Commons Sitting of 15 July 1981

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS
  BRITISH RAILWAYS BILL
  Lords amendments agreed to.
  ULLAPOOL PIER ORDER CONFIRMATION BILL
  Considered; to be read the Third time tomorrow.
Oral Answers to Questions

  SCOTLAND
  Mr. Speaker: I appeal to hon. Members to ask a question and not to submit an argument when they put a supplementary question.
  Mr. Hugh D. Brown: On a point of order, Mr. Speaker. I do not wish unduly to detain the House and, as you know, Mr. Speaker, I shall accept your advice and guidance on the matter. It will not have escaped your attention that out of the total of 36 questions on today's Order Paper, 19 relate to one subject. In case you think that I have an axe to grind or a personal interest, in that my question is No. 20, I assure you that that is not so. Nine out of the first 16 questions relate to the same subject. I appeal to you in good faith. I have not taken the trouble to discover whether the Minister is linking even half a dozen of the questions, but I hope that you will call as many of my hon. Friends as possible rather than the usual divide between the two sides of the House. I am making a fair and reasonable point. I draw the matter to your attention, Mr. Speaker, in the light of the unusual circumstances of the 1981 Act.
  Mr. Canavan: On a point of order, Mr. Speaker.
  Mr. Speaker: Order. If the hon. Gentleman wishes to waste Question Time, he can do so by all means.
  Mr. Canavan: I shall wait until after Question Time to raise the point of order, Mr. Speaker.
  Mr. Speaker: May I say that, obviously, more hon. Members are called when questions are not grouped. I tend to call fewer hon. Members if more questions are taken together, but on this occasion there is little grouping.

  SCOTLAND

    Age Concern Scotland (Report)
    Mr. Foulkesasked the Secretary of State for Scotland what consideration he has given to the recommendations contained in the Age Concern Scotland working party report on retirement education in Scotland; and whether he proposes to implement any of the recommendations.
    The Under-Secretary of State for Scotland (Mr. Alexander Fletcher): The recommendations addressed to my right hon. Friend are being considered, and it would be premature for me to comment upon them at this stage.
    Mr. Foulkes: That is a disappointing reply. Does the Minister accept that in reality it will be extremely difficult either for the Government or, more important, local authorities and voluntary organisations to carry out any of the recommendations because of the cutbacks that We Government are imposing on the education budgets and community education budgets of regional councils and, above all, their effects on the voluntary organisations?
    Mr. Fletcher: The introduction to the report says:
    "We hope that all the organisations to whom the report is addressed will give it careful consideration".
    The report was published in May, and we are now giving it careful consideration.

    Local Authorities (Spending)
    Mr. Eadieasked the Secretary of State for Scotland how he proposes to respond to replies from local authorities as a result of his request to them to cut their spending; and when he intends to report to the House the action he intends to take.
    The Secretary of State for Scotland (Mr. George Younger): On 10 July I laid before the House reports proposing reductions in rate support grant of £47 million for Lothian regional council, £2 million for Dundee district council and £1 million for Stirling district council. I intend shortly to lay a further report proposing grant reductions in respect of Dumbarton, East Lothian and Renfrew district councils. I do not propose to lay a report in the case of Cumnock and Doon Valley district council. Replies from authorities to my general request for revised budgets are not yet complete, but I have indicated that it may also prove necessary to reduce grant generally if present budgets are not substantially reduced.
    Mr. Eadie: Does the right hon. Gentleman accept that that is a disappointing reply? It articulates the unyielding attitude of the Government towards the problem of local authorities. Does he accept that it is the responsibility of not only his Government but all Governments to subscribe to strengthening local democracy in local government? How can he reconcile the Government's determination, because they have a mandate, to implement their election manifesto with his and the Government's attitude of wishing to prohibit a Labour-controlled council in Lothian from implementing its manifesto?
    Mr. Younger: I do not agree with the hon. Gentleman, especially when he suggests that I have been unyielding. Throughout the controversy during the past two years I have, on every occasion, bent over backwards to try to moderate any difficulties for Scottish local authorities. The hon. Member will especially recall that I made some savings in my budget to reduce the abatement on local authorities. I am asking local authorities to contain their spending to a level that is higher than that approved by the Labour Government. That cannot be unreasonable.
    Mr. Ancram: Will my right hon. Friend confirm that he remains prepared to meet the Lothian regional council to discuss proper areas where savings can be made? Does

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    he agree that its intransigence in refusing to see him simply underlines that its action is partly political and is working against the interests of those that it was elected to serve?
    Mr. Younger: I appreciate my hon. Friend's remarks. I wish to make it clear that I am only too willing to discuss expenditure and expenditure reductions with any local authorities. I have made that clear all along.
    Mr. Millan: Is it not now—
    Mr. Ron Brown: May I just put this on the Table, Mr. Speaker?
    Mr. Speaker: Order. I name Mr. Ron Brown for gross disorderly conduct. I call upon the Minister to move the appropriate motion.
    Mr. Younger: I beg to move, That Mr. Ron Brown be suspended from the service of the House.
    Mr. Brown rose—
    Mr. McQuarrie: Out.
    Mr. Brown: The point is valid.
    Mr. Speaker: I name the hon. Gentleman. The question is, That the hon. Member be suspended from the service of the House.
    Mr. Brown: The point is relevant, Mr. Speaker.
    Mr. Speaker: As many as are of that opinion say "Aye".
    Hon. Members: Aye.
    Mr. Speaker: To the contrary "No"—[Interruption.] Clear the Lobby. [Interruption.] Order. I am advised that there were no "Noes". I shall put the Question once more. The Question is, That the hon. Member be suspended from the service of the House. The "Ayes" have it.
    Question agreed to.
    The hon. Member, having stood before the Table, was directed by Mr. Speaker to withdraw from the House; and he withdrew accordingly.
    Mr. Millan: May I now put my question, Mr. Speaker? Is it not now absolutely clear that the way in which the Government have dealt with Scottish local authorities during the past couple of years, and the attitude that they have displayed towards them, has now produced—as we said it would—the inevitable confrontation? The hit list of authorities produced by the Secretary of State cannot possibly be sustained on the justice of the cases that the authorities have produced.
    Is the Secretary of State aware that we are now facing a crisis of unprecedented proportions, with the distinct possibility of a breakdown of essential services? In those circumstances, instead of proceeding with these orders, will he now do what he should have done before and hold discussions with all the authorities concerned, including Lothian regional council?
    Mr. Younger: I am afraid that I cannot agree with the right hon. Gentleman's description of the effect of the reductions. Perhaps, on reflection, he will agree that it is not strictly fair, because the level to which I am trying to reduce the authorities' budgets is above that which he thought was sufficient some years ago when he was in office.
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    I shall certainly respond to the right hon. Gentleman's request to talk to the authorities. I am prepared to talk to any of them about their budgets and their reductions. [Interruption.]
    Mr. Millan: Will the Secretary of State talk to the authorities before proceeding with the orders?
    Mr. Younger: There is no time for me to do that. However, I am already arranging discussions with at least two of the authorities, and they will take place before the order is made. If others wish to see me before then, I shall be happy to arrange it.—[Interruption.]
    Mr. Harry Ewing: On a point of order, Mr. Speaker. Will you please call for some order in the House so that Scottish Question Time can proceed in an orderly fashion?
    Mr. Speaker: We have had enough disorder this afternoon, of a most unusual character.
    Mr. Gordon Wilson: Is the Secretary of State aware that his proposed cuts in rate support grant will hit areas of multiple deprivation? Does he dare risk the consequences in view of recent events in England?
    Mr. Younger: If I were in any local authority in Scotland and I were trying to implement these very reasonable reductions, I would not make any reduction in areas of multiple deprivation. I hope that local authorities will not do so either.
    Mr. Hugh D. Brown: On a point of order, Mr. Speaker. [HON. MEMBERS: "Oh!"] I have the right to raise a point of order. I object to Conservative Members trying to anticipate what I might say. Mr. Speaker, I drew your attention to the fact that there were many related questions. I condemn the action of my hon. Friend the Member for Edinburgh, Leith (Mr. Brown) because it was sheer gimmickry. It will not have escaped your attention that the Secretary of State has given the names of more local authorities. If questions had been linked, pertinent questions could have been asked. I know that it is for the Government to decide whether questions are linked. I beg you to understand why some of us are a bit annoyed this afternoon.
    Mr. Speaker: With every respect to the hon. Gentleman, I shall be able to call many more hon. Members whose local areas are affected if we are allowed to proceed. I hope to call as many hon. Members as possible from both sides.

    Poultry Industry
    Mr. Mylesasked the Secretary of State for Scotland if he will make a statement on the competitive position of the poultry sector of the agriculture industry in Scotland.
    Mr. Younger: In the free Community market which applies to eggs and poultry meat, I am concerned to ensure that the Scottish industry—which is undoubtedly efficient—is able to compete against imports on a fair and equitable basis.
    Mr. Myles: Does my right hon. Friend realise that although a poultry processing plant in my constituency received a FEOGA grant from Europe of £39,000 recently, it is finding it difficult to compete with the level and cost of imports?
    Mr. Younger: I appreciate the problem that my hon. Friend mentioned. We are concerned about reports that we

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    have received about overseas subsidisation in this sector, which is affecting our home industry. We have raised the matter with the Commission and hope that it will look into it urgently.
    Mr. Robert Hughes: Is the Secretary of State aware that his right hon. Friend the Minister of Agriculture, Fisheries and Food maintains that there is no mechanism by which the Government can police imports of poultry meat? Not only poultry factories, but hatcheries, feed mills and everything else in the industry are closing. What action will he take, other than simply asking the Commission to investigate the matter?
    Mr. Younger: That is the first step open to us. We expect the Commission to take the point seriously and to take action. We operate within Community law, and we intend to continue to do so.

    Scottish Trades Union Congress
    Mr. Langasked the Secretary of State for Scotland if he has any plans to meet the general secretary of the Scottish Trades Union Congress to discuss the recovery of the Scottish economy.
    Mr. Alexander Fletcher: My right hon. Friend and I have met representatives of the STUC several times since taking office and have made it clear that we are prepared to meet them whenever that would be useful.
    Mr. Lang: When my hon. Friend mext meets them, will he emphasise that their Stone Age intransigence about the reform of apprenticeships and training schemes will be a major impediment to the creation of new employment when we emerge from the recession?
    Mr. Fletcher: There is no doubt that the apprenticeship system is obsolete. It restricts employment opportunities for youngsters, as do the wages that trade unions demand that youngsters should earn, which take no account of the fact that youngsters are inexperienced and require training. If those two matters could be tackled by the STUC and the CBI, there would be better prospects for youngsters in Scotland.
    Mr. James Hamilton: When the Minister meets the general secretary of the Scottish Trades Union Congress, will he remind him of the request that came from the Federation of Civil Engineering Contractors for more public expenditure? Will he also remind him that we require 20,000 houses in Scotland and that there is a need for a modernisation programme that will bring men back to work? Will he do something positive for Scotland for a change before the country goes into liquidation?
    Mr. Fletcher: Reflation would worsen inflation, and that would do nothing for the unemployed or for job prospects in Scotland or anywhere else.
    Mr. Henderson: When my hon. Friend next meets the general secretary of the STUC, will he congratulate him on the important contribution that the trade union movement has made to youth opportunities schemes in the widest sense and ask him to use what influence he has to encourage the unions to make available their valuable co-operation, which is greatly appreciated, in apprenticeship training and the payment of young people?
    Mr. Fletcher: I shall certainly do that. As I said earlier, real jobs are more valuable to young people than even the best efforts of the youth opportunities programme.
    Mr. Harry Ewing: The unemployment figures for Scotland will be published again on Tuesday of next week. How many more job opportunities will be denied not only to youngsters but to all working people in Scotland as a result of the Government's disastrous policies? When will the Minister and the Secretary of State stop being the Prime Minister's poodles and start trying to protect the interests of Scotland inside the Cabinet?
    Mr. Fletcher: I am happy to repeat that the priority given by the Government to reducing the rate of inflation is the most important thing that can be done to improve job prospects in Scotland and elsewhere in Britain.

    Glasgow (Population Decline)
    Mr. David Marshallasked the Secretary of State for Scotland if he will make additional resources available to Glasgow, as a special case, in order to reverse the present decline in its population.
    The Under-Secretary of State for Scotland (Mr. Malcolm Rifkind): The special needs of Glasgow are already being recognised by such measures as the assistance given through the urban programme, the particular priority accorded to the GEAR project, the distribution formulae for rate support grant and housing support grant, and its special development area status where maximum financial incentives to incoming or expanding industry may be available.
    Mr. Marshall: Is the Minister aware that his answer is most unsatisfactory? Does he appreciate the social consequences that will confront Glasgow? Will he agree to convene an early meeting between Glasgow district council, Strathclyde regional council and himself to tackle this problem, which cannot be solved without Government assistance, which is not forthcoming despite what the Government say because they are biased against Glasgow?
    Mr. Rifkind: The suggestion that the Government are biased against Glasgow does not tally with Glasgow having 20 per cent. of local authority housing and receiving 27 per cent. of total public expenditure on housing. In the current year it will receive 42 per cent. of the SSHA budget. In the last year for which figures are available it received 49 per cent. of the Housing Corporation's budget. The needs element of rate support grant now paid to the Glasgow district council is £42 per head, which is nearly twice the average sum received by all the other district councils.
    Mr. Allan Stewart: Does my hon. Friend agree that this and previous Governments have poured hundreds of millions of pounds into the East End of Glasgow, often with no obvious returns? Is it not time for a more balanced programme for the whole conurbation, with appropriate priority for areas such as Barrhead and Milton in my constituency?
    Mr. Rifkind: The House generally will recognise that Glasgow's problems deserve special attention. My hon. Friend is correct in saying that we must give even greater attention to the way in which available resources have

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    been used over the years. Enormous resources have been poured in by successive Governments, but Glasgow's problems remain acute.
    Mr. Maxton: Is the Minister aware that, despite his great claims a few minutes ago, his capital allocation for Glasgow district council for the coming year will be insufficient for it to maintain its present stock of housing, which means disaster for those who live in council houses in Glasgow?
    Mr. Rifkind: I have already said that Glasgow receives a substantially greater proportion of housing resources than its population merits. I do not say that in criticism, because it is a justifiable allocation. However, it reveals that any suggestion that the Government are discriminating against Glasgow is at variance with all the available facts.

    Local Authorities (Spending)
    Mr. Craigenasked the Secretary of State for Scotland what effect he estimates that his request to local authorities to cut their spending commitments will have on employment and services within the areas concerned.
    Mr. Rifkind: If authorities complied fully with my right hon. Friend's request to revise budgets, the resultant levels of expenditure and staffing would be broadly in line with those which prevailed in 1977–78. Priorities among services are a matter for the individual authorities to resolve.
    Mr. Craigen: Has the Minister made no serious estimate of the number of job losses that will occur in local government and through natural wastage or redundancy? Is he saying that he has not made that calculation?
    Mr. Rifkind: I am saying that there is little doubt that in the authorities that have been identified by my right hon. Friend many millions of pounds could be saved without compulsory job redundancies or any significant effect on the vital services that are provided to the local community.
    Mr. Sproat: Does my hon. Friend agree that some of the claims about redundancies by Socialist spokesmen, especially by those representing the Lothian council, are ridiculously exaggerated and irresponsible? Will he remind the House that Tory councillors in Lothian have identified £28 million-worth of cuts that could be made without any job being lost?
    Mr. Rifkind: My hon. Friend is correct. I understand that the Conservative group on the Lothian district council announced this morning that, after discussions with the officials of the Lothian region, it can identify savings of £28 million that could be made without any compulsory job redundancies and without any effect on vital services.
    Mr. Home Robertson: The Secretary of State has announced that he will take punitive action against East Lothian district council as well as Lothian regional council, in spite of the assertion of East Lothian Tories, among others, that he is asking the impossible of them. As East Lothian will get a double dose of these mad cuts, will the Minister say exactly what effect the cuts will have on employment, services and everything else in the area that I represent?
    Mr. Rifkind: The Government are willing to have discussions with the East Lothian district council—
    Mr. Home Robertson: Horse trading.
    Mr. Rifkind: I acknowledge that it has already identified certain savings that could be made in its budget. If sufficient effort is made, considerably greater savings can be identified.
    Mr. Bill Walker: Does my hon. Friend agree that the behaviour that we saw earlier this afternoon is fairly typical of the far Left? Is he aware that if Dundee district council were to follow the example of Perth and Kinross district council there would be substantial cuts in its spending and a small reduction in manpower levels?
    Mr. Rifkind: I will not comment on the conduct earlier this afternoon. Dundee district council has requested a meeting with the Government. I am meeting a deputation from the council tomorrow morning. Stirling district council has also requested a meeting, the date for which has still to be arranged. Lothian regional council has not so far requested a meeting.
    Mr. Dewar: Does the hon. Gentleman accept that the bitter vendetta that he is waging against Scottish local government and local democracy is being conducted regardless of the social consequences? Will he comment specifically on the COSLA estimate that if the cuts were implemented in full there would be a loss of about 6,000 jobs in the teaching profession alone? Is it not a matter for regret that the Government are intent on creating not employment but misery?
    Mr. Rifkind: The hon. Gentleman is absurd in his accusations. He will be aware that when the previous Labour Government were in office his right hon. Friend the Member for Glasgow, Craigton (Mr. Millan), as Secretary of State for Scotland, presided over a substantial reduction in staffing in local authorities in Scotland without redundancies. If local authorities are prepared to co-operate with the Government, as in the past, the same achievements could be made.
    Mr. Millan rose—
    Mr. Speaker: Order. I have not called the right hon. Gentleman. I will call him, but it will be at the expense of his Back-Bench colleagues.
    Mr. Millan: Will the Minister say whether the figure of 6,000 teachers is correct? He knows that it is an accurate COSLA figure. Why does he not have the guts and decency to admit it?
    Mr. Rifkind: The right hon. Gentleman will not expect me to comment on education matters within the Scottish Office. We are well aware that if local authorities respond to the guidelines proposed by the Scottish Office in respect of staffing they will still be able to maintain a higher pupil-teacher ratio than has been possible in Scotland in the past.

