Commons Sitting of 16 May 1978

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
DEATH OF A MEMBER
Mr. Speaker: I regret to have to inform the House of the death of Frank Hatton, esquire, Member for Manchester, Moss Side, and I desire on behalf of the House to express our sense of the loss we have sustained and our sympathy with the relatives of the hon. Member.
PRIVATE BUSINESS
  LONDON TRANSPORT BILL
  As amended, considered; to be read a Third time.

  GREATER LONDON COUNCIL (GENERAL POWERS) BILL (By Order)
  Order for consideration, as amended, read.
  As amended, to be considered upon Thursday.

  CHRIST CHURCH WOBURN SQUARE AND SAINT MATTHEW OAKLEY SQUARE BILL [Lords]
  Read a Second time and committed.
ORAL ANSWERS TO QUESTIONS
  EDUCATION AND SCIENCE

    Speech and Language Disorders (Special Tuition)
    Mr. Edwin Wainwrightasked the Secretary of State for Education and Science, in the light of the fact that throughout England and Wales the parents of children who require special tuition because of speaking difficulties are concerned at the lack of facilities in this educational field, if she will make a statement on what action she is taking or intends to take, to improve the present position.
    The Under-Secretary of State for Education and Science (Mrs. Margaret Jackson): I am well aware of the difficulties faced by children who have disorders of speech or language. The identification, assessment and placement of individual children are matters for the local education authority concerned, in consultation with the parents. In addition to the provision made in special schools, local education authorities are increasingly setting up classes and units for these children in ordinary schools. Her Majesty's Inspectorate is currently reviewing some of this provision.
    Mr. Wainwright: Does my hon. Friend realise that thousands of parents are deeply disturbed about the future of their children who require special teaching facilities? The children are not being organised, and it is no good leaving it to the local education authorities. Will my hon. Friend therefore take into account the fact that these parents are deeply worried about what is to happen to their children when the parents pass away? In this very cold, inconsiderate and thoughtless society, we ought to offer special facilities for these children to be educated and trained.
    Miss Jackson: We do our best to encourage local authorities to offer such special facilities in a variety of ways. Unfortunately, as my hon. Friend will know, legislation has placed the duty of carrying out such practices on local authorities rather than on us, but we seek

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    to see that the right kind of provision is made.
    Mr. Wigley: Does not the Minister accept that it is necessary to provide not only special units but also the specialist teachers within them? Is she satisfied with the situation in relation to speech therapists, particularly in view of the drastic shortfall between the numbers now available and those recommended in the Quirk Report?
    Miss Jackson: The provision of speech therapists is a matter for my right hon. Friend the Secretary of State for Social Services. However, it is not my information that there is a shortfall below the figures recommended by the Quirk Report, in the sense that the Quirk Report recommended a certain level of provision but also recommended the speed with which that provision should be reached. It is my understanding that we are, in fact, doing better than the Quirk Report recommended in this connection.
    Mr. George Rodgers: Will my hon. Friend explain the association between her Department and the Department of Health and Social Security in this matter? Presumably the qualified teacher as distinct from a speech therapist, has to have a knowledge of teaching. Does she agree that this situation has lingered for many years and during many Governments? Is there a prospect of remedying it? It leads to great frustrations to the children and their parents.
    Miss Jackson: I understand that there is very close co-operation between speech therapists and teachers in the provision of this work. Many speech therapists carry out a great deal of their work in schools or in particular classes in co-operation with the teachers, but we are always anxious to see this improved.

    University Teachers (Pay)
    Mr. Gouldasked the Secretary of State for Education and Science when she expects to receive the report of Committee B on university teachers' pay.
    Mr. Michael Lathamasked the Secretary of State for Education and Science whether she is now in a position to make a statement on the review by Committee B on the timing of the rectification
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    of the anomaly regarding the salaries of university teachers.
    The Minister of State, Department of Education and Science (Mr. Gordon Oakes): As my right hon. Friend told the House on 5th May, agreement was reached in the negotiating committee that day that the anomaly in university teachers' pay would be rectified in two approximately equal stages on 1st October 1978 and 1st October 1979. I welcome this agreed solution to a long-standing and difficult problem.
    Mr. Gould: Is my hon. Friend aware that there is considerable satisfaction in the universities that a long-standing problem is at last on the way to being resolved? Will he also recognise that the last few years of financial constraint on both staff and resources has damaged morale in the universities and that what is now needed is renewed evidence that the Government place a proper value on the contribution they are able to make?
    Mr. Oakes: I am aware of considerable satisfaction in the universities that a promise made was a promise kept by this Government in this matter. I am also aware that because of that difficulty there has been some lowering of morale. I hope that that will now pass away and that morale will be quickly restored to normal, as I am sure it will be.
    Mr. Latham: Is the Minister aware that those of my constituents who are lecturers at the universities of Leicester, Loughborough and Nottingham will be glad that progress has been made in this way? But they will be well aware that a great deal of time elapsed before a settlement could be reached, and they deeply regret that dilemma.
    Mr. Oakes: Yes, some time elapsed because they were difficult negotiations. However, my right hon. Friend said in March of this year that a decision would be made before June of this year, and, indeed, it was made at the beginning of May.
    Mr. Grocott: Is not one of the main problems that bedevil pay settlements in higher education the fact that divisions exist between universities on the one hand and polytechnics and colleges of further education on the other? Is it not the case that we shall get some sanity

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    at this level of education only if we have a common comprehensive system of further and higher education?
    Mr. Oakes: My hon. Friend has raised a very much wider question, but, as the whole House is aware, there has been an anomaly with university teachers' pay which has existed since 1975. Promises were made by two Secretaries of State that it would be remedied, and I am delighted that it has now been remedied.
    Dr. Hampson: How can the Minister of State say that when the Government, in keeping that promise, have drifted and dithered right up to the point at which university staff threaten not to mark finals examinations? Does he believe that that sort of treatment will keep people of brilliance and talent on £4,000 or £5,000 a year in British universities?
    Mr. Oakes: We did not drift and dither. There was a threat of this form of industrial action, but the university teachers won their case because of their lack of power of industrial action, which proves that the Government are fair to all sections of the community, whether they have industrial muscle or not.
    Mr. St. John-Stevas: Will the Minister of State accept that repentance of a sinner is always welcome, even if it is on a death bed?
    Mr. Oakes: We are far from dead.

    National Association of Schoolmasters and Union of Women Teachers
    Mr. Montgomeryasked the Secretary of State for Education and Science when she last met representatives of the National Association of Schoolmasters and Union of Women Teachers.
    The Secretary of State for Education and Science and Paymaster General (Mrs. Shirley Williams): I attended the organisation's annual conference during the Easter Recess, as the hon. Gentleman may have noticed, and I hope to meet it at the opening of the new administrative building in Rednal on 23rd June.
    Mr. Montgomery: As the National Association of Schoolmasters and Union of Women Teachers is operating a ban on out-of-hours activities in all areas where members have not had a written
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    undertaking from the local education authority that their duties are entirely voluntary, does not the Secretary of State now feel that it would be a good idea to set up a national forum to discuss not only teachers' pay but conditions of work?
    Mrs. Williams: On the first part of the question, the hon. Gentleman may not be aware that I am not a party to teachers' conditions of service. That is a matter which, by law, lies between the teachers' employers—the local authorities—and the teachers' organisations. With regard to the possibility of a professional council, I have indicated to teachers' organisations that I would be willing to consider that suggestion if they can put forward agreed proposals.
    Mr. Hardy: Does my right hon. Friend agree that her reception at the recent annual conference of the union was a great deal more cordial than that which would be afforded by any intelligent group of teachers to the primeval lunacies of the hon. Member for Brent, North (Dr. Boyson)?
    Mr. William Shelton: With reference to the NAS and UWT, can the right hon. Lady comment on the submissions from ACAS regarding teachers' representations in meetings with Her Majesty's Government?
    Mrs. Williams: I very much regret that ACAS has not been able to identify a basis upon which joint consultative meetings can take place. The matter will therefore be passed to me to discuss with the teachers' organisations.

    Schools (Parental Choice)
    Mr. Jesselasked the Secretary of State for Education and Science when she expects to bring forward proposals relating to parental choice of schools.
    Mrs. Shirley Williams: My proposals on school admissions were issued last October. I intend to introduce legislation drawn up in the light of my consultations on these proposals as soon as the parliamentary timetable permits.
    Mr. Jessel: Does the right hon. Lady agree that the drop in the birth rate makes it much easier for local education authorities to let parents have more say in the placing of their children in schools

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    than has sometimes been the case in the past? Can she now give a date on which she will introduce legislation, rather than merely saying "as soon as possible", to promote and encourage wider choice by parents in where their children go to school?
    Mrs. Williams: The fall in the birth rate presents great difficulties as well as great opportunities to local authorities. It is extremely expensive to run a school persistently under capacity. On the latter part of the hon. Gentleman's question, I can give him no fairer or more honest answer than "when the parliamentary timetable permits".
    Mr. Gerry Fowler: Has my right hon. Friend noticed that, in a perversion and sullying of the fair name of parental choice, the hon. Member for Brent, North (Dr. Boyson) seems to have committed the Conservative Party to a voucher system of admissions? However, the hon. Member for Chelmsford (Mr. St. John-Stevas) does not seem to speak with the same voice. Would my right hon. Friend care to comment on the effects of using such a system?
    Mrs. Williams: I am delighted to notice that all those Conservative Members who care seriously about maintained education do not support the concept of the voucher system, which is a ludicrous waste of public money merely enhancing the power of the purse.
    Mr. Flannery: Does my right hon. Friend agree that the slogan "parental choice" has been used by the Opposition to mean everybody, when we all know that they mean education for their own children and not for others? Does she agree that when Government supporters speak of parental choice we want the very best choice for all parents and children and that there is more parental choice now than there ever was before?
    Mrs. Williams: My own view is that parents should be able to express their wishes as between schools. I want to make it absolutely clear that under the old selective system 80 per cent. of parents had no choice at all. We are not interested in a choice that is for only a small minority.
    Mr. St. John-Stevas: Would not the Secretary of State agree that if the Prime
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    Minister wishes to be taken seriously in his new-found concern for the family—[HON. MEMBERS: "Cheap."] It is the truth—he will back up the right hon. Lady in her losing battle with Mrs. Caroline Benn and produce some legislation? Will she make it clear that in that legislation she will make it her first priority not to close anomalies in the law but to extend parental rights and influence?
    Mrs. Williams: With regard to the first part of the question, my right hon. Friend the Prime Minister has consistently, throughout his ministerial career, concerned himself with the interests of the family. With regard to the second part of the hon. Gentleman's question, that horse will not run. As I have said to him on more than one occasion—and I say at the Dispatch Box today exactly word for word what I said in November 1977—we have always favoured the idea of parents being able to express their preferences within the comprehensive principle.

    School Governing and Managing Bodies
    Mr. Formanasked the Secretary of State for Education and Science what representations she has received about the Taylor Report on school governing and managing bodies.
    Miss Margaret Jackson: We consulted more than 30 interested bodies immediately after the publication of the Taylor Report and received about 170 letters commenting on various aspects of the report's recommendations. I have had recent discussions with some of the bodies concerned and expect to have further meetings shortly.
    Mr. Forman: Is the Minister confident that in the light of those representations there is now more widespread public understanding of Lord Taylor's commitment to a genuine partnership in the management and running of schools? Will the Minister confirm that the teaching profession has nothing to fear from a fuller and more equal partnership with parents?
    Miss Jackson: I accept and endorse completely all that the hon. Gentleman said. I can only say to him, in the hope

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    that it will not do him any harm, how nice it is to hear positive sentiments coming from the Conservative Benches.
    Mr. David Atkinson: Whatever the considerable merits of the recommendations of the Taylor Committee, their implementation will require additional resources for local education authorities. Will the hon. Lady give the House an assurance that it will be the Government who provide those resources?
    Miss Jackson: We are a long way from implementing the recommendations of the Taylor Report. We are still at the stage of full discussions about the exact implications of the report. Only when those discussions are finished shall we have a clear idea about the resource implications.
    Mr. Beith: As local authorities in some parts of the country are now embarked upon appointing their education committees in the absence of any change in the law, does not the hon. Lady think that the time is ripe to remind them that governing bodies should contain people who are genuinely representative of the interests involved in schools, and not simply political placemen?
    Hon. Members: Hear, hear.
    Miss Jackson: I accept what the hon. Gentleman said, but I am surprised to hear cheers coming from the Conservative Benches, because it is that party which has been instrumental in putting political placemen in public bodies and in removing governors of immense interest and experience. I agree entirely with what the hon. Gentleman says. Local authorities are already free to implement many of the recommendations of the Taylor Report, and we hope that many of them will do so.
    Dr. Boyson: Is the Minister aware that, in view of the number of representations, many people fear that the Taylor Report—it is an important report, because it is vital to have more teacher and parent representation on the governing bodies—will be put in the "awaiting action" file, like the report on literacy from the Bullock Committee? Can the Minister assure us that, instead of its being put in the "awaiting action" file, the Taylor Report will be debated in this House so that the great debate on education, which is supposed to be going on round the country, may eventually arrive here?
    Miss Jackson: It is not for me to say what will be debated in this House. As the hon. Gentleman well knows, there are many aspects of the Taylor Report which do not need action in this House and which local authorities are perfectly free to carry out at present. I hope that the hon. Gentleman will do his part in encouraging the many Conservative education authorities to carry out those proposals.

    School Transport
    Mr. Temple-Morrisasked the Secretary of State for Education and Science what representations she has received on the subject of the statutory walking distances and school transport.
    Miss Margaret Jackson: My right hon. Friend has received about 100 letters since the beginning of the year on school transport issues from parents and from hon. Members on both sides of the House.
    Mr. Temple-Morris: The Minister will know that it is some three years—1975 to be exact—since her Department published proposals that would lead to the abolition of statutory walking distances. Bearing in mind the considerable delay, does the hon. Lady fully appreciate the arbitrary nature of statutory walking distances, particularly in rural areas. Does she appreciate also the various vested interests which undoubtedly are present when it comes to change? Will she please drive on with her proposals, produce some results and make a statement to the House before the Summer Recess?
    Miss Jackson: I cannot guarantee to do that, although I shall attempt to do so. We quite accept what the hon. Gentleman says about the arbitrary and unsatisfactory nature of the present arrangements. For the past three years we have been trying to find a way in which some kind of arrangement could be reached to improve them.
    Mr. John Ellis: Is my hon. Friend aware of the position in South Humberside, where the new Conservative-controlled council has gone back to the absolute minimum standard—we had a better standard under a Labour-controlled authority—to the consternation of everyone in my constituency, particularly in the rural villages? Will she make quite clear, because all sorts of

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    rumours are going about, that there is no question of any Government directive but that it is a Conservative action taken by a Conservative-controlled council which could be doing something better?
    Miss Jackson: Sadly, the example of Humberside is repeated right across the country. It is my understanding that in Humberside it is not only in transport that improvements carried out by the previous authority have been removed.
    Mr. Michael McNair-Wilson: Would not the Minister agree that it would be fairer if the distance were related to the actual miles that have to be driven by a vehicle rather than the present basis of assessment, which appears to be the principle of "as the crow flies"?
    Miss Jackson: I must agree with the hon. Gentleman that there are a variety of ways in which a fairer scheme could be devised. It is our hope that we shall be able to find a scheme which will meet with agreement.

    Mathematics and Science Teaching (Retraining)
    Mr. Madelasked the Secretary of State for Education and Science how many vacancies currently exist for those who would like to take the special Government courses for retraining in teaching of mathematics and science in schools and if she will make a statement.
    Mr. Oakes: Some 270 qualified teachers are taking these retraining courses this year, and about 340 people are taking initial training courses with awards from the Manpower Services Commission. About 320 places will be available on retraining courses beginning next autumn, and initial training will again be available. Those now wishing to take such courses should apply as soon as possible.
    Mr. Madel: As we now know the number of students taking these courses and the number of vacancies for those who can apply if they want to, can the Minister say what is the shortage of teachers of these subjects in schools and how long the Government think it will take to overcome that shortage?
    Mr. Oakes: I cannot give the precise figure now but I shall write to the hon. Gentleman with that figure. It will take some years before the shortage of mathematics
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    and science teachers is made up, but by these schemes the Government are doing their best to bridge the gap.
    Mr. Spearing: Will any of the teachers who are retraining in science be equally competent to take physics, biology and chemistry classes up to O-level? Does my hon. Friend agree that over-specialisation in teachers who are unable to teach these three subjects up to O-level has been one of the difficulties in the past?
    Mr. Oakes: They will be studying a variety of science courses and some of the teachers—I do not know the percentage—will be able to teach all three science subjects. Of course, some of the retrained teachers would not be able to do so.
    Mr. R. C. Mitchell: Will the Minister ensure that teachers who are retrained to teach mathematics are able to teach traditional mathematics as well as that hotchpotch popularly known as modern mathematics?
    Mr. Oakes: I think that training colleges are aware of the concern expressed in the country, but there are different ways of teaching mathematics to different students and pupils. However, I think that training colleges will be aware of my hon. Friend's concern.

    Education for Political Competence
    Mr. Knoxasked the Secretary of State for Education and Science what action she is taking to persuade schools to include in the curriculum for 11 to 16-year-olds education for political competence, as suggested in the working papers recently prepared by Her Majesty's Inspectorate.
    Mrs. Shirley Williams: While I have indicated my support for the study in schools of our political institutions, it is for local education authorities and schools themselves to decide whether to adopt the suggestions of the recent Her Majesty's Inspectorate working paper. Copies of the document have been sent to all LEAs and are available in the Library.
    My Department's circular 14/77 sought information on the steps authorities have taken to help schools promote the development of pupils' understanding of contemporary economic, social and political life.
    Mr. Knox: Does the Secretary of State agree that most schools are failing to give children an adequate political education and that, provided there is no political indoctrination, it is essential that there should be more political education if we are to have a well-informed and responsible democracy?
    Mrs. Williams: I could not agree more with the lion. Gentleman, but before the working paper was prepared by Her Majesty's Inspectorate there had been no working papers on the subject of political education. I very much hope that schools will look at that working paper. I hope, too, that the original agreement between the political parties made in 1973 under the aegis of the Hansard Society, which sets out some useful rules for the teaching of politics to children in schools, will be honoured.
    Mr. Madden: What plans are being made to enable parents to receive the same information?
    Mrs. Williams: I am sure that my hon. Friend knows the answer to that question even better than I do.
    Miss Fookes: What is meant by "political competence", and would we all pass the test?
    Mrs. Williams: The hon. Lady tempts me, but I have never endeavoured to insult the House from this Dispatch Box.

    Educational Maintenance Allowances and Awards
    Mr. Andrew F. Bennettasked the Secretary of State for Education and Science what steps are being taken to increase educational maintenance allowances and discretionary awards to students for the academic year 1978–79.
    Mr. Oakes: I refer my hon. Friend to the answer given by my right hon. Friend to his Question on 12th May, but I would point out that no new statutory system of awards which might result from my right hon. Friend's discussion with local authorities could possibly be introduced as early as the academic year 1978–79.
    Mr. Bennett: I thank my hon. Friend for that answer, but does he not appreciate that if an increase is not introduced for this September there will be a temptation for people to defer going
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    into the sixth form for a year and to join the dole queue or try to get a job and return to higher education the following year so as to take advantage of the grant? Would it not be a good idea for the Minister to try to persuade local authorities to increase the educational maintenance allowances now available from this September, possibly on the basis of reimbursement from the Government?
    Mr. Oakes: I do not think that any increase in the existing provision for EMAs would have a lot of effect, nor do I think that there is a grave risk of my hon. Friend's fears being realised in that people would defer going into higher education for a year. It is unreasonable in May to expect that negotiations with local authorities could be completed for what, in effect, would be September.
    Mr. van Straubenzee: Does not the Secretary of State's recent announcement add yet one further form of support for 16-year-old to 18-year-old students, some of whom are not under her control? Does not this require us to look at the totality of this support? Is there not a fear that such support is now so separated as to be defeating some of its original purpose?
    Mr. Oakes: It is true that there are many different schemes at different levels. The fact that the Government are operating these schemes, which have been asked for by various Members of the House for years, is a major breakthrough. I pay tribute to all those who have put pressure on the Government, including my hon. Friend the Member for Stockport, North (Mr. Bennett), who has had a Question on this matter on the Order Paper every month since I have been a Minister.
    Mr. Gwilym Roberts: Is not my hon. Friend concerned about the reluctance of Tory-controlled authorities to offer many of these discretionary awards? Does he not consider that we should now be moving towards the stage when the discretionary nature of awards should be abolished and when awards for the majority of courses should become mandatory?
    Mr. Oakes: The principle has been decided, but the nature and type of the awards are still under discussion. The

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    object of this exercise—and I hope that every local authority, whether Tory-controlled or Labour-controlled, will be of this opinion—is to increase the participation rate to well above the present 30 per cent.
    Dr. Hampson: Is the Minister aware that the Opposition have repeatedly called for an inquiry into the anomalies that exist in this matter as a result of the involvement of the Manpower Services Commission and the local authorities, as well as the social security system, but that the commitment announced on Friday was of a very generalised kind, with conceivably wide-ranging cost implications? Will he say when the House will have further details and when the Secretary of State intends to have the commitment implemented? As the means test for the educational maintenance allowances is much stricter than that, for example, for school meals, what sort of means test will be implied in this case?
    Mr. Oakes: I am not convinced that an inquiry will achieve more than can be accomplished through the initiatives that we have currently in hand. Indeed, we have acted, not set up an inquiry, on educational maintenance awards. As the hon. Gentleman is aware, this will require discussions with the local education authorities on a number of matters, and I cannot therefore now give a date or a time when firm proposals can be given. The whole question of the means tests will also be discussed with the local authorities. I can say, however, that those discussions will begin immediately.
    Mr. Gerry Fowler: Will my hon. Friend accept, for himself and his right hon. Friend, the congratulations of this side of the House on the fact that at last we have made progress on this vital matter? Will he also accept that the net cost of such a scheme is not nearly as great as the gross cost when one deducts supplementary benefit for those who would otherwise be in the dole queue? Will he accept, too, that many of us hope that, whatever restrictions are placed upon the initial scheme, it will prove to be the thin end of the wedge in securing adequate support for all in this age group?
    Mr. Oakes: I am grateful to my hon. Friend for what he says. It is, of course,
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    a red letter day for him too after his work on this matter both as a Minister and as a Back Bencher.
    Mr. St. John-Stevas: I accept the Minister's argument that there is something to be said for these sixth-form allowances, but is not my hon. Friend the Member for Wokingham (Mr. van Straubenzee) right in saying that, by introducing yet another benefit into a competing field, we are making a confused situation even more chaotic? Is there not now a strong case for a rational policy based on clear principles to deal with the educational and employment problems of the 16 to 19-year-olds?
    Mr. Oakes: There is a need for a rational approach, but in the meantime I think that the Government are right to establish the principle that they have. It is money that is wanted, not inquiries. I greatly welcome what the Government have done in ensuring that some youngsters who at present are denied higher education because they are poor will be able to achieve it in the future.

    Public Schools
    Mr. Grocottasked the Secretary of State for Education and Science if she will take steps to provide for equality of educational opportunity by incorporating the public schools into the comprehensive system.
    Miss Margaret Jackson: As I told my hon. Friend the Member for Enfield, North (Mr. Davies) on 18th April, my right hon. Friend has at present no plans to do so but remains firmly committed to the long-term aim in our manifesto of phasing out fee paying in schools.
    Mr. Grocott: Since 62 out of the 74 High Court judges and the overwhelming majority of leading industrialists, civil servants, diplomats, newspaper men and military men—not to mention 211 out of 282 Tory Members of Parliament—are public school-educated, is it not high time that we scrapped the system and gave all our children an equal chance?
    Miss Jackson: I accept what I am sure is my hon. Friend's underlying contention—that the quality of all these gentlemen would be greatly improved had they attended comprehensive schools.
    Mr. Stokes: Is the Minister aware that the hon. Member for Lichfield and Tam-worth (Mr. Grocott) wants to abolish everything which is good in England? Is she further aware that what the country needs is the spirit of leadership and service which the public schools so amply provide?
    Miss Jackson: I had no idea that my hon. Friend's ambitions were so widespread. I certainly accept that the country needs leadership and service. That is what it is getting and will always get from this party.
    Miss Joan Lestor: Will my hon. Friend convey to her right hon. Friend that, whatever the difficulties may be about the integration of public schools into the State sector, there is a real anomaly in relation to the registration as charities of schools such as Eton College and others in my constituency? Will she therefore do something about the Chancellor of the Exchequer, who seems very reluctant to take any action in relation to this question?
    Miss Jackson: I do not accept that my right hon. Friend is reluctant to take action, but I believe that the difficulties are more substantial than one would at first imagine.
    Mr. Adley: Is the Minister not aware that many thousands of parents, including, for example, myself, are nearly bankrupting themselves in order to take advantage of the United Nations Charter and provide the education of their choice for their children? Is it not a fact that people do this because they believe that there are advantages to be gained for their families? If the Minister and her right hon. and hon. Friends are interested in good education, would they not seriously be better employed in trying to understand what it is about the public schools that provides the sort of education that appears to be so advantageous, according to her hon. Friend the Member for Lich-field and Tamworth (Mr. Grocott), and trying to learn from them rather than trying to abolish them?
    Miss Jackson: I accept that there are many parents who mistakenly believe that by paying extra money for their children's education they will automatically give them a better standard of education. However, the questions of monetary difficulties
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    and salaries of Members of Parliament are not for me.
    Miss Maynard: Does my hon. Friend agree that it is high time that this became a short-term rather than a long-term objective? Is it not really a question of political will and a real desire to incorporate these private schools into the comprehensive system?
    Miss Jackson: Unfortunately, it is not as simple as a matter of political will. We have taken many steps in that direction—for example, by reducing the number of places that local education authorities have previously taken up in the independent sector. We are making progress.
    Dr. Boyson: Does the Minister agree that it is part of a free society that people are allowed to dispose of their remaining income as they wish after they have paid their dues to the State? Would not a desire for a proper education for their children be part of that? Would there be any moral claim on a State which outlawed three things—hard drugs, hard pornography and private education?
    Miss Jackson: I do not understand the hon. Gentleman. Do I take it that he is saying that hard drugs, hard pornography and private schools are all equally desirable?

    Comprehensive Education
    Mr. Litterickasked the Secretary of State for Education and Science what proportion of the current year's school leavers will have received all of their secondary school education in a comprehensive school.
    Mrs. Shirley Williams: I am afraid that the information requested is not available, because the information we collect on pupils leaving school includes only the school last attended and not any other secondary schools pupils may have attended in the course of their secondary education.
    Mr. Litterick: I am grateful for that answer. Does it not point to the fact that the various wild comments made by Conservatives about the effect of comprehensive education are based on ignorance and emanate from bigotry?
    Mrs. Williams: In 1973, of those leaving school 51 per cent. had attended comprehensive schools, and the figure has now risen to over 80 per cent. That seems to be a development in the right direction. It is interesting that the Conservative Party is almost wholly schizophrenic on the subject of comprehensive schools. We should like to know its true opinion.
    Mr. Rhodes James: Is the right hon. Lady aware that the eldest daughter of the hon. Member for Cambridge is leaving a comprehensive school this year, that we are delighted with her progress and that we believe in the comprehensive system, but as our own free choice?
    Mrs. Williams: I am delighted to hear that the comprehensive school has pleased the hon. Gentleman so much. I do not know what party that leaves his children to become members of.
    Mr. Ashton: Will my right hon. Friend make it perfectly clear to those Tory county councils, such as my own in Nottinghamshire, which are deliberately stalling and determined not to bring comprehensive education into the area that she will not stand for it? Is she aware that when Clay Cross took on the Tory Government in 1973 and defied the law, the Tory Government leaned on it very hard indeed? Can she now do the same to those Tory county councils which are refusing to bring in comprehensive education?
    Mrs. Williams: My hon. Friend will know that we have made absolutely clear to those authorities which have not yet submitted schemes, or submitted revised schemes, that the law must take its course in this case, as under all other Acts of Parliament.

    Tameside Litigation (Costs)
    Mr. Gowasked the Secretary of State for Education and Science what was the total cost to public funds involved in the legal expenses incurred by her Department in the Tameside litigation in the High Court and in the Court of Appeal.
    Miss Margaret Jackson: I have nothing to add to my reply to the hon. Member's Question on 21st November 1977.
    Mr. Gow: When does the Minister expect that the total cost to public funds of this disgraceful exercise by the former
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    Secretary of State will be known? Does the Minister recollect that the judge in the case found that the Minister has misdirected himself fundamentally about his duties? In those circumstances, may we look to a contribution from the present Secretary of State for Defence and from his successor?
    Miss Jackson: I think it extremely unlikely. As for when we shall know the answer, unfortunately we are awaiting the views of the local authority on its costs before any decision can be reached.
    Mr. Noble: Does my hon. Friend agree that the Tameside affair cannot be measured in financial terms alone but should be measured in terms of the deprivation suffered by many people, particularly the children who were forced into a selective system? As regards the late lamented Councillor Thorpe, who was chairman of the education committee and who was removed by the electorate at Tameside, would my hon. Friend care to comment on the reasons for his failure to achieve re-election?
    Miss Jackson: I am not sure that I would say that Councillor Thorpe is lamented. As for the reasons for his defeat, I understand that most ungallantly he blames his defeat on the immigration policies of the right hon. Lady the Leader of the Opposition—in which, of course, he may be correct. But, in fairness to the right hon. Lady, it is only right to point out that since Councillor Thorpe claimed, when he was last elected, that the electorate had chosen grammar schools, we can deduce that perhaps now they have chosen comprehensives.

    Secondary Education (Cheshire)
    Mr. Nicholas Wintertonasked the Secretary of State for Education and Science what recent discussions she has had with representatives of Cheshire County Council concerning the reorganisation of secondary education in Cheshire.
    Miss Margaret Jackson: My right hon. Friend has had none, but I have recently had a meeting with representatives of Cheshire County Council concerning the reorganisation of secondary education in Crewe.
    Mr. Winterton: I am grateful to the Under-Secretary of State for that reply.

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    Is she aware that many of my constituents whose children go to Crewe Grammar School for Boys are very pleased that she has turned down the county's proposals to establish a tertiary college in Crewe, which would have meant that at the age of 16 pupils would have had to transfer from a grammar school, interrupt their education and go to a tertiary college?
    Will the hon. Lady accept that uncertainty still exists about what will happen in the future in Crewe, and will she give an assurance to the House that the children who start selective education at Crewe Grammar School for Boys will be enabled to go through until the age of 18 to complete their education at that school?
    Miss Jackson: The hon. Gentleman will know the implications of the decision we have taken on the scheme in Crewe, and it is my understanding that all local opinion in Crewe was united in wishing for the original scheme put forward by Cheshire County Council rather than this new scheme put forward at such a late day.
    Mr. Flannery: Will my hon. Friend accept from me that, where anyone's constituents have the chance to send their children to a grammar school, far more of those constituents do not have the chance to send theirs to a grammar school? Will she accept, therefore, that the sooner we do not have Crewe Grammar School and other grammar schools, and the sooner we have comprehensive education all over the country, the more democratic will education be for every child?
    Miss Jackson: I entirely accept that, and we are working towards that end.
    Mr. St. John-Stevas: On behalf of my hon. Friends and myself, may I ask the hon. Lady whether the activities of herself, her Department and the Secretary of State would not be better directed to improving existing comprehensive schools rather than destroying grammar schools of proven worth?
    Miss Jackson: We are spending our time not only on seeing good comprehensive schemes brought into being but on improving all schools that currently exist.

    TEHERAN
    Mr. Litterickasked the Prime Minister if he will seek to visit Teheran in the near future.
    The Prime Minister (Mr. James Callaghan): I have at present no plans to visit Iran.
    Mr. Litterick: Is my right hon. Friend aware that the United Arab Emirates have tripled their expenditure on armaments during the last year and that this has taken place in response to what they regard as the rapid military build-up of Saudi Arabia and Iran, both of which are being heavily supplied with armaments by the United Kingdom? Therefore, will my right hon. Friend try to find a way of conveying to the Shah of Iran—and to this House—that there must be some limit to the quantity of arms that we are prepared to supply to both Iran and Saudi Arabia because we wish to avoid the repetition in the Gulf of the shambles that we and other great Powers have created in the Eastern Mediterranean?
    The Prime Minister: The expenditure on arms in almost every country is too high at present, and especially in the developing countries. That is one reason why I hope that the United Nations disarmament conference will be able to take steps to reverse that trend. I would point out to my hon. Friend that Iran has on her northern border a most powerful and heavily armed neighbour and that there has been a recent uprising in her Eastern neighbour. She is, therefore, properly concerned with her own security. However, I assure the House that we shall consider on its merits every proposal made for the sale of arms.
    Mr. Walters: Should the Prime Minister have the opportunity of visiting Iran, will he point out how much we and the Western world appreciate the important part that that country is playing in maintaining stability in the area? Will he also point out how much we value its important trade relations with Britain?
    The Prime Minister: The policies of the Shah of Iran are intended to produce greater stability in the area in which it is such a powerful component. Of course, Iran is the most important trading partner we have in Asia, and we must also take

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    that factor into account, too. But I hope that we shall be able to have good discussions with the Shah about a number of matters that are of concern, I know, to him in his process of liberalisation which has gone so far and which, I believe, he wishes to carry further. I should like also to express my appreciation of the help that he has given us in our policies in relation, for example, to the Middle East and Rhodesia.
    Mr. Newens: But in view of the flagrant abuses of human rights and the denials of elementary democracy in Iran, how can my right hon. Friend justify the continuation of the supply of huge quantities of arms to that country which are to be used primarily in suppressing the attempts of the people of Iran to obtain similar rights to those which we demand for ourselves in this country?
    The Prime Minister: I do not accept my hon. Friend's analysis. The arms that we are supplying are certainly not intended to work for internal suppression. They are intended for the reasons I gave in reply to the first supplementary question.
    On human rights there is concern, as is well known, and that concern is felt inside Iran as well as outside. But it is a difficult process for a ruler such as the Shah, who has immense power, gradually to release that power and to encourage more liberalisation while at the same time maintaining a degree of order. I hope that he will be able to do so. Certainly, we would support him in both efforts—namely, to secure greater liberalisation but at the same time to secure continual progress in that country.

    QUEEN'S REGULATIONS
    Mr. Ridleyasked the Prime Minister if there is a copy of Queen's Regulations for the Army in the library of No. 10 Downing Street paid for out of public funds.
    The Prime Minister: No.
    Mr. Ridley: Is the Prime Minister aware that Queen's Regulations do not forbid the wives of Service personnel protesting about the low level of pay, and was it not rather shabby of him to try
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    to stop them doing so? Secondly, will the right hon. Gentleman stop trying to pay decent wages to public service personnel by post-dated cheques drawn on the next Tory Government?
    The Prime Minister: The hon. Gentleman is quite right in saying that Queen's Regulations do not forbid Service wives making protests about the levels of pay or, indeed, other matters. Far from discouraging them or forbidding them to do so, when I went to Plymouth I met a deputation of Service wives from the Royal Navy and had a very full discussion with them about the whole matter. Therefore, perhaps the hon. Gentleman will withdraw that imputation. As regards post-dated cheques, I can promise the hon. Gentleman that we shall be here to redeem all the cheques that are issued.
    Mr. Roy Hughes: Will the Prime Minister consider allowing members of Her Majesty's Forces to join their appropriate trade union, so that they may then have opinions different from the one recently expressed in cold-war terms in China by a senior officer?
    The Prime Minister: My experience over the last few weeks convinces me that the Services are extremely well served in the matter of knowledge of their conditions and pay being made public and the pressures that are applied upon Her Majesty's Government to ensure that their obligations are met in full.
    Rear-Admiral Morgan-Giles: When this subject was last raised with the right hon. Gentleman, he assured the House that the Forces would get a square deal. Why has he not fulfilled that promise?
    The Prime Minister: Clearly, that must remain a matter of opinion, but in relation to all civilian employees, both in the Government service and generally, I think it true to say that the Services have been given an equivalent deal, together with a firm promise that where their conditions have fallen behind they will be brought up to date during the next two years. Despite our great success in the battle against inflation, we must not forget that there is still a continuing battle to be fought and won on that front, and every section of the community has to play its part.

    PRIME MINISTER (ENGAGEMENTS)
    Mr. Kenneth Lewisasked the Prime Minister whether he will list his public engagements for Tuesday 16th May.
    The Prime Minister: This morning I greeted President Khama of Botswana on his arrival for an official visit to this country. In addition to my duties in this House, I shall be holding meetings with ministerial colleagues and others. This evening, subject to parliamentary business, I hope to address the annual dinner of the CBI.
    Mr. Lewis: If the Prime Minister has time during the rest of the day, will he reconsider two speeches he made over the weekend? In the first of them he said that his Government had plenty of time. As for the second, will he reconsider what he said in terms of the family—that he would have a special family policy, the Government's family policy? Does the right hon. Gentleman realise that the impact of every Government policy so far has done nothing but damage families in this country? Unemployment is now higher than ever before, we have a poorer education system than we have ever had before, and we have a flagging National Health Service. Had not his Government better forget bringing in that kind of policy?
    The Prime Minister: I am glad to say that both speeches I made at the weekend were extremely well received and that I derived very great encouragement from them. I do not recall—I wish that I could pick the audience here; it would be a lot better than the one I have got—the first reference that the hon. Gentleman made. As regards family policy, however, I do not really see how he can make that charge when we consider the proposed and actual increases in child benefit, when we recall that the present Budget introduces a new reduced rate band which certainly helps every working wife to a greater extent than it helps where there is one income coming in, and when we recall a number of other measures of which the hon. Gentleman is well aware.
    What I feel is clear is that the policy of the Government—like that of others—has not been totally co-ordinated. As
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    there is now a larger number of women going out to work than ever before, a number of changes are needed if we are to preserve and enhance the family's dimension and the family circle, which I believe to be a very precious asset in our national life.
    Mr. Mellish: My right hon. Friend should not be worried, because most of us thought that the speeches were jolly good. [AN. HON. MEMBER: "What is your majority, Bob?"] Unlike some hon. Gentlemen, I do not worry about majorities. When the Prime Minister meets the CBI tonight, will he be good enough to revert to what is properly called his "Buy British" campaign and in this instance strongly urge British manufacturers to ensure that they buy British raw materials rather than buy from abroad? This is one of the worst features of our import problem.
    The Prime Minister: The accent on our import propensity is very considerable. I believe that the CBI is a very useful instrument for trying to bring suppliers and customers much more closely together. It is at the manufacturing stage that I believe "Buy British" can have most effect. It is "Buy British make British and sell British".
    Mrs. Thatcher: If the Prime Minister has always had a natural wish to help the family, why have his Government pursued a policy of heavy income tax on families, as on everyone else in society? Why have successive Labour Administrations taken so much away from families in income tax that they have left them with too little to keep themselves and then compelled them to apply for means-tested benefits in order to get some of their own money back?
    Mr. William Hamilton: Milk snatcher.
    The Prime Minister: The right hon. Lady's comment seems to be more an expression of opinion than a question asking for information, but I must tell her that, in addition to the benefits that I have already mentioned in reply to the Question of the hon. Member for Rutland and Stamford (Mr. Lewis), we have, as she will remember, kept the price of school meals steady during the course of the current year. I am particularly glad that we were able to increase the provision of free school milk. [HON.

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    MEMBERS: "Hear, hear."] I am sure that the right hon. Lady will join me in thanking the Chancellor for doing that.
    Generally, it seems to me that the burden that the family has had to carry has been part of the national burden borne over the last few years in order to get our situation right. I am glad to say that living standards are now going ahead faster than they have done for some years.
    Mrs. Thatcher: Will the Prime Minister address himself to the supplementary question which I asked? Is it not better to leave the family with enough of its own money to keep its own children rather than first to take it away in income tax and then to compel the family to suffer the indignity of applying for means-tested benefit such as school meals?
    The Prime Minister: The right hon. Lady obviously does not want to listen to the answers that I give, because it is quite clear from what my right hon. Friend the Chancellor of the Exchequer said that in fact income tax is being reduced in this Budget for the family. This was in every sense a family Budget when one takes into account school meals, school milk, the reduction in income tax and the increase in children's benefits. It is the right hon. Lady and her friends who have distorted the Budget by giving relief to those who are best off in the country—to those, indeed, who are getting the highest incomes. How that can be construed as helping the average family is more than I can understand.
    Mr. Terry Walker: Will my right hon. Friend have opportunity today to consider newspaper reports about the future production programme of British Aerospace and whether the future partners of British Aerospace will be European or American? Will he confirm those reports, which suggested that a Cabinet decision is forthcoming on this matter? This is most urgent and important to many workers in my constituency whose jobs depend upon it and also in view of the pressure of British Airways in trying to buy American aircraft at this time.
    The Prime Minister: My hon. Friend introduces one of the complications in
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    what is undoubtedly a natural instinct to buy British, because the conflicting interests of British Airways, British Aerospace and Rolls-Royce do not all run in the same direction. I can promise my hon. Friend that the Government are giving the most careful consideration to these matters. We shall try to produce an answer in due course that will best meet the national needs and, I hope, safeguard a great many jobs.
    Mr. Prior: Will the Prime Minister take time today to inquire why no decision has been reached about the removal of the hulk of the "Eleni V" from just off my constituency? Is he aware that the delay has caused grave misgivings among my constituents and that there has been a lack of decisive action? Will he further state that the Government will now hold a full inquiry into all the events of this ghastly accident in order that we can learn from the experience of what has happened so that we try not to make the same mistakes again?
    The Prime Minister: Without accepting that mistakes have been made in this matter, I understand fully the concern of the right hon. Gentleman and his constituents, as I believe we all do, especially taking recent events into account. I made inquiries before coming into the House and I understand that the immediate objectives of attaching tow lines securely to the wreck have largely been achieved. There is adequate buoyancy, and representatives of two leading salvage firms are now meeting in order to reach an early decision on the best course of action. If there are any lessons to be learned, I can assure the right hon. Gentleman that that will be so, but after every one of these disasters the local arrangements are reviewed very completely indeed in order to ensure the least possible damage to the coast.
    Mr. Prior: Is it not extraordinary that this ship—
    Hon. Members: Oh, not again.
    Mr. Speaker: Order. I have always tried to help hon. Members from both sides. If they have constituency interests, Members know that I try to help.
    Mr. Prior: What seems extraordinary is that the hulk has been lying off the

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    coast for 10 days, it has been known that it would have to be raised, it has now been raised and still no decision has been taken as to what to do with it. It really is a terrible situation for my constituency, and I believe that the Government ought by now to have decided what to do.
    The Prime Minister: I do not complain about the right hon. Gentleman using this opportunity to raise what clearly is a very serious matter for him, but I think he will excuse me from knowing all the details of these matters. I shall certainly make inquiries of the appropriate Ministries about the situation, but I understand that eight spraying vessels, together with a naval minesweeper, were on the scene within 24 hours, that the numbers have progressively been increased and that the local authorities were prepared when the first oil reached the beaches, but I also understand that they are still having great difficulty in deciding about the future of the vessel. That, however, does not necessarily lie wholly in the hands of the Government. I can assure the right hon. Gentleman, and especially the people who live on that part of the coast, that the Government will make sure that there is no delay in reaching decisions on this matter.

    QUESTIONS TO THE PRIME MINISTER
    Mr. Newens: On a point of order, Mr. Speaker. Is it possible to give further consideration to the pattern which Prime Minister's Questions seem to take time after time, when hon. Members flit from one subject to another which has nothing whatsoever to do with the subject of the Question? I believe that I am correct in saying that some time ago it was agreed that the Prime Minister would answer a great many more Questions of substance instead of merely dealing with the general Questions which come forward.
    Therefore, would it not be timely for us to ask that some further consideration be given to this matter in order to ensure that hon. Members on both sides of the House have a better opportunity to follow through themes which are developed during Question Time? I also believe that many members of the public who listen to what is going on here are completely
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    bemused by the way in which we conduct our affairs and that we ought to do something about it.
    Mr. Speaker: I am much obliged to the hon. Gentleman for raising that very serious question. I have no doubt that the usual channels will have noted what the hon. Gentleman said.
    Mr. Heffer: Further to that point of order, Mr. Speaker. As regards the last two questions put to my right hon. Friend the Prime Minister by the right hon. Member for Lowestoft (Mr. Prior), I should like to ask what exactly is the position. There are many hon. Members on the Government side who are not Members of the Front Bench and who may well have constituency problems, too. Is it not right that right hon. Members should either put down a Private Notice Question or raise the matter with the appropriate Minister and not use their Front-Bench position in the way in which it was used?
    Mr. Speaker: As I said to the House, I have tried to help many hon. Members on both sides of the House when I know that they have anxieties about their constituencies.
    Mr. William Hamilton: Abuse.
    Mr. Speaker: Order. I must say that both sides of the House benefit from time to time from the efforts on my part to be fair and, above all, that is what I try to be.
    The Prime Minister: Further to that point of order, Mr. Speaker. While it may be of benefit to the House, I hope that you will also appreciate in your consideration that it is sometimes an embarrassment to me when I am asked detailed questions on any of the thousands of matters that pass in front of the Government, when it is only by coincidence or good fortune that I may happen to have the information.
    I suggest, with all due deference to hon. Members, that it would be better if we reverted in some ways to the earlier practice of addressing far fewer detailed Questions to the Prime Minister, but addressing individual Ministers on the subjects on which hon. Members want replies. This would enable me to give far better consideration to what is addressed to me.
    Mr. Tebbit: Further to that point of order, Mr. Speaker. Is it not a fact that, during the period when the Prime Minister said that he would welcome more Questions on more specific matters to avoid the difficulty of the typical Question about his engagements for the day—a visit to Chingford or something of the sort—he fell into the habit of transferring all those Questions, and that hon. Members who imagined that they had a Question in the first three which were to be reached too often found that that Question had been transferred?
    If I may say so, Mr. Speaker, it is not a matter for you and the Chair. It is a matter primarily for the Prime Minister—whose office decides which Questions he will keep and which he will transfer—to sort out the business of how Prime Minister's Question Time proceeds.
    The Prime Minister: Further to that point of order, Mr. Speaker. The hon. Member for Chingford (Mr. Tebbit) has touched on a very important matter. I think he will find, when he looks at the Answer which I gave him earlier, that I transferred very few Questions during that period. The truth is—I shall offend the hon. Gentleman by saying this—that Question Time was abused by him and some of his hon. Friends. They were putting down Questions in an attempt to get me to take over ministerial responsibilities, to prove party points in the House, and not genuinely seeking information at Question Time. I know that that statement offends Opposition Members, but I want to try o give reasonable Answers o sensible and well-designed Questions. That was not, however, what the hon. Gentleman tried to do when he put his Questions down.
    Mr. Stoddart: Further to that point of order, Mr. Speaker. Is not the point that my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) was trying to make that, while we understand your desire to help hon. Members in constituency matters, all hon. Members other than Front Benchers do not have that opportunity, since Front Benchers are called automatically, whereas it is very seldom—and I appreciate that it can only be very seldom—that Back Benchers are called? Was not that the point that my hon. Friend was making?
    Mr. Speaker: I understand the difficulty, if I may refer to the general problem first. The House knows that I now keep a register of every hon. Member who is called to ask the Prime Minister a supplementary question, because the facts of life are that in recent days far more hon. Members want to be called—and I understand that they want to be called—then it is possible for me to call. In order to ensure justice, I am trying to keep a register.
    With regard to the Opposition Front Bench today, it is within the memory of the House that it is a considerable time since I called anyone from that Front Bench other than the Leader of the Opposition during Prime Minister's Questions, as it so happens. That is a fact to be borne in mind.
    With regard to the open Question, this has become a problem in this Parliament for the first time. It used not to be. We used to be able to get down Questions to the Prime Minister. We have always had a full Question period to the Prime Minister. But the House itself has to look to that, not me.
    Mr. Tebbit: Further to that point of order, Mr. Speaker. I appreciate that the Prime Minister is very keen that nobody should make party political points in this House of Commons. He does his best to avoid doing that himself, I am sure. But the point is that if he maintains that Questions about specific matters should be transferred to the Ministers concerned and that we should not ask general Questions of him, it will be difficult to find anything at all that we can ask the Prime Minister. I repeat that it is in his hands to improve the standard in Prime Minister's Question Time if he so wishes, because it is he who has the opportunity to pick the Questions that he wants to answer. That is what he has been doing.
    Several Hon. Members rose—
    Mr. Speaker: I will, of course, call any hon. Member who wishes to raise a point of order, but I suggest that the House would like to move on to the Private Notice Question.
    Mr. Ashton: Further to that point of order, Mr. Speaker. I am sorry to prolong these exchanges, but is it not a fact

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    that since the House has been broadcasting Prime Minister's Question Time live, the number of Questions put down has doubled and that this had never occurred before the past few weeks?
    Mr. Speaker: Not only that, but our own normal Question Time has slowed down by nearly 30 per cent. I understand the reasons, and if I were sitting on the Back Benches, I should probably also want to be heard. But the truth is that we have to adjust to a new dimension in our affairs.
    Mr. Ridley: Further to that point of order, Mr. Speaker. Is it not the case that the open Question, as you so rightly call it, presents the Prime Minister with extremely great difficulties because he does not know which supplementary questions he will be asked, which is why we have had such an abysmally low level of answers from the Prime Minister? Would it not be for the convenience of the Prime Minister himself if he undertook to accept more specific Questions, because in my own experience, during the period to which he referred, every Question that I put down on a specific topic was transferred, but all the open Questions were kept? He has only himself to blame if he is always being bowled out.

