§ '(1) Where an amount due to a person from a Government department in connection with a business carried on by him remains unpaid for any period as a result of industrial action taken by civil servants after 8th March 1981 and that person withholds any tax—
- (a) which became due and payable by him after that date and before 6th April 1982; and
- (b) on which interest would, apart from this section, be chargeable under section 86 or 87 of the Taxes Management Act 1970,
§ (2) Where for the whole or any part of the period mentioned in subsection (1) above the person in question withholds any amount for which he is accountable to the collector after the said 8th March—
- (a) in respect of income tax which he was liable to deduct in pursuance of section 204 of the Taxes Act (pay as you earn); or
- (b) in respect of Class 1 contributions under the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975,
§ (3) The reference in subsection (1) above to an amount due to a person from a Government department in connection with a business carried on by him is to any value-added tax due to him from the Commissioners of Customs and Excise, to any grant or subsidy due to him from any other Government department in respect of such a business and to any sum due to him from a Government department under a contract entered into by him in the course of a business; and for the purposes of this subsection "business" includes any trade, profession or vocation.
§ (4) Any claim under this section shall be made to the Board.'.—[Mr. Peter Rees.]
§ Brought up, and read the First time.
§ Mr. Peter Rees
I beg to move, That the clause be read a Second time.
I make no secret of the fact that the Government are concerned about the inability of the Customs and Excise, due to industrial action, to make repayments of VAT. We are aware of the impact that this has on the cash flow of a wide range of businesses and firms. There are about 1,300,000 registered traders, and of those perhaps 400,000 are repayment traders.
1026 We have considered long and hard how we could make those repayments of VAT, and have come reluctantly to the conclusion that because the whole system is computerised it would be impossible to do it manually. We have given great and anxious thought to the question.
In an endeavour to mitigate the impact of the action, we announced some months ago that a taxpayer who is owed a VAT repayment may, by agreement with the collector of taxes, offset his liability for PAYE. That seemed to us to be a fair and equitable arrangement. But an essential element is that VAT carries no interest either way. If a registered trader is in arrears with his VAT, he pays no interest, even though he may be subject to penalty proceedings. Conversely, if the Customs and Excise is in arrears with VAT repayments, no interest is payable on those sums. That contrasts with the Inland Revenue position, which, for historic and various other reasons, is different. Similarly, PAYE does not attract interest, even though it is delayed in payment.
We have endeavoured to extend this kind of offsetting arrangement. Indeed, taxpayers who were owed sums of VAT have been permitted to offset income tax, corporation tax or capital gains tax which they owed, up to the same amount. But in that case the difficulty is that the Inland Revenue is not, by statute, empowered to waive the interest on the tax that may be delayed, even though there may be very good reasons for the delay. There is no administrative tolerance that could properly be invoked in this kind of situation.
We feel, therefore, that the matter should be put right, and that the new clause will go some way towards mitigating the inconvenience, not to say positive hardship, that has been occasioned to businesses by the failure to make VAT repayments. The new clause is designed to ensure that where tax is deferred, whether it be income tax, corporation tax or capital gains tax, in order to offset a repayment of VAT which is due in connection with a business, and the delay is due to the industrial action of the Civil Service, interest on that tax should be waived.
§ Mr. Maxton
The Minister says that the interest will be waived for those who are not paying tax at present because of the industrial dispute. What about those who are not receiving their benefits because of the industrial dispute? I refer to those in receipt of teachers' pensions, and so on. Will the Government introduce legislation in order to pay those people interest on the sums of money that are outstanding to them?
§ Mr. Rees
The Government are equally concerned with that problem, but that is not the responsibility of the Customs and Excise. It is the responsibility of the Paymaster General's Department, which is located principally in Sussex. The hon. Member for Glasgow, Cathcart (Mr. Maxton) made a perfectly valid point. I am sure that he and many other hon. Members have received information about constituency cases, as I have, and are well aware that there is acute concern on the part of those whose pensions may be deferred or delayed because of industrial action. But this matter is not within the purview of the Treasury.
The point is well made, and my right hon. Friend the Lord President of the Council has, I believe, set in hand measures which will, I hope, enable these pensions to be paid through the banks. But the point raised by the hon. 1027 Gentleman is not the precise one at which the new clause is aimed. I do not dispute for a moment the validity of his point. If he cared to direct a question to my right hon. Friend the Lord President of the Council, I hope that he would receive an answer that would satisfy him.
The point is well within the Government's knowledge, but the new clause, I regret to say, cannot be directed precisely at the point made by the hon. Gentleman, because it is directed to empowering the Inland Revenue to waive interest. It is not to empower the Revenue or the Customs and Excise to pay interest. I do not think that it would be within the ambit of a Finance Bill to seek to enable the Government to pay interest on pensions that are delayed.
§ Mr. Robert Sheldon
My hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) has raised a good point, because it may be that the taxpayer is being charged interest on outstanding tax at the same time as he is awaiting a pension that is delayed due to some industrial action. Will the Minister consider that aspect of the problem?