    Local Government (Miscellaneous Provisions) (Scotland) Act 1981
    Mr. George Robertsonasked the Secretary of State for Scotland against how many local authorities in Scotland he intends to act under the terms of the Local Government (Miscellaneous Provisions) (Scotland) Act 1981.
    Mr. Rifkind: I refer the hon. Gentleman to my right hon. Friend's reply to the hon. Member for Midlothian

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    (Mr. Eadie). My right hon. Friend is now considering whether action of this kind should be initiated against other authorities.
    Mr. Robertson: Is the Minister aware that, by acting and continuing to act in this unreasonable, dictatorial fashion, he and his Government are endangering the principle of local democracy and of local accountability and responsibility for local decisions? If the consequence of the Government's actions in this area is the damaging of local services and the sacking of thousands of staff, the blame will lie with him and the Government.
    Mr. Rifkind: The hon. Gentleman should appreciate that in every authority that my right hon. Friend has identified, it has already been proved possible to identify millions of pounds of savings which could be made without compulsory redundancies. If local authorities wish to discuss with my right hon. Friend the savings which can be made and if they are anxious to identify the savings which can be made without compulsory redundancies, we shall consider the matter closely. I have said that in the Lothian region alone £28 million has already been identified. The hon. Gentleman and his hon. Friends had better appreciate that, when savings and rate reductions can be made for ratepayers, it is bounden upon local authorities to make a response to the flexible attitude that my right hon. Friend has always taken on this matter.
    Mr. Peter Fraser: When my hon. Friend meets Dundee district council tomorrow, will he say that some of the extravagant claims that it has made about the number of redundancies that will be necessary are patently nonsense, as the number that has been mentioned would mean that it was operating with a staff smaller than that operated by the former Tory-controlled Dundee district council without having to impose a 150 per cent. rates rise?
    Mr. Rifkind: My hon. Friend is correct. Not only can the figures which have been given be the subject of discussions with the local authorities concerned, but in Dundee, as in Lothian, major savings can be made with no job losses. The allegations which have been made amount to little more than scaremongering in order to get support from employees where otherwise support would not be forthcoming.
    Mr. Cook: Has none of the hon. Gentleman's constituents told him that there will be local elections in Lothian region in barely nine months' time? Why is he not prepared to leave it to the judgment of the Lothian electorate whether services are excessive and unreasonable? Is he aware that, in seeking now to pre-empt that essential local democratic right, he is seeking powers which will lead us towards a much more centralised, authoritarian State than has been sought by any Government in peace time?
    Mr. Rifkind: The hon. Gentleman should appreciate that the £63 million by which Lothian is above the Government's guidelines is many millions greater than for any other local authority in the United Kingdom. That figure has national as well as local implications, which a Labour Government would not have ignored and which this Government will not ignore.
    Mr. Pollock: Now that the Secretary of State has tabled orders against a number of local authorities, is there any
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    opportunity for the local authorities involved to avoid a reduction in rate support grant by further discussions with the Government?
    Mr. Rifkind: My right hon. Friend has already said to the local authorities concerned that, in the event of the House approving the report which has been tabled, he will allow a short period to ascertain whether the local authorities are willing to discuss with the Government what economies they can make. In the event of local authorities refusing to have discussions with my right hon. Friend, he would then have no option but to implement the report, if that report is approved by the House.
    Mr. Millan: Why does the Minister try to pretend something which he knows to be completely untrue—namely, that the cuts can be achieved without serious redundancies affecting tens of thousands of local authority employees in Scotland? Why will he not admit what he knows to be true: that in the teaching profession alone there will be a reduction in the number of teachers of no fewer than 6,000? Why does he not come clean with the House and with the local authorities?
    Mr. Rifkind: If the right hon. Gentleman believes that the figures proposed by my right hon. Friend could not in full be achieved without many redundancies, perhaps he and his hon. Friends will inform the House of a maximum figure that they believe can be achieved with no redundancies at all.

    Road Equivalent Tariff
    Mr. Grimondasked the Secretary of State for Scotland if he is now in a position to announce a decision on a road equivalent tariff or alternative methods of assistance over freight and transport to islands.
    Mr. Younger: My hon. Friend the Member for Edinburgh, Pentlands (Mr. Rifkind), in the Scottish Grand Committee on 18 June 1981, said that we hoped to make an announcement before the Summer Recess.
    That remains the position.
    Mr. Grimond: I am grateful for the assistance offered to further companies trading with Orkney, but it is becoming urgent that the general policy should be made known so that it can be discussed. May I take it that there will be an opportunity for debate when the Secretary of State makes his announcement?
    Mr. Younger: I thank the right hon. Gentleman for what he said. The reason why this matter is taking rather longer to straighten out than we had hoped is that there are varying opinions about whether RET is desirable. I am anxious to take into account all representations before making a decision. I shall pass on to my right hon. Friend the Leader of the House the right hon. Gentleman's view that we must have some time to debate the matter. I support that view.
    Mr. Donald Stewart: Before rejecting the RET formula, if that is what is in the right hon. Gentleman's mind, will he bear in mind the suggestions from the Highlands and Islands Development Board that adjustments and variations within the formula are possible? Will he also bear in mind that the main thing is to extend the excellent start on assistance which has been made to ensure an economic transport system for the Scottish islands?
    Mr. Younger: I am taking into account all factors, including those which the right hon. Gentleman mentioned. As he suggested, our main contribution in the last two years has been to increase the grant to Caledonian MacBrayne from £3·7 million in 1979 to £5·8 million in 1981. I believe that that is real help for those in the islands.
    Mr. John MacKay: When my right hon. Friend announces his decision, will he consider adding some riders about what happens in Norway, where, contrary to the widely held belief, RET does not operate? Will he accept from me that the most important help that he can give is to commercial traffic from the islands? If we cannot have RET because of the various complications that all the bodies have pointed out to him, can we concentrate the help on commercial traffic?
    Mr. Younger: I note what my hon. Friend has said. I agree that it appears that there is not, as people thought there was, a uniform and neat system of RET in operation in Norway. We are trying to work out such considerations.

    Local Authorities (Rate Support Grant)
    Mr. Canavanasked the Secretary of State for Scotland what representations he has received from those local authorities whose rate support grant he has threatened to cut; and what action he intends to take.
    Mr. Younger: Representations by Lothian regional council, Dundee district council and Stirling district council are incorporated in reports under section 5 of the Local Government (Scotland) Act 1966, as amended by the Local Government (Miscellaneous Provisions) (Scotland) Act 1981, that I laid before the House on 10 July. Representations by Dunbarton, East Lothian and Renfrew district councils will be incorporated in a further report that I intend to lay shortly. Representations by Cumnock and Doon Valley district council clarified and revised the budget estimate, and I propose no further action under these provisions in that case.
    Mr. Canavan: Is the Secretary of State aware that every apprentice who finished his time last week with the property maintenance department in Stirling district council was paid off, including one young lad who won a national apprenticeship award? Is he further aware that the reason for the council being unable to afford to employ those young people is the cuts which the Tory Government have already imposed on the district council? How many more essential jobs and essential services will be destroyed as a result of the Secretary of State's proposal to go ahead and try to rob the people of Stirling district of another £1 million?
    Mr. Younger: If I were a member of Stirling district council, that is not the way that I would have chosen to make reductions. I would have looked for economies in the extra expenditure that that new council has been incurring since it came to office.
    Mr. Ancram: Will my right hon. Friend remind the House and the councils against which he is acting that one of the purposes of the 1981 Act was to allow them to reduce rates? Will he confirm that that option is still open to those against whom he has laid orders, and will he urge them to reduce rates for the sake of Scottish ratepayers?
    Mr. Younger: That option is open. I hope that all those authorities mentioned in the orders will feel that they have an open invitation to discuss the matters in the best possible way with me or my representatives in the Department. If they have a reduction in grant, it is open to them to return that in the form of a rates reduction to their ratepayers. I should have thought that that would have been the preferable option for them.
    Mr. Dewar: Will the Minister explain what happens if negotiations take place? If a concession is offered by the local authorities under threat but a sum less than the total is ultimately agreed, will the shortfall be deducted from the total that the Treasury is looking for, or will that saved sum be clawed back from the other local authorities which are not the subject of specific action under the 1981 Act? We need to know that if we are to have any idea of the prospects for realistic negotiations. Will the Secretary of State please answer?
    Mr. Younger: I appreciate the hon. Gentleman's point. Both rebudgeting—reducing budgets on reflection—and reductions negotiated by the authorities will make it easier to avoid taking the full £100 million, which I suggested was the sum that I needed. Reductions by either method should make it easier for everyone.
    Mr. Sproat: Is it not scandalous, untrue and grossly unfair to ratepayers in Lothian to say, for example, that no cuts can be made in local authority spending when this week literally hundreds of pounds are being spent flying Socialist councillors back from holiday in Spain and Greece and from cosy trade union jaunts in Czechoslovakia? Will my right hon. Friend look at the Local Government (Miscellaneous Provisions) (Scotland) Act to see whether it needs changing to prevent those scandalous abuses?
    Mr. Younger: I note what my hon. Friend says. If there are such abuses, it is open to ratepayers to raise them with the local authority accounts commission, and I have no doubt that they will do so. On general expenditure, one of the strangest things is that some authorities maintain that it is impossible to make reductions of any kind. I do not know of any business, commercial or local authority organisation that could straightforwardly say that. It simply is not realistic.
    Mr. Strang: Since the Under-Secretary of State has made repeated references to the cuts proposed by Conservative councillors in the Lothian region, will the right hon. Gentleman tell the House how many jobs on the Lothian regional council would be lost through natural wastage this year as a consequence of the package? Where does he believe that it is possible to cut an additional £19 million to make up the £47 million without compulsory redundancies?
    Mr. Younger: I have not had the opportunity to study the proposals that were announced this morning by the Conservative members of the Lothian regional council, but I understand that they reckon that they could make savings of about £5 million through natural wastage, which is something that I have been pressing on the authority for two years. The point is that it is much better to make economies without redundancies than to spread scare stories about redundancies that may never occur.

    Tenants' Rights, Etc. (Scotland) Act 1980
    Mr. Allan Stewartasked the Secretary of State for Scotland what is his latest estimate of the number of tenants who have applied to buy their homes under the Tenants' Rights, Etc. (Scotland) Act 1980.
    Mr. Rifkind: The latest available information about applications under the right to buy is that local authorities, the new towns and the SSHA have received more than 22,000 applications from tenants. This figure does not include the 10,000 or more applications made under voluntary arrangements.
    Mr. Stewart: I am grateful to my hon. Friend for that information. Will he comment on the recent opinion poll in Scotland that showed not only that 85 per cent. of tenants supported the right to buy but that 12 per cent. were extremely interested in buying? Does that not show how out of touch with the wishes and aspirations of ordinary working people the Labour Party is in its continuing doctrinaire opposition to the right to buy?
    Mr. Rifkind: My hon. Friend is correct. The opinion poll also showed that 75 per cent. of Labour voters believed in the right to buy.
    Mr. Maxton: Is the Minister aware that in Glasgow only about 2,500 people have applied to buy their houses, which is less than 3 per cent. of the total number of council tenants in Glasgow? Is he also aware that the other 97 per cent. are suffering from higher rents, poorer repairs and problems with dampness, which are not being helped by the lack of money as a result of the Government's policies?
    Mr. Rifkind: The whole purpose of the Tenants' Rights, Etc. (Scotland) Act is to allow those who wish to do so to buy their homes. We have no objection to tenants not wishing to purchase their homes. Indeed, through the tenants' charter, we have given tenants security of tenure and greater rights than they have had before.
    Mr. Henderson: Is my hon. Friend aware that Kirkcaldy district council carried out a detailed analysis of the results of its policy of selling council houses, which it carried forward until the council elections, and found that no particular kind of house was being sought, all were in demand, tenants wanted to buy and the council, tenants and ratepayers benefited substantially from the sales?
    Mr. Rifkind: My hon. Friend is correct. That is the experience not only in Kirkcaldy but in many other parts of Scotland.
    Mr. Dewar: Has the Minister read the unanimous report of the Select Committee on the Environment on the sale of council houses in England? If so, has he pondered its finding that the sale of council houses has increased the housing shortage in parts of England, put at risk future housing for the elderly and reduced choice in the public sector? Does he accept that the same is almost certainly happening but to an even greater extent in Scotland? Therefore, will he consider reversing the policy before too much damage is done?
    Mr. Rifkind: As the hon. Gentleman said, the report of the Select Committee on the Environment was based on English evidence. He asked whether I had read the report. I do not believe that he has read it, because he said that the conclusions were unanimous. The Committee has 11 members, and six either voted against or did not take part in the vote.

    Local Authorities (Spending)
    Mr. Harry Ewingasked the Secretary of State for Scotland what replies he has received from local authorities in response to his request to cut their spending; what action he intends to take; and if he will make a statement.
    Mr. McTaggartasked the Secretary of State for Scotland what response he has had from local authorities to his request that they should cut back their public expenditure still further.
    Mr. Rifkind: My right bon. Friend has had detailed representations from seven authorities which received notice that he proposed to reduce rate support grant. In reply to the hon. Member for Midlothian (Mr. Eadie), my right hon. Friend has indicated the conclusions reached on these representations. Since replies from authorities to my right hon. Friend's general request for revised budgets are not yet complete, it is premature to make a statement.
    Mr. McTaggart: In view of the Secretary of State's answer and his continued unbending attitude towards democratically elected local authorities, will he at least commit himself in a statement to the House that he intends to fight for the people of Scotland and to get more money for local authorities, so that we may open up the many facilities that are being closed, particularly for the unemployed, in an effort to stop the civil unrest that we are seeing throughout the country spreading further?
    Mr. Rifkind: Far from being unbending, my right hon. Friend constantly says that if local authorities are prepared to discuss their overspending with him that factor can be taken into account. Certain local authorities have not yet responded to the invitation, but we hope that they will.
    Mr. Peter Fraser: Instead of manipulating youngsters in apprenticeships, as has been mentioned, if there are to be redundancies, will my hon. Friend tell Labour authorities that are employing political advisers for the first time that those people could certainly go, in the ratepayers' interests?
    Mr. Rifkind: My hon. Friend is entitled to make that remark. It is extraordinary that a local authority, such as Dundee, which maintains that it is having an impossible time because of Government cuts, is still able to employ someone full-time purely as a political adviser to the: Labour group.
    Mr. Harry Ewing: Is the Minister aware that we cannot avoid noticing the pleasure that particularly the Secretary of State derives from causing suffering and hardship to countless numbers of people? In view of the: constant reference to conditions that prevailed in 1977, will the Minister reconsider his approach to the Stirling, problem against the background of the decision announced last week to slaughter Stirling university and the impact that that will have on employment prospects in Stirling?
    Mr. Rifkind: I am competent only to comment on local government spending in Stirling at the moment. The hon. Gentleman will appreciate that the greatest damage done to the local economy was the 150 per cent. rate increase imposed by the district council.
    Mr. Lang: May I assure my hon. Friend that the general thrust of the Government's policy to make spendthrift authorities face the consequences of their

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    profligacy is warmly welcomed? Will he reassure the House that he will persist with the policy and, so far as possible, protect efficient and prudent authorities from the extravagances of others?
    Mr. Rifkind: First, I apologise to the hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing). I did Stirling district council a disservice by saying that its rate increase was 150 per cent. In fact, it was merely 100 per cent. That should be made clear.
    I should tell my hon. Friend the Member for Galloway (Mr. Lang) that the reasons for the 1981 Act and the selective measures that my right hon. Friend is pursuing are to keep to an absolute minimum the problems that will be faced by Labour, Conservative and Independent-controlled authorities that have co-operated in the national interest and reduced their expenditure.
    Mr. Michael Martin: If the Minister is so worried about public spending, will he reconsider the Scottish Office decision to ask Strathclyde to become an agent to build the Step's bypass, which will cost several million pounds and require the local authority to take land from Ellenacre Ltd., which got it for a song in the first place? Is he aware that if the bypass goes through, good communities will be destroyed? Is that not an area where savings can be made?
    Mr. Rifkind: Before any road can be built, all the planning procedures must be completed, including a full public inquiry, where that is appropriate. I am not sure whether the hon. Gentleman has discussed this matter with the regional council. We would, of course, wish to take into account the views of Strathclyde region on the question of roads affecting its locality.

    Herring Fishing
    Mr. Donald Stewartasked the Secretary of State for Scotland what conditions he will lay down for resumption of herring fishing in the North-West.
    Mr. Younger: Although the International Council for the Exploration of the Sea has now decided to recommend a resumption of this fishery, no firm decisions on management arrangements can be taken until the timing and extent of any fishery have been discussed by the Council of Ministers.
    Mr. Stewart: Is the right hon. Gentleman aware that yesterday the masters of two West German vessels appeared in Stornoway sheriff court in connection with a catch of herring valued at £61,000? Local boats are not allowed to take a single fish. Does he agree that this pinpoints the necessity for the regulations, the rules and the control requested by fishermen's organisations if herring fishing is not to end up with the same chaos and illegal fishing as mackerel fishing?
    Mr. Younger: I agree with the right hon. Gentleman and express my congratulations to our fishery protection service on catching these vessels and bringing them into Stornoway to face British justice.