ZAIRE (BRITISH SUBJECTS)
Mr. Luce(by Private Notice) asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the position and safety of British subjects in Zaire following the reported invasion across the southern borders.
The Secretary of State for Foreign and Commonwealth Affairs (Dr. David Owen): The Government are making every effort, through the British Embassy in Kinshasa and other Western countries with communities in Shaba province to ensure the safety of the British community in the area of the fighting. The total number of British and Commonwealth citizens in the Shaba province—the area affected—is believed to be 171. We are in close touch with the mining companies, who employ a number of British subjects. The town of Kolwezi, where there are 24 British and Commonwealth citizens, is
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reported to have been taken by the invading force. We have, so far, had no reports of harm to British subjects. The mining town of Tenke-Fungurume, east of Kolwezi, could be affected. Of the 19 British subjects there, six dependants were flown by their company to Kinshasa yesterday and other dependants are being flown today to Zambia.
My right hon. Friend the Prime Minister and I discussed this question in detail with President Kaunda yesterday. The President has assured us that Zambia will give every facility to British subjects evacuated from Shaba province.
This is a serious and threatening development to the stability of this part of Africa. I will keep the House closely informed and make all possible information available to the relatives of those concerned.
Mr. Luce: I am grateful to the Secretary of State for that statement. May I put three questions to him? First, since it is a primary duty of any British Government to safeguard the interests of British subjects in any part of the world, may I tell him that the Opposition will support any positive action that he decides to take, preferably in concert with other Western Powers, to protect the interests or British subjects? May we also welcome the fact that President Kaunda has offered to help in this connection?
Secondly, can the Foreign Secretary tell the House a little about the nature of this invasion? What information is available to him? Is there evidence of any military support—whether by means of equipment of personnel—from outside powers, particularly Cuba or the Soviet Union?
Thirdly, in view of the historic European links with Zaire and with other African nations, and in view of the Western interest to see stability in the African continent, can the Foreign Secretary tell the House what action he will seek to take in concert with European and other African Powers to help maintain stability in Zaire?
Dr. Owen: As to the first question, we shall act in concert with Western Powers. We are in close touch with Belgium and France and, of course, the United States. As for the hon. Gentleman's last question,

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there will be a private meeting in Denmark of Foreign Ministers of the European Community on Saturday and Sunday. That will provide a very good opportunity to discuss this situation.
As to the nature of the attack, an attacking force—which appears to be similar in nature to that which mounted an incursion into Shaba from across the border with Angola in March 1977—attacked the region of Kolwezi. There is no evidence of involvement of Cuban forces, but, of course, there are about 20,000 Cuban troops in Angola.
Mr. John Mendelson: While the Foreign Secretary will, of course, receive support from everyone in this House and in the country in protecting the interests and, above all, the safety of British workers and managers out there, may I ask that he should not be carried beyond that into co-operation with, say, France or other Powers immediately to take action of a military nature that might be based upon the assumption, not proven, that this is an operation coming from any particular outside Power? Has my right hon. Friend seen the reports in Brussels that there is a genuine inside movement against the Government in that country at the moment? We have no business to take sides if that is the case.
Dr. Owen: As my hon. Friend knows, the root of this problem goes way back to the whole question of Katanga. There are, and have been for a number of years, Katangese who have been allowed to stay in Angola. There is no evidence that the movement is backed by anyone other than them at present, but it would be idle to pretend that there is not the possible danger of their being supported by other forces. This is something we want to watch very closely to make sure that it does not escalate into a very serious arms struggle—which it could do.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call those hon. Members who have been seeking to catch my eye.
Mr. Amery: If, as appears to be the case, the insurgents came from Angola, would the Foreign Secretary agree that they could not have come without Soviet
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and Cuban authorisation? Secondly, as it is alleged that they came through Zambian territory, did President Kaunda make it clear to him that this was against the wishes of the Zambian Government?
Dr. Owen: As to the first question, I do not think that we can make the assumption that the insurgents came with such authority. I should be very surprised however if they came without the Soviets and Cubans knowing about it.
As to the second question, it is not exactly clear what was the line of attack. It could have been to cross that small part of Zambian territory. But when we discussed that with President Kaunda, he knew nothing about it and was having inquiries made. We have no evidence that people, armed and in uniform, or in any military sense, crossed through Zambia, but that is a possibility.
Mr. Dalyell: As delicate and emotive issues of recent history are involved, would it not be better to do the work on an EEC rather than on a Belgian basis, and can it wait even until the weekend conference?
Dr. Owen: We are in close touch with our European colleagues, and I agree that it would be unfair to Belgium to expect a response entirely from that country. Its traditions and historical links are well known. If it is necessary, I shall be speaking to people well before the weekend. The situation is moving very fast, and it is difficult to know at this stage exactly what is happening.
Mr. Fairbairn: Can the Foreign Secretary give us some more detailed information? How many rebels are involved, who armed them, who trains them, who leads them and what is their political objective? Do they have the backing of Soviet Russia, and do they have the approval or disapproval of the British Government?
Dr. Owen: The answer to the last question is perfectly clear and has been made known to everyone. We do not believe that the way to solve these problems is through armed conflict. We are, therefore, opposed to any threat to the territorial integrity of the country. The way to resolve these disputes is through peaceful negotiated means.

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As for his other questions, the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) is asking for a degree of detail that I cannot provide. I have given to the House all the information that I have.
Mr. Rathbone: In the light of the Foreign Secretary's first answer to my hon. Friend the Member for Shoreham (Mr. Luce), what representations have Her Majesty's Government made to the Governments of Cuba and Soviet Russia?
Dr. Owen: The main question is that the attackers have come from Angola. Then the question is what is the involvement of the Angolan Government. As for Cuban involvement in Africa generally, and Cuban involvement in Angola in particular, the view of the British Government is clear and is well known. I ask the hon. Gentleman to look at the issue in its historic perspective. There is no doubt that there is a danger of adventurism of the kind we have seen by the Soviet Union and by Cuba there. But at root there is a complex dispute over Katanga which goes back deep in history, We need to stand back and to consider it in that context, as well as in that of our genuine concern for other dangers.
Mr. Hastings: Referring to the Foreign Secretary's last answer, is it not high time that the Foreign Secretary protested again—if he is interested, as he says he is, in stability in the area—to the Cuban Government and to their Soviet masters about the presence of two or more Cuban divisions in Angola? Why cannot they be told to take them away?
Dr. Owen: The hon. Gentleman asks questions as though he were totally unsophisticated in these matters. The House knows that that is not the case. He holds his views, and that is fair enough. But he knows perfectly well that it is the right of any sovereign Government to invite other troops into their territory. We disapprove of it, particularly when it changes the balance of power—
Mr. Hastings: Has the right hon. Gentleman said so?
Dr. Owen: Of course I have said so. I made a speech at the Mansion House
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—of which I shall send the hon. Gentleman a copy—which made my view on Cuban involvement in Africa very clear.
Mr. Rathbone: On a point of order, Mr. Speaker. Since the Foreign Secretary refused to answer my question, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest opportunity.

ELIZABETH GARRETT ANDERSON HOSPITAL
3.55 p.m.
Mr. Geoffrey Finsberg: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the closure of the Elizabeth Garrett Anderson Hospital."
This hospital is of great importance to women, many of whom do not wish to have doctors attending them other than of their own sex. This applies particularly to some of the immigrant communities whose representatives have made representations to me.
It is also important because there are breaches of faith involved. The Secretary of State confirmed the view of his predecessor, which was recorded in Hansard on 6th May 1975. That statement was read out by the hon. Member for Holborn and St. Pancras, South (Mrs. Jeger) quoting the Under-Secretary of State for the Home Department who said:
"'Fortunately, as quite a lot of women doctors are available, many women are able to choose a woman GP, or go to the Elizabeth Garrett Anderson Hospital. Such choice is a factor in NHS medical treatment and it will continue to be'."—[Official Report, Standing Committee B, 6th May 1975; c. 252.]
The hon. Member for Holborn and St. Pancras continued:
"I am sure that my hon. Friend would not have given such a categorical undertaking in Committee without consulting her hon. Friend the Minister of State, Department of Health and Social Security."—[Official Report, 16th May 1975, Vol. 892, c. 970.]
The breach of faith was compounded—
Mr. Frank Allaun: On a point of order, Mr. Speaker. On previous occasions, when hon. Members have strayed into arguing the case, you have promptly

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pulled them up. The hon. Gentleman was so straying during the past few minutes.
Mr. Speaker: I am much obliged to the hon. Member for Salford, East (Mr. Allaun). We must treat everyone alike and I try to do so. The hon. Member for Hampstead (Mr. Finsberg) must make out a case for holding an emergency debate. He must not argue the merits of the case.
Mr. Finsberg: I was not straying, Mr. Speaker, as I think the House is well aware. I was giving the reasons why we should have the debate. One of the reasons concerns a breach of faith. That breach continued, because in the debate in another place on 26th April, the following was stated:
"the view of the right honourable Barbara Castle and repeated by her successor in office, … who said that he believed that the future of the hospital would be within the ambit of a district general hospital."—[Official Report, House of Lords, 26th April 1978; c. 1926.]
That breach of faith was repeated in a DHSS statement of 17th February.
The other reason why this is an important matter is that there was a meeting with the Minister of State and the hon. Members for St. Pancras, North (Mr Stallard) and Holborn and St. Pancras, South when we were given a categorical assurance that no statement about closure would be made without prior notification to the three hon. Members. That assurance has not been honoured, and that is a reason why this matter should be debated urgently in the House. Any issue that can combine the three hon. Members for Camden is obviously a bipartisan matter. It is a specific matter, because a closure date has been announced and a spurious offer has been made, yet again to put the Elizabeth Garrett Anderson Hospital into the Whittington Hospital. That hospital does not want it, and has said so.
The matter is urgent for two reasons. First, the Government business managers must know that if they do not accede to this request, those of us who are interested will follow the lead of the hon. Member for Islington, South and Finsbury (Mr. Cunningham) and block all Government business. The Government business managers would not like that.
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They will remember what happened previously. They had to give in to the hon. Member for Islington, South and Finsbury.
The issue is urgent because the action, once taken, would be almost irreversible. There is a need for this action to be justified to the House.
Mr. Speaker: The hon. Member asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"the closure of the Elizabeth Garrett Anderson Hospital."
As the House knows, under Standing Order No. 9, I am directed to take into account the arguments set out but to give no reasons for my decision. I am afraid that I cannot accede to the hon. Gentleman's request, although I have listened carefully to what he said.
Mr. Mellish: On a point of order—a friendly point of order—Mr. Speaker. I have listened to what has been said and I understand and respect your ruling. But in a human interest matter of this kind—there are no party politics involved—would it not have been a good thing if the Secretary of State for Social Services had been here to listen to what was being said? He must have known that such an argument was to be raised. Should it not be put on record that the least he could have done was to have the courtesy to come and listen?
Mr. Speaker: That might be friendly to me, but it was not friendly to someone else.

GOVERNMENT CONTRACTS
4.0 p.m.
Mr. John Cope: I beg to move,
That leave be given to bring in a Bill to regulate Government contracts; and for connected purposes.
The purpose of the Bill is to stop Governments from using the purchasing power of the public purse in a discriminatory manner for their own purposes without the express approval of Parliament. It seeks also to provide proper controls over the operation of discriminatory powers if Parliament should, in the future,

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approve such powers for some purpose. Obviously, the immediate example I have in mind is the pay policy and the enforcement of the so-called voluntary pay policy, but the Bill covers any discrimination.
In my view, public servants should make the best buy they can when purchasing the items that the Government need, and do nothing else at the same time. If a Minister or an official were to discriminate in favour of a particular firm out of a mere preference for one firm rather than another, we should all rightly be horrified and suspect corruption. Indeed, the black list system which has now been adopted by the Government was anticipated by the Royal Commission under Lord Salmon on the standards of conduct in public life. It chose as an example of possible corrupt practice the refusal to include a company on a list of suppliers invited to tender for a particular contract. Naturally, it was concerned that such a practice should not occur: and we, too, should be concerned.
Therefore, Part I of the Bill would make it clearly illegal for a Minister or an official of the Government to award or fail to award a Government contract on any ground other than the fitness, having regard to all the circumstances including price, of the goods and services to be supplied. The Bill would provide for fines related to the size of the contract involved.
If we in this House do not stamp on this practice now, I believe that the practice will increase. Indeed, even since I put this motion on the Order Paper the required 21 days ago, a further extension of the practice has been discovered. The case of GEC-Schreiber is now public knowledge. It seems that that case may be illegal under the existing law. It concerns discrimination under the Industry Act and would not be covered by my Bill but is covered by other legislation.
I believe that the discriminatory awarding of contracts without parliamentary permission is a disgraceful constitutional practice. If the Government argue in a particular case—as they do now concerning pay policy—that it is the best or the only way to achieve some policy, let them come to the House, and get approval.
A few minutes ago the Prime Minister seemed to be saying that discrimination
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in favour of buying British might be a good idea, particularly in the context of the aircraft industry. Those remarks surprised me, because it has recently come to my knowledge that Customs duties at present actually discriminate against British Airways buying British aircraft and in favour of that corporation buying American aircraft. That is a matter which I am attempting to pursue in another manner and which I cannot pursue today.
Part II of the Bill would come into play if Government purchasing were to be used to discriminate at some time in the future. It would provide that any Department or office of the Government which legitimately discriminated would have to be the subject of a special report each year by the Comptroller and Auditor General in which he set out the additional cost of discrimination, and such costs would count against the estimates of the Department whose policy was supported by the discrimination, and not the Department which signed the contract.
I believe that it is important that the House and the public should realise that discriminatory Government contracts cost money and that they distort the figures of Government spending on the various programmes. I give a hypothetical example. Let us suppose that the DHSS is stopped from buying some hospital beds from the supplier who submitted the lowest tender because he is not complying with pay policy. Three consequences follow. First, it benefits another supplier who pays lower wages but charges higher prices, so distorting competition in favour of the less efficient. That is an inevitable consequence of the policy. Secondly, it increases Government expenditure in total. Thirdly—this is an important consequence—it increases National Health Service expenditure in particular, although that extra expenditure is designed to assist not health policy but economic policy.
There is a concealed virement or transfer of money voted for one purpose to another purpose. Normally, that is not allowed. Incidentally, given cash limits, the result is also a reduction in the amount that can be spent on health care.
I hope that the Bill will appeal to Members in all parts of the House. I think that it should appeal to the nationalists, who do their best to identify

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supposed discrimination in the system against Scotland and against Wales. The Bill would control any such discrimination if it were to occur. The Bill also should appeal to the Liberals—if they were here—as being an extension of the careful accounting bequeathed to us by the Gladstonian tradition. I hope that the right hon. Member for Down, South (Mr. Powell) and his colleagues will likewise support it for the same reason.
The Bill should appeal to those Labour Members who dislike enforced pay policies. For the same reason it should appeal to the TUC, which is against such policies. It should appeal to the CBI, which last week called for a larger role by the Commons in the creation of pay guidelines. It should even appeal to the Government. They—I am sure that they realise it—have got themselves into a grave constitutional difficulty and my Bill would get them out of it. Part II, in particular, would provide machinery for the Government to do legally, and under proper control, that which they are now doing unlawfully. I therefore hope that they, too, will support my Bill.
It is therefore with every expectation of a clear run for the Bill through to the statute book, even at this stage of the parliamentary year, that I present this Bill. On that basis I ask leave of the House to introduce the Government Contracts Bill.
Question put and agreed to.
Bill ordered to be brought in by Mr. John Cope.

GOVERNMENT CONTRACTS
Mr. John Cope accordingly presented a Bill to regulate Government contracts; and for connected purposes; And the same was read the First time; and ordered to be read a Second time upon Friday 14th July and to be printed. [Bill 132.]
ORDERS OF THE DAY

  FINANCE BILL
  (Clause No. 11; new clauses relating to stamp duty on house purchase, indexation for capital gains tax, deferred payment of duty on whisky or interest on repayments of overpaid tax.)
  Considered in Committee. [Progress 10th May.]
  [Sir MYER GALPERN in the Chair]
  4.10 p.m.
  The Chief Secretary to the Treasury (Mr. Joel Barnett): On a point of order, Sir Myer. The Committee will recollect that I was accused by the right hon. and learned Member for Surrey, East (Sir G. Howe) of misleading the Committee in some figures I gave. He said that I had given false figures. I remind the Committee of what was said at the time. It stemmed from the fact that the right hon. and learned Gentleman had said that Inland Revenue and Customs and Excise staff had grown by 20,000 between 1974 and 1978 and suggested that they could be cut so as to make a considerable saving.
  I said on 8th May:
  "Another big item which the Shadow Chancellor put forward for offsetting the tax cuts was a cut in the staff of the Inland Revenue and the Customs and Excise, which, he claimed, had increased by 20,000 since 1974. The increase between 1974 and 1978 was about 13,000, slightly less than the increase between 1970 and 1974, when it was 15,000."—[Official Report, 8th May 1978; Vol. 949, c. 915.]
  On 10th May the right hon. and learned Gentleman said:
  "I have taken the precaution of checking the figures"—
  since he had previously spoken—
  "and the actual figures are as follows. On 31st March 1974, the total employed by Customs and Excise and Inland Revenue was 94,800. On the same date in 1970 the total was 86,500. There was an increase during the four years March 1970 to March 1974 of 8,300 in round figures. Almost all of that, just over 7,000, was in Customs and Excise … The increase under this Government from the end of March 1974 to the end of last year has been 20,000."—[Official Report, 10th May 1978; Vol. 949, c. 1194.]

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  Clearly, it would be right for me to apologise to the Committee if I had misled it and if the facts that I had given were incorrect. In fact, the facts that I gave to the Committee were correct, and the right hon. and learned Gentleman once again has his figures wrong. I must ask him to apologise and withdraw the serious accusation that he levelled at me.
  In fairness, I should give the Committee the figures. The totals employed by the Inland Revenue and Customs and Excise are as follows: 1st April 1970, 87,125; 1st April 1974, 102,152; 1st April 1977, 113,961; 1st April 1978, after adjusting for the effect of the Budget, 115,079. The increase is thus some 15,000 between 1970 and 1974, some 11,800 between 1974 and 1977 and some 12,900 between 1974 and 1978.
  The reason for the right hon. and learned Gentleman's error is that he took the permanent figures and ignored short-term appointments. For example, on 1st April 1974 there were 7,303 people in post on short-term appointment in the Inland Revenue. Thus, when the right hon. and learned Gentleman told the Committee that I was wrong and said that the total employed on 31st March 1974 was 94,800, that was untrue. The actual total employed at that date was 102,152. I repeat that the right hon. and learned Gentleman has his figures wrong, and I ask him to withdraw the serious charge that he made against me.
  Sir Geoffrey Howe (Surrey, East): I am grateful to the right hon. Gentleman for that information. He will recollect that the figures that I gave in my speech on 10th May, from which he has quoted, were then stated to have been drawn from answers to Questions. The Questions were those answered in relation to Inland Revenue staff on 19th January 1978—this is column 310 of Hansard—and on Customs and Excise staff on 16th January 1978, at column 27 of Hansard. They are a familiar line of inquiry, which has been pursued by hon. Members on both sides over a number of years.
  The right hon. Gentleman has not challenged the figures that I gave based on those Written Answers. The Questions were related to permanent staff and, as far as I know, there has been no disclosure in answers or anywhere else of the existence of the temporary staff to which the right hon. Gentleman has referred.
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  If one takes the inquiry a stage further, as clearly one should, and studies the annual reports of the Board of Inland Revenue—I look at the 119th report for the year ending 31st March 1976 and the 120th report for the year ending 31st March 1977—one sees that in each of those reports there is a chapter, chapter 4 in each case, entitled in 1976 "The Staff" and in 1977 entitled "Staff and Organisation". Those two chapters set out, in 1977, under the heading "Staff Numbers", detailed figures which coincide precisely with the figures given in the parliamentary answers to which I have referred. They refer—I quote from the most recent one, 1977—to the following:
  "Staff Numbers—At 31st March 1977 the Department had 83,885 permanent staff."
  That is one of the figures I have been quoting—
  "The table below shows the growth of staff numbers for selected years since 1939."
  We then turn to paragraph 53:
  "The table shows that the 3,600 additional staff this year were needed, as in previous years",
  and so on. Therefore, throughout these reports the references are to staff and organisation—staff numbers. When the reports talk of the need for "additional staff", without qualification, they give the figures on which I have relied taken from the annual reports, and the figures given by Treasury Ministers in answer to Questions.
  If one looks at the most recent report of the Commissioners of Customs and Excise for the year ended 31st March 1977, one finds a much more laconic reference. There is only one reference to the figures there: the number of staff in post on 31st March 1977 was 29,389.
  The figures I gave were founded on questions directed, in each case over a number of years, to the number of permanent staff employed by these Departments. But there is nothing anywhere in any of the annual reports of the Commissioners of Inland Revenue to suggest that there is any difference between staff numbers taken in the round and the additional staff appointed this year and the number of permanent staff quoted in those figures. The permanent staff figures are those which I gave to the Committee and are entirely in line with the answers given by Treasury Ministers. For the purposes

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  of the calculation I was giving, they are the relevant figures. They represent the permanent growth in the size of the staff of these Departments as reported to the House in successive parliamentary answers.
  Mr. Joel Barnett rose—
  Mr. Stan Thome: On a point of order, Sir Myer—
  The First Deputy Chairman: Order. I confess that I find points of order one of the most difficult aspects of occupying the Chair. One is always told that one cannot say that anything is out of order until the point of order has been heard. But, having heard what I have just listened to from both sides, I think that the whole business is absolutely irregular. It has nothing whatever to do with the Chair. I am here to conduct the Finance Bill and to permit hon. Members to start discussing New Clause No. 1. Therefore, I do not propose to allow any further discussion on the point of order. There are other methods, well known to both sides, by which this matter can be raised. What has happened is irregular. I am therefore calling New Clause No. 1—Sir Geoffrey Howe.
  Mr. Joel Barnett: Further to that point of order, Sir Myer. A very serious accusation has been made against me personally as a Minister giving incorrect information to the Committee. The right hon. and learned Gentleman has once again misled the Committee. I ask him to withdraw his accusation. It is quite disgraceful.
  Sir. G. Howe rose—
  The First Deputy Chairman: Order. We are not going to carry on with this. We are here to discuss the Finance Bill.
  Sir G. Howe: Further to that point of order, Sir Myer. I have quoted from the parliamentary answers given to Questions tabled by my hon. Friends. The figures that I quoted are founded on those parliamentary answers and on the figures quoted in the annual reports of the Commissioners of the Board of Inland Revenue, and the only figures quoted in those annual reports.
  Mr. Joel Barnett: That is not true.
  The First Deputy Chairman: Order. There are many methods whereby this matter can be pursued other than by addressing points of order to the Chair. I want to get on to the business that we have down for consideration.
  Mr. Thorne: Further to that point of order, Sir Myer.
  Mr. Nicholas Ridley rose—
  The First Deputy Chairman: I am not taking any more points of order. I have indicated that quite clearly. The whole thing is irregular.
  Mr. Ridley: I beg to move, That the Chairman do report Progress and ask leave to sit again.
  The First Deputy Chairman: I am not accepting the motion.

  FINANCE BILL
    New Clause No. 1

      INDEXATION OF CAPITAL GAINS TAX
      '(1) At the end of section 20(4) of the Finance Act 1965 there shall be added the words "Provided that the said total amount shall be multiplied by the retail price index for March in the year of assessment and divided by 100."
      (2) At the end of section 20(7) of the Finance Act 1965 there shall be added the words:
      "(8) The amount of the chargeable gains shall be computed as provided in this Act subject to the amount of the consideration, the value at 6th April 1965, and the sums allowable under paragraph 4 of the Sixth Schedule to this Act, being adjusted by applying thereto the fraction 100,/y where Y is the retail price index at 6th April 1965 or for the month in which the acquisition for disposal is deemed under this Act to occur.
      (9) In this section "the retail price index" means in relation to periods from 1st January 1962 the general index of retail prices and in relation to earlier periods an index which shall be, calculated and published by the Board."
      (3) The provisions of this section shall apply for the year 1978–79 and subsequent years of assessment.'.—[Mr. Lawson.]
      Brought up, and read the First time.
      Mr. Nigel Lawson: I beg to move, That the clause be read a Second time.
      The new clause stands in the name of my right hon. and learned Friend the

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      Member for Surrey, East (Sir G. Howe), who I must say is owed an apology by the Chief Secretary—
      Mr. Joel Barnett rose—
      The First Deputy Chairman: Order. I think it is unfair of the hon. Member for Blaby (Mr. Lawson) to introduce a topic when I have said that it is out of order. I hope that he will conduct himself appropriately to the dignity of the Committee.
      Mr. Lawson: This is a matter which is not new to the Committee, but I make no apology whatever for bringing it before the Committee again on this occasion. It is a new clause to index the capital gains tax—[Interruption.] May I have some protection, Sir Myer, from the non-stop chattering—
      The First Deputy Chairman: Order. I think that the hon. Gentleman is getting more interference from right hon. and hon. Members on his own side of the Committee than he is geting from the other side.
      Mr. Lawson: This is a matter which has been raised on a number of occasions, in previous Finance Bill Committees and in the House on Report, but I make no apology for again raising the matter, because we have had, since it was last debated on the Report stage of the Finance Bill last year, a very important document from the Inland Revenue on this subject. This carries the matter a little further, and in that sense it is a most helpful document. The fact that it does not carry it to a successful conclusion from the Opposition's point of view, and, I believe, from most of the Committee's point of view, is a matter which we hope can be put right even at this late stage.
      Perhaps it might be as well to put the matter into perspective. The question has been raised in previous debates on this matter by, I believe, the right hon. Member for Down, South (Mr. Powell) about whether there should be any capital gains tax at all, or whether there should be any capital taxation at all. It is my view, and the view of my right hon. and hon. Friends, that there should be capital taxation. But it is not at all clear to us that there need be a whole battery of capital taxes in order to achieve the taxation of capital.
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      At present we have, at the very least, four major taxes on capital in one shape or form. We have a surcharge on investment income, capital transfer tax, stamp duty—one part of which we shall be coming to shortly—and we have capital gains tax. It seems dubious whether we need the last-named tax at all.
      If the total amount of capital taxation is adequate—whatever is considered to be adequate, and there might be differences of opinion within the Committee on that—do we need four totally separate taxes on capital to achieve it?
      If we are to have a tax on capital gains, it should be just that—a tax on genuine, real capital gains and not on paper gains. Yet it has been revealed in a recent speech by one of the Treasury Ministers that before the minor changes introduced in the Budget, of the total expected yield this year from capital gains tax of £390 million in a full year, no less than £350 million was the result of purely inflationary gains—paper gains—and only 10 per cent. of the yield was derived from genuine gains.
      I have no idea whether that is right or wrong, and, no doubt, the Minister will confirm or deny it. All I know is that that is the figure that was thrown across the Chamber by Ministers in an earlier debate. But we are concerned about the principle of whether inflationary gains, which are only paper gains, should be taxed.
      Mr. Ron Thomas: Is the hon. Gentleman suggesting that his party wants to give another tax handout of £350 million to the wealthy section of our society?
      Mr. Lawson: I thought I made quite clear that we are concerned here with justice. Despite the jeers of hon. Members below the Gangway, this is accepted by all those who have made a serious study of the matter and is, indeed, why the Inland Revenue, under instructions from the Treasury, produced the document of 5th October to which I have already referred.
      While we are talking about the cost, another point is that, whatever the cost may be, no cost will fall on the borrowing requirement this year. It is clearly stated in the clause that it will come into effect only for gains made this year. Any

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      tax payable on gains made this year, whether at the present level or any diminished level, will not affect the revenue until next year, 1979–80. So it has no effect whatsoever on the borrowing requirement this year.
      The capital gains tax covers two different types of gain—that is, genuine gains in the real value of the asset which has been disposed of, and gains which are not real gains at all—gains which arise on paper because the asset appears to have increased in value when disposed of although in fact, because prices generally have increased, the true value of the asset may not have increased at all.
      What we have here is a substantial and capricious wealth tax. This has been admitted by Treasury Ministers in past debates, and those who have come lately into our debates should not attempt to contest it unless they have studied the matter rather more deeply than the hon. Member for Bristol, North-West (Mr. Thomas) has done.
      As I say, this is a wealth tax of the most capricious kind, and that is why the Minister of State said what he said last year on Report. I quote from the Inland Revenue document:
      "In the course of a Finance Bill debate on 14th July 1977, the Minister of State to the Treasury, Mr. Denzil Davies, said that the Government would look sympathetically at the problem of the effect of inflation on capital gains."
      It is to that point that I wish to devote myself in opening the debate. But for the benefit of hon. Members below the Gangway on the Government side who may have a misunderstanding of what is at issue, I shall read a letter from a constituent of my hon. Friend the Member for Bosworth (Mr. Butler). This is from a small shopkeeper:
      "I came to my business 7 years ago having experienced three jobs disappear, and bought a sub-post office and newsagency which had just had the delivery service abandoned. I paid £10,000 split as to £7,500 property and £2,500 goodwill…
      "Over my term of office my post office salary has increased from £1,000 to £3,150. Last year I realised that if I wanted a saleable business I had to resurrect the news delivery service so now in spite of sometimes feeling rather ill I opted to work a 13-hour day instead of merely 12. Just to show really willing, I also installed an automatic paraffin vending machine.
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      "You must ask yourself whether we small shopkeepers really try. I must mention that over this period my rate of pay would not be much more than 50p an hour.
      "And now after 7 years I decide to sell up! We have now gone 7 years without a holiday and at last we are having to think in terms of appointing an assistant for whom I would have to allow £1·20 hourly plus and three weeks holiday. And this I will not do.
      "Over my 7 years, what we have not suffered to enhance the value of my business I cannot think. I always managed to save the post office salary and it seemed some consolation for working 6½ days a week. When the estate agent got me £34,000 for the business it seemed that at least I had balanced out inflation …
      "You have probably guessed—my accountant now tells me that I shall be liable to capital gains tax to the tune of £5,000.
      "I cannot describe the utter despair my wife and I feel. Everything we have done has been a waste of time and one of my tax inspector friends tells me how lucky we are that we didn't put our money in a building society as if there is something akin as between a stock exchange capital gains flutter and the service we have given the public.
      "I scarcely need to say, that I am having my rewards confiscated purely on a non-existent capital gain created by inflation. Is it any wonder that the unions, this Government and even some traders love inflation and will not consider indexation?"
      Need I tell hon. Members that after paying the Chancellor his £5,000, the shopkeeper, possibly fatally ill, can receive neither dole nor sick pay? That is an example, of what is happening under the present regime of capital gains tax. I notice that Labour Members below the Gangway are no longer jeering or laughing. Quite right, too.
      4.30 p.m.
      This sort of problem is not in any way met by the mitigation for small gains introduced in Clause 35 of the Finance Bill. Nor is it met by any of the other provisions of the Bill. There is a genuine problem to which this Committee, should address itself. Indeed, the Inland Revenue note did its best to address itself to this problem. Hovever, the Inland Revenue—
      Mr. Russell Johnston: The hon. Gentleman said, after he had finished recounting the example of the shopkeeper, that Labour Members below the Gangway were, perhaps, taking a more solemn view of the matter. As far as I could see, they were not. It would be interesting to see whether they agree

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      with what the hon. Gentleman said. Perhaps they might indicate that by some interjection.
      Mr. Lawson: The hon. Gentleman is absolutely right. It will be interesting to see whether Labour Members agree. I hope that in particular the hon. Member for Liverpool, Walton (Mr. Heffer), who I know is concerned about small businesses, will make some contribution to the debate on this very matter and indicate his feelings.
      Mr. Eric S. Heffer: The hon. Gentleman has read out a letter which quotes one side of the argument. We would need to examine it. I have learned in this world that one needs to examine the full details of any case that is put forward. I receive letters from constituents. The hon. Gentleman has a letter which puts one side of an argument.
      In the past—I do not do it now—I have rushed in on the white horse, charging for this or that constituent and have discovered that there is another side of the argument as well, which had not been mentioned to me. Before I or anybody else rushes in to say that that is right or wrong, we would need to examine all the facts of the case.
      If we are talking in general I agree that there is a case for small businesses, and that there is a need to look into the problems of small business men. But I wonder whether the hon. Gentleman is concerned only with the small business man—
      Mr. Ron Thomas: Of course he is not—
      Mr. Heffer:—or whether he is concerned with all of those in business rather than one aspect of the problem.
      Mr. Lawson: I admire the hon. Gentleman's insistence on studying this matter thoroughly before jumping to any conclusion. I and my hon. Friends have done so. Evidently he has not. I hope that he will not vote in any Division on this matter, on the ground that he has not had time to go into the matter with the thoroughness that he thinks necessary before reaching a conclusion.
      The Revenue's note was interesting in one respect. It was looking at two different
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      methods of dealing with this admitted problem of inflationary gains which ought not to be subject to tax but which are caught by the tax as it is at present constructed, and which would not be subjected to tax were this new clause, which indexes the gains, to be approved by the Committee.
      One method of dealing with the problem was tapering, say over a period of 10 years, and the other was indexation. I know that a number of hon. Members have, until this Revenue document, thought that, possibly, tapering was a simpler solution and, therefore, to be preferred to indexation. The Revenue document makes two things absolutely clear. First, it makes clear that if the problem is inflation, the only logical solution is indexation. There is a case for tapering, but it is not the case which arises from inflation.
      Before the hon. Member for Inverness (Mr. Johnston), the representative of the Liberal Party, leaves the Chamber, he should know that in our debates last year his hon. Friend the Member for Cornwall, North (Mr. Pardoe) stated clearly that he was in favour of indexation rather than tapering, because indexation directly concerned itself with the problem of rising prices and inflationary gains whereas tapering was something other than that. I refer to column 864 of the Official Report for 14th July 1977. I hope, therefore, that, with his usual consistency, the hon. Gentleman will be in the Lobby tonight with his hon. Friends.
      Secondly, the Revenue document showed that the complications arising from tapering were every bit as great as those arising from indexation and that therefore the possible advantage of tapering—that it was a such simpler method—disappeared.
      Logic and practicability go hand in hand to favour indexation as the method. There is only one respect in which tapering produces a simplification: the gains disappear altogether, for tax purposes, at the end of 10 years. But that can perfectly well be written into an indexation clause, as is done in some countries overseas, where gains over 10 years old are automatically exempt and there is indexation for those that are caught.
      Three alleged practical disadvantages of indexation were produced by the

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      Revenue in paragraph 20 of the consultative document. The first is that
      "a suitable index—or set of indices—would need to be prescribed."
      There is no problem in prescribing a suitable index. In this clause we have suggested the retail price index, which is what is usually used where there are linkages to take account of inflation, whether in pensions or other aspects of our social security or tax system.
      What is clearly wrong is the suggestion that there would have to be a set of indices. We are concerned with inflation, which means the changes arising in the general price level. Therefore, the only relevant index is one relating to the general price level. The argument of the Minister of State in our debates last year that there would have to be a separate index for every different type of asset was, therefore, bad. He now accepts that that was a bad point. That is made clear also in the Meade Report, which I have to hand. We need a general index of prices to establish how much is real and how much inflationary gain. That rules out the problem which might be introduced if there had to be a set of indices.
      The second objection put forward by the Revenue was the "awkwardness", in the case of wasting assets such as leases, of both writing down the cost of the asset and adjusting it to take account of indexation. I think that by now the Inland Revenue will have received sufficient submissions to show that there is no such awkwardness. The existing system would be used for wasting assets such as leases. I do not wish to go into this matter in any more detail, but I have a note on it. If the right hon. Gentleman wishes me to—
      The Minister of State, Treasury (Mr. Denzil Davies)indicated dissent.
      Mr. Lawson: The right hon. Gentleman accepts that there is no problem there. Good. I shall not go into that.
      The Revenue's third objection was about very long-term gains. If the Minister of State considers that this is the only problem, such gains could be exempted in an amendment to the new clause.
      The Revenue put forward one other ironical objection—the compliance cost
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      to taxpayers. Taxpayers pay a large sum of money on capital gains which are not true capital gains at all. All the taxpayers that I know would be happy to suffer the increased compliance cost in order to escape paying a tax which they should not pay in the first place.
      Many other countries such as France, Sweden—for some gains—Ireland and so on index their gains for just this purpose. The Revenue is opposed to indexation. One knows that. I have a letter from a Revenue official. It is surprising to find Revenue officials having policy views, but evidently that is the situation we are in now. The Revenue official says:
      "As you know, I hold no brief for indexation".
      Therefore, the Revenue has been inclined to exaggerate the difficulties. There are some difficulties. For example, there are difficulties in the case of investment trusts and unit trusts, which, if there were indexation of gains, should be exempted altogether from capital gains tax. But the difficulties are not nearly as great as the Revenue has made them out to be. A number of submissions, copies of many of which I have, which were made to the Revenue in response to its consultative document have shown the way round these problems.
      There was one curious matter in the Revenue document. The document claimed that when capital gains tax was orginally introduced in 1965 by the present Prime Minister, then Chancellor of the Exchequer, it was introduced at what was called "a relatively low flat rate" because it was specifically taken into account that it might contain an inflationary element.
      Reading that document surpised me because it did not accord with my recollection, so I looked back to see what the then Chancellor of the Exchequer, the present Prime Minister, said on that occasion. He said:
      "As for assets which are held for periods exceeding 12 months, I think that it would not be reasonable to subject a gain which may have accrued over a long period to the full rates of Income Tax and Surtax applicable to ordinary income for the year in which the gain is realised. I propose, therefore, that these long-term gains shall be taxed at a flat rate. Given a flat rate, I do not consider that there is any need to taper the rate according to the length of time for which the asset has been held, and the flat rate will, therefore,

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      apply irrespective of the period of ownership.—[Official Report, 6th April 1965; Vol. 710, c. 250.]
      That was all he said on that point.
      Therefore, the Revenue has it completely wrong. The 30 per cent. flat rate was specifically put as an alternative to a taper. It was not in any sense intended to take inflation into account because, of course, it was not envisaged at that time that we should have inflation at anything like the rates we now have.
      We were then living in a different age. We were living in an age of what is now called the money illusion, when people who expected interest on money which they had lent thought of it in money terms, not taking inflation into account. People drawing up the profits of their companies were not concerned about inflation. Trade unions negotiating for wage increases in those days of 1965 did not really take inflation into account. Now everybody does. Now we are in a different era.
      It is a very sad thing, and a damp squib, that the Treasury has come up with at present, because the relief that is included in the capital gains tax clauses, which we shall be dealing with in Standing Committee, is a relief which nowhere near meets—quite apart from the fact that it is different in form, size and scale—the amount of tax which is wrongfully extracted from taxpayers for gains which they have not in any genuine way been fortunate enough to acquire.
      The Chancellor of the Exchequer, announcing the failure to introduce any form of indexation in his Budget Statement—this is the last quotation I shall read from a member of the Government—said this:
      "I do not think that it would be right to give relief for inflation to investors in shares and land"—
      If I may here interpolate, as we have seen, it is not simply a matter of shares and land. It is also a matter of the small shopkeeper and the sale of his shop. The Chancellor continued:
      "while investors in building societies and other fixed-interest loans receive none—and while an investor can benefit from the decrease in the real value of his own borrowings."
      That is an extraordinary statement. As to the first half of it, it is perfectly true
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      at present that if somebody invests in a building society or some other fixed-interest security, a part of that which is taxed as income—and with the investment income surcharge, too—is merely replacement of the capital value which is otherwise deteriorating through inflation. That causes taxation to be too high.
      4.45 p.m.
      But the amount that that man suffers is not nearly as great as the suffering from capital gains tax—the inflationary gains being taxed at a real rate. That is a far greater injustice, and to say that the Government cannot remedy that glaring injustice because they have not seen a way of remedying the lesser—even though there are ways suggested in the Meade Report for doing that, but I leave them aside—really is a poor argument.
      Mr. Heffer: I am following the hon. Gentleman's argument very closely, and up to a point I sympathise with some aspects of it. But would he not agree that if we are to have a system of indexation of the kind that he wants, he would also then have to apply indexation to wages and salaries? In fact, he would have to index all incomes of one kind or another. Is the hon. Gentleman in favour of indexing wages? Does he think that salaries also should be indexed? What is his view on that?
      Mr. Lawson: The hon. Gentleman is on to an interesting point, but it is a completely different matter. He would be the first, I should have thought, to insist that wages and salaries are matters for negotiation freely between employers and employees and between employers and trade unions. If a trade union wishes to negotiate with an employer an index clause in a pay agreement, it is free to do so. There is no reason why it should not. But it is not a matter for negotiation or collective bargaining, even though perhaps the hon. Gentleman might like it to be, to decide how much tax should be paid. That is a matter laid down by law. It is a matter of the legal relationship between the State and the citizen and the obligations under law that the citizen has.
      Mr. Denzil Davies rose—
      Mr. Nick Budgen: I wonder whether my hon.

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      Friend would comment upon the relative attractiveness, in terms of employment in the private sector and the public sector, if all contrasts of service within the public sector were indexed. Would it not mean that labour would be sucked into the public sector, unless the private sector was prepared also to index all contracts of service?
      Mr. Lawson: It might well do but, as I say, I do not accept the parallel of the indexation of wages.
      Mr. Denzil Davies: Will the hon. Gentleman give way?
      Mr. Lawson: In a moment, I shall. Where there is a parallel is in other aspects of the taxation system; and it will be within the hon. Gentleman's recollection that last year, despite the Government's opposition, we insisted on indexing the personal allowances for income tax on precisely similar grounds.
      Mr. Denzil Davies: In reply to my hon. Friend the Member for Liverpool, Walton (Mr. Heffer)—and I think it was a fair point—the hon. Member said that within private industry of course it was a matter of negotiation between the employer and the employee. However, if the Government accepted his view that indexation was a good idea, would he be in favour of indexing all contracts of employment between the Government and their employees, given that there was indexation?
      Mr. Lawson: No. There really is no comparison with, say, the firemen, to take a recently topical case, who negotiate wages with the local authorities, and if they do not like the wages they can leave the fire service, as some of them may have done. That is quite different from a taxpayer who is legally obliged to pay a particular tax and cannot opt out of it. I think, therefore, that the Minister is on to a very bad point, and not for the first time.
      Mr. David Price: May I go back a number of years, as one who has had a lot of experience at negotiating in the private sectors with trade unions? It is implicit in the realm of contract that one tries to index. All that stops indexation is Government pay policy. In the real world, every trade union which is
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      worth its salt expects the minimum of indexation, although the phrase is not used, and any sensible employer who can possibly afford it will accord it.
      Mr. Lawson: There is implicit in what my hon. Friend said a very important point—that is, that matters which are reviewed every year, such as wages, can be, in a rough and ready way, adjusted for inflation. One of the reasons why the injustice is greatest in relation to capital gains tax is that this is not something which is adjusted every year, unlike even the income tax allowances. It is a tax concern with a period of years, when the pounds at the beginning of the period bear no relation in value to the pounds at the end of the period.
      Let me remind the Committee of the final reason, as it was a few moments ago now, that the Chancellor gave for not moving on this matter, even though we were given to understand that there would indeed be legislation this year and the Inland Revenue document stated that the hope was that there would be legislation this year that a satisfactory form could be found.
      The Chancellor said that he was not prepared to do this
      "while an investor can benefit from the decrease in the real value of his own borrowings."—[Official Report, 11 th April 1978; Vol. 947, c. 1202.]
      Who is the investor who benefits most from the decrease in the real value of his own borrowings? It is the Government. It is the Government who are the biggest borrower of all. If anybody has benefited from the decrease in the real value of his borrowings, it is the Government. For the Government to say "Because we have had this great benefit, that is a reason why we cannot give any benefit to taxpayers whom we have been mulcting unfairly all these years" is a most monstrous and extraordinary argument. I am surprised that even the Chancellor, who, after all, had time to compose his Budget Statement as well as a long time to say it, should have used an argument of that kind. The fact that he did is, I think, some indication of the weak ground on which he found himself.
      Mr. Ron Thomas: I thank the hon. Gentleman for giving way and will disregard the nasty comments he made earlier. Will he be good enough to tell

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      the Committee how much he thinks the proposal will cost? We know that he had some trouble with the figures last time the Committee met, and perhaps he has had difficulty in getting it right, but could he give us some indication? Is it the £350 million of which we spoke earlier? If he would give just some indication, I at least should be grateful.
      Mr. Lawson: The cost this year will be nothing at all, for the reason I have already given. The cost in a full year, next year, will in any case fall to be met by the incoming Conservative Government, so I think that the hon. Gentleman can leave that to us. I would judge that the order of magnitude—and it is possible to make only a guess at it, and that is the case with the Treasury, too, which is perhaps why it has produced a series of wrong answers in its Written Answers—is about £300 million of inflationary gain.
      This, as I have said, is a matter of pure justice. That is why we have said in our policy document "The Right Approach to the Economy" that
      "we shall adapt Capital Gains Tax so that only true profits (as opposed to inflationary gains) are subject to the tax."
      We have an opportunity to embark on that course now. We have an opportunity to remove from the statute book in its present form a tax which is a wealth tax masquerading as a capital gains tax, a wealth tax of a higher incidence even than the Swedish wealth tax in a period of the sort of inflation that we have had in recent years, and a wealth tax which falls in a most capricious and undesirable way, which is contrary to any justice and contrary to the economic needs of the country.
      I invite hon. Members on both sides of the Committee to give the new clause their support.
      Mr. Denzil Davies: Perhaps I may come in at this stage and say a few words about the new clause, because the hon. Member for Blaby (Mr. Lawson) did not address his mind to it at all. He pretended that there were no real problems involved in indexation. Then he made a knock-about Second Reading speech which we have heard from him before.
      Mr. Peter Rees: A very good speech.
      Mr. Davies: It may have been a very good speech from the hon. and learned Gentleman's point of view, but the hon. Member did not really address his mind to the clause itself. He was asked, and he gave figures, about the cost of the new clause. He is quite right in saying that there is no cost this year because of the way the assessments are made. Our best estimate is that in a full year this new clause would cost about £350 million. I am not making an issue of the figures. I am just telling the Committee that our best estimate of the cost is £350 million.
      The total yield from capital gains tax, if we include corporation tax on capital gains, is slightly greater than the hon. Gentleman seemed to think. It is about £480 million. But, as far as we can judge, the cost of this new clause in a full year is about £350 million.
      Mr. John Cope: Will the right hon. Gentleman give way?
      Mr. Davies: In a minute. The hon. Member for Blaby dismissed that. He said "Next year it will be a Conservative Government, and we will see about the cost." But he still has not told the Committee—indeed, we were not told on other amendments—from where this money is to come. We have had almost £700 million in a full year on other amendments, and here we have another £350 million, with very little indication from the Opposition where they will find the money.
      Mr. Cope: What assumptions has the Minister made in arriving at the figure for the rate of inflation next year?
      Mr. Davies: The assumptions are that the rate of inflation more or less will remain what it is now. I said that it was extremely difficult—the hon. Member for Blaby also mentioned this—to arrive at an accurate figure when estimating for a year ahead. But our best estimate is that the cost is around £350 million. I cannot pretend that it is an exact figure, but it is probably pretty close to what the actual cost will be if this new clause is accepted.
      Mr. Ridley: Is it not a rather extraordinary admission by the Government that, if we take the £390 million figure of my hon. Friend the Member for Blaby (Mr. Lawson), 90 per cent. of capital gains

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      tax is yield from inflation gains and only 10 per cent. is true capital gains? Is that not an extraordinary admission?
      Mr. Davies: I do not accept that. In fact, leaving aside assumptions and the argumentative point, about 75 per cent. of the yield is what we assume would be lost as a result of this new clause. We are debating a new clause and its effect on the Government's income, and I am telling the Committee—whatever conclusions hon. Gentlemen wish to draw—that this amounts to about £350 million. I think that the Opposition owe it to the Committee to tell us where they would find the money that would be lost as a result. The tax may be unfair. It may be a tax on inflationary gain. That is a matter for argument. The Opposition still have a duty, if they pretend—I think that they have given up all pretence of being a responsible Opposition—to be responsible, to say from where the money is coming. We have heard nothing.
      Mr. Ridley: Next year.
      Mr. Davies: Next year. That is a typical Conservative approach. There is no problem this year, so let us pile up the problems for next year. That is extremely irresponsible. We have not been told from where the £350 million is coming.
      The hon. Member for Blaby argued for indexation. We have heard the argument before. He appears to be in favour of almost general indexation, provided that it is not of wages and salaries in the public sector—or, perhaps, contracts. He holds his face against that.
      We have debated this case several times, and I do not suppose that we shall ever agree whether indexation of the tax system is right. My own view, which I have expressed previously, is that I do not think it fair to index for the benefit of one group, be it a group selling capital or any other group. If one goes down the road of indexation, one must index right across the board, and then, as far as I can see, one is back in the same situation as at present, and nobody really benefits at the end of the day.
      5.0 p.m.
      Indexation addresses itself to the symptom of inflation. It is not a cure. It is a kind of pain-killer, and, like all painkillers, it gives one the false illusion
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      that the disease has been cured. In fact, the disease has not been cured.
      That is why my own view is that indexation is dangerous. It draws attention away from the real problem of inflation, which is the problem to which the new clause should address itself The real injustice is inflation. That is why this Government have been addressing themselves, very successfully, to the problem of inflation.
      Mr. Lawson: I do not accept for a moment that a Government who have allowed prices to double during their four and a half years of office have been successful in dealing with the problem of inflation. But may I make it absolutely clear that the clause is in no way concerned with curing inflation. The arguments I was adducing in favour of the clause were grounded entirely on justice. It is no good saying that it is not a cure for inflation, a cure for baldness or a cure for anything else. It has not been put forward on those grounds.
      Mr. Davies: I accept entirely what the hon. Gentleman has put forward as a cure. If he is basing his argument on justice, he must, with justice, give the benefit of indexation—if it is a benefit when it covers everybody—to all other groups as well. He cannot in justice claim the benefit of indexation for this group, however worried they might be, without arguing that the benefit should be applied to other groups as well. That is the point I was seeking to make.
      Indexation in this regard seems another Tory easy way out of the problem of inflation. At least this particular group would not suffer. That kind of regime leads to the illusion that inflation is not such a bad problem after all because one has protected certain people from it.
      Mr. Lawson: Rubbish.
      Mr. Davies: In reply to the hon. Gentleman may I quote from the Carter Commission, which was set up by the Canadian Government some time ago to look into the whole tax system. The hon. Gentleman may not agree with that commission's conclusion, but it is a wide-ranging, deep analysis of taxation problems. The Carter Commission said about indexation and capital gains tax:
      "It has been argued that it would be inequitable to tax a gain that resulted from a general increase in the price levels."