§ Mr. Rees
I shall consider it. It is theoretically possible but, after all, most of the people who will be concerned with the kind of problem that the hon. Member for Cathcart has raised will probably be pensioners who will be subject to PAYE, so it is not quite the same point. It is a point of slightly narrower scope, because we are particularly concerned with the damage done to the cash flow of various businesses, particularly small businesses, by the inability of the Customs and Excise, due to the industrial action, to make repayments of VAT.
The new clause may not have as wide a scope as the whole House would like, but I hope that the House will feel that it is a modest measure which will go some way to ameliorate the present difficulty.
§ Mr. Foulkes
The new clause deals only with the Civil Service industrial action, and I can understand why the Government are preoccupied with that at the moment. But have they given thought to other forms of industrial action which might have a similar kind of effect, such as industrial action by Post Office workers?
Did the Government think of that possibility when drafting what is a fairly narrow clause, covering only the Civil Service industrial dispute?
§ Mr. Rees
The hon. Gentleman would be within his rights in suggesting that the Government should consider that kind of problem. The hon. Gentleman may be envisaging an interruption of repayments due to secondary action of some kind. I think that that goes rather wider than the clause. I hope that what the hon. Gentleman envisages is a little hypothetical. If and when it arises, I have no doubt that the Government will urgently consider the kind of response that they should make. However, that situation is not one which fortunately the country or the Government face now.
I think that the acuteness of this problem is that the Government appear to be asking with one hand whilst failing in their duty to pay with another. That, I think, is the unattractiveness of the present situation. The Government are acutely aware of the impact of the industrial action on registered traders. We are endeavouring to mitigate the problem. I do not think that we should endeavour to broaden the clause to cover any hypothetical 1028 situation which might arise and prevent a Government Department from making repayment of VAT or some other sum.
Although our consideration of this problem started with the consideration of the repayments of VAT, the new clause covers, as the House will see, any amountsdue to a person from a Government Department in connection with a business carried on by him.It therefore goes wider than repayments of VAT. I hope however, that we need not consider, either at present or during the lifetime of the Government, the hypothetical situation which the hon. Member for South Ayrshire (Mr. Foulkes), with his customary imagination and acumen, has raised today.
§ Mr. Paul Dean (Somerset, North)
Will my hon. and learned Friend make clear the position of the self-employed? Do I understand from the welcome new clause that those liable to schedule D—the self-employed—will be covered by the provision?
Secondly, are the Government contemplating any compensation for people who may suffer cash flow problems, or difficulties through the non-receipt of money that they would otherwise be usefully employing, as a result of VAT repayments not being made?
§ Mr. Rees
I am happy to give an assurance on the first point. The clause certainly covers the self-employed. It is not limited to bodies corporate.
On the second point, I regret that we have not devised a scheme of compensation. VAT has never attracted interest in either direction. No interest is charged on arrears of VAT, and similarly no interest has ever been paid on overdue repayments. That would considerably enlarge the scope of the provision. I can see the case that my hon. Friend would wish to make at greater length were he not sensitive to the pressures on the time of the House.
This is a modest measure, to ameliorate some of the damage that has been done. I do not put it any higher than that. I hope that on that basis it will be accepted by the House.
§ Mr. J. Grimond (Orkney and Shetland)
I regret that the Government have not included interest in the new clause. I have long felt that the behaviour of the Inland Revenue in regard to these matters is unfair. It charges interest on money due to it but resolutely refuses to pay interest on money due to the taxpayer, even though the fault may lie with the Revenue.
However, the immediate difficulty arises over the strike by civil servants. I appreciate not only that, but what the Minister said about how concerned the Government are over the matter. I do not think that that relieves Members of Parliament from the duty of pressing the Government again, since we are certainly being heavily pressed—at least, I am—by our constituents.
One firm in my constituency, LHD—largely shipping brokers and managers—is in great difficulties. I sent particulars to the Chief Secretary, since he replied to questions on the matter some time ago. However, that is only one of many firms affected all over the country, as the Government well know.
Inasmuch as the new clause offers some help, it is certainly welcome. We appreciate that the Government are trying to help these firms by allowing them to set off against taxation what is due to them. However, I must tell the Government that this will not get those firms out of 1029 their difficulties. I do not see how it will improve their cash flow, which is the main thing. I will not waste the time of the House by going over the arguments, which have been rehearsed before, but I hope that the Government will, possibly in a different context or in a different Bill, not only take up some of the points made on both sides of the House already but consider what further help can be given to small firms if the strike continues.
The Government are attempting to keep small firms in business and to encourage them to expand by helping them. However, many of them are finding that the damage done by this strike is far more serious than can be redeemed by any help that is offered to them.
Therefore, while I welcome the new clause, I trust that the Government will reconsider the whole matter. Does the Minister think that this provision will be of substantial help to firms which are in difficulties over their cash flow?
§ Mr. K. J. Woolmer (Batley and Morley)
I declare an interest as the parliamentary adviser to the Inland Revenue Staff Federation. As with the right hon. Member for Orkney and Shetland (Mr. Grimond), I acknowledge the problems that are being caused by the dispute for many of those involved in the economy who previously, perhaps, had gone along with the often wild and exaggerated view that the Civil Service provides no substantial service in reality and can be ignored until its services are called upon.