    Civil Service Dispute
    Mr. Gordon Wilsonasked the Solicitor-General for Scotland what effect the Civil Service dispute has had on prosecutions in Scotland; and what criteria will determine the introduction of emergency legislation.
    The Solicitor-General for Scotland (Mr. Nicholas Fairbairn): Strike action is confined to Edinburgh and Glasgow. Since its beginning, 42 High Court cases have been dealt with in Edinburgh and Glasgow, including 25 which had previously been delayed. In Glasgow, 189 sheriff and jury trials due to have been called or gone to trial have not been dealt with; some 204 cases are awaiting sheriff and jury dates; and approximately 6,000 summary cases have been delayed. In Edinburgh, 125 sheriff and jury trials have not been dealt with; some 68 cases are awaiting sheriff and jury dates; but the sheriff court is dealing with one-third to one-half of its summary criminal work load.
    The second part of the question should be directed to my right hon. Friend the Secretary of State for Scotland.
    Mr. Wilson: Does the Solicitor-General accept that he has read out a frightening catalogue? Does he agree that in the two biggest cities in Scotland there is likely to be a breakdown of law and order? In view of the effects that that would have in those cities, will he make representations to his right hon. Friend to take some action either to arrange for the settlement of the Civil Service dispute or to introduce emergency legislation? Does he also recognise that many people are now beginning to feel that, had this kind of juridical dislocation taken place at the Old Bailey, action would have been taken by now?
    The Solicitor-General for Scotland: I am not responsible for the Old Bailey. The situation does not result in a breakdown of law and order in Scotland. The result is that some summary cases are dropped rather than prosecuted.
    Mr. Bill Walker: Does my hon. and learned Friend agree that the problem is one of individuals not facing their responsibilities and that the Government should perhaps be looking at ways and means of ensuring in future that they are not able to strike?
    The Solicitor-General for Scotland: As I have said before, there are moral duties upon those involved in running the courts to do their duty and ensure that justice does not suffer.
    Mr. Millan: Does the hon. and learned Gentleman agree that there is also a moral duty on the Government to introduce the necessary emergency legislation? How can they justify their continued refusal to do that when, among other things, a large number of cases are not being proceeded with at all—and this from the party of law and order—and people who otherwise should be charged with serious offences, such as carrying offensive weapons, dangerous or drunken driving, will escape scot-free? Why do the Government not introduce emergency legislation?
    The Solicitor-General for Scotland: References to the party of law and order come ill from the party of the trade unions responsible for the present dispute. Those not being prosecuted are very few. Emergency legislation would have the same effect. It would merely postpone the results.

    Dr. Alan Clift
    Mr. Canavanasked the Solicitor-General for Scotland on how many occasions the Crown Office called on Dr. Alan Clift, senior forensic scientist at the Home Office, to give evidence at prosecutions in Scotland.
    The Solicitor-General for Scotland: Dr. Alan Clift has been called by the Crown to give evidence as a forensic scientist in Scotland in only one case: that of Her Majesty's Advocate v. John Preece.
    Mr. Canavan: In view of the recent case of John Preece and all the other cases, whether north or south of the border, in which Dr. Clift's evidence has been discredited, will the Solicitor-General for Scotland consult his legal friends the Law Officers south of the border with a view to an inquiry about all the cases in which this man's evidence was heard? Is it mere coincidence that Mr. Preece was wrongfully convicted of murder and that Paddy Meehan, for example, was also wrongfully convicted of murder and that both had as their defence counsel the Solicitor-General for Scotland, who is as fanatical a believer in capital punishment as the Ayatollah?
    Hon. Members: Answer.
    The Solicitor-General for Scotland: I am happy to answer, but I cannot answer for the Ayatollah, and I have consistently voted against capital punishment. If the hon. Member for West Stirlingshire (Mr. Canavan) ever requires, as he may, my services as a defence counsel, I shall probably not be in a position to supply them and he is unlikely to be in a position to afford them. Of those whom I have defended on murder charges, very few were convicted and both have been pardoned.

    Vandalism
    Mr. Pollockasked the Solicitor-General for Scotland how many prosecutions have been brought so far in 1981 involving charges of vandalism.
    The Solicitor-General for Scotland: When the Scottish Office computer is functioning again, I shall be in a position to give these figures; but I can say that section 78 of the Criminal Justice (Scotland) Act 1980 is being used quite extensively.
    Mr. Pollock: In spite of the rather thin information in that reply, does my hon. and learned Friend agree that it is nevertheless a useful criminal offence in the hands of the courts and, perhaps more particularly, in the hands of the police in their battle against criminal hooliganism?
    The Solicitor-General for Scotland: I certainly confirm that. Between the beginning of April and the end of May this year, 18 cases of vandalism were subject to compensation orders, in which the compensation ranged from £5 to £400.
    Mr. Peter Fraser: Despite the fact that when the Government introduced that crime it was heralded by the Opposition as being merely a cosmetic matter and of little value, has my hon. and learned Friend read an editorial in the Scottich Legal Action Group's magazine pointing out that the introduction of this crime in Scotland has made it clearer to petty hooligans and vandals precisely what they are doing?
    The Solicitor-General for Scotland: I have seen that report. I trust that the Opposition will now repent and understand that it is an important and useful category of crime.

    Civil Service Dispute
    Mr. Dewarasked the Solicitor-General for Scotland how many statutory offences he estimates have
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    been time-barred by the six-months rule as a result of the disruption to Scottish courts resulting from the civil servants industrial action.
    The Solicitor-General for Scotland: It is estmiated that at the end of June 1981 the cases of some 6,000 persons accused of statutory offences had been time-barred as a result of the disruption to Scottish courts resulting from the industrial action of civil servants.
    Mr. Dewar: Do not those horrifying figures make the complacent answer given to my right hon. Friend the Member for Glasgow, Craigton (Mr. Millan) scandalous? Will the Solicitor-General explain to the House why the Government are living with a situation in which in the same week a person may be prosecuted for drunk driving in Aberdeen and, if he is found guilty, be banned and face a heavy monetary penalty, while in Glasgow the same person would get off scot-free because of the Government's failure to bring in emergency legislation? Does that not bring the whole fabric of law and order into disrepute, and, as a professional man, is not the Solicitor-General ashamed of himself?
    The Solicitor-General for Scotland: To answer the last part of the question first, no, I am not ashamed of myself. If there are any drunk drivers in Aberdeen, some are caught and acquitted, some are caught and convicted and some are not prosecuted. I greatly regret that the action of the civil servants results in a greater unevening of justice. That is a matter for which I should like them to have some moral responsibility and to return to work at once.
    Mr. Ancram: Will my hon. and learned Friend confirm that in the case of the most serious statutory offences, such as causing death by dangerous driving, it is possible to proceed by way of petition and that such serious crimes will not be allowed to go unpunished?
    The Solicitor-General for Scotland: I assure my hon Friend that no serious cases have been lost, although some have been delayed. In the High Court, I am glad to say that all the cases that were delayed in Glasgow have been, or are being, prosecuted.

    Travelling People
    Mr. John MacKayasked the Solicitor-General for Scotland if he will review the guidance given by Crown Office on the non-harassment of travelling people.
    The Solicitor-General for Scotland: I presume that my hon. Friend refers to the instruction which my right hon. and learned Friend the Lord Advocate issued in January 1980 requiring procurators fiscal to report to the Crown Office any case reported by the police involving unauthorised encamping by travelling people, so as to enable my right hon. and learned Friend to consider each case personally. That instruction remains in full force.
    Mr. MacKay: Will my hon. and learned Friend confirm that if a local authority provides a camp for the local people whom those of us from country areas prefer to call tinkers, others who come into the area and encamp by the roadside can be moved on, instead of riding on the back of a local authority that is doing its best by its travelling people but does not want to be burdened by outsiders?
    The Solicitor-General for Scotland: I confirm that that is so. My right hon. Friend the Secretary of State increased the grant for the provision of such sites to 100 per cent. If there are suitable sites, those who insist on parking in other places are prosecuted.
    Mr. Canavan: On a point of order, Mr. Speaker. I delayed raising this point of order until the end of Question Time, because I did not want to lessen the time available to my hon. Friends for raising supplementary questions. As you will have noticed, Mr. Speaker, more than half of the questions on the Order Paper concern one issue—namely, the savage cuts in local government expenditure that are being perpetrated by this Tory Government. All of those questions relate to Labour-controlled local authorities. It may have escaped your notice, Mr. Speaker, that more than half of the Scottish constituencies are represented by Labour Members. Many of us have had great difficulty in raising this question on the Floor of the House. When such orders are debated on
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    the Floor of the House, will you bear in mind the Government's discriminatory attitude and the way in which they pick on Labour-controlled authorities—
    Mr. Speaker: Order. The hon. Gentleman knows that I have no intention of changing the long-established custom of calling hon. Members from alternate sides of the House. Any Speaker would be placed in an impossible situation if he were to respond to the hon. Gentleman's request.
    Mr. John Home Robertson: On a point of order, Mr. Speaker. I appeal to you again—
    Mr. Speaker: Order. I hope that the hon. Gentleman is not pursuing the same point, because I have finished with it and given a ruling.
    Mr. Home Robertson: The point that I wish to draw to your attention, Mr. Speaker, is that of the 36 questions tabled to the Secretary of State for Scotland, only seven were tabled by Scottish Conservative Back Benchers—
    Mr. Speaker: Order. Clearly, that is not a point of order.

Police (Equipment)
The Secretary of State for the Home Department (Mr. William Whitelaw): With permission, Mr. Speaker, I shall make the short statement which was requested yesterday in advance of tomorrow's debate by the Leader of the Opposition and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) on the equipment available to the police. Naturally, the whole House wants to see the police provided with sufficient means of protecting themselves and also of taking positive and effective action to deal with riotous behaviour.
To protect police officers, special helmets are being provided in increasing numbers; fire resistant overalls have been ordered; and so have more standard shields and new lighter shields. Better protection has assisted chief officers in adopting positive tactics to break up violent groups. It is firmly the view of the chief officers who have been most closely involved that their most effective approach lies in training their officers and developing their tactics for mobile and positive public order policing.
But there may be extreme circumstances in which further equipment might be required in dealing with riots. I have, therefore, decided to make available to chief officers, who alone are responsible for the conduct of operations, a range of alternatives.
Different types of water cannon are being looked at by police forces to see which might suit their needs. Additional protection is being provided for normal police vehicles, and the need for specially protected vehicles will be urgently examined.
This brings me to CS gas and plastic bullets. Neither I nor chief officers wish to see these used except in the very last resort and under strict control, but they should be available. Stocks of CS gas have therefore been reviewed, and appropriate groups of officers will be trained in the proper use of plastic bullets. They will be used only on the authority of the chief officer himself. I shall be talking to chief officers about the circumstances in which such authorisation might be given.
In opening tomorrow's debate, I shall be speaking on other aspects of these matters and about the implications for the penal system.
Mr. Roy Hattersley: Is the Home Secretary aware that the House asked for this statement today so that the response to it in tomorrow's debate could be considered rather than made impromptu? In the light of that, I at least accept that the Home Secretary may want to incorporate in his opening statement tomorrow the answers to the questions that I shall ask him. I shall ask him four specific questions.
First, will the right hon. Gentleman tell us, either now or tomorrow, the type of CS gas that is to be made available, the rules governing its use and the risks that using it entails? Secondly, may we be assured that the various proposals associated with the right hon. Gentleman after his meeting on Monday evening—but which are not included in the statement—have been abandoned? Thirdly, how, if at all, do "new proposals" for using CS gas and plastic bullets—as the Home Secretary says, in extreme circumstances—differ from the procedures that operate now, were operated at Toxteth and applied before then? Fourthly, will the right hon. Gentleman give a categorical assurance that the several
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chief constables who are opposed to the use of such materials and techniques will not be put under any pressure to adopt them?
Will the right hon. Gentleman prepare his speech for tomorrow's debate on the understanding that, although he is entirely correct to say that the whole House wishes the police to be provided with sufficient means of protecting themselves, some of us are deeply opposed to equipment and techniques that change the character of the British police force in a way that will break down their traditional relationship with those they serve and protect?
Mr. Whitelaw: It would be right to respond to some of the more detailed points in accordance with the reasonable proposal that the right hon. Gentleman has made. I shall, of course, take great care to reply in detail to the right hon. Gentleman's various points. However, there are two general points to which I should reply now.
The first concerns the position of the chief constables. I said in my statement that they alone are responsible for operations. That is crucial to the whole of policing in this country and will remain so. Nothing that I shall do at any time, in any circumstances, will put any pressure on chief constables in the conduct of their operations. That must go for all politicians at all levels in our society. It is extremely important. The equipment will be available. If chief constables do not want to use it, they will not. The decision will be entirely up to them.
Secondly, the House will know that the Government have stood firmly behind the normal community police service. It is vital that in that connection the role and position of the police should be preserved in our society. I strongly defend that. However, if we find ourselves faced with severe violence we are entitled to have the police ready and able to respond to it. I hope that overall we shall be able to make the conditions such that the traditional policing of this country will be preserved.
Several Hon. Members rose—
Mr. Speaker: Order. The House is aware that this subject is to be debated tomorrow. I want to give a fair opportunity for questioning but also to be fair to the House in view of all the business that is to follow. I suggest, therefore, that a quarter of an hour for questions, if they are brief and to the point, should cover many hon. Members.
Mr. Michael Hamilton: If my right hon. Friend decides to reopen Rollestone camp, will he appreciate that that decision will be well received locally? Does he remember that on the last occasion it was the prisoners who lived comfortably and those who looked after them—soldiers and police—who had to live rough?
Mr. Whitelaw: It will be necessary to reopen Rollestone camp because of the general overcrowding of the prison system, quite apart from what has happened. What has happened makes it all the more urgent and necessary. Rollestone camp will be staffed on this occasion by prison officers. I am grateful to them for the way in which they have coped in difficult circumstances in recent times. The camp will be staffed by prison officers and, therefore, the situation will be different from the previous occasions when it has been used. I should make it clear that prisoners of all sorts, not just those associated with the riots, will go to Rollestone. It will depend on the suitability of prisoners to go there. They will include all sorts of prisoners serving different sentences.
Mr. A. J. Beith: Does the Home Secretary recognise that the extremists who have been at work in the recent riots have as their objective the destruction of the relationship of trust between the British public and the police? We should not play into their hands. Therefore, chief constables must be cautious, especially about the use of such things as plastic bullets which pose a potential danger to innocent bystanders, and must make a great effort in building up the community policing on which the relationship has long been based.
Mr. Whitelaw: I shall refer to many of those matters and their implication in my speech tomorrow. This morning I had the opportunity of having a short talk with some of the chief officers of police from the areas particularly affected. They are strongly of the view that the hon. Gentleman has put forward.
Mr. Ivor Stanbrook: Is my right hon. Friend aware that his statement will be greeted with great satisfaction in the country as a whole, but will he confirm that if it is shown that a change in the law is needed he will have no hesitation in putting proposals to the House?
Mr. Whitelaw: Any new law is a matter which needs careful study to ensure that any proposals that are introduced will help the police and the public in dealing with such problems. In the last 10 days we have all faced entirely new problems in our national life.
Mr. S. C. Silkin: Does the Home Secretary accept that it is welcome to everyone that the most extreme weapons will be used only in the most extreme circumstances? Will he consider before tomorrow the possibility of going further than he went today and reserving to his authority the decision to use extreme weapons?
Mr. Whitelaw: I shall consider what the right hon. and learned Gentleman has said. I should like to discuss that carefully with my colleagues and listen to what right hon. and hon. Members say. Any of my predecessors would confirm that, although that is desirable in principle, circumstances can blow up on the spot very quickly, and even though the Home Secretary is constantly available he is not always in possession of the facts on the ground and it might put him in a difficult position if he had the final authorisation. But I shall consider it.
Mr. Eldon Griffiths: To keep matters in perspective, will my right hon. Friend confirm that the vast majority of policing in this country will continue to be traditional, based on consent and not power? Will he confirm that the police did not seek the use of such equipment but that it was forced on them by those who make war on our society? Will he also confirm that the police will receive the best available training not only in the anti-riot equipment but in tactics and deployment so that they will not remain sitting ducks for brickbats and fire-bombs?
Mr. Whitelaw: I am grateful to my hon. Friend. We must do everything we can. It is important, following what the hon. Member for Berwick-upon-Tweed (Mr. Beith) said, that we should seek to preserve the trust between the police and the community that they serve. Therefore, provisional policing methods are vital. If we have to rely, as we did, on the bravery of the young police officers, it
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is our duty in the House, and it is expected by the country, to ensure that they are properly equipped and protected for their dangerous task.
Mr. Eric S. Heffer: Is the right hon. Gentleman aware that many Opposition Members, while accepting completely the need for the police to have proper protection, are concerned that it would appear that the Government are concentrating on dealing with the riots rather than introducing positive proposals to deal with the causes in areas where there have been outbreaks of violence? Accepting that looters and others later took advantage of the situation, can he give us an assurance that urgent measures will be taken to deal with the real problems rather than taking repressive action that in the long run will solve nothing?
Mr. Whitelaw: I promised the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) that I would make this statement today. I am glad that he pressed me to do so because he has been proved correct. At the same time, I said that I and my right hon. Friend the Secretary of State for the Environment want to develop in the debate tomorrow our views and our plans on a wider basis. I shall, therefore, reserve those for tomorrow while accepting that we must enable the police to deal with the serious violence immediately and to restore public confidence. I accept and will develop tomorrow the other factors.
Sir John Biggs-Davison: What concern did the Opposition show about the use of plastic bullets in Northern Ireland? Although they may have had their views on the politics of Northern Ireland, they have never expressed concern. Do they think that the people of Northern Ireland are second-class citizens for whom plastic bullets are all right but that when a similar situation arises on this side of the water the appropriate measures should not be used?
Mr. Whitelaw: I am not responsible for what Opposition Members may say at any time. My hon. Friend's remark seemed to be addressed to them. In the interests of having a calm and constructive debate tomorrow, I should be wise not to be drawn further.
Mr. Neville Sandelson: I assure the Home Secretary of the firm support of my right hon. and hon. Friends for his measures and for any measures that will strengthen the hand of the police in these unprecedented times. Does he recognise—I heard what he said to the hon. Member for Liverpool, Walton (Mr. Heffer)— that the Government will ignore the social factors at their peril and at the peril of the nation? Under successive Governments those factors have given rise to the problems that we now face in Toxteth and Brixton.
Mr. Whitelaw: I give the same reply to the hon. Gentleman as I gave to the hon. Member for Liverpool, Walton (Mr. Heffer). These matters will be developed by myself and by my right hon. Friend the Secretary of State for the Environment in tomorrow's debate.
Mr. W. Benyon: As experience in Northern Ireland with the use of CS gas has shown that it requires special tactics and special equipment, can my right hon. Friend assure me that those are available to the police?
Mr. Whitelaw: I made it clear, and I emphasise, that these weapons will be used only as a last resort. That is

