concede that on this occasion the age allowance has been generous because it has got over the problem that faced the country last year in that some pensioners reliant on basic State pension alone were beginning to pay tax, for the very first time. But there are a large number of other pensioner groups who are facing difficulties in their own way, which the Chancellor has not tackled. I refer to those who have built up modest investment savings throughout their lifetime to which investment income surcharge now applies, whereas those who are fortunate to have company pensions are in a different position.
  Those whose savings—here I refer particularly to widows—are concentrated in owner-occupied houses and who have no other savings have great problems. Some of these people are in their late 70s. They live alone and have no other resource but their house. They face high repair costs on that form of saving, and yet find that they can obtain no other form of benefit. Those groups have felt a severe reduction in their living standards over the past three-and-a-half years. In return for a lifetime of saving, those groups have been savagely treated, and the present proposals will do nothing to help them.
  I do not want to have to repeat the battles of the last three-and-a-half years during which period the country has had to face the damaging tax changes introduced by the Labour Government and we have had to fight them constantly and then to see some reversal in the last two years of their life for electoral reasons. My fear is that if a Labour Government get back again, that is precisely the course we shall see again.
  8.39 p.m.
  Sir Brandon Rhys Williams: I am sorry that the hon. Member for Fife, Central (Mr. Hamilton) is not in his place. If he were here, I should invite him to act as a Teller with me in dividing the House. We should then be able to see how many Labour Members accept the priorities set out in this recent Budget.
  The sum of £940 million in the current year which the Budget is handing back

  875
  to the British people is a large amount of money. It is possible to discern Government priorities, and indeed Labour Party priorities, in the way they have made their allocation of these funds. Such a large sum is bound to have important social, employment and incentive effects. There are clearly also administrative implications.
  I wish briefly to deal with some of these points. First, I wish to draw attention to an extremely interesting reply given to my hon. Friend the Member for Norfolk, North (Mr. Howell) on 30th March this year. He asked for a comparison over a period of years between the tax allowance of a single person and the child tax allowance. It is clear that there has been a sharp percentage reduction from 1957 to 1977. I shall not weary the House with all the figures, but for children not over the age of 11 we see a reduction from 71·4 per cent. to 33·7 per cent. after allowing for clawback. There has been a reduction from 89·3 per cent. to 38·5 per cent. for children not over 16 years. For children over 16 years, we see a fall of from 107 per cent. to 42·5 per cent. From the figures, we discern that the tax changes that have been introduced by successive Governments during this span of approximately 20 years have consistently shown the anti-family bias on the part of our Treasury rulers. We must reflect, too, that the Labour Party is the party of organised labour: it is clear that women and children do not come very high in the scale of the Labour Party's priorities.
  I have often made the point that when there is a sharp increase in the cost of living—especially in the cost of essentials on which families are bound to spread their budgets, such as food, clothing and heating—it is the larger families that are selectively hit harder. For example, if a housewife has to cover several plates with food, she will find the cost-of-living increase for bread or meat much more damaging than it is for a single person or a couple fending only for themselves, especially if both are at work.
  Although we know how the cost of living is rising, this Budget is not concerned to help families. It panders to organised labour because the Government are putting at the top of their priorities the acceptance by the trade unions of
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  their policy of limiting wages. It throws everything it can at organised labour in the form of tax relief; but it forgets mothers and children, especially in poorer families. The Labour Party boasts of its Socialism and its concern, but it seems that it is prepared to allow £940 million worth of expenditure to go through without the presence in the Chamber of one Labour Back Bencher.
  Mr. Peter Bottomley: Or a Liberal.
  Sir B. Rhys Williams: Indeed. There has been a poor attendance on the Government Benches throughout the afternoon. Not one remark have I heard from the Government Benches—I believe that I have listened to virtually the whole debate—on behalf of one-parent families. We heard a brief reference to widows. We heard two or three sincere Labour Members complaining that nothing was being done about the child endowment, but I do not think that they will be here with me if the issue comes to a Division.
  Government expenditure of £940 million—this applies to tax reliefs or to expenditure—can be expected to have a serious effect on the pattern of employment. We need to analyse much more fully what is happening to employment. It is no good making emotional speeches about unemployment, such as that that we heard from the hon. Member for Ormskirk (Mr. Kilroy-Silk), without analysing the situation more fully. I was brought up in South Wales during the depression, and I shall never speak lightly about unemployment. But we should be rather more penetrating in our analysis of what is happening.
  I received a most illuminating answer on Friday of last week about the total number who are at work in the United Kingdom rather than the total out of work. It showed that there had been a significant increase between 1972 and 1976. That increase was not among men or heads of household but was among women doing part-time work. If over the course of a few years there has been a sharp increase in the number of women doing part-time work—a development against the trend of the economy—we need to analyse why it has taken place and to decide whether we wish to introduce further incentives just now to encourage women to enter the labour market at a time when it is difficult for men

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  who have families to look after to find jobs.
  The unemployment problem is mercifully more one of disturbance in the employment market and of relocation than long-term unemployment. The number of men who are heads of households and have been out of work for more than six months is still relatively small, thank God! I am not trying to underestimate the number of human tragedies in the increase of perhaps 120,000 or 130,000 cases over the past three or four years. But we need to look at the changing pattern of employment—the move into part-time work and the way in which women, particularly married women, are coming into employment—and decide whether we wish to encourage that trend just at this time. This Budget is unfortunate in the effect that it is likely to have in attracting women to take part-time work at the expense of men who are seeking to do full-time jobs to provide the wherewithal for their families.
  The Financial Secretary dealt with the question of incentives. It would have been better if he had kept off that subject, because this Budget is doing nothing about the poverty trap. Let us look at the figures as they apply since the increases in supplementary benefit rates which have just come into effect. I calculate that for a man with three children aged 4, 6 and 8, which is not an untypical family, the loss in family income if he goes into low-paid work and ceases to draw supplementary benefit is at least £10 a week. That is simply because the child allowances and child endowment are so much lower than the amount that must, for the sake of humanity, be paid to look after the children of people on supplementary benefit. We shall not tackle the poverty trap or the disincentive to work for people able to earn only low wages until we raise the family allowance for those who go back into work so that they do not suffer that loss.
  Let us see how much worse is the position where the children are older and the supplementary benefit allowances are that much larger. I calculate—I am open to correction—that the loss for a man with children aged 11, 13 and 15 would be £17 a week because of the difference between the family benefit that he receives on supplementary benefit and
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  that which he receives once he returns to full-time work.
  Mr. Peter Bottomley: The incidence of tax makes an even greater difference to such a sum earned at work.
  Sir B. Rhys Williams: I am grateful to my hon. Friend. That is so, and it is a fact that is well known to the Treasury. But I was looking at the case of a man who would be able only to go into low-paid work and who would therefore probably be below the tax threshold. The loss to such a man with three children—and the three-child family is not so uncommon—is still striking.
  Do the Government wish to do anything to improve the incentive to work or to accept regular work? Many people on supplementary benefit are tempted—one cannot blame them—to take part-time work without declaring it. To regularise the position and improve the incentive to go back into full-time work, the Government must increase, child endowment. All the excuses for doing nothing about child endowment show the true character of the Labour Party and its insensitivity over child poverty.
  I should like also to deal briefly with population trends, because a Budget such as this is not a negligible incident in the tax year. We must see it in the context of social trends over a long period. The live birth rate in the United Kingdom in 1966 was the not particularly high figure of 18 per 1.000. Ten years later it had shown what I suppose one must call a catastrophic fall to only 12. Let us look at the way in which the figures have fallen in even the past three or four years, taking the month of June in each year. The figure in 1973 was 14·3 per 1,000. In 1974 it was 13·4; in 1975, 12·9; in 1976, 12·5; and this year, 11·9. With that fall, the live birth rate in this country has fallen below the death rate, so the crude figures show that we are no longer replacing ourselves.
  A few days ago it came to my notice that figures had been published for the different London boroughs showing for 1975 the borough of usual residence and the birthplace of mothers. My borough, Kensington and Chelsea, has the highest figure for mothers whose birthplace was outside the United Kingdom. The figure was 57 per cent. Westminster has the next highest figure of 52 per

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  cent. The figures indicate the change in the pattern of fertility in the country. The fertility of the indigenous population is adapting itself to the tax climate. Hon. Members must take note of their responsibility in shaping the take-home pay of families since this striking effect is being shown so clearly in the figures.
  Should anyone think that I am making a cheap point about immigration, I hasten to add that of the 57 per cent. of babies in Kensington and Chelsea whose mothers were born outside the United Kingdom only 12 per cent. came from the new Commonwealth. This theme needs to be developed more fully. There are important population changes taking place, and I am certain that family incomes influence them.
  The hon. Member for Loughborough (Mr. Cronin) spoke about the rates of family benefits in other countries and in the European Community in particular. He reminded us of the shameful comparisons between this country and the Continent. I do not need to go over the figures, but we should ask why family allowances in this country are so much lower than they are on the Continent.
  One of the reasons is that the trade union movement here is so much more powerful and united than it is on the Continent. It does not have the denominational affiliations which tend to change the attitudes of trade unionists towards family benefits. Trade unions here exist to maximise the take-home pay of working men. They are bitterly hostile to increases in housewives' receipts if they are given at the expense of the organised trade unionists.
  In Germany, what we call the tax credit system was brought in two or three years ago in a matter of months. I suppose that the Germans brought in tax credits in as many months as we shall have taken years.
  This partly reflects the lack of enthusiasm by the Labour Government for child endowment. It also reflects the bad leadership, poor organisation or tragic inefficiency of the Departments that handle benefits and taxation in the British Civil Service. I do not wish to attack the people whose intellect and dedication I admire; but the way in which we organise the Civil Service in this country
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  and the leadership it is given—from politicians and the permanent heads of Departments—is not always of the best quality. As a result British public administration is lagging behind that of other countries. That is nothing to be proud of.
  The Chancellor of the Exchequer mentioned the large number of people who would be excluded from the tax system as a consequence of the changes. I think he said that the figure was 900,000, on top of the 1,200,000 who were excluded from the tax system by the changes made earlier in the year. Many people will be brought back into the tax system by rises in wages by the time the next Budget is introduced. New measures will then have to be introduced to take them back out of the system again. It would be better to change the system so that we no longer have this stage army of people moving in and out of the tax system and bringing it to the point of breakdown.
  It is nearly 10 years now since I opened the campaign in the House of Commons for a reform on the lines now known as the tax credit scheme. I recall that I was greeted with incredulity on the Labour Benches and with a certain element of scepticism and dismay on the Conservative side. But the logic of the reform is so obvious that it commended itself in the end to a large number of Members, and at the end of a long story we now have child endowment, though still only bringing a pitiful benefit for the mother of the first child.
  That is nothing to be especially proud of, but at least it is a beginning on the right road. But why do we not go much further? Why does not the Treasury go through the whole list of negative benefits and abolish them all, turning them all into positive payments? We should then have a clear-cut tax system under which everybody would pay the same rate of tax in the pound, and everybody would receive the same rate of benefit, week in and week out, to which he was entitled. With such a system, we should not find our tax administration brought to the verge of mutiny or breakdown every time there was a change in rates of tax or benefit.
  The Financial Secretary introduced his mini-Budget Bill this afternoon by saying

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  that large numbers of civil servants felt able to live with the situation. What an extraordinary window that opens on the state of affairs in the Inland Revenue now. Surely we can devise a system which is flexible enough for modern needs and not have to carry on with a system which was already obsolete in the 1950s.
  I shall close with a few words on the question of the tax threshold. I often hear hon. Members on both sides insisting that the tax threshold ought to be raised. My own view is the opposite. I do not want to create two nations in taxation—those who pay tax and those who do not. I recognise that if we ask everyone to pay the same proportion of his income in tax, we must look after those on lower incomes by giving them generous credits. But if we turned into positive payments the personal allowances, the marriage allowances, the whole of the child allowances and all the apparatus of negative allowances in the tax system as it has grown up since the time of William Pitt, we should have something better than a negative income tax system. We should be able to give to people on low wages take-home pay greater than their gross wage, and if, for administrative reasons and reasons of social policy, we then asked them to make the same contribution in every pound as that made by people on the higher or even the highest rates of tax, that would simply be an extension of equality into the field of taxation. I believe that this is something which must come.
  I do not, therefore, agree with those of my hon. Friends and hon. Members opposite who say that we should raise the tax threshold, for that is simply creating two nations in taxation; but what I do insist is that we should give more generous treatment through positive payments to people on low wages, and especially to those who have large family responsibilities.
  I have not had many polite comments to make about this mini-Budget. It is a trade unionists' Budget at the expense of the family. A Government who aim to give so much to people who already have a reasonable standard of life but forget the people at the bottom of our society have forgotten their Socialism. This is not a sincere social-reforming Government at all.
  8.59 P.m.
  Mr. Peter Bottomley: I shall try to be brief, and I shall not spell out all the arguments, although I may make a few assertions. It is clear from the attendance on the Government side that there are those who are looking forward to the "Miss World" contest which is due to begin in half an hour, and there may still be others who wish to go and join them. However, I regret in particular the absence of the hon. Member for Fife, Central (Mr. Hamilton), since he took me to task for quoting bits, or asking him to quote bits, from the Written Answers recorded in col. 80 of Hansard for 8th November, dealing with the Royal Family.
  The hon. Gentleman said that whenever he made his comments about the Civil List someone jumped and made the same points. In fact, it was the first time that I had made those points, and I can only say that if it is a fact that every time the hon. Gentleman opens his mouth on the subject someone stands up to say that he is being partial or not giving the full information, that shows that the mood of the House is rather against him.
  Just to redress the balance, I should like to quote three lines from the footnote to that Written Answer which says:
  "Her Majesty The Queen contributed £150,000 towards the cost of the Civil List in 1975 in addition to meeting the deficit of £8,535. In 1976 and 1977, Her Majesty has met the whole cost of payment by the Royal Trustees under section 3 totalling £118,000 and £130,000 respectively."—[[Official Report, 8th November 1977; Vol. 938, cc. 79–80.]
  I should like also for the record to reiterate that the cost of the Civil List came to 4p per family per year in this country. As one of my hon. Friends said, that would buy a quarter of a sausage at a British Railways buffet. If the hon. Member feels so strongly about his 4p, he can always contract out of the political levy for his trade union, which is being increased by 4p a year this year as a contribution to the Labour Party, and he could then make his contribution to the Civil List without reducing his net take-home pay at all.
  Mr. William Hamilton: This point has been made several times before. I always reply to people who have written to me and sent me 2p stamps—I return the stamps—by asking them to try to

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  calculate what the enormous cost of the tax concessions to the Royal Family is. It is quite incalculable. It must be tens of millions of pounds every year.
  Mr. Bottomley: That is a fair point that the hon. Gentleman makes. Again for the record, it might be said that the Exchequer benefits by £5 million from the income that the Duchy has given up, though I accept that the hon. Gentleman could make the point about taxation again. I would go on to make a further point, and then perhaps we can leave the subject for the time being, but I am perfectly willing to return to it on some other occasions. We have a three-part constitution consisting of the monarchy, the House of Lords and the House of Commons and if we were to abolish the monarchy we would then find that other things would replace it and the cost of the salaries to the staff working for whoever might replace this part of the constitution would equally go through, perhaps not under the Civil List, but under some other payment or some Budget heading from the Treasury and exactly the same argument could be made. So it comes back to which system we prefer. I prefer to keep the monarchy.
  I want to go on and make a passing reference to the very good maiden speech of the hon. Member for Birmingham, Ladywood (Mr. Sever) and then pass on from that to the speech made by the right hon. Lady the Member for Blackburn (Mrs. Castle). I shall not criticise her. I want to pick up one point in her speech, however, because in the autumn of her life in Parliament, in contrast to the hon. Member for Ladywood, she has fought valiantly for child benefit since she left the Cabinet.
  One must point out the difficulties that right hon. and hon. Members face when they join a Government in having to support things or not get things through that they particularly want. We saw some of this yesterday on the guillotine motions for devolution. We saw it in the right hon. Lady's time as Secretary of State for Social Services. In debate after debate, night after night, in response to pressure mainly from this side of the House—though I accept that if the Conservatives had been in Government it might have been the other way round—when the
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  Opposition tabled amendments seeking to get a date for the introduction of child benefit, which was originally supposed to come in 1975 or 1976, when it came through in the Bill the right hon. Lady was obliged—I am not saying that she particularly wanted to—to lead the Government to oppose the various amendments which had been tabled.
  It is regrettable both that there was high alumina cement up in Washington and even more that the Government were not able then to fix a firm date for the full introduction of child benefit, because if that had happened and we did not have this confusing situation of a bit of child allowance and a bit of child benefit it would be much easier for people, like myself, on both sides of the House to argue strongly for putting up the rate of child benefit at the same time as personal tax allowances are increased.
  The hon. Member for Ormskirk (Mr. Kilroy-Silk) talked about the obscenity—that was not his word, perhaps; it was another hon. Member's word—or his distaste for people having high levels of income. Most people in this country, certainly the electors in my constituency, many of whom were previously Labour supporters, or else I would not be here, would regard it as far better that a man should build up a business worth £½ million, perhaps providing employment for 100 people and producing exports worth £¼ million a year for this country, and become wealthy in that way than that a man should earn—or gain—£½ million, say, by being successful on the football pools after using Labour Weekly Perm No. 37 which is advertised on page 13 or page 11 or whatever it may be in the political magazine Labour Weekly each week during the autumn and spring football season.
  I now come back to the Bill. I strongly supported almost everything that was said by my hon. Friend the Member for Kensington (Sir B. Rhys Williams), who has a good record in this matter. I should also like to quote a selection of figures from a Written Answer which was given to my hon. Friend the Member for Norfolk, North (Mr. Howell) by the Financial Secretary at column 188 of Hansard of 15th November, comparing the combined value of family allowance and child benefit as well as child tax allowance plus residual child tax allowances for a

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  family with three dependent children aged 16, 14 and 12 years as a percentage of a married person's tax allowance, assuming tax at the standard rate, over the last 17 years. I shall not go into the figures for each year but I shall give a selection.
  In 1960–61, the combined net value of the benefit to those three children would have been more than 200 per cent. of the value of the married person's tax allowance. By 1970 that figure had dropped to 112 per cent., and it is now 88 per cent.
  Those figures demonstrate that no Government of either party during the last 17 years have made a serious attack on this decline in the value of the social wage or transfer payment support for people with dependent children. There are several reasons for that. One is that political parties tend to be dominated by those who go to political meetings and they tend not to be looking after dependent children, so that the interests of parents are not directly represented. Another reason, as my hon. Friend the Member for Kensington said, is that trade unions, although they contain a large proportion of people with children and who are at the worst point in their financial life cycle, do not make it easy for the financial position of those people to be reflected in a special way. Basically, a trade union represents the interests of those at work, without discrimination over family responsibilities.
  I know that the TUC sometimes goes out of its way to put in a plea for child benefit, but usually it does not go further because of the way that the TUC engages in discussion with the Government. If the subject is mentioned by the TUC during discussions with the Treasury, one can only assume that the Treasury has reasons fir not agreeing to the TUC's suggestions. Either the TUC's priorities change when it is in a closed room or the Treasury refuses. That does not happen only with this Government. The problem has worsened during the last three years, but it applied also during the last 17 years.
  Another, reason is that we always regard transfer payments as a transfer from those who have no children to those who have children and consider it a static transfer, but that is totally wrong. We need to reflect the reality, which is that
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  if one receives substantial transfer payments as a child they are paid back when one goes to work and pays taxes. The childless person is paying back the cost of his support during childhood. It is not a horizontal transfer between the childless and those with dependants.
  A residual problem associated with this is that many people brought up families in the days before substantial allowances were available, before the war when, although life was difficult, food, clothing and fuel were cheap. Things are far worse now. The running costs of a baby, apart from the capital outlay on clothes and such items, is now £4 a week, and in winter there is an extra fuel charge of about £1 per week. There is no way that the million one-parent families in this country can obtain the transfer payments that they need until the general level of income for all children is increased. One can only get the guaranteed maintenance allowance after child allowance has been increased to a proper level.
  I agree with the right hon. Member for Blackburn that indexing is not sufficient. It would have helped had, we had indexing during the last 18 months, because it would have stopped the position getting worse. However, we need to raise child benefit to the level of the long-term child supplementary benefit rate of about £7 a week. Once that has been done, families on high incomes will be paying back their share through taxation and it would help those families where parents are in and out of work, families on low incomes and one-parent families. It would provide a certainty of income for those children and they would not have to rely on going to courts for maintenance orders. They would not have to rely on making sure that unemployment benefit came through as soon as it was needed.
  I said that I would make a short speech. I shall not make the other points that I feel are necessary. However, I want to make one last point. This is a debate about £1 billion of tax relief and about what inflation has done to tax allowances during the last 12 months. It has taken place in an almost deserted House. We often find that when we are discussing whether the. British Steel Corporation or some other organisation should be able to raise its borrowings by £500 million or £1,000 million the House is almost deserted.