Why have the Government got themselves into such a position on this matter that they have had to bring forward this new clause? As I understand the position, the trade unions involved offered to process the VAT repayments manually. The House is owed an explanation from the Ministers, who are, after all, responsible for this area of service, as to why that offer has not been taken up more vigorously.
How much in VAT repayments is currently being repaid? What proportion is that of the normal repayment flow that could be expected? What positive and active steps are being taken to ensure that VAT repayments are being processed manually?
This is an important matter for the House. Although it is always useful to have a legislative way of overcoming the interest problem that would otherwise occur, what is even more important in this situation is to resolve the effects of the dispute as far as possible.
The new clause arises because VAT repayments are not being made. It goes beyond that to a number of other general considerations. I do not wish to go into all the ramifications, but I suggest to Ministers concerned that in terms of Inland Revenue staff they are in the position of the employer and they are having to come to the House this evening because the Inland Revenue has been allowed to get into the worst state of industrial relations and dispute with the Government, as the employer, in our history. In asking the House to change legislation in order to ameliorate some of the effects of the dispute I would have hoped that the Minister would at least have given us his views on the dispute, and his own views, as the employer, on its effects.
Is any assessment being made, by way of a review, of the effects and consequences of the current industrial action on the organisation and efficiency of the Inland Revenue service?
1030 7 pm
It is possible that we have yet to see the effects of a whole series of problems in the Inland Revenue service. There are the problems for VAT traders and also the substantial interest charges that are accumulating as a result of additional Government borrowing because the dispute has not been settled. I understand that this additional borrowing now amounts to over £80 million, almost the equivalent of 2 per cent. on the pay bill.
This is not the time, when negotiations are proceeding on delicate matters, to say anything that would make attempts to resolve the dispute more difficult. However, the Minister has lost an opportunity to explain the effects of the dispute on the Inland Revenue and the service that it should be providing to those involved within it as recipients or as taxpayers.
I should like to know what further problems lie in store as a result of this dispute. How much tax will not be collected? It was noticeable that the Minister, in his brief introduction, did not put any figures upon the problem. Hon. Members should know what sums are involved in terms of VAT repayments not being made and taxes not collected and the amount of interest that will be waived as a result of the new clause.
This seems not merely a reasonable but a necessary question. On a number of clauses in Committee, Ministers often did not provide figures unless pressed. One would have thought that the obvious procedure in putting before the House a Bill that involves millions of pounds would be for the Minister to say, "This is what we want the House to approve. This is what it will cost. You can form an assessment whether it is worth while."
I hope, therefore, that the Minister will give the figures involved in VAT not being repaid, the taxes that have not been collected and the estimate of the amount of interest being waived. Hon. Members on both sides have pointed out the problems facing people as a result of this industrial action. Many people will be assessing the sums being provided to overcome the problems for a particular group. I do not quarrel with the measure, but it seems that many of our businesses have come to a sorry state when a dispute in this area apparently threatens to bring them to their knees. It implies that their level of profitability and liquidity and the ability of the banking system to meet their requirements needs to be spelt out.
The amount not being collected and the cost that this imposes goes beyond the measure that we are discussing. While it would not be in order to have a wide-ranging consideration of all these issues, there is an opportunity for the Minister to inform the House of his latest estimates of the amount of revenue not collected and what this means in terms of additional interest on borrowings that have to occur. At the end of the day, this substantial sum of money will presumably have to be borne by someone. It may be the taxpayer, or the Government may attempt to recoup it by some other means.
Only a week or two ago the Chancellor of the Exchequer found himself involved in the need to produce a mini-Budget dealing with cigarettes for a sum of money less than the Government are having to pay out in additional interest charges. This has happened to a Government that attempted to say that the Civil Service dispute was not a serious matter for the public, that it could be simply sat out, and that it would go away. It has become crystal clear that it will not go away.
1031 It is a matter of deep regret that the Finance Bill, which can be implemented only by the good will and ready co-operation that has always traditionally been provided by Inland Revenue staff, is being considered in such an appalling industrial relations climate. How can the Chancellor of the Exchequer and his Ministers have allowed the Inland Revenue service to get into such an appalling industrial relations state? That is the situation. I have never attempted in the House in the last few months to stir up or to exaggerate the problem, but it is undoubtedly true that the Inland Revenue service, a traditionally extremely moderate trade union, is in a most appalling industrial relations situation.
Many further matters lie below the surface and are threatened as a consequence of this industrial action. The cost has yet to be counted. I hope that the Minister will be able to give his assessment on some of these important matters. For example, the computerisation of schedule D was due to commence in August. I assume that it is not going ahead on time. I assume that it has been put back. The result in the service will be an inefficiency that this House has wanted to overcome. I hope that the Minister will be able to say whether he has instituted any review of the effects and consequences of the industrial action on the organisation and efficiency of the service.