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the view of the chief constables. It is nevertheless important that there should be training in their use. The police will have that training.
Mr. Arthur Lewis: The Home Secretary, the Prime Minister and various Ministers have correctly paid tribute to the bravery of the police, but will some Minister pay tribute to the bravery of the ambulancemen who do not have the elementary protection afforded to the police? They have called off their industrial dispute because of the riots, even though they have been shabbily treated by Governments of both parties. Their pay structure used to follow that for police pay. As they are in the thick of it, will the right hon. Gentleman ensure that they are better treated from the point of view of pay? Will the right hon. Gentleman pay a tribute to them as they are just as important as the police?
Mr. Whitelaw: Without making any commitments of any sort, I gladly applaud the efforts of the fire service, the ambulance services, the law and order services, and many members of the general public, who have done a great deal, frequently in situations of great difficulty, to cool matters. I pay tribute to them all.
Mr. George Gardiner: I warmly welcome my right hon. Friend's statement, but is he satisfied that the present law gives police officers immunity against civil court actions brought by those who might suffer injury while anti-riot weapons are being used?
Mr. Whitelaw: That is one of the important legal matters that we are looking into.
Mr. Robert Kilroy-Silk: Does the Home Secretary realise that, whatever may be the truth of the matter, a large number of those engaged in the recent disturbances sincerely believed that they had previously been subjected to unfair and discriminatory tactics? In that context, has not the relationship between the police and the communities concerned clearly already broken down? The measures that the Home Secretary has proposed today will do nothing to restore it and may exacerbate the position. Will he now acknowledge that the relationship between the police and the community is likely to be forfeited if these measures are introduced?
Will the Home Secretary give an assurance that he will try to deal with the causes, not the symptoms, and at least adopt the suggestion of my right hon. and learned Friend the Member for Dulwich (Mr. Silkin) and allow these methods to be used only with his specific agreement?
Mr. Whitelaw: I am certainly not prepared to agree in any circumstances that there can be any excuse for the sort of violence that we have seen on the streets. The hon. Gentleman sought to propose that there was an excuse. [Interruption.] If he did not, I am glad to hear it, but it sounded like it. I do not believe that there can be any such excuse. I have already said that some of the other matters will be discussed tomorrow.
I agree very strongly with what the hon. Member for Berwick-upon-Tweed (Mr. Beith) and my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) said about trust between the police and the public. Every effort should be made in this House to cement that trust and not to make it more difficult to achieve. That effort must and will go on. Anyone who went to the areas concerned will know that many people in the communities were prepared to help the police all the time throughout the worst of the
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troubles. That should be said, too. Trust is, of course, very important, but in the final event it must be right to protect our police when they are protecting us.
Mr. Toby Jessel: In order to help maintain the morale of the police in Greater London, will my right hon. Friend not only repeat that the Government intend that the Home Secretary shall remain the Metropolitan Police authority but assure the House that the police committee that has been set up by the Greater London Council has no official status, power or authority whatever?
Mr. Whitelaw: The answer is "Yes" to both my hon. Friend's questions.
Mr. James A. Dunn: Is the Home Secretary aware that anything he may do to provide personal protection for the police will be welcomed and, indeed, supported on both sides of the House? Nevertheless, there are apprehensions, as he will know from his own experience in Northern Ireland. Does he recall that the use of water cannon and CS gas was rejected as operationally unpredictable and unsatisfactory? In those circumstances, will he cause those items to be reviewed as part of the equipment to be provided? Will he study more intently the need for one single authority to authorise the use of such weapons in any circumstances?
Mr. Whitelaw: I think that I am correct in saying that in Northern Ireland it was not so much a question that the authorities decided not to use CS gas and water cannon but that rubber bullets would be more satisfactory. It is my apprehension about rubber bullets—an apprehension that is shared by many hon. Members—that leads me to the belief that it is right to provide a wide variety of equipment such as I am proposing.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call two more hon. Members from each side of the House.
Mr. Nigel Forman: Is it not preferable that my right hon. Friend should adopt a firm and measured approach to these very serious problems and should confine the special measures which are necessary to the regular police rather than to any riot police force on the Continental pattern?
Mr. Whitelaw: There is no intention in the Government's mind to have riot police on the Continental pattern, but it is important that the mobile groups which all forces must have should have proper training and equipment for riot control. This they will have. It is also important that a large number of police officers should have training in all these tactics in case they are required on the streets.
Mr. Norman Atkinson: Now that the Home Secretary has abdicated his responsibilities by handing full authority to chief constables, how can he give assurances, either to the House or to trade unionists outside, that these weapons will not be used against trade union picket lines or trade union demonstrators? In view of the record of the Government, as we proceed towards 3 million unemployed the Home Secretary should reconcile himself to the inevitability, as night follows day, of these weapons being used against peaceful demonstrators.
Mr. Whitelaw: It is in the nature of policing in this country—which I understood the Labour Party and its leaders supported strongly—that no politician, neither the Home Secretary nor any local politician, should have operational control of chief constables. There is no question of abdicating responsibility. It is a matter of carrying out the duties laid upon any Home Secretary by the Police Act 1964. That is very important.
With regard to the hon. Gentleman's remarks about picket lines, I believe that in this House there is great and proper belief and trust in our chief constables. That is an important factor.
Mr. John Stokes: Is my right hon. Friend aware that, in spite of some of the views expressed on the Labour Benches, the vast majority of the people want the police to have all the aids and weapons necessary to enable them to fulfil their duties and keep the peace?
Mr. Whitelaw: My hon. Friend is entirely correct, and I support his point of view.
Mr. Alexander W. Lyon: Does the Home Secretary recollect that yesterday the Prime Minister asked the Leader of the Opposition whether he supported the use of water cannon and CS gas? Is it not clear from the Home Secretary's statement today that he and, indeed, most chief officers of police do not support the use of CS gas and would wish to use it only in extreme circumstances? Does not that underline the point that partisan remarks on the issue of law and order do not advance one iota the cause of freedom or democracy?
Mr. Whitelaw: I do not accept what the hon. Gentleman has said. My statement about equipment for the police was perfectly plain. I made it clear—as my right hon. Friend the Prime Minister has always made it clear—that use of these weapons will be a matter of last resort. That is also the view of the chief constables, as I made clear to the House.

Representation of the People
3.58 pm
Mr. Dennis Canavan: I beg to move,
That leave be given to bring in a Bill to require any person who has given up membership of the House of Commons in order to take office as a member or employee of the European Economic Commission and who then seeks re-election to the House of Commons to declare on the ballot paper all the extra remuneration which he has received or is receiving as a result of his membership of or employment by the European Economic Commission; and for connected purposes.
It is just over six years since the Common Market referendum. It can now be seen as a gigantic con trick. The referendum campaign succeeded in conning millions of people. They were conned by the propaganda of the British Establishment, the forces of big business, the Tory Party, the Liberal Party, and those who have since left the Labour Party to join the so-called Social Democratic Party.
One of the slogans that the pro-Marketeers were using then was "Jobs for the boys". That can now be seen to be the lie that it is, because Common Market membership for Britain has been an unmitigated disaster in terms of jobs, industry, agriculture, fisheries, trade and the ability of the people of this country to determine their own affairs through parliamentary democracy.
Yet, in a sense, that same slogan "Jobs for the boys" has at least one ring of truth, because the president of the Britain in Europe referendum campaign at that time was a Mr. Roy Jenkins. Less than two years later, in January 1977, after failing to win the leadership of the Labour Party, he deserted the Parliamentary Labour Party and his constituents in Stechford in order to take up a better-paid job as President of the Common Market Commission. He took with him another Euro-fanatic, Mr. David Marquand, who deserted the Parliamentary Labour Party and his constituents in Ashfield in order to take up a better-paid job with the Commission.
Some of us predicted then that it would be only a matter of time before those traitors left the Labour Party altogether, the Labour Party that gave them their first chance in political life, the Labour Party that they used to get themselves elected to Parliament—
Mr. Speaker: Order. The hon. Gentleman must not make the speech that he would make if the House granted him permission to introduce the Bill. He must give the reasons why he wishes to introduce it.
Mr. Canavan: That same Labour Party enabled Mr. Jenkins to become a Cabinet Minister and President of the EEC Commission, which is relevant to the long title of the Bill.
In January of this year, sure enough, he returned, and within a matter of weeks he had set up a new outfit, the Social Democratic Party. In other words, having failed to destabilise the Labour Party—
Mr. Speaker: Order.
Mr. Canavan: —from within—
Mr. Speaker: Order. If the hon. Gentleman does not resume his seat when I stand up, next time, I shall request him to resume his seat instead of continuing, and I shall put the Question. When I stand up and say "Order", any hon. Member on his feet should resume his seat at once.

1185
The hon. Gentleman must realise that he is not free to make the speech that he would make if he were moving that his Bill be read a Second time. He must explain the terms of his Bill.
Mr. Canavan: This man did not receive much response from the rank and file of the Labour Party, although he managed to seduce a few Members of this House who are afraid to submit themselves for re-election under their new banner. They are now seeking to increase their representation in the House by putting up Mr. Roy Jenkins as a candidate in the Warrington by-election. It seems that he is now intent on using the good people of Warrington as a stepping stone between Brussels and Westminster—
Mr. Michael Neubert: On a point of order, Mr. Speaker. Is it not clear that not only is the hon. Member for West Stirlingshire (Mr. Canavan) reading his speech but that he is unable to deviate from his script when you ask him to give reasons for bringing in the Bill?
Mr. Speaker: It is an abuse of our rules for the hon. Gentleman not to do as I have asked—to explain what would be in his Bill—and to make a Second Reading speech. If he continues, I shall ask him to resume his seat.
Mr. Canavan: I am coming to the point about the money that Mr. Jenkins made, which is referred to in—
Mr. Speaker: Order. The hon. Gentleman will, without further delay, state the contents of his Bill. Otherwise, I must tell him that he will not proceed any further.
Mr. Canavan: The Bill would require people such as Mr. Roy Jenkins to state on the ballot paper at a general election or by-election in which they seek membership of the House the amount of money that they have made from the Common Market. In 1977, when Mr. Roy Jenkins became president of the Common Market Commission, his salary was £43,500 per annum, virtually tax-free, plus £14,000 per annum in various allowances. Four years later the salary had increased to over £60,000 a year and—[Interruption.]—the allowances to over £18,000 a year.
Mr. Bob Cryer: On a point of order, Mr. Speaker. I am trying to listen intently to my hon. Friend's speech, in which he is elaborating a very important point. Unfortunately, although you may not hear them, three members of the so-called Social Democratic Party sitting behind me are continually shouting, and I cannot hear.
Mr. Speaker: I notice from time to time that many hon. Members who themselves are given to interrupting will draw my attention to the fact that interruptions are taking place. If all hon. Members will observe the rule that the hon. Member for Keighley (Mr. Cryer) has so kindly outlined, our proceedings will be better.
Mr. Canavan: I did not complain about being interrupted, Mr. Speaker. I shall carry on regardless.
By the time Mr. Roy Jenkins lifted his books as President of the Common Market Commission, this man, who preaches excessive wage restraint for working-class people—
Mr. Speaker: Order. I shall now put the Question. The hon. Gentleman has declined—
Mr. Arthur Lewis: On a point of order, Mr. Speaker. I have been here long enough to
1186
know that Mr. Speaker can never be wrong, but it is possible that Mr. Speaker has not been acquainted with all the facts when he makes his remarks.
I was in the House only yesterday when my hon. Friend the Member for Berwick arid East Lothian (Mr. Home Robertson) moved that leave be given to bring in a Private Member's Bill and the hon. Member for Banff (Mr. Myles) opposed the motion. I listened to the hon. Gentleman's speech, understanding it as best I could, despite trouble with the hon. Gentleman's dialect. He rambled on about various matters, including who owned what, whether a certain chap had a big landed estate and whether he had his own farm. It was nothing to do with the Bill, yet the hon. Gentleman went on to explain—
Mr. Speaker: Order. In that case, I was sadly lacking. The Question is, That the hon. Gentleman have leave to bring in his Bill.
Mr. Patrick Cormack rose—
Mr. Speaker: Mr. Cormack—on a point of order?
Mr. Cormack: I do not want to make a long speech., Mr. Speaker, but I believe that the hon. Member for West Stirlingshire (Mr. Canavan) has abused the House.
Mr. Speaker: I thought that the hon. Gentleman was rising on a point of order.
Mr. Cormack: I rose to oppose the Bill, Mr. Speaker.
Mr. John Silkin: On a point of order, Mr. Speaker. I am sure that the House will regard the matter that has been raised as very important, because it affects both sides of the House, and the decision now will decide it for a long time.
I would not for one moment dispute your ruling, Mr Speaker, but I think that this is the first time that any of us have known a speech introducing a Ten-Minute Bill to be so narrowly confined. I can understand that that is true of a speech on a Standing Order No. 9 application, but it is often difficult if one is introducing a Bill under the Ten Minutes Rule to stick purely to the words of the Bill and an explanation of what the Bill does, without going into wider aspects of policy.
You are always very kind and considerate to the House, Mr. Speaker. Sometimes we undoubtedly overstep the rules of order. But I beg you to consider whether your ruling today might not be a little too narrow for us in the future.
Mr. Speaker: I was leaning over backwards to try to be fair. I gave the hon. Member for West Stirlingshire (Mr. Canavan) three or four chances. I have often had occasion before to draw hon. Members' attention to the fact that they are not supposed to make the speech that they would make if they were granted permission to introduce a Bill, but as a rule I have suggested that the hon. Member concerned should link his remarks to the Bill by saying that if it were introduced such and such a thing would happen. However, the hon. Gentleman seemed—to me, at least—to be bent on making the speech that he has prepared, whether or not it dealt with the content of the proposed Bill. The Ten Minutes Rule is not intended merely to allow hon. Members to make a speech on a favourite subject that happens to be topical.
I want to keep the House in as good a mood as I can and I will allow the hon. Member for West Stirlingshire

1187
to continue if he will relate his remarks to the content of his Bill. He must do that or I shall have to interrupt him, notwithstanding the request from the right hon. Member for Deptford (Mr. Silkin), who intervened from the Opposition Front Bench to try to help his hon. Friend. In view of the right hon. Gentleman's appeal, I will allow the hon. Member for West Stirlingshire to continue as long as he refers to the contents of the Bill. About seven minutes of the hon. Gentleman's time has gone.
Mr. Canavan: If my Bill were introduced and received its First, Second and Third Readings and, perhaps the Royal Assent today, the ballot paper at the Warrington by-election tomorrow would contain the words "This man, Roy Jenkins, has already made more than —¼ million out of the Common Market and stands to gain perhaps another £¼ million if he lives to the ripe old age of 80."
Let me explain that point in a couple of minutes. Despite the fact that Roy Jenkins has given up his Common Market job and is seeking election to the House, he is entitled to severance pay of more than £30,000 a year for three years—a golden handshake of more than £90,000.
Mr. Speaker: Order. Will the hon. Gentleman make his speech respectable by saying that his Bill will stop the severance pay, or will he link the severance pay with the provisions of the Bill?
Mr. Canavan: My Bill will, unfortunately, not stop the severance pay, but it will provide that ballot papers at Warrington will state clearly what this man has made out of the Common Market. If he lives to 65—and he might even manage that if he does not have too much claret and good living—he will get not a mere State pension of £27·50 a week but 18 per cent. of his retiring salary, totalling £11,000 per annum. If he manages to become an octogenarian he will be half-way to becoming a millionaire. The people of Warrington ought to be aware of that before they go to the polls tomorrow.
We hear much about opportunism and adventurism by politicians. This story seems to be straight out of the pages of the "Boys' Own" comic. When it comes to winning bonuses and European trophies, even Roy of the Rovers is no match for Roy of the Market. Of course, Roy of the Common Market has a distinct advantage. He will change his jersey at half-time if he thinks that he is not winning.
4.13 pm
Mr. Patrick Cormack rose—
Mr. Speaker: Is the hon. Gentleman rising to oppose the Bill?
Mr. Cormack: Yes, Mr. Speaker. If there were ever an example of opportunism, we have just seen it. The hon. Member for West Stirlingshire (Mr. Canavan) displays not only an ignorance of the postal votes system and what goes on ballot papers but a touching faith in the speed of the British printing industry. He has abused the procedures of the House, and that should go on record before we vote down his ridiculous measure.
Mr. James Lamond: On a point of order, Mr. Speaker. I do not know whether the hon. Member for Staffordshire, South-West (Mr. Cormack) has
1188
concluded his speech, but if he has I am surprised that you did not interrupt him, because he did not mention anything contained in the Bill.
Mr. Speaker: Order. We can have only one speech after the main speech.
Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—
The House divided: Ayes 119, Noes 203.