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      That was the hon. Gentleman's argument.
      "The point is made that such a gain is illusory because it does not represent any real increase in purchasing power. This argument, when used to support the exemption of stock market gains, appears over-emphasised if the substantial increases in the stock market averages are compared with the rather smaller increase in the cost of living index."
      I make no point on that. The commission went on:
      "In addition, we cannot overlook the fact that there are many members of society with fixed incomes who suffer losses in economic power because of inflation and are unable to protect themselves against it. This is in contrast to the equity holder who during a period of inflation will generally experience some growth in the dollar value of his assets."
      Mr. Lawson: That does not happen.
      Mr. Davies: That is not true.
      The commission continued:
      "Because it is not possible to make provision for complete recognition of declines in purchasing power brought about by inflation, we have concluded that it should not be the function of the tax system to attempt to relieve only some segments of the population from the effects of inflation. The tax system, therefore, in our opinion should continue to be based on current dollars and not on constant dollars."
      Mr. Peter Rees rose—
      Mr. Davies: I have given way on a number of occasions. The hon. and learned Gentleman should contain himself. I am summing up the quotation.
      The Carter Commission makes it quite clear—this is a point that my right hon. Friend the Chancellor made from the Dispatch Box—that it would not be right, on grounds of justice, to give this benefit to one segment of the population and to protect it from the effects of inflation if we were not prepared to extend the benefit to other segments of the population.
      Mr. Peter Rees: If that is the considered view of the Treasury Front Bench, why did it encourage the Revenue to put out a consultation paper and waste a great number of people's time making representations? The only basis for the consultation paper must have been that the Government recognised that there was some case, at any rate, for indexing, or at least countering, the effects of inflation.
      Mr. Davies: The Government did recognise it and still recognise the problem here in relation to inflation and gains of all kinds. But, at the end of the day, having considered the matter, it does not seem to us just and right that we should introduce a measure to protect one group, however worthy or unworthy—it is not a question of merit—from the effects of inflation when other groups would not be so protected by the tax system.
      Perhaps I should remind the Committee—I do so only as a matter of fact and not to draw any special conclusions from it—that the rate of capital gains tax is lower than the rate of taxes on income. The Carter Commission came to the conclusion—I make no comment on this—that the tax on a capital gain should not be at a different rate from the tax on income gains, because both represent a spending power or purchasing power.
      The Meade Committee, which looked at the whole tax system, also seems to be inclined to the view that a capital gain merely reflects purchasing power at the end of the day—whether that is true, I know not—but again thinks that the tax should not be different.
      Mr. Lawson: Will the right hon. Gentleman give way?
      Mr. Davies: The hon. Gentleman has made his speech. He keeps bouncing up and down at every point one makes. He should sit back and reflect on the points that I am making. I want to develop my argument.
      The index chosen in the clause to assess a gain, or to remove the inflationary part of the gain, is the retail price index. That is an index of spending power. So in the new clause we have a kind of implied admission that capital gains can be looked at only as money that can be spent, because of the index which is used. If that is so, does the hon. Gentleman still argue that the rate of tax on capital gains should be any different from the rate of tax on incomes? He should bear in mind that he is relating capital gains to spending power in terms of the index.
      Mr. Lawson: A little while ago the right hon. Gentleman appeared to be praying in aid the Meade Report. Is he aware that that report, which is a

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      very valuable study in many ways, is specifically in favour of indexation of the tax system in general and the capital gains tax in particular?
      Mr. Davies: The tax system in general, and capital gains come into it. The Meade Report was not specific on a large number of matters. I am surprised that the hon. Gentleman can be so dogmatic about that report.
      The question I was seeking to ask—perhaps we shall have a reply from the Opposition in the winding-up speeches—was whether the Opposition accept that even with the new clause the rate of tax on capital gains should be any different, as it is now, from the rate of tax on so-called income or income gains.
      Mr. Ron Thomas: Does not my right hon. Friend agree that for the wealthy taxpayer the rate of tax on capital gains is far less than he would pay on an additional slice of income? At the end of the day, this would be a slice of disposable income, just as though it had been earned.
      Mr. Davies: That was the point that I was seeking to make. My hon. Friend has put it clearly. Many reports, including both the Meade and Carter Reports, come to the conclusion that the rate of tax on capital gains does not necessarily have to be any different. Why should it be, if one is looking simply at spending power? There may be other reasons why the tax on a capital gain should be at a different rate.
      But if one is looking at spending power, why should the rate of tax be any different in respect of capital gains than it is for income gains? The hon. Gentleman should think about it for a while. He is very prone to jump up, and sometimes he does not get it right when he jumps up on the spur of the moment. I suggest that he considers the matter and that when he has the opportunity he returns to it later.
      I now return to the clause. The hon. Gentleman skated over it. The clause was not so important, it seemed. It was the principle in the clause that he was concerned about. The clause fails to meet many important points—and not merely drafting points. I realise that the Opposition cannot be expected to get the
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      drafting right. But this clause was originally conceived by the Society of Conservative Lawyers, so I do not excuse any drafting errors. If those lawyers cannot get it right, they cannot complain if I criticise them on that score.
      The new clause skates over many problems in an attempt to make it look nice and simple. But if we really wanted to introduce the kind of datum indexation that the new clause seeks, we should need at least 10 pages of the Finance Bill instead of one and a quarter sides, as on the Amendment Paper.
      The new clause says nothing about part disposals. Presumably the clause was drafted by all the resources of the Conservative Central Office as well as the Conservative lawyers, but it makes no attempt to deal with the problem of part disposals. No attempt is made to deal with the problem of the pooling of shares. No attempt is made to deal with the problem of enhancement of expenditure. Those are three extremely important issues.
      Mr. Lawson: They are easily dealt with.
      Mr. Davies: The hon. Member for Blaby says that they are easily dealt with. It seems that everything is easy for the hon. Memer for Blaby, but he does not always get things right. If these three matters are so easy, why are they not dealt with in the clause?
      The fact remains that these are complicated matters. I do not say that it is not possible to draft a clause dealing with them, but the best advice I have is that it would take about 10 pages of the Finance Bill. I am not saying that it cannot be done. I am saying that it shows the complexity of what is being put forward by the Opposition and their failure in the clause to recognise—perhaps they did not want to recognise—the complexity involved.
      Then, assuming that we can take care of those three matters, there is the additional problem of existing share pools. I am surprised that the hon. and learned Member for Dover and Deal (Mr. Rees) did not mention that. It, too, is an extremely difficult matter, but the clause makes no attempt to deal with it. My advice is that the Inland Revenue fails to see how it could be dealt with in this particular clause.

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      The hon. Member for Blaby regaled us with quotations from some of the representations made on the Revenue's discussion paper. He will know that one paper put forward by two members of the Bar tried to deal with the problem in relation to datum indexation—the problem of existing pools of shares. They came up with a concept called the minimum referable cost concept with two graphs to support it. But the Inland Revenue has been unable to understand what is meant by the minimum referable cost concept. Indeed, when the Inland Revenue wrote to the distinguished gentlemen who produced the paper, those gentlemen did not even supply an answer.
      I am merely saying that we are dealing with an extremely complicated area. The new clause does not begin to deal with it. It is no good the hon. Member for Blaby coming her and seeking a vote of the Committee. I accept that a debate can take place on the principle of the matter. But here we have the Conservative Opposition saying "It will be a problem next year when we come into Government." They are to vote on a new clause which, frankly, is hopelessly defective. I am surprised that they are prepared to go into the Lobby in support of it.
      Apart from the clause being legislatively defective, there is also the question of administration. Tory Members said that the compliance costs to the taxpayer do not matter. Very well. The taxpayer does not mind as long as he does not pay the tax. But there are the administration costs for the Inland Revenue. In view of the reduced yield of the tax, the actual costs of administration of this tax—the present cost being about 3 per cent. of the yield—would then be about 15 per cent.
      Tory Members will say "That just shows that these are all inflationary gains." But they must accept the consequences of that. The consequences are that they are collecting a tax under the new clause where the costs of administration are 15 per cent. of the actual yield of the tax. I suppose that they will continually leave that problem until the year after next. It is an extremely difficult problem for them to overcome.
      Those are some of the reasons why the Government are opposed to the new clause, apart from our view that indexation for one group is not fair. As I said,
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      indexation is an attempt to offer a palliative to inflation. For that reason, it tends to obscure the real problem. Apart from that, there are the complexities of introducing this kind of indexation in our tax system. That is why the Government decided against it.
      Clause 35, which we put forward and which we shall debate upstairs in Standding Committee, is not a substitute for dealing with indexation. It is not put forward as a substitute. I remind the Committee, however, that proposals put forward by the Government at a cost of £65 million this year—not a small sum of money—
      Mr. Lawson: Not this year.
      Mr. Davies: The hon. Gentleman has got it wrong again. It is a cost of £65 million this year in terms of Clause 35, because it relates to assessments that have been made.
      Mr. Lawson rose—
      5.15 p.m.
      Mr. Davies: I will not give way. The hon. Gentleman is wrong again on his figures. I do not want to make a point of it, but the hon. Gentleman should sit down and think about these matters and consult those who understand them before he jumps up.
      I shall finish my argument. The cost is £65 million in this year, with a saving of about 200 staff and a reduction of 50 per cent. in the assessment. Therefore, 50 per cent. of the assessments will be reduced this year.
      Mr. Lawson: Wrong again.
      Mr. John Pardoe: I think that it would help the Committee if the Minister replied to what the hon. Member for Blaby (Mr. Lawson), said. The hon. Member is reading from the Red Book, saying that the cost is £15 million. The Minister has said £65 million. Who is right?
      Mr. Davies: The cost in a full year is £65 million. If I said "this year", I withdraw what I said. The cost is £65 million in a full year. The cost in the Red Book is the cost this year. The cost is £65 million in a full year. There is a saving of 200 staff and as a result of the new regime there will be only half the number of assessments.

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      Against that, this is a system that is not complicated. I agree that it does not meet the problem of indexation, but that is a much wider problem. The new clause is extremely defective in many areas and I hope that the Committee will not accept it.
      Mr. David Price: I do not agree with much of what the Minister of State said. I am glad that my right hon. and hon. Friends have decided to move a new clause in favour in indexation rather than tapering since I believe that tapering raises not only much more complicated administrative issues but more complicated issues of principle which might divide us all.
      In spite of what the Minister of State said I believe that the new clause is very simple. It does not raise matters of principle and it is non-controversial. In these inflationary days—this is the real point—indexation is increasingly becoming a well established principle. This is why I intervened in the Minister's speech in relation to pay settlements and free collective bargaining.
      When I first became a Member of Parliament we had very gentle inflation. There were sound Treasury reasons for saying "Let us not write indexation into our affairs". But with current rates of inflation—I make no party point about it—indexation has to become part of our general scheme if justice is to be maintained between one citizen and another and the equitable relations between citizen and State are also to be maintained.
      The principle has already been established. I need only mention the indexation of personal allowances for taxation which the House insisted upon last year in the Finance Bill. It is true that it was against the advice of the Treasury Bench, but we did it. It appealed to the House as a whole as a matter of basic natural justice.
      Secondly, there is the whole area of public service pensions. I know that that is not taxation, but it is direct public financing. When I listened to the Minister of State I was inclined to interrupt him on this point but I did not wish to detain the Committee too long. Once we have the indexation of public service pensions
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      it becomes an accepted part of our practices.
      We have the implicit indexation of our social security benefits. The annual review is written into legislation. Therefore, the only issue involved in the new clause is whether we should index chargeable gains under a capital gains tax.
      Let me remind the Committee of what the rate of inflation has been since the present capital gains tax was introduced in April 1965. Between April 1965 and March 1978—roughly 13 years—there has been an increase in the retail price index of 228 per cent. The Chancellor spoke of a more optimistic figure for the future anticipated rate of inflation. He has been telling the country that we can expect a 7 per cent. rate of inflation within the foreseeable future. Let us not argue whether he will achieve that. Let us, for the purposes of this debate, take him at his own word.
      A little simple arithmetic will show that a 7 per cent. inflation, extended over the second 13 years of the capital gains tax, produces an increase of 241 per cent. We have, therefore, the first 13 years of capital gains tax producing a 228 per cent. increase in inflation, and the second 13 years—if the Chancellor is right—241 per cent. I say this to illustrate the rate of inflation that we are currently experiencing and are likely to go on experiencing.
      There was a time in our history when we had years of inflation and years of deflation, and over a period they roughly evened out. Between 1850 and 1914, price levels evened out to about the same. Between 1914 and 1945—say, 30 years—and through two wars, prices roughly doubled. From 1945 to 1967, prices doubled again, in another 30 years. From 1967 to 1973, they increased by a further 50 per cent. But since 1973, they have doubled, in about four years. Let us not go into the reasons. Let us just record the fact.
      The object of the capital gains tax is to put a tax on chargeable gains—that is, where an asset is worth more in real terms when it is disposed of than when it was acquired. Let us not go into the question whether we think it a good or bad tax, but simply accept that we have this tax. The only issue is a very narrow but a very important one; how do we assess chargeable gains?

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      Government supporters below the Gangway say that they would like to see the rate of capital gains tax the same as the rate of income tax. That is not the issue today. They may be right; they may be wrong. We can argue that matter, but let us have a proposition. The issue before us is whether, under a capital gains tax, the chargeable gains should be indexed. I believe that as a matter of simple equity they should be indexed.
      When they are not indexed, the capital gains tax becomes a wealth tax. When there is 224 per cent. inflation in 13 years, it does not require a degree in higher mathematics to work out that if an asset has maintained its market value and one disposes of it after 13 years, one is being taxed on inflation.
      I concede to Labour Members below the Gangway that there may be a case for a wealth tax. If they favour it, let them introduce an honest wealth tax. But let it be open and clean. Let us not have a wealth tax under the disguise of a capital gains tax, when there is no capital gain and the disposer of an asset is taxed on an inflationary gain, whereas in real terms he has made none.
      The only objection to accepting the new clause can be the objection in the Inland Revenue paper. The paper, which we all have at hand, is as to 95 per cent. of its wordage dealing with tapering, so we can ignore that. The amount written in the paper on indexation is about one page. There are broadly three points.
      First, one has to find a suitable index. I suggest that we take the RPI, which is increasingly becoming the general index of inflation. One can get into the more recondite points of statistics, but I think that we can ignore that. I think that anyone with an asset would settle for the RPI. One need not draw any broad deductions, as the Minister of State did, about an asset being, as a result, income and spendable in the year that it is realised. The RPI, incidentally, is used by the Treasury on its own inflation-proof savings certificates for elderly people, so the principle has already been accorded.
      Secondly, let us take wasting assets—leases and so on. That problem exists already under a wealth tax, if we had one, and under a capital gains tax. Therefore, there is no new issue in that respect.
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      Indexation adds nothing except a very minor addition to the problem. The problem already exists.
      Thirdly, there is the proposition that the rules for assets acquired before 6th April 1965 might make it more difficult for taxpayers—and so on. We have that problem anyway, and have to cope with it so, again, there is no new issue.
      The only issue is the choice of index, and I suggest that the Treasury has already set the example in the way that it handles indexation on savings certificates for elderly people by using the RPI.
      In spite of a certain attempt by thy hon. Friend the Member for Blaby (Mr. Lawson), who is so eloquent and such a good debater, and the Minister of State with his Welsh eloquence, to make a great matter of principle out of this new clause, I believe that there is none at all. It is a terribly simple, modest, administrative matter. Nobody need get the least bit steamed up, and I think that we could pass this on the nod and go on to further business.
      Mr. John Cronin: The hon. Member for Eastleigh (Mr. Price) made an interesting point. He said that the clause was meant to dispose of a form of wealth tax. Surely, there is no idea of a wealth tax but simply a question of a tax on capital gains, and even that is not payable until the gains are actually realised. I think that it would be a very good idea if we had a wealth tax, but I do not see how that idea could apply to this new clause.
      The hon. Member for Blaby (Mr. Lawson) made an ingenious and, at times, moving speech. There was a moment—the hon. Member was talking about small businesses—when I thought tears would come to his eyes—
      Mr. Ron Thomas: He was talking about one small business.
      Mr. Cronin: Indeed, yes. But if such tears had come to the hon. Member's eyes, they would have been a splendid example of crocodile tears. The clause might benefit small businesses to some extent, but the overwhelming majority of beneficiaries would be really wealthy people and institutions with enormous sums of money at their disposal.

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      Everyone suffers from inflation, except a privileged class. Thanks to the Government of the right hon. Member for Sid-cup (Mr. Heath), civil servants and officers of the Armed Forces have completely inflation-proof pensions. They are, of course, very worthy people, but in spite of their meritorious services I think that there is considerable resentment among a large number of people, at the particularly privileged position such persons have, I should have thought it most undesirable, in relation to inflation, to create a new privileged class of people who obtain capital gains.
      The new clause may well benefit small business men. I do not know the situation as regards small business men, but it may well be that some of them suffer some hardship. I think that it would be desirable for my right hon. Friend the Minister of State to look into this, in consultation with the Chancellor, to see what can be done to help small business men in cases where they suffer hardship in this matter.
      The new clause benefits mostly entirely different members of the community. In fact, if the hon. Member for Blaby wanted to benefit small business men, he could have reduced the scope of his clause so that it benefited small business men primarily. But the clause is absolutely wide and will embrace everyone who makes capital gains.
      Let us consider what people they are. Pension funds, of course, will be beneficiaries, and that is desirable. But the clause will benefit mostly holders of ordinary shares.
      Mr. William Clark: If I did not mishear the hon. Gentleman, he said that pension funds would benefit from this clause. Pension funds are exempt from taxation.
      Mr. Cronin: That is very helpful. But pension funds draw some of their income from sources where capital gains tax has to be paid. However, I agree that in the majority of cases pension funds do not to a large extent.
      I am trying to be perfectly fair to the hon. Member for Blaby and bring in every possible favourable circumstance for the new clause. But that exhausts my supply of favourable circumstances.
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      5.30 p.m.
      We come now to the other beneficiaries—the holders of ordinary shares. There are insurance companies, merchant banks, joint stock banks, and all the other City institutions. I cannot see why they particularly deserve to have this concession made to them. The clause would also benefit large property owners and large landowners. Why should they have a special concession from, above all, a Labour Government? Those who benefit will be the property speculators, people who buy for no other purpose than to make large capital gains.
      The hon. Member for Blaby read us a letter, which perhaps touched some of us, about a small shopkeeper suffering real hardship at the end of his days. That may well be a genuine case. But I suggest to the hon. Gentleman that his new clause will chiefly benefit such people as Mr. Harry Hyams, the owner of Centre Point—[HON. MEMBERS: "Not the owner."]He was the owner until recently. Such people would profit enormously, not the small shopkeepers. Property speculators would be able to make enormous killings as a result of the new clause. I shall be glad if any hon. Gentleman can tell me why he believes that I am wrong in this respect
      Mr. Budgen: The hon. Gentleman does not take any account of the effect of the development land tax, which was introduced long after the 1965 legislation on capital gains.
      Mr. Cronin: I am fully aware of the development land tax, but even when that takes full effect there are still enormous profits made from property speculation. There is no doubt of that.
      There are also very large profits to be made by Stock Exchange speculators. Why should they be privileged people and have this concession? One of the biggest causes of inequality in this country is capital gains. Rich men, over the years, consistently become richer and richer as a result of capital gains. The new clause is the last thing to which this Committee should give serious consideration.
      Hon. Gentlemen, including the hon. Member for Eastleigh suggested that people who buy property or shares suffer some injustice because of the effects of inflation, but even that injustice is of a

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      very limited nature. Surely all Stock Exchange prices, and perhaps to a lesser extent property prices, are based on the assumption that the purchaser will at some time in the future sell that property—in the hope of obtaining a capital gain. Surely all prices are discounted to allow for that.
      Mr. William Clark: That might be true if someone had bought shares when capital gains tax had not been introduced. But if capital gains tax were introduced, and the hon. Gentleman and I bought some shares, it would be discounted in our purchase price and the discount on the sale price neutralises that. The hon. Gentleman is on the wrong wicket here.
      Mr. Cronin: That is just the point I am making. The discount on the purchase price to a large extent offsets the ill effect of inflation on the sale price even allowing for the continuing discount. I suggest that that is eventually the case, taken over the years.
      A further point is that I believe that a large amount of money for these transactions is found by borrowing—for example, from the banks. Those sums are borrowed at a fixed interest. Someone borrows money to buy shares or property and the money borrowed loses its purchasing power steadily. Although the money that a person receives from an eventual sale loses some of purchasing power due to inflation, nevertheless the two factors tend to cancel each other out to some extent. I believe that to be true.
      The hon. Member for Blaby may laugh at this, but he has produced an extraordinarily ill-drafted clause and he might try to pay some serious attention to a simple situation like this. If the hon. Gentleman borrows £1,000 and buys some equity shares and at some time in the future sells those shares for £5,000, that £5,000 will, admittedly, be affected by inflation. But inflation would equally affect the £1,000 that he has borrowed. Therefore, to a large extent what he has suffered from the effects of inflation will be offset by the fall in the purchasing power of the money he has borrowed. This is simple arithmetic. But one must bear in mind that this new clause will have no useful effect on the economy. It will in no way help people living on small fixed
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      incomes, the worst sufferers from inflation.
      Mr. Clement Freud indicated assent.
      Mr. Cronin: I am very glad to see that the hon. Member for Isle of Ely (Mr. Freud) agrees with me on this, but he is surrounded by a vast number of Tory Members who are not interested in people with small fixed incomes. I suggest that the new clause will have no useful effect on the economy. It will produce no particular incentive to anyone who wants to work harder or who wants to use his ingenuity to help the country. It will not make the trade unions happier, or more disposed to be conciliatory about wage increases. There is no case for this new clause, except a marginal case for shopkeepers. The clause is primarily looking after the interests of the wealthy people whom the Opposition primarily represent.
      Mr. Douglas Crawford: In his opening speech the hon. Member for Blaby (Mr. Lawson) talked about this being a tax on capital. It is a tax not on capital but on capital gain. I hope that the right hon. Member will accept that definition. He did not say how this £350 million was to be funded. I do not know whether the Conservative position is that there should be further public expenditure cuts but, be that as it may, he did not explain how the £350 million was to be found.
      I should have thought that the purpose of a Budget was to seek some sort of social and financial justice and also to create a tax system which would stimulate the actual creation of wealth—wealth which is created through motivation to work, and motivation to work is created by a fair system of rewards. That is why the SNP last week voted for the widening of the tax band at the middle level to assist middle management and others whom we consider to be the real creators of wealth and employment. But it is also the reason why we did not support the Conservatives, who sought to reduce the rates of tax at the very top level. I suggest that the new clause comes into the latter category.
      The Government have done something in the context of capital gains to mitigate the effects of CGT at the lower levels,

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      but my party and I do not believe that the new clause will help the creation of wealth or stimulate the work motivation of individuals. Indeed, it could be argued that the new clause might operate against the motivation of individuals to work to create wealth. If there is to be tax relief, it should be primarily on earned income and not on unearned income.
      My party is against the new clause because it does not assist the creation of the country's wealth. It is inequitable, and if a country's wealth cannot be created there will be insufficient wherewithal to be used for the creation of social engineering—items such as kidney machines and hospitals. The Scottish National Party will therefore vote against the new clause tonight.
      Mr. Ron Thomas: This again, in my judgment, is a clear example of the Tories serving the class interest that they are here to represent. I wish that they would be honest and tell us exactly what they are about. There is no doubt that the new clause is designed basically to assist the wealthy in our society.
      I feel sad that certain hon. Members—for example, the hon. Member for Perth and East Perthshire (Mr. Crawford)—should have got caught last week to the extent that they gave massive handouts to those earning over £10,000 a year and gave £5,000 to those earning £50,000 a year. These are the great innovators and entrepreneurs about whom we heard.
      It would seem that the Tories are determined in this Budget to give approximately £1,000 million to their friends. My right hon. Friend will tell me if I am wrong. If the Tory Party had had its way completely last Wednesday and the previous Monday, I understand that the bill would have been £780 million. Is that right?
      Mr. Denzil Davies indicated assent.
      Mr. Thomas: Thank you. The Tories now want to give away another £350 million, so I am underestimating. We are talking about £1,100 million—over £1,000 million—that the Tories want to give to their friends. We are not given any indication where the £350 million under this proposal is to come from. All we are told is that, if elected, the next Tory Government will deal with it. We know that
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      they are intent on making all kinds of cuts in public expenditure. We know that in the many areas where the Government have given help to certain firms and industries, the Tories would have let them go, unless they were in their own constituencies. When their own constituencies are affected it is a different kettle of fish altogether. They send the begging bowl round at practically every Question Time to the Department of Industry and other Departments.
      In addition, as I understand the statistics of the Budget, 57 per cent. of the total tax handouts on the Government's proposals are to go to those earning over £4,500 a year, which is the average wage. Well over half of the Government's proposals for tax handouts, therefore, were going to those who were earning more than the average wage.
      Given the Tory proposals, including this new clause, it would be 70 per cent. If we add the £1,100 million that they want to give to their friends to what has been given anyway, about 70 per cent. of the total tax handouts will go to those earning more than £4,500 per year. In any event, it will be considerably greater than the Government's 57 per cent. because of the measures adopted on Monday and Wednesday of last week.
      This is a pure example of naked class interest. I wish that the Tories would make this clear instead of trying to wring our hearts about some little shopkeeper who saves up all his pennies to buy a shop, goes into the shop and then has to sell it. If the Tories want to help such people, why not put down a specific amendment to try to deal with that kind of situation? It will not be easy, because such a proposal would encourage people to rush in and out of business and to make losses. They would be better off if they made losses in certain cases. It would not do much for this great innovative and incentive challenge which we are told the Tories' taxation system would defend. Let us get it clear that this is a piece of naked class interest.
      5.45 p.m.
      I am sure that the right hon. and learned Member for Surrey, East (Sir G. Howe) will not be surprised to learn that on capital gains tax I have not had one letter from any docker, aircraft or other

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      worker who creates the wealth in my constituency. I do not know whether the hon. Member for Perth and East Perth-shire has had any letter from the real creators of wealth in his constituency. I certainly have not. If I were to mention capital gains, I am sure that most working people would not know what I was talking about.
      The hon. Member for Blaby (Mr. Lawson) and others suggested that this was some kind of wealth tax. I do not know whether the Royal Commission reports are to be believed, but the November edition, like the others, gives some indication of the total wealth in this country. On page 69 of the report of November 1977 there is a table which gives the total personal wealth in this country. It gives the
      "Numbers of identified wealth owners and amounts of net wealth, by range of net wealth."
      The total estimate of personal wealth in this country is £190,000 million. Capital gains tax bring in £400 million. That is a rate of tax of 0.002 per cent. What a wealth tax: We can work it out for ourselves. We are told that the total wealth is about £200,000 million, and this tax brings in £400 million. If my arithmetic is wrong, I shall apologise to the Committee. What a wonderful wealth tax we have in this country.
      The Labour Party has for decades tried to get across the concept that capital gains are just as much income as any other form of income. The hon. Member for Eastleigh (Mr. Price), in a very reasoned speech—as against the speech made by the hon. Member for Blaby; I listened to him very closely—was trying to say that that particular chunk of income should be treated differently from any other. He was suggesting that perhaps there was something in the indexation of wages. Indeed, he suggested that in some areas workers get wage increases which are equivalent to the increases in the retail price index. But the point is that they pay tax on them. Workers have taken a massive cut in their standards of living. I do not know whether the hon. Gentleman takes the same approach as I do, but if we accept that capital gains are just as much income as income from rent or anything else, because they can be spent, they should be treated as such, and the rate of tax should be the rate for
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      that level of income. I do not see any argument against that.
      Mr. David Price rose—
      Mr. Thomas: If I may finish this point, I shall certainly give way to the hon. Gentleman. If we say that the allowances are not enough, that comes down to increasing someone's personal allowances before he pays tax. But if it is part of his income, it should be treated as income, and income tax at the appropriate rate should be charged on it.
      Mr. David Price: The hon. Gentleman is entitled to argue from his point of view that we should have the same rates for capital gains tax as for income tax. But that does not dispose of my argument, which is outwith his argument, that a capital gain should be corrected for inflation. Therefore, it should be a real gain. We can argue whether the rate should be 100 per cent. total confiscation or 10 per cent. That is not the issue. The simple issue is: what is the chargeable gain for the purpose of capital gains tax? I am sure that the hon. Gentleman is with me on that point.
      Mr. Thomas: The hon. Member can tell me whether I have understood his point. Let me draw a comparison with wages and salaries. The logical conclusion of what he is saying is that those who get a 14 per cent. increase in earnings in the current year will pay no tax on 10 per cent. of it, and will be taxed only on the remaining 4 per cent.—
      Mr. Price: That is not the same thing.
      Mr. Thomas: I say that a capital gain must be treated just like any other income.
      Mr. Price: The hon. Member has got it wrong. Capital gains tax is levied on the basis that over a number of years a capital asset increases in real value and that the increase should be taxed. The proposition is not that the paper value increases and should therefore be taxed. On incomes, the House decided last year to index personal allowances. That was in accordance with the point that the hon. Gentleman is now seeking to make.
      Mr. Thomas: That is not the same thing. All of us receive an indexed personal allowance whether or not we receive a capital gain. We are therefore all equal

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      on that score. The hon. Member for Eastleigh wants those who receive a capital gain to enjoy an additional indexation. I know of no legislation which provides for the taxation of real increases. Capital gains tax is applied on the sale of an asset where the sale price is greater than the purchase price. The figure will not be adjusted according to some index of retail prices or the like, but that is what the hon. Member for Eastleigh is arguing should happen.
      Mr. Ridley: May I suggest that the hon. Member for Bristol, North-West (Mr. Thomas) studies the Order Paper, where he will see just what the clause is intended to do?
      Mr. Thomas: I am taking up the point that the hon. Member for Eastleigh was making, as the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) would know if he had been listening, which I doubt. The hon. Member for Eastleigh was referring to taxes on real gains. Until now tax has been levied on all gains. It is a nonsense to suggest that a person with a total income of £10,000 a year, of which £1,000 is a capital gain, should pay one rate of tax on £9,000 and a completely different rate of tax, or none at all, on the balance.
      On that basis I would insist that a worker who had a 14 per cent. increase should have that increase indexed, in addition to the indexation of his personal allowance. He should not pay tax on 10 per cent. of it, but should pay the same level of tax as capital gains tax, which is 30 per cent., on the remaining 4 per cent.
      Capital gains tax was introduced in 1965 by the then Labour Government. There was growing evidence that people were finding ways of converting income into capital gains which until then had not been taxed. Those who paid high rates of tax did not want dividends; they wanted free shares or scrip issues, and so on. In that way they could employ a tax avoidance technique by obtaining untaxed capital gains. In the event, even those gains are now taxed at a lower rate than income—at 30 per cent. No one has ever explained to me why that difference should exist.
      The right hon. Member for Down, South (Mr. Powell) takes a particular
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      interest in these matters. Does he agree with the suggestion in an article in The Guardian that the differential between capital gains tax and the tax on other income distorts investment decisions? While that arrangement might be best for the individual, it is certainly not best for the community. In addition, the article refers to possible damage to the economy and so on.
      Not for one minute would I support the amendment, which is a plain example of the Tories serving the class interest that they were sent here to represent. That is fair enough. However, I am not happy with the Government's proposals either. I do not see why we should hand out £600 to someone who makes a capital gain of £6,000. The Government's proposal will do just that, but in addition will apply retrospectively to last year, giving a total figure of £1,200 which is in addition to the £750 that such people will get from the Budget anyway.
      The Government's proposals are an erosion of the concept that capital gains should be treated as income. Even at this late stage I ask them not to proceed with the clause, even though the total sum involved may be small. There can be no justification for giving such a handout. If the Government did as I suggested they would at least claw back a little of the revenue lost when the Tories and their allies forced through the income tax amendments last week.
      Mr. Budgen: There is a greater measure of agreement between the hon. Member for Bristol, North-West (Mr. Thomas) and my hon. Friend the Member for Blaby (Mr. Lawson) than appeared to be the case when the hon. Member began his speech. He concluded by advocating some form of more comprehensive indexation. He was saying quite reasonably that we have indexation in respect of capital gains and that we must therefore have some element of it in respect of taxation of income. I am sure that my hon. Friend would agree with that.
      However, the attack that has been made upon my hon. Friend is unjustified. His proposals for the indexation of capital gains are not presented as a class measure, although that would be perfectly justified in this Committee. There would be a perfectly reasonable case for saying that the element of taxation on those with

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      large incomes and wealth is too high. But the proposal is not advanced on that ground. My hon. Friend favours general indexation. He sees it as a method of mitigating for all classes and persons the harsh effect of inflation.
      My hon. Friend at first restricted his argument in favour of the clause to narrow grounds. He said that there was a problem in respect of capital gains, and there is. He argued persuasively that capital gains tax in its present form is nothing more than a disguised form of wealth tax. That is correct. He went on to argue that there were already enough taxes on capital. But he did not give an entirely comprehensive summary of all the taxes levied on capital. He pointed to the investment income surcharge, to the capital transfer tax and to stamp duty. He failed to point out the introduction of the development gains tax and the development land tax.
      6.0 p.m.
      My hon. Friend drew a proper distinction between a so-called real gain, as he put it, and a paper gain. He said that it was this taxation upon the paper gain that concerned him and led him to believe that indexation was the proper way to deal with this anomaly. I do not describe it as an injustice because I do not know in these circumstances what is just or unjust. I describe it as an anomaly.
      However, the fact is that when capital gains tax was introduced back in 1965 there was some truth in the point made by the hon. Member for Bristol, North-West that the great tax game was to try to convert income into capital. Once one has done that, however, it is of benefit to oneself only if one uses it.
      It is true that in the past the principal benefit derived from being able to convert a large income into capital and then pass it on to someone else before the seven-year period was up was that one got the benefit of the legal tax avoidance that was available under the old estate duty legislation. But here the situation has changed. We no longer have a voluntary inheritance tax. We have the capital transfer tax. If we are to have any system of capital taxation on transfer, the general idea of capital transfer tax is fairer, in my view, than the old system of totally avoidable death duty.
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      I argue immediately about the provisions, the exemptions and, most of all, the rate. But personally I much prefer the concept of an even-handed tax upon all forms of transfer.
      The case that existed in 1965 has been eroded. It has been further eroded by the harsh development land tax, because, in respect of all large gains, that starts at 80 per cent. and it is said by the Government to be likely to rise to 100 per cent. in the future. The Tory Party has said that it is in favour of the continuance of DLT—not, of course, I emphasise, at the present level, but at some level. We can argue about whether it should be 40 per cent. or 50 per cent.
      Therefore, I argue that, whatever the case may have been in 1965 for capital gains tax, that case has been eroded. It has been further eroded also by the existence of the Income and Corporation Taxes Act 1970 which, by Section 488, makes artificial transactions in land taxable as though they were income. It has been further eroded by the fact that a single transaction may now be taxed as income if a person is held to be trading in respect of that single transaction.
      I would argue, therefore, that the proper approach for the Tory Party ought to be to give a firm commitment either to phase out or, better still, to abolish capital gains tax. The sooner that is done, the better. If it be that we have not got the courage to say that in bald terms in the new circumstances, so long after 1965, it is not right to pretend—I do not say that my hon. Friend pretends—that it is not right to say that indexation is the only way of dealing with the phasing out of capital gains tax.
      It can be done by tapering, though I accept that when dealing with tapering it is technically very difficult. It can be done also by the system of reliefs which has been introduced in Clause 35 and following clauses in this Finance Bill. I suspect that it may not be possible baldly to say in a pre-election period that we are in favour of abolishing capital gains tax. But these anomalies, the anomalies argued about by the shopkeeper, can be dealt with by the sort of reliefs, on a vastly extended scale, that are so tentatively introduced in this Bill.
      However, in the second part of his speech, my hon. Friend the Member for Blaby stated what I know to be his firm

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      intellectual belief. He is in favour, as the hon. Member for Bristol, North-West turns out to be, of general indexation. I should just like to state very shortly my belief that general indexation is neither possible nor desirable. I shall deal first with why it is impossible.
      It is impossible because although theoretically, of course, it is possible to index both all payments by the State and all payments the other way—receipts—it is not possible in a free society to order every private citizen to index all the contracts that he has with another private citizen. It is not possible, most of all, because one would have to deal with it in respect of retrospective payments. How would one index payments that have been made in the past? One would have to index them retrospectively. One would have to say, for the sake of argument, "I borrowed £100 from my granny 20 years ago." However, when one came to pay back one's granny, the State would have to say "We order you retrospectively to repay to your granny an additional sum that takes into account the change in he RPI"—or whatever other index might be introduced.
      It would be impossible because, no matter how sophisticated we in the House of Commons might be in introducing new clauses such as that before the Committee—and no doubt my hon. Friend the Member for Blaby would say that if I were slightly more numerate I would be able to understand the new clause—I very much doubt whether Granny Smith—
      Mr. Lawson: What the hon. Member for Blaby would say is that what his hon. Friend is now entering into is a fantasy that bears no relation to the proposition that I was putting forward.
      Mr. Budgen: It is not a fantasy. What I am trying to do is to say that one can have total indexation and that that may introduce some appearance of honesty in contracts, but one cannot have partial indexation. It is impossible to argue for indexation only in State transactions without introducing indexation in transactions between private individuals.
      Mr. Ron. Thomas: The point I was trying to make was that if one cannot have—I agree with the hon. Member—
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      indexation for all other forms of income, it is quite wrong to have indexation for a particular form of income—namely, capital gains.
      Mr. Budgen: The hon. Member emphasises the next point that I wish to make. That concerns whether it is desirable for there to be total indexation or even partial indexation. As my hon. Friend the Member for Eastleigh (Mr. Price) says, we already have a high degree of partial indexation. We have indexation in respect of State pensions. Let us be clear about it. There are very many right hon. and hon. Members on the Opposition side who are highly sceptical about whether we should have indexation of State pensions.
      Mr. J. Enoch Powell: Or of Members' salaries.
      Mr. Budgen: There have been many in the Conservative Party who have expressed grave concern about the indexation of State pensions. In Committee and in the House we often talk about the grave difficulty of persons on low wages finding almost no advantage in working because of the incidence of tax and the high level of State benefits. Those State benefits are now indexed.
      There are those on this side of the Committee—I am one of them—who wish to consider whether those benefits should be indexed. However, there will be no intellectually sustainable case for considering either State pensions or State benefits if we are also introducing indexation in respect of capital gains. Therefore, it was undesirable as well as impossible to go further along the road of indexation.
      My hon. Friend the Member for Eastleigh says, rightly, that we already have a great measure of indexation. He argues, rightly, that effectively in wage negotiations there is a high level of indexation. He points to the indexation to which I have referred in public sector pensions, but that merely shows a reason why this country has not felt a greater sense of outrage at the very high rate of inflation that we have suffered in recent years. For instance, if there were not relief from the capital gains obtained on principal private residences, would there not be a great deal more outcry against inflation? If there was not also tax relief on mortgage interest payments,

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      which is tax relief against an inflation-proofed asset, would there not be more of an outcry against inflation?
      I cannot prove that if we mask the symptoms of inflation we shall thereby erode the popular will to defeat inflation. These are psychological factors that we either feel or do not feel in our bones. I was brought up in what is now called a one-parent family. We lived on a fixed income. As a boy, I understood clearly the effect of those low rates of inflation. If I have a strong emotional feeling in politics, it is to see inflation squeezed out of the system. Yet at present I know that in the change of my fortunes I am now a small farmer who is very heavily over-geared. As every month goes by, I see the money value of my assets increasing and the real value of my debt reducing. I know also that as a Member of Parliament I am at least partly dependent on what is effectively an indexed wage from the State. I know that if I am not careful, my emotional attitude towards inflation changes. I say that I can live with it. We can all live with it.
      Unless there is some pain in inflation, the popular will to defeat it will be gone. In a great inflation there will always be those who are clever, able and strong enough to get on the right side of inflation, but the fight against inflation is the fight against real injustice. It is the fight against the arbitrary unjust redistribution of assets.
      Mr. Pardoe: I agree entirely with the hon. Gentleman's indictment of inflation. Most of us in the Committee would agree that inflation has to be beaten. However, his arguments against indexation were slightly odd, coming from someone who, I have always thought, takes the monetarist viewpoint. The monetarist viewpoint is increasingly common on both sides of the Committee which, unfortunately, like much of the rest of the Western world, is in the grip of an evil guru.
      The evil guru himself, Mr. Friedman, states explicitly—
      Mr. Budgen: The hon. Gentleman must not believe everything he reads.
      6.15 p.m.
      Mr. Pardoe: Mr. Friedman says that general indexation is the sine qua non of his whole proposition for defeating inflation. He does not say that he can
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      defeat inflation without general indexation. He says that the only thing that makes his policy for defeating inflation politically and economically possible is general indexation.
      Therefore, those who argue the Friedman policy for dealing with inflation, of acting on the money supply, but deny that we have to go along with his proposals for making it politically possible, are living in cloud-cuckoo land. The only way in which one could make it politically possible to follow Friedman would be to have general indexation. However, I agree that general indexation would be impossible. Therefore, I believe that Friedman is impossible—but I arrived at that conclusion by a different course.
      One of the honest remarks that the hon. Member for Wolverhampton, South-West (Mr. Budgen) made was that perhaps we cannot abolish capital gains tax in an election year.
      Mr. Budgen: No, I did not say that.
      Mr. Pardoe: If the hon. Gentleman reads his speech, he will see that he implied that. If that is so, the amendment comes near to abolishing capital gains tax. The hon. Member for Blaby (Mr. Lawson) thought at the start of events that it was coming nearer to abolishing capital gains tax than it really is.
      Mr. Ron Thomas: It is 90 per cent.
      Mr. Pardoe: It is not 90 per cent. because we have ignored in the Red Book the revenue from corporation tax, which is dependent upon capital gains tax. Therefore, as the Minister made clear, the actual yield that we are dealing with is about £480 million, if we include the corporation tax effects, and we have a new clause which would cost about £350 million. Nevertheless, it is abolishing a pretty large slice of capital gains tax. It is abolishing three-quarters of it.
      Some Conservative Members might well consider, as we all have to, whether this is the moment to abolish capital gains tax, though I would go nearer to the hon. Member for Wolverhampton, South-West on that point than on his other arguments.
      I disagree fundamentally with the hon. Member for Bristol, North-West (Mr. Thomas) about indexation. He has got it wrong. The argument about indexation

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      of the tax system as opposed to general indexation is about parliamentary power and control of the Executive. That argument should appeal to the Tribune Group, as it must appeal to a Liberal Member or to any parliamentarian. The first reason for indexing the tax system—I believe that the principle of doing so is right, proper and necessary—is that taxation should be what Parliament decided and intended. Capital gains tax was intended to tax the increase in the capital value of an asset.
      Inflation was very much lower when Parliament entered into that undertaking. That was one of the reasons, as the hon. Member for Blaby would point out, why the Conservative Government did not index capital gains tax when they were in power between 1970–74.
      Mr. Ron Thomas: I have always understood that Parliament introduced capital gains tax because it was convinced that realised capital gains were the same as income.
      Mr. Pardoe: That, funnily enough, is not the reason why Parliament introduced capital gains tax. The reason why Parliament introduced it is not the essence of the argument. The essence of the argument is that Parliament intended it to be a tax on gains at the then rate. Inflation has changed the balance of that. If Parliament wants to tax capital gains, it should tax the real gains. If they want to achieve £480 million of revenue from gains, the Government should do so by coming to the House and saying "This is the rate at which we have to tax capital gains in order to yield £480 million in a year." Parliament in its wisdom can then decide whether that rate is right or wrong.
      Surely, the whole argument is about parliamentary control. It is wrong that, Parliament having made a decision on the appropriate rate in those circumstances, inflation should be allowed to change that real rate and that Parliament should not be allowed to do it for itself. That is why I believe that, in principle, indexation is right and proper.
      Mr. Denzil Davies: Why cannot Parliament change the rate? The hon. Gentleman is talking as though the rate were laid down in 1965 and is immutable.
      Mr. Pardoe: Parliament could change the rate, but that does not alter the problem. The whole basis of the argument is that we should be taxing the real gains, just as we should be setting the real level of personal allowances right through the tax system, and it is up to the Government to come to Parliament and change the rate. Parliament cannot increase the rate of capital gains tax. Only Governments can put forward an amendment to do that. If Parliament believes that the increase in capital values should yield a specified amount of revenue, we should charge the appropriate amount on real gains. On the principle of indexation, it should be introduced as soon as possible, right across taxation.
      The Minister got it wrong when he said that if indexation were across the board, we should be back in the situation we were in before and no one would gain. That is a gross distortion of the argument. The whole point is that inflation does not affect all people equally. It distorts the economy. That is one reason why the hon. Member for Wolverhampton, South-West and I would argue that inflation must be beaten.
      It is far better that Parliament should distort if anyone is to distort. I suppose that one would then call it discrimination in favour of one section of the economy rather than another, but to allow inflation to do it haphazardly, without Parliament deciding whom it wants to gain and whom it wants to lose from the economic process, is an abdication of Parliament's power. It is not true to say that indexation across the board would put us back to the situation that we were in before. It would alter the situation fundamentally from what we have under current rates of inflation.
      The hon. Member for Bristol, North-West rightly introduced into the argument the fundamental question of why we distinguish between income and capital gains. Parliament introduced capital gains tax for short-term gains only, and those are certainly much nearer to being income than are long-term gains, in reply to public demand. There was considerable public concern at every level of society about, in particular, short-term speculative gains on the stock market. The public does not distinguish between that sort of gain and income.
      Mr. Budgen: Under the present law, that single gain may be taxed as income.
      Mr. Pardoe: That is true, but when the tax was introduced the public did not make that distinction. Since then, because of the tax applying in a different way for long-term gains, we have arrived at a situation in which we try to distinguish between capital gains and income by taxing at a different rate.
      By far the most sensible formula, if we are to go on with capital gains tax, would be to index it but to count the real gains as income for income tax purposes and include them in the income tax schedules. That would be a sensible reform.
      The hon. Member for Loughborough (Mr. Cronin) got it wrong when he said that capital gains tax was the cause of inequality. It is not. The cause is the failure of inheritance taxes and gifts taxes to redistribute wealth adequately. That is where the greatest fiscal failure has taken place in tax policy since the war. I do not believe that it is capital gains tax which has caused this inequality but rather the ability to pass on wealth.
      Mr. Cronin: The problem is entirely an acoustic one. I said that capital gains was the major cause of inequality.
      Mr. Pardoe: All right, but that does not alter the argument, except that the word "tax" does not need to be there and does not make sense if it is.
      Capital gains are not the cause of inequality. It is, largely, inherited wealth which is the cause of inequality and therefore, we need to reform our capital taxation and decide first whether we are to tax the income from wealth or the wealth itself. We have decided that it is better to tax the wealth itself than the income from it. Clearly, wealth that is productive is, generally, good for society and wealth that is not productive and does not produce an income is lazy wealth and is not in the interests of society generally.
      Having decided that we should tax the wealth itself—and that argument is unanswerable—we have to decide how it should be done. We can have either an annual wealth tax or tax the wealth at the point of transfer. If we choose the latter course, it makes much more sense to tax the person who receives
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      a gift or bequest than to tax the estate that gives it up. That would be a redistributive accessions tax. It is a thousand pities that the Chancellor of the Exchequer, having been persuaded in Opposition that an accessions tax was infinitely preferable to a capital transfer tax, was persuaded by the Inland Revenue to change his mind. That is a great pity because we would have had an accessions tax, which would be the best way of taxing gifts or wealth at the point of transfer.
      The Government have not accepted indexation or tapering in the Finance Bill but they have made a significant change in the administration of capital gains tax and the incidence of the tax. I wholly welcome that change. It is not indexation and no one could claim that it is. It seeks only to mitigate the effect of capital gains tax, but let us be under no misunderstanding about the effect of what the Government have done. In an article in the Financial Times on 12th April, Professor Cedric Sandford and Adrienne Gleeson said:
      "The upshot of the proposed changes is a substantial reduction in capital gains tax liability for individuals whose annual net gains rise to quite a sizeable figure, the concession being greater for high income receivers than for basic rate payers, since the latter benefit from the replaced 'alternative charge'."
      There is one problem that I hope the Government will take note of and will return to. Capital gains of £1,000 a year are free of tax. It is comparatively simple for the negative investor on the stock market to arrange his finances so that he makes that sort of gain every year—if he makes a gain at all.
      Why should we discriminate in favour of the person who is able to make a gain of £1,000 a year but not in favour of the person who is able to make a gain of £5,000 on an asset held over five years? Surely that person may be a more positive investor than the man who is going in and out of the stock market in order to make £1,000 a year tax-free.
      I fear that we shall see all sorts of strange devices cooked up in order to ensure that no one makes a gain of £5,000 over five years but that it is somehow converted to £1,000 a year. I see no reason for the Government not to introduce a simple amendment that would enable the £1,000 a year to be held over and credited for as long as a person holds the

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      asset so that, if he buys an asset this year for £5,000 and sells it in five years' time for £10,000, that should count as £1,000 a year and be tax-free.
      The hon. Member for Blaby knows that I accept his arguments for indexation in principle, but in the end the decision comes down to a question of priorities and what we do with £350 million. The hon. Member will say that it is next year and that that is easy. It is always easy to give away money next year. But we shall need to reduce income tax next year as well, whether the hon. Gentleman's party is in Government or not, and £350 million represents 1p off the standard rate. It is a great pity that the Conservative Party, when it refused to support the Liberal Party's suggestion for a 2p reduction in the standard rate, did not say that it could manage only 1p this year but that it would take off 1p next year as well. It did not say that and it did not commit itself in any way to doing that. The Conservative Party is now giving away £350 million of the money which it could use next year to reduce income tax, at the lower level, at the higher rate, in the middle or wherever it might be.
      6.30 p.m.
      I believe that the priority in tax reform is pre-eminently the reduction—and the substantial reduction—of income tax. I do not think it right, therefore, to mortgage funds that will be available for that purpose next year by committing ourselves to a partial reform of the capital gains tax, which is only one small part of capital taxation this year. I believe that we should go for a wholesale reorganisation and reform of capital taxation. It would not reduce the total revenue available. The reforms that I have advocated would actually increase the total revenue available.
      I do not think that this is the right year in which to spend this kind of money—nor, indeed, next year—in fiddling around with the capital gains tax when the money could be used to much better economic purpose by reducing the income tax for every income earner in this country.
      Mr. John Wakeham: We seem to have established in the Committee that in the case of capital gains tax
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      somewhere between 75 per cent. and 90 per cent. of the gain is inflationary. It seems to me that, if we are to go on with the present system, we might as well face up to some of the economic consequences of that fact, or else we ought to alter the position on the lines of the new clause..
      The first consequence of going on as we are is to recognise that anyone wishing to maintain the real value of his capital must speculate. He must put his money into something which is highly risky and probably not very desirable socially. That is one of the very few ways in which to keep up with inflation.
      Secondly, what are we saying to the person who might be inclined to put his money into sensible long-term investments—plant and machinery, factories and businesses—which most of us would consider to be desirable in creating more jobs? We are almost certainly inviting him to incur, over the period of his investment, some sort of capital loss in real terms.
      Thirdly, we are saying that it is much better to seek out that sort of investment which gives a tax-free capita] gain—for example, life policies, Government stocks and so on. If we are to discriminate—as we do at the moment—in favour of institutional investors in that sort of area, particularly in regard to life policies, the effect of this, frankly, is to distort the investment market, because those investments generally tend to find their way back into the major companies in this country and not, for very good practical reasons, into the small businesses. By carrying on in this way, therefore, we are deliberately encouraging the investors to discriminate, whether they realise it or not, against small businesses.
      Fourthly, we are saying to someone who has investments, which it might be right for all sorts of considerations of economics to switch into something else, that he should think very carefully about doing so because a real chunk of his capital will be taken away. This means that attempts to get investment into the right source—the source which will grow and be good for the country—will be distorted by a view of the capital gains positing away part of the real capital of the investor by taxing the inflationary element.