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  I would ask the Government this question, and I also hope that my own party will take this to heart. If we can find an extra £500 million subsidy for the British Steel Corporation, why is it not possible to find £500 million for people bringing up children in this country? One result of the declining birth rate is that more married women are going out to work and the number of families with children is becoming a smaller and smaller proportion of the population. The standard of living for those families has dropped alarmingly. I seldom use the word "obscenity", but it is a word that I would use to describe this situation, which seems to be ignored or, at least, accepted with equanimity, by many hon. Members.
  9.12 p.m.
  Mr. Tony Newton: I am a little hesitant to intervene in the debate having, for various reasons, been unable to hear all of it. I am encouraged to do so by the fact that my hon. Friends the Members for Woolwich, West (Mr. Bottomley) and Kensington (Sir B. Rhys Williams) have both concentrated mainly on the issue which interests me most. I was able to be present earlier to hear the speech of the right hon. Member for Blackburn (Mrs. Castle), who also concentrated on the relationship between tax allowance and child benefits.
  It is that on which I want to speak briefly before the winding-up speeches begin. I shall in no way attempt to go through all the figures that my hon. Friend the Member for Woolwich, West touched upon and which illustrate how relativities have changed between the single and married allowance for people without children and for families with children over the years since the war.
  This has been admirably pointed out in a number of recent articles including a very powerful piece by Frank Field in New Society which, no doubt, has been read, learned and, I hope, digested by Ministers in their examination of these subjects. What has happened with regard to the change in relativities is very clear. By itself I accept that it does not prove very much, because one has to decide on the starting point so that one's choice is right.
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  But what is indisputable is that during most of the period since the war—apart from short periods, particularly during the Conservative Administration of the 1950s and early 1960s—the balance has moved steadily and sharply against families with children.
  The point I want to make—not in any way based on some learned statistical analysis but as a matter of observation —is that as a Member of Parliament for nearly four years I find it absolutely clear from my correspondence and from the people whom one sees at surgeries that, apart from special groups like the disabled and in some cases the retired there can be very little doubt that the worst hardship and the biggest struggle in our community today are being faced by parents with two or three children. That is true not only of those on social security but of those with incomes that would normally be regarded as being well able to make them fully self-supporting.
  The fact is that the amount which they are allowed to keep out of that income, or the amount of assistance which they obtain out of taxes to help with their children, leaves them in a situation in which they cannot cope on what ought to be an adequate income. That is a matter of observation and I think it will be fairly generally agreed by hon. Members on both sides of the House.
  One consequence of the way in which we have been proceeding is that a large number of women who do not want to go out to work and who would prefer to be at home looking after their children have been forced to go out to work. There is a powerful school in the country—and I stress that I am not a supporter of it—which believes that married women ought not to go out to work. My wife works and has done for most of the time since we have been married. I am happy that women who want to go out to work should be able to do so. Many women are much happier doing that and in such cases it is better for their families. But the choice should be left to them.
  That means that the tax system and the arrangement of social benefits should, as far as possible, be neutral and should not compel women to go out to work. They should provide a genuine option for women to choose whether they want to be full-time housewives and mothers or to combine that duty with going out to work.

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  It can in no way be said that the tax and social benefits systems are neutral in that respect. Large numbers of women cannot afford to give up work because to do so would totally destroy the finances of their families. That is a most unsatisfactory state of affairs. I believe that undoubtedly the financial problems of bringing up children and the financial problems which cause wives to go out to work have depressed the birth rate. That is having serious consequences on the balance of the population and will no doubt create serious consequences for the level of taxation which is required to support the dependent population, and so it is relative to our argument tonight.
  I take it as indisputable that families have suffered and that there is a good deal of hardship and difficulty. The social consequences of that are to me thoroughly objectionable and need a complete examination.
  I turn next to child benefits. Unless we do more in that direction, I do not think that we shall fully tackle the problem surrounding those who are better off out of work than in. The biggest single factor in that is the position of families with children. Very few single people and very few married couples without children are better off out of work than in. The move towards child benefit, therefore, is a significant part of any policy to get rid of the problem of people being better off out of work than in.
  We need action on four fronts. First, we need a speedy transition to full child benefit. Secondly—and I agree totally here with the right hon. Member for Blackburn—we must raise the level of the child benefit to a more realistic and sensible point, a point which restores some part of what has been eroded over the last few years. The third and fourth aspects go together, and here I slightly differ from the views expressed by the right hon. Lady in saying that indexation was not the main point. We need to devise machinery which can speedily adjust child benefit and which does not take months of bureaucracy to get anything done.
  Unless these steps are taken, unless child benefit can be uprated as flexibly as tax allowances can be increased, and unless the benefit is indexed in the way that the main tax allowances are indexed,
  890
  I believe as a practical matter of politics that families will go on steadily losing out.
  It may be said that that is not wanted and people may declare their intentions that families should not go on losing out. However, unless we devise machinery to permit indexation and rapid change in benefit, families will go on losing out and all of us, regardless of party, will live to regret the consequences.
  9.20 p.m.
  Mr. Peter Tapsell: I should like first to congratulate the hon. Member for Birmingham, Ladywood (Mr. Sever) on his maiden speech. He spoke with confidence, fluency and obvious sincerity. I particularly want to congratulate him also, as did the right hon. Lady the Member for Blackburn (Mrs. Castle), on his quite extraordinary self-assurance. Most of us who remember our maiden speeches recall our extreme state of nervousness. If the hon. Member was nervous, he certainly betrayed no sign of it. In Mr. Brian Walden he succeeds an exceptionally distinguished Member of this House. Listening to the hon. Member I felt that he would be a worthy successor. We look forward to hearing many further contributions from him.
  This is the twelfth Budget and the sixth Finance Bill that this Socialist Government have spawned in three and a half years. Taken together, those measures form a deplorable record of miscalculation, vacillation and inconsistency. No doubt that is what the Chancellor had in mind last Thursday when he said:
  "I am an unorthodox, neo-Keynesian monetarist."
  The significance of this Finance Bill can be comprehended only when it is set in the context of all its Socialist predecessors, starting with the utterly disastrous one of March 1974. Yet I agree with Lord Morley's observation:
  "There is something repulsive to human nature in the simple reproduction of defunct Budgets".
  So I shall spare the House a catalogue of past Labour Budgets, save to say that the Government's previous Budgets have indeed been mostly repulsive and that the raison d'etre of this Budget is to seek to demonstrate that they are now defunct.
  After all, election day draws nearer. But what is not defunct is the public

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  memory. It is impossible to consider this Finance Bill—perhaps the Government Whips will be good enough to stop chattering, if they can. We do not want the habit to spread now that we have an exceptionally silent Whip on our side. It is impossible to consider this Finance Bill in a Second Reading debate except against the terms of the Chancellor's Budget Statement of 26th October and his speech moving the Ways and Means Resolution on 10th November which provides his justification for this Bill. His sentiments were echoed by the Financial Secretary this afternoon when he opened this debate with a wide-ranging speech.
  On 10th November the Chancellor spoke in characteristically confident and optimistic terms saying:
  "our financial situation has improved dramatically in all respects over the last few months."—[Official Report, 10th November 1977; Vol. 938, c. 875–981.]
  What the Chancellor, by a curious lapse of memory, forgot to tell the House was that this financial recovery was brought about by the adoption of Conservative policies, notably control of DCE and the money supply and reductions in public expenditure—each of them a precondition for the granting of the IMF loan, the lowering of interest rates and the firmness of the currency which resulted, strongly aided by the timely arrival of North Sea oil. I shall come in a moment briefly to consider the real economy, where goods are manufactured, where services are rendered, where companies invest, where delivery dates have to be honoured, where growth takes place or should take place, where price stability is important, where jobs are created, and see what contribution this Finance Bill makes to all that.
  As to the financial economy, of which the Chancellor was boasting, I have some news for him: the modern world does not date from 25th October 1976, when sterling fell to 1·57 against the dollar. "BC" does not stand for "Before Crisis", nor does "AD" signify "Amass Debt". One would have thought that the Chancellor's 8·4 per cent. inflation prediction before the last General Election might have persuaded him of the unwisdom of basing economic analysis on very short and unrepresentative time-spans.
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  If, by contrast, we take the three and a half years' period in office of the Government as a whole and compare it with the record of other Governments in other countries over that same period, we get the true measure of this Chancellor's stewardship and of the relevance of this Finance Bill. Since the end of February 1974, when this Government first took office, the value of the British currency, even at today's improved levels, has fallen by one-third against the German and Japanese currencies and by one-fifth against the American currency. Those are the facts about the financial situation after three and a half years of Socialist Government.
  Mr. Pardoe: There is a most extraordinary coincidence here. Is the hon. Gentleman aware that if we consider the value of the £ sterling against the dollar when the Conservatives came to power in 1970 and its value against the dollar on the last day before the General Election of February 1974, we find that it had fallen by almost exactly one-fifth—21 per cent., to be precise.
  Mr. Tapsell: That is absolutely untrue. In the last days of the Conservative Government the pound was standing at around $2·29.
  It may be argued—particularly by the type of defeatist "little England" mind which produced the recent Think Tank report on our overseas diplomatic representation—that we should not even be trying to keep up financially or in any other way with the Japanese, the Germans, or the Americans. That school of thought, not wholly unrepresented on the Government Benches—I readily accept that there are honourable exceptions—prefers Britain to measure herself only against nations such as the Swedes, the Dutch and the Austrians, admirable as they are.
  What is this Government's financial record in that league? If we take the 14 currencies in which Britain conducts most of her trade—those of Austria, Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Netherlands, Norway, Sweden, Switzerland, the United States and Australia—what has been the relative performance of our currency against the currencies of all those countries? Since February 1974 sterling has depreciated against that basket of currencies

  893
  by 23 per cent. If, to please the Little Englanders, we take the United States dollar out of that basket, the depreciation of sterling is seen to be significantly greater, because much of the recent strength of sterling—it is important for us to remember this—has been due to the weakness of the dollar. That prop will not be there indefinitely—certainly not if Dr. Arthur Burns has any say in the matter.
  That is the financial record on which the Chancellor last week and the Financial Secretary today have been congratulating themselves and on the basis of which they are sponsoring this Finance Bill. We have sterling devaluations ranging up to 40 per cent., according to one's choice of alternative currency. If we take the Chancellor's preferred time span, short and unrepresentative though it is, since the recovery in our currency began last autumn, and since the very nadir of our national fortunes a year ago, we find that he has had everything going for him—a massive IFM loan, stringent and long overdue IMF-imposed disciplines at last introduced, public expenditure cut, the North Sea oil beginning to flow, the terms of trade moving in our favour, and speculative hot money pouring into this country to take advantage of the situation. Even with all that to help him, what has been the actual extent of the Chancellor's vaunted dramative improvement in the financial situation?
  Since October 1976 sterling has appreciated against the basket of trade-weighted currencies by only 7½ per cent. and is still 23 per cent. below the level at which it stood in the middle of the miners' strike in February 1974. Even since October 1976, again to take the Chancellor's carefully-chosen time-span, the pound has actually lost a further 5 per cent. of its value against the Japanese yen.
  Still examining the very optimistic speech with which the Chancellor commended this Bill to the House on 10th November, let us look at another aspect of our financial position—the reserves, to which he referred, as did the Financial Secretary today. At the beginning of his speech moving the Ways and Means Resolution the Chancellor said:
  "Our reserves are now over 20 billion dollars second in size only to those of Germany and Saudi Arabia."—[Official Report, 10th November 1977; Vol. 938, c. 875.]
  894
  How splendid that sounded and was intended to sound! No better news had been heard since the relief of Mafeking. But, alas, the right hon. Gentleman had suffered another of those sad little lapses of memory to which he is sometimes prone.
  The Chancellor had forgotten our debts, and so did the Financial Secretary when he made the same point today. The Chancellor forgot, until I jogged his memory later in his speech, that since 1st March 1974 this Socialist Government have run the country into debt to the staggering total of over 16 billion dollars, and that the overall total of our indebtedness as a country actually exceeds our present reserves, so that our true reserve position today is still negative.
  So much for the financial position on which the Bill is founded—and I am not surprised that the hon. Member for Cornwall, North (Mr. Pardoe) has retreated from the Chamber.
  The Minister of State, Treasury (Mr. Denzil Davies): How can the hon. Gentleman equate what he has just said with his advocacy of freedom of exchange control and capital movement? If the position is as he has described, surely he should argue that there should be no relaxation in exchange control.
  Mr. Tapsell: Because when the Chancellor let it be known that he did not want any further purchases of British Government bonds from overseas, there was inevitably a massive upsurge of purchases of British gilts, and few things will do more to restore confidence further and ensure an increase in our reserves at this time than for the Government to begin gradually to liberalise exchange controls, as I am fairly confident events are going to force them to do. One certain thing is that when the miners' strike threat has been withdrawn, the hot money will start pouring in again. The Government said up to the last moment that they would not allow sterling to float, and, whatever the Minister may say now, in a matter of weeks or months someone at the Dispatch Box will announce some liberalisation of exchange control.
  One important thing for us to remember is that the very welcome recovery which makes this Finance Bill possible is only financial. Apart from the

  895
  fall in interests rates, it has had little beneficial effect on the man in the street or on the real economy. Indeed, I found it salutary to be reminded on my most recent visit to Saudi Arabia, last June, that that country has a 30 per cent. annual rate of inflation, and an even higher rate if rents are included, while many of the jobs there are held by immigrant workers.
  It would be a profoundly unwise thing for the present Government or any politician to suggest to the British people that a large oil income will solve most of our national problems. It can and probably will make some of those problems worse and others more difficult to overcome. [Interruption.] The Minister of State thinks that Saudi Arabia is a poor example, but if he went to Norway he would find a similar analogy.
  This effect of oil income—welcome as it is in many respects—making many of our problems more difficult applies particularly to prices and industrial competitiveness. The Chancellor himself acknowledged this when in answer to a Question on 26th October he admitted:
  "We should all recognise that our very dramatic … improvement has not been accompanied by an improvement in our real economy."—[Official Report, 26th October 1977; Vol. 936, c. 1469.]
  He can say that again. When any ordinary mortal approaches the promised land he is confronted by a large notice board on which is boldly inscribed: "Private. Keep out. Reserved for dealers in foreign exchange."
  When one turns to the real economy, to the real Britain in which people actually live and hope to work and to earn a decent wage, one finds that after nearly four years of Socialist Government we have an inflation rate still twice as high as that of our competitors, we have personal taxes at some of the highest rates in the Western world and starting at some of the lowest wage levels—a situation that will still exist even after the increases in personal allowances contained in this Bill come into effect—a number of unemployed almost trebled since the days of the last Tory Government, and it would seem inexorably heading towards 2 million. Production is still at the levels of February 1974, and future investment intentions are still extremely cautious and hesitant.
  896
  All of this has resulted in a cut in the real living standards of the people of this country of about 9 per cent. I wish that I felt that this Finance Bill would make a major impact on this situation, but it will not, I fear.
  As far as they go, however, the provisions of this Finance Bill are welcome. The Bill has even one not inconsiderable claim to fame: it will probably prove to be one of the very few Finance Bills ever passed by a Socialist Government in this country which may do little positive harm.
  We particularly welcome Clause 2, which ensures that the increases in retirement pensions, widows benefits, invalid care and mobility allowance will not be taxed for the rest of this financial year, even if this is only because of the Chancellor's incessant tinkering with the tax system, usually in an upwards direction, has brought the Inland Revenue to the brink of exhaustion.
  Even so, the Bill fails to make good the harm already done, even within the tax spheres to which it is addressed. The proposed adjustments in the personal allowances, as the Financial Secretary admitted when he opened the debate, do no more than keep in step with the rise in the Retail Price Index for the calendar year 1977, on the assumption that this will not be more than 12 per cent. They fall well short, as my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) and other of my hon. Friends have pointed out during this debate, of restoring the real value of these personal allowances to their 1973 levels, in the last year of Conservative Government. I point out in passing that age relief is not included at all, and this will come as a great disappointment to many people.
  Even after the £1,200 million in a full year, or £950 million in the current financial year, of the proposed tax reliefs have been made, a further £1,430 million would have to be slashed from the tax bill before these allowances were restored to the levels of the personal allowances enjoyed by the people of this country before Labour came to office. Not one of these proposed new personal allowances is as valuable in real terms to the recipients as in the past under a Tory Chancellor.

  897
  To restore the position to the 1973–74 tax year, even after this Bill has taken effect, it would be necessary to make a further increase in personal allowances for a single person from the proposed level of £945 to £1,199, increasing it by £254. For a married couple it would be necessary to increase the allowance from the proposed £1,455 to £1,562, an increase of £107. For the age single allowance it would be necessary to increase it by £161 from £1,250 to £1,411. For the age married allowance it would have to be raised from the proposed level of £1,975 to £2,016. Those adjustments would be needed just to bring everyone eligible for personal allowances back to the level that applied under the last Tory Government.
  Even after this election-tinged Finance Bill reaches the statute book—and we shall not oppose it—it remains profoundly true that Conservative Governments cut taxes and Labour Governments put them up.
  9.43 p.m.
  The Minister of State, Treasury (Mr. Denzil Davies): We have had today, as often occurs on these occasions, a wide-ranging debate covering many areas, not all of which are strictly within the confines of the two clauses in this Finance Bill. We have been regaled by the knowledge of Conservative Members about the Japanese yen and other currencies around the world. I should like to return to the matter under discussion and briefly answer some of the points arising from the debate.
  On the question of assessments, the increase in personal allowances will mean that very many assessments of tax under Schedule A and Schedule D in the current year will have to be adjusted if the Bill becomes law. These assessments will have to be adjusted for the current year because they reflect the personal allowances that could be given under the provisions of the Finance Act 1977. If the assessments are under appeal, the adjustment will be done when the appeals are settled. If they are not under appeal, the tax will be due for payment under these assessments on 1st January 1978 and interest will run from that date if the tax is not paid.
  This may be a source of difficulty to taxpayers if, because of the size of the
  898
  task, the Inland Revenue is late in telling some people of the new reduced liability. Therefore, the Chancellor of the Exchequer has authorised the Inland Revenue to make administrative arrangements to meet this problem in advance of the appropriate legislative provision. The intention is that nobody will have less than 30 days after notification of the adjustment before the interest starts to run. The Inland Revenue will be issuing a statement to the Press which will explain the arrangements in detail, and legislation to deal with this matter will be brought forward in the Finance Bill of 1978.
  I wish to add my congratulations to my hon. Friend the Member for Birmingham, Ladywood (Mr. Sever) on his excellent maiden speech. Remembering my own maiden speech, I share the sentiments of the hon. Member for Horn-castle (Mr. Tapsell) and agree with him that the new Member was far more eloquent, and certainly far less nervous, than we were in our day. My hon. Friend showed great concern for his constituency, which probably has more problems than most constituencies, including inner city depopulation and immigrant issues. I am sure that we shall hear a great deal from my hon. Friend in many of our debates.
  The hon. and learned Member for Dover and Deal (Mr. Rees) dealt with the matter of mortgages. Perhaps the House will bear with me if I read from my brief so as to get absolutely right the situation as it affects PAYE taxpayers with mortgages.
  Most PAYE taxpayers on building society mortgages were put on non-cumulative codes in September to limit under-payments arising from the reduced building society interest in April and June. It is true that this will mean that they will not immediately receive rebates, since employers can deal only with taxpayers on cumulative codes. They will, however, receive the immediate benefit of weekly or monthly reductions for the rest of the tax year. Tax offices will be reviewing these cases in the next two months in conjunction with the 1978–79 PAYE code review. If it shows that rebate is due, those people will be put back on to the cumulative code so that any rebate can be made before the end of the 1977–78 fiscal year. The Inland Revenue cannot, however, undertake a full review of those tax cases immediately.