Division No. 271]

[4.15 pm

AYES

Adams, Allen

McDonald, Dr Oonagh

Ashton, Joe

McElhone, Frank

Atkinson, N. (H'gey,)

McKay, Allen (Penistone)

Barnett, Guy (Greenwich)

McKelvey, William

Bennett, Andrew (St'kp't N)

McMahon, Andrew

Booth, Rt Hon Albert

McNamara, Kevin

Bray, Dr Jeremy

McTaggart, Robert

Brown, Hugh D. (Proven)

McWilliam, John

Callaghan, Jim (Midd't'n & P)

Marshall, D (G'gow S'ton)

Canavan, Dennis

Marshall, Jim (Leicester S)

Clark, Hon A. (Plym'th, S'n)

Martin, M (G'gow S'burn)

Clark, Dr David (S Shields)

Maxton, John

Cocks, Rt Hon M. (B'stol S)

Meacher, Michael

Cook, Robin F.

Miller, Dr M. S. (E Kilbride)

Cowans, Harry

Morris, Rt Hon C. (O'shaw)

Cox, T. (W'dsw'th, Toot'g)

Morton, George

Cunningham, Dr J. (W'h'n)

Moyle, Rt Hon Roland

Davis, T. (B'ham, Stechf'd)

Newens, Stanley

Deakins, Eric

O'Neill, Martin

Dean, Joseph (Leeds West)

Orme, Rt Hon Stanley

Dixon, Donald

Pavitt, Laurie

Dobson, Frank

Pendry, Tom

Dormand, Jack

Powell, Raymond (Ogmore)

Dubs, Alfred

Proctor, K. Harvey

Duffy, A. E. P.

Richardson, Jo

Eadie, Alex

Roberts, Ernest (Hackney N)

Eastham, Ken

Roberts, Gwilym (Cannock)

Edwards, R. (W'hampt'n S E)

Robinson, G. (Coventry NW)

Ellis, R. (NE D'bysh're)

Rooker, J. W.

English, Michael

Sever, John

Evans, loan (Aberdare)

Sheldon, Rt Hon R.

Fletcher, Ted (Darlington)

Silkin, Rt Hon J. (Deptford)

Foulkes, George

Skinner, Dennis

Garrett, John (Norwich S)

Smith, Rt Hon J. (N Lanark)

Garrett, W. E. (Wallsend)

Snape, Peter

Graham, Ted

Soley, Clive

Grant, George (Morpeth)

Spearing, Nigel

Grant, John (Islington C)

Spriggs, Leslie

Hardy, Peter

Stallard, A. W.

Harrison, Rt Hon Walter

Stoddart, David

Haynes, Frank

Summerskill, Hon Dr Shirley

Heffer, Eric S.

Taylor, Mrs Ann (Bolton W)

Hogg, N. (E Dunb't'nshire)

Thomas, Dafydd (Merioneth)

Homewood, William

Thomas, Dr R. (Carmarthen)

Hooley, Frank

Tilley, John

Huckfield, Les

Tinn, James

Hughes, Roy (Newport)

Torney, Tom

Janner, Hon Greville

Urwin, Rt Hon Tom

Jay, Rt Hon Douglas

Varley, Rt Hon Eric G.

Johnson, James (Hull West)

Walker, Rt Hon H. (D'caster)

Johnson, Walter (Derby S)

Welsh, Michael

Jones, Barry (East Flint)

White, Frank R.

Jones, Dan (Burnley)

Whitehead, Phillip

Kilroy-Silk, Robert

Wilson, William (C'try SE)

Lamond, James

Winnick, David

Leighton, Ronald

Woolmer, Kenneth

Lestor, Miss Joan

Young, David (Bolton E)

Lewis, Arthur (N'ham NW)

Lewis, Ron (Carlisle)

Tellers for the Ayes:

Litherland, Robert

Mr. Bob Cryer and

Lofthouse, Geoffrey

Mr. Russell Ken

Lyon. Alexander (York)

1189

NOES

Adley, Robert

Fitch, Alan

Alison, Michael

Fletcher, A. (Ed'nb'gh N)

Amery, Rt Hon Julian

Fletcher-Cooke, Sir Charles

Ancram, Michael

Forman, Nigel

Arnold, Tom

Fox, Marcus

Baker, Nicholas (N Dorset)

Fraser, Rt Hon Sir Hugh

Banks, Robert

Galbraith, Hon T. G. D.

Beaumont-Dark, Anthony

Garel-Jones, Tristan

Beith, A. J.

Glyn, Dr Alan

Bennett, Sir Frederic (T'bay)

Goodhew, Victor

Benyon, W. (Buckingham)

Goodlad, Alastair

Berry, Hon Anthony

Gorst, John

Best, Keith

Gower, Sir Raymond

Bevan, David Gilroy

Greenway, Harry

Biffen, Rt Hon John

Griffiths, E. (B'y St. Edm'ds)

Biggs-Davison, John

Griffiths, Peter Portsm'th N)

Body, Richard

Grimond, Rt Hon J.

Bonsor, Sir Nicholas

Grist, Ian

Boscawen, Hon Robert

Grylls, Michael

Boyson, Dr Rhodes

Gummer, John Selwyn

Braine, Sir Bernard

Hamilton, Hon A.

Bright, Graham

Hamilton, Michael (Salisbury)

Brinton, Tim

Hampson, Dr Keith

Brooke, Hon Peter

Hannam, John

Brown, Michael (Brigg & Sc'n)

Haselhurst, Alan

Browne, John (Winchester)

Havers, Rt Hon Sir Michael

Buck, Antony

Hayhoe, Barney

Bulmer, Esmond

Henderson, Barry

Burden, Sir Frederick

Higgins, Rt Hon Terence L.

Butcher, John

Hooson, Tom

Cadbury, Jocelyn

Horam, John

Cant, R. B.

Howe, Rt Hon Sir Geoffrey

Chapman, Sydney

Howell, Ralph (N Norfolk)

Clark, Sir W. (Croydon S)

Howells, Geraint

Colvin, Michael

Hunt, David (Wirral)

Cope, John

Hunt, John (Ravensbourne)

Cormack, Patrick

Irving, Charles (Cheltenham)

Corrie, John

Jenkin, Rt Hon Patrick

Cranborne, Viscount

Jessel, Toby

Crouch, David

Johnson Smith, Geoffrey

Douglas-Hamilton, Lord J.

Johnston, Russell (Inverness)

Dunn, Robert (Dartford)

Jopling, Rt Hon Michael

Durant, Tony

Kaberry, Sir Donald

Edwards, Rt Hon N. (P'broke)

Kellett-Bowman, Mrs Elaine

Eggar, Tim

Kilfedder, James A.

Emery, Peter

Knight, Mrs Jill

Eyre, Reginald

Knox, David

Fairbairn, Nicholas

Lamont, Norman

Fairgrieve, Russell

Lang, Ian

Farr, John

Langford-Holt, Sir John

Fell, Anthony

Lawson, Rt Hon Nigel

Fenner, Mrs Peggy

Le Marchant, Spencer

Fisher, Sir Nigel

Lester, Jim (Beeston)

1190

Lewis, Kenneth (Rutland)

Rossi, Hugh

Lloyd, Peter (Fareham)

Rost, Peter

Loveridge, John

Sainsbury, Hon Timothy

Luce, Richard

Sandelson, Neville

McNair-Wilson, P. (New F'st)

Shelton, William (Streatham)

McQuarrie, Albert

Shersby, Michael

Major, John

Sims, Roger

Marland, Paul

Skeet, T. H. H.

Marten, Neil (Banbury)

Speed, Keith

Maude, Rt Hon Sir Angus

Speller, Tony

Mawby, Ray

Spence, John

Mawhinney, Dr Brian

Spicer, Jim (West Dorset)

Mayhew, Patrick

Spicer, Michael (S Worcs)

Mellor, David

Stainton, Keith

Mills, Iain (Meriden)

Stanbrook, Ivor

Mitchell, David (Basingstoke)

Stanley, John

Mitchell, R. C. (Soton Itchen)

Stewart, Ian (Hitchin)

Monro, Hector

Stewart, A. (E Renfrewshire)

Montgomery, Fergus

Stokes, John

Morgan, Geraint

Stradling Thomas, J.

Morris, M. (N'hampton S)

Thomas, Rt Hon Peter

Morrison, Hon C. (Devizes)

Thompson, Donald

Mudd, David

Thorne, Neil (Ilford South)

Murphy, Christopher

Townend, John (Bridlington)

Myles, David

Townsend, Cyril D, (B'heath)

Neubert, Michael

Trippier, David

Newton, Tony

Trotter, Neville

Normanton, Tom

van Straubenzee, W. R.

Onslow, Cranley

Vaughan, Dr Gerard

Osborn, John

Viggers, Peter

Owen, Rt Hon Dr David

Waddington, David

Page, John (Harrow, West)

Wainwright, R. (Colne V)

Page, Rt Hon Sir G. (Crosby)

Wakeham, John

Page, Richard (SW Herts)

Ward, John

Parris, Matthew

Warren, Kenneth

Pawsey, James

Wells, John (Maidstone)

Penhaligon, David

Wells, Bowen

Percival, Sir Ian

Wheeler, John

Powell, Rt Hon J.E. (S Down)

Wickenden, Keith

Prentice, Rt Hon Reg

Wiggin, Jerry

Price, Sir David (Eastleigh)

Wigley, Dafydd

Raison, Timothy

Williams, D. (Montgomery)

Rees, Peter (Dover and Deal)

Wilson, Gordon (Dundee E)

Rhodes James, Robert

Winterton, Nicholas

Ridley, Hon Nicholas

Wrigglesworth, Ian

Rifkind, Malcolm

Younger, Rt Hon George

Roberts, M. (Cardiff NW)

Roberts, Wyn (Conway)

Tellers for the Noes:

Roper, John

Mr. Robert Atkins and

Ross, Stephen (Isle of Wight)

Mr. John MacKay.

Ross, Wm. (Londonderry)

Question accordingly negatived.

Orders of the Day
  Finance Bill
  As amended (in the Committee and in the Standing Committee), further considered.
  Finance Bill
    Clause 23

      PERSONAL RELIEFS
      4.25 pm
      Mr. Robert Sheldon: I beg to move amendment No. 21, in page 13, line 9, at end insert 'except for widows' bereavement allowance which shall be £800 for the year 1981–82'.
      Mr. Speaker: With this it will be convenient to take amendment No. 24, in page 13, line 9, at end insert—
      '(1A) In subsection (1A) of section 8 of the Taxes Act (personal relief) there shall be inserted after "upwards" the words "or that she was at any time within the year of assessment of the age of sixty and in receipt of a Category A retirement pension under subsection (1) of section 28 of the Social Security Act 1975.".'.
      Mr. Sheldon: We come now to the question of personal allowances. We are dealing once again, as we have done on many previous occasions, with the problems of indexation. Unquestionably, there has been a considerable change since the Government came to power, shown by the way in which their views are implemented in the Bill. I have been in favour of indexation on certain conditions. Given that inflation is continuous, large and persistent, I have always seen the case for indexation. I had hoped that it would be possible to wait to see whether the Government were successful in limiting the increase in inflation. If that had happened, it might have been possible to avoid indexation in many, and possibly most, particulars.
      The Government have shown that they are unable to limit inflation. It is therefore reasonable for them to consider further indexation and to act as they did in the Finance Act 1980. Under section 24 of that Act, the Government provided for indexation at the basic rates and at the higher rates. I must, however, say that when they introduced indexation they changed the pattern of taxation. They made sure that there were considerable reliefs for the higher incomes. Only after that had been done did they fix the indexation provisions. This is noted as one of the philosophies behind Government action in the matter.
      A number of allowances were settled as the basis of indexation, including the single allowance, the married allowance, the additional personal allowance, the age allowance, the higher rate threshold and the investment income surcharge. Also included, under section 24(6) of the 1980 Act, was the widow's bereavement allowance, which is the subject of the amendment now being discussed. It was agreed that there should be a rounding-up to the nearest £10 on each of the indexation provisions. The purpose was to bring about what the Financial Secretary, with his gift for a phrase, called "truth in taxation". One has only to recognise the considerable benefits that were given to the better-off to know that when this Government talk about truth in taxation it is time for ordinary people to look to their purses.
      1192
      The truth in taxation has benefited the better-off. It has not benefited the less-well-off. In this year's Finance Bill, the Government have not merely failed to revalorise completely. They have failed to make any increases whatever to take account of inflation. This is phenomenal coming from a Government who believe in truth in taxation.
      If the Government had said nothing about this matter and had not mentioned that taxation has to take account of inflation in the various complicated ways that they devised when in Opposition, we might have thought that the Government were trying to make use of inflation to finance the objectives that they had in mind. Among the most important of these objectives was to relieve taxation on the better-off. However, the Government made so much of the truth in taxation theory that the Opposition must be concerned when the practice no longer meets the theory. It is not as if we have reached a plateau where one could overlook one year's failure to revalorise. A failure to revalorise has continued over the years and the decades.
      I mention as an example the manner in which the threshold has declined over the years. In the 1950s, a married person with two children paid no income tax as long as he was earning about average pay. In the 1960s he was paying income tax if his pay was about 70 per cent. of the average. In the 1970s he was paying income tax if his earnings were about 50 per cent. of average pay. In November 1980 he was paying income tax if his income was about 38 per cent. of average pay.
      That is a staggering decline. As we know, this has accounted for the very large numbers of people corning into tax. One can continue in this way almost indefinitely, until one comes up against one particular problem—the interaction between the benefits paid by the Department of Health and Social Security and the tax thresholds at which one is asking people to pay. Once one starts bringing down the threshold at which tax starts, one finds oneself taxing people who are in receipt of benefits. We have had that before, so it is nothing new. However, when one gets so far down, obviously the problems increase—and they have increased spectacularly as a result of the failure to revalorise in this way.
      The Government have always held that they are a party of low taxation. [Interruption.] They are; my hon. Friend the Member for Edinburgh, Central (Mr. Cook) should not misjudge them. They are a party of low taxation for the wealthy, but they are also a party of high taxation for the poorer people, the ordinary people of Britain.
      Before the Government introduced all their indexation provisions, they made sure that the highest rate of income tax came down to 60 per cent. and that the thresholds and bands were restructured suitably. The quid pro quo—there was one—was a promise of a 25 per cent. rate of income tax, which promise, as we are all aware, has long since vanished from the scene.
      Last year there was a change. It concerns our amendment most directly. There was the introduction of the widow's bereavement allowance. I welcomed it. It was a valuable innovation. But—
      Mr. Tony Durant: Will the right hon. Gentleman give way?
      Mr. Sheldon: May I just finish this point? I shall be glad to give way then, because I know the hon. Gentleman's deep concern and interest in these matters,

      1193
      which he has pursued on behalf of widows for many years. When he speaks on these matters the House always listens to him with the greatest respect. He will be aware that that widow's bereavement allowance, which we see in legislative form now, was altered considerably under pressure in Committee. I shall refer to that matter shortly.
      Mr. Durant: Will the right hon. Gentleman concede that on many occasions when I discussed this matter with him when he was in office he put the point to me, as someone who was keenly concerned about widows' problems, that the blanket approach was much the better approach? The present Government have done something in relation to the widow's bereavement allowance. They have avoided the clawback, which has been one of the most difficult problems for widows in the early stages of bereavement. At least the Government have done that.
      Mr. Sheldon: I accept that. I thought that I had said so at the outset. I also said, however, that this was in the context of very large handouts to much wealthier people, so it should be seen in that context. I believe that there was much to be gained by a number of grants of various kinds, which we discussed at great length. The whole House benefits from the actions of the hon. Gentleman and others who have taken an interest in these matters over the years. As I mentioned, it was altered under pressure in Committee, and I think that it was improved and widened as a result.
      In Committee last year, the Financial Secretary talked about his concern about widows. He mentioned how much concern there was about widows and the tax system. He said that
      "that concern is particularly acute in the year of bereavement. That is the year when the emotional shock is greatest. It is also the year of an abrupt change from the married allowance to the single allowance. That is why we thought that, even in the context of an economic situation that called for very great stringency, we should do something this year for widows."—[Official Report, Standing Committee A, 10 June, 1980; c. 322–3.]
      I am not sure about the stringency part, because considerable assistance had been given to the better-off.
      As a result of that, the Government came under pressure to do something for those who were less advantaged. The widows were among them. Here I add my voice to the view that I have heard so frequently from the hon. Member for Reading, North (Mr. Durant). At our advice bureaux we frequently see widows. They are one of the sources of the greatest distress that we meet. Nothing can replace a husband and the position that he had in the home, and in the assistance in the transition to a newly altered life one cannot do very much with money, but, at any rate, it provides a cushion for that aspect of it.
      I suppose that all of us are to a certain extent social workers in these matters. We try to provide comfort and solace to the best of our inadequate ability. But if there is to be a standstill on the question of revalorisation, if we are to say that our economic position is such that nothing can be done, I should have thought that an exception could have been made for the widows. We are not dealing with all that many. We are dealing with people who are suddenly widowed in that year. If we do not do anything this year, it is no use doing anything next year, because this applies only to those who are newly widowed. That means that those who are widowed this year will not get that increase. The Financial Secretary should bear that in mind. Those who have failed to get the other allowances
      1194
      will be able to benefit next year and in subsequent years, as the Financial Secretary tries—I am sure that he realises that he must do so—to make good the damage done this year.
      However, as regards the widow's bereavement allowance, those people who are widowed in the year in which this applies will find themselves disadvantaged and will never receive the allowance as a result of what may be done in the future.
      This is the essential basis for our amendment. There are about 3 million widows, and about 330,000 of them are between the ages of 60 and 64. They are the subject of the next amendment. I believe that my hon. Friend the Member for Birmingham, Ferry Barr (Mr. Rooker) hopes to make a contribution to the debate if he catches your eye, Mr. Deputy Speaker. I do not think that any debate on indexation would ever be complete without my hon. Friend's presence, which is always an essential and welcome part of our debates on these matters.
      Amendment No. 24 deals with women between the ages of 60 and 64. They will be in receipt of a State pension, but they may also be in receipt of an earnings-related pension. That is their particular problem, because they will now be subject to tax. As I have illustrated, we have lowered the threshold to such a level that we are now not only interfering with any of these ordinary pensions but are at a level which interferes with the State pension.
      This can be dealt with by introducing what are called tolerance levels. When we get nonsense of this kind, the Inland Revenue comes to the Minister with the problem and the Minister makes a concession. He says "We shall forgo a certain amount of taxation because we cannot be involved in the nonsense of trying to get money from people who obviously have very limited means." Therefore, the tolerance levels are increased, and this absurdity is avoided.
      That is what has happened up to now. Now, for the first time, we are to tax these people. Taxing them is bad enough, but there is worse to come. These widows are in receipt of two pensions, and although the pensions can be as little as 52p a week—that is the average and very modest figure—that brings them above the level of the tolerance. Not only will they be charged tax because they are above the level of the tolerance, but the tolerance provisions will not apply to them. They will be taxed the whole amount. For example, if there is a £100 disregard, there will be £30 tax on that amount. If there is 1p more, not only is tax paid on that penny but the £30 has to be paid as well. That is what amendment No. 24 seeks to alter. It is the loss of the tax on the graduated pension, as well as the loss of the tolerance, that concerns us.
      The amendments seek to assist widows who we believe have been wronged, and we seek to remedy the wrong. The first wrong was the failure to uprate the bereavement allowance for widows, and the second was to bring into tax for the first time those whose circumstances had always made them exempt from taxation. If this is truth in taxation, it is a distortion of the truth, and the House should decide accordingly.
      Mr. A. J. Beith (Berwick-upon-Tweed): On a point of order, Mr. Deputy Speaker. I am sorry to intrude in the debate, but a matter has just come to my notice which can be sorted out only in the course of today if the arrangements in the Table Office are to be accommodated.