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      Fifthly, whether or not we argue, as the hon. Member for Bristol, North-West (Mr. Thomas) did, that it is only a tiny, weeny wealth tax, it is in fact a form of capital levy of one sort or another if year by year, by capital realisation, we take away some part of the real capital fund.
      There are, therefore, several very serious economic reasons why it is not good for the business, the industrial and the commercial life of the country that we should distort our investment decisions in this way by a capital gains tax which creates taxation on inflation.
      I would go quite a long way with the Minister of State in his references to the Carter Commission. I am by no means less radical than some people on what I consider should be taxed, but what I believe is that, for very sound economic reasons—reason other than simply the personal convenience of the taxpayer—although that is a very important consideration—we have to recognise that if we continue in the way we are going we shall have to face some of these very serious problems. That is one of the reasons why I shall support the new clause, which, I believe, goes a substantial way towards dealing with them.
      Mr. Powell: It has been a curious as well as an interesting debate in Committee on the new clause, because about halfway through—partly thanks to the hon. Member for Bristol, North-West (Mr. Thomas)—the Committee discovered that what we are really debating is not amendment of an existing tax but the replacement of one tax by a quite different tax. Thereupon the debate switched from the previous rather arid attempt to define a capital gains tax to the more practical discussion as to whether we ought to move from one sort of tax to aother.
      Mr. Anthony Nelson: Would the right hon. Gentleman agree that the tax has already become a different tax from that which was intended?
      Mr. Powell: The hon. Member is on the same line of thought as I was intending to pursue. I was about to say that the crystal which the Minister of State injected into the debate was his disclosure that, on the Treasury's estimate, three-quarters of the tax to be expected this year—I think he was talking about
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      this year—is a tax upon inflationary gains: that is to say, 75 per cent. is a tax levied upon that part of the sums coming into taxation which represents the consequences of past inflation.
      I would myself be inclined to think that, even if that estimate is true in one particular year, it is an underestimate, looking at it more broadly, because there are three—and three only—form of capital gain. One is the major forms that we are primarily discussing—that which simply represents the fall in the value of money.
      The second form is a relative gain—namely, the fact that one asset has become relatively more valuable. But that sort of gain is always equal and opposite to a corresponding loss, for it is a truism that all relative increase in value is offset by an equal relative decline in value somewhere else.
      The third and only remaining form of capital gain is one which reflects the general accretion of wealth; but there has been precious little general accretion of wealth in this country in the last five years.
      If capital gains tax, excluding inflation, is run over a period of time, the fact that relative gains and relative losses balance will show up in a disappointingly and surprisingly small yield for the tax. Therefore, from its inception, whatever the illusions that were entertained about it, the capital gains tax was a tax which looked for its prime source of revenue to the taxation of illusory or inflationary gains.
      Indeed, it is doubtful whether we should have engaged in a capital gains tax at all but for the phenomenon of inflation. Certainly, we should not have done so but for the combined phenomena of inflation and high marginal rates of taxation which put such a premium upon methods of converting income into capital that the question naturally arose "Cannot we catch that capital when in due course it is liquidated?"
      There are two ways in which we can face the situation which our experience over the last 15 years has disclosed. One is the method adopted in the new clause. We can attempt to drain out of the capital gains tax the inflationary element. I have an objection of detail as well as

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      an objection of principle to the attempt to do that. The objection of detail is that we all very well know the significance of the retail price index when we compare one year with another, or when we are dealing with a relatively brief run of years. If, however, one has to use the retail price index as a measure of inflation over 20 years, one really is applying an inappropriate instrument to one's purpose.
      The retail price index, even for the purpose for which it was invented—to deal with matters which affect the standard of living of the ordinary family—has periodically to be adjusted, with a consequent break which deprives it of its validity over a long period of time. In fact, every index suffers from an inbuilt contradiction, which is that if its base is consistent it is wrong, because a consistent base becomes increasingly out of date, but if its base changes it is also wrong—for what is the point of an index with a different base? We can laugh off this difficulty when we are dealing with two, three, four or five years at a time. We cannot laugh it off when, as in this new clause, we are prepared to apply it over decades. There simply is no objective method, in terms of decades, of measuring inflation. We know broadly that inflation has taken place, but by the very nature of the phenomenon itself we are incapable of measuring it. That is my technical objection.
      My more serious objection is allied to that of the hon. Member for Wolverhampton, South-West (Mr. Budgen), namely, that we are seeking to reform or, indeed, alter a tax by means of institutionalising inflation, for all indexation implies an acceptance of the phenomenon of inflation and the building of that phenomenon into the structure of our law, be it the tax law or whatever. I share the hon. Gentleman's objection to our undertaking in a branch of the law what is, in effect, an institutionalisation of inflation.
      In an earlier speech, an hon. Member expressed what is a very general assumption but is, I believe, a fallacious assumption that is, that although we were mistaken 10, 15 or 20 years ago, when we thought that inflation rates of more than 2 or 3 per cent. were impossible, we are not mistaken now when we suppose that,
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      having experienced inflation rates of 7 per cent., 10 per cent., 15 per cent. and 20 per cent., we shall go on experiencing those rates in the future. I believe that the one extrapolation is as fallacious as the other. I do not believe that we can go on living with 7 per cent. per annum inflation any more than we could go on living with 15 per cent. per annum inflation. Whether we like it or not, and whether the rest of the world which has more or less been engaging in the same jolly game likes it or not, we shall find that, however painful, we have got to get inflation out of our system or, rather, out of our methods of Government.
      6.45 p.m.
      Mr. Peter Hordern: Many of us share the right hon. Gentleman's hopes in that direction, but we see precious little evidence of that happening with the Government increasing the supply of money as rapidly as they are at present. However, that is not the point that I wish to make. The point is on indexation. Surely the principle of indexation has already been allowed by the Government in allowing for stock appreciation. Indeed, had not stock appreciation been allowed two or three years ago, many companies in British industry would by now have been bankrupt. Therefore, the principle is already allowed. Does not the right hon. Gentleman think that, having allowed that principle, it should be further extended to the indexation of capital gains?
      Mr. Powell: I would certainly not accept that because, in one sector or another, we have found ourselves forced to admit and allow for, and attempt to measure, the consequences of inflation, we ought therefore to generalise any such allowance and that there is an automatic ground therein for extending that procedure from one sphere of taxation or legislation to another.
      The main point to which I was coming is that if it be so that, with bumps along the way, we shall discover that the depreciation of money which even 7 per cent. compound inflation represents is intolerable, capital gains tax will cease to be important in our fiscal pattern. Of course, how soon a given fall in the rate of inflation would reduce the yield of capital gains tax must depend upon something which no doubt the Treasury knows

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      but which is not given to other mortals, namely, the past inflation profile of the capital gains which are coming into tax in a particular assessment year. But, whatever that profile may be, as time goes on, with the fall in inflation, and maybe the disappearance of inflation as an important phenomenon, the capital gains tax will become a very minor revenue yielder indeed. It will certainly disappoint the hopes—here I am with the hon. Member for Cornwall, North (Mr. Pardoe)—of those, like the hon. Member for Bristol, North-West, who believed that capital gains tax would be an instrument of redistribution of wealth.
      Of course it is an instrument of redistribution of wealth between one poor bounder and another, because the man who has made a capital gain gets less benefit from that gain—part of it being taxed away—than he otherwise would. But it does not bring about a distribution of wealth as between classes—as between the owners of property and the proletariat, for example—because with real gains balancing one another automatically no such effect can be produced by a capital tax upon real gains. It is, therefore—
      Mr. Ron Thomas rose—
      Mr. Powell: I should like to finish my sentence and then I shall willingly give way to the hon. Gentleman. Indeed, I was complimenting and thanking him in his absence for the contribution which he made to the debate.
      It is arguable that there would be no fun at all in a capital gains tax unless there were inflation with no indexation for inflation, because it is the taxation of illusory capital gains which gives a certain distributional effect to the capital gains tax.
      Mr. Ron. Thomas: I must apologise to the right hon. Member for not being present to hear the beginning of his speech. I do not think that I have ever suggested that capital gains tax makes any contribution to the redistribution of wealth. What I tried to say was that a capital gain was income, just like any other income—just like a wage or salary increase. We do not say to the man who receives a wage or salary increase "You have only 12 per cent. You need 10 per cent. of that to meet the increase in the index of retail prices. Therefore, we shall
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      tax you only on the remaining 2 per cent." I see capital gains as a form of income, and I do not see why it should be excepted.
      Mr. Powell: At any rate, I am glad to learn that the hon. Member will not suffer the disappointment, which I feared, of finding that a capital tax on real gains is not redistributive, and I hope that he will forgive me—although it is a delightful temptation—if I do not in answer to his intervention attempt to deal with his effort to equate capital and income. It leads to some remarkable results, but it would take us far from the subject of this debate.
      At the outset, in introducing the new clause, the hon. Member for Blaby (Mr. Lawson) referred to the objection to any capital gains tax that I had voiced in earlier debates and which I suppose—for time goes on and Crossman diaries are published—I may now say I voiced in the Conservative Shadow Cabinet in 1965 when capital gains tax was introduced.
      But if we follow through the result of today's debate, we shall find that what we are debating is the attempt to abolish capital gains tax by a side wind and by the instrument of indexation. I would much sooner, as I think would the hon. Member for Wolverhampton, South-West, do it openly by recognising the futility of a true capital gains tax as a means of raising revenue and its inadequacy as a means of redistributing income if that is desired. We had better get rid of it altogether.
      I venture upon the prophecy that, not many years ahead, some Chancellor of the Exchequer will come to the conclusion that the cost of levying what will then be left of the capital gains tax, even in its present form, will not be worth the candle.
      Mr. Ridley: The objective of the new clause has been deserted by many of its friends last year. The Liberal Party was in favour of this principle and appears not to be in favour of it this evening. The Government were also in favour of it, and they seem to have retreated from it. So also, perhaps, has the right hon. Member for Down, South (Mr. Powell), and I want to take the directly opposite point of view to his last remark.
      Quite properly, the right hon. Member sees this attempt to index capital gains

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      tax as a way of ridiculing the tax itself, leading to its eventual abolition. I was not sure whether he intended to vote against the clause, but I shall vote for it for that reason. I think that it would be excellent to have the tax abolished.
      Taking matters the other way round, it is extraordinary not that the clause will cost £350 million, or whatever it is, but that, if it were passed, the entire yield of capital gains tax would be only £130 million. If one asked what would be the yield with a fully indexed capital gains tax on persons as opposed to companies, with which there are different considerations, it would be probably more in the region of £50 million or £60 million. It would be so small that it would not be worth the cost of collecting it. What is more, the economic damage which it causes is great, and I venture to suggest to the hon. Member for Bristol, North-West (Mr. Thomas) that the social good that it does is non-existent.
      There are two or three Government supporters who come here as what might be described as Robespierrian representatives of the people and tell us of the divisive effects of Tory tax policies. I include in that group the hon. Member for Ormskirk (Mr. Kilroy-Silk), who graced our debates last week on this same theme and who believes that the only way to look at any tax proposition is whether it will benefit people who are not taxpayers. That in itself is an impossible proposition. The hon. Member for Ormskirk told us about his constituents who would give their right arms to be taxpayers. All of the hundreds of thousands of one-armed taxpayers wandering round Ormskirk will not thank him, because it will not do a pennyworth of good to them to be told that the capital gains tax is to left as it is or that it is to be abolished. It will not help the so-called poor to abolish this tax. To leave the tax as it is will not do them any harm. It will not make any difference at all to the sort of considerations that the hon. Member for Ormskirk has in mind.
      What really affects all our constituents is whether this tax has done harm to the creation of jobs. I believe that it has. I believe that the effect of capital gains tax has been to delay investment decisions which should be taken, to stop switching
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      which should be done, to frighten people off from making investments, especially in this country, and perhaps even to drive them to go abroad to an extent which has damaged the one-armed taxpayers of Ormskirk and others too.
      The hon. Member for Bristol, North-West made another extraordinary remark. He equated capital gains with income, and I am afraid that the Minister of State made the same error. I took down his words. He said:
      "Capital gains are just spending power."
      Mr. Denzil Davies: I did not say that. I merely asked whether it could not be argued in certain circumstances that capital gains were different from income, because they conferred spending power. Indeed, the index used by the hon. Member for Blaby (Mr. Lawson) in his new clause is an index related to spending power.
      Mr. Ridley: The Minister of State must not disown his own arguments. He has a hard enough job disowning his own intention to adopt this policy last year. He is now attempting to disown what he said earlier today. He most certainly looks at it, as do his hon. Friends, as though any capital gain which is realised is spending power. But let us suppose that the capital which is realised is reinvested. Then it is not spending power.
      Mr. Ron Thomas: Let us suppose that the income that someone receives is reinvested. Then that is not spending power. But that tells us precisely nothing.
      Mr. Ridley: If I may develop the argument, it is that the evil about this tax is that it taxes, in some cases quite heavily, gains which are made when people simply wish to switch an investment.
      The evil about which the constituents of the hon. Member for Bristol, North-West complain is the spending of the gain. I do not agree with them. I am not an egalitarian, and I do not believe that envy and bitterness are the motive for tax policy or are in order, pointful or reasonable. But, if they are, it is the spending of the realisable gain which is offensive to the hon. Gentleman's constituents. In that case, the right way forward with capital taxation is to make clear that only that capital which is withdrawn and consumed, as opposed to being

      319
      reinvested, should be subject to the sort of taxation which the hon. Member likes to see. I am not advocating that myself. I am merely saying that it is a logical position for the hon. Member to take.
      Anything that we can do in this Committee to wreck the whole of capital gains tax should be done. I support the new clause, warts and all. Obviously, any attempt to index anything will have warts. I do not have any passion about indexation, but I have a passionate hatred of capital gains tax because of the harm that it does to all our constituents.
      7.0 p.m.
      Mr. Nelson: I, too, support the new clause. I recognise that of itself it will not cure the seemingly interminable problem of inflation, but it will concentrate the mind of the Government on so doing. There is nothing like indexation of Government receipts to make the Government more aware of the benefit that inflation provides in raising revenue. Perhaps they will deal more certainly with the problem if they are prevented from raising revenue by stealth, which is the present situation.
      Many hon. Members have spoken with care and restraint about the clause. They, too, recognise that it will not, in itself, cure inflation. But it seems to me that capital gains tax itself has changed radically since it was introduced in 1965. It is not that we are now proposing a radically different tax; all that we seek to do is to return to the situation that prevailed in 1965. The rate of inflation then was substantially less then than it is today, and it does seem inequitable, not that capital gains tax should be indexed and therefore compare favourably with earned income but that inflation and the failure to index capital gains tax should bring inequities between different forms of capital tax.
      It seems wrong that a man with a substantial amount of capital, just because he has been left it, may pay absolutely no tax on the income while he holds it whereas someone who sells the capital—it having produced a gain over a period of time, but not necessarily having produced an increase in real value—has his asset reduced in value. This seems to be inequitable treatment between two holders of a capital asset, which results solely from the accident of that wealth being transferred.
      320
      If we do not carry this new clause and capital gains tax is not indexed, we should at least change the name of the tax. It is not capital gains tax: it is more a selective wealth tax. It is not entirely a wealth tax, because it does not apply to all wealth. On the other hand, it is not a gains tax, because in the majority of cases it does not tax a real gain. It taxes selectively the wealth of those who choose, or are forced, to transfer or dispose of a capital asset. Therefore, to that extent it is inequitable between different categories of capital holders.
      It is this fundamental injustice of the tax that we seek to rectify with the new clause. It is nonsense that every year so many individuals and companies are involved in disposing of capital assets purely to realise a loss to set against their capital gain. This is a largely unproductive process, and the passage of the new clause would mean that if the gains that were realised were only paper gains, and not of a real nature, individuals and companies would not have to dispose of other assets for the purely technical reasons of incurring an off-setting loss. Surely, the hon. Member for Bristol, North-West (Mr. Thomas) would not be in favour of the substantial amounts of commission and the benefits which go to many individuals in the City from realising losses on behalf of asset-holders. Yet that is the situation that exists without indexation.
      If the new clause were to be carried, the only sort of losses that would be realised would be those genuinely going to offset real capital gains that have been made.
      For those reasons the continuation of this tax in its present form is inequitable. While we hope that we shall return to the days of lower inflation, there can be no certainty about this and there cannot be any accurate forecasts of Government receipts from capital gains tax. These receipts depend entirely on the growth of the economy, and where the economy expands at a substantial rate, the disposals that are made and the value of assets generally are bound to increase. In such circumstances, the real value of capital gains tax to the Government will increase. Therefore, receipts depend on many external factors as well as internal ones. Real economic growth and the growth of real personal disposable assets

      321
      are bound to be encouraged by the passage of the new clause or, better still, by the removal of capital gains tax altogether.
      I would go further than many of my hon. Friends in my approach to the taxation of capital. It seems to me entirely wrong that the whole of our system is orientated towards a swingeing tax on what people earn during their lifetime, but virtually nothing on what people happen to inherit if, by some quirk of circumstance, they can go the whole of their lifetime without disposing of it.
      I would be prepared to consider trading much lower levels of income tax for a system of capital tax, but as the system stands at present there are gross anomalies and inequities. I believe that the new clause will help at least to alleviate some of them.
      Mr. Lawson: We have had a valuable debate, or, in many ways, two debates. One was on the new clause and the other was initiated by my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), followed by his predecessor, the Wolverhampton wanderer—the right hon. Member for Down, South (Mr. Powell). They were really concerned with showing that their opposition to this clause was a virility symbol indicating the strength of their hatred of inflation. All I can say is that if I thought for one moment that the passage of this clause would in any way impede the fight against inflation I would not propose it, vote for it or have my name attached to it in any way.
      The Minister of State asked me a number of technical questions about the clause itself. He asked me how we would deal with part disposals, share pools and enhancement. Of course, we have looked into these, and the form of the clause is one which would enable us to deal with them relatively simply. Although for a Government who have put as much complicated legislation on the statute book as this one, to say that there are certain complications in this clause is a bit rich.
      On share pools it is a matter of simple arithmetic to uplift the expenditure on all acquisitions by reference to the indices for all relevant years in order to compute the gain or loss.
      If there is a part disposal, the cost of the acquisition of the shares sold would
      322
      be calculated as the appropriate proportion of the uplifted cost. The remaining holding would then be carried forward at the uplifted value of assessment. I hope that the Minister of State has fully taken that in.
      As for enhanced expenditure, there are slight complications here, but basically the difficulty which is envisaged—which is in paragraph 45 of the Inland Revenue's memorandum—is in fact a difficulty that occurs anyway, irrespective of the indexation in the new clause.
      I have dealt with the Minister's technical objections. I thought that it was agreed on all sides that the Committee should follow the Inland Revenue paper. Having heard the devastating intervention of my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) on the point of stock appreciation, I feel that it is something to which the Minister ought to address himself. My hon. Friend the Member for Maldon (Mr. Wakeham) made an important point about the economic distortion in the capital market caused by this tax.
      In view of all that has been said, I hope, with renewed conviction, that the Committee will support the new clause.
      Mr. Denzil Davies: The hon. Member for Blaby (Mr. Lawson) has tried to deal with some of the technical inadequacies of the new clause. It is a pity that he did not write into the clause what he has just read out—although I suspect that if he had done so the clause would be more unintelligible than it is now. The hon. Member asked me to comment on stock appreciation. The right hon. Member for Down, South (Mr. Powell) gave the answer. I accept that stock appreciation is a form of indexation, but the lesson to be learned from the stock appreciation exercise is that in periods of high inflation pressure will be brought in favour of indexation in one way or another so as to benefit a group suffering from the effects of inflation.
      There are dangers in this line of argument. I believe that we should resist such pressure, because of the dangers that certain groups will secure a change in the law for their own benefit while others who do not have the muscle will be unable to get the law changed. That is why I believe indexation is unfair.

      323
      The hon. Member for Blaby told us of the grocer from Grantham—
      Mr. Lawson: Hinckley.
      Mr. Davies: Sorry. With the knowledge of indexation revealed in the letter, I thought that perhaps the grocer came from Grantham. This is a difficult case. I remind the hon. Gentleman that 75 per cent. of the yield arising from capital gains tax and corporation tax flows from the disposal of stocks and shares and not from the sale of small grocers' shops. Most business assets have the benefit of rollover relief and most people who retire have the benefit of retirement relief. The writer of the letter did not, unfortunately, have that benefit.
      The hon. Member for Blaby did not say from where he would get the £350 million. All that he did was to mention next year. He did not say where the money would come from next year. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) had it right when he said that ultimately the new clause was not about indexation; it was about abolishing the tax. If this new clause were to be accepted, the yield from the tax would be so small that the cost of collection would represent about 15 per cent. of that yield. Such a tax could not be sustained by any Government. I understand the implications of what I have said, but I also understand the fundamental objections of Tory Members to indexation. The new clause is about indexation and the vote upon it will, likewise, be about indexation.
      Leaving aside the passion of the hon. Member for Blaby for indexation, I can see that a consequence of the new clause would be the abolition of this tax. If that is what Opposition Members want they should table a new clause and make it clear, in election year—as the hon. Member for Wolverhampton, South-West (Mr. Budgen) said—that the Tory Party stands for no tax on capital gains. We are going back to the days before 1960. From 1960 onwards there were attempts in the Finance Acts to prevent people dressing up income as capital gains. This started in the Finance Act 1960. Since then there have been attempts to stop people converting
      income into capital and getting the benefit of the lower rate. If the Opposition want to go back to that, to the days when there were no taxes on capital, let them say so.
      7.15 p.m.
      Mr. Budgen: Will the right hon. Gentleman agree that the introduction of capital transfer tax has markedly changed the case to be made against these contrived capital gains since such a gain is only of value if it gives income or can be passed on?
      Mr. Davies: I heard the hon. Gentleman's speech. The point he made then, and which he makes again now, is that since capital transfer tax is presumably not as legally avoidable as estate duty was, perhaps there is less of an incentive to turn income into capital. The fundamental point is that there is now less of an incentive because there is a tax on capital gains. Before 1960 there was no such tax. If the Opposition want to return to those halcyon days, when a lot of people made a lot of money quickly and a lot of legal advisers made a lot of money—
      Mr. Budgen: Careful.
      Mr. Davies: I was not called to the Bar in 1960. The hon. and learned Member for Dover and Deal (Mr. Rees) was called to the Bar before 1960. If the Conservatives want to return to those halcyon days, let them table the appropriate new clause and argue the case before the Committee.
      The new clause is about indexation. In my opinion indexation for one group is unfair. I do not believe that it is an answer to inflation. There is a great danger that the more we spread indexation the greater will grow the feeling that somehow we can thereby cure the problems of inflation. I want to deal with the problems of inflation rather than propose palliatives.
      Question put, That the clause be read a Second time:—
      The Committee divided: Ayes 223, Noes 278.

      Division No. 209]

      AYES

      [7.17 p.m.

      Adley Robert

      Atkins, Rt Hon H. (Spelthorne)

      Bennett, Dr Reginald (Fareham)

      Aitken, Jonathan

      Atkinson, David (Bournemouth, East)

      Benyon, W.

      Alison, Michael

      Awdry, Daniel

      Biffen, John

      Amery, Rt Hon Julian

      Bell, Ronald

      Biggs-Davidson, John

      Arnold, Tom

      Bendall, Vivian (Ilford North)

      Blaker, Peter

      Body, Richard

      Hordern, Peter

      Percival, Ian

      Bowden, A. (Brighton, Kemptown)

      Howe, Rt Hon Sir Geoffrey

      Pink, R. Bonner

      Boyson, Dr Rhodes (Brent)

      Howell, David (Guildford)

      Prentice, Rt Hon Reg

      Braine, Sir Bernard

      Hunt, David (Wirral)

      Price, David (Eastleigh)

      Brittan, Leon

      Hunt, John (Ravensbourne)

      Pym, Rt Hon Francis

      Brotnerton, Michael

      Hurd, Douglas

      Raison, Timothy

      Bryan, Sir Paul

      Hutchison, Michael Clark

      Rathbone, Tim

      Buchanan-Smith, Alick

      Irving, Charles (Cheltenham)

      Rees, Peter (Dover & Deal)

      Buck, Antony

      James, David

      Rees-Davies, W. R.

      Bulmer, Esmond

      Johnson Smith, G. (E Grinstead)

      Renton, Rt Hon Sir D. (Hunts)

      Burden, F. A.

      Jones, Arthur (Daventry)

      Renton, Tim (Mid-Sussex)

      Butler, Adam (Bosworth)

      Jopling, Michael

      Rhodes, James R.

      Chalker, Mrs Lynda

      Joseph, Rt Hon Sir Keith

      Ridley, Hon Nicholas

      Churchill, W. S.

      Kaberry, Sir Donald

      Ridsdale, Julian

      Clark, Alan (Plymouth, Sutton

      Kershaw, Anthony

      Roberts, Wyn (Conway)

      Clark, William (Croydon S)

      King, Evelyn (South Dorset)

      Rossi, Hugh (Hornsey)

      Clarke, Kenneth (Rushcliffe)

      Kitson, Sir Timothy

      Rost, Peter (SE Derbyshire)

      Clegg, Walter

      Knight, Mrs Jill

      Royle, Sir Anthony

      Cockcroft, John

      Knox, David

      Sainsbury, Tim

      Cooke, Robert (Bristol W)

      Lamont, Norman

      St. John-Stevas, Norman

      Cope, John

      Langford-Holt, Sir John

      Scott-Hopkins, James

      Cormack, Patrick

      Latham, Michael (Melton)

      Shaw, Giles (Pudsey)

      Costain, A. P.

      Lawrence, Ivan

      Shaw, Michael (Scarborough)

      Crowder, F. P.

      Lawson, Nigel

      Shelton, William (Streatham)

      Dodsworth, Geoffrey

      Lester, Jim (Beeston)

      Shepherd, Colin

      Douglas-Hamilton, Lord James

      Lewis, Kenneth (Rutland)

      Shersby, Michael

      Drayson, Burnaby

      Lloyd, Ian

      Silvester, Fred

      du Cann, Rt Hon Edward

      Loveridge, John

      Sims, Roger

      Durant, Tony

      Luce, Richard

      Sinclair, Sir George

      Dykes, Hugh

      McAdden, Sir Stephen

      Skeet, T. H. H.

      Elliott, Sir William

      McCrindle, Robert

      Speed, Keith

      Eyre, Reginald

      Macfarlane, Neil

      Spence, John

      Fairbairn, Nicholas

      MacGregor, John

      Spicer, Jim (W Dorset)

      Fairgrieve, Russell

      MacKay, Andrew (Stechford)

      Spicer, Michael (S Worcester)

      Farr, John

      Macmillan, Rt Hon M. (Farnham)

      Sproat, Iain

      Fell, Anthony

      McNair-Wilson, M. (Newbury)

      Stainton, Keith

      Finsberg, Geoffrey

      McNair-Wilson, P. (New Forest)

      Stanbrook, Ivor

      Fisher, Sir Nigel

      Madel, David

      Stanley, John

      Fletcher, Alex (Edinburgh N)

      Marshall, Michael (Arundel)

      Steen, Anthony (Wavertree)

      Fookes, Miss Janet

      Marten, Neil

      Stewart, Ian (Hitchin)

      Forman, Nigel

      Mates, Michael

      Stokes, John

      Fowler, Norman (Sutton C'f'd)

      Mather, Carol

      Stradling Thomas, J.

      Fox, Marcus

      Maude, Angus

      Tapsell, Peter

      Fraser, Rt Hon H. (Stafford & St)

      Maudling, Rt Hon Reginald

      Taylor, Teddy (Cathcart)

      Fry, Peter

      Mawby, Ray

      Tebbit, Norman

      Galbraith, Hon T. G. D.

      Maxwell-Hyslop, Robin

      Temple-Morris, Peter

      Gardiner, George (Reigate)

      Mayhew, Patrick

      Thomas, Rt Hon P. (Hendon S)

      Gardner, Edward (S Fylde)

      Meyer, Sir Anthony

      Townsend, Cyril D.

      Gilmour, sir John (East Fife)

      Miller, Hal (Bromsgrove)

      Trotter, Neville

      Glyn, Dr Alan

      Mills, Peter

      van Straubenzee, W. R.

      Goodhart, Philip

      Miscampbell, Norman

      Vaughan, Dr Gerard

      Goodlad, Alastair

      Mitchell, David (Basingstoke)

      Viggers, Peter

      Gorst, John

      Moate, Roger

      Wakeham, John

      Gow, Ian (Eastbourne)

      Montgomery, Fergus

      Walder, David (Clitheroe)

      Gower, Sir Raymond (Barry)

      Moore, John (Croydon C)

      Walker, Rt Hon P. (Worcester)

      Grant, Anthony (Harrow C)

      More, Jasper (Ludlow)

      Walker-Smith, Rt Hon Sir Derek

      Gray, Hamish

      Morgan, Geraint

      Wall, Patrick

      Grist, Ian

      Morgan-Giles, Rear-Admiral

      Walters, Dennis

      Hall-Davis, A. G. F.

      Morris, Michael (Northampton S)

      Weatherill, Bernard

      Hamilton, Archibald (Epsom & Ewell)

      Morrison, Charles (Devizes)

      Wells, John

      Hamilton, Michael (Salisbury)

      Morrison, Hon Peter (Chester)

      Whitney, Raymond (Wycombe)

      Hampson, Dr Keith

      Mudd, David

      Wiggin, Jerry

      Hannam, John

      Nelson, Anthony

      Winterton, Nicholas

      Harrison, Col Sir Harwood (Eye)

      Neubert, Michael

      Wood, Rt Hon Richard

      Harvie Anderson, Rt Hon Miss

      Newton, Tony

      Young, Sir G. (Ealing, Acton)

      Haselhurst, Alan

      Onslow, Cranley

      Younger, Hon George

      Havers, Rt Hon Sir Michael

      Osborn, John

      Hayhoe, Barney

      Page, Rt Hon R. Graham (Crosby)

      TELLERS FOR THE AYES:

      Hicks, Robert

      Page, Richard (Workington)

      Mr. Michael Roberts and

      Hodgson, Robin

      Parkinson, Cecil

      Mr. Spencer Le Marchant.

      Holland, Philip

      Pattie, Geoffrey

      NOES

      Abse, Leo

      Beith, A. J.

      Brown, Hugh D. (Provan)

      Allaun, Frank

      Bennett, Andrew (Stockport N)

      Brown, Robert C. (Newcastle W)

      Anderson, Donald

      Bidwell, Sydney

      Brown, Ronald (Hackney S)

      Archer, Rt Hon Peter

      Bishop, Rt Hon Edward

      Buchan, Norman

      Armstrong, Ernest

      Blenkinsop, Arthur

      Buchanan, Richard

      Ashley, Jack

      Boardman, H.

      Callaghan, Jim (Middleton & P)

      Ashton, Joe

      Boothroyd, Miss Betty

      Campbell, Ian

      Atkins, Ronald (Preston N)

      Bottomley, Rt Hon Arthur

      Canavan, Dennis

      Barnett, Guy (Greenwich)

      Boyden, James (Bish Auck)

      Cant, R. B.

      Barnett, Rt Hon Joel (Heywood)

      Bradford, Rev Robert

      Carmichael, Neil

      Bates, Alf

      Bradley, Tom

      Carson, John

      Bean, R. E.

      Bray, Dr Jeremy

      Carter, Ray

      326

      327

      Carter-Jones, Lewis

      Irving, Rt Hon S. (Dartford)

      Price, William (Rugby)

      Cartwright, John

      Jackson, Colin (Brighouse)

      Radice, Giles

      Clemitson, Ivor

      Jackson, Miss Margaret (Lincoln)

      Reid, George

      Cocks, Rt Hon Michael (Bristol S)

      Janner, Greville

      Richardson, Miss Jo

      Cohen, Stanley

      Jay, Rt Hon Douglas

      Roberts, Albert (Normanton)

      Coleman, Donald

      Jeger, Mrs Lena

      Roberts, Gwilym (Cannock)

      Colquhoun, Ms Maureen

      Jenkins, Hugh (Putney)

      Robinson, Geoffrey

      Conlan, Bernard

      John, Brynmor

      Roderick, Caerwyn

      Cook, Robin F. (Edin C)

      Johnson, Walter (Derby S)

      Rodbers, George (Chorley)

      Corbett, Robin

      Johnston, Russell (Inverness)

      Rooker, J. W.

      Cowans, Harry

      Jones, Barry (East Flint)

      Roper, John

      Crawford, Douglas

      Jones, Dan (Burnley)

      Rose, Paul B.

      Crawshaw, Richard

      Kaufman, Gerald

      Ross, Stephen (Isle of Wight)

      Cronin, John

      Kelley, Richard

      Ross, Rt Hon W. (Kilmarnock)

      Crowther, Stan (Rotherham)

      Kerr, Russell

      Ross, William (Londonderry)

      Cryer, Bob

      Kilroy-Silk, Robert

      Ryman, John

      Cunningham, Dr J. (Whiteh)

      Kinnock, Neil

      Sandelson, Neville

      Dalyell, Tam

      Lambie, David

      Sedgemore, Brian

      Davidson, Arthur

      Lamborn, Harry

      Selby, Harry

      Davies, Rt Hon Denzil

      Lamond, James

      Sever, John

      Davies, Ifor (Gower)

      Latham, Arthur (Paddington)

      Shaw, Arnold (Ilford South)

      Davis, Clinton (Hackney C)

      Leadbitter, Ted

      Sheldon, Rt Hon Robert

      Deakins, Eric

      Lee, John

      Shore, Rt Hon Peter

      Dean, Joseph (Leeds West)

      Lestor, Miss Joan (Eton & Slough)

      Silkin, Rt Hon John (Deptford)

      de Freitas, Rt Hon Sir Geoffrey

      Lever, Rt Hon Harold

      Silkin, Rt Hon S. C. (Dulwich)

      Dell, Rt Hon Edmund

      Lewis, Ron (Carlisle)

      Silverman, Julius

      Dempsey, James

      Litterick, Tom

      Skinner, Dennis

      Dewar, Donald

      Lomas, Kenneth

      Smith, John (N Lanarkshire)

      Doig, Peter

      Loyden, Eddie

      Snape, Peter

      Douglas-Mann, Bruce

      Lyon, Alexander (York)

      Spearing, Nigel

      Dunlop, John

      Lyons, Edward (Bradford W)

      Spriggs, Leslie

      Eadie, Alex

      Mabon, Rt Hon Dr J. Dickson

      Stallard, A. W.

      Edge, Geof

      McCartney, Hugh

      Steel, Rt Hon David

      Ellis, John (Brigg & Scun)

      MacCormick, Iain

      Stewart, Rt Hon M. (Fulham)

      English, Michael

      McCusker, H.

      Stoddart, David

      Evans, Fred (Caerphilly)

      McDonald, Dr Oonagh

      Stott, Roger

      Evans, Gwynfor (Carmarthen)

      McElhone, Frank

      Strang, Gavin

      Evans, Ioan (Aberdare)

      MacFarquhar, Roderick

      Summerskill, Hon Dr Shirley

      Evans, John (Newton)

      MacKenzie, Rt Hon Gregor

      Swain, Thomas

      Ewing, Harry (Stirling)

      Mackintosh, John P.

      Taylor, Mrs Ann (Bolton W)

      Ewing, Mrs Winifred (Moray)

      Maclennan, Robert

      Thomas, Dafydd (Merioneth)

      Fernyhough, Rt Hon E.

      Madden, Max

      Thomas, Jeffrey (Abertillery)

      Fitch, Alan (Wigan)

      Magee, Bryan

      Thomas, Mike (Newcastle E)

      Fitt, Gerard (Belfast W)

      Mahon, Simon

      Thomas, Ron (Bristol NW)

      Flannery, Martin

      Mallalieu, J. P. W.

      Thompson, George

      Fletcher, L. R. (Ilkeston)

      Marks, Kenneth

      Thorne, Stan (Preston S)

      Fletcher, Ted (Darlington)

      Marshall, Dr Edmund (Goole)

      Tierney, Sydney

      Foot, Rt Hon Michael

      Marshall, Jim (Leicester S)

      Tilley, John (Lambeth, Central)

      Ford, Ben

      Maynard, Miss Joan

      Tinn, James

      Forrester, John

      Meacher, Michael

      Tomlinson, John

      Fowler, Gerald (The Wrekin)

      Mellish, Rt Hon Robert

      Torney, Tom

      Fraser, John (Lambeth, N'w'd)

      Mendelson, John

      Tuck, Raphael

      Freeson, Rt Hon Reginald

      Mikardo, Ian

      Wainwright, Edwin (Dearne V)

      Freud, Clement

      Millan, Rt Hon Bruce

      Wainwright, Richard (Colne V)

      Garrett, John (Norwich S)

      Miller, Dr M. S. (E Kilbride)

      Walker, Harold (Doncaster)

      George, Bruce

      Mitchell, Austin

      Walker, Terry (Kingswood)

      Gilbert, Rt Hon Dr John

      Mitchell, R. C. (Soton, Itchen)

      Ward, Michael

      Ginsburg, David

      Molyneaux, James

      Watkins, David

      Golding, John

      Moonman, Eric

      Watt, Hamish

      Gould, Bryan

      Morris, Alfred (Wythenshawe)

      Weitzman, David

      Gourlay, Harry

      Morris, Rt Hon Charles R.

      Wellbeloved, James

      Graham, Ted

      Moyle, Roland

      Welsh, Andrew

      Grant, George (Morpeth)

      Murray, Rt Hon Ronald King

      White, Frank R. (Bury)

      Grant, John (Islington C)

      Newens, Stanley

      White, James (Pollock)

      Grocott, Bruce

      Noble, Mike

      Whitehead, Philip

      Hamilton, W. W. (Central Fife)

      Oakes, Gordon

      Whitlock, William

      Hardy, Peter

      Ogden, Eric

      Wigley, Dafydd

      Harrison, Rt Hon Walter

      O'Halloran, Michael

      Willey, Rt Hon Frederick

      Hattersley, Rt Hon Roy

      Orme, Rt Hon Stanley

      Williams, Alan Lee (Hornch'ch)

      Hayman, Mrs Helene

      Ovenden, John

      Williams, Rt Hon Shirley (Hertford)

      Healey, Rt Hon Denis

      Owen, Rt Hon Dr David

      Williams, Sir Thomas (Warrington)

      Henderson, Douglas

      Padley, Walter

      Wilson, Rt Hon Sir Harold (Huyton)

      Hooson, Emlyn

      Palmer, Arthur

      Wilson, William (Coventry SE)

      Horam, John

      Pardoe, John

      Wise, Mrs Audrey

      Howells, Geraint (Cardigan)

      Park, George

      Woodall, Alec

      Huckfield, Les

      Parker, John

      Woof, Robert

      Hughes, Rt Hon C. (Anglesey)

      Parry, Robert

      Wrigglesworth, Ian

      Hughes, Mark (Durham)

      Pavitt, Laurie

      Young, David (Bolton E)

      Hughes, Robert (Aberdeen N)

      Pendry, Tom

      Hughes, Roy (Newport)

      Penhaligon, David

      TELLERS FOR THE NOES:

      Hunter, Adam

      Powell, Rt Hon J. Enoch

      Mr. Joseph Harper and

      Irvine, Rt Hon Sir A. (Edge Hill)

      Price, C. (Lewisham W)

      Mr. James Hamilton.

      Question accordingly negatived.

    New Clause No. 2

      REDUCTION OF STAMP DUTY ON HOUSE PURCHASE
      'Section 55 of the Finance Act 1963 (rates of ad valorem duty on conveyance or transfer on sale) shall be amended as follows:
      (a) In subsection (1), for "subsections (2) and (3)" substitute "subsections (1A), (2) and (3)".
      (b) After subsection (1) there shall be inserted the following subsection:—
      "(1A) In any case of the conveyance or transfer on sale of land with a view to its use by the purchaser as his only or main residence, the stamp duty chargeable under the heading 'Conveyance or Transfer on Sale' in Schedule 1 to the Stamp Act 1891 shall be charged by reference to the amount or value of the consideration for the sale at the following rates, that is to say—

      (a) where the amount or value of the consideration is £20,000 or under and the instrument is certified within the meaning of section 34 of the Finance Act 1958 at £20,000 nil;

      (b) where the amount or value of the consideration is £21,000 or under and the instrument is certified as aforesaid at £21,000, 5p for every £50 or part of £50 of the consideration;

      (c) where the amount or value of the consideration is £22,000 or under and the instrument is certified as aforesaid at £22,000, 10p for every £50 or part of £50 of the consideration;

      (d) where the amount or value of the consideration is £23,000 or under and the instrument is certified as aforesaid at £23,000, 15p for every £50 or part of £50 of the consideration;

      (e) where the amount or value of the consideration is £24,000 or under and the instrument is certified as aforesaid at £24,000, 20p for every £50 or part of £50 of the consideration;

      (f) where the amount or value of the consideration is £25,000 or under and the instrument is certified as aforesaid at £25,000, 25p for every £50 or part of £50 of the consideration;

      (g) where the amount or value of the consideration is £30,000 or under and the instrument is certified as aforesaid at £30,000, 50p for every £50 or part of £50 of the consideration;

      (h) where the amount or value of the consideration is £35,000 or under and the instrument is certified as aforesaid at £35,000, 75p for every £50 or part of £50 of the consideration.

      (i) in any other case, £1 for every £50 or part of £50 of the consideration; and any duty chargeable by reference to that heading shall be charged accordingly."'.—[Mr. Peter Rees.]

      Brought up, and read the First time.
      7.30 p.m.
      Mr. Peter Rees: I beg to move, That the clause be read a Second time.
      The Chairman (Mr. Oscar Murton): We shall consider at the same time Amendment (a) to New Clause No. 2, in new subsection (1A), after 'land', leave out
      'with a view to its use by the purchaser as his only or main residence'.
      In addition, we shall take the following two new clauses:
      New Clause No. 3—Reduced rates of stamp duty on house purchase—
      'Section 55 of the Finance Act 1963 (rates of ad valorem duty on conveyance or transfer on sale), as amended by Schedule 11 to the Finance Act 1974, shall be further amended as follows:

      (a) In paragraph (a) of subsection (1), leave out "£15,000" and substitute "£20,000".

      (b) In paragraph (b) of subsection (1), leave out "£20,000" and substitute "£25,000".

      (c) In paragraph (c) of subsection (1), leave out "£25,000" and substitute "£30,000"

      (d) In paragraph (d) of subsection (1), leave out "£30,000" and substitute "£35,000".'

      New Clause No. 6—House purchase: reduction of stamp duty—
      In subsection (1) of section 55 of, and in Part I of Schedule 11 to, the Finance Act 1963, as amended, for "£15,000", "£20,000", "£25,000", and "£30,000" wherever occurring, there shall be substituted respectively "£20,000", "£25,000", "£30,000" and "£35,000".'
      Mr. Rees: New Clause No. 2 is uncontroversial, I venture to say—indeed, so uncontroversial that I hope that Treasury Ministers will accept it as an olive branch and take it as a chance to restore their shaken reputations.
      As the Committee knows, 2 per cent. ad valorem stamp duty is charged on conveyances, but there is a relief for conveyances of house properties to a certain value. As so often in our debates, one has to go back to a Liberal Administration to find the origin of this provision. I am sorry to catch the hon. Member for Cornwall, North (Mr. Pardoe) off his guard, but he and the rest of the Committee will recall how in 1910 Mr. Lloyd George doubled the rate of stamp duty and at the same time introduced certain reliefs at the bottom end of the scale. This, I recall, as will the Committee,

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      remained almost unaltered until 1958, when the then Conservative Chancellor introduced the threshold of £3,500, with graduated reliefs up to £6,000.
      That provision remained unaltered until 1974. As I recall, this was almost the only bright deed in a summer overshadowed by slag heaps and the imminence of a second General Election. On that occasion—I am happy to give full credit to him for it, although, of course, he was prompted by the Conservative Opposition at that time—the present Chancellor raised the threshold to £15,000, with graduated reliefs up to £30,000. One can only assume—indeed, I think that this can be extracted from our debates in 1974—that it was done in recognition of the rise in house prices, and I assume also, though the Minister of State will, no doubt, correct me if I go a little far here, that it was to demonstrate the Socialist Party's belief in house purchase, other than the purchase of council houses, of course.
      Since 1974, there has been an inexorable rise in house prices. I cull these figures from information given by the Building Societies Association, which, I hope, will be taken as incontrovertible. In 1974, the average price of a new dwelling was £11,340, and in the first quarter of 1978 it was £16,190.
      It is to take account of that trend and to continue the encouragement to house purchasers, especially first-time house purchasers, that New Clauses Nos. 2, 3 and 6 have been tabled by the Conservative Opposition.
      Mr. Pardoe: The hon. and learned Gentleman has just given some figures for the average price of a house. Do they apply to all houses, or do they apply only to the price of houses bought by first-time house purchasers? If they apply to all houses, as I think they do, will the hon. and learned Gentleman accept that the likely average price of a house bought by a first-time purchaser will be much lower than £16,000?
      Mr. Rees: I do not think that the Building Societies Association breaks the figures down between first-time house purchasers and those who may be buying their second or third house or wishing to upgrade their house. I do not necessarily accept the hon. Gentleman's conclusion that the average is likely to be
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      lower in respect of first-time purchasers. Perhaps he can draw certain inferences from the figures as relating to mortgages, on the assumption that a mortgage is likely to be taken out by a first-time purchaser, but it may be equally true that someone wanting to move into a larger or better house will wish to take out a mortgage.
      If the hon. Gentleman catches the eye of the Chair, I shall listen to his argument if he puts it on that basis, but so far, as he has expressed it, I do not think that I am prepared to accept his proposition.
      One recognises that there are wide regional variations. In Cornwall, North, perhaps the average price of a new dwelling is lower than that in the South-East. I have no doubt that the hon. Member for Ormskirk (Mr. Kilroy-Silk)—I am sorry that he is not taking part in our debates today—would rise with a lump in his throat and tell us that his constituents would be delighted to buy a new house costing £16,000. However, I leave him to make that point.
      I gave those figures to the Committee to demonstrate that since 1974 there has been an upward trend in house prices. We have put down these simple and relatively uncontroversial new clauses to take account of that upward trend. I shall now briefly explain New Clause No. 2. Again, to demonstrate our total responsibility in this matter and to assuage the susceptibilities of the Minister of State, it is limited in its scope to property purchases where the property is to be the purchaser's sole or main residence.
      The intention is that the threshold should be raised from £15,000 to £20,000 and that there should be graduated relief bands of £1,000 between £20,000 and £25,000, then a band between £25,000 and £30,000, finally a band between £30,000 and £35,000, and beyond that, of course, the full rate of 2 per cent.
      Mr. Denzil Davies: The hon. and learned Gentleman says that his new clause shall apply to a property being the only or main residence of the purchaser. How is that test to be met? What machinery does he propose?
      Mr. Rees: I see very many ways. It can be certified by the purchaser. Perhaps the great Department of State over which the Minister of State and his right hon.