  899
  One hon. Member referred to 5 million fewer taxpayers, but the number involved is considerably lower, around the 2½ million mark. There are 4 million PAYE taxpayers with building society mortgages compared with 25 million PAYE tax- payers in all.
  A number of other points were raised in the debate, and I shall try to deal with them. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who informed me that he would not be here for my reply, made the point, as have others, that the Budget shows the pointlessness of fine tuning. It has been said that we are now on the twelfth Budget which again sets out to change tax rates, but if Conservative monetarists—they are all monetarists when in Opposition—adhere strictly to the monetarist position, which involves a close examination of the public sector borrowing requirement and M3, they will appreciate the difficulty of forecasting any change in the course of a year. It inevitably follows that more fine tuning is required, and that is one of the parodoxes of the monetarist approach. One needs more fine tuning if one has to rely on estimates which, for reasons that lie outside Government control within the fiscal year, can vary. This has happened and will continue to happen in respect of the PSBR.
  My hon., Friend the Member for Blyth (Mr. Ryman) asked why more benefit had not been given to widows. But the Bill does benefit widows in respect of allowances, and there is an additional allowance in respect of children. Indeed, the Bill helps widows and others on low incomes.
  My hon. Friend also said that the tax system discriminates against the married woman who goes out to work. That again is untrue. The tax system discriminates in favour of married women who go out to work, because there are three lots of personal allowances paid in respect of them.
  The hon. Member for Norfolk, South (Mr. MacGregor) asked me about the Inland Revenue's computerisation programme. I take the point that he made. We do not wish to foreclose the options before we have decided how the tax system is to develop. We do not want the options foreclosed by the compu-
  900
  terisation programme. I can assure the hon. Gentleman that we are fully aware of that hazard and that there is no danger of its happening.
  The hon. Gentleman also asked me why the estimates for the yield from income tax were different from what it is now likely to be. With respect, I think that his figures were not entirely accurate. The estimates are slightly different. They are different by only some £200 million. The reason why the PSBR estimates are different is partly for that reason, partly the great success that the Government have had in controlling public expenditure with cash limits and other measures, and partly the fact that the financial requirements of the nationalised industries have been much lower this year than were estimated at the beginning of the year. That demonstrates how difficult it is to assess the PSBR and to plan the economy on the basis of PSBR targets.
  What we have not heard from the Opposition is how they would resolve the particular dilemma that would be the consequence of their solutions. They say that we must further cut taxes. They say "This is not enough. We want a further reduction in taxation. We want a further reduction in the PSBR." At the same time, they say that they want us to adhere to the monetary targets.
  The hon. Member for Blaby (Mr. Lawson) and other Opposition spokesmen have not said how we cut taxes, cut the PSBR and keep to the monetary targets. That is the one glaring gap in the Opposition's so-called economic programme. Once they have gone along that road, they have to say "And you must cut public expenditure." However, we are now led to understand that they will not cut public expenditure. The speeches that we have heard from many Opposition Back Benchers indicate that they will seek to increase public expenditure. We have been told that we should spend more money on child benefits, thereby increasing public expenditure. The Opposition have not told us exactly what they will do about public expenditure. All that I can conclude is that their monetary stance is as confusing when they are in Opposition as they were irresponsible when in Government.
  When in Opposition, Conservative Members espouse conventional, orthodox

  901
  and sensible views, but when in Government they forget them entirely, with the result that Labour Chancellors have to set the country back on the right financial course. For example, the hon. and learned Member for Dover and Deal espoused the virtues of Lord Barber. I do not wish to go over that history again. The hon. and learned Gentleman is fully aware of what happened when Lord Barber decided to cut taxes and public expenditure and to inflate the money supply by printing money to cover the difference. The issue is not so much the level of the PSBR, although that is important, as how we fund it. That is something that the Tory Party still has not quite understood. It certainly did not understand it when in Government. The Conservative Government decided to fund the PSBR by printing money. That was what caused the enormous inflation that we have had to live through for a considerable period.
  Mr. Lawson: The Minister has put forward a series of propositions for a long time, none of which has been true. I have been patient until now. The record shows that under the Conservative Government a much higher proportion of the public sector borrowing requrement was funded by genuine borrowing than is the case under the hon. Gentleman's Government. That was confirmed to me by a Written Answer from the Treasury.
  Mr. Davies: The hon. Gentleman should remember that when his party was in office the money supply was completely out of control. There was the most awful boom in the money supply, with the result that all the money flowed into property speculation. The banking system was brought almost to collapse. We had to try to clear up the mess left by his right hon. and hon. Friends. For him to quibble about how the financing took place is an indication that he does not understand the problems of that time.
  Mr. Budgen: Does the hon. Gentleman agree that in following his argument the present Administration will either have to cut public expenditure by next spring or conform to the agreed constraints on the money supply, which means that it is almost inevitable that interest rates will have to increase sharply in the spring, which will have a most harmful effect
  902
  upon any investment boom that might come about?
  Mr. Davies: The hon. Gentleman, who is looking forward to the spring, does not have the benefit of the money supply figures for the period between now and then, and the matter cannot be decided now before the position becomes clearer. However, I entirely accept what the hon. Gentleman says. If the money supply is to be kept under control, interest rates must also be examined. Such an examination is part of the whole picture in controlling the supply of money.
  Many speeches have been made about the Bill, but its object is simply to put some extra money back into people's pockets. I accept that the Opposition do not like that very much. They do not want this Government to do that. They prefer that a Labour Government should increase taxation, so that they can make their set speeches saying that a Labour Government always increase taxation. A Labour Government are putting more money back into people's pockets, into the pockets of those who are worse off.
  The people who will benefit most are those on the lowest incomes. [Interruption.] I know that the hon. Gentleman does not like it, but those who will benefit are the people on the lowest incomes, pensioners and widows, those who deserve to have the benefit first. We are doing this now, and we intend to do it in the next Budget, so that we can remedy the fact that so many people on low incomes have been brought into the tax net.
  Mr. Lawson: Who brought them into it?
  Mr. Davies: The hon. Gentleman does not understand the effects of inflation, caused partly by his own Government, partly by the increase in the price of oil and partly by world economic factors. The mutterings of Opposition Members show that they do not understand what has happened to the economy in the past few years, just as they do not understand what happened to it when they were in Government. This is a clear case of a Labour Government reducing taxation, a start on the process—
  Mr. Peter Rees: The hon. Gentleman has not yet addressed himself to a point that I put to him. Why has the Chancellor changed his stance since the

  903
  summer, when he was proposing to reduce the basic rate from 35 per cent. to 33 per cent.? Do we take it that the Government no longer believe in the preservation of differentials? Have they been overruled by Mr. Kitson or Mr. Moss Evans with this dramatic change of front?
  Mr. Davies: The hon. and learned Gentleman sees drama and changes everywhere. There is no change. What we have done was deemed to be at this time the best and fairest way of reducing the tax burden on the British people. I should have thought that the Tories would welcome that instead of quibbling about it as they have done tonight. This is the first instalment. We hope that in the next Budget we can go further and again improve the standard of living of the British people.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Committee of the whole House.—[Mr. Frank R. White.]
  Bill immediately considered in Committee; reported, without amendment.
  Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.
  Bill accordingly read the Third time and passed.

  BUSINESS OF THE HOUSE
  Ordered,
  That the Pensioners Payments Bill may be proceeded with at this day's sitting, though opposed, until any hour.—[Mr. Frank R. White.]

  PENSIONERS PAYMENTS BILL
  Considered in Committee.
  [Sir MYER GALPERN in the Chair]

Clause 1

  LUMP SUM PAYMENTS TO PENSIONERS
  Question proposed, That the clause stand part of the Bill.
  10.1 p.m.
  Mrs. Lynda Chalker: We welcome the Government's reintroduction of the Christmas bonus or lump-sum payment for pensioners and others. As my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) said:
  "We note with pleasure that the Government have turned their back on all the various criticisms that they addressed to a comparable proposal that was introduced by the Government of which I was a member".—[Official Report, 4th November 1977; Vol. 938, c. 251.]
  He was referring to the time when he was a Minister in the Conservative Government.
  I have only one argument with my right hon. Friend. It is his description of the lump-sum payment as being "comparable". Compared with the £10 paid in 1972, the 1977 bonus of £10 is less than half the true value. To be truly equivalent in spending power this year's bonus should be about £21, working on the retail price index. Even comparing it with the £10 bonus in 1974 it should be £16.
  Although we say that it is welcome, we must keep its value for the recipients in true proportion. We well remember being accused of being unrealistic when we kept the 1973 bonus at £10. At that time it would have had to be increased to about £11 to keep its original value.
  Over the last few weeks, I have asked potential recipients what use they will make of the bonus. Most of them say that they will buy a few Christmas presents but they will save as much as they can for fuel bills this winter. We know that there are other means of helping towards fuel bills, but they are an everlasting worry for the elderly, the handicapped and disadvantaged in our society. Their attitude is not surprising.
  906
  Let us look at the retail price index for fuel and light. Taking December 1972 as 100, that retail price index is now 230·45.
  In spite of our realisation that the bonus can be only small—and we must be grateful for small mercies—we must realise why it is being reintroduced. We know how much this tax-free bonus is appreciated. The House will know that every market research survey conducted on benefits has shown the recipients' great appreciation of it. It is not, therefore, surprising that this Government have tumbled to the popularity of the benefit at the beginning of their fourth year in office. They know that this help is very well received by the public.
  We welcome the extension of the bonus to new categories of people—those receiving invalid care allowances, those receiving non-contributory invalidity pensions and, from this week, disabled housewives. The new recipients amount to only about 160,000 but they will be grateful for the bonus, small as it is. However, now that the bonus has been extended so far, there must be a little questioning about those not included.
  The hon. Lady the Member for Halifax (Dr. Summerskill) spoke in 1972—in c. 1024 of the Official Report of 20th November of that year—about "glaring exclusions", and there were more then than there are now. But still there are some questions I have to put to the Minister, of which I have given him notice. First, how much would it cost to give the £10 bonus to men aged between 60 and 65 who are on invalidity pension and at present seem excluded? They are people who cannot work but do not benefit from the bonus. Also—and I recognise that this is difficult for the Minister to answer—can anything be done for the couple with the man aged 65 or over but the wife under 60? Perhaps unreasonably but certainly undeniably, this group feel angry about their exclusion. Finally, will the Minister confirm that war pensioners, regardless of age, will have their Christmas bonus? I gather that there has been some doubt about this in the past.
  We recognise that this benefit, although introduced for one year in the first place, then repeated, and taken up by the present Government in 1974 and now again,

  907
  is fast becoming much more of a universal benefit than was originally envisaged. The provision for it is so widely drawn now that any group outside it are saying "Why not us as well?" This is so especially among the long-term unemployed who are excluded.
  It is clear from earlier debates that the Minister's thought was not to have a bonus again this year. This should be noted. On 29th April, he replied to my hon. Friend the Member for Uxbridge (Mr. Shersby) in terms which showed that the Government had fundamental doubts about the payment of the bonus. When asked whether it was his intention to pay a bonus to retirement pensioners at Christmas 1977, he said:
  "No. A bonus payment is bound to be arbitrary in coverage, and to exclude many deserving groups. A general uprating of benefits, such as will take place in November, is an altogether fairer method of distributing the resources which are available."—[Official Report, 29th April 1977; Vol. 930, c. 462]
  We understand that, but no one will deny the pleasure with which the announcement has been received. So the question remains: why have the Government suddenly made a change of course? In 1973—this is column 580 of Hansard for 19th October 1973—the right hon. Lady the Member for Blackburn (Mrs. Castle) levelled at us the accusation that the introduction of the bonus had been very much a matter of last thoughts, and she went on to say that the bonus was not really the appropriate answer.
  We are well aware of her view, but she spoke then of lifting pensions and other benefits. We acknowledge that the Government have had to lift pensions and other benefits, against the background of mammoth inflation, but the Government have still returned to the bonus. I draw the Minister's attention to the comment of his right hon. Friend the Member for Deptford (Mr. Silkin) in 1973, that a pension of £10 and £16
  "would obviate the need for a repetition of the once-and-for-all £10 bonus".—[Official Report, 19th October 1973; Vol. 861, c. 578.]
  The Secretary of State has proudly patted himself on the back this week now that we have reached pensions of £17.50 for the single person and £28 for a couple. Yet the bonus is here again—for different reasons, I suspect. What are
  908
  the reasons for the change of course? Plainly, the Government have realised the popularity of this bonus.
  Finally, on this clause, we must express our thanks to the Post Office staff for making it possible for the bonus to be paid. Without their assistance it would be utterly impossible, and we recognise that it must cause a quite heavy additional strain on them.
  Clearly, the bonus is welcome. Certainly, no one will say that the pensioner's payment is not welcome. But it must be seen for what it is—great as an idea but very small in purchasing power now.
  The Minister for Social Security (Mr. Stanley Orme): My hon. Friends will have noted what was said by the hon. Lady the Member for Wallasey (Mrs. Chalker) in welcoming the payment of the Christmas bonus, which was in sharp contrast to what was said in the previous debate on public expenditure. I cannot let this opportunity pass without saying that this is public expenditure. The Government find themselves in a position to pay the Christmas bonus this year to pensioners to give them that extra purchasing power at a time when they need it. The Government's action will be widely welcomed.
  I heard what the hon. Lady said about a decent pension. When this Government discontinued the payment of the bonus, there were two upratings of the pension in one year. This year the pension has been raised to £17.50 for a single person and to £28 for a married couple—an increase in real terms since the last increase by a Conservative Government in 1973. Although it is never enough and my hon. Friends will be pressing for more, we can be proud of the actions of this Government on pensions. This week I met a very formidable and respected deputation of pensioners. This Government have not neglected pensioners.
  The hon. Lady said that many pensioners will use this bonus to assist in paying fuel bills. She is probably correct, but in heating allowances this year the Government will be paying to supplementary benefit and FIS recipients £88 million in heating additions. In addition, £22 million will be spent, this time by the Department of Energy, in meeting

  909
  one-quarter of the cost of certain electricity bills and making cash grants of £5. That is another indication that the Government are aware of the problem of fuel costs. It does not behove the hon. Lady to criticise us. She and her party have pressed us to remove all restrictions on the public sector so that prices can rise to the market level.
  Mrs. Chalker: The right hon. Gentleman is well aware that it has been only because of the high fuel bills and the rate at which fuel prices, particularly electricity prices, have risen since the Government came into office that we have had to resort to these measures to help pensioners. We do not decry the efforts that are made. We simply point them out for what they are—benefits to help those most vulnerable to cope with mammoth increases in fuel charges.
  Mr. Orme: We could become involved in a much wider debate, but that would not be allowed on this clause. I leave the Committee to draw its own conclusions from the Government's records.
  The long-term unemployed are excluded as recipients. We have examined this problem, but there is an administrative difficulty about identifying them. It would involve a colossal job throughout the whole of the United Kingdom. Had it been possible to identify them, we would have paid them the benefit. This year the categories have been widened as far as possible.
  The hon. Lady asked how many women aged under 60 who are wives of retirement pensioners will not qualify for the bonus. We estimate the number to be about 150,000 in round figures. The reason for excluding this category is again the question of identification. There is no record either of such a woman drawing benefit or of her age. All one has is the husband's record as he draws the pension. It would be impossible. It is not just that we do not want to do it, but we could not identify that category. I hope the Committee will recognise that it would be an addition to the work that goes on when such payments are made—and here I should like to echo what has already been said about the terrific job that the Post Office does. Such a task could not be put on my Department. It would be extremely unsatisfactory for the Department to do this work of identifica-
  910
  tion, and it could lead to thousands of anomalies occurring without covering the point in the way that hon. Members would wish.
  10.15 p.m.
  I have been asked whether those aged between 60 and 65 who are on invalidity pensions will be excluded. They will not. Everybody who is entitled to an invalidity pension can qualify for a bonus provided all the other conditions are satisfied. That includes those on contributory and non-contributory pensions. I was also asked about war pensioners and war widows. Age is not relevant in the case of a war widow, who will get the bonus automatically, nor will it be relevant in the case of a war-disabled pensioner who is entitled to unemployment benefit, retirement pension or other qualifying benefit. War pensioners will be put on precisely the same footing as retired pensioners.
  We have considered these categories not in order to restrict them but to extend them, and that is what we have done. I regret that it has not been possible to extend them to the two categories that have been particularly mentioned today. That is unfortunate.
  I hope that I have answered all the points that have been raised.
  Question put and agreed to.
  Clause I ordered to stand part of the Bill.

Clause 2

  INTERPRETATION
  Mr. Robert Kilroy-Silk: I beg to move Amendment No. 1, in page 3, line 12, leave out
  'week beginning with 5th December 1977'
  and insert
  'first week in December of each year'.
  I should like first to congratulate the Minister on having brought forward the Bill and on reintroducing the Christmas bonus. Whatever the merits of such ad hoc payments may be—and we could have many arguments about that—the bonus is extremely popular among the beneficiaries. It will be welcomed by pensioners. As the hon. Member for Wallasey (Mrs. Chalker) pointed out, a whole range of people will benefit, whether they are pensioners, war widows

  911
  or in some other category, and the bonus will be particularly welcomed in such areas as Merseyside and my constituency.
  However, there is a problem. A bonus of £10 was first paid in 1972 and again in 1973. The scheme was extended by my right hon. Friend the Member for Blackburn (Mrs. Castle) in 1974 to cover about 9 million beneficiaries in more or less the same categories as those covered by the Bill. The bonus was not paid in 1975 or 1976, to the great dismay of all those who had previously received it and had considered it a regular feature of their benefits, particularly as it had been paid for three years. It was not unnatural that they should anticipate its continuance.
  It was not paid on the grounds that social security benefits had been uprated and that payments were, therefore, being received in a more regular and continuous fashion than by ad hoc payments. Now the benefit is to be paid again in 1977. It was stopped in the face of great controversy, but for some reason we have decided to pay it again this year. Indeed, my right hon. Friend the Minister for Social Security said only on 29th April this year, in a Written Answer, that it was not his intention to pay the bonus to retirement pensioners at Christmas 1977. He said:
  "A bonus payment is bound to be arbitrary in coverage, and to exclude many deserving groups. A general uprating of benefits, such as will take place in November, is an altogether fairer method of distributing the resources which are available."—[Official Report, 29th April 1977; Vol. 930, c. 462.]
  I agree entirely with those sentiments. The question is: why, a few months later, are we suddenly having a massive reversal of policy and deciding that we shall now pay that bonus? On 29th April this year my right hon. Friend made out a perfectly reasonable case why we should not pay the bonus. Tonight I presume that he has a perfectly good case why we should pay it. If we are to pay it this year it seems to me that we have no option but to continue to pay it in future years.
  Mr. Orme: This point is central to my hon. Friend's argument. He has asked a fair question because in April of this year I said—my right hon. Friend the Secretary of State said it a little later—
  912
  that we would not pay the bonus. We said that against the economic background as it then was. We were still very much in the grip of the IMF position. But as the economy improved during the autumn it became obvious that the Government were in a position again to offer assistance in terms of both public expenditure and tax relief.
  It would have been extremely unfair if we had made tax concessions but not taken pensioners into account. We therefore decided to pay the bonus on that basis. I hope my hon. Friend will accept that in no way was this meant to be a sleight of hand. It was an immediate response to the problems of the pensioners because we felt that we could assist.
  Mr. Kilroy-Silk: I accept my right hon. Friend's argument. It is one of the arguments in favour of ad hoc payments of this kind. One of those arguments, which specifically relates to this bonus, is that it enables pensioners and other potential recipients to share in the general prosperity of the country. Just as other members of the community get tax rebates or productivity bonus increases, the pensioners, too, are entitled to share in this through such an ad hoc payment. That is a very considerable argument.
  In a moment I shall come back to the central point of my right hon. Friend's riposte to my argument. Ad hoc payments of this kind are of crucial help to the aged, to pensioners and to the most disadvantaged and unfortunate members of our community. They are of crucial help and aid to them at a time like Christmas. They assist many who have no savings and do not have the ability to save. These people get what, admittedly, to them is a windfall which enables them to pay the heating bills about which they had been worrying, or to buy an extra present or extra food.
  Such a bonus is a very effective means of giving aid directly to the people who need it most. It is extremely effective in that it is tax-free and simple to administer and goes direct to those most in need.
  The amendment seeks to ensure that the bonus is paid not only in 1977 but also next year and in following years. The argument in favour relates not so much to the merits or otherwise of ad hoc payments but rather to the psychological damage that is caused by using