      1195
      The House has not yet passed a motion dealing with whether it is to sit on 29 July, and there has been no Business Statement by the Government on that subject. The Table Office—acting, I think, in good faith but, in my view, mistakenly—has taken the view that it should be assumed that the House will not sit on 29 July and that that day will, therefore, be ignored in the notice period for questions to the Chancellor of the Exchequer. The effect is that any hon. Member who expected to table a question to the Chancellor of the Exchequer tomorrow in the normal course of events cannot now do so because at 4 o'clock the Table Office dispatched all the questions on the assumption that Wednesday 29 July was not a sitting day.
      I ask you, Mr. Deputy Speaker, to consider the matter and rule on it later. Its effect is to deprive hon. Members of the normal opportunity to table questions, with the chance of being called to put a supplementary question, and that is based on no announcement and no indication from the Government. Clearly, you, or perhaps Mr. Speaker, will have to consider the matter. I bring the matter to your notice in time for alternative arrangements to be made, and perhaps for the sorting of questions—the ballot, so to speak—to be reopened in the light of what I have said.
      Mr. Deputy Speaker (Mr. Ernest Armstrong):I am grateful to the hon. Member for Berwick-upon-Tweed (Mr. Beith). I shall acquaint Mr. Speaker with the matter, and it will be considered.
      Mr. Durant: I wish to participate in this short debate about widows, because I wish to say one or two things on behalf of the all-party group on widows and single-parent families.
      I accept what the Opposition say in their amendment about the bereavement allowance. The Government did something in this regard, which I mentioned in my intervention, whereby clawback is avoided. However, that has been lost, as the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) said, owing to the change in the tax situation. He has asked for a greater increase in the bereavement allowance to allow for that. I agree with his valid point.
      The first period of widowhood is the most important time for widows. Widowhood is not prearranged. No matter how much husbands have thought about it and been persuaded by insurance companies, and so on, people do not suddenly arrange to die. It may be an unfortunate tragedy, but it is also true that people suddenly die, and widows are faced with this enormous problem. Many of them have never faced the problem of running a household, dealing with the bills and the whole business of running a home, which often the husbands have had entirely under their control. For that reason, the bereavement allowance is an important allowance, and society has accepted that fact.
      I am worried that the allowance has not kept pace with the cost of living. The right hon. Gentleman seeks to increase the allowance to take account of increases in costs. The Government, by avoiding the clawback, have helped in this regard. The Opposition want the amount to be increased, and the Government say that there should not be a clawback. So there is a double benefit in that there
      1196
      is no taxation and there is an increased benefit. I am not against that. I am simply pointing out that there is a double benefit.
      4.45 pm
      I discussed the matter many times with Labour Members when they were in Government. They always said "We understand your point of view on behalf of widows, but what about single women who look after households in which there are aged parents, and so on?" I do not deprecate that. I simply put it forward as part of the debate. There has to be a balance.
      As the House will know, I have fought the case for widows on many occasions. I am attacked by single people in my constituency who look after aged relations and who say to me "We accept your views about widows, but what about us? We are battling on behalf of aged parents and relations and looking after them, but there is no help for us." We have to strike a balance, as I am sure widows themselves agree, but that does not mean that I am not in favour of what the right hon. Gentleman said.
      I want to put my case on record. I shall vote with the Opposition on the amendment because I have no option. The Opposition have a valid case concerning widows. However, we must keep a balance between widows, single women and all the other aspects of society that involve dealing with aged parents and accepting responsibility for capital and expense problems when women are suddenly faced with widowhood.
      The right hon. Gentleman has said many times that the overall situation has to be considered. I do not disagree with him. He said that a balance has to be drawn between all the different pressures on society. I believe, because I fight the widows' cause, that they have a unique position in that they do not choose their environment. Even the single woman, to a certain extent, chooses her environment. Widowhood is sudden. There it is. Any of our wives could be left alone suddenly because of all the pressures on society, road accidents, and so on. In spite of all the provisions that we may make, widowhood is not prepared for, psychologically or otherwise.
      From the studies that I have made of widowhood, I believe that widows should have every opportunity to get out of their environment of sorrow, problems and difficulties and get back into society. We should do all that we can to make them full members of that society by giving them financial help during a short period. That is why I believe that the proposal is right, and I support it. However, the right hon. Gentleman should remember that a balance must be drawn. Indeed, when he was in Government he accepted the difficulty of striking a balance between the single woman looking after old people and all the other pressures on his Department. We have to keep a careful balance but I accept what the right hon. Member for Ashton-under-Lyne is trying to do. If he is doing it non-politically, I am prepared to go along with it.
      Mr. Richard Wainwright: The Liberal Bench supports the amendments. I do not wish to repeat the clear and lucid arguments advanced by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) but I wish to make several comments.
      Last year the Government's original proposal in the Finance Bill was for the new allowance to be apportioned to widows on a monthly basis. That meant that anybody who had the misfortune to be widowed late in the tax year

      1197
      would receive only a fraction of the allowance. The House will not be surprised to hear that the right hon. Member for Crosby (Sir G. Page) tabled an amendment to give all widows the full allowance. Since I was the only hon. Member to speak in support of the right hon. Gentleman, I have a special interest in the allowance. To the Government's credit, they accepted the right hon. Gentleman's amendment.
      If we must distinguish between different items of misery and different forms of acute need—and I do not believe that we should have to do that—people who are widowed in the circumstances so eloquently described by the hon. Member for Reading, North (Mr. Durant) are the most vulnerable. They will be receiving pensions and income tax assessments.
      Income tax assessments are formidable. They are not always correct. Sometimes they are horrendous in the amounts that they involve. They are covered in small print. They engender panic in all types of people, as hon. Members know from their interview sessions.
      In my experience, widows are the most panic-stricken when they receive, out of the blue and often for the first time in their lives—because their husbands received the awful documents in the past—all the paraphernalia of an income tax assessment on their pension.
      The tolerance of £30 of taxable income a year, which the Revenue chooses not to collect, is not satisfactory for more than about one tax year when widowhood first occurs. I am glad that the Revenue exercises that humanity when there is no time for legislation to put proper authority behind it. But it is intolerable that the House should debate these tax matters year after year in confusion and that the Revenue has to decide whether to collect tax.
      Each year the Government's duty is to put statutory authority behind emergency tolerances which, rightly, have been adopted in the meantime. In my view, they should be adopted only temporarily. I fully support an amendment which at least has the effect of regularising the £30. I hope that on reflection the Government will be willing to go a little further. I am sure that the Government do not want the present situation to persist.
      It appears that the Chancellor of the Exchequer and his colleagues have said "No indexation this year." The word has gone out that not only are personal allowances not to be indexed but that there is to be no indexation even for the most needy and acute cases. That is an approach without compassion.
      The Government are saying sweepingly that they suspend indexation this year. To refuse to apply indexation to widows at a relatively trivial cost will reinforce the Government's image as a Government who go in for diktats and are not prepared to temper the wind to the shorn lamb. If ever there was a case for departing in a small way from a principle, however misguided, that a Government have decided to adopt in a Finance Bill, it is that of the widows. Unless the amendment is carried, widows will receive tax assessments, probably for the first time, and suffer a great deal of misery as well as financial hardship.
      Mr. John Horam: The hon. Member for Reading, North (Mr. Durant) has a longstanding interest in widows' rights. He made an interesting and knowledgeable speech. However, he might have misled the House in talking about a double benefit occurring partly from the Government's action on clawback and partly from the amendment. It will be a
      1198
      double advantage only if the amendment is carried. Otherwise, we shall be back in the situation which the Government created. I was delighted to hear that he will be voting for the amendment. I hope that other Government Members will vote for it. The Social Democrats and Liberals also intend to support it.
      We are talking not merely of a double benefit but of the rectification of a double wrong. That is a more appropriate way of describing the position. Once again we are dealing with something which I particularly deplore. The side effects of a general change in taxation and the failure to index are for widows the worst aspects of the Budget. That causes us concern.
      As the hon. Member for Colne Valley (Mr. Wainwright) said, widows are a cause for anxiety because they must face all the paraphernalia and anxiety associated with tax assessment forms at a particularly distressing time. That should be avoided if possible.
      Mr. Durant: I am sorry to interrupt the hon. Gentleman, but I wish to return to the question of double benefit. The Government have dealt with the clawback and, therefore, the allowance is tax-free, in a sense. That means that there is a double benefit. It is not only tax-free, but if the amendment is carried, which is the point I am making, widows will receive a double benefit because they are not involved with tax.
      Mr. Horam: The double benefit applies only if the amendment is passed. That is what I was saying. We are talking of a rectification of a double wrong rather than a double benefit.
      I agree with the hon. Member for Colne Valley that we are talking not merely about tax that is levied but about all the difficulty and anxiety associated with forms which people in stress have to tackle.
      We know from experience of the length to which pensioners go to avoid filling in forms. They do that by investing in building societies, for example, and receiving less money than they might otherwise receive simply to avoid being caught in a tax net and having to deal with tax forms. That is common and leads to people receiving lower incomes but less anxiety.
      The Government should pay attention to the lax philosophy about which they boast so much. The present policy has a serious effect on a disadvantaged group. If the Government do not seek to counter that by accepting the amendment, they will appear to be unwieldy and mean-minded in their approach to disadvantaged groups such as widows.
      5 pm
      I fully support the general propositions advanced in the widows' charter. I do not support all the details, but I support the general proposition behind it. I also support the general feeling that not only is the tax position of widows disadvantageous, but that they feel it to be so—rightly or wrongly. That comes across every time I speak to a widow. They feel at a disadvantage in comparison with a married woman, although that is not always so.
      We should pay careful attention to the feelings of widows, as well as to their position. I hope that the Government will look favourably on this amendment and that it will be passed by the House.
      Mr. J. W. Rooker: If there is a remote possibility that the Government will accept

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      amendment No. 21, I suspect that there is no possibility that they will accept amendment No. 24. I wish to address my remarks to that amendment.
      Amendment No. 24 grants the age allowance—that is, the higher personal allowance—to women above the age of 60. The present age allowance is payable only when they reach the age of 65. That may be convenient for men, because they receive the higher personal tax allowance on reaching their statutory retirement age. However, women have to wait five years after they have reached their statutory retirement age.
      I am well aware that amendment No. 24 would not be cheap to implement. I wish to put part of the Financial Secretary's case before he even gets to the Dispatch Box. When talking about a greater use of resources, it may be argued that one would do other things, such as making a reduction in the retirement age for men. Nevertheless, there is a gross inequality for women in the operation of the age allowance in the tax system.
      I wish to put some questions to the Financial Secretary. Written parliamentary questions have not done the job that hon. Members desired. We wish to find out how many in that category are affected by the Government's major statement in the Budget about the freezing of the tax allowances. That was a major plank of the Budget. It raises about £2·5 billion in additional revenue.
      In answer to a parliamentary question on 20 March, I was informed that by the freezing of tax allowances 1¼ million additional people would pay tax this financial year than would otherwise have been the case—400,000 would be over the age of 65 and 850,000 below that age. I and other hon. Members have sought to find out how many of the 850,000 below the age of 65 are women over the age of 60. For some reason it has not been possible for the Treasury to give the detailed answers required.
      On 30 March, in reply to a question from the hon. Member for Anglesey (Mr. Best), the Minister said:
      "It is not known how many single women or widows age 60–64 in receipt of retirement pension have additions to their pension but no other income. The number is not thought to be large, but it is not possible to estimate the extra tax payable".—[Official Report, 30 March 1981; Vol. 2, c. 23.]
      If the Minister does not know how many single women are in that age range who have an addition to their pension but are without other income, what is the justification for saying that it is not thought to be a large number?
      My right hon. and learned Friend the Member for Aberavon (Mr. Morris) asked a question on 24 March of the Chancellor of the Exchequer, who said:
      "The basic retirement pension receivable in 1981–82 by a single woman under 65 will be higher than the single person's tax allowance, but those with no income apart from basic pension will in practice be kept out of tax by the Inland Revenue's administrative tolerances. Some of them who have additions to their basic pension may become liable to tax for the first time in 1981–82. The number is likely to be much less than the figure of 600,000 which has been referred to, but it is not possible to make a realistic estimate." — [Official Report, 24 March 1981; Vol. 1, c. 288.]
      Now that we are at the end of July, with the pressure of the announcement of the Budget over and the Finance Bill almost through the House, is it possible for the Financial Secretary to put firm figures on the two answers that I quoted? I used the figure of 600,000 erroneously because that happens to be the number of women aged 60 to 64 who have a retirement graduated pension under the
      1200
      old system. I did not infer that the 600,000 would be caught. From information given by the Treasury to the Press Gallery—but not to the House—it would seem that the figure is more likely to be 200,000. The House and the country need to know how many will be hit harder in a new way by the Budget measures.
      Mr. Durant: Because we have now moved into a new situation where more people are involved in pension schemes of varying sorts, that number is likely to increase over the years. We may be establishing a precedent for many more people. The hon. Gentleman quoted a figure for this year, and I am not challenging it. However, as time goes on we are moving to an increasing number in the area to which he referred.
      Mr. Rooker: The hon. Gentleman is correct. As it is not part of my plank when speaking to the amendment, I have not referred to the additional component to the retirement pension that will come out of what is now the present State pension system—the two parts, contracted in or out, to give every person two pensions. After three years of operation, that is becoming quite large for some people. It will take them straight into the tax net. It takes them out of the administrative tolerance of the Inland Revenue.
      My purpose is to try to achieve some equality for women because they are not treated fairly under the tax system. Many women over the age of 60, who are already retired but have not reached the age of 65, never paid into the new system which began in 1978. They paid into the Boyd-Carpenter graduated pension scheme, which most people in this country still remember. They occasionally receive a little chitty from the national insurance computer to tell them how many units they have. They all know that the scheme was a rip-off. That is why it was abandoned after several years. The amount of pension from the contributions will always be payable to those who paid the contributions.
      The average payments are not large. For a woman aged 60 to 64, in this year the average payment will be 57p a week. Because the Government froze the single person's tax allowance, which is also the tax allowance for widows, the minute they receive more than 33p a week of graduated pension in addition to their ordinary State retirement pension they are liable for a tax deduction of 57p a week. It is not possible to explain such matters in detail without an overhead projector or a blackboard.
      If a woman receives the basic State retirement pension—I refer to women aged 60 to 65—and an additional 32p a week of graduated pension, the tax liability is zero. If she is getting the basic retirement pension and graduated pension of 33p a week or more, the tax liability is 57p a week. It is clear that it pays her not to collect the graduated pension. She is receiving the graduated pension only because she has paid contributions. If she were receiving only 33p or some other small amount, it would pay her to say "Please do not pay me my graduated pension, because I am being crippled by tax." Some of these women are in receipt of supplementary benefit. However, they are paying income tax.
      When will the women aged 60 to 65 years to whom I have referred start to pay the increased tax liability? I acknowledge that there is a problem because many widows do not wish to complete tax forms. I think that everyone