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      Friends preside with such distinction will require an affidavit.
      Mr. Tony Newton: I think that I may be able to help my hon. and learned Friend here, since it is my recollection that this phrase is precisely the phrase used by the Government themselves in the Finance Act which limited the relief on mortgage interest to the figure of £25,000 and at the same time limited the relief on mortgage interest to certain houses so that the purchaser would qualify in respect of only one. The phrase "only or main residence" is used for that purpose. May I suggest to my hon. and learned Friend that it is up to the Government to explain why it cannot be used here?
      Mr. Rees: I am grateful to my hon. Friend, who, I know, has devoted a great deal of thought to this matter. Both the amendment to New Clause No. 2 and New Clause No. 6 stand in his name. I hope that he will make his usual important and helpful contribution.
      I remind the Minister of State that not only is this phrase to be found in relation to mortgage interest relief but it is to be found also in capital gains legislation. So the concept is certainly not unknown to the Inland Revenue, and I have no doubt that the Stamp Duty Office will be able to cope with it. Moreover, I remind the Minister of State that one has to certify in respect of certain transactions for stamp duty purposes that a transaction is not part of the complex of another range of transactions. Plainly, the purchaser could be asked to certify that the property was his sole or main residence.
      I do not think that the Minister of State need be oppressed by the difficulties. I know that he is deeply conscientious and is worried about the prospects of avoidance and evasion, and such thoughts are always uppermost in his mind. However, he usually takes a broad and tolerant view of these problems. If it is the Committee's wish that the new clause should be passed into law, I have no doubt that it would be relatively easy for the Stamp Duty Office to devise some—I will not say totally, but at any rate relatively, foolproof mechanism to meet this point.
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      The question is whether there is the will. The Minister of State will no doubt demonstrate in a few minutes whether he and his right hon. and hon. Friends have the will. I see sitting behind him one of his hon. Friends who has great knowledge of this matter, both professionally and politically. It may well be that he can make a contribution on this question. I have no doubt that he has dealt with many conveyances and will be able to help us with some of the practical details. His branch of the legal profession is much more adept at these matters than my branch and regards us as dilettantes in this field.
      That is the objective of New Clause No. 2. The cost would be relatively small. This, again, has been elicited through the assiduity of my hon. Friend the Member for Braintree (Mr. Newton) in a recent answer to a Parliamentary Question. I understand that if New Clause No. 2 were enacted the cost in this present year would be only £25 million and in a full year would be £30 million. That is without the restriction that we would seek to introduce. If that restriction proved to be workable, it could be—I am sure that the Minister of State will confirm this—that the cost would be much less.
      New Clause No. 3 differs, though not in a very marked degree, from New Clause No. 2. It has slightly wider bands. It raises the threshold to £15,000. Then there are bands from £15,000 to £20,000, from £20,000 to £25,000, from £25,000 to £30,000, and from £30,000 to £35,000. Further, there is not a restriction in favour of purchasers whose sole or main residence the house in question is designed to be. I understand—again, the Minister of State can confirm this—that the cost this year would be £25 million and in a full year would be £35 million.
      I read on the tapes this afternoon that at a Press luncheon today the Chancellor expressed his concern about the position of house purchasers. He has turned his massive mind to the question of mortgage interest rates, which, of course, are now moving upwards. I think he said that everyone expects things to get better.
      Mr. Denzil Davies: Is that true?
      Mr. Rees: It may be that the Minister of State was not privileged to enjoy the same invitation, but he can check through his right hon. and hon. Friends.
      Mr. Denzil Davies: The hon. and learned Gentleman said that mortgage rates were moving upwards. Will he give an example of this happening? I did not know that they were.
      Mr. Rees: I think it is very likely. The Minister of State will have had, perhaps, some small hand in the debates on what the minimum lending rate shall be. He cannot be entirely unaware of the facts of life. I know that sometimes Treasury Ministers are cocooned—sheltered—from the outside world by their devoted civil servants. If the right hon. Gentleman tells the Committee that there is no risk of mortgage interest rates rising, that will be a very interesting proposition
      As I say, the Chancellor was concerned. I have not been privileged to see the full report of the speech, but he also made the challenging statement that everyone expects things to get better. As I said, I think that people may be disappointed in regard to mortgages. Therefore, at least the Chancellor and his right hon. and hon. Friends might consider a douceur, some balm to home buyers in the form of these new clauses.
      The amounts involved for home purchasers may not seem very great. I shall give a few simple calculations which are true either of New Clause No. 2 or of New Clause No. 3. A person buying a house for £16,000 would incur no stamp duty, or perhaps a fixed stamp duty of 50p. A person buying a house for £27,000, whereas previously he would have paid stamp duty of £405, would under these proposals pay stamp duty of £270. A person buying a house for £32,000, whereas previously he would have paid stamp duty of £640, would, if these clauses were accepted, pay stamp duty of £480.
      These may seem relatively small amounts to the hon. Member for Luton, West (Mr. Sedgemore), who, I know, in his close acquaintance with Private Eye, is used to considering a rather wider range of transaction with rather bigger sums involved. All the same, for home buyers these are important amounts and I have no doubt that my hon. Friends will be able to draw on their constituency experience and demonstrate that the rates of stamp duty currently in force are having a slightly deterrent effect.
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      7.45 p.m.
      These clauses would not bite in favour of those at one end of the range. When the hon. Member for Bristol, North-West (Mr. Thomas)—I am sorry that he is no longer in his seat—bought his council house, presumably with a discount in favour of the sitting tenant, it may well be that he paid less than £16,000. Below that end of the range, obviously no great savings would be achieved.
      At the other end of the range the Chancellor, selling his mansion in Hampstead and reinvesting the proceeds in a country house in Sussex, will be outside the scope of the new clause. However, in between there is a wide range of people who cannot by any stretch of the imagination be described as plutocrats, representatives of the capitalist class, paid-up members of the Conservative Party. They are simply ordinary home buyers. It is to benefit them, to help them, that the Opposition have tabled these two new clauses.
      We are giving the Government a chance to demonstrate that they believe in the diffusion of wealth, that their morale is unimpaired and that their motives are of the purest and their generosity untarnished. On that basis, I commend these new clauses to the Committee.
      Mr. Bruce Douglas-Mann: I am not particularly concerned whether the new clause as it stands is accepted by the Committee. I should like to ask my right hon. Friend to consider to what extent it is desirable to retain any provision for stamp duty on a conveyance of a private house for residential purposes. Whether the limit is £30,000 or £50,000 seems to me to be relatively immaterial.
      We have in many ways an almost excessive contribution to be benefit of the person who is buying or owning his house. The higher rates of tax relief on mortgage interest are a case in point, but that is a separate point from this. I see no reason why there should be a tax of £800 on someone wishing to move from a flat in London which sells at £40,000. That is an average price for a modest three-bedroomed flat in many parts of central London. There is no economic case for this measure of taxation. There is a revenue case for it, of course, but there are many other sources

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      from which we could gain the relatively small amount of revenue involved. In particular, I suggest that there should be some inroad into the level of tax relief on mortgage interest, which is a very highly regressive tax.
      If we are to have the tax, however, it would obviously be preferable for there to be regional variations of it. The difference between the quality of accommodation that can be purchased for £30,000 in the area where most of us may need to acquire accommodation and the quality of accommodation that can be obtained for that sum in other parts of the country is so great as to make the differential of a tax of £600 on the one and nil on the other for identical accommodation—except for the area in which it is situated—ludicrous.
      It is not in the interests of the country that there should be such a handicap to mobility. It is desirable that people should be able to move from one part of the country to another without paying such a tax. I urge my right hon. Friend to take the earliest opportunity to abolish the stamp duty on the conveyance of a principal residence. The change proposed by the Opposition is merely a palliative to this and may deter its total abolition. It is a matter towards which I feel neutral, though I hope that my right hon. Friend will feel able to accept it. Whether or not he does, I urge him to embark on a more serious and fundamental review of the whole principle of taxing the transaction of a conveyance on the sale of a principal residence.
      Mr. Michael Shersby: I want to speak only briefly in the debate. The imposition of stamp duty has been something against which I have campaigned since I entered the House of Commons. It is a monstrous tax. I agree with the hon. Member for Mitcham and Morden (Mr. Douglas-Mann) that it should be abolished. My only regret is that the new clause does not bring about its abolition. I can only hope that the next Conservative Government will lose no time in abolishing it at the first possible opportunity.
      Stamp duty is a burden that faces every prospective house purchaser buying a property in the London area and in many other parts of the country where the rates
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      are becoming acute. It is a factor which every family wishing to move has to take into account. If one calculates the burden of the estate agent's fees and the solicitor's fees for conveyance of the property, plus a removal and all the other hidden expenses of moving home, the addition of stamp duty is often the straw which breaks the camel's back and makes a person decide that it is not worth moving after all.
      As was pointed out by the hon. Member for Mitcham and Morden, it discourages mobility, particularly among those who occupy houses in the higher price brackets to which reference is made in the table. The result is that fewer houses come on to the market. People stay where they are and extend their existing houses. Therefore, prices go up considerably, as they have been doing all over the country during the past few months.
      I suggest that stamp duty, coupled with the other expenses which a prospective purchaser has to bear, has affected the property market. It is a considerable expense which the Government should take into account in their desire to stabilise the cost of property.
      I believe that, with the inflation in house prices that has taken place over the past few years, stamp duty has now become a severe burden and is a tax that can no longer be tolerated. It is a tax that it not so widely known as income tax, corporation tax or value added tax. That is because it hits the average member of the public only when he or she decides to move home. By the time that he or she has found out about it, there is often very little that can be done except to write letters to Members of Parliament urging them to do something about it when the chance comes their way.
      I have that chance tonight. Therefore, I propose to vote for the new clause on behalf of my constituents who are burdened by this ridiculous tax. I hope that the Committee will agree to the new clause. If so, it will be a major step towards improving mobility and stabilising the cost of property.
      Mr. Cronin: I would not go so far as to vote for the new clause, but it is not entirely without merit.
      New Clause No. 1 was clearly a facelift for the unacceptable face of capitalism. It showed the Tory Party at

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      its most rapacious in trying to help the higher income groups to a large extent. But New Clause No. 2 seems to be an honest attempt to secure some mitigation for people of moderate incomes who wish to buy new houses. I think that this is in many ways desirable.
      When people buy houses they go through a period when they incur severe expenses. Conveyancing fees are becoming more onerous, as I think my hon. Friend the Member for Mitcham and Morden (Mr. Douglas-Mann) would agree. In addition, there are countless expenses associated with moving. Stamp duty is an additional intolerable nuisance. As has been said, it may stop people buying new houses or moving. In any event, even for people who can afford the money for stamp duty, it seems to be an irritating tax. It is a small irritant to some people, but it is a source of real distress and nuisance to others.
      Another important point is that stamp duty impairs mobility, particularly among working people who have to move to another district. For instance, miners in Scotland who have been working in mines which have closed and who decide to move, say, to Loughborough to work in an active mine find that they have to pay this additional impost merely to keep their jobs. It cannot be helpful to impair the mobility of labour in that way.
      I ask my right hon. Friend the Minister of State to consider this whole question. I should be glad if, when he replies, he would let us know the cost of abolishing stamp duty completely on purchases up to, say, £25,000. I am sure that the cost would be trifling. The hon. and learned Member for Dover and Deal (Mr. Rees) said that the total cost of the new clause would be only £35 million a year. If it were confined to purchases up to £25,000, I am sure that the cost would be negligible. The social and economic benefit of getting rid of stamp duty below that figure would be great indeed.
      Mr. Newton: Having had something to do with these new clauses—New Clause No. 6 being in my name—I particularly welcome the all-party agreement that seems so far to have pervaded the Committee. However, I suspect that the hon. Member for Mitcham and Morden (Mr. Douglas-Mann), who has spoken so favourably, may not be in the same
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      Division Lobby if it comes to a Division later.
      I entirely endorse what has been said by the hon. Member for Mitcham and Morden. That was indeed where I intended to start. It is absurd that we should have a tax on house purchase. We have a whole range of measures designed to encourage people to buy their homes—interest relief, option mortgages, relief from capital gains tax and domestic rates relief. Indeed, there is a Bill before the House of Commons to provide further subsidies to first-time buyers. To have that armoury on one side and then, on the other, to tax people when they buy houses, is the kind of thing that would strike anyone coming fresh to the scene as utterly ludicrous.
      The new clauses are essentially the same in their major elements. They would raise the exempt slice from £15,000 to £20,000 and raise all the reduced rate slices by £5,000 each. The only significant difference is that New Clause No. 2 introduces an element of greater subtlety, and sophistication by grading in at the beginning of the reduced rates between £20,000 and £25,000.
      I should like to refer to my Amendment (a) to New Clause No. 2. That was designed solely to anticipate the objection with which the Minister of State came forward—that to confine it to
      "his only or main residence"
      would be administratively complicated. I thought that, anticipating that argument, we would table that amendment so that the right hon. Gentleman could not resist the new clause on that basis but could accept both the new clause and the amendment if that were to be his line of argument. For once I seem to have anticipated him accurately.
      There has been some reference to the effect of the new clause. I shall not attempt to elaborate the figures, but we are not talking about large sums of money. As has been helpfully emphasised by the hon. Member for Loughborough (Mr. Cronin) and my hon. Friend the Member for Uxbridge (Mr. Shersby), although the sums are not large in absolute terms or in relation to the value of a house, they can be very large at the margin, as it were, in increasing the friction of moving and the pain and cost of transfers in the housing market. At the

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      £20,000 level, which under any of these proposals would be exempt, we are talking of stamp duty of £100. If one of the new clauses were carried, no tax would be payable at all. The sum is a little larger further up the scale, but it is that kind of sum about which we are talking.
      8.0 p.m.
      I calculate that New Clause No. 2 would cost £39 million in a full year and that New Clauses Nos. 3 and 6 would cost £35 million. There is not a great deal of difference between them, therefore, but both figures would be reduced in the present year because we are already part way into the year. Those are not negligible sums. They are certainly not immense, however, in the context of other matters that we have discussed on the Bill.
      I turn now to the reasons for the new clauses that have not already been explained. As my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) said, the current levels of exemption were set in May 1974. Studying the Standing Committe debates of July of that year has brought back happy memories of the days when, on my first Standing Committee on the Finance Bill, I had the inestimable privilege of watching the right hon. Gentleman who is now the Minister of State, Ministry of Defence, display his invaluable ability to generate many hours of unnecessary argument.
      I recently tabled a series of parliamentary Questions to establish what those 1974 limits would be now if indexed. On the basis of prices or earnings, that £15,000 figure for exemption would be more than £26,000, and the £30,000 figure, which is where the reduced rates run out, would now stand at more than, £50,000. In that context the new clauses are quite modest. I am well aware that Ministers tend to argue that the right index to take for this purpose is not general prices or earnings, but house prices. I asked about that, too. The answer was interesting. It established that if the £15,000 exemption had been increased in line with the rise in house prices it would now stand at £20,100.
      The figure that we have proposed in the new clause is almost exactly right for preserving the level set in May 1974. Further
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      up the scale the £30,000 figure should be, on that basis, more than £40,000. We are proposing to raise the figure to £35,000, and we are therefore not going so far as would be justified by indexation based on house price increases.
      By no stretch of the imagination, therefore, can Ministers argue that these proposals are wildly generous to the better off, or wildly beyond what would be justified by what has happened in the housing market during that period.
      My hon. and learned Friend has already referred to what has happened to average house prices. However, the figure he gave was for new dwellings, not for all dwellings, on which the figure is slightly lower. It is likely that on the average price of new dwellings at March 1978—the figure of £16,556, based on prices approved for new mortgages—significant numbers of young couples buying homes will have to pay stamp duty.
      Those average national figures, significant though they are, conceal the fact that the figures for London and the South-East are much higher. The data published by the Department of the Environment for that region is somewhat out of date, but it is clear from the figures for the third quarter of 1977 that, given the rise in prices that we know has taken place in this area since then, the average price of dwellings, judging from completed mortgages in the last month or two, may well be nearer £18,000. We therefore are not talking about a minority of wealthy people but of significant numbers of ordinary people buying average-priced homes. That fact is borne out by the statistic given in a recent issue of Building Society Affairs, which shows that the percentage of houses mortgaged to building societies at a cost of more than £15,000 was only 16 per cent. in 1974 and, by the third quarter of last year, had reached 30 per cent.
      There is a yo-yo effect here, as much as there is with tax allowances in the income tax system. If, on an index, average house prices have risen from £15,000 value in 1974 to £20,000 now, virtually all the houses that are now in the bracket that attracts stamp duty are the same houses that were taken out of it in 1974 on the ground that that was needed to assist young couples and others to buy

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      their own homes. The houses that the Government thought should be exempt from stamp duty in 1974 have been made liable to it by inflation. We are doing no more than argue that they should be exempted again, in line with the case that the Government made in 1974.
      I appreciate that the Committee is anxious to make progress and I therefore sum up simply by saying that I should like stamp duty on house purchase to be abolished. It is absurd to have an army of measures to encourage home ownership and then put a tax on people when they buy a house. If we cannot abolish the tax altogether because the Government say they need the money, the least we can do is to make sure that the tax is not levied on many young couples, especially in London and the South-East. We can do that by raising the exemption level from £15,000 to £20,000 and making the other modest reductions proposed in the new clauses. That is the central purpose of what we are proposing. I believe that that move commands the support of common sense and of social justice, and I hope that it will command the support of the Committee.
      Mr. John Moore: I have great pleasure in following up the remarks of my hon. Friend the Member for Braintree (Mr. Newton). He said little with which I disagree. I take particular pleasure in the debate, knowing that we have a semblance of all-party support and interest in the clauses. It is crucial to secure that, because our clauses are an attack on the impact of inflation and on a tax that at the best of times is not an intelligent revenue raiser.
      I wish to advance two brief arguments, both of them germane to the debate and both obviously picking up points that are important to those who have constituencies in the London area and the South-East. I know that the hon. Member for Mitcham and Morden (Mr. Douglas-Mann) will understand and recognise the points that I shall make.
      I want to be a bit more particular about this tax's impact on individuals. I accept what my hon. Friend the Member for Braintree said about the impact of the tax on young couples buying and selling houses that in 1974 were exempt from the tax.
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      I have checked today with the Nationwide Building Society to get the up-to-date picture on average house price increases throughout the country. The figure is 44 per cent. between the beginning of 1974 and today. But it is worth considering an example from my constituency. There is there an estate known as Forestdale. The houses were built by Wates and they are in most cases three or four years old. They are medium-sized, with three bedrooms. I have had constituents specifically complaining about the implications of the stamp duty tax. I checked on two specific houses. One was a very small three-bedroomed house priced in 1974 at £12,750. Stamp duty in that year on that house was nil. Last week that house was priced at £20,100 and it now carries stamp duty of £210.
      I talked to another couple about a similar property on the same estate. It was slightly larger, but nevertheless still quite modest. In 1974 it was priced at £16,500. Stamp duty then was £82·50. Today that house will cost £27,000 and the stamp duty will be £405. That sort of figure has more than marginal implications for most families when they are moving house, and for the question of mobility to which the hon. Member for Mitcham and Morden referred as a key and crucial factor. We must understand the importance that that figure assumes when added to all the other costs, such as conveyancing charges, in providing a marginal disincentive to people to move.
      I would prefer to go far beyond the raising of the threshold for stamp duty and to see the complete abolition of the tax, which is unsound. I should like also to consider the implications of the tax for the revenue as a whole.
      Whichever party is in office, quite legitimately the question is frequently asked, "All right. There is a revenue loss on your proposal X. Where will the money come from?" We ought to understand the revenue implications in more detail.
      Looking at the stamp duty on house transfers as a whole, one sees that the supposed revenue loss would be £80 million if it were abolished in toto. I have looked at that theoretical revenue loss and have tried to analyse it in more detail. I have tried to analyse it by talking, this

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      morning, for example, to the Home Builders Federation, because I wanted to try to work out the degree to which that revenue loss was a static revenue loss, taking no account of the dynamics of how many more houses might be built if we did not have the marked disincentive feature added to by this stamp duty.
      We must examine this matter with care. I see in today's edition of the Financial Times a very brief article that refers to the degree to which the loan curbs that the Government have introduced have hit hopes for a housebuilding revival. I am not making a party-political point; I want to illustrate the extraordinary effect, at the margin, that a change can have in housing starts.
      Until this activity was taking place there was, happily, a suggested increase of up to 165,000 in private sector housing starts this year—1978. That was very good. We would all be very pleased about that, on whichever side of the House we sit. However, that figure, it is now suggested, has been dropped to 150,000, so we are talking about a loss of about 15,000 in housing starts.
      If that sort of factor has that kind of marginal effect, we ought to examine the revenue implications of what 15,000 houses mean to the State. Let us look at the people employed in constructing those houses. Again, I asked the Home Builders Federation this morning what were the average man-years of labour taken in the construction of a new house. I was given an approximate figure, obviously, for the construction of an average house, of two man-years. Five thousand new houses would involve about 10,000 construction jobs.
      On the assumptions about which I was talking, of the marginal impact that we see today, let us suppose that we could see an increase of 15,000 private sector housing starts. That would mean 30,000 construction jobs—for 30,000 people currently unemployed. The revenue implications of that are quite profound. They are important and serious implications. Looking at those implications, my assumption is that the cost to the revenue of 30,000 unemployed people—this is all from Treasury statistics, obviously—on the national insurance charge, with revenue loss and benefits paid out, is
      346
      about £40·5 million for the fiscal year 1978–79.
      Supposing those 30,000 people, happily, were back in work constructing those 15,000 houses, excluding, of course, any Finance Bill changes and assuming an average gross weekly wage—I have done it on these figures specifically—for adult male manual workers in the construction industry, including losses through absence, of approximately £76·23 a week, and taking the case of a married man with no children, the loss in taxation revenue would be about £25·5 million.
      In toto, therefore, one has a net loss to the revenue—including the losses caused by those people being out of work and forgetting all the implications of getting unemployed people back into work, and all the social implications because of that—of £66 million.
      Therefore, the notional costs of the abolition of stamp duty to the revenue—I know that this is a somewhat specious analysis, but it is assuming that the people concerned could have that marginal impact in the creation of 15,000 new homes—is £80 million, which becomes a notional total loss of £14 million only. That, of course, does not take into account from the very beginning all the attractions through the multiplier of the impact of all those new home constructions and the impact right through the economy.
      All that I would say, in a very nonpolitical way, is that this is a particular example of a new clause which, frankly, does not go far enough but on which, in a debate, we ought to be able to get beyond merely the supposed loss of revenue and understand the implications for individuals and for the revenue and society as a whole if we could abolish stamp duty on home property—a duty that is really irrelevant.
      8.15 p.m.
      Mr. Roger Moate: I, too, shall be very brief. I endorse the remarks made by my hon. Friends in support of the new clause.
      I have long regarded stamp duties generally as a very anachronistic and rather absurd form of taxation. Indeed, I had hoped that we would move to their total abolition. Up to 1974, stamp duties had been reduced, and had been eliminated in some respects—on cheques, for

      347
      example—to the point at which the revenue yield from them was so little that we could have eliminated them altogether from our taxation system with one further step.
      It is a matter of great regret, therefore, that in 1974 stamp duties on properties were raised. They now produce a revenue that is hard to eliminate from our taxation system at one go. I still hope that one day we shall get rid of stamp duties altogether. I do not believe that there is an economic justification for them. I certainly do not think that there is a social argument in their favour in terms of house purchase.
      I wish to emphasise particularly the nature of the burden on people buying their homes. It has been argued that stamp duty represents a disincentive for such people. That may be so, but, as often as not, it comes as a rather nasty surprise after people have committed themselves to buying their homes. That applies particularly in the case of first-time buyers. Often they do not stop to think of the extra costs, conveyancing costs, estate agents' fees and the like, and the increased costs of moving in these days, and in addition to that they then get a bill of £100 or £200 for stamp duty. They have usually strained their resources completely to buy the house. Suddenly, they get this other very nasty blow of an extra couple of hundred pounds for stamp duty. This is a great burden on the house purchaser. I cannot see how it can be justified in social terms by the Government.
      Briefly, my next point concerns the question of the unfairness of the tax in two particular respects. One is that, despite the fact that we have higher stamp duties on higher value properties, it still seems grossly unfair that the higher rate of duty applies to the whole of the consideration of the property. One could argue for the higher rate to apply to the higher bands of value, but to apply the 1 per cent., 1½ per cent. and 2 per cent. on the whole value, down to nil, is grossly unfair. I have not yet heard any argument in favour of applying it in that way.
      The other unfairness lies in the fact that if one were trying to argue that richer people buying more valuable property should pay higher tax, that would be an understandable argument, though one would not necessarily accept it in
      348
      this context. But, of course, it does not work in that way. A £10,000 house, perhaps in the West Country, might be the sort of home that could be afforded by a young couple, but to get that same sort of house in certain parts of London, that same young couple might have to pay £25,000, £30,000 or even £40,000. Why are we penalising those people in the same sort of income group? In one case, someone buying his or her first home may pay no stamp duty, but the same sort of family in other parts of the country may have to pay £200. It seems to be a grossly unfair tax. I hope that we shall move to its total abolition.
      However, as a first very modest step, we have the new clause before us. It has been commended in all the speeches made in the debate so far, from Members in all parts of the Committee. I hope that the Government will feel that this is something that can be accepted as a sign of good intentions. If not, I hope that at least the speeches by my hon. Friends will indicate that it is the long term intention of the Conservative Party to lift this very real burden on home purchasers.
      Mr. Denzil Davies: We have had an interesting debate on the new clauses plus the amendment to one of them. Perhaps I may deal with cost figures again. Broadly they have been given, and given correctly.
      New Clause No. 2 would cost £35 million. New Clause No. 3, which, of course, is not confined to residential property, would cost about £38 million.
      My hon. Friend the Member for Loughborough (Mr. Cronin) asked about the costs of abolishing stamp duty on, I think, land and buildings up to £25,000, although that might not be entirely residential property. The cost would be above £20 million. How much above that sum is not clear at present, but it would be in excess of £20 million.
      New Clause No. 2 attempts to deal with people who buy their own homes. It does not go further and deal with all property in those bands of value. When I asked the hon. and learned Member for Dover and Deal (Mr. Rees) how he proposed to ensure that a person was buying with a view to use as his only or main residence, I was not trying to

      349
      be clever or to catch him out or raise simply an administrative problem.
      There is a slight problem. The hon. Member for Braintree (Mr. Newton) anticipated that I would use this argument, but it is not used for its own sake. The test for capital gains tax, although it might be difficult in a particular case, is generally easy to determine, as it is in the case of interest. With stamp duty, however, someone may not have moved into the residence, because stamp duty has to be paid within 30 days of the conveyance. The title is not valid unless properly stamped, so a person may not have moved into residence. Presumably, he would have to declare that he intended the house to be his only or main residence, and on that basis he would get a tax exemption which might not turn out to be correct.
      There is a difficulty, therefore, in attaching to stamp duty, which is quite different from capital gains tax and interest, a test which would be difficult in practice.
      Mr. Pardoe: It is not a very good objection.
      Mr. Davies: One must consult the Stamp Duty Office which has to deal with these matters. The point is that this would create problems and introduce into stamp duty some tests which are not suited to it, with very few exceptions. It is not a major point, but it is a factor.
      Mr. Pardoe: I hope that the Minister has better arguments than that, or he had better sack his advisers. Whoever wrote that nonsense should be sacked. As he knows, one can change one's mind about which is one's private or main residence or one's second home every other year. That affects capital gains tax. One has to tell the Inland Revenue every year which is which. Members of Parliament are constantly changing their main residence from their constituency to London or back again. That argument would apply to capital gains tax and to income tax relief as well.
      Mr. Davies: The hon. Gentleman is very clever and extremely arrogant. He has got it wrong about capital gains tax. When one sells one's house, it is then that one must determine liability to
      350
      capital gains tax and the question must be asked whether the house is the person's sole or main residence. What he did in the previous year is another matter, but when the question is asked it can be determined in the case of capital gains tax.
      It is not easy to determine it for stamp duty. The hon. Gentleman should not be so arrogant in talking about sacking advisers. When one gets advice from people who have dealt with this area for a long time, he should not make such silly statements. But, then, it is not unusual for him to make silly statements on taxation.
      New clause No. 3 would cost £38 million because it would include not only residential accommodation.
      The main argument is the argument of cost. The sum of £35 million may not seem very much, although the hon. Member for Braintree accepted that it was not negligible.
      Mr. Newton: It cannot be as much as that in the present year, given that there is no date in the new clauses and that they would therefore not come into effect until the Finance Bill took effect. The Minister should make clear what year he has in mind.
      Mr. Davies: I suspect that that is a full-year cost, although the hon. Gentleman is right to point out that the Provisional Collection of Taxes Act does not apply to stamp duty, so the relief would not come into operation until, normally, 1st August, when the Finance Bill becomes law. Nevertheless, putting this into next year, as the Opposition say, the full-year cost would be £35 million.
      The question is whether an extra £35 million should be used for this or for some other worthy purpose. Even if the new clauses were rejected, four out of five houses would still be exempt from stamp duty. I accept that a small flat in London can cost £15,000 and a threebedroomed house £20,000 to £25,000. But 80 per cent. of houses would still be exempt. One is therefore concerned with 20 per cent. of houses at present values.
      We already have reliefs from capital gains tax and mortgage interest for housing. We do not even have £35 million, but, if we did, is this the best use of scarce resources? The resources from the

      351
      tax system devoted to housing are considerable at the moment. My hon. Friend the Member for Mitcham and Morden (Mr. Douglas-Mann) made a valid point when he suggested doing away with interest relief on higher rate tax. At least he was addressing his mind to the problem, which is, whether we should devote an extra £35 million to housing or should look at the total sum and perhaps decide that there are other areas where that money could be better spent.
      Mr. Douglas-Mann: Is my right hon. Friend aware that, under the Home Purchase Assistance and Housing Corporation Guarantee Bill at present going through the House, we should give assistance to house purchasers up to the value of £16,000-odd in London and the South-East, so we should be taking with one hand and giving with the other in the most ludicrous way?
      Mr. Davies: There are, of course, a couple of "ifs" in that statement. First of all, that Bill is intended to benefit first-time buyers. Secondly, it is not intended to come into operation for some time. If the Bill were law, it would be a different matter, but at the moment we are concerned with 20 per cent. of houses and an extra £35 million.
      The present reliefs for housing are very generous, especially compared with other countries. The fact that stamp duty is the one tax which has to be paid does not mean that it has to be done away with.
      Mr. John Moore: I agree with what the Minister said about generosity, but would he comment on what so many of us have said about mobility and those seeking to get into the housing market for the first time?
      Mr. Davies: I accept that there are good arguments for the two new clauses, including the mobility argument, but in the end we must decide whether to give this extra priority to housing. We already give it high priority in our tax system. If the Opposition feel that another £35 million is available within the Government's plans, should that go to housing as well? I submit that that would not be right in the present situation. The Government's Budget and their attempt to concentrate all tax reliefs on income was right in the present circumstances.
      352
      For those reasons, I ask the Committee to reject the new clauses.
      Mr. Peter Rees: We have had a short, helpful and constructive debate. What has emerged clearly from interventions from both sides of the Committee is that there is almost unanimity on the principles involved. I say "almost" because the Minister of State, concealing his innate generosity, has stuck closely to his administrative brief. The principles have been well ventilated and I shall not repeat them. There have been useful contributions from both sides of the Committee. The discussion has been almost entirely free from partisan bias.
      It has been demonstrated beyond argument that, on the figures, the amendments are justified. My hon. Friend the Member for Braintree (Mr. Newton), who made the subject particularly his own, has produced incontrovertible evidence. My hon. Friend the Member for Croydon, Central (Mr. Moore) has demonstrated the absurdity of the present position that a married couple who bought a house in 1974 or 1975 might have been free of stamp duty, yet another couple buying the same house now will have to pay stamp duty. There cannot be any logic or reason in that.
      8.30 p.m.
      The Minister of State drew attention to certain practical difficulties in New Clause No. 2. May I say, without the self-confidence of the hon. Member for Cornwall, North (Mr. Pardoe)—unlike him, I am not opposed by the practical difficulties, which can be met—that there are examples of other reliefs in stamp duty. I instance Section 55 of the Finance Act 1977, whereby stamp duty can be clawed back if circumstances alter.
      If this were the sole argument, the Committee would recognise that it was not a good enough case for rejecting either of the proposals. However, I am always happy to defer to the Minister of State, who does his best to meet a legitimate case. If he feels that New Clause No. 2 is objectionable on that ground, I shall invite my hon. Friends to support New Clause No. 3. By our doing so, the Minister of State would be purchasing administrative simplicity at a cost of £3 million against Government expenditure of £60 billion. If the administrators want simplicity, let them buy it at

      353
      that very small figure. I see the Minister of State, with his habitual courtesy, nodding. On reconsideration, he is obviously going to accept New Clause No. 3.
      If the Minister of State will not accept New Clause No. 3, it means that the Administration do not put house buyers high on their list of priorities. There is continual emphasis in the speeches of Labour Members and in their allocation of public finance that they are not over-concerned with the building industry or employment in the building industry. For those reasons, I invite my hon. Friends and Labour Members to support me in the Lobby tonight in pressing New Clause No. 3.
      I am sorry that I have to take the matter to a Division. I had hoped that the Minister of State would have been able to offer some glimmer of hope for these two important sections of our community, but he cannot. I hope that the whole Committee will support New Clause No. 3. On New Clause No. 2, I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New Clause No. 3

      REDUCED RATES OF STAMP DUTY ON HOUSE PURCHASE
      "Section 55 of the Finance Act 1963 (rates of ad valorem duty on conveyance or transfer on sale), as amended by Schedule 11 to the Finance Act 1974, shall be further amended as follows:

      (a) In paragraph (a) of subsection (1), leave out "£15,000"and substitute "£20,000".

      (b) In paragraph (b) of subsection (1), leave out £20,000" and substitute "£25,000".

      (c) In paragraph (cI of subsection (1), leave out "£25,000" and substitute "£30,000".

      (d) In paragraph (d) of subsection (1) leave out "£30,000"and substitute "£35,000"."—[Mr. Peter Rees.]

      Brought up, and read the First time.
      Question put, That the clause be read a Second Time:—
      The Committee divided: Ayes 227, Noes 266.

      Division No. 210]

      AYES

      [8.33 p.m.

      Adley Robert

      Crowder F. P.

      Harrison, Col Sir Harwood (Eye)

      Aitken, Jonathan

      Dodsworth, Geoffrey

      Harvie Anderson, Rt Hon Miss

      Alison, Michael

      Drayson, Burnaby

      Haselhurst, Alan

      Amery, Rt Hon Julian

      du Cann, Rt Hon Edward

      Hayers, Rt Hon Sir Michael

      Arnold, Tom

      Dunlop, John

      Hayhoe, Barney

      Atkins, Fit Hon H. (Spelthorne)

      Durant, Tony

      Hicks, Robert

      Atkinson, David (Bournemouth, East)

      Dykes, Hugh

      Hodgson, Robin

      Awdry, Daniel

      Elliott, Sir William

      Holland, Philip

      Bell, Ronald

      Emery, Peter

      Hordern, Peter

      Bendall, Vivian (Ilford North)

      Eyre, Reginald

      Howe, Rt Hon Sir Geoffrey

      Bennett, Dr Reginald (Fareham)

      Fairbairn, Nicholas

      Howell, David (Guildford)

      Benyon, W.

      Fairgrieve, Russell

      Hunt, David (Wirral)

      Biffen, John

      Farr, John

      Hunt, John (Ravensbourne)

      Biggs-Davidson, John

      Fell, Anthony

      Hurd, Douglas

      Blaker, Peter

      Finsberg, Geoffrey

      Hutchison, Michael Clark

      Body, Richard

      Fisher, Sir Nigel

      Irving, Charles (Cheltenham)

      Bowden, A. (Brighton, Kemptown)

      Fletcher, Alex (Edinburgh N)

      James, David

      Boyson, Dr Rhodes (Brent)

      Fookes, Miss Janet

      Johnson Smith, G. (E Grinstead)

      Bradford, Rev Robert

      Forman, Nigel

      Jones, Arthur (Daventry)

      Braine, Sir Bernard

      Fowler, Norman (Sutton C'f'd)

      Jopling, Michael

      Brittan, Leon

      Fox, Marcus

      Kaberry, Sir Donald

      Brotherton, Michael

      Fraser, Rt Hon H. (Stafford & St)

      Kershaw, Anthony

      Bryan, Sir Paul

      Fry, Peter

      King, Evelyn (South Dorset)

      Buchanan-Smith, Alick

      Galbraith, Hon T.G. D.

      Kitson, Sir Timothy

      Buck, Antony

      Gardiner, George (Reigate)

      Knight, Mrs Jill

      Budgen, Nick

      Gardner, Edward (S Fylde)

      Knox, David

      Bulmer, Esmond

      Gilmour, Sir John (East Fife)

      Lamont, Norman

      Burden, F. A.

      Glyn, Dr Alan

      Langford-Holt, Sir John

      Butler, Adam (Bosworth)

      Goodhart, Philip

      Latham, Michael (Melton)

      Carson, John

      Goodlad, Alastair

      Lawrence, Ivan

      Chalker, Mrs Lynda

      Gorst, John

      Lawson, Nigel

      Churchill, W. S.

      Gow, Ian (Eastbourne)

      Le Merchant, Spencer

      Clark, Alan (Plymouth, Sutton)

      Gower, Sir Raymond (Barry)

      Lester, Jim (Beeston)

      Clark, William (Croydon S)

      Grant, Anthony (Harrow C)

      Lewis, Kenneth (Rutland)

      Clarke, Kenneth (Rushcliffe)

      Gray, Hamish

      Lloyd, Ian

      Clegg, Walter

      Grist, Ian

      Loverldge, John

      Cockcroft, John

      Hall-Davis, A. G. F.

      Luce, Richard

      Cooke, Robert (Bristol W)

      Hamilton, Archibald (Epsom & Ewell)

      McAdden, Sir Stephen

      Cope, John

      Hamilton, Michael (Salisbury)

      McCrindle, Robert

      Cormack, Patrick

      Hampson, Dr Keith

      McCusker, H.

      Costain, A. P.

      Hannam, John

      Macfarlane, Neil

      MacGregor, John

      Pattie, Geoffrey

      Spicer, Jim (W Dorset)

      MacKay, Andrew (Stechford)

      Percival, Ian

      Spicer, Michael (S Worcester)

      Macmillan, Rt Hon M. (Farnham)

      Pink, R. Bonner

      Sproat, Iain

      McNair-Wilson, M. (Newbury)

      Powell, Rt Hon J. Enoch

      Stainton, Keith

      McNair-Wilson, P. (New Forest)

      Prentice, Rt Hon Reg

      Stanbrook, Ivor

      Madel, David

      Price, David (Eastleigh)

      Stanley, John

      Marshall, Michael (Arundal)

      Pym, Rt Hon Francis

      Steen, Anthony (Wavertree)

      Marten, Neil

      Raison, Timothy

      Stewart, Ian (Hitchin)

      Mates, Michael

      Rathbone, Tim

      Stokes, John

      Mather, Carol

      Rees, Peter (Dover & Deal)

      Stradling Thomas, J.

      Maude, Angus

      Rees-Davies, W. R.

      Tapsell, Peter

      Maudling, Rt Hon Reginald

      Renton, Rt Hon Sir D. (Hunts)

      Taylor, Teddy (Cathcart)

      Mawby, Ray

      Renton, Tim (Mid-Sussex)

      Tebbit, Norman

      Maxwell-Hyslop, Robin

      Rhodes, James R.

      Temple-Morris, Peter

      Mayhew, Patrick

      Ridley, Hon Nicholas

      Thomas, Rt Hon P. (Hendon S)

      Meyer, Sir Anthony

      Ridsdale, Julian

      Townsend, Cyril D.

      Miller, Hal (Bromsgrove)

      Roberts, Michael (Cardiff NW)

      Trotter, Neville

      Miscampbell, Norman

      Roberts, Wyn (Conway)

      van Straubenzee, W. R.

      Mitchell, David (Basingstoke)

      Ross, William (Londonderry)

      Viggers, Peter

      Moate, Roger

      Rossi, Hugh (Hornsey)

      Wakeham, John

      Molyneaux, James

      Rost, Peter (SE Derbyshire)

      Walder, David (Clitheroe)

      Montgomery, Fergus

      Royle, Sir Anthony

      Walker, Rt Hon P. (Worcester)

      Moore, John (Croydon C)

      Sainsbury, Tim

      Walker-Smith, Rt Hon Sir Derek

      More, Jasper (Ludlow)

      St. John-Stevas, Norman

      Wall, Patrick

      Morgan, Geraint

      Scott-Hopkins, James

      Walters, Dennis

      Morris, Michael (Northampton S)

      Shaw, Giles (Pudsey)

      Weatherill, Bernard

      Morrison, Charles (Devizes)

      Shaw, Michael (Scarborough)

      Wells, John

      Morrison, Hon Peter (Chester)

      Shelton, William (Streatham)

      Whitney, Raymond (Wycombe)

      Mudd, David

      Shepherd, Colin

      Wiggin, Jerry

      Nelson, Anthony

      Shersby, Michael

      Winterton, Nicholas

      Neubert, Michael

      Silvester, Fred

      Wood, Rt Hon Richard

      Newton, Tony

      Sims, Roger

      Younger, Hon George

      Onslow, Cranley

      Sinclair, Sir Georgs

      Osborn, John

      Skeet, T. H. H.

      TELLERS FOR THE AYES:

      Page, Rt Hon R. Graham (Crosby)

      Speed, Keith

      Lord James Douglas-Hamilton and

      Page, Richard (Workington)

      Spence, John

      Sir George Young.

      NOES

      Abse, Leo

      Crawshaw, Richard

      Gourlay, Harry

      Allaun, Frank

      Cronin, John

      Graham, Ted

      Anderson, Donald

      Crowther, Stan (Rotherham)

      Grant, George (Morpeth)

      Archer, Rt Hon Peter

      Cryer, Bob

      Grimond, Rt Hon J.

      Armstrong, Ernest

      Cunningham, Dr J. (Whiteh)

      Grocott, Bruce

      Ashley, Jack

      Dalyell, Tam

      Hamilton, James (Bothwell)

      Ashton, Joe

      Davidson, Arthur

      Hamilton, W. W. (Central Fife)

      Atkins, Ronald (Preston N)

      Davies, Rt Hon Denzil

      Hardy, Peter

      Barnett, Guy (Greenwich)

      Davies, Ifor (Gower)

      Harrison, Rt Hon Walter

      Barnett, Rt Hon Joel (Heywood)

      Davis, Clinton (Hackney C)

      Hattersley, Rt Hon Roy

      Bates, Alf

      Deakins, Eric

      Hayman, Mrs Helene

      Bean, R. E.

      Dean, Joseph (Leeds West)

      Healey, Rt Hon Denis

      Beith, A. J.

      de Freitas, Rt Hon Sir Geoffrey

      Henderson, Douglas

      Bennett, Andrew (Stockport N)

      Dempsey, James

      Hooson, Emlyn

      Bidwell, Sydney

      Dewar, Donald

      Horam, John

      Bishop, Rt Hon Edward

      Doig, Peter

      Howells, Geraint (Cardigan)

      Blenkinsop, Arthur

      Douglas-Mann, Bruce

      Hoyle, Doug (Nelson)

      Boardman, H.

      Eadie, Alex

      Huckfield, Les

      Boothroyd, Miss Betty

      Edge, Geoff

      Hughes, Rt Hon C. (Anglesey)

      Bottomley, Rt Hon Arthur

      Ellis, John (Brigg & Scun)

      Hughes, Mark (Durham)

      Boyden, James (Bish Auck)

      English, Michael

      Hughes, Robert (Aberdeen N)

      Bradley, Tom

      Evans, Fred (Caerphilly)

      Hughes, Roy (Newport)

      Bray, Dr Jeremy

      Evans, Gwynfor (Carmarthen)

      Hunter, Adam

      Brown, Hugh D. Provan)

      Evans, Ioan (Aberdare)

      Irvine, Rt Hon Sir A. (Edge Hill)

      Brown, Robert C. (Newcastle W)

      Evans, John (Newton)

      Irving, Rt Hon S. (Dartford)

      Brown, Ronald (Hackney S)

      Ewing, Harry (Stirling)

      Jackson, Colin (Brighouse)

      Buchanan, Richard

      Ewing, Mrs Winifred (Moray)

      Jackson, Miss Margaret (Lincoln)

      Callaghan, Jim (Middleton & P)

      Fernyhough, Rt Hon E.

      Janner, Greville

      Campbell, Ian

      Fitch, Alan (Wigan)

      Jay, Rt Hon Douglas

      Canavan, Dennis

      Fitt, Gerard (Belfast W)

      Jeger, Mrs Lena

      Cant, R. B.

      Flannery, Martin

      Jenkins, Hugh (Putney)

      Carmichael, Neil

      Fletcher, L. R. (Ilkeston)

      John, Brynmor

      Carter, Ray

      Fletcher, Ted (Darlington)

      Johnson, Walter (Derby S)

      Carter-Jones, Lewis

      Foot, Rt Hon Michael

      Johnston, Russell (Inverness)

      Cartwright, John

      Ford, Ben

      Jones, Barry (East Flint)

      Castle, Rt Hon Barbara

      Forrester, John

      Jones, Dan (Burnley)

      Clemitson, Ivor

      Fowler, Gerald (The wrekln)

      Kaufman, Gerald

      Cocks, Rt Hon Michael (Bristol S)

      Fraser, John (Lambeth, N'w'd)

      Kelley, Richard

      Cohen, Stanley

      Freeson, Rt Hon Reginald

      Kerr, Russell

      Coleman, Donald

      Freud, Clement

      Kilroy-Silk, Robert

      Colquhoun, Ms Maureen

      Garrett, John (Norwich S)

      Kinnock, Neil

      Conlan, Bernard

      George, Bruce

      Lambie, David

      Cook, Robin F. (Edin C)

      Gilmour, Rt Hon Ian (Chesham)

      Lamborn, Harry

      Corbett, Robin

      Ginsburg, David

      Lamond, James

      Cowans, Harry

      Golding, John

      Latham, Arthur (Paddington)

      Crawford, Douglas

      Gould, Bryan

      Lee, John

      356

      357

      Lestor, Miss Joan (Eton & Slough)

      Owen, Rt Hon Dr David

      Strang, Gavin

      Lever, Rt Hon Harold

      Padley, Walter

      Summerskill, Hon Dr Shirley

      Lewis, Ron (Carlisle)

      Palmer, Arthur

      Swain, Thomas

      Litterick, Tom

      Pardoe, John

      Thomas, Dafydd (Merioneth)

      Lomas, Kenneth

      Park, George

      Thomas, Jeffrey (Abertillery)

      Loyden, Eddie

      Parker, John

      Thomas, Mike (Newcastle E)

      Lyon, Alexander (York)

      Parry, Robert

      Thomas, Ron (Bristol NW)

      Lyons, Edward (Bradford W)

      Pavitt, Laurie

      Thompson, George

      Mabon, Rt Hon Dr J. Dickson

      Pendry, Tom

      Thorne, Stan (Preston S)

      McCartney, Hugh

      Penhaligon, David

      Tierney, Sydney

      MacCormick, Iain

      Price, C. (Lewisham W)

      Tilley, John (Lambeth, Central)

      McDonald, Dr Oonagh

      Price, William (Rugby)

      Tinn, James

      McElhone, Frank

      Radice, Giles

      Tomlinson, John

      MacFarquhar, Roderick

      Reid, George

      Torney, Tom

      MacKenzie, Rt Hon Gregor

      Richardson, Miss Jo

      Wainwright, Edwin (Dearne V)

      Mackintosh, John P.

      Roberts, Albert (Normanton)

      Wainwright, Richard (Colne V)

      Maclennan, Robert

      Roberts, Gwilym (Cannock)

      Walker, Harold (Doncaster)

      Madden, Max

      Robinson, Geoffrey

      Walker, Terry (Kingswood)

      Magee, Bryan

      Roderick, Caerwyn

      Ward, Michael

      Mahon, Simon

      Rodgers, George (Chorley)

      Watkins, David

      Mallalieu, J. P. W.

      Rooker, J. W.

      Watt, Hamish

      Marks, Kenneth

      Roper, John

      Weitzman, David

      Marshall, Dr Edmund (Goole)

      Rose, Paul B.

      Wellbeloved, James

      Marshall, Jim (Leicester S)

      Ross, Stephen (Isle of Wight)

      Welsh, Andrew

      Maynard, Miss Joan

      Ross, Rt Hon W. (Kilmarnock)

      White, Frank R. (Bury)

      Meacher, Michael

      Ryman, John

      White, James (Pollock)

      Mellish, Rt Hon Robert

      Sandelson, Neville

      Whitehead, Philip

      Mendelson, John

      Sedgemore, Brian

      Whitlock, William

      Mikardo, Ian

      Selby, Harry

      Wigley, Dafydd

      Millan, Rt Hon Bruce

      Sever, John

      Willey, Rt Hon Frederick

      Miller, Dr M. S. (E Kilbride)

      Shaw, Arnold (Ilford South)

      Williams, Alan Lee (Hornch'ch)

      Mitchell, Austin

      Sheldon, Rt Hon Robert

      Williams, Rt Hon Shirley (Hertford)

      Mitchell, R. C. (Soton, Itchen)

      Shore, Rt Hon Peter

      Williams, Sir Thomas (Warrington)

      Moonman, Eric

      Silkin, Rt Hon John (Deptford)

      Wilson, Rt Hon Sir Harold (Huyton)

      Morris, Alfred (Wythenshawe)

      Silkin, Rt Hon S. C. (Dulwich)

      Wilson, William (Coventry SE)

      Morris, Rt Hon Charles R.

      Silverman, Julius

      Wise, Mrs Audrey

      Moyle, Roland

      Skinner, Dennis

      Woodall, Alec

      Murray, Rt Hon Ronald King

      Smith, John (N Lanarkshire)

      Woof, Robert

      Newens, Stanley

      Snape, Peter

      Wrigglesworth, Ian

      Noble, Mike

      Spearing, Nigel

      Young, David (Bolton E)

      Oakes, Gordon

      Spriggs, Leslie

      O'Halloran, Michael

      Stallard, A. W.

      TELLERS FOR THE NOES:

      Orme, Rt Hon Stanley

      Stoddart, David

      Mrs. Ann Taylor and

      Ovenden, John

      Stott, Roger

      Mr. Joseph Harper.

      Question accordingly negatived.

    New Clause No. 4

      INTEREST ON TAX OVERPAID
      "(1) Section 47 of the Finance (No. 2) Act 1975 shall be amended as follows:—

      (a) In subsection (1) (a) for the words "twelve months following that year of assessment" there shall be substituted the words "relevant time".

      (b) In subsection (3) (a) for the word "in" there shall be substituted the words "on the last day of".

      (c) In subsection (3) (b) for the words "for the year of assessment in which the contingency mentioned in that section happened" there shall be substituted the words "on the last day of the tax month in which the contingency mentioned in that section happened or on the last day of the tax month in which the claim was made, whichever is the later".

      (d) For subsection (4) there shall be sub-stituted—

      (4) For the purposes of subsection (1) above—

      (a) if the repayment is of tax that was paid on or before the reckonable date under section 86 of the Taxes Management
      358
      Act 1970, the relevant time is the reckonable date in relation to that tax;

      (b) if the repayment is of the special charge, the relevant time, as regards so much of the charge as was paid before the end of the year 1969–70, is the end of that year, and, as regards so much of the charge as was paid in any later year of assessment, is the end of the year of assessment in which it was paid;

      (c) in any other case, the relevant time is the last day of the tax month in which the tax comprised in the repayment was paid;

      and, subject to subsection (6) below, where a repayment to which subsection (1) above applies is of tax paid on different dates, the repayment shall as far as possible be treated for the purposes of this subsection as a repayment of tax paid on a later rather than an earlier date among those dates.
      (e) In subsection (5) for the word "for" there shall be substituted the words "on the last day of".
      (2) Section 48 of the Finance (No. 2) Act 1975 shall be amended as follows:—

      (a) In subsection (2) there shall be omitted the words "the end of the twelve months beginning with"

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      (b) For subsection (4) (a) and (b) there shall be substituted

      (a) if the payment is a repayment of corporation tax that was paid on or before the material date, the relevant date is the material date;

      (b) in any other case, the relevant date is the last day of the tax month in which the corporation tax comprised in the repayment was paid;

      (c) In subsection (5) (a) for the word "for" there shall be substituted the words "on the last day of".