  913
  pensioners and others as a political football. That is basically what my right hon. Friend admitted in his intervention earlier.
  At the moment the situation is that we shall have the bonus this year, but we do not yet know whether pensioners will get it next year. There is a tremendous amount of uncertainty. Either the Government are determined to make ad hoc payments, in which case they must give them a place in our social security system on a regular basis in future years, or they must say that they are against such payments in principle. I accept that there are good reasons in principle for being against them. We could give the aid by other means and not use the pensioners and others as a political football, making them susceptible to the whims and caprice of any Government as they are at the moment. There is a great deal of dismay, consternation and controversy that, having once stopped paying the bonus, the Government have now decided to pay it again. If the Government decide to pay it this year it is impossible for them not to pay it in future years. The psychological blow of not paying the bonus to pensioners and others who believe that it will be maintained every year will be enormous.
  Mr. George Cunningham: I understand the difficulties created by resuming payment of the bonus this year and then giving it up again next year. But surely there is a difference between circumstances this year and next year in that next year, whatever money is available for pensioners, it will be possible to build that into the normal rate when that is decided in the spring, to take effect in November 1978. Is that not a better way of doing it?
  Mr. Kilroy-Silk: That is what we argued in 1974 and 1975, but it did not stop pensioners believing that in those years they were diddled out of their Ted Heath bonus, as they called it. The pensioners feel that they were given an entitlement which was subsequently withdrawn. Their position may have been improved by the general uprating. But for some reason—I suspect it is to help prime the pump of the economy—the Government have decided to pay the bonus this year. It is morally indefen-
  914
  sible to hold out to thousands of pensioners the hope, since the bonus is being paid this year, that the Government are putting down a marker for future years and then for my right hon. Friends to decide in future years not to pay it.
  I am asking my right hon. Friends to ensure that it will be paid every year. That is the aim of the amendment. In that way the payment will not be dependent upon the charity, caprice or whim of the then Chancellor of the Exchequer. The pensioners are on the edge of a precipice awaiting the announcement that they will get the £10 bonus not at the patronising and charitable discretion of future Chancellors but as of right.
  I therefore urge my right hon. Friend to think seriously about the amendment and to enter a commitment on behalf of the Government to accept that, having paid the bonus this year, they must pay it every year in the future.
  10.30 p.m.
  Mr. Michael Shersby: I have some sympathy with the amendment moved by the hon. Member for Ormskirk (Mr. Kilroy-Silk). The Christmas bonus to pensioners has a particular memory for me because it was introduced in Christmas 1972, a few days after I entered this House. During the course of my by-election campaign in Uxbridge I had the opportunity of talking to hundreds, if not thousands, of pensioners who were to receive their bonus, the first to be introduced, from the Conservative Government.
  It was clear to me then that the bonus was an important part of every pensioner's budgetary arrangements for that Christmas. I was sad when it was not possible to continue the bonus. There is a strong case to be made for making arrangements to ensure that the bonus is paid annually. We all know that Christmas is an expensive time for us. This is no less true for pensioners. Many of them have children and grandchildren whom they wish to visit in various parts of the country. They have additional expenses at that time of the year and have no extra way of meeting them. It is right that we should introduce the bonus on a permanent basis. There is much to be said for providing for it in the pension book and for the bonus to be dealt with annually with the pension

  915
  uprating, with inflation being taken into account.
  I understand that the cost of the bonus amounts to £100 million. That is a great deal of money but in assessing the costs we should have regard to the contribution made by pensioners to the success of our country, to the contribution they have made to industry and commerce and our way of life generally. We have to recognise the severe hardship they experience in meeting heating costs and the costs of Christmas. It is certainly not impossible for us to consider meeting such costs.
  The Government have proposed that the bonus should be paid this year. There are hon. Members who feel that the principle should be adopted on a permanent basis. I favour that because I dislike the suggestion that the bonus is paid only when we are approaching a General Election. That is an unworthy suggestion, and I do not believe that the Minister has introduced the bonus for that reason. I believe that he has done it because he recognises, as we all do, the serious position of many elderly people in these days of hyper-inflation.
  I hope that the Committee will give sympathetic and serious consideration to the amendment. I intend to vote for it to demonstrate that I believe that the Government should adopt the proposal It is sensible, humane and charitable. Moreover, it brings help to all pensioners, to whom so many of us owe so much. We would like to make this an annual affair, not to be decided by the annual whim of this House in a separate Bill.
  Mr. J. W. Rooker: I rise to support the amendment moved by my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk). It would be political suicide for the Government to leave this matter hanging in the air during 1978. Because the bonus was paid in 1974, stopped, and then brought back, we shall be accused of making the issue a political football in a General Election year, as we were in 1974. I do not want the Government to be in that position next year. I do not want them to have to be asked "Are you going to pay the bonus at the end of the year?" I do not want there to be an item in the next Labour Party manifesto similar to that
  916
  which appeared in the last one saying "The Labour Government will pay another £10 Christmas bonus this year." I do not want this to be remotely connected with a General Election. If that happens it will turn the pensioners against the Labour Party. They will argue that we are doing it only because of the General Election. I want the Government to get the credit by putting this on the statute book direct so that all know where they stand.
  The commitment is not that great. I submit that £100 million is not a great deal of money in terms of the size of the British economy. It is chicken-feed—equivalent to 20p a week on the old-age pension. But if we had put another 50p on the pension in the recent operation we should not have got as much credit for it, because the psychological effect of the Christmas bonus far and away transcends the monetary value of it. It was referred to earlier as the Ted Heath bonus. When I went round the constituency saying what a good job the Labour Government had done in putting up the pension, people still asked about the Christmas bonus.
  Mr. Shersby: Will the hon. Gentleman accept that it is not a question of this Government or any other Government getting credit for introducing the increase? It is a question of Parliament deciding that this payment should be made on an annual basis. Surely that is what we are talking about, rather than credit to any particular Government. We are talking about Parliament deciding that the pensioners shall get a fair deal every Christmas.
  Mr. Rooker: The hon. Gentleman may not have noticed it but in the last three and a half years I have been playing in the Labour team and not the Tory team. I have even been trying to get credit for my own Government from this year's Finance Bill, even if it has meant putting the boot in to defeat the Government for their own good.
  The value of this Christmas payment psychologically, as I was saying, far and away transcends the monetary value involved. When the Bill was passed earlier today to give tax reliefs, it was only because the Treasury could not get its sums right earlier in 1977, and I have no more confidence that the Treasury will get its sums right in 1978 than this year.

  917
  We could be in exactly the same position then as we are now, with money in the kitty as a result of the Treasury getting their sums wrong, and with the need for another mini-Budget at that time.
  I represent a constituency with more than twice the average number of old-age pensioners. Over 30 per cent. of my constituents are old-age pensioners. I know the value to them of even a very small sum of money. My right hon. Friend will know that this week many of my constituents are £1 worse off than they were last week. They have not achieved the full impact of the rise in the pension because they have lost the special heating subsidy which was received from the Supplementary Benefits Commission by certain people in Birmingham. They are now losing some £50 a year as a result.
  I want it to be clearly on record that a sum of money will be made available next year for the old-age pensioners. If it were not for the Ways and Means Resolution we would probably have sought to change the figure of £10, but we are not here to cause trouble. We are here to exercise our rights as individual Members of the House, acting according to our conscience and in the best interests of our constituents. The best interests of my constituents happen to coincide with the best interests of the Labour Government and the Labour Party, and basically I am here to represent the constituents who put me here, the majority of them having voted Labour.
  I do not see how my right hon. Friend can make a case against the amendment which can hold conviction outside the House, bearing in mind the change in attitudes of Members over the payment of the bonus over the years. There were cheers from below the Gangway on this side of the House when my hon. Friend said that this bonus was not really the right way to do the job.
  My hon. Friend the Member for Pontefract (Mr. Harper), mow a Government Whip, spoke in 1973, when the bonus was to be made for the second time. He said that he had grave doubts whether a bonus was a suitable mechanism. He thought that there should be an adequate pension, so that pensioners would not need such a bonus. He thought that paying a bonus smacked of the poorhouse attitude. That is not my attitude towards the bonus.
  918
  But my hon. Friend went on to say:
  "During the past year or two my opinion has changed. I think that the bonus has come to stay. I believe that, whichever party is in power, when Christmas comes the bonus will be there, whatever the amount. It has come to stay."—[Official Report, 19th October 1973; Vol. 861, c. 568.]
  He is governed now by the rules of the payroll vote, so he cannot speak in the debate, but I have spoken for him. I have quoted what he said four years ago, and there is every indication that in other circumstances he would probably take the same attitude today.
  There should be no need for a vote on this amendment because I am sure that my right hon. Friend the Minister for Social Security will give a full commitment to fighting like hell in Cabinet for a Government commitment to annual payment. We know him, but he might not be in his present job very long, and without such a commitment from him now we shall have to get it out of someone else who may follow him.
  Obviously, therefore, it is far better to write such a provision into the Bill now. My experience is that it is better to write commitments into a Bill. I ask my right hon. Friend to take on board the representations made from both sides of the Committee. There may be cynicism from the Opposition Front Bench, saying one thing and voting another way, but the hon. Member for Wallasey (Mrs. Chalker) has not the benefit of a public relations firm working for her, otherwise she would not have made the comments she did about the pension increase. The right hon. Member for Wanstead and Woodford (Mr. Jenkin) should really have been here for the Opposition.
  I hope that my right hon. Friend can now say that he will accept the amendment.
  Mr. Robert Boscawen (Wells): I think that what has been said in this debate convinces me that I was right in 1972, and am right today, not to like the £10 Christmas bonus. Of course it is popular, and the Government have done a popular thing. It is probably right, if they had this sum of money available at this late stage in the year, that it should go to the pensioners, and that it should go to them in the form of a Christmas bonus. But it would be wrong for the Government to accept the amendment.

  919
  But if £100 million is to be made available annually, it should be made available where the need is really great. There are plenty of ways in which it could be spent urgently and where it would do a great deal of good, rather than that it should be spent in giving a £10 bonus to a very large number of pensioners.
  Of course the pensioners will like it; it will give pleasure to a considerable number of people—I do not doubt that. But there are certain areas to which we as a responsible House of Commons ought to be bringing more assistance. I shall not go into detail about them, because we all know them. They lie particularly in health and social security services.
  10.45 p.m.
  When the bonus was introduced in 1972, I accepted it. It had been done, and it was a popular move. But I did not like it then, and I do not like it today. Governments should not be in the business of handing out largesse to certain groups at certain times of the year. That gets us a bad name, and it can be misinterpreted. I am sure that this is not being done for the worst possible reasons and that there was a sum of money available through a change in the economic tide. The Government wanted to get that out as quickly as posible, to a wide field of hands, and felt that this was a sensible way to do that. However, to do it every year would be a mistake. It would be unwise. It would not be a responsible thing to do.
  No one can say that during the time I have been a Member of the House of Commons I have not been the first to want to see that less-fortunate people and those in retirement get a fair deal. They should get a fair deal, but this is not the right way for the House of Commons to go about it.
  Mr. William Hamilton: The assumption behind the amendment is that we are dealing with the poorer sections of the community. That is very doubtful. The people with whom the amendment is concerned are among the poorest, but they are not necessarily wholly the people with whom we ought to be dealing.
  My second point concerns the effect of inflation. If we wrote this into the legis-
  920
  lation, we should have to write in indexation somehow. As the hon. Member for Wallasey (Mrs. Chalker) quite fairly pointed out earlier, to return to the purchasing power of the bonus in 1972 would mean increasing it to £21. I should like my right hon. Friend to indicate what such additional public expenditure would be if this had already been written into the legislation. What would be the reaction of the Tory Party in relation to the increased public expenditure involved in paying a bonus of £21?
  My third point is whether it would be wise to do this given the fact that it would lead to considerably increased administrative costs. What are the additional administrative costs in administering this bonus over and above normal national insurance administrative costs?
  Fourthly, despite those misgivings, I support the amendment. I revert to what I said earlier. If the Government can pay the enormous sums involved in the Civil List, they can afford to pay this.
  Mr. G. B. Drayson: I am very sympathetic towards the amendment, which I do not think goes far enough. I am surprised that we have not had a number of amendments on the Notice Paper increasing the sum involved to £15 or £20. However, I am glad that we have not indulged in "pensioneering". A number of hon. Members have shown that that is something that they heartily dislike.
  I should have liked the amendment to say that the Christmas payment would be one additional week's pension. It would then overcome the difficulty raised by the hon. Member for Fife, Central (Mr. Hamilton). Every year it would be index-linked because it would simply be another week's pension. When the Government were considering what the pension for the following year should be, they could take that into account. Therefore, it need not necessarily be an inflationary once-for-all payment. If the Government took into consideration when assessing what the pension should be for the following year that there was to be an extra week's payment in the first week in December, that would overcome the difficulty.
  It is a time of year when additional expenses come along. In his maiden speech today, the hon. Member for

  921
  Birmingham, Ladywood (Mr. Sever) indicated that a large number of his constituents live from week to week with their pay packets. That demonstrates quite clearly that it is not easy for people today to save for special occasions such as Christmas.
  The Minister of State recently said that he had received a deputation of old-age pensioners. I can remember a deputation I received when I first stood for Parliament as a young man. I was trying to win back a seat that had been lost by 200 votes. This deputation consisted of one man from the local old-age pensioners. He told me that he was the president, and that he had 500 members in his organisation. His members, he claimed, would do anything that he told them, and he asked me what 500 votes were worth. To me, they were worth a considerable amount, and I certainly hoped to win most of them. He asked me again what it was worth. I must have appeared very dull, because I did not really understand what he was getting at. I said that I had every confidence that the old-age pensioners would reach the proper decision, and that I was sure they would appreciate any advice he cared to give them.
  That was my early experience of pensioneering, and we have had many instances of it since in this House. When the Labour Party was in opposition between 1951 and 1964, it would put down motions on the Order Paper asking for an immediate increase in the old-age pension. The Conservative Government would put down a reasoned amendment saying that the House welcomed the good things the Conservative Government had done for pensioners and looked forward to further benefits in future. The motion would be put to the House, and we would vote against it and for our reasoned amendment. Immediately pamphlets from old-age pensioners would go around my constituency saying that I, as the Member, had voted against an increase in the old-age pension. It is very difficult to explain about reasoned amendments, and this is another reason why I have always disliked what I call "pensioneering".
  I welcome this suggestion that the bonus should be a permanent feature, but I would prefer it to be one week's additional pay, which would mean £28
  922
  for a married couple. I would not mind if it was taxable, which would mean the Treasury could claw some of it back. Equally, I should like to see the annual allowances and age allowance to those in retirement steadily increased so that even if the pension were taxable it would be relieved from tax by increasing the allowances by the equivalent amount.
  Reference has been made to the undignified way in which old people have been treated. In April they were told that they would not be getting the bonus; now they are told they will get it. They live in a state of anxiety. It has been called psychological warfare by the Government. I would call it cat-and-mouse treatment that old people have received over the past 12 months.
  I welcome the suggestion that the bonus should be a permanent feature that those in retirement can expect in the first week of December.
  Mr. Tim Sainsbury: I welcome the return of this Bill, and have some sympathy with the amendment tabled by the hon. Member for Ormskirk (Mr. Kilroy-Silk). There are good reasons why we should view with suspicion the fact that Bills of this kind are introduced on an irregular basis—or even a regular basis—at about this time every year. We all know about the risks of turning the whole process into a political football.
  Hon. Members on both sides of the Committee have protested, somewhat to my surprise, that there is no suggestion of this measure being introduced for purely political reasons. But I am not sure one should expect pensioners and those outside the House to do other than suspect the motives of any Minister who introduces Bills of this nature at a time when the following year is expected to bring a General Election. I think that is true no matter which party the Minister represents. There must at least be some suspicion that these matters could be manipulated for political reasons. One slips too easily into pork-barrel politics, particularly if at one time in the year there are ministerial statements that such a thing will not happen and then later, mysteriously, because a General Election may be approaching, it becomes desirable to put forward a Bill dealing with the subject.

  923
  There is another reason why we should look to the amendment with friendliness. It is not justified to use the pension as a means of finely tuning the economy because of the advent of the latest Treasury report showing that £100 million can be pumped into the economy. One could debate many desirable ways in which that £100 million could be spent. But pensioners should not be treated as the victims of economic fine-tuning and left out one Christmas when it appears that Treasury indicators do not look quite so good. We might also see a situation where Ministers may at one time in the year say that they intend to take certain action and then, having seen the latest Treasury report, they may decide to do nothing. That kind of attitude is not justified at all.
  I have in my constituency even more retired people than there are in the constituency of the hon. Member for Birmingham, Perry Barr (Mr. Rooker), and I know that they do not wish their extra Christmas benefits to be determined by the precise state of the economy at any given moment.
  It has been suggested that this is not a sensible way of spending £100 million or of helping senior citizens. I am not sure that that argument stands up. One can argue that a bonus payment, far from being unfair, indiscriminate and ineffective, if introduced by some method at about this time in respect of pensions and other benefits specified in the Bill, is a sensible and justified provision.
  A number of hon. Members, including my hon. Friend the Member for Wallasey (Mrs. Chalker), referred to the extra expenses which pensioners have to bear at this time of the year. They face winter expenses, fuel being the predominant one. It is no good Ministers saying "What about the action we have taken on that front?" It does not please pensioners who rely on solid fuel or gas heating to be told that there is a special bonus for those who use electric heating. That kind of statement, far from pleasing many pensioners, displeases them. That is the most unfair, indiscriminate and ineffective way of helping people with their heating bills that can possibly be imagined. It is helping only those who happen to use one fuel—it is not a par-
  924
  ticularly suitable form of fuel—for their space heating.
  11.0 p.m.
  We must recognise that space heating is something that becomes of the greatest importance at this time of year. Lighting will be used more at this time of year. There will be a need for extra clothes. Even the amount of food that one eats should increase with the onset of the colder weather. All those factors are involved, not to mention matters such as trying to give presents to grandchildren.
  There are many justifications for an increase of some sort for pensioners at this time of year. One way of dealing with the issue would be to employ a system that is available elsewhere—namely, more frequent pension entitlement adjustments. However, that is something that even the computers available to the Government seem unable to bring about, in spite of its being done elsewhere.
  We must look at other methods, and when we do I suggest that Ministers take account that it is now recognised and documented that one of the features of our democracy is that we shall have a considerable increase in the number of people over 75 years old as opposed to those over 65. Another factor in favour of the amendment is that those who are most at risk and find life the hardest at this time of year are those who have had small savings. As they get older they are most likely to find that their savings, which were especially useful on occasions when extra expense was incurred, have been exhausted. Therefore, some form of bonus payment is most appropriate. However, I am not convinced that this form of bonus payment is the best way of meeting the problem.
  In ably moving his amendment, the hon. Member for Ormskirk seemed to be of the opinion that if it were carried it would solve the problem. I do not think it would. One reason is that the Bill includes the amount of the benefit—namely, £10. As has already been said, in real terms £10 is already only half the value of the original benefit. If the bonus were enshrined in the Bill as only £10 we should still be having to consider at Christmas time whether there should be an uprating, and, if so, by how much. We should be back to the game of making pensioners a political football. From

  925
  that point of view it may be argued that the amendment is, in a sense, defective.
  The hon. Member for Fife, Central (Mr. Hamilton) spoke of administrative cost. The costs of paying the benefit are presumably similar in real terms to what they were in 1972, but the real value of the benefit is half what it was in 1972. It can be logically deduced that administrative costs as a proportion of the benefit have doubled since 1972, or slightly more than doubled. That raises a question-mark against a continuing benefit.
  I hope that we can find some way of giving additional help to pensioners at this time of year. It may be that the benefit should not be the Christmas bonus in its present form. I have considerable sympathy with the amendment but I do not think that it would entirely solve the problem.
  Mr. Tony Newton: If there is one thing for which I shall remember the debate, it will be the spectacle of the hon. Member for Birmingham, Perry Barr (Mr. Rooker) acting as a ventriloquist for somebody on the Government Front Bench. Apart from that, I shall have a nostalgic feeling as I contemplate the hon. Gentleman and the hon. Member for Coventry, South-West (Mrs. Wise). I must confess at the outset of my remarks what some will regard as an unholy alliance with the hon. Gentleman and the hon. Lady, I am entirely with them, and if the hon. Member for Ormskirk (Mr. Kilroy-Silk) chooses to press the amendment to a Division I shall go into the Aye Lobby with him and his hon. Friends.
  I support in particular what has been said about the way in which the matter has been handled. I shall not go on about it as I think that hon. Members have made the point already. It seems inherently patronising and cynical for Ministers to say to pensioners, above all others, "We find that we have a little money to spare, so we thought that we would toss it to the pensioners before Christmas." That is no way to treat the pensioners. If Ministers believe that this is the wrong way to give money to pensioners, they should not do it. If they believe that it is the right way to give money to pensioners, they should put it on a more permanent, sensible and regular footing. I go along with the second of those courses.
  926
  I turn to the underlying argument—namely, whether this is the best way to pay fuel bills. I take up the strand introduced by my hon. Friend the Member for Wells (Mr. Boscawen). Is it not better to help pensioners by, for example, giving them an extra 20p a week throughout the year, or is it better to pay them an extra £10 at Christmas? One can vary the figures as one wishes, but the question remains whether it is better to have a small extra regular payment during the year or a slightly smaller payment each week and a lump sum, because inevitably over the years money used for a lump sum is money that will not be given to the pensioners on the regular basis.
  Far from its being better, as Ministers seem to believe, to pay the extra regular sum during the year, there is merit in paying the lump sum, in this case at Christmas, because it corresponds to the psychological reality. To people living on the margin of their income, as so many pensioners are, a lump sum is much more use than a few extra pence a week during the year. Most of us who have had the happy experience of receiving a rebate from the tax man have found that it is much more fun and much more useful suddenly to receive £10, £20 or £30 than to have 10p or 20p more on our regular payslip.
  The other day my children were playing Monopoly. In that game there is a card which sends a player halfway round the board. There are others which say "Bank error in your favour" or "Advance to Mayfair". It is theoretically better that the bank should never make an error, but it is fun to find that it does. The same psychology essentially applies to the pensioners. A lump sum, especially at a time such as Christmas, is more useful to them than a few extra pence a week during the year.
  Therefore, I hope that the payment will be put firmly on a regular basis. I do not like the technique of the amendment. I do not like the reference to a figure. I would prefer an extra week's pension, or perhaps two weeks' pension, to be specified. It is important to solve the administrative and indexing problems. But I understand that the hon. Member for Ormskirk could not do as I suggest because of the way in which the Bill is drafted.