The whole dispute has been a tragic mishandling of industrial relations by the Government. The dispute has had effects far more serious than hon. Members on either side of the House really believed would occur. I hope that the Minister will be able to put a price on the cost. It is also possibly no more than a hope that Ministers responsible for the Inland Revenue service are doing all that they can to ensure that the true feeling within the Inland Revenue service is communicated to other Ministers and even to the Prime Minister, who thought that the Government could simply trample over the civil servants. This is a matter of deep regret and the House has still to count the cost.
I hope that the Minister will give me some figures and comment on the position, as he sees it, regarding the Inland Revenue service. Conservative Members, as always, prefer to take a one-sided view of industrial relations, but even they must be appalled at the effects of this dispute upon the Inland Revenue service.
It would greatly assist the establishment of the good industrial relations that we all desire if Conservative Members would on occasion ensure that both they and the public recognise the service that those workers provide. I hope that the Minister will be able to respond to the detail of my questions and say something to enable the employees for whom he is responsible to feel that their work is recognised and that he at least is trying to do what he can to ensure that the merit of their case obtains some recognition.
§ Mr. Campbell-Savours
My hon. Friend the Member for Batley and Morley (Mr. Woohner) has effectively put the case that many civil servants would have wished to put themselves, had they had the opportunity.
This measure falls within a group of other measures that my hon. Friends and Conservative Members have been asked to approve during the past 12 months. I group it with the measure that we dealt with late one night to deal with the industrial dispute by prison officers. It is part of the 1032 tinkering arrangements that the Government have had to introduce to try to offset the difficulties that have arisen as a result of poor industrial relations.
This will not be the last such measure. We shall see more measures of this nature over the next few years which attempt to remove the difficulties that result from industrial action and cushion those people who are suffering, for perfectly understandable reasons, from the effects of those industrial actions. However, that is not the way to resolve the problem. The real way is to come to terms with the problems in a practical manner. That is where the Prime Minister repeatedly fails.
I want to raise a matter which directly relates to the new clause, but which is of great concern to many thousands of business people outside the House—the question of VAT payments at the end of this industrial dispute. Some people have a certain amount of money that they can offset against their VAT liability, but many people are not in that fortunate position.
A few minutes ago I spoke to a small company in my constituency which has had difficulties and is to close tomorrow. Its problems arise in part from its VAT account. Of course, I do not expect flexibility from the Government in that respect, because when a liability arises it should be paid. However, for many small companies over the past few months the VAT money that they have not paid to the Treasury has been a particularly useful additional resource in their cash flow. The companies may have been wrong to use that money as part of their cash provision, because the money was not theirs by entitlement. It belonged to the Revenue. However, that is what they have done.
I have asked a number of parliamentary questions about VAT liability which companies may find difficulty in meeting at the end of the industrial dispute, and I want to know what action the Minister of State will take to insulate the country against the many bankruptcies that may occur.
I do not make a habit of making predictions in the House, but on this occasion I predict that at the end of the dispute many small companies will panic. As the civil servants get back to work and begin to bear down on them to pay the liabilities that they have attracted over the preceding months, they will find that they do not have the money.
Perhaps the Minister will show a little more flexibility, because many of the companies do not have the money to pay their liabilities. The money may be tied up in stocks or be owed by debtors. Certainly, it will not be available for many companies, and I hope that the Minister understands the serious problem that is involved. When the industrial dispute ends—assuming that it will not continue into the next Session of Parliament—hon. Members will table questions to measure the Government's sensitivity to this worrying problem.
§ Mr. Foulkes
I admire the facility and expertise of the Treasury Ministers. Almost all of them are lawyers and they make a convincing case, in spite of the fact that it is often an almost impossible one.
Before the last election we were told that the present Government would introduce very little legislation. We were also told that we should not have the sort of instant legislation and instant reaction of some previous Governments. Yet we have had possibly two of the heaviest Sessions of legislation for a long time, and in the 1033 past few days we have had perfect examples of instant reaction, instant legislation. We have heard the Home Secretary, although he does not have the courage to make a statement in the House—he does it behind the scenes to a group of Tory Back Benchers—talking about the reaction—
§ Mr. Foulkes
It is a comparison. It is typical of the things that the Government are doing. The same is true of this Finance Bill. Now we have this instant legislation to deal with problems which were created by the Government and which they could have avoided if they had honourably carried out the commitment that was given to civil servants that their pay would be brought into line with the pay of people working outside the Civil Service. The Government did not honour that commitment, and as a result they have to introduce this kind of legislation.
It was clear from the response to the question that I put to the Minister that he had not considered the possibility of any other disputes. It was clear that he was responding just to this dispute, responding to the problems of the moment and to the instant anxiety which now bears down on the Government. We understand that preoccupation. We understand the fact that they are caught up with the immediate problems. However, that is not the basis of good legislation. Time and again I have seen from the outside—and, in the past two years, from the inside—that the poorest legislation, the legislation that is found wanting soon after it is enacted, is that which is brought in in response to a problem and in an attempt to solve that problem.