      (d) In subsection (5) (b) for the word "for" there shall be substituted the words "on the last day of"."—[Mr. Peter Rees.]

      Brought up and read the First time.
      8.45 p.m.
      Mr. Peter Rees: I beg to move, That the clause be read a Second time.
      At first sight the new clause may seem to be rather complex, but it has a fairly simple objective. It is to amend Section 47 of the Finance (No. 2) Act 1975, which, the Committee will recall, altered the arrangements with regard to interest on overdue tax and also provided for a "repayment supplement" where tax had been overpaid and had to be repaid by the Revenue. The difficulty was that the repayment supplement is not calculated, at any rate in point of time, on the same basis as interest on tax underpaid. Interest on tax underpaid or overdue is calculated, as it is charmingly described in the statute, from "the relevant date", which is normally a date just in or just after the year of assessment.
      On the other hand, the repayment supplement, which in spite of its name is, in effect, interest, although not subject to tax, is to be calculated from a time running from at least one year later from the date the tax was paid. Again, that is another asymmetry between interest on tax overdue and underpaid and the repayment supplement in that the Revenue has the right to waive up to £10 of interest on tax overdue but has the right to ignore the first £25 of any repayment supplement.
      It is to correct the greater of these two imbalances that my right hon. and hon. Friends and I have tabled the new clause. Of course, the imbalance is greater than might at first sight appear, because it is often very difficult to calculate the tax which a taxpayer may have to pay inside the year of assessment. For instance, in the commencement years under Schedule
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      3 it is often difficult for a taxpayer to determine, on quite innocent and honourable motives, what the tax due might be. He may well find himself, for quite innocent reasons, paying interest on the tax that is eventually found due.
      In the case of partnerships, it is difficult for the individual partners to determine their own liability because it so often depends on the shifting circumstances of the partnership, such as, partners joining and leaving. The same is true of capital gains tax and capital transfer tax where complex valuations are in point. Therefore, so far as my right hon. and hon. Friends and I can detect, there is unease about the operation of these two provisions. Clearly, if there is to be equity the repayment supplement provisions should be the mirror image of the interest provisions.
      The unease is not confined to taxpayers. To reassure Government supporters below the Gangway, who I am sure intend to support the new clause, there is also unease at Somerset House. I know that the hon. Member for Bristol, North-West (Mr. Thomas) is very tender of the susceptibilities of Somerset House, although he may not be so tender of the susceptibilities of the Opposition. But I am sure he would wish to put the consciences of those at Somerset House at rest, and we shall listen with great interest to what he has to say.
      Mr. Ron Thomas: How many votes have they?
      Mr. Rees: That is a very crude intervention. The hon. Member may find that in his constituency, for instance, there are a considerable number of Inland Revenue staff.
      Despite the slightly acrimonious exchange between the Chief Secretary and my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), it has emerged fairly clearly that the business of revenue collection is a growth industry and that the number of people getting drawn into it year by year, certainly under a Labour Administration, is increasing.
      Mr. Thomas: Tax avoidance is a growth industry, too.
      Mr. Rees: Indeed it is, and tax evasion is, too. If the hon. Member is concerned about tax avoidance and tax

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      evasion, he might consider why it is a growth industry. He may consider the complexity of the tax system. He may also consider the rates.
      Mr. Thomas indicated dissent.
      Mr. Rees: I see that the hon. Member does not agree. It may be that he finds the tax system simple. He may be a person of luminous intellect. So far, I have not heard any very carefully considered speeches from him on fiscal matters. I had occasion to listen to a certain amount of his contribution to our debate on the indexation of capital gains. Although I shall take care to reread his lapidary words in Hansard tomorrow, if it is printed, it did not strike me that he had shown a very profound knowledge of the tax system.
      We know that the hon. Member knows a certain amount about housing, and I was sorry that he did not contribute to our recent debate on stamp duty and housing. If he had, he might have told us whether, for example, there should be a special exemption for those who are buying council houses as sitting tenants. I know that many of those who are doing so are below the threshold. It may be that the hon. Member was lucky enough to pay a price well below the threshold. But let me remind him, although he is drawing me a little off course—it is one of the charms of these debates in Committee on Finance Bills—that, whatever happens in the noble city of Bristol, a great number of council houses in the Greater London area are worth considerably more than £20,000, so questions of stamp duty are of great concern.
      Mr. Cronin: On a point of order, Mrs. Butler. The hon. and learned Member is making a very entertaining speech, but I cannot see what relevance it has to the new clause.
      The Temporary Chairman (Mrs. Joyce Butler): I hope that the hon. and learned Member will make his meaning clear.
      Mr. Rees: I am perhaps at times a little obscure in my contributions, and perhaps I was tempted by the hon. Member for Bristol, North-West. I know that it is always unwise to consider his interventions at all seriously, especially those
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      which he makes from a sedentary position. Whether he will make a serious contribution on his feet remains to be seen.
      To reassure the Committee and particularly the hon. Member for Bristol, North-West and his hon. Friends—this is absolutely germane to our debate—I was about to say that there is unease not only among the general body of taxpayers but also at Somerset House and in the mind of the Ombudsman. I refer the Committee to the report of the Ombudsman for 1976. In paragraph 8 he said:
      "Another particular source of complaint during 1976 was the charging of interest on unpaid tax. The Finance (No. 2) Act 1975 tightened up considerably the provision relating to such charges. In particular it did away with the two-month period of grace …. In other, more recent, cases in which I have not yet completed my investigations, the situation giving rise to the interest charge may have involved some official error. At the end of the year I was still considering whether the Department's present policy of interest charges—as expressed in relation to cases which I investigate—is one I would be justified in accepting without further comment."
      Those are interesting words.
      The Ombudsman thought a little further in 1977 on that subject, and in paragraph 36 he said:
      "the Chairman of the Board informed me on 18th October 1977 that he had decided that the time had come to review the provisions on interest on late payment (and repayment) of tax, two years having elapsed since their introduction. The departmental committee conducting the review had not completed its report at the time this present Report went to print."
      We have both the Ombudsman and the chairman of the Board of the Inland Revenue concerned about this. Of course, to the frivolous mind of the hon. Member for Bristol, North-West these matters are of small moment. But I am a little concerned about these matters, and this is one of the reasons why we have put down this provision.
      Following up this theme, I should point out that this matter was taken up by the Select Committee on the Parliamentary Commissioner for Administration. Members of the Committee asked Sir William Pile what he had done about this and how the departmental review had proceeded. He was unable to give a clear answer and said that there was one matter—a matter of forms—which he

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      regarded as within his administrative competence. He said that he would be designing new forms. I am sure that this will be a matter of great reassurance to the general body of taxpayers. He went on to say that there were two other matters, which would involve legislative changes, which he was putting to the Ministers responsible for his Department. Therefore, we are entitled to ask the Financial Secretary, in the context of this debate, the outcome of the departmental review.
      Does the Financial Secretary share the concern of Sir William Pile and Sir Idwal Pugh? If not, why does he take a blander and more robust view of these problems? Does he think that they can be swept under the carpet, or does he think that something should be done? It is to give the Financial Secretary an opportunity to make amends to the general body of taxpayers who may be unfortunate enough to incur interest on taxes that are overdue or who may be lucky enough to have a repayment supplement due to them that we have put down this new clause.
      The public unease about the administration of the tax system goes a little wider than that. I do not level by criticism at the devoted servants of Somerset House, almost all of whom are courteous and incorruptible. But we know and they know in their heart of hearts, although they would be much too loyal to say so publicly, that they have had heaped on their shoulders of late a quite impossible task—complex legislation with penal rates.
      In imposing this legislation, the unattractive consequences are that there will be many cases where a person will, quite unwittingly, find himself having to pay interest on tax that he cannot even reasonably calculate within the year of assessment. Equally, of course, he may be fortunate enough to have due to him this repayment supplement, but the supplement will not be calculated on the same basis as interest on tax overdue.
      In this process of destroying public confidence in the tax system and heaping even more unconscionable burdens on the taxpayers, the Government have been egged on by Lord Plant and Mr. Christopher, who seem to regard it as their particular duty to incite the Government to ever-fresh flights of fancy in turning
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      the screw even harder and exacting more and more tax from the general body of taxpayers.
      The hon. Member for Bristol, North-West may find that these are matters for complete hilarity. I do not know how many taxpayers there are in his constituency. Perhaps there are none—which would be most unusual. But it is difficult to know how he will explain his frivolity to those who return him to this place. Perhaps they will not be returning the hon. Gentleman for much longer and his hilarity is, therefore, of a certain forced and hysterical note.
      9.0 p.m.
      The Government have started what appears to be a vendetta against the self-employed. Their motives are a little hard to fathom. It may be that in their simple, Marxist minds we can all be categorised into sharply defined classes—self-employed, employees, kulaks. Of course the self-employed are those marked down for disapprobation and destruction. Those Members in the Committee who have a slightly closer acquaintance with the facts of life and the operation of the tax system will know that the self-employed are not a clearly defined body of taxpayers. They will know that a great number of people who pay part of their tax under Schedule E also have self-employed jobs on the side.
      Mr. Ron Thomas: Such as Members of Parliament.
      Mr. Rees: Perhaps. I do not know. It may be that the hon. Gentleman is lucky enough to have some other form of occupation. I doubt it. It is not, perhaps, profitable for me to speculate on the contribution that the hon. Gentleman can make outside this Committee. I suspect that it is rather limited.
      The Committee will recall that it is possible for people to move in and out of the category of self-employed. For instance, in the Finance Bill there is an interesting clause that takes divers out of the ranks of the employed and puts them into the ranks of the self-employed. This is, perhaps, a welcome move and I suspect that we had one or two debates on this last year. It will be important to determine why it is that the Financial Secretary has chosen to introduce this interesting provision.

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      Whether a person is employed or self-employed he is entitled to be treated with a modicum of care and courtesy. There have been interesting reports circulating of the most extraordinary series of questions being administered to the self-employed. My hon. Friend the Member for Somerset, North (Mr. Dean) tabled Questions about this but the Financial Secretary has not given a clear or convincing answer. I do not know whether it is that he is unaware of what is being done in his name in various tax districts or whether it is because he is a little coy about the questions that are being administered. No doubt he will be able to enlighten the Committee this evening.
      I should like to tell the Committee—because there are obviously some Labour Members below the Gangway who are unaware of the situation—what is being done in the name of the Government to perhaps quite innocent taxpayers. A range of personal questions are being administered. They are placed under certain general headings. These are questions apparently being administered to the self-employed by inspectors. I have no doubt that they are being administered extremely reluctantly, because I know a number of Inland Revenue staff and I know that they find the process extremely distasteful.
      The Temporary Chairman: Order. Will the hon. and learned Gentleman relate what he is saying to the new clause? It is difficult to find a connection at present.
      Mr. Rees: If you will bear patiently with me, Mrs. Butler, you will see the connection, because we are concerned here with the relationship between interest on tax overdue and the repayment supplement.
      The questions to be administered to the self-employed, as I understand it—perhaps the Financial Secretary will correct me—will go very much to the question of whether they have paid their full measure of tax. In other words, the inspectors are groping around trying to find out whether there has been tax underpaid. If so, the unfortunate taxpayer will be charged interest. The essence of this debate is the harmonisation of the provisions relating to the repayment supplement to the provisions relating to tax
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      underpaid. That is why I feel it is important—
      The Temporary Chairman: Order. The new clause relates to tax overpaid.
      Mr. Rees: As you will have heard, Mrs. Butler, the burden of our case is that it is crucially important, if there is to be equity in the tax system and if taxpayers are to have confidence in the system, that these two provisions should be a mirror image of each other. In other words, interest on tax underpaid should be calculated in exactly the same way and on the same basis as the repayment supplement. Therefore, it is important to discover what steps the Inland Revenue is taking in this respect.
      I hope that you will bear with me, Mrs. Butler, because all will become clear in due course. I hope that you will allow me to investigate a little the techniques employed by the Inland Revenue to force out of the reluctant, perhaps ignorant, individual taxpayer the basis of his affairs. I hope that you will let me proceed.
      On the subject of tax underpaid, let me explain the range of questions that are being put. The Financial Secretary may say that this is not the case. For example, taxpayers are being asked about their general housekeeping.
      Mr. A. J. Beith: I am trying to work out in what way the practices of the Inland Revenue will be changed if the new clause is carried. Some of the allegations which the hon. and learned Gentleman seems to have got hold of may be serious, but how can we be sure that the effect of the clause would be to stop these practices?
      Mr. Rees: It may be that the Inland Revenue will be a little more concerned to see that, where tax is overpaid, it is repaid with a little more promptness. I apologise to the Committee if I am being a little obscure in my presentation. I am sorry that the Liberal Party appears to be not over-concerned about these matters.
      Mr. Beith: How will this clause help?
      Mr. Rees: We know that the hon. Gentleman does not contribute a great deal to these debates and takes his line in this subject from his hon. Friend the

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      Member for Cornwall, North (Mr. Par-doe). I am sorry that that hon. Gentleman is not present. I know that it must be difficult for the hon. Member for Berwick-upon-Tweed (Mr. Beith) to deputise for such an ebullient and expansive figure, but he must do his best. No doubt he will catch the eye of the Chair a little later.
      Mr. Ron Thomas: Is the hon. and learned Gentleman saying that if people have overpaid tax and get back a little more interest, they will not mind these questions being asked?
      Mr. Rees: I thought that the hon. Gentleman was not following the debate very closely, and I now know that to be the case. The hon. Gentleman must be patient. I know that he is a newcomer to these problems. He will have his chance and his moment of glory. For the moment, he should be patient and leave the banner to be carried by his right hon. Friend the Financial Secretary, who is looking a little uneasy at having to carry the burden.
      I do not wish to detain the Committee for long, but I believe that the right hon. Gentleman should put our minds at rest. For example, does the Financial Secretary feel it right that a taxpayer should be asked about the clothing of his family, including shoe repairs, school uniforms and sports equipment, or that the cross-examination should go on to question the school fees for children at dancing classes? Finally one comes to capital items, including the major furniture for each room in the house. These are deeply personal and intrusive questions.
      It is all very well for the hon. Lady the Member for Thurrock (Dr. McDonald) to make muttered comments. I do not know her personal circumstances. I wonder how she would like it if she were cross-examined about outings and visits, including those to relations. Would she be very happy if she were cross-examined about the scale of her entertaining or her contribution to charities? For all I know, the hon. Lady may make none. What will be a matter of particular concern to the hon. Lady is being questioned about her expenditure on hairdressing and cosmetics. Does she think that that is the kind of question to be put to a taxpayer? She is now beginning to look
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      a little uneasy, and naturally so. She cannot be happy that that type of question is administered to a taxpayer, who must be presumed to be innocent.
      Mr. Eddie Loyden: Are not these questions posed to every applicant for supplementary benefit'? Does not the hon. and learned Member realise that in many cases the questioning is even closer and that the authorities, before they make a decision, require to see the shoes, the clothes and the furniture in question?
      Mr. Rees: The hon. Gentleman is getting a little carried away. I cannot speak—of course, I cannot—of what the Supplementary Benefits Commission may do in his constituency.
      Mr. Loyden: Not just my constituency.
      Mr. Rees: I have never had evidence that in my constituency—
      The Temporary Chairman: Order. I am sorry to interrupt the hon. and learned Gentleman again, but we are getting very wide of the new clause. Other hon. Members wish to speak, and I hope that he will confine his remarks rather more closely to the clause.
      Mr. Rees: I am afraid that it was the hon. Member for Liverpool, Garston (Mr. Loyden) who trespassed a little on my good nature, and I was led into matters which, I agree, are not entirely germane to this provision. I am sure, Mrs. Butler, that, had you checked the question, I should not have fallen into the trap, but, as I say, I am always rather prone to that kind of self-indulgence.
      I have given an indication of the type of approach which, apparently, the Revenue is adopting in this area of taxation. I wish only to identify certain areas of unease, and perhaps the Financial Secretary will be able to reassure the Committee and say "No, this is done entirely without my concurrence and consent. These are only one or two over-enthusiastic officers, and the general run of inspector never has any truck with that type of questionnaire."
      I wish now to move on, if I may—
      Mr. Ron Thomas: Keeping to the point, I hope.
      Mr. Rees: The hon. Gentleman must contain himself. If he wishes to make an intervention, let him do so on his feet, He will have ample opportunity, and I think it the grossest discourtesy—
      Mr. Thomas rose—
      Mr. Rees: I have given way to the hon. Gentleman on every possible occasion, and I shall not do so again because, as you rightly pointed out, Mrs. Butler, I may get led into interesting byways which, perhaps, are of no direct relevance to this important new clause.
      I come now to the report of the Ombudsman. In 1976 there were 114 complaints against the Inland Revenue. Of these, 39 were rejected, 75 were accepted and the Ombudsman found 26 cases of maladministration. In 1977 he investigated 89 cases. Thirty complaints he did not uphold, but he criticised the Department concerned and in 32 cases he upheld the complaint.
      Since the Committee is obviously avid for evidence. I refer it to the report of the Parliamentary Commissioner for Administration on the investigations completed from November 1977 to January 1978. There are about eight or nine cases there, and I am sorely tempted to take the Committee through them in some detail, since there is a rich vein of ore to be exploited. [HON. MEMBERS: "GO on."] Now I am being encouraged by hon. Members on the Government side. They are changing their tune. A moment ago they affected boredom and disbelief. Now, evidently, they are breast high with me, they have had a change of heart and they are beginning to realise that there may well be substance in the complaints which we are making.
      With that encouragement, how can I possibly refuse? Obviously, I must take hon. Members through each case. The theme is constant. I refer the Committee to case No. 1A/725/K—"Interest on capital gains tax". The report starts off emotively and very directly:
      "A widow complained that she had been charged interest on capital gains tax in circumstances which were no fault of hers."
      Here is the conclusion:
      "The Chairman's apologies acknowledge that there has been considerable delay in establishing the complainant's tax liability; and I am afraid that, for the reasons given in paragraph 7, she still has tax to pay. But her complaint
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      to me was concerned with the interest she had been required to pay, and this has been satisfactorily resolved by the Department's decision to give up the whole of that interest charge."
      In case after case—almost every single case in this volume except one, in which the taxpayer went to the Special Commissioners and largely had his problem sorted out there—we find a constant theme. The chairman apologises, "Yes, there have been delays, yes, standards are not quite what one would think appropriate for a great Department of State"; sometimes, "We can help and repay the interest and waive it"; sometimes, "Yes, there will be a repayment supplement." But a very sorry state of affairs is disclosed.
      Against that background, it is not putting it too high to say that there is a risk of the breakdown of confidence in the whole tax system. A system which does not appear to be fair to the general body of taxpayers will give rise—I think that even the hon. Member for Bristol, North-West will appreciate this—to avoidance and evasion. The Government should search their conscience and consider the part which their actions have played in reducing our tax system to this sorry state—higher and higher rates and greater and greater complexity against a background of inflation and falling living standards.
      9.15 p.m.
      There is no point in arming the Revenue with more powers of search and inquisition. I know that this was the tactic adopted a few years ago by those on the Treasury Bench.
      Dr. Oonagh McDonald indicated dissent.
      Mr. Rees: I see the hon. Lady shaking her head. I am not absolutely certain that she was in the House of Commons—she was certainly not a member of the Committee which considered the Finance Bill—when we debated the inquisitorial powers—[Interruption.]—The hon. Lady is very quick and pert with her comments, but if she cannot follow the thread of my argument, I admit that the fault must be mine, although it could equally well be that she has not applied herself to these problems. It is not enough merely to look decorative on the Bench behind the Financial Secretary. I know that a

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      little feminine charm does not come amiss to add a thin veil of decency to what has happened in the Financial Secretary's name, but it does not advance our debates.
      I believe that the most telling summary of what has happened was contained in a recent article by a very distinguished figure, Lord Houghton of Sowerby. As it happens, he was a predecessor of Lord Plant and Mr. Christopher and probably has a deeper and far more profound knowledge of the tax system than they. Labour Members will recollect that Lord Houghton of Sowerby did not grace the Conservative Party. He was brought up in the hard school of Labour politics. He knew all about the kind of things that the hon. Lady and the hon. Member for Bristol, North-West regard as part of the political education of any Labour Member.
      This is what Lord Houghton of Sowerby said, and I am sure that Labour Members will regard this as relevant:
      "In desperation, the tax-gatherer is driven to the conclusion that to administer and construe the Income Tax and Finance Acts is not enough. He must have the power to search the taxpayer's conscience and compel him to bare his soul. Was he up to something? To protest innocence is not enough: there must be proof of it.
      "It is time tax-gatherers thought out more deeply and clearly their ethical approach to those aspects of human conduct which appear to offend them so much. Taxation has no more to do with morals than the Rating and Valuation Act, or the Community Land Act, or even the dog licence. Taxation is an act of Parliament not an act of God. It is what Parliament says it should be, no more, no less."
      It is too late in the life of this Administration to expect a major measure of reform. It is too late, perhaps, to expect from the Financial Secretary a gesture of repentance, but at least he can accept this very modest new clause as a token that he appreciates the damage that he and his right hon. Friends have done to the body of taxpayers and to the tax system. On that basis I commend the new clause.
      The Financial Secretary to the Treasury (Mr. Robert Sheldon): On Supply Days there is a note on the Order Paper saying that the subject to be debated is selected by the Opposition. It would have been helpful on this new clause if we had had a note saying that it had been selected by the Opposition, because I do not think
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      that one could have told that from what the hon. and learned Member for Dover and Deal (Mr. Rees) said.
      The hon. and learned Member spoke about the reform of the tax system. It that is what he wished to achieve, it would not have been beyond his abilities to table a new clause dealing with precisely that subject. This is a technical new clause. It has a very precise purpose. It seeks to equalise the situation concerning interest due to the taxpayer and interest due to the Inland Revenue.
      The new clause attempts to provide a measure of symmetry between the amount of repayment to the taxpayer and the date from which it should run, on the one hand, and the position of the Inland Revenue, on the other. I do not think that I need go into the position in anything like the depth that I had thought would be necessary, because the hon. and learned Gentleman did not address his remarks to the new clause. The answer is that there is no difference of principle between the sentiments underlying the new clause and what I feel. I should dearly wish to see symmetry but such symmetry is not practicable. This is no matter of principle, but of impracticability. The arrangements for charging tax are different from those made for repaying the extra amount due as a result of an overcharge.
      I should say at the outset that blame does not necessarily attach to the Inland Revenue's making a late repayment. There could be a very late claim. As a result, interest would still run at 9 per cent., and that could be of benefit to the taxpayer because it is free from tax. It is impossible to attempt to achieve symmetry between the Inland Revenue and the taxpayer, largely because the pay-as-you-earn system does not permit it.
      According to the new clause, the repayment would have to be made at the end of the tax year. It is not possible to do that, because the information does not come in to the tax offices until well after the tax year. That covers five-sixths of all tax repayments. Clearly, if we were to make a gigantic effort to bring about a situation which was as closely in line as was possible, we would have to engage 1,200 extra staff to deal with 3 million

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      additional cases and we still would not meet the obligations of the new clause.
      It is interesting to look not at the report of the Parliamentary Commissioner for Administration, which, as the hon. and learned Member for Dover and Deal said, can be interpreted in different ways, but at the clear report from the same Select Committee in 1971, Cmnd. 4729, when condemnation was made of the existing practice. As a result, the Government made some observations:
      "The Chancellor of the Exchequer"
      —that was Mr. Anthony Barber—
      "has therefore concluded that it is not practicable to introduce arrangements, capable of being operated by tax offices, for applying a financial remedy in cases of undue delay in repayment of tax."
      That was confirmed in the report by the same body two years later. It was not considered practicable. In the Finance Act 1975 we introduced such a balance between the treatment of the taxpayer and the Revenue. Of course, it is not complete. The interest charged on late payments of tax and the interest provided by late repayments have come more into line. We have tried to be as fair as possible between the taxpayer and the Revenue.
      I am not convinced that it is possible to go further at present, but I take note of the wording of the new clause, if not of the comments made by the hon. and learned Member for Dover and Deal. I ask the Committee to reject the clause.
      Mr. Cope: I do not think that the Financial Secretary was of great help to the Committee in making up its mind about the new clause. First, he said, and I entirely agree, that he thought that there should be asymmetry—I think that was his word, and it is a good word—between the taxpayer and the Inland Revenue in the way in which the interest charges operate for tax which is overpaid and for tax which is underpaid. This goes to the nub of what the new clause is all about.
      In saying what he did the Financial Secretary was reflecting what the Chancellor of the Exchequer said on the Second Reading of the Finance (No. 2) Bill in 1975. The right hon. Gentleman, explaining why the provisions were being introduced, said:
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      "The new provisions are intended broadly to neutralise the advantage which a taxpayer may secure under the present system".—[Official Report, 8th May 1975; Vol. 891, c. 1644.]
      I am not sure what he meant by "neutralise". There are two possible meanings. One is to eliminate the taxpayer's advantage—to neutralise it in that sense—and the other is to make it neutral—in the Financial Secretary's words, to introduce symmetry as between taxpayers who overpaid and taxpayers who underpaid. Certainly I should like to see symmetry, as would the Financial Secretary and, I presume, the Chancellor. It should be obvious to anyone who knows anything about the matters that there is no symmetry now.
      The Financial Secretary spoke of obtaining an element of balance, but there is an extremely unbalanced balance at the moment. It involves a 12-months' difference in the date from which the interest starts to run when paid by the taxpayer and by the Revenue respectively. The new clause, relatively complicated as it seems on paper and full of the sort of jargon that is used a great deal in this sort of legislation, does its best to eliminate that one-year difference.
      It is important to bear in mind that the view of the Inland Revenue, and therefore, I assume, of the Government, is that the interest charged on tax paid late, or the interest paid by the Revenue on tax paid early or overpaid, is not intended to be a penalty. It is intended only to be a commercial rate of interest which compensates the Revenue or taxpayer for the lack of use of the money over a period of time.
      I do not think that the system works like that. The rate of interest paid at the moment is 9 per cent. on both sides, but that is paid out of after-tax income. For many people that is a completely different matter from 9 per cent. paid out of pre-tax income. For example, if a man owed £100 for a year he would be charged £9 interest by the Revenue. If he had put that money into a bank and had earned 9 per cent., when the Inland Revenue had finished with it he would not have £9 left with which to pay the Inland Revenue. In that sense the rate is in no way a commercial rate; it is a penalty. With repayment claims the system works differently.

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      It follows, in the Inland Revenue's view, and I assume therefore, the Government's, that the system should operate automatically. It does not operate on the basis of anyone making a mistake. There might be a mistake, or perhaps the taxpayer is being difficult and is not sending in his returns. But the late payment can be the fault of the Revenue, not the taxpayer. The Revenue may make a mistake in its calculations, but the interest is still generally payable. Many of the cases that have gone to the Parliamentary Commissioner for Administration have come within this category where the Revenue has made a mistake or misled a taxpayer and the interest became due. The other half of the symmetry of which the Financial Secretary spoke also applies.
      9.30 p.m.
      I have the honour to be a member of the Select Committee on the Ombudsman. The Select Committee supervises his work, goes through his reports, and so on. We have recently taken evidence from Sir William Pile and Mr. Green, of the Inland Revenue, on the whole question of interest charges and the way in which they work. They made clear to us that they recognise that there are areas of difficulty and that sometimes the Revenue makes a mistake. How could it not do so? There are a large number of people doing a complicated job. There are bound to be mistakes from time to time. But the Revenue rarely agrees to any waiver of the interest charge as a result of its having made a mistake. Therefore, it is important to see the way in which this interest operates if one is to understand what we are trying to do and the symmetry that we are trying to achieve.
      It is also clear from the evidence of Sir William Pile and Mr. Green on 15th March this year that they themselves recognise, from the Ombudsman's reports and from their own experience, that these interest charges, in both directions, were not working as well as they might. Sir William said to us:
      "I was conscious that there were difficulties, so I thought it was time we had a look at the arrangements as they worked out in practice."
      He went on to explain that they had had a considerable review of the arrangements in practice and were trying to improve the system.
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      I do not want to mislead the Committee. Sir William did not suggest the new clause, or anything like it, but he was addressing his mind, and causing his departmental committee to address its mind, to similar sets of problems. They came up with four suggestions—two administrative and two legislative. The first is concerned with the forms and the way in which they are filled in, and so on. One is a descriptive form, the other being a form which had to be filled in by taxpayers to make it absolutely clear what he was doing. Those are administrative things which we understand are being put in hand by the Revenue.
      But there are also two legislative changes which we were told were being recommended by the Revenue to the Financial Secretary, both of which seem to be sensible changes. They do not go as far as we would like to go or as far as the new clause goes. However, if tonight the Financial Secretary can tell us—it is not in the Bill—that he proposes to implement at a later stage those legislative proposals of the Inland Revenue, it would slightly modify my attitude towards the new clause, because it would alter the balance of the symmetry a little as between the taxpayer and the Revenue in this matter—the symmetry that the Financial Secretary told us he wants to see.
      Even if the Financial Secretary is not able to answer us on this point tonight, I shall be doing my best, with the support of some of my hon. Friends, I hope, to table amendments similar to those suggested by the Inland Revenue, which we can discuss in Standing Committee later.
      However, the important thing, the nub of the new clause, is the starting date. The Financial Secretary, like Sir William in answering questions in the Select Committee, dwelt heavily on the complications of the arrangements that would be necessary in order to try to secure the symmetry that we both desire. Sir William said that when he was considering most of the repayments, he thought that 125 more staff would be required. In that figure he was not including extending repayments to the PAYE taxpayers, which is what the Financial Secretary was adding in. PAYE, however, seems to be a separate consideration, because it is a self-adjusting system, operating over a longish cycle—that is

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      an advantage, but it has disadvantages—and with relatively small amounts compared with Schedule D and other large claims. That element seems to loom large for the Financial Secretary.
      Sir William made it clear that if the de minimis provision of interest waived by the Revenue, at present £10, were increased to £20, about 40 per cent. of the annual total of 340,000 cases would be eliminated. It would be acceptable if a similar de minimis rule applied the other way. If it applied to the repayments and interest on tax overpaid to which the new clause refers, the numbers of cases and staff given by the Financial Secretary and by Sir William would be much smaller.
      The Minister has made the case for the new clause in principle and announced his attachment to that principle. In that, he follows the Chancellor, and has only feebly tried to argue administrative difficulties. Those of us who have operated in this area for some time recognise that there are always administrative difficulties for the Revenue and Governments, but it is surprising how, after a few years of pressing, those difficulties are overcome when the principle is accepted. That, of course, is part of the reason why our tax system is so complicated, but they are overcome. If the Minister cannot accept the new clause I hope that his acceptance of the principle will lead to something on these lines. That is why we should press it, to make our opinion clear.
      Mr. Ian Gow: I pay tribute to the excellent speech of my hon. and learned Friend the Member for Dover and Deal (Mr. Rees). I did not hear the last few moments of it, but I heard the hors d'oeuvre and the main course. All I missed was—
      Mr. Ridley: The cadeira.
      Mr. Gow: Exactly—but it was a speech of high quality.
      The new clause would not be necessary if the Inland Revenue and the Treasury were devoted to administrative simplicity in taxation. The reason why the new clause is necessary and why my right hon. and hon. Friends will press it to a Division is the increasing complexity of tax legislation. If it were not for the complexity of tax legislation and the incentives
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      that are presented to almost all mankind to try legitimately to avoid every burden heaped upon it by the Government Front Bench, it would not be necessary to trouble ourselves with amending the Finance Act (No. 2) 1975.
      The new clause is first and foremost an indictment of the complexity of our tax system. There is no need to blame the Board of Inland Revenue for this. Its members are the unsung heroes of our saga tonight. The guilty men are seated upon the Treasury Bench. There are not many of them.
      By a strange accident of events, in the Official Report for yesterday we were given a list of Her Majesty's Ministers. There was on the Government Front Bench earlier an Assistant Whip. Now we have upon the Treasury Bench the Financial Secretary and a Lord Commissioner of the Treasury. He is even more distinguished and more grand than that. In any event, those who occupy the Treasury Bench bear a responsibility for the debate. If it had not been for the complexity of the tax legislation, the new clause would not have been required.
      My hon. and learned Friend the Member for Dover and Deal made passing reference to the report for 1977 of the Parliamentary Commissioner for Administration. My hon. Friend the Member for Gloucestershire, South (Mr. Cope) also referred to it. I draw attention to paragraph 36 of the report, which was presented to us as recently as 26th January this year. The Parliamentary Commissioner said:
      "A particular point made by complainants who have been charged interest on late paid tax"—
      those are the words I wish to underline—
      "but have at the same time overpaid other tax"—
      my hon. and learned Friend had in mind when drafting his new clause, which he has done with such skill, these very words of Sir Idwal Pugh—
      "is that the rules for payment of interest (in the form of a 'repayment supplement')".
      Those are the very words which appear in Section 47 of the Finance (No. 2) Act 1975.
      I am not sure, Mr. Goodhew, whether you were Chairman of the Standing Committee which dealt with the second Finance Bill of 1975. Whether you were or

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      not, you will have studied Hansard closely and will have seen that the precise wording in Section 47 is the very wording which was used by the Parliamentary Commissioner.
      To go back to the beginning of this paragraph of the report, it states:
      "A particular point made by complainants who have been charged interest on late paid tax, but have at the same time overpaid other tax"—
      one might think that this was worthy of Lewis Carroll by the time we just get here, but this is a trivial matter compared with some of the complexities of our tax legislation—
      "is that the rules for payment of interest (in the form of a 'repayment supplement') on tax overpaid to the Inland Revenue normally allow a period of grace of at least 12 months before the Department incur liability."
      9.45 p.m.
      Those are the awful words which appear in the Parliamentary Commissioner's annual report. They mean that the Government impose a liability for interest on the taxpayer when he has underpaid which they do not impose upon themselves when the taxpayer has overpaid. In his excellent opening speech, my hon. and learned Friend was saying that if there is to be a payment of interest to the taxpayer, it should be on precisely the same basis as the Inland Revenue requires interest from the taxpayer.
      How is it that Ministers can resist this essay in fairness, this attempt to achieve equity, this desire to achieve for the citizen precisely the same standards as the Government seek to impose upon themselves? It is just another example of the increasing arrogance and insensitivity of the State, the increasing bullying of the taxpayer, the penalisation of the little man who is struggling and the way that the Government regard themselves as being entitled to greater benefits than they confer upon the people they are supposed to serve.
      If we look at the infamous Section 47 of the 1975 Act, whom do we find included in this penalty, this arrangement for denying interest in respect of overpaid tax? Surely this is something that should moisten the eyes of the serried ranks of Labour Members who sit behind the Financial Secretary.
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      I am glad to see the former Foreign Secretary, the right hon. Member for Fulham (Mr. Stewart), in his place. He at least is a man filled with compassion, and I hope that he will interrupt me shortly in order to give his support to the new clause.
      Mr. Michael Stewart: The hon. Gentleman is referring to this as a new example of what he regards as had behaviour by the State, but this practice, whether unjust or not, has been going on for a considerable time under several Governments. It cannot be described as a new invasion of the rights of the individual.
      Mr. Gow: The right hon. Gentleman knows better than I that there is more joy in Heaven over one sinner that repenteth than over ninety and nine just persons who need no repentance.
      Mr. Stewart: I agree with that proposition, but it does not answer my point. The hon. Gentleman has incorrectly described this practice as a new piece of what he called arrogance by the State. If it is wrong, it is, unhappily, a wrong which has been going on for a long time, and previous Governments of either party might have remedied it.
      Mr. Gow: The right hon. Gentleman is entitled to rebuke me for not having made this speech on an earlier occasion. Whether my hon. Friends wish that I had made it on an earlier occasion or are content to listen to it now is a matter for them. I shall come back to the Biblical quotation with which the right hon. Gentleman found himself in respectful agreement with me.
      Mr. Ridley: My hon. Friend might care to tell the right hon. Member for Fulham (Mr. Stewart) that it was the Finance (No. 2) Act 1975, to which my hon. Friend has been referring, which tightened the screw on the taxpayer at the same time as it loosened the screw on the Revenue, which, as we have heard today from the Chief Secretary, has now got totally out of hand. There has been a major change, and it was not under Governments of other colours but only under Governments of a particular red hue that this happened.
      Mr. Gow: I think that the right hon. Gentleman voted in favour of the Finance

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      (No. 2) Act 1975. I believe that he was not a member of the Standing Committee which considered the Bill upstairs. I also know that my hon. Friend, as I would expect, is right. I want, however, to come back to the criticism—
      Mr. Robert Sheldon: Will the hon. Gentleman take account of the fact that the Finance (No. 2) Act 1975 introduced the repayment supplement? It did not exist before then.
      Mr. Gow: But what my hon. and learned Friend the Member for Dover and Deal was saying is that we believe that Section 47 of the Finance (No. 2) Act 1975 operates inequitably. That is what we are saying. My hon. and learned Friend's new clause seeks to put right that which we believe to be an injustice. The right hon. Member for Fulham rebuked me and my hon. Friends for not having introduced a new clause of this kind earlier.
      Mr. Ridley: We did.
      Mr. Gow: That is what I am saying to the right hon. Gentleman. This is not the first time that my hon. Friends have sought to amend Section 47 of the Finance (No. 2) Act 1975. But, even if it were, I must say to the right hon. Gentleman that is the first occasion on which the enormity of the inequity perpetrated by Section 47 has come to my attention.
      Taking the Bibical analogy further, we are on the road from Jerusalem to Jericho, and as we journey we find Section 47 of the Finance (No. 2) Act 1975. Instead of passing by on the other side—which was the advice given to the Committee by the Financial Secretary—my hon. Friends are going to the taxpayer, binding up his wounds and pouring in oil and wine. They are setting the taxpayer on the back of a Conservative beast, taking him to the inn and taking care of him. On the morrow, when they depart, they will take out 9 per cent. interest—or whatever rate of interest is fixed for the time being under the Finance (No. 2) Act 1975 by the powers given there—and they will say to the taxpayer "We have cared for you and, if there is anything further which is due, when we come again and we are on the other side of the Committee, we shall repay you."
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      I do not believe that that is something improper for the House of Commons to do. Are we here—this is hardly music to the ears of the Financial Secretary, although I know it will be to the right hon. Member for Fulham—to ignore the true interests of the people when they find themselves aligned against the State? I assert most emphatically that what we are here to do in this place is to defend the citizen when he finds that the mighty State is doing something which it ought not to do.
      I wish to return now to the annual report for 1977 of the Parliamentary Commissioner. Sir Idwal says:
      "This apparent imbalance between the citizen's liability and that of the Department"—
      that is, the Department of Inland Revenue—
      "is not a matter I have been able to take up, because the repayment supplement rules are laid down quite specifically in the 1975 Act."
      That is the very Act that we are seeking to amend in the new clause and the very grievance that we are seeking to put right.
      Whom do we find upon our side? I must not speak for the Scottish nationalists, who have other things upon their minds, but we find that the Parliamentary Commissioner for Administration is aligning himself—I hope I do him no injustice—with my hon. and learned Friend the Member for Dover and Deal.
      I have not finished with the quotation. I wish to return to it.
      "I have noted that it is open to an Inspector"—
      that is, an inspector of taxes—
      "in certain circumstances, to authorise an overpayment to tax to be set against other outstanding tax and so prevent interest from running against the taxpayer to the extent that the two amounts of tax overlap. And the Chairman of the Board"—
      that is, the chairman of the Board of Inland Revenue—
      "informed me on 18th October 1977 that he had decided that the time had come to review the provisions on interest on late payment (and repayment) of tax".
      Is not that very remarkable? Who would have believed that we could have had supporting the Conservative Opposition not only the Parliamentary Commissioner for Administration but the chairman of the Board of Inland Revenue? When one has a trio of my hon. and learned Friend the Member for Dover and Deal, the Parliamentary Commissioner for Administration and the chairman of the Board of

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      Inland Revenue all in agreement, one has a kind of trinity. I shall not lay myself open to a charge of blasphemy by trying to describe their different roles, but we have a trinity of whom the first to speak in the Committee was my hon. and learned Friend.
      My hon. and learned Friend was too diffident and modest to call in aid those two very distinguished persons. But I should add that they were appointed not by my right hon. Friend the Leader of the Opposition, not even by my right hon. Friend the Member for Sidcup (Mr. Heath), but by the Government whose representative sits upon the Treasury Bench looking rather gloomy.
      Mr. Robert Sheldon: Bored.
      Mr. Gow: I hope very much that we may have a further speech from the Financial Secretary.
      Mr. Timothy Raison: No.
      Mr. Gow: My hon. Friend says "No" but just look at the alternatives. It is when we look at the alternatives that the Financial Secretary appears to be the best available.
      My hon. Friend the Member for Aylesbury (Mr. Raison) suggested that the Lord Advocate should reply to this debate. The Lord Advocate was what I would call an intermittent attender during the Committee stage of the Scotland Bill. That has now gone to another place, and long may it remain there, but I do not want to get diverted down that road. I want to answer the suggestion made by my hon. Friend the Member for Aylesbury that the Lord Advocate should be invited to reply to this debate.
      Mrs. Winifred Ewing: Perhaps I can assist the hon. Gentleman by giving him a good precedent for his argument that the Lord Advocate should be invited to reply to the debate. In Scotland bail money attracts interest when it is recovered. It seems to me that the Lord Advocate would, therefore, be bound to agree with the hon. Gentleman's proposition.
      Mr. Gow: I hope that if the hon. Lady catches the eye of the Chair she will be able to develop that further. My hon. Friend's suggestion has considerable merit, but by custom it is the Solicitor-General
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      who replies when important legal matters are raised.
      10.0 p.m.
      I was about to refer to the last but one subsection of Section 47. This is the one which refers to the personal representatives of a deceased person, and it is here that I know I shall carry with me Government supporters who sit above the Gangway, because they must be enthusiastic in trying to give justice to widows and orphans. But, as so often happens, it is left to the Opposition to be the champions of the poor, the oppressed, the widows and the orphans, and it is those people who are mentioned in the subsection.
      It provides:
      "The preceding provisions of his section shall apply in relation to a partnership"—
      and perhaps here I should declare an interest in that I am a partner in a firm of solicitors. It could be that, if we had overpaid tax, we might get a benefit under this new clause. The subsection goes on:
      "or a United Kingdom trust (as defined in section 110(1) of the Finance Act 1972), or, in the case of a United Kingdom estate, the personal representatives of a deceased person."
      This is where I wish to enlist the support of my hon. Friend the Member for Croydon, South (Mr. Clarke). He is a man who has very much at heart the interests of widows and orphans. He will wish to address the Committee about the injustice which is being done to them—an injustice which will be remitted if the new clause should meet with the approval of the Committee.
      So persuaded am I by the force of my own arguments, let alone those of my hon. and learned Friend the Member for Dover and Deal, that I think we have driven away supporters of Her Majesty's Ministers, and I believe that even those who have remained are now persuaded of the virtue of the new clause.
      It would be wearying for the Committee if I read other paragraphs of the report of the Parliamentary Commissioner for Administration. I shall conclude this part of my remarks by saying that the principle lying behind the new clause is irrefutable. Lying behind the arrogance of the Government is the contempt which Her Majesty's Ministers feel for taxpayers. The Opposition do not share that feeling.

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      We say that where a taxpayer has overpaid tax to the Treasury and where the Inland Revenue has had the use of that tax, the rules for the payment of interest which apply should be exactly the same as those which apply to unpaid tax.
      I agree with the Government that the present rules about the payment of interest on unpaid or underpaid tax are right. But surely, in decency, fairness, equity and justice, we should apply the same rules to those who have overpaid tax.
      I give one warning to the Financial Secretary. I do not know how he voted during the course of the European Communities Bill, nor do I know how he voted in the referendum. But, if the Government resist this new clause and remain deaf to our arguments, there is a real possibility that this issue will be taken to the European Court of Justice. If it is taken there, it will be claimed that it is unfair discrimination against the taxpayer.
      Look who has just arrived—the Chief Secretary has come to hear our debate. A few moments ago we were talking about the Lord Advocate. We do not have him here, but we have the Chief Secretary. Mercifully, he is now engaged in conversation with the Financial Secretary. It is a matter of joy for the Committee that he should have arrived. He is a fair-minded man who cares deeply about the European Court. I am sure he would not like to be taken before it for discriminating against taxpayers and in favour of Government Ministers. Before long the Chief Secretary will be going back to his role of giving tax advice, and it will be of great advantage to his clients if they have the benefit of New Clause No. 4. With these few words, I commend the new clause to the Committee.
      Mr. Nelson: This has been a remarkable debate. The incisiveness of my hon. Friend the Member for Eastbourne (Mr. Gow) in putting the plight of widows and orphans was very moving. I also wish to pay tribute to the eloquent and persuasive way in which my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) moved the new clause.
      I take this opportunity to pay tribute to the tax office at Chichester, which has a considerable burden to bear. I had the
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      privilege of visiting this tax office recently on constituency business—
      Mr. Gow: Could my hon. Friend tell the Committee the number of those employed in the Chichester tax office on 1st March 1974, and the number employed there on 15th May 1978?
      Mr. Nelson: Not without notice. Suffice to say that the rate of productivity has risen as steeply as the income of my constituents, who are well satisfied with their treatment by this tax office.
      Looking at the work done by the Chichester tax office, I was very impressed by the depth of care that its staff take and the sympathetic treatment that they give to so many individuals and small businesses in my district.
      In paying that tribute, which is richly deserved—that office has always taken up my representations and dealt with cases rapidly and ably—I must say that it seems extraordinary that we have had such a national swelling in the number of tax inspectors. This is of particular relevance to the new clause. The Financial Secretary has already told us that 1,200 new tax inspectors would have to be employed to staff an extra 3 million cases that would need analytical work and computation, were the new clause to be carried. I find this absolutely remarkable. Hardly any explanation was given showing why such a large number would need to be employed as a result of a relatively minor amendment to the 1975 Act. There was little indication why the technical and administrative changes that would be necessary would be insurmountable.
      This was a matter raised during the passage of the 1975 Act and all hon. Members will have read closely the report of our proceedings then. On that occasion it was drawn to the attention of the Minister that it should be possible to move towards a system of symmetry without unduly increasing the number of people within the inspectorate or substantially increasing the complexity or number of cases that the inspectorate would have to examine. The new clause deals with a case of simple justice. We believe that there must be a logical as well as a desirable case to be made for symmetry with the interest or repayment

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      of late tax. It seems to be obtuse of the Minister to say that this is not possible.
      The 1975 Act introduced the repayment supplement. This was a welcome improvement, but it is noteworthy that the position of those who have suffered through late repayment of tax overpaid or who have had to pay interest on tax paid late has become noticeably worse as the inflation rate has risen. For them, in recent years, not only the complexity of their tax liability but the opportunity cost of having money left with the Government as opposed to utilising it themselves has increased substantially. As a result, so has their cause for concern. This is why such people support the new clause.
      The Minister asks why we have not proposed such a change on previous occasions. The answer must be, in part, that the rate of inflation was not nearly as severe and the impact on so many taxpayers was not as great. Now that so many people are owed repayment of tax by way of repayment supplement it seems that they are not only losing out because of the basis date for computation purposes of the tax; they are losing out in pure financial terms, because the 9 per cent. rate specified in the 1975 Act does not begin to compare with what they might be able to achieve if they used their money in other ways.
      This position may be strictly comparable with a temporary rate of interest on
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      a bank account. A large number of taxpayers who are due sums from the Revenue would be able to earn considerably more than the 9 per cent. The complexity of the tax system, which has drawn so many more people into it, has meant that people are uncertain of their liability. The cash flow for individuals and companies cannot be predicted as certainly as before. For those people the symmetry provided for in the new clause is essential.
      It seems doctrinaire of the Financial Secretary not to provide at least some words of sympathy and to show a readiness to reconsider the matter. Although the issue has been discussed before, it is almost churlish of the Minister not to explain in any more detail why such administrative changes would be necessary. He should explain what were the complexities of the computation by the tax inspectors and why the wording of the new clause could not even be substantially improved by the Government if they were sympathetic at a later stage.
      For these reasons I believe that the new clause should be carried by the Committee. It will alleviate substantial hardship suffered by many people who are due repayment of overpaid taxes by the inspector of taxes, and it will redress an anomaly by restoring the symmetry which, in justice, should be provided.
      10.15 p.m.
      Mr. Ian Stewart: I did not originally expect to take part in the discussions of this new clause, but as I listened to the debate—a debate of exceptional quality—I thought that I should rise to explain one point. I am affected by the new clause and since, if the matter reaches a Division, I shall vote for the proposals, I should explain my position to the Committee.
      The fact that I am potentially affected by these provisions gives me an opportunity to say, from personal experience, that these situations which have been described, and in which the dice are so heavily loaded against the taxpayer, are not as rare as may be imagined.
      I am not saying that the clause will assist persons such as myself who are partly in this situation because of their own failings. It was my fault that, last year, I completed my tax return several months late. Therefore, I am in no sense making a personal complaint, but I now have, as I understand it, money that is due to be repaid to me for tax overpaid when I have already paid extra tax only a few months ago under threat of a charge to interest on unpaid tax if I tried to offset the two.
      In regard to many taxpayers whose affairs are not all that complicated, I believe that the circumstances described by the Parliamentary Commissioner can easily occur. The reason is not only that there are now many more taxpayers and that the taxes which they pay are at much higher rates, but that the burden on the taxpayer, involving his having to face the possibility of paying interest on unpaid tax, which is no longer allowable as a deduction against income tax, tips the scale against them. This is the fact that lies at the heart of the problem.
      I know that the right hon. Gentleman the Financial Secretary feels that there is a case for symmetry between taxpayers and the Revenue in the case of tax overpaid or underpaid, but perhaps he feels that there would be opportunities for abuse if taxpayers were deliberately to pay large sums of potential tax early and in excess amounts so that they could obtain the benefit of 9 per cent., or whatever the rate may be for the time being, tax free.
      390
      I believe that 9 per cent. tax free should not be such an exceptional benefit to the taxpayer that it becomes an object of envy by the Revenue and a matter that it must watch as an opportunity for tax avoidance; or alternatively, that the way to balance the scales would be to even them out, not by moving a new clause on the tax overpaid but by altering the rules in the other balance of the scale and dealing with the situation at the other end.
      Perhaps if the interest on tax paid late were allowable as a deduction for income tax, this lack of symmetry would partially disappear and the taxpayer would not feel that he was being unduly burdened by the rules. Even though an attempt was made to remedy the difficulty in 1975, going a little way to recognise the problem, it did not go far towards properly dealing with it.
      We read today that the tax men are gathered in Scarborough and are complaining that they have not received the increase in pay to which they feel themselves to be entitled. They have suggested that they should take industrial action if they do not receive the extra money by April next year, but the extra money to which the tax men feel themselves entitled is not theirs already, or theirs by right; it is merely a wage settlement which they consider should come their way. On the other hand, the money that we are discussing here—the taxpayers' money—is due to them, having been overpaid, and it should come their way as soon after the matter can be settled with the Revenue.
      The difficulty with the clause and with any means of remedying the problem is that the subject is, as the Financial Secretary said earlier, one of considerable complexity. However, I cannot believe that we should be frustrated on those grounds in our attempts to produce a more equitable balance between the rights of the Revenue and the rights of the taxpayer. I recall that in the Standing Committee a year ago we raised the question of relief for VAT on bad debts, and—lo and behold—this year it has not proved a matter of insurmountable complexity to introduce provision on that subject, which we shall be debating in the coming weeks.