      1201
      finds that there are problems when completing a tax form. When it is being done for the first time in the circumstances of the women whom we are discussing, it is an extremely difficult task. It is not generally known outside the House that since the Government took office they have taken two major steps to change the rules about collecting tax on State benefits when the benefits are computable in the annual return for tax.
      I ask the Financial Secretary again to tell us when the extra tax will be liable. I asked the Financial Secretary on 14 April:
      "if retirement pensions liable to income tax due to pension increases in November"—
      that is when the new arrangement will come into effect. It is necessary to take so many weeks of the pension that pensioners receive from April to November and to take account of the pension increase in November to the next April. The tax year is not the same as the pension year. One has to be careful to calculate so many weeks of one pension and so many weeks of another pension to compare like with like.
      My question continued:
      "are required to pay the increased income tax before the pension increase is actually received"—
      namely, from the beginning of the tax year, which begins in April—
      "or whether the annual tax due is collected between the date of the increase"—
      that is, in the pension in November—
      "and the end of the tax year."
      The end of the tax year is April. There is a problem. A year's tax liability is triggered off when the pension is increased in the November. There is only five months in which to collect a year's tax liability.
      The right hon. Gentleman replied:
      "Pensioners who have another source of income subject to deduction of tax under PAYE are given an amended code number at the time of the pension increase which has the effect of collecting the additional tax between the date of the increase and the end of the tax year. Those whose tax is collected directly by instalments pay the tax on a pension increase in those instalments which remain to be paid." — [Official Report, 14 April 1981; Vol. 3, c. 106]
      The second part does not matter. The effect of the right hon. Gentleman's answer is that there will be an amended tax code near November, which will be shortly before the date of the increase.
      We know that there has been a slight hiccup in the administration of the Inland Revenue due to the Civil Service dispute. That is one of the reasons why hon. Members have not been chased up. At this stage in the past I have received reminders, which have not come from the Cardiff tax office. I know that that has happened to others.
      Shortly before November, many women over the age of 60 years who have not been paying tax to date merely because their income has not been above the Inland Revenue's assessing tolerance, or above the personal allowance, will find themselves paying tax for the first time. That is because the Government have frozen the personal allowances and increased the pension in line with inflation. These women may be in receipt of an average graduated pension.
      5.15 pm
      The women who will be asked to pay tax for the first time will be requested to complete a tax form. They may be 61 or 62 years of age and they may have only recently retired. Those in that position will be receiving the ordinary State retirement pension. They may be married
      1202
      or single. If they are married, they will be receiving the pension in their own right, having paid the contributions. We have not been inundated with mail from our constituents because the tax forms will be not amended forms but initiations in the tax system. The forms have not been sent out. It is not close enough to November for the Inland Revenue to have started doing so. Bearing in mind the dispute that is taking place, it is not possible to say when the system will come into operation.
      Mr. Durant: I am not defending the system when I say that the situation that the hon. Gentleman has outlined is not unique. It has happened before under other Governments. Widows have been included on previous occasions. That has happened when there have been increases in the widow's pension. That which the hon. Gentleman has described is nothing new. It is something that happens regularly and we must try to prevent it from happening in future.
      Mr. Rooker: The hon. Gentleman is both right and wrong. It is correct to say that what I have described occurs annually for pensioners and newly bereaved widows. However, this year, for the first time, a woman aged between 60 and 65 years, whose only source of income is the State retirement pension and average graduate pension, will be called upon to pay income tax. That has never happened before.
      In the past the single person's tax allowance has not been frozen. In the late 1960s, when it was frozen on one occasion, inflation was only 3 or 4 per cent. and the pension was never increased by a large amount. Therefore, women in the position of those whom we are discussing were never taken into the tax net. I stand to be corrected by the Treasury, but this year about 200,000 women aged between 60 and 65 will be called upon to pay tax for the first time. I shall accept any figure that the Treasury cares to submit. So far it has not been able to provide a figure.
      The system is computerised and the Treasury should know. It is aware of the age distribution of women and the distribution of graduated pension payments. This information appears annually in "Social Security Statistics".
      The Inland Revenue must know about the tax liability for these women. It should be able to provide a figure. These women have not been paying tax since they became 60. Their only source of income is that which. I have described. That income was not taxable because it fell below the allowance, or below the assessing tolerance on top of the allowance.
      That will not be the position from the beginning of this tax year. That is my argument. Something will happen this year that has not happened before. Am I correct in assuming that the system will be triggered off and that these women will receive tax forms through their Letter boxes in the course of being asked to pay tax for the first time?
      On 26 July 1979 the hon. Member for Welwyn and Hatfield (Mr. Murphy) asked the Chancellor of die Exchequer whether he was
      "aware of the difficulties which pensioners have in understanding their tax affairs; and whether he has any proposals for simplification."
      That was a straightforward question but it is not the type of question that is to be asked out of the blue. It is clear that the hon. Gentleman had been tipped a nod and a wink. The Minister of State replied "Yes." The answer added

      1203
      that he thought that one of the main problems was that the tax liability was dependent upon pensioners notifying details of their pensions to the Inland Revenue. He added that with his right hon. Friend the Secretary of State for Social Services he had
      "agreed to introduce an arrangement which will reduce the need for pensioners to make returns of their income to the Revenue, and will result in significant administrative savings."
      The Minister added that with effect from next year—at the time of the answer that was 1980—
      "the DHSS will notify the Inland Revenue of the new rates of pension payable so that the Revenue can proceed with its annual pension recording without having to ask for this information from pensioners themselves".— [Official Report, 26 July 1979; Vol. 971, c. 423–24.]
      That would save £1 million, even before Sir Derek Rayner got to work.
      I am not sure what the connection is between that arrangement and the question which was asked by the hon. Member for Bedford (Mr. Skeet) on 18 January 1980. He asked the Chancellor of the Exchequer
      "whether he has any plan to deal with the difficulties which arise from the present arrangements for taxing national insurance pensions; and if he will make a statement."
      The reply in Hansard takes up about eight column inches, so clearly it was not thought up on the spur of the moment. The Minister of State said:
      "My right hon. Friend the Secretary of State for Social Services and I have therefore decided to introduce with effect from April 1982 a system under which, in appropriate cases, tax may be deducted through PAYE from national insurance pensions."
      Therefore, in the pension book which pensioners receive to take to the post office every once in a while—usually weekly—from the financial year 1982, in appropriate cases, tax may be deducted. That is what the Government are planning from next year. The Minister of State went on to say:
      "The net staff saving once the scheme is established will be about 800, representing a net administrative saving of £5·2 million per annum."—[Official Report, 18 January 1980; Vol. 976, c. 892.]
      The Minister of State also said that there would be some talks about the matter.
      I followed that up on 21 January this year and asked whether the talks which had been referred to the previous year had been concluded. I was told by the Minister for Social Security:
      "The Inland Revenue wrote to a number of representative organisations shortly after the proposals were announced, and it will be contacting them again later this year."—[Official Report, 21 January 1981; Vol. 997, c. 181.]
      Has that been done yet? If so, with what result? As it is now July, can the Financial Secretary confirm that from the tax year starting in April 1982 the process which the Ministers' answers outline will begin?
      Hon. Members can see what has happened. There is no fear of tax any more for the bereaved widow or the woman of 60 to 65 who is caught in the tax net. Everything will be done for her. She will not have to worry about tax returns and form filling. The DHSS will tell the Inland Revenue and the Inland Revenue will then tell the DHSS what the tax is. The DHSS will print it on the pension book, and the woman concerned will be able to go down to the post office and collect her pension like any other pensioner. She will not have to fill in forms or bother herself reading the explanatory memorandum or going to Members of Parliament or to the citizens advice bureau.
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      It is as if she did not even know about it. Tax matters have been taken well out of her hands. The Government have saved much money on administrative chores—800 jobs in one Department—and have saved the widow the job of filling in a tax return, as everything is done by computer.
      One can see the Treasury's argument. It wishes to bring more people into the tax net and widen the tax base. That makes it easier to raise the revenue with small change in the rates, because there will be more people in the tax net. We know now that there were 1¼ million more this year. The Treasury could pull the same trick next year, because the easiest way to raise revenue is to freeze or not to raise allowances in line with inflation. In amendment No. 24 we seek at least to protect women of between 60 and 65 who we believe are discriminated against.
      Mr. Durant: I am sorry to interrupt the hon. Gentleman again, but I am following his argument closely. There is an interesting argument on both sides of the House. On the Conservative Benches we are tending to economise on administration, but from the Labour Benches the hon. Gentleman is asking for a tax return and for all the evidence to be shown. To be honest, are we not talking about small sums of money? Would it not be better to look at some sort of marginal benefit to those on low incomes who should be outside the tax net? It could be done by a tax return or by altering the benefits—which is the Government's view. I put that to the hon. Gentleman as part of the argument.
      Mr. Rooker: I do not wish to fall out with the hon. Gentleman, particularly as he has already more or less said that he will vote with the Opposition. Earlier he said that we should not be political in the House of Commons. I am being party political, and I am not ashamed to say so.
      The hon. Gentleman had a golden opportunity in Committee—for all I know, he may have voted with us, although I suspect that he did not—to put up the allowance for women of 60 to 64 and not to give them the full amount of the age allowance. However, we worked out an amendment to raise the allowance, so that it would cost the Government the minimum amount in lost resources. It would have been an extra new allowance to take those women over the assessing tolerance. It would have caught almost 95 per cent. of women affected. It would have lifted the allowance for a single person from £1,375 per annum to £1,425. The sum of £50 added to the allowance—which is £150 in taxable income, plus the assessing tolerance, which is another £100 in taxable income—would have solved the problem. We had a debate and a vote on it and the Government turned it down. They could have solved the problem cheaply. I completely accept that it would have solved the problem only for women aged 64 and not the problem which the Government have created for themselves for widows aged between 50 and 60.
      Of course, the sums of money are small to Members of Parliament on £300 a week. That is not a cheap debating point. They are relatively small to Fleet Street editors and journalists. However, they are not small for the recipients or someone who, for getting the extra 30p a week on a graduated pension, will lose up to 57p a week, which is the equivalent of an annual television licence or a quarter's electricity or gas bill. They are not insignificant amounts to the people we are talking about. As I have said, there was an amendment that would have got the Government out of this problem in the cheapest way.
      Mr. Durant: I do not disagree with the hon. Gentleman, but I am saying that those sums are small, and, therefore, the Treasury should not be so concerned about them. I am taking the hon. Gentleman's view. I am arguing that they are small amounts, so need we collect them?
      Mr. Rooker: That brings us to the use of the assessing tolerance. The Inland Revenue has no statutory authority for the £30 of assessing tolerance off £100 of taxable income. It is not in statute; it is part of extra-statutory concessions—the little book which has the list of the giveaway tax reliefs that affect the well-off. However, perhaps we should put it in statute and bring about a change every year.
      Mr. Richard Wainwright: The hon. Gentleman's careful researches are greatly helping the House. From his researches, can he say how the following case will be dealt with under the new anaesthetic arrangement of automatically deducting the tax on the pension books? Let us suppose that such a pensioner as he has described takes into her home a dependent relative and becomes entitled to the dependent relative allowance. What will happen to the automatic deduction of tax from that pension?
      5.30 pm
      Mr. Rooker: I do not know the answer, but I should be pleased if a Minister from the Treasury or the Department of Health and Social Security could tell us. We shall have to pursue the matter before the beginning of the next financial year. We have not yet passed the operating orders for the social security benefits or pension increases. I presume that we shall do that next week or the week after. They will take effect in November and carry the beneficiaries half-way through the next financial year. I shall be speaking from the Opposition Front Bench, and we shall raise the matter and make time available to discuss it.
      The Government did not necessarily plan some of the things that I and my hon. Friends dealt with during previous stages of the Bill. I may get into trouble for this, but I genuinely believe that when they planned the Budget they did not foresee the consequences of freezing tax allowances for the women above the age of 60. If they did, they should have said so. It has never been admitted in correspondence or in parliamentary exchanges that that was part of Tory planning.
      On page 27 the Tory manifesto complained:
      "Income tax starts at such a low level that many poor people are being taxed to pay for their own benefits."
      If the women we are discussing are not poor, I do not know who is. They are being taxed to pay for their benefits under the Tories but they were not under a Labour Government, so what did the Tory manifesto commitment mean? I, therefore, give the Government the benefit of the doubt and assume that they did not understand the interaction of the tax and social security systems for those women who, when they reach retirement age, do not get a retirement tax allowance—most of us think of it as a retirement tax allowance and not an age allowance. The Minister shakes his head. If he wishes to say that it was all part of Tory planning, let us have it on the record. It is not what the Prime Minister said before the election.
      The Financial Secretary to the Treasury (Mr. Nigel Lawson): I was shaking my head at the hon. Gentleman's
      1206
      assertion that it was a retirement tax allowance and not an age allowance. That is incorrect. We are talking about an age allowance.
      Mr. Rooker: I shall come to the argument about whether it is a retirement tax allowance or an age allowance.
      I see the hon. Member for Braintree (Mr. Newton) in the Chamber. It is unfortunate that he is a Whip. In case he intends to leave the Chamber, I tell him that I shall refer to him shortly.
      If before the election, on 17 April 1979 at Gravesend, the Prime Minister was not referring to the people we are discussing, I do not know to whom she was referring. The press release begins:
      "My first Ministerial job in government was at the Ministry of Pensions and National Insurance and I want to set out some of the very good things Conservatives have done for pensioners and those on other benefits."
      She listed a few measures, and I do not knock them. They included assistance to the disabled. The statement concludes:
      "Those pensioners who have another little pension of their own or some savings and who therefore pay tax will benefit from our Income Tax reductions."
      Mr. D. N. Campbell-Savours: My hon. Friend needs the special voice.
      Mr. Rooker: Yes—the haircut, the lot.
      The speech was glossed up. It was widely reported in the press the following day. To pin it down, it was at Gordon school, Lower Higham Road, Gravesend.
      That pledge has clearly been broken in the Budget. The Government and the Prime Minister stand condemned. The right hon. Lady gave a pledge before the election that people with a small pension of their own would benefit from Tory tax reduction, but the reverse has happened.
      I turn briefly to the age and retirement allowance. On 26 March I wrote to the Prime Minister—I was not aware of the speech that I quoted at the time—about the problem of single or married women with a pension of their own. I said that I believed that the Government's action was unintentional—but I am beginning to think that I may have been wrong. I gave examples of the massive marginal tax rate that they would have to pay, and I gave four examples of how the Government could avoid them, some of which cost more than others.
      The right hon. Lady replied on 13 April:
      "As you will appreciate, the proposals which you make in your third paragraph to deal with this problem raise wider issues about the structure of personal income tax reliefs."
      In effect, she said, "I have, therefore, passed the buck to
      the Chancellor and his colleagues", although she did not quite put it like that. She said that she would ask them to consider the proposals. I heard part and read other parts of the Financial Secretary's speech on 5 May. It dealt almost entirely with widows. I accept that there is a problem there, but I am dealing with all women between the ages of 60 and 64 who have a State retirement pension paid for through their own contributions.
      I had heard nothing else by 10 May, so I asked the Prime Minister to find out what was going on and look into the matter herself. My letter was acknowledged promptly, and on 24 June I received a massive three-page reply from the Chancellor of the Exchequer stating:
      "The justification for age allowance has always been that the taxable capacity of people declines as they get older, because of the extra expenses they incur, and that an additional allowance is justified on this account."

