INTEREST ON TAX OVERPAID

HC Deb 16 May 1978 vol 950 cc357-403

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

1. (a) In subsection (1) (a) for the words "twelve months following that year of assessment" there shall be substituted the words "relevant time".
2. (b) In subsection (3) (a) for the word "in" there shall be substituted the words "on the last day of".
3. (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".
4. (d) For subsection (4) there shall be sub-stituted—

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

1. (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;
2. (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;
3. (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:—

1. (a) In subsection (2) there shall be omitted the words "the end of the twelve months beginning with"
359
2. (b) For subsection (4) (a) and (b) there shall be substituted
1. (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;
2. (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;
3. (c) In subsection (5) (a) for the word "for" there shall be substituted the words "on the last day of".
4. (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 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 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 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 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 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.

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 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 (Berwick-up-Tweed)

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 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 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 (Liverpool, Garston)

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 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 (Thurrock)

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 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 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 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: 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.

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.

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 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 (Eastbourne)

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 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 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.

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 (Fulham)

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 (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."

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 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 (Aylesbury)

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 (Moray and Nairn)

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 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. 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 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 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 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 (Hitchin)

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.

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.

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 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 (Gateshead, East)

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 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 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 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 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 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 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)

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.