  927
  I take it that the hon. Gentleman is trying to mount a demo by moving the amendment. I am in favour of his demo, and if he proceeds with it I shall vote for it.
  Mrs. Chalker: It is clear from the debate that we are all very conscious of the great attraction of the bonus. We know very well what people think of it.
  However, we must also look at the background against which the bonus is being paid, and at its adequacy. My hon. Friend the Member for Hove (Mr. Sainsbury) pointed out that the amendment on its own does not achieve the real intention of the hon. Member for Ormskirk (Mr. Kilroy-Silk) and many other hon. Members, including many of my hon. Friends, because if £10 continued to be paid, as it would if the amendment were passed, its value would soon become meaningless at the present levels of inflation under a Labour Government.
  Way back in 1972 the right hon. Member for Blackburn (Mrs. Castle) accused us of just tinkering with the problem, and of doing so in the most ineffective way. It is a much smaller tinker this time than in 1972. Whilst I am not in total agreement with all that the right hon. Lady said then, there is more than a grain of truth in it, and we must judge this bonus against the wider background.
  It is well known that we in this country have the most complicated benefits system anywhere in the world. The staff in many of our DHSS offices are almost bemused by the huge variety and complexity of the range of benefits which might or might not apply to their customers. On this occasion the Post Office is having to respond to something which is being agreed at relatively short notice.
  We understand all these problems. We also know that the Department, together with the Supplementary Benefits Commission, is thoroughly reviewing the supplementary benefits part of our system. We support that review, and look forward to the findings early next year.
  The past years have been full of changes to our system. In some years the Christmas bonus has been paid—in 1972, 1973, 1974 and now in 1977. However welcome, each change has been in
  928
  isolation. The major common characteristic of all the changes is that they have led to the system becoming much more complicated. We have looked at this problem, and we shall continue to examine it, along with the tax credit system and the much-needed radical changes in our benefit system.
  We cannot look at this bonus without looking at the other parts of the system. We can only regret that there is no sign of Government work on a rationalisation of our benefit system other than on supplementary benefits. The situation is constantly changing, and the pensioners, the disadvantaged and the handicapped are always the first to suffer. We must have a system which stands up against these changes.
  Thankfully, the rate of inflation is improving. The Minister agreed in this debate that it is thanks to International Monetary Fund policy that there is a bit left over this year for the bonus to be paid. The country needs a system that will hold good under a wider range of fortunes than under a one-on, one-off system.
  Let us examine the arguments for and against the bonus. In favour of it is its strong popularity—which would be even greater if it were index-linked. It helps to pay Christmas bills. But we know that it does not always come when the recipient is most in need of a boost. Administratively, it is a great burden on the Post Office staff, however gladly, they undertake the extra work. It does not always reach those who are in the greatest need. Some people are excluded even when their need is greater than those who receive the bonus.
  We are happy to accept the Government's change of heart since April for this bonus. But because the system must be simplified we must look at the Christmas bonus in a different manner.
  A suggestion was made by my hon. Friend the Member for Skipton (Mr. Drayson), supported by my hon Friend the Member for Braintree (Mr. Newton), which is worthy of closer examination. The suggestion is for a 53-week pension year or a 52-week plus bonus week pension year. The additional or bonus payment could be paid through the usual system at the decisive time which we now regard as Christmas. That would mean that in future it could become an integral

  929
  part of the pension and benefits system. If it were included in the annual upratings, all the arguments against the one-off, oft-repeated bonus and the difficulties of the "political football" debates that would continue over the size of the bonus if this amendment were passed would be overcome.
  This idea has much to commend it, though it might mean that people had a little less each week during the year.
  Mrs. Audrey Wise: The hon. Lady has done us a favour by exposing her thinking on this matter. Does she acknowledge that her proposal is fraudulent? She wants to give the impression that the pensioner will get something extra. However small a £10 bonus may be because of the effect of inflation, it is an extra payment and not a replacement for uprating.
  Mrs. Chalker: The hon. Member for Coventry, South-West (Mrs. Wise) is quite wrong. I am saying that the suggestion is worthy of closer examination. I am suggesting that we consider introducing a 53-week pension year or a 52-week plus bonus week pension year so that the bonus is not decided when we come to the Christmas period.
  There are two further reasons why we should give careful thought to that proposal. It would save a great deal of trouble for the Post Office staff. There could be a dated voucher in the benefit book. Moreover, it would delight the beneficiaries to know of the bonus not in the short period leading up to Christmas but well before.
  Back in 1972, the right hon. Lady the Member for Blackburn said:
  "Our duty … is to look far more imaginatively at the situation."—[Official Report, 20th November 1972; Vol. 846, c. 992.]
  The Opposition are doing just that, considering the full needs of the elderly, the disadvantaged and the handicapped. But we are happy to let the Government's plan stand tonight, whilst keeping under constant review all needs, including the need for simplification, with a view to seeing whether we can meet them in the coming months.
  11.15 p.m.
  Mr. Orme: The commentary by my hon. Friend the Member for Coventry, South-West (Mrs. Wise) exposed the type
  930
  of argument and support which comes from the Opposition—support not based on wanting to do anything genuinely for pensioners. They say now that they are in favour of payments of this kind, but on other occasions and on other aspects of policy they are in favour of public expenditure cuts. I think that their support can be left there, revealed for what it is.
  I assure the Committee, and especially my hon. Friends, whose argument I take very seriously, that I put this Bill forward without any apology whatever. The Government's record on pensions over recent years is very creditable. One has only to see how the pension for a married couple has increased. In 1974 we came in with a pledge, a TUC-Labour Party pledge, for a pension of £10 and £16, and this we implemented in full in 1974. In 1975 the pension went up to £18.50 for a married couple, and in November of that year it went up again to £21·20. There were two upratings in 1975. Then in 1976 it went up to £24·50, and this week it has gone up to £28.
  As I said earlier, while wage earners took a reduction in real terms of 6 per cent. last year—we all know the reasons and arguments surrounding that—pensioners have been protected, and hon. Members will see when the retail price index figures are published later this month that pensioners will have had an increase in real terms. We shall have done more than meet the amount of inflation for them.
  I do not, therefore, offer any apology. It has been suggested that what we are doing is condescending. I did not hear the Opposition say that it was condescending to give tax relief to taxpayers. When we are in a position to make this money available, I do not understand the argument about fine-tuning and the effect it has.
  Mr. Sainsbury: It is too complicated for the right hon. Gentleman to understand.
  Mr. Orme: The hon. Gentleman should declare his interest, because his stores will probably get a lot of benefit from this £10. A good deal of this money especially among pensioners, will go on food and fuel. As I was saying, there is talk about fine-tuning when we put £100 million into the economy. This £10 is giving spending power which in

  931
  itself helps the economy. We all know that pensioners will probably use the money fairly soon on fuel and so forth. They will use it as they wish, but it will be spending power put into the economy, which is what so many of my hon. Friends have been urging. They want there to be more, but this will be spending power put into the economy.
  My hon. Friend the Member for Fyfe, Central (Mr. Hamilton) asked me two questions. First, he asked what the cost of indexation would be. Instead of £100 million it would be £210 million. In reply to another question by my hon. Friend, the cost of administration is approximately £2¼ million.
  It has been alleged that the Government have introduced this pension bonus as a General Election gimmick. I reject that completely. My hon. Friends know where I stand. I was interested in getting this purchasing power for pensioners. I wanted it widened even beyond pensioners. We have widened it to include invalidity pensioners, widows and other groups. As I said earlier, I should have liked it to go to the long-term unemployed if that had been feasible.
  Mr. Ron Thomas: My right hon. Friend said earlier that it was not possible to identify the long-term unemployed. Is it not the case that the long-term unemployed who have been unemployed for more than 12 months are on supplementary benefit and are identifiable?
  Mr. Orme: No, unfortunately they are not. They are on supplementary benefit, but it would be a colossal job to try to identify them in each office. The staff would have to do that by going through records. I have studied this matter, and I hope my hon. Friend will accept my word. I have said that this is in no way meant to avoid the question. If we could have done it, we would have done so. Unfortunately, it was not possible.
  The main point raised by my hon. Friends was that this should be made a permanent feature. It should be recognised that the Bill is designed to give money to pensioners immediately. Arguments such as whether the bonus should, be paid this year or should be included in the pension and whether people would
  932
  want more to go to pensioners will have to be considered by the Government.
  I understand the thinking of my hon. Friends. My hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk), who moved the amendment, said that he did not think that this was necessarily the best way of proceeding, though he recognised that pensioners will welcome it. When we discontinued the bonus in 1975, there were two pension upratings in one year.
  Mr. Rooker: There is a slight problem. I am not sure that my right hon. Friend appreciates it, though certainly my hon. Friend the Member for Coventry, South-West (Mrs. Wise) and I appreciated it earlier this year. As regards social security and national insurance benefits, the House of Commons does not have the opportunity to table and discuss amendments when upratings come forward, whereas the House spends hour after hour and day after day discussing any taxation matter that arises and we can table amendments to various tax changes, whatever the allowances may be. On the other side of the coin, it is not open to the House of Commons to have a discussion on the annual uprating of pensions or any other benefit that arises under the social security or national insurance system. This is a problem for us. We must take the opportunity when it arises on an occasion such as tonight.
  Mr. Orme: I take my hon. Friend's point. He will appreciate that the Bill to index pensions covered his points because many benefits are indexed. He will agree also that child benefit is an instance of a benefit which is not indexed but on which hon. Members have expressed their point of view. These decisions are not made solely in the Department of Health and Social Security but are collective Cabinet decisions. The Cabinet took the decision on the principle of paying the £10 bonus.
  The Cabinet will take the decision on future policy in this matter. I hope that my hon. Friends will take that point in the spirit that it is made. I am sure that, like me, my hon. Friends do not want to confuse pensioners and start them worrying about next year when they have not yet received this year's money. I do not think that they are worrying yet. They are interested in getting the money

  933
  to which they will be entitled under the Bill this year. We want them to get it as quickly as possible.
  I also want to pay tribute to the Union of Post Office Workers, which has taken the difficult decision of agreeing to assist in this matter, because this causes a great deal of extra work for it members.
  Obviously, next year's bonus is a matter upon which the Government have not yet decided and it will have to be looked at next year. However, I can assure the Committee that I can report the strength of feeling on this matter to the Cabinet, and also the arguments that have been presented. I have no doubt that my right hon. Friends will consider them. I hear some of my hon. Friends say that that is not good enough, but I am sure that they will recognise that I am trying to go as far as possible without in any way misleading them. I hope that hon. Members will accept that this will not prejudice any future action that they may wish to take.
  Forgetting the Opposition for the moment, I say to my hon. Friends that it is certainly in the interests of our Government that we should look at this in the round. I shall take back the proposals that they have made, and if my hon. Friends wish to discuss the matter with me later they will be welcome. I assure them that their proposals will be put to my colleagues. I hope that my hon. Friends will accept that I have gone as far as possible tonight and that I recognise the strength of their argument and their sincerity.
  Mrs. Wise: Does the Minister accept that we believe that the Government will decide to pay the bonus next year, and that that reinforces our view that this should be made clear here and now? Does he realise that we are trying to strengthen his hand just in case there is any problem with the Treasury? We feel sure that most of the Cabinet will want to pay the bonus, and we want to strengthen the Minister's hand to guard against any machinations.
  Mr. Orme: My hon. Friend's crystal ball is obviously better than mine. I do
  934
  not know what the position will be, but this is not the time to decide on the issue. That does not mean that the matter will not be considered seriously, but in this debate it should not be decided. Many hon. Members have spoken tonight, but there are other views that have not been considered. I want to carry the argument further so that when the matter is discussed the Government can take into account the strength of feeling that exists. I hope that we can go forward on that basis, and I therefore urge my hon. Friends not to press the amendment.
  11.30 p.m.
  Mr. Kilroy-Silk: My right hon. Friend said that we were concerned to ensure that the pensioners got their bonus this year. That is not jeopardised by what my hon. Friends and I are attempting to secure tonight. Our aim is to ensure that they receive their bonus this year, next year and every year. As my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) pointed out, if it had been possible we would have amended the figure of £10, but that was prevented by the terms of the Money Resolution. We want to take the doubt out of pensioners' minds and remove payment of their bonus from the charitable discretion of the Chancellor of the Exchequer.
  Mr. Orme: If my hon. Friends force a Division on this issue tonight, as they are free to do, and if they lose that Division, their aims in this direction will be severely damaged. They have made their case clear tonight. I advise them not to be tempted by the Opposition.
  Mr. Kilroy-Silk: My right hon. Friend said earlier that the matter would have to be considered and that he would take account of our representations. But this decision is one for the House of Commons. There is no better time to take it than now. That may sound churlish in view of what he has said, but, unfortunately, his words do not go far enough. I must, therefore, invite my hon. Friends to follow me into the Lobby.
  Question put, That the amendment be made:—
  The Committee divided: Ayes 21, Noes 46.

  Division No. 11]

  AYES

  [11.34 p.m.

  Brooke, Peter

  Newens, Stanley

  Stanbrook, Ivor

  Cope, John

  Newton, Tony

  Thomas, Ron (Bristol NW)

  Drayton, Burnaby

  Prescott, John

  Wise, Mrs Audrey

  Hodgson, Robin

  Richardson, Miss Jo

  Kilroy-Silk, Robert

  Rooker, J. W.

  TELLERS FOR THE AYES:

  Lamond, James

  Ross, Stephen (Isle of Wight)

  Mr. William Hamilton and

  Madden, Max

  Sainsbury, Tim

  Mr. Leslie Spriggs.

  Maynard, Miss Joan

  Shersby, Michael

  Mills, Peter

  Skinner, Dennis

  NOES

  Armstrong, Ernest

  Grant, John (Isington C)

  Sever, J.

  Brown, Robert C. (Newcastle W)

  Hamilton, James (Bothwell)

  Sheldon, Rt Hon Robert

  Cocks, Rt Hon Michael (Bristol S)

  Hardy, Peter

  Smith, John (N Lanarkshire)

  Coleman, Donald

  Harrison, Rt Hon Walter

  Snape, Peter

  Cook, Robin F. (Edin C)

  Hooley, Frank

  Stallard, A. W.

  Cox, Thomas (Tooting)

  Johnson, James (Hull West)

  Strang, Gavin

  Cryer, Bob

  Jones, Alec (Rhondda)

  Thomas, Mike (Newcastle E)

  Cunningham, G. (Islington S)

  Jones, Barry (East Flint)

  Tinn, James

  Cunningham, Dr J. (Whiteh)

  Kaufman, Gerald

  Varley, Rt Hon Eric G.

  Davidson, Arthur

  Kimball, Marcus

  White, Frank R. (Bury)

  Davies, Denzil (Llanelli)

  McDonald, Dr Oonagh

  Whitehead, Phillip

  Deakins, Eric

  McElhone, Frank

  Wrigglesworth, Ian

  Dell, Rt Hon Edmund

  Marks, Kenneth

  Dormand, J. D.

  Orme, Rt Hon Stanley

  TELLERS FOR THE NOES:

  Douglas-Mann, Bruce

  Palmer, Arthur

  Mr. Joseph Harper and

  Eadie, Alex

  Price, William (Rugby)

  Mrs. Ann Taylor.

  English, Michael

  Sandelson, Neville

  Question accordingly negatived.
  Clause 2 ordered to stand part of Bill.
  Clauses 3 to 5 ordered to stand part of the Bill.
  Bill reported, without amendment.
  Motion made, and Question, That the Bill be now read the Third time, put part forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.

  EUROPEAN COMMUNITY (BIRDS)
  11.45 p.m.
  The Under-Secretary of State for the Environment (Mr. Kenneth Marks): I beg to move:
  That this House takes note of Commission Documents Nos. R./3265/76 and R/1961/77 on the preservation of birds.
  The proposal for a directive on this subject was made at the end of last year. The purpose was to ensure that all member States give general protection to wild birds. There was, and is, need for action of this kind. That was demonstrated by the concern expressed by hon. Members and by many members of the public last year about the mass slaughter of migrant birds that takes place in certain other countries. The Government have consistently expressed strong support for the principles of the directive, while seeking a number of detailed changes in its provisions.
  Although the proposal is on broadly similar lines to our own Protection of Birds Acts, the original drafting did not take the needs of all interests fully into account. The Select Committee pointed out that the needs of game bird management, falconry, aircraft safety, public health and even of agriculture did not seem to have been adequately considered. However, in our consideration of the draft we have sought to consult all relevant interests, ranging from conservation bodies and field sports and shooting organisations to local authorities and those concerned with aircraft safety and with falconry. We have consulted bird fanciers, food manufacturers and public health services. We have been particularly conscious that some birds can have a damaging effect on agriculture, and my colleagues in the Ministry of Agriculture have been closely involved in all our discussions. I am pleased to say that, on virtually every point, we have been able to reach agreement on the amendments that should be sought to the draft.
  Since last December this directive has been intensively discussed by officials in the Council's Environmental Working Group, and these discussions are still going on—indeed, the group has been meeting today, and will be meeting again tomorrow. As a result, the text has been substantially revised, and the revised Explanatory Memorandum which my
  938
  right hon. Friend submitted on 8th November indicates that many of points have been met.
  The group has also considered proposals from other quarters, notably from the European Parliament. There is general support in the group for the directive, and it had been hoped that it would be ready for submission to the Council of Ministers in December. This is not likely, but Ministers will probably be asked to give political guidance on a number of outstanding points. I would hope that the directive will then be ready for adoption by the Council during the first half of next year. Most of the outstanding points are discussed in the Select Committee's report, and I would welcome the views of hon. Members on them.
  The first concerns the sale of dead birds, one of the few points on which there has been a difference of view in the United Kingdom. Our own Protection of Birds Acts allow the sale of any dead game birds except where there is evidence, as with wild geese, that this commercialisation may be harmful to the species. The directive is much more restrictive in the species which can be sold—an approach supported by many conservation bodies. The views of the working group are divided on this point, and a political decision may be required. The European Parliament has recommended that, with the advent of deep freezers, the prohibition on sales during the close season should be abandoned, and this is another point still under consideration.
  The directive prohibits large-scale nonselective methods of killing, and this is what has concerned most hon. Members. Some countries have difficulties over this, but we do not. We share the view expressed to the Select Committee that punt-gunning and night shooting are not prohibited. While the directive goes beyond the Protection of Birds Acts in prohibiting the use of automatic and semi-automatic weapons to kill birds, we believe that such a prohibition would be generally acceptable, particularly as I understand that it is possible to modify existing weapons.
  The Directive contains provisions to permit otherwise prohibited actions such as the killing of birds for special reasons, such as pest control. These derogations