My hon. Friend the Member for Batley and Morely (Mr. Woolmer) said that the economy must be in a pretty parlous state if so many businesses need such help. I am not against the help. Businesses need it to enable them to hobble and struggle on through the economic difficulties.
When driving the other day I heard on my radio that the Government's previous record for company liquidations had been broken. This Government are more successful at breaking their own records than Sebastian Coe. That is another high achieved by the Government. We can understand why they need to squeeze the legislation through to try to provide some meagre help for companies that are suffering so much from the other effects of the Government's economic policies.
The Government's intransigence and unwillingness to honour commitments has resulted in the Government falling into this pit. They have achieved the unique distinction of uniting the eight Civil Service unions in action. They are unions with a tradition of moderation. They have a tradition of not wanting to take militant action. However, the Government have succeeded in uniting them in opposition to their policies.
The unions understandably feel aggrieved because the Government have not honoured their pledges. That is why they are so unwilling to accept the word of the Lord President of the Council, who has offered to set up a committee to examine Civil Service pay. That does not solve the immediate problem, nor does it give the Civil Servants anything now. The unions are reluctant to accept the good faith of a Government who have already broken faith with them on pay.
1034 We are discussing instant legislation to solve an immediate problem. I asked the Minister what might happen if there were further industrial disputes. The Minister did not reply. If the Government continue kicking unions in the teeth and slapping down employees who have traditionally been moderate they will cause more disputes in their lifetime, however long that may be. I hope that it is not too long.
I wonder what other legislation will be introduced. The Minister says that there might be legislation if there were a postal dispute, for example. Then we might not have the convenience of the Report stage of a Finance Bill in which to slip a convenient amendment. We might be put to the trouble of dealing with special Bills to deal with particular problems.
A number of other problems caused by the current Civil Service action are not dealt with—
§ Mr. Deputy Speaker
Order. That is an interesting preamble but I hope that the hon. Gentleman will come to deal with overdue tax and sums which are delayed by the industrial action, instead of generalities.
§ Mr. Foulkes
I was about to bring my remarks to a conclusion. I was trying to explain, without going into specific details, that such legislation is bad. The Government could legislate for other circumstances caused by the industrial dispute but they have declined to do so. As my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) said, the Government are not willing to legislate to help people who are losing their benefits because of the dispute. The amendment provides a special privilege for small business men. I am not against that—as my hon. Friend the Member for Batley and Morley said, in the present dire economic circumstances caused by the Government's policies, they need it—but, many other groups and individuals also need help.
I hope that the Minister will consider the possibility of other disputes arising and causing similar hardship which the legislation does not cover. I hope that he will also consider the plight of others who are affected by the current dispute but who are not helped by the amendment.
§ Mr. John Farr (Harborough)
I welcome new clause 37 and particularly the back-dating of its provisions to 8 March this year. I have been in correspondence with the Chancellor of the Exchequer about a number of issues in this connection. Many cases of hardship occur as a result of the civil servant's industrial action and they are multiplying almost every day. A tragic example that I heard of the other day is that attendance allowance books are not being posted to some of my disabled constituents because of pickets who are preventing the posting of the books. We must hope for an early end to the industrial action.
In the meantime, the Government are right to introduce the new clause. Pharmacists are also seriously affected and are in severe financial difficulties. Many pharmacists are owed tens of thousands of pounds in VAT repayments. Such small business men will go under unless a sensible solution is found.
Other categories and individuals are also suffering. For instance, a double glazing contractor came to see me last Saturday. He calculated that he was owed about £3,000 in VAT repayments, which he has no chance of receiving at present. The Government's solution in new clause 37 is admirable if the amount of VAT repayments are about in 1035 balance with any tax money that is due. That is not always so. In many cases the VAT repayments due greatly exceed the amount of tax due to the Exchequer.
I cannot help thinking that in some respects new clause 37 is a rather rough and ready solution to a sophisticated problem. In agriculture, for instance, a farmer might be engaged in business. He might owe a little money in taxation but be owed a four-figure sum in VAT repayments. The solution proposed in new clause 37 will not help him.
I welcome the new clause. It is better than nothing. I hope that my hon. and learned Friend will say whether he has considered the alternative of maintaining the 12½ per cent. interest due on overdue taxes but simultaneously, as from 8 March, chalking up as credit the 12½ per cent. on VAT repayments due. In that way a large number of people who will not be helped tremendously by the clause will be more greatly helped. I shall be grateful if my hon. and learned Friend can address himself to that point when he speaks.
§ Mr. Robert Sheldon
We welcome the principle that lies behind the new clause, but we must question the way in which it was introduced and we must consider the other ways in which such provisions might have been made.
The new clause deals with two forms of taxes that can be waived for the time being because of the failure of the Government to make payments due to the taxpayer. Those are income tax under pay-as-you-earn and class 1 contributions. If a taxpayer owes that money, he can withhold payment of it if there is due to him some VAT or a grant or subsidy.
My hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) asked why that could not apply to a person receiving a public service pension or a retirement pension, who receives it late and loses the interest on it. That was a good question. The answer that the Minister of State gave was that that did not apply, but he did not go into the question why the new clause was not more broadly set out to cover such matters.