      391
      I hope that it will be possible to remedy this manifest injustice between the Revenue and the taxpayer. I say that not only because it is important that the taxpayer should know where he stands and have a fair deal as between his financial position and that of the Revenue but because the Revenue itself ought not to suffer the odium of having to administer a lopsided and unfair system.
      The higher rates of tax and the more individuals brought into the personal tax net, the more important it is that individual taxpayers should not find themselves in conflict with Inland Revenue staff because the rules themselves are tilted against them. The taxes may be too high—they may be far higher than taxpayers believe to be fair or reasonable—but if on top of that the administrative rules relating to the payment and collection of taxes and the repayment of tax overpaid are tilted against the taxpayer, the taxpayer will not unreasonably feel that the Inland Revenue is trying to exploit him and get out of him not only what is due but something that is not due.
      It would be well for us to remember that tax morality, if that be the right way to describe it—the willingness of taxpayers to meet their tax bills—has been undermined in recent years by the high rates of tax payable, but it will be undermined even further if taxpayers believe, as at present they would be entitled to believe, that the administrative rules also are balanced against them.
      I therefore ask Treasury Ministers to recognise, by accepting the new clause, that until some other way can be found of balancing the scales between Revenue and taxpayer, the clause would go at least some way to remedy the injustice that many taxpayers feel. I support my hon. Friends who have spoken in favour of the clause, and I hope that it will prove acceptable to the Treasury Bench.
      Mr. Ridley: Underlying the new clause, which I heartily support, is a collapse of public confidence in the Inland Revenue and the Customs. I do not think that it is the fault of those Departments; it is a consequence of the legislative diarrhoea on tax matters issuing from this Government. But it has serious implications, because at no time since I have
      392
      been in the House have there been such strained relations between taxpayers and the tax-gathering authorities. This is very bad, because it will alienate the taxpayer from the tax gatherer.
      For example, an article in the last edition of The Sunday Times revealed—I cannot remember exactly how the article went—that the Revenue gives a dubious tax victim 10 per cent. of the maximum penalty if he is honest, 20 per cent. if it thinks that he is acting, 40 per cent. if he is dissembling, 60 per cent. if he is lying, 80 per cent cent. for cheating and 100 per cent. for downright fraud. Those are exactly the marks that this Government should get.
      On the other hand, it is very bad for the relationship between taxpayers and the Revenue. I wonder whether it would not be a good idea for the Revenue to appoint a few public relations officers to try to improve its image. There will be a lot of redundancies on the Labour Benches very soon. I am wondering whether the Chief Secretary himself might do the job, but when I think of his fraudulent exchange with my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) this afternoon about the numbers of the Inland Revenue staff, I am not so sure that he would be very suitable.
      The Chief Secretary knows full well that the 7,400 extra tax men who were on the books in 1974 were not full-time tax men. They were put there to deal with a temporary situation and were seconded from other Departments. He did not make that clear.
      Mr. Joel Barnett rose—
      Mr. Ridley: I shall not give way now. I want to finish dealing with the Chief Secretary, and then I shall give way to him. He knows perfectly well that those 7,400 tax men were engaged on paying out post-war credits. Furthermore, if they were employed by the Revenue, why did not the Chief Secretary ensure that the Revenue put the fact in its annual report and the Customs and Excise put it in its annual report? If those people had been employed by the Customs and Excise and by the Revenue, the Chief Secretary should have ensured that the fact was made public in the reports.
      Mr. Joel Barnett: I am surprised at the hon. Gentleman. I should have thought that he, unlike the right hon. and learned Member for Surrey, East (Sir G. Howe), would at least have checked the facts. In 1974 the report of the Board of Inland Revenue stated the number of casual workers during the year. If the hon. Gentleman had checked that, he would have known that that is a fact. He would also have known that it is a fact that the number of short-term engagements between 1970 and 1974 grew from some 600 to some 7,000 at the year-end in question. He should at least be willing to accept that. At 1st April 1974 there were in post some additional 7,300 that neither he nor his right hon. and learned Friend had the decency to accept as being the fact, and they should withdraw the ridiculous accusation they have made.
      Mr. Ridley: The Chief Secretary knows very well what they were doing, and it was on a temporary assignment. He has made a point to the Committee which I do not think is worthy of him. So he is not fit to be the public relations officer of the Inland Revenue in his next incarnation.
      Mr. Joel Barnett: Whatever they were doing, there were 7,300 in post at 1st April 1974. Will the hon. Gentleman have the decency to withdraw the accusation he has made?
      Mr. Ridley: I have made no accusation except that the Chief Secretary is not playing straight with the Committee, and I stick to that.
      I thought of others who might be public relations officers for the Inland Revenue and the Customs and Excise. I see that the Chief Secretary has retreated after that interchange. I am pleased to see the end of him if that is the best he can do for the Committee.
      Mr. Bernard Conlan: The Financial Secretary has defended himself adequately. He has made perfectly clear, without making a party point, that the 7,000 people to whom the hon. Gentleman is now referring were appointed under the regime of the Conservative Government.
      Mr. Ridley: It would be better if the hon. Gentleman were to distinguish between
      394
      the Chief Secretary and the Financial Secretary. The Financial Secretary has not uttered a word in this debate. It would be a good idea if the hon. Gentleman checked his facts before coming into the Chamber and making a speech like that.
      10.30 p.m.
      The new clause is symptomatic of the worsening relationship between the Revenue and the taxpayer. I need say no more, except to urge upon the Government that they must at some time take seriously the fact that, if they are to get a happy relationship between taxpayers and tax gatherers, they cannot ignore what is going on—the tax raids, the cowboys and Indians stuff, breaking into this company's office, breaking into that person's house in the middle of the night and all the nonsense about which we read in the papers. Such things do untold damage to the Revenue, and they arise from the ridiculous legislation that we have considered on previous Finance Bills and which we shall consider on this Bill upstairs in Standing Committee.
      It is not the fault of the Revenue. I am not blaming the civil servants. I know that some of them speak out of turn. Lord Plant has made it known that it was his express purpose, as chairman of the tax gatherers' union, to suppress the self-employed altogether. But that was an aberration. I am defending the tax man. I am saying only that if the Government are to get a little more acceptance of the taxation system, they must make life a little less complicated and give fewer powers to the Revenue. That is why I support the new clause.
      Mrs. Winifred Ewing: It appears to me that the role of the tax inspector as a friend, confidant and adviser is a little short of the fact when, as a working Member of Parliament, I find how many constituents, particularly PAYE constituents, are up against delays in repayment of tax due to them because of the complexities of the system.
      Frankly, with no disrespect to the hon. Member who paid tribute to his tax area. I cannot pay such tribute to Centre 1 in East Kilbride on which many of my constituents have to depend for justice. It seems that a letter from an MP is almost necessary to get the due repayment of tax. My constituents have caught

      395
      on to this, so a huge number come to me every week to write letters for them to Centre I so that their cases will get to the top of the basket. That is an unsatisfactory situation. I do not think that should be the role of an MP. But it is necessary to do it because Centre I is in such utter chaos.
      The late Lord Cooper, the former Lord President of the Court of Session, is on record as saying that there was nothing illegal in a man—I suppose it would be "a person" now—so arranging his tax affairs as to minimise his tax liability. I hold with that view. I see nothing wrong with it. The trouble is that fishermen in my constituency, who are mostly self-employed, are greatly overpaying tax because they will not so arrange their affairs as to keep vouchers and chits for the enormous amounts they spend on gloves, oilskins and so on. They cannot be bothered. They say that as they go to sea every week and are home for only a couple of days, they cannot be bothered to do it. I cannot get the Revenue to lay down a reasonable guideline for these men who incur so much a year in legitimate claims. These fishermen are done down by the tax inspectors.
      With that background I turn to the new clause, which I support and which the SNP Bench will support, too. The Revenue is behaving in a high-handed way because it has a great deal of power The Inland Revenue is a fearsome body. I suppose that all of us—those on PAYE and those who are not—fear it. The Revenue has enormous sanctions. It does not obey the ordinary rule of law, as I understand it, where the onus is the other way round. The onus is now on many taxpayers to prove that they have not done something instead of its being the other way round. The Inland Revenue starts with a great advantage. I accept that that may be necessary to run the country, but it still means that, having got the onus on its side, it should be reasonably fair when a genuine mistake has been made.
      In Scotland, the law relating to interest due on money depends mainly on a decree having been granted in the court to prove that a debt is due. The interest can date back to when the action was raised. That, of course, would not apply under this clause. However, I can cite
      396
      a precedent which is relevant in terms of basic justice. When, as a condition of obtaining freedom, an innocent person wrongly charged with a crime in Scotland pays bail, on acquittal the bail is repaid with interest. Instead of the Inland Revenue, with all its powers—greater powers than are possessed by a court—treating a person, who is usually up against it financially and usually finds the injustice extremely worrying in his attempts to secure economic survival, in an unjust manner, why should it not treat that person in the way as someone wrongly accused is treated in a criminal proceeding?
      Mr. Peter Rees: However warm the Financial Secretary's heart—and we know that beneath that stern exterior he is a human being—he has treated the Committee this evening very shabbily. He has made a perfunctory, dismissive, if not entirely frivolous, speech. No doubt he was encouraged to do that by support from his hon. Friends below the Gangway, support which evaporated noticeably after he had sat down. The country will note where it can find support in its battles with the Inland Revenue. There is no criticism of the individual officer, but it must be the experience of every right hon. and hon. Member on the Opposition side that a great part of their postbag is devoted to problems with the Inland Revenue.
      Of this factor the Financial Secretary has shown himself signally unaware. What he has been doing over the last four years one is left to conjecture. Those of us who have studied him across the Committee in Finance Bill debates know that he takes an extremely superficial view of his duties.
      The first point that the right hon. Gentleman failed to grasp or to deal with is that there is a symmetry in these provisions. He does not seem to realise the sense of grievance and injustice felt by taxpayers when, having overpaid their tax, they find that the repayment supplement takes no account of the 12 months or more during which the Inland Revenue has enjoyed their money.
      My hon. Friend the Member for Hampstead (Mr. Finsberg) was kind enough to give me before the debate a letter which reached him only the day before yesterday from two of his constituents

      397
      who received a capital sum on their discharge from important offices. They will be entitled to relief on that sum. Nevertheless, tax was deducted at the basic rate under Schedule E and they will probably have to wait two, if not three, years before any kind of recompense is made to them. That is the kind of case that irks the general body of taxpayers, even if it is not generally appreciated on the Government Benches.
      The reasons that the Financial Secretary produced for this asymmetry were specious indeed. He had to go back to my noble Friend Lord Barber and cite, slightly out of context, certain observations of his. But I remind the Committee and the Financial Secretary that in the days when my noble Friend presided at No. 11—and would that we were back in those days as far as fiscal matters are concerned—
      Mr. Robert Sheldon: The money supply.
      Mr. Rees: For the Financial Secretary this week, to say "The money supply"—well, I do not know whether it would be quite in order, Mr. Godman Irvine, to take up that particular challenge now, but we shall remember it when we proceed upstairs, because I apprehend that we shall have a debate on the general financial situation when we come to consider the regulator, and we shall examine in very great detail indeed that rather unconsidered careless remark of the Financial Secretary, which has been characteristic of his interventions in our debate so far.
      As I was saying when the Financial Secretary was ill-judged enough to interrupt me, in the days when my noble Friend was presiding at No. 11 the interest provisions were not as they are now. Characteristically, the right hon. Gentleman and his right hon. Friends, without giving very careful thought—or, if they did that, giving thought with malice against the taxpayer—devised a system for tax collection, interest payments and inquisitorial methods which were quite novel to this country. The balance was tilted quite against the taxpayer and quite in favour of the Inland Revenue.
      That is a point that the Financial Secretary and his right hon. Friends have
      398
      never realised. Therefore, in citing the remarks of my noble Friend, as I have said, fine words butter no parsnips, and they certainly do not advance the Financial Secretary's particular argument because they were uttered in a quite different context.
      But the debate went a little further than that. The Financial Secretary fails to have appreciated the general unease, examples of which were given by my hon. Friends, who have contributed so notably to this debate, which he evidently has not appreciated. If he feels that perhaps they come from too partisan a source, I would remind him of the passages from Sir Idwal Pugh's various reports, which I ventured to cite to the Committee and on which the Financial Secretary did not have the courtesy to comment to any degree whatever.
      I think that this will demonstrate to the country outside, as it has demonstrated to the Opposition side of the Committee, but perhaps not to the Government side, that there is something gravely wrong with the administration of the Revenue system. I quite concede that it is not something that will be cured by this new clause. It can be cured only by a change of Government, by a Conservative Government who will approach these matters with an entirely different heart and eye. If proof of that fact is needed, if the country wants some tangible reason why there is need for that, people have only to consider the debate tonight and to consider who made a contribution, and in what guise, from the Government side of the Committee.
      Although I recognise that this is a modest new clause, limited in its effect—indeed, after the trumpery way in which it was treated by the Financial Secretary, I wish that we had put down a new clause of far wider scope and far deeper import—nevertheless, for the moment, I believe that it will demonstrate to the country what is wrong with the tax system and why
      Therefore, I invite all Opposition Members to divide on the new clause and support it in the Division Lobby.
      Mr. Robert Sheldon: The hon. and learned Member for Dover and Deal (Mr. Rees) finally got around to dealing with the new clause. However, I noted that the debate ranged very much wider than

      399
      the very narrow new clause. If the hon. and learned Member wanted a debate on taxation generally, what is wrong with taxation and where he wants to direct it, he has many opportunities to set down new clauses which deal with these wide issues which he wishes to raise. I would have been very happy to deal with them in turn.
      The new clause deals with the equity of the taxpayer paying interest on overdue tax as compared with the interest on overpaid tax received by the taxpayer. What we did in the Finance Act 1975 was to introduce for the first time something which is of benefit to the taxpayer. We actually paid him interest on the tax which was overpaid.
      10.45 p.m.
      That was the first time that this had been done. It had been recommended by the Parliamentary Commissioner for Administration. The solution had been refused by Lord Barber in 1971 and again
      in 1973. This Government introduced the principle of paying interest on overpaid tax in 1975. That is obviously not the end of the line. If there are changes that we can introduce we shall do so. But for the hon. and learned Member for Dover and Deal to condemn the Government for introducing these improvements when nothing was done for years is wholly unjustifiable. The new clause fails to take account of those changes.
      The present system produces a measure of equity between those who pay their taxes late and those who pay on time. That is a useful way to proceed I shall note the serious contributions which have been made, and if some changes are necessary they will obviously come forward. Meanwhile, I ask my right hon. and hon. Friends to reject the new clause.
      Question put, That the clause be read a Second time:—
      The Committee divided: Ayes 253, Noes 274.

      Division No. 211]

      AYES

      [10.46 p.m.

      Adley Robert

      Drayson, Burnaby

      Harvie Anderson, Rt Hon Miss

      Aitken, Jonathan

      du Cann, Rt Hon Edward

      Haselhurst, Alan

      Alison, Michael

      Durant, Tony

      Havers, Rt Hon Sir Michael

      Amery, Rt Hon Julian

      Dykes, Hugh

      Hayhoe, Barney

      Arnold, Tom

      Edwards, Nicholas (Pembroke)

      Henderson, Douglas

      Atkins, Rt Hon H. (Spelthorne)

      Elliott, Sir William

      Hicks, Robert

      Atkinson, David (Bournemouth, East)

      Emery, Peter

      Hodgson, Robin

      Bell, Ronald

      Evans, Gwynfor (Carmarthen)

      Holland, Philip

      Bendall, Vivian (Ilford North)

      Ewing, Mrs Winifred (Moray)

      Hooson, Emlyn

      Bennett, Dr Reginald (Fareham)

      Eyre, Reginald

      Hordern, Peter

      Benyon, W.

      Fairbairn, Nicholas

      Howe, Rt Hon Sir Geoffrey

      Biffen, John

      Fairgrieve, Russell

      Howell, David (Guildford)

      Biggs-Davison, John

      Farr, John

      Hunt, David (Wirral)

      Blaker, Peter

      Fell, Anthony

      Hunt, John (Ravensbourne)

      Body, Richard

      Finsberg, Geoffrey

      Hurd, Douglas

      Bowden, A. (Brighton, Kemptown)

      Fisher, Sir Nigel

      Hutchison, Michael Clark

      Boyson, Dr Rhodes (Brent)

      Fletcher, Alex (Edinburgh N)

      Irving, Charles (Cheltenham)

      Braine, Sir Bernard

      Fookes, Miss Janet

      James David

      Brittan, Leon

      Forman, Nigel

      Jenkin, Rt Hon P. (Wanst'd & W'df'd)

      Brooke, Peter

      Fowler, Norman (Sutton C'f'd)

      Johnson Smith, G. (E Grinstead)

      Brotherton, Michael

      Fox, Marcus

      Jones, Arthur (Daventry)

      Bryan, Sir Paul

      Fraser, Rt Hon H. (Stafford & St)

      Jopling, Michael

      Buchanan-Smith, Alick

      Freud, Clement

      Joseph, Rt Hon Sir Keith

      Buck, Antony

      Fry, Peter

      Kaberry, Sir Donald

      Budgen, Nick

      Galbraith, Hon T. G. D.

      Kershaw, Anthony

      Bulmer, Esmond

      Gardiner, George (Reigate)

      King, Evelyn (South Dorset)

      Burden, F. A.

      Gardner, Edward (S Fylde)

      King, Tom (Bridgwater)

      Butler, Adam (Bosworth)

      Gilmour, Sir John (East Fife)

      Kitson, Sir Timothy

      Carlisle, Mark

      Glyn, Dr Alan

      Knight, Mrs Jill

      Chalker, Mrs Lvnda

      Godber, Rt Hon Joseph

      Knox, David

      Churchill, W. S.

      Goodhart, Philip

      Lamont, Norman

      Clark, Alan (Plymouth, Sutton)

      Goodlad, Alastair

      Langford-Holt, Sir John

      Clark, William (Croydon S)

      Gorst, John

      Latham, Michael (Melton)

      Clarke, Kenneth (Rushcliffe)

      Gow, Ian (Eastbourne)

      Lawrence, Ivan

      Clegg, Walter

      Gower, Sir Raymond (Barry)

      Lawson, Nigel

      Cockcroft, John

      Grant, Anthony (Harrow C)

      Le Merchant, Spencer

      Cooke, Robert (Bristol W)

      Gray, Hamish

      Lester, Jim (Beeston)

      Cope, John

      Grimond, Rt Hon J.

      Lewis, Kenneth (Rutland)

      Cormack, Patrick

      Grist, Ian

      Lloyd, Ian

      Costain, A. P.

      Hall-Davis, A. G. F.

      Loveridge, John

      Crawford, Douglas

      Hamilton, Archibald (Epsom & Ewell)

      Luce, Richard

      Crouch, David

      Hamilton, Michael (Salisbury)

      McAdden, Sir Stephen

      Crowder F. P.

      Hampson, Dr Keith

      MacCormick, Iain

      Dodsworth, Geoffrey

      Hannam, John

      McCrindle, Robert

      Douglas-Hamilton, Lord James

      Harrison, Col Sir Harwood (Eye)

      Macfarlane, Neil

      MacGregor, John

      Pattie, Geoffrey

      Stainton, Keith

      MacKay, Andrew (Stechford)

      Percival, Ian

      Stanbrook, Ivor

      Macmillan, Rt Hon M. (Farnham)

      Pink R. Bonner

      Stanley, John

      McNair-Wilson, M. (Newbury)

      Prentice, Rt Hon Reg

      Steen, Anthony (Wavertree)

      McNair-Wilson, P. (New Forest)

      Price, David (Eastleigh)

      Stewart, Rt Hon Donald

      Madel, David

      Prior, Rt Hon James

      Stewart, Ian (Hitchin)

      Marshall, Michael (Arundel)

      Pym, Rt Hon Francis

      Stokes, John

      Marten, Neil

      Raison, Timothy

      Stradling Thomas, J.

      Mates, Michael

      Rathbone, Tim

      Tapsell, Peter

      Mather, Carol

      Rees, Peter (Dover & Deal)

      Taylor, Teddy (Cathcart)

      Maude, Angus

      Rees-Davies, W. R.

      Tebbit, Norman

      Mawby, Ray

      Reid, George

      Temple-Morris, Peter

      Maxwell-Hyslop, Robin

      Renton, Rt Hon Sir D. (Hunts)

      Thomas, Dafydd (Merioneth)

      Mayhew, Patrick

      Renton, Tim (Mid-Sussex)

      Thompson, George

      Meyer, Sir Anthony

      Rhodes, James R.

      Townsend, Cyril D.

      Miller, Hal (Bromsgrove)

      Ridley, Hon Nicholas

      Trotter, Neville

      Mills, Peter

      Ridsdale, Julian

      van Straubenzee, W. R.

      Miscampbell, Norman

      Roberts, Michael (Cardiff NW)

      Vaughan, Dr Gerard

      Mitchell, David (Basingstoke)

      Roberts, Wyn (Conway)

      Viggers, Peter

      Moate, Roger

      Rossi, Hugh (Hornsey)

      Wainwright, Richard (Colne V)

      Monro, Hector

      Rost, Peter (SE Derbyshire)

      Wakeham, John

      Montgomery, Fergus

      Royle, Sir Anthony

      Walder, David (Clitheroe)

      Moore, John (Croydon C)

      Sainsbury, Tim

      Walker, Rt Hon P. (Worcester)

      More, Jasper (Ludlow)

      St. John-Stevas, Norman

      Walker-Smith, Rt Hon Sir Derek

      Morgan, Geraint

      Scott, Nicholas

      Wall, Patrick

      Morgan-Giles, Rear-Admiral

      Scott-Hopkins, James

      Watt, Hamish

      Morris, Michael (Northampton S)

      Shaw, Giles (Pudsey)

      Weatherill, Bernard

      Morrison, Charles (Devizes)

      Shaw, Michael (Scarborough)

      Wells, John

      Morrison, Hon Peter (Chester)

      Shelton, William (Streatham)

      Welsh, Andrew

      Mudd, David

      Shepherd, Colin

      Whitelaw, Rt Hon William

      Neave, Airey

      Shersby, Michael

      Whitney, Raymond (Wycombe)

      Nelson, Anthony

      Silvester, Fred

      Wiggin, Jerry

      Neubert, Michael

      Sims, Roger

      Wigley, Dafydd

      Newton, Tony

      Sinclair, Sir George

      Winterton, Nicholas

      Nott, John

      Skeet, T. H. H.

      Wood, Rt Hon Richard

      Onslow, Cranley

      Smith, Timothy John (Ashfield)

      Younger, Hon George

      Oppenheim, Mrs Sally

      Speed, Keith

      Osborn, John

      Spence, John

      TELLERS FOR THE AYES:

      Page, Rt Hon R. Graham (Crosby)

      Spicer, Jim (W Dorset)

      Mr. Anthony Berry and

      Page, Richard (Workington)

      Spicer, Michael (S Worcester)

      Sir George Young.

      Parkinson, Cecil

      Sproat, Iain

      NOES

      Abse, Leo

      Cocks, Rt Hon Michael (Bristol S)

      Fletcher, L. R. (Ilkeston)

      Allaun, Frank

      Cohen, Stanley

      Fletcher, Ted (Darlington)

      Anderson, Donald

      Coleman, Donald

      Foot, Rt Hon Michael

      Archer, Rt Hon Peter

      Colquhoun, Ms Maureen

      Ford, Ben

      Armstrong, Ernest

      Conlan, Bernard

      Forrester, John

      Ashley, Jack

      Cook, Robin F. (Edin C)

      Fowler, Gerald (The Wrekin)

      Ashton, Joe

      Corbett, Robin

      Fraser, John (Lambeth, N'w'd)

      Atkins, Ronald (Preston N)

      Cowans, Harry

      Freeson, Rt Hon Reginald

      Atkinson, Norman

      Cox, Thomas (Tooting)

      Garrett, John (Norwich S)

      Barnett, Guy (Greenwich)

      Crawshaw, Richard

      Garrett, W. E. (Wallsend)

      Barnett, Rt Hon Joel (Heywood)

      Cronin, John

      George, Bruce

      Bates, Alf

      Crowther, Stan (Rotherham)

      Gilbert, Rt Hon Dr John

      Bean, R. E.

      Cryer, Bob

      Ginsburg, David

      Beith, A. J.

      Cunningham, Dr J. (Whiteh)

      Golding, John

      Bennett, Andrew (Stockport N)

      Dalyell, Tam

      Gould, Bryan

      Bidwell, Sydney

      Davidson, Arthur

      Gourlay, Harry

      Bishop, Rt Hon Edward

      Davies, Rt Hon Denzil

      Graham, Ted

      Blenkinsop, Arthur

      Davies, Ifor (Gower)

      Grant, George (Morpeth)

      Boardman, H.

      Davis, Clinton (Hackney C)

      Grant, John (Islington C)

      Booth, Rt Hon Albert

      Deakins, Eric

      Grocott, Bruce

      Boothroyd, Miss Betty

      Dean, Joseph (Leeds West)

      Hamilton, W. W. (Central Fife)

      Bottomley, Rt Hon Arthur

      de Freitas, Rt Hon Sir Geoffrey

      Hardy, Peter

      Boyden, James (Bish Auck)

      Deil, Rt Hon Edmund

      Harper, Joseph

      Bradley, Tom

      Dempsey, James

      Harrison, Rt Hon Walter

      Bray, Dr Jeremy

      Dewar, Donald

      Hart, Rt Hon Judith

      Brown, Hugh D. (Provan)

      Doig, Peter

      Hattersley, Rt Hon Roy

      Brown, Robert C. (Newcastle W)

      Dormand, J. D.

      Hayman, Mrs Helene

      Brown, Ronald (Hackney S)

      Douglas-Mann, Bruce

      Healey, Rt Hon Denis

      Buchan, Norman

      Eadie, Alex

      Heffer, Eric S.

      Buchanan, Richard

      Edge, Geoff

      Horam, John

      Callaghan, Rt Hon J. (Cardiff SE)

      Ellis, John (Brigg & Scun)

      Howell, Rt Hon Denis (B'ham, Sm H)

      Callaghan, Jim (Middleton & P)

      English, Michael

      Howells, Geraint (Cardigan)

      Campbell, Ian

      Ennals, Rt Hon David

      Hoyle, Doug (Nelson)

      Canavan, Dennis

      Evans, Fred (Caerphilly)

      Huckfield, Les

      Cant, R. B.

      Evans, Ioan (Aberdare)

      Hughes, Rt Hon C. (Anglesey)

      Carmichael, Neil

      Evans, John (Newton)

      Hughes, Mark (Durham)

      Carter, Ray

      Ewing, Harry (Stirling)

      Hughes, Robert (Aberdeen N)

      Carter-Jones, Lewis

      Fernyhough, Rt Hon E.

      Hughes, Roy (Newport)

      Cartwright, John

      Fitch, Alan (Wigan)

      Hunter, Adam

      Castle, Rt Hon Barbara

      Fitt, Gerard (Belfast W)

      Irvine, Rt Hon Sir A. (Edge Hill)

      Clemitson, Ivor

      Flannery, Martin

      Irving, Rt Hon S. (Dartford)

      402

      403

      Jackson, Colin (Brighouse)

      Miller, Dr M. S. (E Kilbride)

      Silkin, Rt Hon S. C. (Dulwich)

      Jackson, Miss Margaret (Lincoln)

      Mitchell, Austin

      Sllverman, Julius

      Janner, Greville

      Mitchell, R. C. (Soton, Itchen)

      Skinner, Dennis

      Jay, Rt Hon Douglas

      Moonman, Eric

      Smith, John (N Lanarkshire)

      Jeger, Mrs Lena

      Morris, Alfred (Wythenshawe)

      Spearing, Nigel

      Jenkins, Hugh (Putney)

      Morris, Rt Hon Charles R.

      Spriggs, Leslie

      John, Brynmor

      Morris, Rt Hon J. (Aberavon)

      Stallard, A. W.

      Johnson Walter (Derby S)

      Moyle, Roland

      Steel, Rt Hon David

      Johnston, Russell (Inverness)

      Murray, Rt Hon Ronald King

      Stewart, Rt Hon M. (Fulham)

      Jones, Alec (Rhondda)

      Newens, Stanley

      Stoddart, David

      Jones, Barry (East Flint)

      Noble, Mike

      Stott, Roger

      Jones, Dan (Burnley)

      Oakes, Gordon

      Strang, Gavin

      Kaufman, Gerald

      Ogden, Eric

      Summerskill, Hon Dr Shirley

      Kelley, Richard

      O'Halloran, Michael

      Swain, Thomas

      Kerr, Russell

      Orme, Rt Hon Stanley

      Taylor, Mrs Ann (Bolton W)

      Kilroy-Silk, Robert

      Ovenden, John

      Thomas, Jeffrey (Abertillery)

      Kinnock, Neil

      Owen, Rt Hon Dr David

      Thomas, Mike (Newcastle E)

      Lambie, David

      Padley, Walter

      Thomas, Ron (Bristol NW)

      Lamborn, Harry

      Palmer, Arthur

      Thorne, Stan (Preston S)

      Lamond, James

      Pardoe, John

      Tierney, Sydney

      Latham, Arthur (Paddington)

      Park, George

      Tilley, John (Lambeth, Central)

      Leadbitter, Ted

      Parker, John

      Tinn, James

      Lestor, Miss Joan (Eton & Slough)

      Parry, Robert

      Tomlinson, John

      Lever, Rt Hon Harold

      Pavitt, Laurie

      Torney, Tom

      Lewis, Ron (Carlisle)

      Pendry, Tom

      Tuck, Raphael

      Litterick, Tom

      Penhaligon, David

      Varley, Rt Hon Eric G.

      Lomas, Kenneth

      Price, C. (Lewisham W)

      Wainwright, Edwin (Dearne V)

      Loyden, Eddie

      Price, William (Rugby)

      Walker, Harold (Doncaster)

      Lyon, Alexander (York)

      Radice, Giles

      Walker, Terry (Kingswood)

      Lyons, Edward (Bradford W)

      Rees, Rt Hon Merlyn (Leeds S)

      Ward, Michael

      Mabon, Rt Hon Dr J. Dickson

      Richardson, Miss Jo

      Watkins, David

      McCartney, Hugh

      Roberts, Albert (Normanton)

      Weitzman, David

      McDonald, Dr Oonagh

      Roberts, Gwilym (Cannock)

      Wellbeloved, James

      McElhone, Frank

      Robinson, Geoffrey

      White, Frank R. (Bury)

      MacFarquhar, Roderick

      Roderick, Caerwyn

      White, James (Pollock)

      MacKenzie, Rt Hon Gregor

      Rodbers, George (Chorley)

      Whitehead, Philip

      Mackintosh, John P.

      Rodgers, Rt Hon William (Stockton)

      Whitlock, William

      Maclennan, Robert

      Rooker, J. W.

      Willey, Rt Hon Frederick

      Madden, Max

      Roper, John

      Williams, Alan Lee (Hornch'ch)

      Magee, Bryan

      Rose, Paul B.

      Williams, Rt Hon Shirley (Hertford)

      Mahon, Simon

      Ross, Stephen (Isle of Wight)

      Wilson, Rt Hon Sir Harold (Huyton)

      Mallalieu, J. P. W.

      Ross, Rt Hon W. (Kilmarnock)

      Wilson, William (Coventry SE)

      Marks, Kenneth

      Rowlands, Ted

      Wise, Mrs Audrey

      Marshall, Dr Edmund (Goole)

      Ryman, John

      Woodall, Alec

      Marshall, Jim (Leicester S)

      Sandelson, Neville

      Woof, Robert

      Mason, Rt Hon Roy

      Sedgemore, Brian

      Wrigglesworth, Ian

      Maynard, Miss Joan

      Selby, Harry

      Young, David (Bolton E)

      Meacher, Michael

      Sever, John

      Mellish, Rt Hon Robert

      Shaw, Arnold (Ilford South)

      TELLERS FOR THE NOES:

      Mendelson, John

      Sheldon, Rt Hon Robert

      Mr. James Hamilton and

      Mikardo, Ian

      Shore, Rt Hon Peter

      Mr. Peter Snape.

      Millan, Rt Hon Bruce

      Silkin, Rt Hon John (Deptford)

      Question accordingly negatived.

    New Clause No. 5

      WHISKY OUT OF BOND
      'The duty of excise charged on whisky shall, instead of being payable on removal from warehouse as specified in the regulations made under section 16(2) of the Finance (No. 2) Act 1975, be payable—

      (a) from 6th April 1979, on the 14th day following the day on which duty was charged;

      (b) from 6th April 1980, on the 28th day following the day on which duty was charged;

      (c) from 6th April 1981, on the 42nd day following the day on which duty was charged.'.—[Mr Younger.]

      Brought up, and read the First time.
      11.0 p.m.
      Mr. George Younger: I beg to move, That the clause be read a Second time.
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      I should first declare an interest in that I am a director of a company which, although it does not make any whisky, sells a considerable amount of whisky both at home and abroad. I cannot remember whether this is the eleventh or twelfth occasion upon which I have taken part in a debate on the subject of the whisky duty and the effect that it has on the industry. However, tonight's debate gives us the chance of approaching the subject with rather more hope than we have had on any of the other occasions in previous years when we have raised this matter with the Government.
      First, I should like to describe briefly the object of the new clause. At the present time, as hon. Members will know, the duty payable on whisky is actually payable to the Revenue before withdrawal from bond. Therefore, the duty cheque has to be payable before the

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      whisky may be extracted from bond. Thereafter, the whisky has to be transported to the customer who will sell it, and that customer, in the normal course of trade, is given a period of credit before he has to pay his account. This is normally between seven and eight weeks. Therefore, the duty which is payable before the whisky comes out of bond has in most cases to be carried by the producing firm for a period of seven or eight weeks.
      The new clause would effectively, when fully in operation, delay payment of the duty for a period of six weeks after withdrawal from bond. Although this would not completely eliminate the difference in time between payment of the duty and receipt of the money from the customer, it would go a very long way towards it. I think that that would be very valuable.
      Mr. Crawford: Will the hon. Gentleman explain why it is that now, after three years, his own party has seen fit to move this new clause? Will he also explain why, having abstained on the new clause which the SNP has sought to move during the last three years, he is now seeking to make this point? The SNP has been in favour of this for the last three years and my hon. Friend the Member for Banff (Mr. Watt) raised the subject in an Adjournment debate. Why are the Tories now moving this new clause?
      Mr. Younger: I am sorry that the hon. Gentleman felt it necessary to intervene with that remark, particularly as he is totally inaccurate. I was taking part in the debates on this subject long before he was even a Member of the House. If he wants chapter and verse for what I assert, I remind him that on 18th May 1976 the Committee of which he was a member discussed a proposal moved by a friend of many of us, Sir John Hall, who, alas, died recently, on which not only I on several occasions but the hon. Member himself spoke.
      Mr. Crawford: Tell us the vote.
      Mr. Younger: He can discover what the vote was if he looks in the appropriate place in Hansard. But I can tell him that I voted as he did. I do not know whether his memory is failing him. I suggest that before he tries to make
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      clever interventions of that sort he should get his facts right.
      I move on to the costs of my proposal. The clause meets one of the main criticisms of the Minister in previous years, which is that the cost would be too heavy to bear if this proposal were implemented in one fell swoop. This clause not only phases the change over three years but does not commence the change until April 1979. So the good bit of news that I have for the Financial Secretary is that, worried as he must be about the financial state of the Budget for this year, here is one change that will have no effect in this financial year.
      The change starting in April 1979 would be effected in three phases and, by the calculations that I have been able to make, each phase would involve a once-and-for-all cost of between £55 million and £60 million. I notice that this tallies reasonably closely with the figures given in a letter from Mr. Christopherson of Customs and Excise. He calculated that a delay of four weeks would cost £120 million and that one of six weeks would cost £180 million. We seem to be fairly well agreed about the cost of implementing the new clause. There would be no cost this year, and there would be a cost of between £55 million and £60 million each year for the three financial years following. Thereafter, there would be no cost whatever.
      I do not think that the Financial Secretary can argue that the clause represents an unacceptable charge on the Exchequer. I hope that that fact will encourage him to accept it.
      Mr. Russell Johnston: It is clear that the hon. Gentleman is putting forward the official view of the Opposition Front Bench. Therefore, perhaps he can explain why the Opposition did not pursue this line when they were in Government between 1970 and 1974. There may have been very good reasons. Perhaps he will remind the Committee what they were.
      Mr. Younger: I do not want to go into them at great length, but my first comment is that during that period there was not the severe and very extreme inflation which we have had since 1974. The hon. Member for Inverness (Mr. Johnston) knows very well the way in which the whisky industry is organised

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      and that inflation has had a severe effect on it. In a moment or two I shall detail one or two facts to demonstrate that in the last few years the effect on the whisky industry has been pretty severe. I hope that we shall have the support of the hon. Member for Inverness and his colleagues. I am sure that he has a large number of people in his constituency who are dependent on the industry. In view of that, I am sure that he will wish to be to the forefront in supporting the new clause.
      There is no doubt that the carrying of the sum of money as I have described for six to eight weeks places a considerable burden on the industry as a whole. The scale of this can be best illustrated by taking the cost of a single bottle of whisky and apportioning the amount of duty. The average price of a bottle of whisky is £4·20. I know that it can be bought more cheaply, but that is about the average. Of that £4·20, £3·16 is accounted for by duty. Another 31p is accounted for by VAT, leaving only 73p, which is the real cost of the bottle. The carrying of such a large percentage of the value—80 per cent. of the sale price—imposes a heavy deadweight charge on the industry.
      It is obvious that this inhibits investment in the industry and also the cash flow of many firms. This point has been made by a number of companies in the past two or three years. That is why there have been amalgamations of firms which might not have been necessary had this problem not existed.
      Mr. Powell: Can the hon. Member estimate the cost in terms of interest of carrying the duty due for a period of seven weeks? Can he indicate also whether this charge, like all other charges is not spread over all the links in the process, from production to consumption?
      Mr. Younger: I am not sure about the right hon. Member's first point. I have not been able to make a precise calculation of how much this would amount to on each bottle, but it is certainly quite a number of pence. On the latter point, the amount is carried in the ultimate price for the product, as every cost on the industry is bound to be, but it is the producing company which has had to carry the smaller cost of maturing the whisky over a three-year period which also has to carry this large sum for the six weeks.
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      This charge is not very even-handed when compared with that on other products of a similar type in the same sort of industry. Whereas whisky has to carry this amount, beer does not because beer has deferment for 39 days between the day when the duty has to be paid and actual production of the money. British wine has 29 days' grace. Therefore, with these two products the principle has been accepted that it is not strictly right that this amount should have to be produced at an early stage in production. This is another reason why the Minister should look at the new clause sympathetically.
      The vast majority of our EEC partners have some form of deferment for spirits. In Belgium there is deferment until the fifteenth day of the fourth month following the day of delivery for consumption. In West Germany it is the fifteenth day of the third month. In Italy 15 days are allowed for payment of half the excise duty, with 30 days for the other half. And so it goes on. If we are to compete on fair terms with other products in the Community, we should move in the direction of the new clause.
      11.15 p.m.
      It has been said that there would be technical difficulties about making a change of this sort. We are grateful to the Minister for what has been done. Over the past year a great deal of progress has been made towards satisfying everyone that there are no technical difficulties in making a change.
      Mr. J. W. Rooker: The hon. Member made various comparisons with the European Community. Can he elaborate a little more? I was not aware that there was a great deal of whisky manufactured in the Community, and the new clause applies only to whisky. If other spirits are involved, why is there not a new clause dealing with spirits other than whisky, on the basis that there is not a lot of competition in the Community?
      Mr. Younger: The hon. Member has raised a good point. The new clause applies only to whisky. We are hoping, because this is the strongest case, to establish the principle. It is true that, if we can do so, logically it ought to be applied to spirits generally and to imported wines. It would be our hope, if we can establish

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      the principle, that the issue could be raised at a later stage to put these other matters on all fours.
      Mr. Russell Johnston: Is the hon. Member satisfied that such a change would be acceptable within the European Economic Community in terms of the rules of competition concerning spirits?
      Mr. Younger: Certainly. I am satisfied that sooner or later the present disparity between these various beverages will be unacceptable to our partners in the Community. We should, if we are looking ahead, be expecting this change, or something like this change, to happen at some time. Unless there is any reason why he should not do so, I hope that the Minister will accept the point sympathetically.
      During our debates in Committee last year, the Minister was extremely helpful and referred to the issue in considerable detail. He used these words:
      "duty deferment is a matter that I am considering. I hope that I shall be able to have some discussions with the wine and spirit industry to look at some of the practical implications of taking some action on deferment. I hope to undertake this over the next 12 months before next year's Budget"—[Official Report, Standing Committee D. 19th May 1977; c. 36.]
      That was fair enough. The Minister has been as good as his word. Fruitful discussions have taken place between the Wine and Spirit Association and Customs and Excise on this matter.
      There was a letter to Mr. Plowman, of the Wine and Spirit Association of Great Britain, dated 22nd December 1977 from Mr. Christopherson, of Customs and Excise, which clearly spelt out the conclusions of those discussions and said what, in his view, would be the cost of this change. It was made clear that there were no absolute technical problems involved. It is fair to add that he stated categorically that this fact did not in any way commit Ministers to agree to the change. I accept that that is the position today. The Minister has not committed himself to make a change, and it is our object to try to persuade him to do so tonight.
      No one can doubt that this is an extremely important industry. It makes a contribution to providing jobs in Scotland,
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      particularly in the remote areas where jobs are difficult to come by. In 1977, no less than 93 million proof gallons, worth £512 million, was exported. That is an extremely fine record.
      There is no doubt that the increasing effect of these duties upon the industry and consumers has had a serious effect on home production during the past few years, as is shown by the production figures. In 1974, 183,000 proof gallons was produced whereas in 1977 only 151,000 proof gallons was produced. That is a drop of about 20 per cent. It is this aspect and the loss of job opportunities that is entailed that should at long last turn the scale, in this longstanding saga, in persuading the Minister that this time some help is needed.
      The Government have to deal with a serious unemployment problem—a problem about which they, as well as the rest of us, are deeply concerned. But Ministers tell hon. Members that there is little they can do about the situation and always add that they wish they could do more. Here is something positive that could be done now by the Government to help an industry whose jobs are very important indeed to many parts of Scotland. I hope that I have made a case of which the Minister will be aware and that the argument will reach such a pitch that at long last it will be conceded. It makes economic sense and sense in terms of fairness between whisky and other industries which should be treated similarly. It is a long-standing matter which we have debated for many years. Surely, this year is the year to bring the matter to fruition.
      This year the new clause is specially designed to make matters easy for the Minister. In this proposal there would be no cost to the Exchequer this year. It gives the right hon. Gentleman plenty of opportunity to make plans for the time when the relatively small cost involved in this exercise in the next three years comes to be felt in a future Budget. I hope that tonight we shall see the culmination of 12 years of pressure and that our proposal will be accepted by the Government.
      Mr. Hamish Watt: Although my colleagues and I welcome this opportunity to press these proposals, we find it galling that, once again, our new clause has not been called. The SNP has

      411
      been consistent in pushing the case for deferment of duty since we came to the House in 1974, and as long ago as 22nd January 1976 I had an Adjournment debate on this subject.
      Mr. Lamson: The hon. Gentleman said that his party's clause had not been called. I have been unable to find it on the Amendment Paper. Will he tell us what number it is and on which page it appears?
      Mr. Watt: I assure the hon. Gentleman that we submitted proposals on spirits in total, but not on whisky in particular. We have always maintained that the provision must cover all spirits. We are particularly concerned that whisky should be covered because it is a subject that is most important for Scotland. Nowadays whisky is made, matured, blended and sold by reputable companies, although I admit that in the past this was not the case. It was important that Customs and Excise could get their money before they allowed anybody to take whisky out of bond. But this is not now the case, and we are merely asking for comparability.
      Mr. F. A. Burden: On a point of order, Mr. Godman Irvine. We are anxious to know what is in the clause that has not been called. Since we cannot find it, perhaps you would tell us where it is.
      The Second Deputy Chairman (Mr. Bryant Godman Irvine): If the hon. Gentleman looks at the very beginning of the Amendment Paper, he will find a note that clarifies the position completely. That will indicate to him where that item can be found.
      Mr. Watt: We are consistent in requesting deferment of this duty, and I believe that it is essential that we should take this decision tonight. There is a very strong case for supporting the whisky industry because it is such a valuable contributor to the Exchequer. It contributes £512 million to the nation, and a great deal of cash accrues to the Exchequer from the sale of whisky.
      It is vital that this industry should be given parity with the beer industry or the wine industry. There is no better time for the Government to do it than this year or next year. A great deal of oil money
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      is coming into the country now, and if that money is to be used sensibly it must be used to bolster up our viable industries. The whisky industry is no lame duck like shipbuilding or even the motor car industry. It is a viable, thrusting and thriving industry which has always paid its way and always will pay its way.
      The whisky industry is not asking for a handout through the new clause. It is asking only for the use of that which is its own. The industry is, I believe, more viable than any other in Britain, with the possible exception of tourism. It has no import materials in its production. It does not have to import expensive raw materials as so many other industries do. I say again that it is time that the Government gave the whisky industry parity.
      As the hon. Member for Ayr (Mr. Younger) said, the industry is an employer of labour in many rural and urban areas of Scotland where no other jobs are available.
      It is asking a great deal of the industry that it has to find £19 million every year to finance the early payment of tax, which is what it amounts to. It is not a deferment we are talking about here. We are talking about parity. It would be far better to let the industry have its own money so that it could finance the laying down of more stocks. It is in everyone's interest that stocks should be laid down now. Whisky which is being made this year and next year will not be drunk until the early 1980s at the earliest, or in the case of mature whisky not until the mid-1980s, and some of it will not be drunk until 1990. That is a very long period for any industry to have to work to, and it is important that the whisky industry should have the use of this cash.
      The new clause is absolutely reasonable. It will not hurt the Exchequer this year. It will not hurt the Exchequer at any time, since it provides for phased steps forward to the parity which the industry has long sought.
      I shall be interested to see how my colleagues on the Liberal Bench vote tonight, especially those who have whisky distilleries in their constituencies. I shall be particularly interested to see how some hon. Members on the Government side vote, especially those with blending and bottling factories in their constituencies. This is a wonderful opportunity to

      413
      do the right thing by the whisky industry, and I commend the new clause to the Committee.
      Mr. Rooker: I am not sure whether I am in favour of the new clause but I should have thought that, with all the problems which we discussed last week, the Government need to get their hands on every pound of tax and duty as quickly as possible, as it becomes due. But the idea seems to be to take out of circulation, as it were, £180 million on the six-week basis and £120 million on the four-week basis. It is still money that would be lost. The hon. Member for Ayr (Mr. Younger) shakes his head, but he gave the figures. I have not got them from anywhere else. He said that it was roughly £50 million or £60 million a year.
      Mr. Younger: I made the point that there is no cost at all this year.
      Mr. Rooker: I accept that entirely; but Governments do not work on a hand-to-mouth basis. No modern responsible Government running our country's affairs can work on a hand-to-mouth basis in taxation. That may be the Tory Party's idea of running our affairs, but it is not the Labour Party's. It is still £180 million of tax cuts.
      Mr. Younger: No.
      Mr. Rooker: It is a tax cut in the sense that it increases the cash flow in the industry by £180 million over three years. I accept that it is a once-for-all payment, but in total it is £180 million over six weeks. That is not chicken feed. It could be spread on many small items over several years, or it could be a once-and-for-all payment to the construction industry, where extra employment is valuable. The sum of £180 million is equivalent to ½p off income tax. It is not an insignificant sum.
      11.30 p.m.
      I repeat that I am not sure whether I am in favour of the proposal. I do not know whether it applies to Irish whiskey, or whether the problems relating to Scotch whisky apply in Northern Ireland, or whether the bonding situation—which is very peculiar to this industry—that applies in Scotland applies in Northern Ireland.
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      If the new clause is approved, I am concerned about the effect it will have on whisky on which no duty is payable. We did not hear anything about this from the hon. Member for Ayr. If the new clause were accepted, it would cost the Revenue money on a once-and-for-all basis. The Revenue loses money on a considerable amount of whisky on which no duty is paid.
      I refer hon. Members to the appropriation accounts, House of Commons Paper 138, presented to the House on 31st Janaury of this year. In paragraphs 56 to 60 inclusive the Comptroller and Auditor General pointed out that there is a massive tax fiddle going on due to the fact that there are 250,000 proof gallons of whisky a year on which no duty is paid. This whisky is that which is drawn off for sampling. It is not an insignificant amount of whisky. When one realises that from each cask or vat of whisky one-tenth of a gallon may be drawn off for sampling purposes, one can see that there is scope for abuse. [Laughter.] Hon. Members may think that this is funny, but some £7 million in revenue is lost each year in this way. Many areas of the public service would benefit greatly from the injection of £7 million.
      However, not all of it is abuse. Much of the whisky drawn off in this way is used for sampling. The Comptroller and Auditor General said that he asked the Customs and Excise what it was doing about this matter, it having been drawn to its attention. The Comptroller and Auditor General said in paragraph 58:
      "The Department have no direct information on the ultimate use of duty-free samples, but they have long been aware from investigations undertaken for other purposes that it is not uncommon for such samples to be added to duty-paid stocks."
      So who makes the profit on that? It is £3·16 on a bottle, plus VAT. Who makes the rake-off on that—the wholesalers or the retailers? The public pay duty on bottles of whisky at the rate of 80 per cent., according to the hon. Gentleman, and that duty does not go to the Revenue. We are losing £70 million a year.
      Reference has been made to our Common Market partners and to the need to harmonise our affairs. These sampling arrangements of one-tenth of a gallon