  939
  can be incorporated in national legislation, and there is no question of a reference to the Commission each time one is required. This part of the directive has been completely redrafted, so that derogations are permitted in the interests of public health and safety and air safety, to prevent damage to agriculture, for rescue operations, veterinary treatment and mercy killing, to protect indigenous flora and fauna, and for scientific research and rearing. This covers many of the areas of concern mentioned to the Select Committee.
  The procedure for derogations is still under consideration, and we are seeking to maintain a balance between the needs of member States to safeguard their essential interests and the desirability of some Community supervision.
  Mr. Ivor Stanbrook: Would the hon. Gentleman tell us what all this has to do with the EEC? Will he tell us what the authority is, under the European Communities Act, the Treaty of Accession or the Treaty of Rome, that entitles all the legislative paraphernalia of the Common Market to legislate for Britain on a subject like this?
  Mr. Marks: There is provision in the articles for this to happen. I am sure that where a matter affects all the member States, as the problem of migrant birds does, there is need for Common Market interest. Indeed, in this case there is need for international interest as well.
  In particular, the needs of agriculture can be covered in this way, and the general view of the group is that a separate list of pest species is unnecessary in the directive. We have doubts about this, and in any event would continue, for practical reasons, to maintain a schedule of nest species in the Protection of Birds Acts. Falconry will also be covered by this derogation procedure, and a reference to falconry as a legitimate form of hunting has been inserted elsewhere in the directive. The interests of bird fanciers will again be covered under the derogations procedure.
  The Select Committees refers to the needs of game bird management. Many of the problems have been resolved by limiting the scope of the directive to naturally occurring wild birds, so excluding captive reared game birds, and the
  940
  scope of the derogations procedure is wide enough to cover egg harvesting for example, of lapwing and gulls eggs—and the taking of young birds or eggs from the wild for rearing or hatching in captivity.
  It is clearly necessary to have machinery for amending the lists of specially protected species and of quarry species, and the list of prohibited methods of killing, and other detailed matters which are included in the annexes to the directive. This will be done by a technical progress committee, but that committee will not itself be able to alter the articles. It will consist of Government representatives, but we intend to ensure that all interests are consulted on its work, as has been done with the directive itself. We recognise that such changes can be controversial, and, indeed, the group is having great difficulty in agreeing the contents of some of the annexes.
  I am pleased, therefore, to say that the directive is likely to emerge in a form even closer to our present legislation, and that it is likely to require few amendments to the Protection of Birds Acts. We shall, however, benefit from increased protection given to migrating birds on their way to and from this country.
  I am pleased that the Select Committee's report and our own consultations indicate that there is general support for the directive. The United Kingdom has played a positive and active rôle in the discussion in the working group, and I share the views expressed to the Select Committee that this is a great and imaginative step forward in international bird protection.
  11.55p.m.
  Peter Mills: I welcome what the Minister has had to say tonight on this subject. This is an interesting and very important subject, particularly to those who value our countryside. We have a wonderful rural heritage in Britain. Although we have set a very fine example in the past. I believe that we must seek to encourage others to follow that example. This is all contained in this legislation.
  In answer to my hon. Friend the Member for Orpington (Mr. Stanbrook), let me say that as one who has sat for three years on the Scrutiny Committee looking

  941
  at hundreds of instruments and pieces of legislation, some with an awful lot of nonsense, I believe that the more one looks into this matter the more one can appreciate that this is a very good illustration of harmonisation which ought to go forward.
  In the past, man has been incredibly stupid and certainly utterly selfish in some countries over these matters. Therefore, the Select Committee on European Legislation on which I have the privilege to sit, had no hesitation in recommending this instrument for further debate in the House so that we could get the full support of the House in these matters. Even with the changes that have now been made. I still think that it is worth while debating the matter and asking the Minister a few questions.
  The Committee is grateful to the Minister and his Department for the trouble taken in these matters. We like to think that our Committee had some influence on these matters. We had a very useful series of Comimttee meetings.
  Looking at the purpose of the directive, I think that all would subscribe to it and support it. Looking at the aims and what it is trying to achieve, although it may take two years or more, I am sure that all will support it. I fear that in some areas it may be too late and it may be difficult to get back the birds that have gone and have been, perhaps lost for ever.
  We welcome the fact that the member States will have a general power of derogation from the laws on taking, killing and sale, for purposes of conservation, research, teaching and breeding, and for the prevention of serious damage to crops, forests and water, provided that the method to be used receives the prior approval of the Commission. The reason I say that is simply because countries have different problems and different circumstances. We cannot all be the same in this matter. Therefore, it is necessary to have some derogations.
  I think, too, that as we in Britain look at the draft directive we can congratulate ourselves as a nation, because most of the directive follows closely the general framework of the United Kingdom legislation on the protection of birds. Birds in Britain—I mean the feathered ones—have had considerable protection for a number
  942
  of years. Long may that continue. I only wish that other countries—I mention Italy as one, and the Southern Mediterranean area—had the same concern that we have had over the years. I think that we can pat ourselves on the back for our legislation and for the fact that it is a pattern for the Community.
  As to the policy implications, because United Kingdom legislation on birds largely accords with modern concepts of conservation the United Kingdom is likely to face fewer problems in implementing the directive than some other member States. While I think that we may not find it very difficult to carry out this legislation, I believe that other countries will find it so. I only hope that they will have the determination, and that the reports that have to be sent to the Commission during the coming years will show very clearly that they are prepared to implement these policies. They have to take these matters seriously, they must be enforced. I hope that the Commission will be fairly tough in these matters, because the constant slaughter of many lovely birds, some of which are very rare, is a real crime. The idea of shooting anything that moves, as they do in some countries, is to me, as a countryman, unfortunate to say the least.
  The Select Committee received evidence from various associations. I will not read them all, but they fully co-operated with us in every way. Each in its own way played a real part. Some had different opinions, and were concerned about different things, but they all played a part and were extremely helpful. I thank them for their co-operation.
  The various problems that arose in the Committee have mostly been solved. I did not know that so many people were keen on falconry. I did not realise the importance of airfield clearance. I did not know much about punt-gunning and night shooting of birds, but all these things are important to certain people.
  Progress has been made in the latest draft, and I am sure that the House will welcome what has been achieved through the representations. It is important that the House should listen carefully to all these bodies so that their specialist views and knowledge can be brought to bear.
  One or two points arose in particular. There is the argument about the undesirability of imposing uniform condition

  943
  of bird protection throughout the EEC. It seems extraordinary that we should have hundreds of miles in which there will be uniformity. I hope that admitted derogations will be considered very carefully to cover the needs of various countries, and I hope that the Minister will give us an assurance that the Government will seek to bring that about.
  I turn now to the composition of the Technical and Progress Committee. The draft directive in its original form proposed the setting up of a committee consisting of representatives from member States under the chairmanship of the Commission to adopt the directive on technical and scientific progress. That is important. Nothing stands still. We must be on the watch for progress in new technical matters. Therefore, this committee must sit and be prepared to make up-to-date decisions.
  What is important is the fact that one or two bodies have spoken to us about assurances that in selecting the United Kingdom representatives shooting interests are not left out. I declare an interest in that I enjoy my shooting and I want to see representatives of the shooting brigade on this committee.
  Then there is the restriction on the sales of dead game birds. Again we are concerned about it. The Department's explanatory memorandum sets out the restrictions which are considerably loosened by the additions to the annexe of species to be sold. It would be helpful if the Minister could give us more information about the species likely to be added.
  Also, we hope that the Minister will make quite clear the position of the poulterer who buys a pheasant legitimately in the open season and sells it in the close season. Will he clarify that point?
  Lastly, on the question of enforcement, I hope the Minister, if he is dealing with this matter in Brussels, will make it clear that many of the penalties are far too low or small. It is ridiculous that some of these valuable birds should be taken or that their eggs should be sold at high prices and that the penalties for so doing should be so tiny. I hope that there can be some fairly tough dialogue in that respect, and I hope that the Minister will say something on the point tonight.
  944
  I have received a letter from the Food Manufacturers Federation, which slightly surprised me. It appears that the federation is still concerned about this directive because of its effect on companies that store food. One thinks of the storage of dried milk in bulk and other material stacked in storehouse premises. Birds can easily cause contamination, and there can be bird infestation of such material. The federation feels that it may be hindered from dealing drastically with bird damage to food. I hope the Minister will make the situation clear so that the federation will be able to take sudden and drastic steps to deal with heavy infestation in a factory or store where food is being processed or made. The federation would like to be reassured on this point.
  There have been many stupid harmonisation measures, including provisions on tinkers' licences, exhaust pipes and motor horns, but I believe that this measure is a worthy one. The small Committee of which I was Chairman supports the measure and also the efforts of the Government in this respect.
  12.8 a.m.
  Mr. Peter Hardy: I find myself in a large measure of agreement with the hon. Member for Devon, West (Mr. Mills). He suggested that it was appropriate that we should consider the subject of birds tonight. It is certainly idiomatically proper that we should do so, in view of the fact that on this same night the Miss World contest is taking place. The young ladies involved in that industry are more able than the feathered variety to care for themselves, and that certainly applies to the PR people involved in the presentation of the contest, who look after themselves very nicely.
  We are concerned about the many hundreds of species of birds that require urgent attention in Western Europe. I agree with the hon. Gentleman that this is one of the more appropriate forms of harmonisation. Since this directive will be of considerable help in saving our natural heritage, it is much to be welcomed.
  I am delighted that the Royal Society for the Protection of Birds is taking a pleasant view of this development. I believe that all interested organisations are viewing it kindly. It appears that as

  945
  the process of consultation developed those bodies became more favourably disposed towards the directive. That goes for responsible bodies, such as the Wild-fowlers Association.
  The proposals are broadly similar to existing United Kingdom legislation, which has been most helpful. Indeed, our reserves of wild birds are envied in many parts of the world. I believe that the present situation would not have been achieved without the response and consideration given to this matter by successive Governments. The situation has improved since last year, when the House afforded favourable consideration to the amending Bill. I was grateful for the Government's helpful attitude on that occasion. The Government has maintained their commendable concern in the ensuing months.
  Reference has been made to the Select Committee on European Legislation, and we are grateful for the line taken by that Committee. Members of this House were greatly concerned, if not appalled, at the evidence in recent years of the astonishing annihilation of millions of birds in and around the Mediterranean, especially in Italy. The fact that many British people were offended is obviously of great concern to us, but we probably do not realise that the massive slaughter caused concern throughout many parts of Northern Europe. There was a great deal of feeling in Britain and other countries. That should not be regarded as meddlesome interference, as millions of the birds killed were obviously on their way to our own and other countries. The slaughter seems to be senseless as there is very little flesh on the carcase of a warbler. It is rather sad that we lost so many of these small birds for such little purpose.
  I hope that the attitude that has already been suggested in this debate will not allow a weakening of the proposed position. It could mean that smaller birds receive less consideration as there seems to be some concentration upon the more unusual and exotic species.
  The concern of millions has been properly borne in mind by the Community, but perhaps it is fair to make reference to other organisations. The Parliamentary Assembly of the Council of Europe, on which I serve, has been
  946
  very much involved in these matters. The political institutions of Western Europe have rightly reflected the growing pressure and great anxiety of many millions.
  In common with the hon. Member for Devon, West, I am not always enthusiastic about many of the directives that we have to consider, but I believe that this one is especially welcome. That is because it is relevant to the interests of many and is broadly similar to our own legislation. It may—perhaps rightly—put a little more stress on habitat than our own legislation, but by and large it is acceptable. I am delighted that it will not require anything but minor amendment to our existing legislation.
  I regard the directive favourably, especially because the Government and the Community have paid careful regard to the views of those with expert knowledge. There are many with expert knowledge in the United Kingdom. It would have been foolish for politicians and administrators to concern themselves with the matter to the exclusion of that tremendous body of expertise.
  I hope that when the regular reviews take place we shall in no way depart from the splendid precedent that the Government have set of ensuring that consultation takes place with experts. I hope that that will continue. I hope that those who represent the United Kingdom's interests in future consultations will themselves be knowledgeable and will have readily available to them the considerable knowledge that exists.
  One of the directive's great attractions is that member States will have to submit reports at regular intervals. They will have to subject themselves to the scrutiny of their neighbours. That places the onus upon the interested individuals and organisations. It seems that without being unnecessarily meddlesome those who are concerned with conservation will have to ensure that they keep an eye on activities throughout the Community. I suppose that this is suggesting that they be good Europeans in a conservationist sense.
  The explanatory memorandum suggests that there is a possibility that night shooting will one day be specifically prohibited. I am not entirely opposed to that, but I am anxious about the definition of "night". Will that definition be

  947
  in accordance with national interpretation, or is there some Community definition of which we should be aware? Secondly, will my hon. Friend offer an assurance that the use of nets, decoys and traps for recording reasons—perhaps purely for research—will not be prevented if it is carried out only by authorised and reputable persons? It is essential that we continue to maintain our knowledge of ornithology, and that sort of activity is at times necessary. My hon. Friend will do well to give an assurance in that respect.
  Broadly, I agree with the species listed in the annexe, but I wonder why the red kite, the goshawk, the merlin and perhaps even the raven and the chough are excluded. In case the House suggests that I am in favour of the predator, it seems that some of the smaller and rarer warblers and the bearded tit have been omitted. There seems a possibility that the legislation for protection is weighted in favour of the more exotic.
  I also regret the inclusion of one or two of the species in Annexe II, particularly the merganser and the bar-tailed godwit.
  A point that may arise in the future concerns the question of a species that may be common and a nuisance in one member State, so that it is afforded no protection, but could well fly into and perhaps become resident in another member State where it becomes a rarity. There should be adequate flexibility so that the rarity can be protected rather than suffer the common condemnation that may arise from its being a nuisance in another member State.
  I would not dream of asking my hon. Friend to answer those questions tonight, but I hope that he will find time to drop me a line about them. I also hope that my hon. Friend will resist any demands that the proposals should be necessarily weakened. It is essential that the species now in danger, some of them at serious risk of extinction, survive. We should accept that the basic reason for the decline of many of those species is not a change in climate or anything of that kind. It is to a large extent due to the often senseless destruction of the birds and very often the unnecessary destruction of their habitat.
  I hope that the directive will be properly effective before long and that it will
  948
  ensure that our future springs in Northern Europe, and certainly in the United Kingdom, will continue to witness the arrival of these migatory species which have been put at so much hazard in recent years. I hope that our summers will continue to be enriched by their colour and their song. We have a saying that one swallow does not make a summer, but a summer without the swallow would be incomplete. We must protect our natural heritage and our springs and summers. I do not think that we can do so effectively acting purely as an individual State. It is essential that the Community should take action.
  The hon. Member for Orpington (Mr. Stanbrook) questioned the legal basis. There is a strong moral basis, but I believe that Articles 100 and 235 of the Treaty of Rome offer adequate justification in law. Law and good sense dictate the action proposed.
  I am grateful that the Select Committee made it possible for us to have this debate, and I am grateful for the way in which the Government have tackled it. I only hope that the rest of Europe will follow the pattern that we have long established.
  12.18 a.m.
  Mr. Stephen Ross: I support the hon. Members for Rother Valley (Mr. Hardy) and Devon, West (Mr. Mills), and very much welcome the directive. It is one of the most sensible things to come out of the EEC for a long time. It is certainly a matter of great importance for the survival of nature. In Italy and some of the other Mediterranean countries the whole balance of nature has been disturbed by the enormous slaughter that has taken place.
  On a recent visit to the dentist I read a colour supplement, I think of the Sunday Telegraph, of some months ago. Any hon. Member who has doubts about the directive should read that supplement, because it shows in startling detail exactly what has been going on, and presumably is still going on this autumn, particularly in Italy. There are the most ghastly forms of traps, liming and nets. Decoy birds are used to attract others in.
  What is it all about? It is done purely for financial gain, at a time when people in Western Europe have plenty to eat and there is no need for this senseless

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  slaughter. Between 100 million and 250 million birds are being slaughtered each year. I do not think that this country is suffering from the loss of the birds, because I understand that on the whole those that migrate to the United Kingdom probably pass through Spain, but there must be a dramatic effect on Germany.
  The effect is also felt in North Africa, where pesticides and other means are having to be used to deal with pests that would have been dealt with naturally by the birds that have been killed. Therefore, this is a matter of great significance, and I congratulate every hon. Member who has had any part in assisting in the compilation of the directive, and particularly the very competent organisations operating in this country. We are fortunate to have such organisations as the Royal Society for the Protection of Birds. We lead the world in this field. One has only to go to the RSPB's annual get-together, which was held in Nottingham this year, to see how many people come from all parts of the world to attend. We are fortunate to have that organisation's advice, and that of others, and, as the hon. Member for Rother Valley (Mr. Hardy) said, I hope that we shall continue to take it.
  I would like to see the directive implemented as soon as possible. I was disappointed to learn that implementation is not expected until the middle of next year. I hope that the Minister will use all his powers to ensure that it is implemented early next year so that it becomes effective by the autumn.
  There must be constant monitoring. I understand that annual reports must be presented by the countries concerned. I accept that there must be derogations. But I hope that we check that they are not bogus under the guise that certain birds are damaging to crops, for instance. This country will be honest, but I suspect that derogations might be used to avoid implementation of the regulations. We must watch that carefully.
  The article in the Sunday Telegraph showed that some finches and other species were coming into Britain in dressed form for consumption. For example, thrush pâte comes here from France. We should try to prevent such imports. Are the Government doing anything about that?
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  I understand that there are to be two additional annexes to the directive. I believe that the fourth annexe will itemise the various traps and decoys which are to be prohibited. I am not sure what is to be in the fifth annexe. Could the Minister tell the House about it?
  I am delighted to be able to speak in the House on this subject. I support everything that has been said.
  12.24 a.m.
  Mr. Neville Sandelson: I shall be brief, not least because I agree so whole-heartedly with everything that has been said by previous speakers. I was particularly impressed with the points made by the hon. Member for the Isle of Wight (Mr Ross). I shall not reiterate the matters that he raised with the Minister. I second him in the answers and assurances that he sought, particularly on the time factor. Implementation will require legislation in some member States. One wonders what the chances are of implementation within a time that most of us would regard as reasonable instead of its dragging on, permitting a continuation of the present annihilation of birds. I hope that there will be no waste of time in adopting the directive. It is of enormous significance to bird conservation.
  I stress the extent to which the directive shows how the Community is often able to achieve internal advances that are beyond the capability of individual Governments. No amount of pressure over many years on particular member States which have been the principal offenders in permitting the indiscriminate slaughter of migratory birds has had any real effect. In spite of the efforts of all the bodies in this country—the Royal Society for the Protection of Birds and others—which have done so much valuable work in bringing these appalling circumstances to public and international attention, there had been very little effect before the Community itself stepped in. We have the culmination now in this very welcome draft directive.
  I shall not name the countries which I have in mind as the worst offenders, but I can illustrate what I mean by relating one experience I had, an experience which may well be common among hon. Members on both sides who have tried to

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  bring pressure to bear on the Governments involved. I made personal representations on the subject not long ago to one ambassador, and he told me that, while he strongly deprecated the practices in his country of which I complained—practices causing indiscriminate slaughter among birds, often by utterly distasteful methods such as those mentioned by the hon. Member for the Isle of Wight—he did not think that his Government would be able to intervene because of the fear of electoral repercussions which might result from interference with a popular recreation in his country.
  What a frightful state of affairs that frank statement reflected! Clearly, it shows the value of having an international body such as the Community able to bring concerted pressure to bear in that sort of political situation.
  The directive is modelled largely on our own Protection of Birds Act. There are certain improvements of detail, to which the Minister properly referred, but they appear to be more of a formal than a substantive nature for the United Kingdom. So far as I know, there is no immediate need for amendments to our statute law, but should that need arise, as it undoubtedly will in due course, I hope that the improvements contained in the directive will at that stage be formally embodied in our own law.
  12.28 a.m.
  Mr. Marcus Kimball: I pay tribute to my hon. Friend the Member for Devon, West (Mr. Mills) for the way he chaired the Select Committee and brought all the interests together. I pay tribute also to the outcome of his Committee's recommendations in that we are having this important debate tonight on an EEC instrument which breaks entirely new ground inasmuch as it is liable to affect the conduct of field sports and other matters in this country. It is right that it should be considered in detail by the House.
  I think that my hon. Friend the Member for Ludlow (Mr. More) may well ask what the EEC is doing considering these matters—has it run out of steam on economic matters and is now turning to the protection of birds? I must admit to some disquiet about the proposals in the directive as they existed at the time of its
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  publication in December last year. Although its originators at that time were well intentioned, the directive showed far too much influence from the uninitiated lobby in Brussels, from people such as the Friends of the Earth, and far too little thought given at that stage to the widely differing climatic conditions throughout the Community, extending from the North of Scotland to the southern tip of Italy.
  Very little consideration has been given to the role of the sportsman as a conservationist. The British Field Sports Society, with which I am involved, was particularly concerned about the position of our oldest of all field sports, falconry, and we are also concerned about the position of game farming and the nonsense of the position which was first of all stated as regards the sale of dead game birds. The House should just ponder on the dangers of uninformed opinion rushing headlong into potential legislation and measures in the name of conservation and the preservation of wild life.
  When this matter was debated in the European Parliament one German Member of that Parliament actually moved an amendment which would have had the effect of making duck, woodcock and even the red-legged partridge prohibited species from the point of view of being game birds.
  It was very encouraging to see the United Kingdom delegation in these matters playing for once a constructive role. We are always being accused of being rather negative in Europe, and it was very encouraging to see a former colleague of ours—Basil de Ferranti—trying to make sense of this directive in its early stages. We are all grateful for the part played by Stanley Cramp, the Ornithological Adviser to the EEC, and to Professor Geoffrey Matthews.
  I want to raise two brief points on the explanatory memorandum which the Minister has laid before us. I thank him and, in particular, the officials in his Department for the way in which they have dealt with the falconry problem. It is now expressly clear that falconry will continue in member countries where it has always been practised under the terms of Article 7. In conjunction with the British Falconers Club, I should like to say how grateful we are that this matter is being left without any doubts.