It will be within the Minister's recollection and that of the House that a number of years ago there was a national savings dispute under which interest was delayed. Because of it legislation came through the House to ensure that the people concerned, having received promises of payment by the Government, would not be inconvenienced as a result of the late payment of interest. Therefore, their interest was brought up. That is the path that the Minister of State could have gone along in precisely that way, but he did not choose to do so. The first question which we must ask is why he did not make the new clause more widely drawn to cover those aspects as well. He would have been following previous legislation designed to meet problems such as the ones which now arise.
The next question covers the matter about VAT or any grant or subsidy due to a person. I am not sure whether the Minister has covered all the various payments by the Government which might be made to the taxpayer. Even if he has, the hon. Member for Harborough (Mr. Farr) mentioned those people who had no tax owed by them, who would never be able to benefit. That is a valid point that follows from the one that I made at the outset. Those people should be offered an interest charge of an approximate amount. I know that such things cannot be settled accurately, but it was done before. If the strike goes 1036 on much longer we shall be dealing with substantial sums and people will be failing to receive repayments. The effect on their cash flow will not be assisted by a number of measures in the Bill. The hon. and learned Member might say that that does not apply to many people. I grant that, but it will apply to some. It is an injustice to some and on previous occasions it was remedied.
The Minister of State set out the cash flow problems that business men and farmers have. Out of the 1.3 million VAT-registered traders, 400,000—or roughly one-third—are repayment traders. Those taxpayers are owed their VAT repayment. The hon. and learned Gentleman should be a little more forthcoming about what conditions there might be when the inspector of taxes does not so agree. If he agrees, the pay-as-you-earn will be a way in which he will not have to pay interest on payments of income tax and corporation tax.
As the hon. and learned Gentleman rightly mentioned, pay-as-you-earn carries no interest charges. Of course, we are in real difficulty here because we are offsetting one payment against another. One payment comes under Customs and Excise and the other comes under Inland Revenue. The House will be aware that the rules are not the same under Customs and Excise as under Inland Revenue. Those are two revenue departments that grew up separately, with their different rules and forms of discretion. Therefore, typically, Customs and Excise has greater authority arising from its old Customs activities, when it had power to seize goods and march into all sorts of premises. The Inland Revenue, which came on the scene later, in more civilised times, has to obtain powers of warrant, and so on. Therefore, the rules are different.
I know that a number of people have looked for eventual unification of those two bodies of the Revenue and are hoping for an eventual amalgamation. That may come. We must think in terms of loyalties to the service and traditions, which are of importance in these matters. However, that is not for us to consider. What we must consider is how we operate when those bodies have different rules and different requirements, and we are asking them to intermix their relations based on their different requirements. It will be necessary for the Minister of State to assure the House that, where one rule is waived for one of the revenue departments, corresponding action will be taken by the other, even though that is not normally the case at present.
The Minister mentioned the question of discretion. We know that Customs and Excise has greater powers of discretion than the Inland Revenue. It is able to waive the laws much more readily than he Inland Revenue. I hope that the hon. and learned Gentleman will show how the Customs and Excise will waive its discretion to the maximum and how that will fit in with the problems of the Inland Revenue.
The most important thing with which we are concerned is the reason for the new clause, as my hon. Friend the Member for Batley and Morley (Mr. Woolmer) said in an important intervention and as was said by my hon. Friend the Member for Workington (Mr. Campbell-Savours). That concerns the cost of the dispute and the reason for it. In that respect, the first question that I should like to ask is: what is the current estimate of the amount of tax outstanding? I should like to follow my hon. Friend the Member for Batley and Morley in asking for a breakdown of the figures.
1037 It is extraordinarily difficult to obtain such figures, which are of great importance in understanding the way in which the Government machine is not operating in the way in which we always took it for granted it would. The figures for the amounts have been £4 billion to £5 billion of revenue outstanding as a result of the dispute, and up to now the interest charges total about £80 million. I should like the Minister of State to bring those figures up to date and to give us the breakdown between income tax, VAT, pay-as-you-earn, corporation tax and capital gains tax.
There are some firms—not necessarily many—which, as a result of their failure to pay over their pay-as-you-earn and some of the other taxes, to quote someone whom I talked to at the weekendare almost awash with money.That is because of their failure to pay the taxation which they would have otherwise paid. I should like the Minister to comment on that aspect.
The most important thing is the way in which a settlement has to be made at some stage, and the earlier the better. Unquestionably there has been a great mishandling of the whole situation which largely comes from the impression given that here are a Government who do not like the Civil Service. On a number of occasions they seem to go out of their way to make that clear. Those who are attuned to understanding those signals—no one is better attuned than the Civil Service—know full well that when a Government do not give their normal commendations that are almost obligatory and customary, and withhold the praises that are part of the normal manner in which a Government conduct their business, their dislike of the Civil Service compared with those who earn their living in the market economy is clear and unequivocal. The employer-employee relationship and the industrial relations aspect, on which we are berated time and again by the Government, is an essential aspect.