      415
      per cask are unique. The United Kingdom allows a very generous amount to be taken for sampling purposes compared with our Common Market partners. I should like to know what is happening in terms of harmonisation.
      Mr. Watt: Does the hon. Gentleman appreciate that a cask can hold about 110 gallons of whisky? He is taking up the Committee's time by talking about a thousandth part of the cask.
      Mr. Rooker: I am taking the Committee's time to ask those who support the clause, which will cost the taxpayer, the Revenue, £180 million over three years, whether it is their intention to put duty on all of the whisky. I have made the point that on 250,000 gallons—a relatively small amount in percentage terms—there is no duty paid. It is clearly stated in the report of the Comptroller and Auditor General to the House of Commons that there is a tax fiddle going on, because some of that whisky is later sold to the general public. This abuse needs to be stamped on.
      Will anything be done about this? It is clear that the housekeeping arrangements of the Customs and Excise and the distillers are not all they should be. It is accepted in every distillery, according to the Comptroller and Auditor General, that the maximum allowable sample is always taken. There is never a cask where there is a need to take less than one-tenth of a gallon.
      The statistical specialists in the House will know that there must be some occasions on some casks, which will be smaller than some that the hon. Member for Banff (Mr. Watt) mentioned, where there is no need to take the full amount as a sample. [Laughter.] Hon. Members think that this is funny. We hear so much about abuse of the social security system costing 0·6 million a year, but every time hon. Members draw attention to tax abuse on a massive scale—whether it is income tax, corporation tax or, as in this case, excise duty on whisky—Opposition Members think that it is funny. They are not prepared to take seriously tax abuse to which the Comptroller and Auditor General has drawn attention. All that the Opposition wish to do is to add to the tax abuse. I accept that they wish to increase public expenditure in the short term. They have come forward with
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      no plans to make sure that all whisky is covered by the duty. There is nothing in the clause or the speech of the hon. Member for Ayr to show that they have even read the Comptroller and Auditor General's report. We have heard nothing about whether they will do anything about this.
      The Opposition should have the good grace to comment on the report. [HON. MEMBERS: "Out of order."] If I am out of order, Mr. Godman Irvine, I will take that from you and no one else. I have kept my remarks strictly to the new clause and the amount of public expenditure that flows from it. It is legitimate to seek to know whether it covers all whisky removed from the warehouse. The whisky taken for sampling is dearly removed from the warehouse, duty free.
      It is not a matter that hon. Members would discuss each day. It is a difficult matter to raise in the normal course of business. I am extremely grateful that the new clause has been tabled. I, too, look for the SNP new clause and amendment. It seems to me from what you said, Mr. Godman Irvine, that the Tory Party ruled the SNP amendment out of order by choosing to debate only the duty payment on whisky on the Floor, whereas the SNP amendment went much wider.
      I do not know the amount of duty on other spirits where there is a tax abuse. The Comptroller and Auditor General's report relates specifically to the whisky industry. He does not differentiate between the Irish whiskey industry and the Scottish whisky industry. I should like to know how the clause affects the Irish position, which has become so important in the passage of the Bill, for legitimate political reasons concerning the Irish Members. I should have thought that they would have something to say on this important matter, as it affects their economy. There is no doubt that this industry is vital to the British economy. I do not wish, in what I have said, to run down the Scotch whisky industry. It is extremely important.
      I want to make the point—I think that I have got the message across—that the new clause represents further tax handouts and cuts on top of the existing abuse and tax evasion. Indeed, it is admitted

      417
      in the Comptroller and Auditor General's report to be illegal. I hope that my right hon Friend will tell us what the Government intend to do about the situation.
      Mr. J. Grimond: I am sure that many hon. Members are well disposed towards the whisky trade. Some of them may even be thinking of going into the sampling trade after hearing the speech by the hon. Member for Birmingham. Perry Barr (Mr. Rooker). I do not intend to deal with possible abuses. Duty-free shops may be said to be evading duty in a similar way.
      We do not often have the opportunity of commenting on this important industry. Therefore, I want to make two serious points. The whisky industry, which is extremely important for the export trade and for many particular localities, is now suffering from a steep increase in costs. The distillery in my constituency suffers chiefly from increases in fuel and transport costs.
      We know that the Government have been having conversations with the industry. What proposals have they to meet the legitimate fear of the industry that there will be a continuing decline in distilling—there has already been some decline—and possible threats to the export trade if costs go on rising indefinitely and duty takes up such a high proportion of the price of whisky? I hope that the Government will tell us the results of their conversations with the trade.
      Mr. Alick Buchanan-Smith: The speeches by the hon. Members for Banff (Mr. Watt) and for Birmingham, Perry Barr (Mr. Rooker) had one thing in common—they both introduced a somewhat ghostly atmosphere into the debate. The hon. Member for Banff asked us to refer to an amendment which does not even appear on the Notice Paper and which we had to conjure up from the figment of our imagination, and the hon. Member for Perry Barr tried to bring to us a different form of departed spirit. It will be interesting to learn from the reply by the Financial Secretary where that spirit has departed to and whether we can bring it back into the Treasury net.
      I do not claim to have the same number of distilleries in my constituency as
      418
      the hon. Member for Banff, but there are six. Cash flow is of major importance, to them.
      The right hon. Member for Orkney and Shetland (Mr. Grimond) intervened briefly to raise one important matter. But I think that the Committee would be interested to know whether the Liberal Party supports the new clause. What should appeal to the Liberal Party is that we are trying not merely to seek equity in the treatment of whisky and other alcoholic beverages, but to move towards the harmonisation to which the EEC is also trying to move. It is significant that the EEC is suggesting that excise duty should be paid at the earliest, on the fifteenth and, at the latest, on the twenty-fifth day of the second succeeding month. In other words, the EEC is moving towards the position set out in the new clause. I hope that the Liberal Party will at least be true to its support of the European Economic Community and, in going towards harmonisation, will support the new clause.
      Mr. Crawford: There has been a lot of laughter about the new clause, but I point out that at least 20,000 jobs are involved directly in the whisky industry, apart from those not directly involved. As has been said, there is considerable short-time working in the industry.
      I am appalled at the cynicism of the Conservative Front Bench in tabling this new clause. The Scottish National Party has constantly sought—
      Mr. Buchanan-Smith: The hon. Gentleman is jealous.
      Mr. Crawford: I am not jealous. The SNP has constantly sought on Finance Bills, as the Treasury Bench knows, to reduce the duty on whisky. We are very interested in the jobs of our countrymen in this respect. The clause affects the matter but lightly. I understand that the once-for-all cost is £150 million to £160 million over three years.
      11.45 p.m.
      The Liberal Party view on whisky is worth considering. I understand that when the SNP sought to reduce the duty on whisky during the last two or three Finance Bills the Liberals voted with the Government. I shall gladly give way if any hon. Gentleman wishes to correct me.
      Mr. Pardoe: I intervene to tell the hon. Gentleman not that he is wrong but that in the 1950s duty was 78 per cent. of consumer expenditure on whisky, and it is now down to 58 per cent. If one raised the price of a bottle of whisky in real terms to what it was in 1967, the retail price would have to go up by £2·75. I cannot think that the House of Commons has done badly by the whisky industry.
      Mr. Hector Monro: Tell that to the people of Inverness.
      Mr. David Steel: Do not confuse the hon. Member with the facts.
      Mr. Crawford: No, do not confuse me with the facts. According to Adam Bergius, who is chairman of the Scotch Whisky Association, in the last financial year, although the duty on whisky has been increased, the amount of revenue from whisky decreased by £20 million. Those are not my figures, but those of the Scotch Whisky Association.
      There has been a spot of bother over whisky in the EEC. It was decided there that whisky was not an eau de vie. Whisky derives from the Gaelic uisge beatha. That means eau de vie. In spite of the cynicism of the Conservatives on this issue, we shall support the new clause.
      Mr. Dennis Canavan: The debate has certainly made clear where the priorities of the Tories and the Scottish National Party lie. Last week they voted to give about £445 million to the rich in tax handouts. To-night they are trying to give about £165 million in a tax handout to the whisky magnates. That is where their priorities lie, and I hope that the people of Scotland will note that the Tories will not be alone in the Lobby tonight, but that the SNP apparently wants to help them give this present to the whisky capitalists.
      Mr. Watt: Will the hon. Gentleman say how many of his constituents work in the whisky industry?
      Mr. Canavan: I shall be coming to that matter later. Perhaps the hon. Member will have a wee bit of patience.
      It is also significant that the Tories and SNP Members are trying to give this present to the whisky companies at a time
      420
      when today's edition of the Glasgow Herald has a headline saying
      "Scotch's strength in profit margins".
      Among other things, it says:
      "The strong trading position of UK distillers is contrasted with tight margins in importers, shippers and retail chains, together with the reticient growth of UK wine consumption, in a survey by Jordan Dataquest. From a sample of 220 companies throughout the UK, the average profit margin for whisky distillers was 13·9 per cent., for retail chains 0·8 per cent., while wine importers and shippers had an average margin of zero."
      They seem to be doing not too badly on that evidence concerning their profit margins.
      Later, the article says:
      "Top prizes for profits growth, in distilling went to DCL's White Horse, with an increase of 89·4 per cent., last year."
      Let us now look at some of the pre-tax profits which these companies are making. Distillers Company, for example, in the year ending March 1977, is listed as making a pre-tax profit of £127,690,000.
      Mr. Crawford: Just how much of that profit was gained from whisky?
      Mr. Canavan: I could not say off-hand but if the hon. Member cares to look into the matter I think that he will find that a substantial amount came from whisky.
      Mr. Robert Hughes: If Distillers is making such vast profits, can it not finance this revenue quite merrily out of profit without coming to the Government and seeking a handout?
      Mr. Canavan: I am grateful to my hon. Friend, because it is obvious that Distillers has profits not only from whisky. It also makes excessive profits out of the National Health Service, for example, to an extent which is, to my mind, almost immoral. We have seen some of the activities in which Distillers has been involved concerning drugs, and I think that it leaves a lot to be desired.
      Mr. Russell Fairgrieve: As the hon. Member reads out his list of profits, will he please give what the profit is as a percentage of sales?
      Mr. Canavan: I could not give that particular figure at this very moment. I am not a walking encyclopaedia. I do not go around with all the figures. But

      421
      if the hon. Member wants one percentage, the article to which I have referred says:
      "Top prize for profits growth in distilling went to DCL's"—
      one brand—
      "White Horse, with an increase of 89·4 per cent. last year."
      What are the companies doing with these profits? It would not be so bad if they were paying their workers decent wages. But I note that the wages bill for Distillers was only £59 million and there are 19,000 workers. By my arithmetic, that means an average wage of about £3,000. Bearing in mind that some of the directors no doubt get more than 10 times that amount, that makes the average wage for the worker in the distillery considerably less than that.
      Mr. Younger: Surely it is the Government who have been preventing these companies from giving better wages to their employees.
      Mr. Canavan: Perhaps recently that has been so, but certainly over the years when there was an element of free collective bargaining Distillers Company and all the other distillers were significant by the slowness with which they responded to trade union pressure for decent wages.
      I maintain that distillers have plenty of money to invest in the industry in order to improve it, to make it more efficient and thereby also to provide more jobs in the industry. They have plenty of opportunity to do that without a tax handout of £165 million. They also have enough left over from their profits to sell a dram at a more moderate price.
      The pressure for the new clause does not come from the unions. Trade unionists in my constituency involved in distilling and in the ancillary industries of bottling and capping have made no representations at all asking me to support it. Trade unionists are not dumb. They know fine that this clause of itself would not create one job in Scotland. Nor have I had any representations from consumers, because they know fine the clause will not take 1p or even ½p off the cost of a dram.
      It is sheer hypocrisy for the Scottish nationalists and the Tories to claim that they are thinking of the workers or the consumers. They are not: they are thinking of those who are making a profit
      422
      out of this industry. I challenge them. They knocked a hole in the family budget of £445 million last week. Now they would increase that hole by £165 million. Where will they get the money from? Their priorities are such that if it came to the crunch they would prefer to take the milk from the schoolchildren in order to put money into the pockets of the whisky capitalists.
      I urge the House to reject the clause.
      Mr. Robert Sheldon: The new clause provides for the phased deferment of excise duty on whisky, in three stages, starting next year. The first difficulty is that it is related to whisky alone. My hon. Friend the Member for Birmingham Perry Barr (Mr. Rooker) mentioned this. He also menioned duty-free samples. The Customs and Excise are at present having discussions with the industry about their use, and I am sure that the House will be notified of any results.
      Because the clause is limited to whisky, it discriminates against other spirits, obviously including brandy, imported from other EEC countries. The clause would therefore be in breach of our EEC obligations. But that is not its only weakness. It makes no provision for security of payment. That has been a feature ever since the beginning of excise duties many centuries ago.
      Mr. Watt: Is the Minister saying that the whisky industry is less reputable than the beer industry and that the Government are more sure of getting their money from the latter?
      Mr. Sheldon: The duty on beer is not collected at the end as it is on whisky and spirits. The method of collection is quite different.
      Mr. Watt: Answer.
      Mr. Sheldon: I have answered, if the hon. Gentleman was listening. The collection of duty on spirits is at the final product stage. That is not so in the beer industry. He should examine duty collection to see how it is done.
      But the main objection, of course, is cost, which is equal to the average duty outstanding at any moment and which has to be financed by Government borrowing. On our 1978–79 estimates of revenue flow, the cost of the new clause for whisky alone would be about £66 million

      423
      over the three years. Of course, deferment could not apply only to whisky, and, if we included all spirits, the cost for three years would rise to £126 million. There would also be problems over our EEC obligations if we did not include wine. We would then arrive at the total of £165 million mentioned by my hon. Friend the Member for West Stirlingshire (Mr. Canavan).
      12 midnight
      The hon. Member for Ayr (Mr. Younger) was asked why the last Conservative Government did not permit duty deferment. He said that levels of inflation were not so high then and that therefore the industry's problem was not so severe. But we have introduced stock relief, which has been of enormous value to the whisky industry, as many representions that I have received confirm.
      The hon. Member for Ayr was right in saying that there is no technical problem. We have had discussions on these matters and if it becomes possible to allow some period of duty deferment, at least we will have removed the technical problem.
      I accept the importance of the whisky industry both for its enormous impact on our export performance and for the jobs it creates, as well as for the unique product that we are fortunate to have manufactured in Scotland.
      As the hon. Member for Cornwall, North (Mr. Pardoe) pointed out, there has been a real terms decline in the incidence of duty. The duty on a bottle of spirits today is £.3·70. On the same price base as 10 years ago, it would have been £6·40. There has been a steep decline, in real terms, in the incidence of duty.
      That is not the only way in which the Government have helped the industry. Home consumption is expected to rise considerably this year. In 1977–78, 16·6 million proof gallons were produced for home consumption, and that figure is expected to rise to more than 21 million proof gallons this year.
      I agree with what the right hon. Member for Orkney and Shetland (Mr. Grimond) said about the importance of the industry, but these production and consumption figures and the figures I have quoted for incidence of the duty show
      424
      that the burdens imposed on the industry by the Government have been reduced over the last few years.
      The burden on the industry of financing the duty depends not only on the level of the duty and the inability or otherwise of the industry to have the duty deferred, but upon the amount of credit that the industry gives to its customers. Distillers and importers of spirits generally give customers considerable commercial credits. The danger is that if there is duty deferment, pressure from retailers for an extension of the period of credit as a result of the distillers receiving a longer period to pay will be severe. That problem has already been recognised.
      More than 80 per cent. of the Scotch whisky produced in Scotland is exported. That is a commendable and unique performance. But if we were to introduce duty deferment, it would not help exporters. So the exporters would not get the benefit.
      When we look at certain major exporters, particularly in the malt part of the industry, we find that they do not do a great domestic trade. That means that the largest part of the exporting business would not get any benefit from duty deferment. That, together with the fact that wholesalers and retailers would be able to exert pressure upon the distillers, so that much of the benefit would go to them, means that the case for sympathetic consideration is not so great this year.
      We came to the conclusion, therefore, that for 1978–79 there could be no duty deferment, with our public sector borrowing requirement at its present level. We are now looking at the prospect for 1979–80 and what we can do to help the industry in improving even further its present performance. But 1979–80 can be dealt with in the Finance Bill of 1979, and there is no need to take action now and try to guess what will be the economic position 12 months or a little less from now.
      Mr. Rooker: If that is the case, the Tory Party will be forced to tell us where it is to get the money. Tonight it has sought to avoid answering that question by putting a date limit on the proposal.
      Mr. Sheldon: My hon. Friend is quite right. It is the easiest thing in the world to incur debts 12 months from now, and

      425
      we are likely to see this sort of thing again and again. That is what the Opposition have sought to provide, because they have found that they would be in some difficulty in trying to save money for this current year. They have sought to find an alternative by saying, in effect, "We shall not try to get it this year but will try to get it next year." The danger is that this will not be seen in the context of the economic position at that time and, of course, anything that can be done in this area can be done in the Finance Bill of 1979.
      The Budget judgment for next year will obviously have to take account of the important points concerning the industry which have been put forward during the course of the debate. The public sector borrowing requirement is another matter that will obviously be taken into consideration in the judgment.
      I do not think that the proposal should be for decision now. I hope that it will be possible to move some way next year, but the final decision must be left until then. I ask the Committee to reject the new clause.
      Mr. Younger: I am afraid that that was a most disappointing reply from the Minister. What he has really said is that he accepts the validity of all the arguments but is not prepared to do anything about the mattter this year. I take it that his last words are an undertaking to us that it will be very much on the agenda for next year. But that is not satisfactory from our point of view.
      I have explained why the new clause refers only to whisky. We would prefer
      to come back possibly at a later stage of the Bill with a proposal which would include spirits as well, if the principle can be accepted.
      The hon. Member for West Stirlingshire (Mr. Canavan) indicated that what he really wanted was a lot of whisky companies which made no profits at all. That would, of course, be an absolute recipe for loss of jobs and for disaster for those companies and for the economy as well. The Minister followed that up by saying that one reason that he was doubtful about this was that he would not have security for payment. Does he seriously think that companies in this industry, which are mostly well known, would actually default on payment in this matter? That is a ridiculous concept.
      Finally, the Minister suggested that if the proposal were carried out the customers would then require to extend their credit for a similar period from the end of the six or seven weeks that the firm would get from the change. That is a quite ridiculous point of view. It would be totally unlikely to happen and is quite out of keeping with the customs of the trade. It is absolute nonsense, in fact.
      The Minister's reply was most disappointing, and in order to reinforce the great importance that we attach to saving jobs in the industry, at a time when unemployment is running at a record rate since the war, I ask my hon. Friends to vote for the new clause.
      Question put, That the clause be read a Second time:—
      The Committee divided: Ayes 236, Noes 264.

      Division No. 212]

      AYES

      [12.9 a.m.

      Adley Robert

      Buck, Antony

      Durant, Tony

      Aitken, Jonathan

      Budgen, Nick

      Dykes, Hugh

      Alison, Michael

      Bulmer, Esmond

      Edwards, Nicholas (Pembroke)

      Arnold, Tom

      Burden, F. A.

      Elliott, Sir William

      Atkins, Rt Hon H. (Spelthorne)

      Butler, Adam (Bosworth)

      Emery, Peter

      Atkinson, David (Bournemouth, East)

      Carlisle, Mark

      Ewing, Mrs Winifred (Moray)

      Bendall, Vivian (Ilford North)

      Chalker, Mrs Lynda

      Eyre, Reginald

      Bennett, Dr Reginald (Fareham)

      Churchill, W. S.

      Fairbairn, Nicholas

      Benyon, W.

      Clark, Alan (Plymouth, Sutton)

      Fairgrieve, Russell

      Berry, Hon Anthony

      Clark, William (Croydon S)

      Fair, John

      Biffen, John

      Clarke, Kenneth (Rushcliffe)

      Fell, Anthony

      Biggs-Davison, John

      Clegg, Walter

      Finsberg, Geoffrey

      Blaker, Peter

      Cooke, Robert (Bristol W)

      Fisher, Sir Nigel

      Body, Richard

      Cope, John

      Fletcher, Alex (Edinburgh N)

      Bowden, A. (Brighton, Kemptown)

      Cormack, Patrick

      Fookes, Miss Janet

      Boyson, Dr Rhodes (Brent)

      Costain, A. P.

      Forman, Nigel

      Braine, Sir Bernard

      Crawford, Douglas

      Fowler, Norman (Sutton C'f'd)

      Brittan, Leon

      Crouch, David

      Fox, Marcus

      Brooke, Peter

      Dodsworth, Geoffrey

      Fraser, Rt Hon H. (Stafford & St)

      Brotherton, Michael

      Drayson, Burnaby

      Fry, Peter

      Bryan, Sir Paul

      du Cann, Rt Hon Edward

      Galbraith, Hon T. G. D.

      Buchanan-Smith, Alick

      Dunlop, John

      Gardiner, George (Reigate)

      Gardner Edward (S Fylde)

      Macfarlane, Neil

      Rost, Peter (SE Derbyshire)

      Gilmour, Sir John (East Fife)

      MacGregor, John

      Royle, Sir Anthony

      Glyn, Dr Alan

      MacKay, Andrew (Stechford)

      Sainsbury, Tim

      Godber, Rt Hon Joseph

      Macmillan, Rt Hon M. (Farnham)

      St. John-Stevas, Norman

      Goodhart, Philip

      McNair-Wilson, M. (Newbury)

      Scott, Nicholas

      Goodlad, Alastair

      McNair-Wilson, P. (New Forest)

      Scott-Hopkins, James

      Gorst, John

      Madel, David

      Shaw, Giles (Pudsey)

      Gow, Ian (Eastbourne)

      Marshall, Michael (Arundel)

      Shaw, Michael (Scarborough)

      Gower, Sir Raymond (Barry)

      Marten, Neil

      Shelton, William (Streatham)

      Grant, Anthony (Harrow C)

      Mates, Michael

      Shepherd, Colin

      Gray, Hamish

      Mather, Carol

      Shersby, Michael

      Grist, Ian

      Maude, Angus

      Silvester, Fred

      Hall-Davis, A. G. F.

      Mawby, Ray

      Sims, Roger

      Hamilton, Archibald (Epsom & Ewell)

      Maxwell-Hyslop, Robin

      Sinclair, Sir George

      Hamilton, Michael (Salisbury)

      Mayhew, Patrick

      Skeet, T. H. H.

      Hampson, Dr Keith

      Meyer, Sir Anthony

      Smith, Timothy John (Ashfield)

      Hannam, John

      Miller, Hal (Bromsgrove)

      Speed, Keith

      Harrison, Col Sir Harwood (Eye)

      Mills, Peter

      Spence, John

      Harvie Anderson, Rt Hon Miss

      Miscampbell, Norman

      Spicer, Jim (W Dorset)

      Haselhurst, Alan

      Mitchell, David (Basingstoke)

      Spicer, Michael (S Worcester)

      Havers, Rt Hon Sir Michael

      Moate, Roger

      Sproat, Iain

      Hayhoe, Barney

      Monro, Hector

      Stainton, Keith

      Henderson, Douglas

      Montgomery, Fergus

      Stanbrook, Ivor

      Hicks, Robert

      Moore, John (Croydon C)

      Stanley, John

      Hodgson, Robin

      More, Jasper (Ludlow)

      Steen, Anthony (Wavertree)

      Holland, Philip

      Morgan-Giles, Rear-Admiral

      Stewart, Rt Hon Donald

      Hordern, Peter

      Morris, Michael (Northampton S)

      Stewart, Ian (Hitchin)

      Howe, Rt Hon Sir Geoffrey

      Morrison, Charles (Devizes)

      Stokes, John

      Howell, David (Guildford)

      Morrison, Hon Peter (Chester)

      Stradling Thomas, J.

      Hunt, David (Wirral)

      Mudd, David

      Tapsell, Peter

      Hunt, John (Ravensbourne)

      Neave, Airey

      Taylor, Teddy (Cathcart)

      Hurd, Douglas

      Nelson, Anthony

      Tebbit, Norman

      Hutchison, Michael Clark

      Neubert, Michael

      Temple-Morris, Peter

      Irving, Charles (Cheltenham)

      Newton, Tony

      Thompson, George

      James, David

      Nott, John

      Townsend, Cyril D.

      Jenkin, Rt Hon P. (Wanst'd & W'df'd)

      Onslow, Cranley

      Trotter, Neville

      Johnson Smith, G. (E Grinstead)

      Oppenheim, Mrs Sally

      van Straubenzee, W. R.

      Jones, Arthur (Daventry)

      Osborn, John

      Vaughan, Dr Gerard

      Jopling, Michael

      Page, Rt Hon R. Graham (Crosby)

      Viggers, Peter

      Joseph, Rt Hon Sir Keith

      Page, Richard (Workington)

      Wakeham, John

      Kershaw, Anthony

      Pattie, Geoffrey

      Walder, David (Clitheroe)

      King, Evelyn (South Dorset)

      Percival, Ian

      Walker, Rt Hon P. (Worcester)

      King, Tom (Bridgwater)

      Pink, R. Bonner

      Walker-Smith, Rt Hon Sir Derek

      Kitson, Sir Timothy

      Prentice, Rt Hon Reg

      Wall, Patrick

      Knight, Mrs Jill

      Price, David (Eastleigh)

      Watt, Hamish

      Knox, David

      Prior, Rt Hon James

      Weatherill, Bernard

      Lamont, Norman

      Raison, Timothy

      Wells, John

      Langford-Holt, Sir John

      Rathbone, Tim

      Welsh, Andrew

      Latham, Michael (Melton)

      Rees, Peter (Dover & Deal)

      Whitney, Raymond (Wycombe)

      Lawson, Nigel

      Reid, George

      Wiggin, Jerry

      Lester, Jim (Beeston)

      Renton, Rt Hon Sir D. (Hunts)

      Winterton, Nicholas

      Lewis, Kenneth (Rutland)

      Renton, Tim (Mid-Sussex)

      Wood, Rt Hon Richard

      Lloyd, Ian

      Rhodes, James R.

      Young, Sir G. (Ealing, Acton)

      Loveridge, John

      Ridley, Hon Nicholas

      Younger, Hon George

      Luce, Richard

      Ridsdale, Julian

      McAdden, Sir Stephen

      Roberts, Michael (Cardiff NW)

      TELLERS FOR THE AYES:

      MacCormick, Iain

      Roberts, Wyn (Conway)

      Mr. Spencer Le Marchant and

      McCrindle, Robert

      Rossi, Hugh (Hornsey)

      Lord James Douglas-Hamilton.

      NOES

      Abse, Leo

      Brown, Hugh D. Provan)

      Crowther, Stan (Rotherham)

      Allaun, Frank

      Brown, Robert C. (Newcastle W)

      Cryer, Bob

      Anderson, Donald

      Brown, Ronald (Hackney S)

      Cunningham, Dr J. (Whiteh)

      Archer, Rt Hon Peter

      Buchan, Norman

      Dalyell, Tam

      Armstrong, Ernest

      Buchanan, Richard

      Davidson, Arthur

      Ashton, Joe

      Callaghan, Jim (Middleton & P)

      Davies, Rt Hon Denzil

      Atkins, Ronald (Preston N)

      Campbell, Ian

      Davies, Ifor (Gower)

      Atkinson, Norman

      Canavan, Dennis

      Davis, Clinton (Hackney C)

      Barnett, Guy (Greenwich)

      Cant, R. B.

      Deakins, Eric

      Barnett, Rt Hon Joel (Heywood)

      Carmichael, Neil

      Dean, Joseph (Leeds West)

      Bates, Alf

      Carter, Ray

      de Freitas, Rt Hon Sir Geoffrey

      Bean, R. E.

      Carter-Jones, Lewis

      Dell, Rt Hon Edmund

      Beith, A. J.

      Cartwright, John

      Dempsey, James

      Bennett, Andrew (Stockport N)

      Castle, Rt Hon Barbara

      Dewar, Donald

      Bidwell, Sydney

      Clemitson, Ivor

      Doig, Peter

      Bishop, Rt Hon Edward

      Cocks, Rt Hon Michael (Bristol S)

      Dormand, J. D.

      Blenkinsop, Arthur

      Cohen, Stanley

      Douglas-Mann, Bruce

      Boardman, H.

      Coleman, Donald

      Dunnett, Jack

      Booth, Rt Hon Albert

      Conlan, Bernard

      Eadie, Alex

      Boothroyd, Miss Betty

      Corbett, Robin

      Edge, Geoff

      Bottomley, Rt Hon Arthur

      Cowans, Harry

      Ellis, John (Brigg & Scun)

      Boyden, James (Bish Auck)

      Cox, Thomas (Tooting)

      English, Michael

      Bradley, Tom

      Crawshaw, Richard

      Ennals, Rt Hon David

      Bray, Dr Jeremy

      Cronin, John

      Evans, Fred (Caerphilly)

      428

      429

      Evans, Ioan (Aberdare)

      Leadbitter, Ted

      Rooker, J. W.

      Evans, John (Newton)

      Lestor, Miss Joan (Eton & Slough)

      Roper, John

      Ewing, Harry (Stirling)

      Lever, Rt Hon Harold

      Rose, Paul B.

      Fernyhough, Rt Hon E.

      Lewis, Ron (Carlisle)

      Ross, Stephen (Isle of Wight)

      Fitch, Alan (Wigan)

      Litterick, Tom

      Ross, Rt Hon W. (Kilmarnock)

      Fitt, Gerard (Belfast W)

      Lomas, Kenneth

      Rowlands, Ted

      Flannery, Martin

      Loyden, Eddie

      Ryman, John

      Fletcher, Ted (Darlington)

      Lyon, Alexander (York)

      Sandelson, Neville

      Foot, Rt Hon Michael

      Lyons, Edward (Bradford W)

      Sedgemore, Brian

      Ford, Ben

      McCartney, Hugh

      Selby, Harry

      Forrester, John

      McDonald, Dr Oonagh

      Sever, John

      Fowler, Gerald (The wrekin)

      McElhone, Frank

      Shaw, Arnold (Ilford South)

      Fraser, John (Lambeth, N'w'd)

      MacFarquhar, Roderick

      Sheldon, Rt Hon Robert

      Freeson, Rt Hon Reginald

      MacKenzie, Rt Hon Gregor

      Shore, Rt Hon Peter

      Freud, Clement

      Mackintosh, John P.

      Silkin, Rt Hon John (Deptford)

      Garrett, John (Norwich S)

      Maclennan, Robert

      Silkin, Rt Hon S. C. (Dulwich)

      Garrett, W. E. (Wallsend)

      Madden, Max

      Silverman, Julius

      George, Bruce

      Magee, Bryan

      Skinner, Dennis

      Gilbert, Rt Hon Dr John

      Mahon, Simon

      Smith, John (N Lanarkshire)

      Ginsburg, David

      Mallalieu, J. P. W.

      Snape, Peter

      Golding, John

      Marks, Kenneth

      Spearing, Nigel

      Gould, Bryan

      Marshall, Dr Edmund (Goole)

      Spriggs, Leslie

      Gourlay, Harry

      Marshall, Jim (Leicester S)

      Stallard, A. W.

      Grant, George (Morpeth)

      Mason, Rt Hon Roy

      Steel, Rt Hon David

      Grant, John (Islington C)

      Maynard, Miss Joan

      Stewart, Rt Hon M. (Fulham)

      Grocott, Bruce

      Meacher, Michael

      Stoddart, David

      Hamilton, W. W. (Central Fife)

      Mendelson, John

      Stott, Roger

      Hardy, Peter

      Mikardo, Ian

      Strang, Gavin

      Harper, Joseph

      Millan, Rt Hon Bruce

      Summerskill, Hon Dr Shirley

      Harrison, Rt Hon Walter

      Miller, Dr M. S. (E Kilbride)

      Swain, Thomas

      Hart, Rt Hon Judith

      Mitchell, Austin

      Taylor, Mrs Ann (Bolton W)

      Hattersley, Rt Hon Roy

      Mitchell, R. C. (Soton, Itchen)

      Thomas, Dafydd (Merioneth)

      Hayman, Mrs Helene

      Moonman, Eric

      Thomas, Jeffrey (Abertillery)

      Healey, Rt Hon Denis

      Morris, Alfred (Wythenshawe)

      Thomas, Mike (Newcastle E)

      Heffer, Eric S.

      Morris, Rt Hon Charles R.

      Thomas, Ron (Bristol NW)

      Horam, John

      Morris, Rt Hon J. (Aberavon)

      Thorne, Stan (Preston S)

      Howell, Rt Hon Denis (B'ham, Sm H)

      Moyle, Roland

      Tierney, Sydney

      Hoyle, Doug (Nelson)

      Murray, Rt Hon Ronald King

      Tilley, John (Lambeth, Central)

      Huckfield, Les

      Newens, Stanley

      Tinn, James

      Hughes, Rt Hon C. (Anglesey)

      Noble, Mike

      Tomlinson, John

      Hughes, Mark (Durham)

      Oakes, Gordon

      Torney, Tom

      Hughes, Robert (Aberdeen N)

      Ogden, Eric

      Varley, Rt Hon Eric G.

      Hughes, Roy (Newport)

      O'Halloran, Michael

      Wainwright, Edwin (Dearne V)

      Hunter, Adam

      Orme, Rt Hon Stanley

      Walker, Harold (Doncaster)

      Irving, Rt Hon S. (Dartford)

      Ovenden, John

      Walker, Terry (Kingswood)

      Jackson, Colin (Brighouse)

      Owen, Rt Hon Dr David

      Ward, Michael

      Jackson, Miss Margaret (Lincoln)

      Palmer, Arthur

      Watkins, David

      Janner, Greville

      Pardoe, John

      Wellbeloved, James

      Jay, Rt Hon Douglas

      Park, George

      White, Frank R. (Bury)

      Jeger, Mrs Lena

      Parker, John

      White, James (Pollock)

      Jenkins, Hugh (Putney)

      Parry, Robert

      Whitehead, Philip

      John, Brynmor

      Pavitt, Laurie

      Whitlock, William

      Johnson, Walter (Derby S)

      Pendry, Tom

      Williams, Alan Lee (Hornch'ch)

      Johnston, Russell (Inverness)

      Penhaligon, David

      Williams, Rt Hon Shirley (Hertford)

      Jones, Alec (Rhondda)

      Price, C. (Lewisham W)

      Wilson, Rt Hon Sir Harold (Huyton)

      Jones, Barry (East Flint)

      Price, William (Rugby)

      Wilson, William (Coventry SE)

      Jones, Dan (Burnley)

      Radice, Giles

      Wise, Mrs Audrey

      Kaufman, Gerald

      Rees, Rt Hon Merlyn (Leeds S)

      Woodall, Alec

      Kelley, Richard

      Richardson, Miss Jo

      Woof, Robert

      Kerr, Russell

      Roberts, Albert (Normanton)

      Wrigglesworth, Ian

      Kilroy-Silk, Robert

      Roberts, Gwilym (Cannock)

      Young, David (Bolton E)

      Kinnock, Neil

      Robinson, Geoffrey

      Lambie, David

      Roderick, Caerwyn

      TELLERS FOR THE NOES:

      Lamborn, Harry

      Rodgers, George (Chorley)

      Mr. James Hamilton and

      Lamond, James

      Rodgers, Rt Hon William (Stockton)

      Mr. Ted Graham.

      Latham, Arthur (Paddington)

      Question accordingly negatived.
      Bill (Clause 11) reported, with amendments to lie upon the Table.

  LITTER AND REFUSE (LONDON)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Tinn.]
  12.25 a.m.
  Mr. Michael Neubert: Well over 10 million people now come to visit
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  the British Isles each year, many of them to London. About 10 million people live in London, many of them working, as we do, in Westminster. At the centre of our capital city we are surrounded by a wealth of historic buildings and Royal parks, rightly renowned world-wide. Yet all too often the state of our streets is a disgrace. It used to be said that the streets of London were paved with gold. Too often these days too many of the streets of London are paved with plastic

  431
  bags, empty Coke cans and cigarette packets.
  As a Londoner, with some interest in travel and tourism, especially I regret the adverse impression that this must leave with many visitors to our city. There is one feature to which I particularly object and that is the new established practice of leaving refuse on public pavements and private forecourts for long periods for later collection. This has the effect of detracting very much from the London street scene. Unless it is vigorously resisted and arrested, the appearance of London can only get worse.
  It is not only the fact that we have litter in our streets that causes me concern. That is a more evident problem. At least the strewing of litter is usually thoughtless and inconsiderate, whereas the practice of dumping rubbish on our streets in plastic bags and cardboard boxes is deliberate and becoming more widespread. This process must not be allowed to continue. If it does, the contrast between our noble buildings and our slovenly streets will widen, and the disparity between taxpayers' money spent on restoring the fabric of our buildings and ratepayers' money spent on the cleansing of our streets will sharpen. The amenities of living in London will be severely damaged.
  For all these reasons, I seek to raise this issue tonight, in the hope that the process can not only be arrested but reversed. Unfortunately, even this apparently simple point, which I take the opportunity to put to the Minister, is not really as simple and straightforward as it might seem. There are many complex factors involved and it is not possible within the scope of this short debate to include all of them.
  What are the main reasons for this state of affairs? There are three major difficulties facing anyone attempting to maintain high standards of cleanliness in London's streets: the nature of our historic buildings, the inadequacy of access to older property, and the traffic congestion which inhibits and slows down refuse rounds. These factors in themselves are not peculiar to London.
  There seem to be three other factors which are particularly pertinent to this problem. The first derives from the
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  origins of this practice, namely, the lowering of standards which took place in the 1969 "dirty jobs" strike, which is an illustration of how a strike can do damage that lives on long after the dispute is settled. The outward effects of this dispute were most unfortunate. It led people at that time, of necessity, to deposit their rubbish on the streets. They saw, day after day, rubbish and rotting refuse at their doorstep. They thought nothing of it. It became almost acceptable. Ever since that precedent was established there has not been the same resistance to such a state of affairs which there would otherwise have been and which existed before. In the past nine years or so this trend has been increasing.
  We have then to consider the inadequacy of the present law. Many of these matters are still governed by the provisions of the Public Health Act 1936. It is not surprising that, 42 years later, those provisions are not meeting modern needs. Circumstances have radically changed in so many evident ways and the regulations under that legislation are no longer satisfactory to deal with the problem.
  Let me give one example. "Waste" is defined as being in two categories—either domestic or trade. Hotels and restaurants are not apparently committed to the latter category, and they often enjoy a free service, whereas the demands made on that service by hotels and restaurants are by their nature exceptional and heavy. In the centre of London where we live and work that consideration is especially the case. There is a need to update the legislation, and I shall return to that matter later.
  There is a third thread which is important. In such a service as refuse collection, which is labour intensive, the attitudes of the men working that service will be critical. This will require a constructive and co-operative approach to the problem by trade unionists, members and leaders alike, if the problems, are to be solved, particularly in central London.
  I wish to draw the Minister's attention to the implications of the Health and Safety at Work, Etc. Act. I know that that legislation is not his responsibility, but I think he will agree that he will need to take those provisions into account. The provisions of that Act, if fully carried through, could prove calamitous to refuse collecting services in central London.

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  The principles of the legislation are unexceptionable, namely, the wish to ensure healthy and safe conditions for men and women at work. But the detailed provisions of the Act, if carried to the extreme, will prove highly costly and counter-productive in many respects in the service that is being undertaken. It is clear, for example, that any one of a number of objections could be made on present practice to dangerous steps to basements or to high rise buildings, defective back alleyways, low ceilings, inadequate lighting, ice and frost on stairs, rotting refuse, rodents, and broken handrails. Any one of those reasons could be taken by an eager beaver union representative, eager to make his mark, as an objection to carrying out the collection. If carried to extremes, it is clear that the practice of kerbside collections, so far from diminishing, will increase. Therefore, we have all these factors in the background.
  What needs to be done? First, a higher priority must be accorded to this Cinderella service. Attitudes to refuse collection have always been gently derisory, and probably always will be, but the service is the very essence of our standard of living. Amenities play a very important part in that standard of living. Living standards depend not just on the size of the cigar or on the cubic capacity of the next new car, or even on holidays in Spain. Standards of living depend on humdrum, everyday events which all too often we take for granted. I refer to the twice-daily delivery of post, the daily delivery of a pint of milk, and, of course, the regular cleansing of our streets and the collection of refuse.
  Greater priority must ge given within local council budgets to this service. I pay tribute to the work that has been done in the face of enormous difficulties by the directors of cleansing in the three central London authorities which I have consulted. I refer to the City of Westminster, the Royal Borough of Kensington and Chelsea and the City Corporation. Nothing in my remarks should be taken to disparage the work they are doing or the policy of their authorities.
  But it is clear from figures given to me of expenditure on the service in the past four years that, although expenditure has increased substantially in cash terms, in real terms it has shown a cut-back.
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  Although some of that may be due to special circumstances, or even perhaps to greater efficiency and achieving the same amount of work at smaller cost, I suspect that in a period of economic restraint inevitably this service has suffered, and it is all too easy for it to suffer.
  I should like to see a recording of priorities not only by the councils themselves but by the Department, too. I make the point to the Minister that, as local government nowadays is so much Government-directed, he, too, might play some part in reordering priorities in this matter. Although humdrum, commonplace, everyday and taken for granted, this service is vital to the well being of our community, and especially in central London.
  Second, and specifically, I draw attention to the fact that, four years after the passing of the Control of Pollution Act 1974, there remain outstanding provisions in Part I still to be implemented. It is regrettable that after this lapse of time they should remain unimplemented. The Act itself was a successor to the Protection of the Environment Bill introduced by the last Conservative Government, which fell at the time of the General Election early in 1974, and it is now time to consider early implementation of its outstanding provisions.
  Those provisions would allow powers to councils to ensure that there were adequate facilities for the storage of refuse and its eventual disposal and that there were adequate facilities for the disposal of waste. In addition, the councils could levy charges, in particular on hotels and restaurants, which are the principal, though not the only, offenders.
  Here is an example of how the present system works to the disadvantage of London. There is a small hotel in South Kensington which enjoys twice-weekly free service from the Royal borough, and it does so by means of an accumulation of bags of refuse which, during the course of the week, can total 500. There is a considerable amount of refuse, and there can be 250 bags at any given time, stacked neatly on the hotel's own ground but none the less an eyesore to those who pass down that side street on their way to the hotel or going about their business or pleasure in London.
  If a charge were levied, it could provide revenue for a self-financing

  435
  scheme, or the potential ability to apply a charge could be used as a deterrent to encourage such hotels and commercial entrprises to invest in compaction equipment which could reduce the volume of such rubbish by a ratio of four to one, thereby making better use of their own space and also removing some of the worst eyesores when rubbish overflows on to forecourts and pavements. In that way, a great deal could be done.
  I call on the Minister tonight to bring about early implementation of those provisions. Although he is not directly responsible for the service, he has a vital role to play because only he can bring in the full implementation of Part I of the Act, and only he can effectively co-ordinate a campaign to improve the appearance of London. He must show a determination not to tolerate a lowering of standards in our capital city. I hope that he will take that opportunity tonight.
  12.38 a.m.
  The Under-Secretary of State for the Environment (Mr. Kenneth Marks): I am sure that the House will allow me to start my speech tonight by taking the opportunity to pay tribute to my friend and colleague, the Member of Parliament for Manchester, Moss Side, Frank Hatton, whose death this morning was reported by Mr. Speaker at the start of today's business.
  This debate is about just one of the many problems of people who live in our great cities. Many of Frank Hatton's constituents in Manchester faced a whole host of such problems. For many years he represented them on the Manchester City Council, and since 1973 in the House of Commons. The pages of Hansard, the minutes of meetings in various Ministries and innumerable letters and interviews record the constancy of his efforts on their behalf.
  Despite illness and pain over a long period, Frank Hatton would have been here to put his constituents' case. They and the city of Manchester owe him a great deal. Manchester's high reputation in education owes much to his leadership. He was chairman of the education committee for several years, and a national figure in education. In the many discussions I had with him, as one of the teachers' representatives, I know that he
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  was patient and understanding, yet decisive when the need arose.
  On Thursday, boys from Frank Hatton's old school—the Manchester Central High School for Boys—will be visiting Parliament, and he had planned to meet them. His life, devoted to working for the benefit of others, is, I think, an example to all of them and I am sure that I speak not only for those who represent Manchester but for the whole House when I express sympathy for his wife. She has been his constant companion both in London and in Manchester, bearing a great share of his work, for a long period of worry and sadness; and our thoughts are with her.
  I am grateful to the hon. Member for Romford (Mr. Neubert) for raising this subject. Much of the litter in our streets comes from members of the public—people who throw away sweet papers or cigarette cartons, beverage cans, and so on. But a big part—perhaps even the greater part—undoubtedly comes from dirty work practices. One of the worst of these is the very unpleasant habit of many shops and restaurants—and, indeed, offices and work shops—of piling up rubbish without any kind of container, and leaving it to blow about until whatever remains is collected.
  Clearly, there are some real physical problems here. The smaller shops and work places in central London are frequently in old property virtually backing on to the shops or houses in the next street. They may have no room at all to store their refuse, or even where they have it may be quite impossible for the refuse collectors to get at it after the staff have gone home. The refuse can be collected only outside ordinary working hours because it is only then that the collection vehicles can get through. So there really is no alternative to refuse being left on the pavement in some cases.
  But if refuse has to be piled up outside these places, it emphatically does not have to be piled up without a container. I am glad that the hon. Member is so clearly with me in believing that to put it out like this is irresponsible and anti-social. Once we can bring Section 13 of the Control of Pollution Act into force it can also become illegal. That section will give local authorities powers to require the waste to be put into a

  437
  container wherever it is likely to cause a nusiance or be detrimental to the amenities of the locality. In other words, the authorities will be able to act on their own—without having to go to the courts for an enforcement order as they must under the nuisance provisions of the Public Health Acts—and they will be able to act before the event and not only after it. This will be a very big step forward.
  We have been discussing implementation of this provision with the local authority associations. The section is linked with another section which places a formal duty on local authorities—as opposed to their present power—to collect trade waste wherever they are asked to do so. That is likely to involve some capital expenditure. There is also a need for some preliminary work on regulations. But we are anxious to implement the whole of Sections 12 to 14 of the Act as soon as we can, and the local authority associations are keen for us to do so, too, provided, of course, that the necessary provisions can be made in the rate support grant settlement. I am glad to be able to tell the hon. Member that we had a meeting with the local authority associations this morning, and as a result we hope to implement subsections (5) and (6) of Section 13 in two months' time.
  There is one point that I want to stress. The new powers we are talking about will be effective only if they are enforced. That job will inevitably fall to the local authorities. But it is, of course, exactly this kind of effort on which the axe is swung first whenever expenditure or staff is cut back. Indeed, this is exactly what has caused the implementation of Section 13 to be delayed for so long. So if we is cut back. Indeed, this is exactly what hon. Member is seeking—and I fully share his enthusiasm for it—we shall have to pay for it. We cannot get it free. Getting rid of pollution, whatever form it takes, costs money and means public expenditure.
  I make this point partly because it seems to me important in itself, but partly also in fairness to the local authorities concerned. It is very easy to criticise them for not doing more. But even when they have the powers they will not be able to do it without the resources.
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  I should like to look at the problems to which the hon. Member has drawn attention in a context rather wider than that of implementing Section 13 of the Act. I think that the hon. Member has performed such a useful service in raising this subject tonight because he has put his finger on a particular source of litter, which calls for a particular approach, and has allowed us to see it as such.
  There are of course other sources of litter which call for a similar homing-in on a specific target: the mess which can be caused by street trading, again essentially an enforcement task for local authorities, in London under the London County Council (General Powers) Act; the activities of advertising agents who indiscriminately hand out advertising leaflets in our main tourist areas; and, I fear, some of the methods of collecting refuse, which seem designed to create litter rather than to remove it. I hope that as we become more systematic in our approach to litter we may be readier to identify special problems of this kind, to consider just what are the best ways of dealing with each, and perhaps whether we have all the powers we need to do so.
  I mentioned earlier that we have already discussed the implementation of Section 13 of the Act with the local authority associations. We are also discussing with them the implementation of Section 24 of the Act, which requires counties, in co-operation with their districts and with interested environmental organisations, to draw up litter plans. I hope that these plans will lead the authorities to look very closely at those parts of the litter problem which derive from the practices the hon. Gentleman mentioned, as well as the litter-dropping habits of the general public, and to consider how best they can act directly on the sources responsible for them.
  I recently helped to launch the litter plan in rural Northumberland. The people there had not waited for the implementation of the Act but had gone ahead and, with the co-operation of the Keep Britain Tidy Group, had examined the various causes of litter in their area and produced a plan to cope with it. I hope that in the near future all the county councils will be doing the same.
  We also hope that some of the projects which are being carried through under

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  our inner cities programme can include action to deal with litter. Litter is certainly not confined to the inner cities, but it is probably at its very worst in the city centres. It is of course for the local authorities concerned to decide what can be done best. I know that one at least has asked the Keep Britain Tidy Group to co-operate with it in a special campaign, and I hope that others may follow its example.
  Behind all this will be the general educational work to change public attitudes to litter. We are greatly indebted for the work which has been done by the Keep Britain Tidy Group, the local authorities and various organisations. It may be that in future it will have to aim not only at dissuading people from dropping litter themselves but at making them less tolerant—as the hon. Gentleman rightly is not tolerant—of litter created in
  440
  the ways we have been talking about tonight.
  People who keep their houses clean and tidy are entitled to demand that there should not be squalor in the streets around them. The combination of litter, graffiti, vandalism and neglect, whether it is caused by individuals, shops and stalls, or works and offices, is an insult to them, and we shall seek to eradicate it.
  I am grateful for the hon. Gentleman's contribution tonight. I have taken note particularly of his comments on the Health and Safety at Work, etc. Act, and shall consult my right hon. Friend the Secretary of State for Employment to consider what the hon. Gentleman has said.
  Question put and agreed to.
  Adjourned accordingly at twelve minutes to One o'clock.