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  The hon. Members for Rother Valley (Mr. Hardy) and the Isle of Wight (Mr. Ross) talked about the terrible things that some of our EEC partners do to birds of passage in particular, and I will not enlarge on that.
  I turn to the all-important Article 9 of the directive which the Minister mentioned in his opening remarks. This is the part of the directive which allows member States to derogate under various headings from the specific terms of the directive as necessary. I think the Minister will agree that this article forms the linchpin of the directive.
  I congratulate the Minister on obtaining it, and I hope that the agreement of other member States to a two-tier system of derogation whereby under the first-tier system provision will be made for this country to continue its well-established regulations will be firmly written into the final document. I hope we shall see no shifting from this situation, because the point about derogation is the most important part.
  My hon. Friend the Member for Devon, West dealt with paragraph 14 of the Minister's memorandum relating to the setting up of a technical progress committee. I hope that when the time comes for the committee to be set up its remit will be clearly defined. I should like the Minister's reassurance on this point.
  In conclusion, it is fair to say that in some respects it is a pity that this directive, which is welcomed on both sides of the House, should be brought forward at such breakneck speed. At the beginning of this week we were not satisfied with it in its final form. We are now satisfied with it in its final form, but I would hope that if we are to see other measures on this aspect of the environment brought forward they will not be brought forward with such a rush and in such a higgledy-piggledy state. If it had not been for my hon. Friend the Member for Devon, West, I doubt whether we should have achieved the agreement on consultations which at the last moment we have achieved.
  12.35 a.m.
  Mr. John Cope: I strongly support the proposals contained in the directive, but it wanders a good way from the Treaty of Rome and the EEC. It is difficult to see what relevance it has to the EEC at all. It seems
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  that the authors of the document and those handling it had a bit of a job fitting it into an appropriate article of the Treaty.
  My hon. Friend the Member for Gains-borough (Mr. Kimball) said that Articles 100 and 235 were the ones that he thought covered it. That was so in the case of the original draft of the directive, but that was a little odd, because Article 100 is the one that enables the Community to issue directives in a proper manner as affecting the establishment or functions of the Common Market. I am not sure how that could be held to lead to such a directive. Therefore, when it was revised one of the changes was the removal of the words "Article 100" and the insertion of "Article 43", which deals with common agricultural policies, provides for a conference of member States on agricultural policy and provides for proposals for the working out of the common agricultural policy itself. It also provides for a marketing organisation and deals with certain raw materials. I am not sure how those matters could give rise to such a directive.
  I am a supporter of the proposals but my worry is that, trouble having been taken to get the directive right, if when it comes to the crunch someone opposes it in any one of the countries of the Community, it might fail in the courts for the reason that it does not genuinely flow from the Treaty of Rome. It is, of course, an entirely environmental directive rather than an economic one. Quite apart from the legal questions about under which article the directive fits, I have some reservations about the EEC bringing such a directive forward. There is certainly no shortage of other things for the EEC to do which are perfectly within its field and which it could spend its time considering, including the common agricultural policy—which everybody agrees is far from satisfactory.
  Of course, there are other international bodies a large number of which provide ways for various nations to agree on conservation measures, not only in the EEC but much more widely, and not only for birds.
  Above all, the boundaries of the EEC, whatever economic and political sense they may have, are not recognised by the birds. I live near Slimbridge, which is in the constituency next door to my own, and birds—particularly geese and swans

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  —fly there from places well outside the EEC, regularly and in large numbers. At certain times of the year the resident birds must feel a little like we do in Parliament Square in the summer, because it is difficult to see another local about.
  However, at least we can unreservedly welcome the fact that discussion on the directive has led to greater European co-operation between the various organisations concerned with these matters.
  In following my hon. Friend the Member for Gainsborough, it is perhaps particularly appropriate for me to mention the new field sports organisation that he has recently helped to set up. It is also noteworthy, in looking at the proceedings of the Select Committee, which was so ably chaired by my hon. Friend the Member for Devon, West (Mr. Mills), to see how close the agreement was on this occasion, as quite often, between the conservationist organisations such as the Royal Society for the Protection of Birds, and the field sports bodies such as the Field Sports Society and the WAGBI for Shooting and Conservation.
  The directive is highly desirable, but constitutionally most dubious.
  12.41 a.m.
  Mr. David Walder: I should like to utter a word of caution. I am as keen as any hon. Member on bird preservation, and I should like to see the directive given much more force. I should like to see harmonisation at least of the contents of this regulation throughout Western Europe. But we must remember that not all of us in this House are always keen upon harmonisation of legislation. There have been occasions when we have taken the view that proposals from the EEC did not fit in with our British ideas.
  It would be optimistic to think that by this House accepting this directive a similar welcome will greet it elsewhere in Europe.
  I know that a number of hon. Members have tried to avoid the subject and not be beastly to the Italians, but it is possible to be beastly to the French as well and, no doubt to the Greeks and Spaniards, too, when the Community is expanded. There is a quotation about Latins making lousy lovers. I do not want to be racialist about that, but it
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  may be true. It certainly is where birds are concerned. Of course, I am being facetious, but we must accept that countries where the hunting of birds is a traditional sport will regard the directive as an interference with their way of life. It is sad to have to admit it, but we must not be too optimistic about what we are doing.
  If we cannot have harmonisation in this area we must accept that migratory birds will be preserved in this country but that their fate is to be slaughtered elsewhere in Europe. We must hope that the United Kingdom bodies associated with the protection of birds will do even more to extend their arguments into Europe.
  I come back to the question of our legislation. Obviously we hold the lead in Western Europe for the preservation and protection of birds. But even our legislation lags behind the facts of life in an inflationary society. For proof of that one has only to look at the determination displayed by egg collectors in the history of the ospreys at Boat of Garten, and one has only to consider the money that can be made out of birds, bird skins, eggs and all the rest. Most of us would accept that fines imposed in this country are in many cases derisory because we are dealing with an activity which in many ways is big business.
  Falconry has been mentioned. My hon. Friend the Member for Gains-borough (Mr. Kimball) said that it was an ancient sport. I have a number of falconers in my constituency. Ancient it may be, but I find it rather messy and I prefer to see it at a distance. But when one considers the value of a young falcon illegally taken, exported, smuggled and all the rest, one must accept that we are dealing with people who are criminals but are dealing in a big business. Small fines have very little effect on such people.
  We have to think in terms of extending from this island the sort of sanctions that we hope will be imposed in Europe. I suggest that that will take a considerable time. There will be considerable difficulties in getting the rest of Europe to accept the attitudes that we accept on this island.
  Of course, I welcome the directive. I should like to see it have more force, but that will take some time. I hope that that time will be shorter, but do not let

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  us be too optimistic about the effects of the directive.
  12.45 a.m.
  Mr. Ivor Stanbrook: I was one of those who voted for the United Kingdom to enter the European Economic Community, but I do not think it was present in the minds of those who did so that at some stage we would be seeing the EEC taking over the legislative functions of this House. In fact, that is what is happening.
  My hon. Friend the Member for Gloucestershire, South (Mr. Cope) referred to the purported justification for this interference in the powers of this House as Article 100 of the Treaty of Rome, which he explained, and another article. A third article probably covers this subject: Article 235, which is designed to secure the objectives of the Treaty of Rome in so far as those objectives are not covered by the article concerned. This is an example of the sort of powers that exist for harmonisation. If one can have harmonisation on the protection of birds one can harmonise on anything, including, for example, firearms legislation.
  How does it come about that we in this House are prepared to give up the right to control the way of life in this country and all matters concerning the way of life of our citizens to some institution beyond the seas which purports to control us and have superior authority over us? It does not have that superior authority, and we should say that this directive does not apply to British institutions because it is this House which has power over these matters and we are not going to give up those powers.
  12.47 a.m.
  Mr. Norman Lamont: I welcome the directive. Like a number of other hon. Members on both sides, I applaud the fact that it recognises that the birds of Europe are a common heritage and that their preservation is a problem which can be tackled only by international action. This is exactly the sort of problem that the European Community should be trying to tackle. It is only through international institutions that we shall ever be able to deal with the problem of preserving birds that migrate across international frontiers.
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  All debates on EEC matters revolve around the question of national sovereignty. There is always the danger of interfering in the affairs of other countries. I am sure that my hon. Friend the Member for Clitheroe (Mr. Walder) is right in saying that the draft directive will not be received with the same enthusiasm in Italy as it has been received here tonight. Certainly, in Italy the trapping of birds is a very live political issue, and politicians wax very eloquent about it.
  On the other hand, the trapping of birds in Italy causes great concern in many countries. The methods used are often indiscriminate, and when indiscriminate methods are used one can foresee that often rare birds will be trapped along with masses of other birds. When a bird is trapped by lime, it is only afterwards that one may discover that one has trapped a very rare species. Often flocks of birds such as finches will contain several species, and netting may result in the destruction of a very rare species.
  It has also been shown that in some instances, such as that of the red-backed shrike, which is now becoming very rare in this country—we have fewer than 100 breeding pairs—one of the causes of the decline has been the killing of such birds in Italy. What happens to birds in Italy certainly affects our fauna.
  I am glad that the directive places upon individual Governments the obligation to preserve habitats and to create the environment in which particularly rare species can be preserved. Some would argue that this is better than having fines. I am not sure that this is the case. Having a suitable habitat or suitable environment will not alone deal with the problem. If we are to have effective preservation measures it is also necessary to have a system of fines and one that takes into account all the changes in the value of money.
  I noticed recently a case mentioned in the papers in which people had attempted to sell a peregrine falcon for £2,000. Even under the latest change in legislation the maximum fine that could have been imposed is £500. It is difficult to get information about the prices prevailing in the market because people are naturally reluctant to disclose the details of what goes on. There is little doubt that fines do not bear any relationship

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  to the prices actually obtained in the market for birds illegally taken.
  I have one or two points to make about the species in the annexes. It is surprising that the chuff is not in Annexe 1. It seems to be disappering from large areas of Europe and the population has certainly shrunk in certain areas of this country. I would have thought that the red-footed falcon was perhaps a candidate for inclusion in Annexe 1 as well as the great skua, although that breeds only in the Shetland Islands. Looking at the other annexes it seems strange that the wood pigeon is classified only as a game species since I would have thought that there was an argument for classifying it as a pest species. My hon. Friend the Member for Gainsborough (Mr. Kimball) might be interested to know that in the annexe dealing with game birds it is only the male capercaillie and the male black grouse that are classified as game birds. Despite the fact that they are polygamous birds, I cannot see the logic for that distinction.
  I reiterate what the hon. Member for Isle of Wight (Mr. Ross) said about Article 9. While I appreciate the arguments that have led to some modification of the powers of derogation, if this is to be meaningful it is essential that some powers should remain with the Commission. If that does not happen we shall find that the directive will be passed by national Governments but nothing will be done in individual countries to create the reservations and habitats necessary and which, according to the directive, national Governments should take action to create.
  Apart from these small points, I warmly applaud the details of the directive and commend it to the House.
  12.54 a.m.
  Mr. Giles Shaw: I apologise to the Front-Bench speakers for being unable to be present at the commencement of the debate. With the Miss World contestants busy outside it is indeed a night for the birds. The important points have been well made by hon. Members. I want to reiterate three of them.
  First, I am sure that we are all agreed that the principles behind the directive are excellent, well argued and cogently placed before the House, but the concern
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  must be whether they can be implemented and whether the principles can lead to a really effective contribution towards conservation. In this connection, although there may not be countries which are party to these discussions at this stage, I ask whether there have been discussions particularly with Spain, in view of the vast importance of the Spanish hinterland to migratory birds and their preservation.
  Secondly, the question of the authority of the Commission to offer directives in this field was raised, and I think the House should recall the importance of maintaining a balance of nature within our environment. Agriculturalists would certainly argue that the preservation of bird life has a most important bearing on pest control, even though there are many modern methods of trying to improve yields and reduce pests. Nature's predators are sometimes the most effective in dealing with many of the problems of our farmers.
  Thirdly, the international application of this matter is obviously very important and quite consistent with the way in which these conservation measures have been tackled in the past. The United Kingdom has been a signatory to a number of international obligations. A recent one was the Ramsar Convention on the Preservation of Wetlands. I have yet to see the Government following that up, or any decisions from the Department of the Environment which favour it.
  We have had discussions with the hon. Gentleman's Department on the Tees-mouth project and on the Somerset wetlands, which we are not entirely satisfied have been given the true status of preservation which their rarity requires. This is a very sound way of proceeding, because we cannot preserve our heritage in isolation here in the United Kingdom. Bird life is an international heritage and it is only by international agreement that we can make some real progress towards solving some of the problems of preservation.
  We have to bear in mind that the pressures towards conservation rest largely upon the backs of voluntary bodies, and tribute has been rightly paid in the debate to those—led, I suspect, by the Royal Society for the Protection of Birds and by the sporting interests, which have all played their part in this. But as we look

  961
  to the future of European conservation we must wonder whether we shall obtain some support from voluntary bodies in other Community countries. In Italy there is not only the greatest slaughter of wild birds on migration. It is also the country with the least number of voluntary conservationists. There number—they do a remarkable job of work—is about 60,000, whereas in this country the RSPB has several hundred thousand members in the field, all helping to raise both money and enthusiasm to protect the wild heritage which we enjoy so much.
  In debating these issues we must recognise that the contribution we can perhaps most effectively make is to encourage the establishment of voluntary bodies to take forward the legislative proposals which are before the House and to translate them into effective action, which so often means merely watching developments to make certain that actions are not taken by Governments or other interested parties which ignore the importance of maintaining a balance in nature and conservation.
  It is good to have a directive of this kind, which has wholehearted support on both sides of the House, and I am sure that we all wish it well.
  12.59 p.m.
  Mr. Jasper More: I too, should like to applaud the hard work which has evidently gone into this directive. In the course of the debate the truth has gradually emerged as to what this is all about. I think it is a question of ganging up on Italy.
  I can claim to have been present at the death of the last Italian woodcock. This happened in a pinewood in Ravenna not far behind the Eight Army Front in March 1945. My childish recollections of Italy are most vivid for the shops one saw in places such as Milan, where the game dealers had whole slabs covered with tiny birds which were eagerly bought by the inhabitants. I think that, in doing what we have done, we have to consider that there has grown up in Italy a certain vested interest in this sort of thing, and that we should perhaps try to make practical suggestions on how to deal with it.
  I want to turn the Minister's attention to Sturnus vulgaris, which is in Annexe II. It is a serious problem in this country. It is doing serious damage
  962
  to our forests. So far as I can see, the Government are doing nothing about it. I do not know what the practical problems are, but perhaps the Government could try using helicopters to see whether they would be of use in dealing with the problem. Perhaps Sturnus vulgaris, if it could be dealt with in quantity, could be exported to Italy and appear on the slabs of the game dealers of Milan and elsewhere. In that way, we might get more co-operation from the Italians in dealing with this legislation.
  There is another bird that I much dislike in Annex II—Steptopelia decaoctoa, a comparatively recent immigrant. I am rather shocked to see that it is a game bird in only some of the countries of the Community. Is it not possible to get some harmonisation here? The countries which do not seem to treat it as a game bird are quite small. Surely it is possible to bully the small countries in the Community and make them come into line and have it recognised as a game bird all over the Common Market.
  Talking of Italy, it occurs to me that the Vatican City is a member of the EEC. When I was in Rome this year, I did not observe any doves hovering even over St. Peter's Square. We should inquire whether shooting takes place by cardinals out of Vatican windows.
  I add my praise to an excellent piece of work, and I hope that the Government will take seriously their obligations under Article 2, because it is so very relevant to the whole problem of Stanzas vulgaris.
  1.3 a.m.
  Mr. Marks: I thank all those who have spoken for their contributions. This has been one of the most pleasant debates on Community legislation that I have ever taken part in or attended. Rarely can any Minister have had such a pleasant ride. It may be because the "shooting brigade" is here—and I do not mean the usual shooting brigade which attends Community debates.
  This is not just a question of the House taking note of a Community directive but of Ministers taking note of what the House says, and I assure hon. Members that I shall do so. I shall not go into detail on the species that have been mentioned, particularly by the hon. Member for Ludlow (Mr. More).

  963
  We shall examine all the points that have been made in the debate.
  The only note in the debate of the usual Community character, was that about the articles. I accept that Article 100 is not relevant in this case and that there are doubts about Article 43. But I am advised that Article 235 of the Treaty of Rome allows the Community to do anything relevant to its functions with the agreement of all of its members.
  We in this House have always accepted that environmental concerns are a proper area of Community authority, and much of the work done in my Deparament—on air pollution, for example—is, as the hon. Member for Devon, West (Mr. Mills) said, a very important part of the harmonisation process.
  Mr. Cope: The hon. Gentleman said that Article 235 covers this matter in effect. But I understand that it provides a blanket permission to do things subject to the rules for achieving the objectives of the EEC. As far as I am aware, the objectives of the EEC as stated in the Treaty of Rome do not include harmonisation of the environment—and Lord preserve it from ever becoming one of them.
  Mr. Marks: For this evening's debate, at any rate, I shall take it that the House has already debated a number of matters concerning the environment. With all the points that have been raised, I do not know whether we should be discussing that at present.
  The hon. Member for Devon, West raised a number of matters. He asked whether it was right to attempt to apply common standards throughout the Community. We believe that there are certain common principles of bird conservation, such as the general prohibition of the killing or capture of birds with a limited number of clearly defined exceptions—the prohibitions that I have mentioned. Birds migrate from one country to another. Last year—and this year as the hon. Member for Isle of Wight (Mr. Ross) pointed out—there was great concern in this country and in others, including Italy, about the mass slaughter of migratory birds that takes place. This directive provides a means of enforcing these common principles on all Governments in the Community, and I have no reason to believe that the Governments in
  964
  the Community have any fundamental objection to it.
  The derogations procedure provides the flexibility needed to take account of different national problems, though I take note of what was said by the hon. Member for Kingston upon Thames (Mr. Lamont) about not allowing too much, perhaps, to national derogation. However, the feeling in the group at present is that all of it should go to national derogations, with a sort of retrospective look at them by the Commission. I shall note what the hon. Gentleman said on that point.
  Of course, it is desirable to extend the principles beyond the limits of the EEC. We are already involved in discussions in the Council of Europe and with the International Union for the Conservation of Nature about further conventions on this subject. We hope that Spain will take part in the conventions. However, these are some way off, and we cannot yet be sure how effective they will be.
  I am convinced that it is right to start at the Community level. Then we can use the directive as a basis for these wider discussions, as our own Acts have been used as the basis for this directive.
  On the question of representation on the Technical Progress Committee, I think that representation of all the interests—the Friends of the Earth, the Royal Society for the Protection of Birds, and the shooting brigade, as it has been called tonight—would be unworkable. We consider that Government representation is the only practical way of proceeding. However, it is our intention to consult all relevant interests over the work of this committee, just as we have consulted on the directive.
  On the sale of dead game birds, I can only repeat that there is a difference of view on this point in the group. Some of those we have consulted would like to see the number of dead game birds that can be sold severely limited to traditional delicacies, such as grouse, partridges and pheasants, as the Commission has proposed. They argue that many species can stand shooting for sport but not shooting for sale. This difference has been mirrored in the discussions in the working party, where some 60 species have been proposed for addition to the particular schedule. I can only say that we shall consider carefully the views expressed in

  965
  the House this evening on the ongoing discussions and in particular when the directive comes before the Council of Ministers.
  On the point about sales in the close season, we in the United Kingdom believe at present that the ban on the sale of dead game birds in the close season should be maintained, despite the advent of deep freezers. Without such a ban the temptation to ignore the close season is that much greater. However, it is clear that many of our partners, in indeed, the European Parliament, do not agree with this view. Fortunately, it is likely that the directive will allow member States to keep more stringent provisions of this nature in their own legislation. One again we shall consider carefully the views that have been expressed.
  On the question of deficiencies in the existing legislation, raised by the hon. Member for Clitheroe (Mr. Walder), my hon. Friend the Member for Hayes and Harlington (Mr. Sandelson) and others, it seems likely that some amendments will be required to the Protection of Birds Acts as a result of this directive. When we deal with that, we shall certainly take the opportunity of considering whether other amendments to such Acts, such as increases in penalties should be proposed at the same time.
  I realise that enforcement is a problem. It is a problem for us and it is probably even greater for the Italians, but increasingly there is public support and education in this field. This is having an effect in this country. We believe that international action of this kind will provide that pressure in other countries.
  A number of different ways of dealing with derogations has been proposed and we still have to agree on a final form of the procedure. However, whatever procedure is adopted, we intend to ensure that we are still free to deal with the problems of public health and safety, aircraft safety and agricultural pests, and the needs of falconry, aviculture, rearing and veterinary educational and scientific work in a proper manner. Indeed we have taken a leading part in the group establishing these needs so that they are fully taken into account in the directive.
  Reference was made to a letter from the Food Manufacturers' Association. It is thinking in terms of the first of the
  966
  draft directives. We are fully aware of the need for food manufacturers to deal with public health problems caused by birds. As I said in opening the debate, the article dealing with derogations from the directive has been completely redrafted and now specifically allows derogations in the interest of public health and safety.
  The Federation is one of the bodies which has been consulted on the directive, and the position was explained by my officials at a meeting on 12th October at which the Federation was represented. If it is still worried when it considers the revised memorandum, I shall look at it again. I do not think the Federation will have any need to be worried.
  I am grateful for the remarks of my hon. Friend the Member for Rother Valley (Mr Hardy). He has apologised for having left the Chamber; he had to be in Yorkshire very early tomorrow morning. At times his speech was quite poetic. He asked me to define the word "night ". I do not think one could ask anyone in this House to define "night" —we never seem to know whether it is night or day. There is no intention to prohibit night shooting, there is no reference to it in the directive and no definition, so I shall not try to define it. My hon. Friend mentioned a number of species, which I shall deal with later. The list in the annexe is far from agreed upon, but I shall look at the species that he mentioned.
  The hon. Member for the Isle of Wight talked about effectiveness before next Autumn. Normally there is a two-year period for implementation by member Governments, and we, with our parliamentary programme as it is, will need another year before we can get amendments on this matter through the House, the hon. Member mentioned Annexe 5, which lists types of research that member States are required to carry out in the directive.
  The hon. Member for Gainsborough (Mr. Kimball) congratulated the Government, and I am grateful to him. I know that he will not congratulate us on Wednesday when we are talking about otters. I know that the Belgian presidency is very keen to get this before the Council of Ministers on 12th December, but I am afraid that it probably will be discussed for the political points to be raised, then

  967
  referred back to the working party. We welcome all the speed that we can get on this matter.
  I have mentioned the point about penalties which the hon. Member for Clitheroe raised. I can certainly assure him that in the Department we looked seriously at this point. He has mentioned wetlands. We are in difficulties here. One of my problems is that I deal with applications for mineral planning and also with areas of outstanding natural beauty, and invariably I find that they are in the same place.
  I should like to thank all hon. Members who have taken part in the debate, especially at such a late hour. I assure them that we shall take note of all that has been said in the discussions.
  Question put and agreed to.
  Resolved,
  That this House takes note of Commission Documents Nos. R/3265/76 and R/1961/77 on the preservation of birds.