If we do not achieve good industrial relations in the Civil Service, not only will this Government and the next Government suffer; so will the whole population of Britain through the way in which the country is administered. When we receive those lectures on industrial relations we must look to the Government to see how they are operating their industrial relations. It is an easy matter to run the Civil Service. There is a fund of loyalty, which has existed for centuries. If one had to pick loyal people, civil servants would be somewhere near the top, if not at the top.
I have a long association with the Civil Service extending back to my days on the Fulton committee. I know, as the Minister may know, of the great dissatisfaction and distaste felt by a number of those loyal civil servants who are torn between what they consider to be wrongs done to them and what they should do because of their position. It may be that Ministers, seeing only the top civil servants, are not aware of what is happening at levels not far below the top. I urge those with responsibilities in that area to look a little further than their immediate preoccupations allow.
The issue is of enormous importance. The settlement of the dispute is not a question of money. People believe that the Government have played a rather mean trick because they suspended the pay research unit unilaterally. They could have imposed a freeze on wages. That has been done before. If the Government had said that they could 1038 not afford a rise, that might have been understood. But the arrangements that have been made in dealing with those who understand and comprehend these matters have been most distasteful. That has resulted in a declining morale in the Civil Service. The Minister may realise that he is not receiving the service from civil servants that he used to receive as recently as a year ago. That fact is known to everyone. It used to be possible, in certain circumstances, to ask civil servants to operate well beyond their normal call of duty, and they did so willingly. That does not happen so easily now. I shall not go further than that, because I hope that the process is reversible. That is the message that the Minister must convey to his colleagues, and hope to achieve a settlement of the dispute at the earliest possible moment.
§ Mr. Peter Rees
We have had a wide-ranging debate about what was a modest and narrowly-drawn clause. Perhaps it is none the worse for that. Perhaps the House should investigate these matters. Having listened as carefully and sympathetically as I could to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), I am bound to say that his perception of the problem is obviously rather different from his perception of a somewhat similar range of problems faced by the Administration of which he was a member.
§ Mr. Rees
The hon. Gentleman may not recall the winter of discontent. He may not recall the VAT problems that the Government inherited from the Labour Administration. We know that he has a gay, boyish enthusiasm for our debates, without a great understanding of the problems about which he speaks.
The right hon. Member for Ashton-under-Lyne made several highly mischievous points, as he well knows. He said that the Government do not like civil servants. Of course we do not like the present industrial action. Of course we do not like its impact on a large number of our fellow countrymen, both in business and without. But to suggest that the Government have any personal animus against the Civil Service is absolute nonsense. I do not know how he discharged his duties. I understand that they were somewhat comparable to mine. From time to time he came into contact with the Civil Service. How far he ventured outside Whitehall he will no doubt explain on a different occasion.
During the short period that I have been charged with my responsibilities I have gone outside Whitehall. I have seen the Revenue Departments working in many parts of the country, and not exclusively in Somerset House or King's Beam House. On appropriate occasions I have expressed my appreciation of the work done and the loyalty shown, but that cannot prevent me, on this occasion, from expressing my concern about the damage being done to sections of our community. That concern has been expressed from both sides of the House. The right hon. Member for Orkney and Shetland (Mr. Grimond) mentioned a company operating in his constituency that is in financial difficulties. My hon. Friend the Member for Harborough (Mr. Farr) is rightly concerned with pharmacists and the double glazing industry. Concern is felt on both sides of the House.
1039 The hon. Member for Batley and Morley (Mr. Woolmer) made a long and powerful speech. He was the only Member who did not express similar concern. He was speaking from a rather special position.
§ Mr. Woolmer
That is an equally mischievous, if not even more mischievous, remark than the one of which the Minister accused my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). He knows well that I made it clear that I support the new clause. I also made clear my regret about the impact of the current dispute. I drew the Government's attention to the fact that if they cared as much for their own industrial relations as we care for the effects of the Civil Service dispute on those outside the House we might move a little nearer to a resolution of the dispute. I ask him to withdraw that imputation. I did not at any time show anything less than concern about the position.
§ Mr. Rees
I shall not give way. I wish to answer the hon. Member for Batley and Morley. I cannot answer two Members at the same time. I am delighted that the hon. Member for Batley and Morley has, at this late stage, made his position clear. It is right that he should do so. I shall study with close interest his contribution in Hansard, as soon as it is printed.
§ Mr. Sheldon
I rose earlier because I thought it would save time, and I wished to deal with the same point. I deeply resent the Minister's comment about my mischievous speech. I said what I firmly believed. I have some backing for that. This is not the place or the occasion to go into that in any great detail. What I said I had thought out previously. I hope that the Minister will have the courtesy to recognise that.
§ Mr. Rees
Let us by all means return to the main point. I have always thought it a courtesy of the House that those who reply to a debate, for either the Government or the Opposition, deal with the points raised. If the hon. Member for Workington (Mr. Campbell-Savours) pays me the compliment of reading my original speech in Hansard, he will notice that I limited myself closely to the subject of the new clause. I have only been drawn to comment on the more general remarks because of the tenor of the interventions from Opposition Members.