  GIPSIES
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Coleman.]
  1.14 a.m.
  Mr. Peter Temple-Morris: I am grateful for this opportunity to raise the subject of accommodation for gipsies. The last time the Minister and I clashed, if I may use the word, in an Adjournment debate was two years ago. We have a distinct improvement on the then situation, since we are beginning this debate four hours earlier.
  I am sorry to drag the Minister back to the realms of reality from discussing vatican cardinals, polygamous birds and other delightful bird species. However, if I may now become serious, we are in this debate dealing with a national problem. We all have this problem in our constituencies, but I shall attempt to approach the matter on a national basis. I shall quote examples in my constituency to decorate the national picture.
  I know that the Minister has spent much time on this subject, particularly since April of this year. He has travelled the country and held consultations
  968
  following the publication of the Cripps Report. Therefore, it is fitting that this debate should take place so that we may hear the Minister's views.
  Let me at the outset, give some figures and the Minister may be able to give the latest figures when he replies to the debate. Following the Caravan Sites Act 1968 there are now 133 local authority sites, which means that there are pitches for 2,131 caravans. That means that this is a sufficient number to accommodate only one quarter of the gipsy population. That leaves about 6,000 gipsy families on the loose throughout the length and breadth of these islands, and that underlines the extent of the problem. Therefore, in spite of all the action and efforts since 1968, local authorities can still cope with only a quarter of the gipsy population.
  On a local level, I wish to refer to my Division of Leominster, which in essence is North Herefordshire. In the old county of Herefordshire there are no sites at all. There are some sites in Worcestershire, but the old Herefordshire County Council did not take the necsessary decision. The new authority of Hereford and Worcester has still taken no decision on the issue.
  We have a stalemate situation typical of the position in many other areas in the country. Because many authorities have not provided sufficient sites, or in my case no sites, they are unable to move on gipsies or travellers generally. They cannot do so because of diktats laying down that such travellers are not able to be moved elsewhere because that would create problems in other areas, particularly when there are no sites for them to go to in the first place.
  The rest of the statement is that for many gipsies there is just nowhere legally they can go.
  The net position is that those travellers are on the highways and byways of Herefordshire, as they are in most other counties. The problem is gradually mounting, and yesterday the subject was featured at Question Time when transport matters were being dealt with. One hon. Member complained bitterly about the state of a lay-by in his constituency, and he was backed by hon. Members from both sides of the House who had similar problems.

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  I should like to give a couple of examples showing that there are two points of view on this subject. I shall use my own area for the purpose. We have in our area a body which has carried out much valuable work, called the Hereford Travellers Support Group. That group has conducted a recent census, which is not complete since the group is still working on it. It appears that about 40 families are being moved on continuously with all the attendant problems in the old county of Herefordshire.
  On the other side of the coin, among my constituents are many long-suffering residents in various villages and places where gipsies tend to dwell and on from which they are not moved. One example —this is something of a jewel as it combines just about all the different entities of the problem—is Bishopstone, which is very close to Hereford.
  At Bishopstone there is one family and its caravan. The family has been there since January 1976. It has been there with the mother and father and various members of the family ever since. It has not moved out during that time, and a tremendous amount of effort has been exerted by the highways department because it considers the caravan to constitute a road hazard. Similar efforts have been exerted by the social services department and the local district council. We have all the elements in this example.
  There have been numerous meetings between all the bodies I have mentioned to discuss the presence of the family. The extent of the problem can be mirrored by the fact that the family was four or five months ago offered a house by the district council. It was not merely a house, it was an old school building that had a hardcore surface so that the family could live in the house and have caravans parked on the hardcore surface. The family refused the offer because it thought that the school building was too far from Hereford. It was some six miles further out than the position that it was occupying at Bishopstone.
  The offer was made four or five months ago and still the social services department is going around wringing its hands in anxiety. The highways department is "going spare" because of the road
  970
  hazard that the caravan constitutes. The district council is fed up with the whole thing. That is typical of the administrative indecision, difficulty and expense that is involved in the whole problem.
  Mr. Jasper More: It happens that my constituency borders on my hon. Friend's constituency. Salop County Council has established a site for gipsies within three miles of my hon. Friend's constituency. It has been an example of two difficulties. First, there has been intense opposition locally. That arises from the fact that the gipsies are not under any proper authoritative control. Secondly, there is a category of gipsy—my constituents call its members Irish tinkers—for whom the right solution would be reportation to Southern Ireland. Will the Government face this situation?
  Mr. Temple-Morris: I am grateful to my hon. Friend for his intervention. I know that his constituency suffers considerably from the problems. I do not know the exact geographical situation, but fortunately his constituency is perhaps a little near Ireland than mine, or the part of Ireland from whence comes the sort of gipsy to whom my hon. Friend refers. Therefore, he gets a greater extent of the truly troublesome element of the travelling population with which we are dealing. I know that from my reading of the local Press, part of which I share with my hon. Friend. I hope that the Minister will deal with his point.
  The Caravan Sites Act 1968 has run out of steam. The Department realises that perfectly well, and that is demonstrated by the fact that it asked Mr. Cripps to consider the matter and report to it. The fact is that the Act has run out of steam and is not sufficient of an answer. The Cripps Committee reported in April 1977. It was a good report that was well presented. The Minister sent it to myself and other Members who he knew had a gipsy problem.
  He then said that he would begin consultation. That was in April 1977. The hon. Gentleman has been around the country. We are now behind schedule in that the Cripps Report recommended that there should be a quota for county councils that should be settled by 31st October. We are already in November, and we are behind schedule.

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  I gather that the Minister—I hope that he will be able to fill us in on this—is still consulting and travelling around the country discussing the problem that we know exists and to which, dare I say, we know the answer. The answer is money, and that is probably part of the hon. Gentleman's problem. He has our sympathy in that respect. However, I am dealing with priorities and I hope that I shall be able to urge this priority upon him. The Cripps proposal on the money that would be necessary was—this is the great fear in the present economic situation—a 100 per cent. Exchequer grant towards the capital cost. I am sure that the proposals were made after a great deal of consideration and with a certain amount of wisdom, because of the stalemate that we have reached.
  The local authority position as a result of the recommendations is understandable. I press upon the Minister the need for action. Having read a report saying that there might be a Government grant, very few local authorities, particularly in these times of financial stringency, will hazard their arms and spend their own money when they think that central Government will help them out and that central Government are about to take a decision.
  That is the reason for the urgency. I stress that the Minister must make up his mind, because there will not be much more progress with the status quo. Local authorities have been squeezed over the rate support grant, particularly in the rural areas. It is not enough to say that running costs and loan charges for sites are eligible for the rate support grant. That does not answer the problem any more than it does for even more central issues for the shires. I think particularly of transport. Some counties even have difficulty in coming up with their part to match their supplementary grant from the Government. That is the state they have reached in following the Government's guidelines.
  The Government called upon the counties to cut back, and they have done so. Here perhaps I may make a party point. Conservative county councils are cutting back—unlike some Labour-controlled councils when we were in Government. Most of the county councils are Conservative. They are controlling public ex-
  972
  penditure on behalf of the Government and doing it very well.
  The political difficulties are considerable, and I do not under-estimate them. Let us now be bipartisan about this. One of the Minister's hon. Friends told me tonight of the efforts of a Labour county council, West Glamorgan. The position there mirrors the difficulties of the county and the district councils, which are responsible under the 1968 Act. The county wants to do something about the matter. The district murmurs that it will help and then finds political difficulties and because it has no direct responsibility, it then says that it does not want to know. In the case of West Glamorgan the leader of the county council had stones thrown through his window because of his efforts to do something about the problem. That mirrors the problem throughout the country.
  For the future, the Government must decide and must take action. The problem is urgent. One way or another the necessary money must be made available, and the duties of national and local government must be made clear. Those are the central points.
  Maybe we shall have to go for less expensive sites. Maybe we shall have to be less doctrinaire about the problem. The Minister has seen the various sites. There was a great ideal, which has been shot down by the Cripps Report, that everybody should be settled on a de-luxe site, that the children would go to school and everybody would settle and be happy for ever more. Most gipsies and most members of the travelling population do not want that. If they do, they will not admit it.
  The matter must be approached gradually. The gipsies must be stopped first, and then we can see how we go from there. The main thing is that they must have somewhere to go. The quota system must be fixed.
  The political difficulties are considerable, and they are causing distress, squalor, ill-feeling and violence. There is a great fear that those problems will increase unless something is done.
  I firmly believe that the responsibility rests primarily upon the national Government, whichever party is in power. It is easier for us here to do something than for the leader of a county council who

  973
  is liable to have stones thrown through his window. I dare say that we shall have stones thrown through our windows, but it is easier for us to deal with what is a national problem. Not only is it easier, but it is our duty to do so.
  1.30 a.m.
  The Under-Secretary of State for the Environment (Mr. Kenneth Marks): I congratulate the hon. Member for Leominster (Mr. Temple-Morris) on raising this matter and on his courage in taking on this sensitive issue. I am sorry that I was unable to visit his constituency, although I was asked to go there. I visited the worst areas and it will give the hon. Member no joy to know that there are areas with worse problems than those in his constituency.
  The hon. Member for Ludlow (Mr. More) intervened to complain that gipsies are not under authoritative rule. One of the problems is that the gipsy way of life is not conducive to authoritative rule.
  I have been consulting local authorities since April, with breaks during the summer. The time for talks has not been that long. I have asked groups of local authorities and counties to try to get together to sort out between themselves what each area's quota should be, how many gipsies there are, and who should cater for them. That is a difficult job, but some areas are doing it.
  Many council officials and councillors realise that this is the way to tackle the problem. But I have no powers without fresh legislation to make them get together. Councils must ask themselves whether they are prepared to allow their ratepayers to suffer because of illegal sites without doing anything about them.
  Not a single site exists in the Leominster constituency. Unfortunately, that is only one example of the situation that exists generally throughout England and Wales. According to the latest information there are 157 local authority sites in England and Wales offering accommodation for 2,531 gipsy caravans. This means that about three-quarters of a gipsy population of between 8,000 and 9,000 families have no alternative but to camp illegally.
  In Hereford and Worcester there are three official sites, all in the area of the former county of Worcester, accommodating 42 caravans. It is difficult to know
  974
  the total number of families in the county because there is considerable seasonal agricultural work. There are probably at least 110 families regularly living in the county but without legal sites and at times during the summer there are likely to be many more.
  County councils have been under a statutory duty for more than seven and a half years to provide sites for gipsies residing in or resorting to their area. The unauthorised encampments on which the great majority of gipsies are compelled to reside are the nub of what has come to be described as the gipsy problem. Whether one calls them gipsies, didicois, or Irish tinkers, the problem is there. It is no good my saying that I am only dealing with the Romanies.
  I saw many of these sites on my travels this summer—on roadside verges in the country, in clearance areas such as in my constituency and on roadways in the cities. With no services and no management, conditions on such sites rapidly become squalid, an unsightly nuisance for local residents and miserable for the gipsies themselves. Much criticism of gipsies is based on the impression created by these illegal sites, but what would our houses and gardens look like after a few weeks if we had no water, no sanitation, and no refuse collection?
  I have seen for myself that adequately equipped and properly managed official sites present a very different picture, not only those which are newly opened, well equipped, and rather expensive, but older sites, more or less adequately equipped, which demonstrate that material shortcomings are less important than good management. On these official sites gipsies have generally settled down well and been accepted locally. I have also seen the usefulness of temporary stopping places with minimal faciilties, some used only in winter.
  But I regard the provision of well equipped sites as the best way of tackling the major problem. Only by adequate provision of satisfactory official sites, equipped to cater for varying gipsy needs, can those appalling illegal sites be eliminated. It is ironic that such provision is held up by local opposition based on experience only of the illegal sites, so that people are tending to perpetuate the very thing that they loathe.

  975
  I suggest, therefore, that local authorities owe it to their ratepayers to break out of this vicious circle and get rid of these eyesores not by pushing gipsies on to the next authority's doorstep, but by providing official sites.
  More rose—
  Mr. Marks: I have not much time. I might be able to give way later.
  I am aware that this advice is not new. As long ago as February 1962, in a circular to local authorities, the Ministry of Housing and Local Government was saying:
  "Moving people off one unauthorised site and leaving them to find another is no solution, and no answer to the human and social problems involved. These can only be resolved by the provision of proper sites, in which the caravan families can settle down under decent conditions, and in reasonable security. This is probably the only effective way of preventing the persistent use of unauthorised sites, continuing trouble, and hardship."
  That circular 15 years ago drew the attention of authorities to the power to provide sites conferred on them by the Caravan Sites and Control of Development Act 1960.
  The failure of these repeated exhortations of this kind to produce significant results led to the enactment of Part II of the Caravan Sites Act 1968—a Private Member's Act which had the support of all parties—which gave county, county borough and London borough councils a duty to provide caravan sites for the gipsies residing in or resorting to their area.
  The Act came into force in April 1970, but, as the hon. Gentleman said, its effects have been disappointing. There was a gradual increase in the annual rate of site provision between 1970 and 1974, largely because the county boroughs had this quota which was given to them and they thought that if they got it, it would save them a lot of trouble, as it did. Now we have a situation where the vast majority of gipsies have no legal stopping place.
  It was the Government's concern at this situation, with its increasing threat of violent confrontation, that in February 1976 led my right hon. Friend the then Minister for Planning and Local Government to ask Mr. John Cripps to carry
  976
  out a study of the effectiveness of the arrangements to secure adequate accommodation. The report was published in April this year.
  The hon. Member referred to the advice which we have given, and also to the Cripps Report. But advice is not a policy in itself, as the hon. Gentleman said. Government policy is, as it has been for all Governments for years, to secure the provision of enough sites by local authorities. To an individual authority the idea of moving on gipsies from its area into that of another authority may seem attractive but the neighbouring authorities and their residents, not to mention the gipsies themselves, are bound to resent it.
  Government advice against indiscriminate evictions was never to be taken as a pretext for doing nothing positive and then blaming the Government for the consequences. It is not simply a matter of leaving the gipsies alone. Our advice also asks authorities to do what they can to alleviate the conditions on an illegal site until they make it a better site.
  I have referred to the Cripps Report. One of its major recommendations is that the Government should seek statutory authority for the payment of Exchequer grants to cover the capital cost of sites at a rate of 100 per cent. for a period of five years. We are considering this recommendation very seriously. The hon. Gentleman will, I know, appreciate that I cannot say more about that now. I hope that we shall be in a position to discuss it with the local authority associations before too long. I need hardly say that there are difficulties about the introduction of new grants—new money —in the present situation.
  It must be remembered that authorities are already getting substantial financial support from the Government, since loan charges and running costs for gipsy sites qualify for rate support grant. The Exchequer bears well over half the recurrent cost over the country as a whole. Grant is based nationally on that. Some counties are doing nothing about it while collecting the cash.
  The problem is far from being entirely financial. Authorities have had the statutory duty of site provision since 1970. Members of both major parties would claim that financial constraints have not

  977
  been on during the whole of that period, but progress was inadequate even at times when restraints were not on. Some counties—the old Herefordshire was one of them—never provided a single site. I suspect that the slow progress in site provision is due as much to public opposition as to lack of funds.
  I have spoken about the Cripps Report's recommendation on finance. There are a number of other recommendations in the report. I am hoping to reach the point of decision as soon as possible and I know that the Government's response is anxiously awaited by county and district councils, by residents, and by gipsies themselves.
  I think there is a danger that everyone is concentrating on the recommendations —as the hon. Gentleman has done—and is forgetting the report itself. Right at the beginning John Cripps puts the whole problem in its proper perspective by pointing out that it concerns a minority, numbering fewer than 50,000, in two countries With a combined population of 49 million. So in terms of individual local authorities the numbers are small indeed in housing terms.
  Gipsies are widely criticised for camping illegally, but the report shows that the loss of their traditional stopping places has largely resulted from a variety of new legislative measures, with one exception not directed against gipsies but having the incidental effect of making them illegal campers on the sites that they and their families had used for many years.
  John Cripps has made it very clear that, like any other cross-section of the population, there are gipsies whose behaviour is not acceptable to their neighbours. This may amount to no more than a knock on the door by a gipsy asking for water, but even that can be very frightening for an elderly person or someone who is alone in the house. Much more serious situations can develop, involving violence —on both sides. It is, of course, these incidents that hit the headlines in the local Press and lead to public condemnation of
  978
  the entire gipsy population. I ask hon. Members and the public in general to look again at the Cripps Report, which seeks a better appreciation of the gipsies' difficulties, without in any way glossing over the problems caused by the behaviour of some of them.
  I believe that we need to bring about a much better mutual understanding by house-dwellers and gipsies alike, of their cultural and social conditions. In that way we can help to get rid of the roadside and inner city encampments that are the source of so many probems.
  I realise that it still difficult for those in local authorities who, in the interests of housedwellers and gipsies alike are struggling to improve the situation. I am sure the hon. Gentleman has added himself to their ranks tonight if he was not already there. They are constantly opposed, criticised and shunned by their colleagues for their efforts. Only last week, at a conference about education for gipsy children, John Cripps spoke again about the loneliness of these workers, particularly local authority officers and members. I am begnning to think he should have included Ministers.
  Though the Department has always seen its role as essentially an advisory and co-ordinating one, I am anxious to put all the pressure I can on county councils and find financial help if I can do so. The Department has been increasingly active in recent years. We have an advisory officer on gipsy encampments. He and his staff spend much time troubleshooting and I believe that they are a great help in that way. The hon. Gentleman sought Government money for gipsy sites—
  The Question having been proposed after Ten o'clock on Thursday evening and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  House adjourned at sixteen minutes to Two o'clock.