The right hon. Gentleman's perception of the problem appears to have changed a little during the past two years. He is also a little historically inaccurate. The Inland Revenue Depaertment was derived from the Customs and Excise. Perhaps that is a matter of historical curiosity. I did not entirely understand the rather heavy weather that he made of the various discretions of the two Departments. The Customs and Excise does not have any general discretion in the area of tax. Neither does the Inland Revenue—[Interruption.]The right hon. Gentleman, from a sedentary position, persists in giving the House a constitutional lecture about the powers of the Customs and Excise and the Inland Revenue. I shall be delighted on 1040 another occasion to engage him in debate. However, it is not relevant to the point in hand— [Interruption.] If I have been drawn to rather more asperity than on other occasions it is because of the tenor of the remarks from the Opposition Benches.
We are discussing a matter of some delicacy. I take that phrase from the hon. Member for Batley and Morley who said that it was a delicate matter. We should show a certain responsibility in our utterances. That is why I limited myself to the theme of the new clause. I did not wish to enlarge the debate into a general debate on either industrial relations as a whole or as it affects the Civil Service at this melancholy moment. However, I felt it right and proper to answer some of the points raised by the Opposition.
I say to my hon. Friend the Member for Harborough that attempts have been made to mitigate the difficulties by making enhanced payments. There is recognition of the VAT difficulties that have been experienced.
The right hon. Member for Orkney and Shetland and others have particular companies in mind. We profoundly regret the damage done to companies' cash flows by the delay in the repayments of VAT. Regrettably, there is no practical way of making those payments in the present conditions.
The hon. Member for Batley and Morley said categorically that the trade unions had offered to handle VAT payments manually. I must say categorically that no such offer has been made to the Government or to the Commissioners of Customs and Excise. If such an offer had been made, it would not have been possible to handle the thousands of repayment claims manually. This aspect of Customs and Excise work has been computerised for some years. It is no longer possible to move back to a manual operation. I am sure that the hon. Gentleman knows that practically speaking it would not be possible to achieve a solution to the problem by embarking on a manual operation. I hope that my comments put that aspect of the problem in perspective.
The hon. Member for Bailey and Morley said that the cost of the Government's new clauses and amendments had to be dragged out of us. If he studies the reports of our debates in Standing Committee I am sure that he will find that my Treasury colleagues and I were ready to give the figures where possible. The interest on overdue tax runs on average at £30 million a year. It is impossible for me to say precisely how much of that interest is likely to be forgone. That must be a matter of speculation. One of the consequences of the present regrettably circumstances is that we do not have perfect records.
Normally, VAT repayments run at about £110 million or £120 million a week. The inability to make the repayments is having an impact on business. There are firms and individual taxpayers who cannot cash their cheques. Indeed, the cheques may not have been sent. There are some cash flows that will have benefited. Regrettably, there is no precise correlation of the two groups—namely, those who have benefited and those who have not.
The hon. Member for Workington made a rather highly charged prediction that small businesses would panic at the conclusion of the industrial action. Surely their response will be precisely the reverse. I am sure that they and everyone else will be happy when the industrial action is brought to a close and the proper business of collecting and repaying tax can continue.
1041 I was pressed by the hon. Member for Batley and Morley to say what the long-term consequences of the industrial action will be. I assure the House that we shall draw the necessary lessons from this sad interlude. That is important for the general administration of the nation. It is vital from the point of view of the Customs and Excise and the Inland Revenue that we draw those lessons.
§ Mr. Tim Eggar (Enfield, North)
Is it not the case that the majority of small businesses while suffering some inconvenience, fully support the Government in their determination to keep Civil Service wages under control?
§ Mr. Rees
I am sure that they recognise that there are certain important principles at stake. I am gratified that there is a measure of support for the Government's position. I do not think that it is necessary to broaden the debate, as some hon. Members have tried to do, by discussing the rights and wrongs of the measures that have been taken to bring the dispute to a satisfactory and honourable conclusion. I am sure that the House wishes that such a conclusion had already been achieved, not only for the better administration of the nation but to reverse the unfortunate impact on many sectors of our community, which has been drawn to our attention by those on both sides of the House.
I do not pretend that the new clause provides a perfect solution to the hardships that have been suffered by the business community. I take issue with the hon. Member for South Ayrshire (Mr. Foulkes), who said that the clause was designed for small businesses. That is not so. It was designed for anyone in business. I accept that it is likely that there are more small businesses than other businesses in the repayment category.
The hon. Member for Batley and Morley candidly declared his interest. Having declared it, and having made a rather partisan speech, I think that he was slightly unfair to my hon. Friends when he said that they made speeches from a certain position. My hon. Friends did not comment adversely on certain of the remarks made by the hon. Gentleman. They were merely concerned to underline, as are the Government, the hardships that can be inflicted by industrial action of the sort that we are witnessing. The clause is designed to ameliorate at least some of the hardships. I hope that it will command the support of both sides of the House.
§ Question put and agreed to.
§ Clause read a second time, and added to the Bill.