      1207
      One may or may not agree with that assertion, but, in any case, why pick on the age of 65? There are more women than men, and there are more women pensioners than men, so more than half the population reaches retirement age at 60. Why not make it 60 for everyone, although that may rightly be seen as an unfair advantage for the majority of men who are still at work?
      I do not accept that it is an age allowance. I believe that it was a Labour Government who introduced the allowance not many years ago. I do not know whether they intended later to give women a different allowance.
      However, on 14 June 1977 we debated the matter at length in Standing Committee D. Mrs. Audrey Wise and I tabled certain amendments and voted for certain amendments of the hon. Member for Braintree, who did not get all the credit that he was entitled to. We put down an amendment which was the same as today's amendment No. 24. I warn my hon. Friends and Conservative Members, therefore, that if one is on to a good thing one should keep to it and not draw back. After Mrs. Wise and I had caused all that trouble and won those victories, we decided not to press to a Division the very point that we are now debating. We thought that we had achieved enough and caused enough problems for our own Government. We therefore decided to hold back on that amendment.
      Nevertheless, in a discourse with the hon. Member for Braintree, we were all agreed. The hon. Member for Braintree said:
      "I cannot say what would happen in those circumstances"—
      the circumstances that had described about the reduction in the retirement age for men and whether if that went down to 63, we would bring the age allowance down to 63—
      "but my view is that the age allowance should be reduced in step with the pension age. It is almost inconceivable that if we were to reduce the retirement age there would not be overwhelming pressure to reduce the threshold for the age allowance."
      I then said:
      "So it is a retirement allowance."
      The hon. Member for Braintree replied:
      "I am grateful to the hon. Gentleman for his implicit support. I, too, see it as a retirement allowance, and that is how the Committee should see it."—[Official Report, Standing Committee D, 14 June 1977; c. 534.]
      With all due respect to the Government, the hon. Member for Braintree has a far better record and knows far more about the social security system than the Financial Secretary, who has been wrapped up in tax policy for the past few years. The hon. Member for Braintree and I both regard this as a retirement allowance.
      I believe that extra expenses are placed upon women when they retire as compared with when they are at work. It is therefore indefensible to have this discrimination between men and women. I shall not go into the arguments about the retirement age for men, Mr. Deputy Speaker, as you would rightly rule me out of order. Nevertheless, this is clearly a retirement allowance. If the Financial Secretary says that it is an age allowance, I ask him to defend the age of 65.
      I draw the attention of the House to the ludicrous position which now obtains. I shall give the examples of two women. For obvious reasons, I shall not disclose the exact circumstances or the names and addresses.
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      Mrs. R. of Sutton Coldfield is not a constituent of mine, but, like many others, she wrote to me after I had raised this matter. She has a basic rate retirement pension of £27·15 and a 91p graduated pension—so she is in real trouble. She also happens to have a pension of £5·28 per month which, as a widow, she receives from her late husband's former employer. She is 62 years of age. She pays income tax. She also receives £7·15 per week in supplementary benefit because, when her housing expenses are taken into account, her net income after tax is below what we in this country consider to be the poverty line below which no person should be required to live.
      5.45 pm
      Mr. Durant: I apologise to the hon. Gentleman. This must be about the fourth time that I have intervened. In fairness, it should be pointed out that this was not dealt with by the Labour Government. I understand the hon. Gentleman's argument and I have sympathy with it. Nevertheless, the Labour Government did not deal with it.
      Mr. Rooker: The Labour Government went a considerable way towards dealing with the problem by accepting the amendments in Committee. They therefore improved matters. The Conservative Government have made the problem far worse than it has ever been before, for the reasons that I have given.
      Mr. Robin F. Cook: On 11 May this year, when we were debating the taxation of unemployment benefit and supplementary benefit to strikers, the Chief Secretary said:
      "It would not make sense for a person to be paid supplementary benefit or unemployment benefit and to have tax deducted from that benefit."—[Official Report, 11 May 1981; Vol. 4, c. 563.]
      Precisely that situation, which the Chief Secretary himself said would not make sense, will occur for tens of thousands of women between the ages of 60 and 65 as a result of the Budget.
      Mr. Rooker: My hon. Friend is perfectly correct.
      I take the further example of Miss D of Harlow in Essex. The papers have been forwarded to me by the Child Poverty Action Group, which has given permission for me to raise the matter.
      Miss D also gave permission for her case to be used as an example. She went to the welfare rights service to see whether she was better off on supplementary benefit or with a rebate. As hon. Members know, one cannot have both. She receives the basic retirement pension of £27·15. Her rent is £10 per week, her rates are £4 a week and there is a further addition for central heating. She is not well off, but she has limited savings of £314 in a building society. Miss D has tax liabilities of £210 for 1981–82—£4 per week. I have before me two sets of calculations to show whether she is better off on supplementary benefit or on a rebate. It is a good job that she went to that office, as she had previously had a rebate. The net effect of the two calculations, however, is as follows:
      "So your income after paying out for rent/rates is"
      under the supplementary benefit heading £28·55 and under the rebate heading £27·34.
      "This means you are 'better off' on supplementary benefit by £1·21 per week."
      She should therefore claim supplementary benefit. She is paying £4·06 per week in income tax, yet the calculation of her outgoings under the complexities of the social

      1209
      security system, with housing expenses, needs, and so on, to which any other citizen is entitled, shows that she is better off on supplementary benefit. But the tax liability is not wiped out because she has gone on to supplementary benefit.
      The thrust of the Government's argument, therefore, cannot be that they have made things better for the women to whom amendment No. 24 relates. There was one way for the Government to escape the problem, which they have now made worse for themselves. I concede immediately that the amendment is expensive, but it is chickenfeed compared with the Budget judgment of several thousand million pounds a year. However, the sum involved is not insignificant. It must be a few hundred million pounds. A way out was open to the Government in Committee, when they could have accepted the Opposition amendment to raise the single person's allowance by £50 for these women—not for the other 20 million people who are at work. They could have got themselves oat of the problem in that way.
      The facts that I have given about what has been agreed among the Treasury, the Inland Revenue and the DHSS are not yet apparent to those on the receiving end of the problem. The hundreds who will be affected in each of our constituencies do not yet know about this. Towards the end of October, after party conference time and towards the end of the recess, however, when, according to the Minister's answer that I have mentioned, the tax returns and amended code numbers will start popping through the letter boxes—subject to the Civil Service dispute being over, I assume that this will happen—I believe that all hell will be let loose. Hon. Members will then be called to account. Constituents will ask "What did you do? Did you vote for this" Did you know about it? Did you make a speech? Did you ask a question? Did you write to a Minister? Is it too late to do anything about it?"
      I hope that constituents throughout the country will ensure that when they ask those questions they are given the Division list for today, 15 July. Those who do not get it should write to my hon. Friends, who will ensure that they receive it.
      Mr. Andrew F. Bennett: I came into the Chamber primarily to listen, in the hope that I should be better informed. As a result of the speech made by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), I certainly am. However, unfortunately he did not quite give me the answers that I wanted. I am concerned to give my constituents the advice that my hon. Friend also seeks. Many of my constituents still remember the Tory Party's promise to reduce the tax burden and to simplify government. Clearly, the Government have done neither. The Conservative Party has made government far more complicated, and the Government can now impose themselves on a group of people who did not previously have to put up with the problems of the taxation system.
      I hope that I shall receive answers to the questions that I shall ask. What happens to those whose graduated pension—the old Boyd-Carpenter scheme—is in a muddle? Indeed, many of my constituents find that their graduated pensions are in a muddle. One of my constituents recently received a letter that said that those involved were sorry for not having paid him the money that he was entitled to for the past three years. He was delighted to receive the back payments.
      1210
      Let us suppose that that case had involved a woman who received back payments. If those back payments were less than the crucial figure of 33p and were received in one year, would they push that person over the tax threshold or would they be spread over the previous years? That is important for the individual. concerned. If a woman retires at 64 and receives her graduated pension straight away, she will cross the tax threshold. However, if she leaves everything to bureaucracy and her pension comes through slowly so that she does not receive it until she has passed the age of 65, or the tax year in which she is 65—at which point she becomes eligible for the age allowance—is she all right? Alternatively, is it deemed that she received the money in the previous year despite the fact that she did not? Would she then be taxed on it? If people just exceed the 33p they will be considerably worse off. What happens if people decide not to collect the money? Are they still taxed on it because it is there to be collected, or are they entitled not to be taxed on the money because it has not been claimed? What happens if the money is clained in two or three years' time?
      My hon. Friend the Member for Perry Barr mentioned the way in which the Government are excluding the individual and allowing the Treasury and pension computers to talk to each other without involving the individual. Do constituents have a choice about whether to collect their graduated pensions? Is it assumed that the graduated pension must be collected? There are many questions that we should like answers to so that we can give our constituents the right advice. Should they collect their graduated pensions even if they become worse off as a result? Can they defer collecting the money until they are over the age of 65 and then collect it as a lump sum? What happens if, through no fault of their own, graduated pension is not paid at the right time and is eventually paid in a larger amount that puts them over the tax threshold?
      I hope that we shall receive answers to those questions. Indeed, it would save the Treasury much time in the long term if it issued hon. Members with a booklet giving them guidance so that they can give the right information to those in this age group. If the Treasury does not issue such a booklet, some Treasury Ministers will have to answer many letters in the next month or two and will have to sort out a lot of anomalies. The answer is for the Government to accept the amendments, to remove the anomaly and to fulfil their election pledge to reduce taxation and bureaucracy.
      6 pm
      Mr. Lawson: As tends to happen year after year when we discuss Finance Bills, we have had a long debate on the taxation of widows. That is understandable. From our experience of our constituencies we all know the concern that exists among widows about the way in which the tax system affects them.
      As the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) said, in many cases the grievance is imagined. When he was a Treasury Minister I heard him say that many times. Nevertheless the grievance is deeply felt. I shall do my best to answer most of the points that have been made. Both the amendments stand in the name of the official Opposition. Amendment No. 21 seeks to increase the widows' bereavement allowance by £30 and is not an expensive amendment in itself. As the hon. Member for Birmingham, Perry Barr (Mr. Rooker) conceded, amendment No. 24 would be very expensive. It seeks to

      1211
      give the full age allowance to women aged between 60 and 64 who have retired and who are in receipt of category A retirement pensions.
      I turn to the subject of widows' bereavement allowance. I am grateful to my hon. Friend the Member for Reading, North (Mr. Durant) for his remarks on the subject. I pay tribute to him for the consistent work that he has done for widows through the all-party widows' group, and in other ways. He pointed out that for years the Labour Government had been pressed to introduce something like the widows' bereavement allowance. All of us who deal with the problems of widows understand that they have problems that will last for years. However, the problems, psychological hardships and difficulties of coping are at their greatest in the year of bereavement. The Labour Government were continually pressed, but did nothing. We did something and introduced the widows' bereavement allowance in the last Budget. Although it is a modest step, it is an important one for widows.
      My hon. Friend made another point that we should bear in mind. A balance needs to be struck between the undoubted case that widows have and the other hard cases that involve people in different circumstances who nevertheless have financial difficulties and problems with the taxation system. We must always keep the matter in perspective. It must be borne in mind not only that this year we were unfortunately obliged to decide not to increase any of the personal tax allowances or thresholds but that the widows' bereavement allowance is not specified as a particular sum in the legislation. In effect, it is tied to the other allowances and is the difference between the single allowance and the married allowance.
      In the year of bereavement, the widow continues to receive the full married allowance. If she has a child, she also receives the one-parent family allowance, the additional personal allowance. It follows that if, regrettably, the single and married allowances cannot be raised this year, the difference between them will remain the same and the widows' bereavement allowance will not increase. The right hon. Member for Ashton-under-Lyne said that somehow that was harder on the widow receiving the widows' bereavement allowance, even though that allowance did not exist when he was a Minister. He said that it was harder because it was for one year only, whereas with other allowances it might be possible to catch up in subsequent years. If that is an argument for anything, it must be an argument for extending the widows' bereavement allowance for a further year beyond the year of bereavement. That does not seem to be an argument for the increase that he suggested.
      Mr. Robert Sheldon: I am rather surprised by that comment of the right hon. Gentleman because if it is his intention to introduce an extra year for the bereavement allowance, that is another matter. If that is not his intention, the failure to give the widow a bereavement allowance in the year of her bereavement means that that has gone for ever, because she has it only for that year.
      Mr. Lawson: The right hon. Gentleman is getting carried away when he speaks of the failure to give the widow a bereavement allowance. There is no failure to give her a bereavement allowance. She receives it in full, whereas there was no bereavement allowance previously. However, she will not receive an increase.
      1212
      The hon. Member for Gateshead, West (Mr. Horam) exaggerated the difficulties by understating the effect that a bereavement allowance would have. He spoke of the difficulties for a widow on a pension receiving a tax bill in the year of bereavement. There are difficulties in the cases that the hon. Member for Perry Barr mentioned of people being brought into the tax net—single women and widows between the ages of 60 and 64—as a result of the pension increases this year, while the personal allowance is not being increased. For the year of bereavement, that does not apply because of the existence of the widow's bereavement allowance. That is the one case where it does not apply and where the relatively new allowance introduced last year is of great benefit.
      The right hon. Member for Ashton-under-Lyne said that the right solution might have been to increase the assessing tolerances. That would have been the wrong solution. The assessing tolerances are not meant to be an extra threshold. They are an administrative convenience. There is a high administrative cost in collecting small amounts of tax. The assessing tolerances should be at the right level for administrative purposes. If we wish to increase and can afford to increase the thresholds, we shall do that, but not by the back-door method of increasing the tolerances.
      Another reason that the right hon. Gentleman gave for increasing the tolerances was to do with the way they operate. It is true that if the taxable income is £100 the tax liability would be £30 or less and no tax is raised because it is below the level of tolerance. If, however, it is slightly above that, the full taxable amount is raised. However, raising the tolerances would not alter that effect but it would happen at a higher level, at £120 or £130. Up to that point, no tax would be levied, but above it the full amount of tax liable is raised. I do not think that there is a case for either of the arguments that the right hon. Gentleman put for an increase in the tolerances.
      Mr. Durant: I accept my right hon. Friend's general premise but when a small income is concerned the tolerance level is important. I do not think he should say that it does not matter in the sense that if it is moved to that point the full amount comes into operation. If the figure is small, what matters to those concerned is that it will assist them if the tolerance level is raised.
      Mr. Lawson: Nevertheless, there will always be cases where small amounts of taxation are levied. My hon. Friend must accept that. If the tolerance levels are raised, the small amounts will be that bit larger. I accept that, but small amounts of tax must still be levied. In some cases, it is reasonable to strike the assessing tolerances at a level where the administrative costs and the trouble of raising the money are greater than it is worth. The hon. Member for Perry Barr suggested that the Inland Revenue had no statutory authority for the assessing tolerances. [Interruption.] If he did not make that point, I shall not bother to reply to it.
      Mr. Rooker: I am not saying that what is being done is illegal. I said that I did not think that it was in an Act, but it was in what is presumably delegated authority to the Inland Revenue, which I know concerns extra-statutory concessions. There are about 40 of those and I understand that this is one of them.
      Mr. Lawson: The hon. Gentleman is not correct on this occasion. He is usually accurate, though not always.

      1213
      In some of his statements in other spheres he has not been so accurate. On this occasion, he has conducted his researches diligently and for a long time. Assessing tolerances are administrative arrangements that the Revenue makes under its powers. That has gone on for years under many Governments, as the hon. Gentleman well knows. The powers are contained in section 1 of the Taxes Management Act 1970 and its predecessors for the care and management of income tax. There is the power under that Act, so that it is not an extra-statutory concession. However, I am not saying that there are not a number of extra-statutory concessions in existence. That situation has existed for a long time.
      Mr. Horam: Is the amount of the tolerance a matter for the discretion of the Revenue or is it in the Act? Has it been indexed?
      Mr. Lawson: The amount is not in the Act.
      The hon. Member for Perry Barr asked a number of searching and penetrating questions. First, he asked how many women were affected in the way that he outlined. Our best guess—we do not have the precise figure—is that there are probably about 50,000. He also asked when the system would come into effect. As he pointed out, I have already answered that.
      Mr. Rooker: Is the right hon. Gentleman confirming what he said in that written answer—that is, that it is only when the pension increases take effect in November, halfway through the tax year, that the amended codes will be sent out from the Revenue?
      Mr. Lawson: I am sure that the hon. Gentleman will not be surprised to know that my written answers are correct. The fact is that the first request for payment will probably be in November, but the tax is paid in quarterly instalments in arrears. Thus it follows that part of the 1981–82 tax will not be collected until 1982–83.
      The hon. Gentleman asked me about the new system of direct deduction of PAYE from national insurance pensions. He asked when that would come into effect. Would it be from April 1982 as we had hoped? I am afraid the answer to that is that I cannot say at present. We do not know when it will come in. April was our original hope.
      Mr. Richard Wainwright: Further to the point about automatic deduction at source of tax from pensions, will the right hon. Gentleman answer the question that I put to the hon. Member for Birmingham, Perry Barr (Mr. Rooker) about what happens if a pensioner becomes entitled to another income tax allowance in the course of one tax year?
      Mr. Lawson: I am not sure whether the hon. Member for Colne Valley (Mr. Wainwright) is referring to the dependent relative allowance and asking how that will be dealt with. A person's total allowances for the year will be estimated in the usual way, and the PAYE coding will also be worked out in the usual way, whatever allowances a person may have.
      The hon. Member for Perry Barr got terribly worked up—
      Mr. Robert Sheldon: The House would be grateful if the Minister would give a proper reply to the hon. Member for Colne Valley (Mr. Wainwright). What would happen
      1214
      if a person's circumstances changed during the course of the year? How would that be recorded on the pension book?
      Mr. Lawson: I shall be happy to write to the right hon. Member about that. [Interruption.] I am not sure whether the right hon. Member is opposing the change, but it is a good question and I shall be happy to write to him about it.
      Sir William Clark: If the allowances of any taxpayer change during the course of the fiscal year, on application to the inspector of taxes the code number is automatically changed.
      Mr. Lawson: The reason why I said that I would write to the right hon. Gentleman is that it is a new system that has not yet come into effect:. It is primarily done through the DHSS, as the hon. Member for Perry Barr explicitly stated. I shall be happy to do my best to answer the question. I shall, as I said, write to the right hon. Gentleman, and also, of course, to the hon. Member for Colne Valley, who raised the question. I shall, indeed, make sure that the letters are despatched on the same day, so that no distinction will be made between the Liberal Party and the Labour Party. Far be it for me to wish to make such invidious distinctions.
      The hon. Member for Perry Barr got terribly worked up in giving the examples of people who were liable to tax on various parts of their income and were also drawing supplementary benefit. This is one of the complexities of our tax and social security system, but there is nothing new about it, as the hon. Gentleman surely knows. It has been happening for years under Governments of both major parties. There have always been individuals who were both liable to tax and eligible for supplementary benefit.
      Perhaps I might turn briefly—before I forget it entirely by concentrating too much on the points made by the hon. Member for Perry Barr—to the question asked by the hon. Member for Stockport, North (Mr. Bennett). He asked whether a person could decide not to draw his Boyd—Carpenter graduated pension. The answer is that he can do so.
      That leads to the more important question raised by the hon. Member for Perry Ban. The position at the moment is that no one who has simply the basic State retirement pension is liable to tax. The assessing tolerance takes care of that. The hon. Gentleman's point, however, is that there are a number of people who have the Boyd-Carpenter addition as well, and that some of them will be drawn into the tax net. As I said in Committee, they are really no different from any other people with extra income, particularly where there is an occupational pension. The new second State pension is, in a sense, an alternative to an occupational pension, and it draws people into the tax net. Over a period that will get larger and larger. The suggestion that it should not be liable to tax is, therefore, absurd and is wholly contrary to the thinking of those who were responsible for the scheme. There is no reason in equity why a substantial second State pension for the contracted-in employee should not be caught for tax whereas an occupation pension is caught for tax.
      6.15 pm
      Mr. Rooker: I do not think, with respect, that I sought to base my argument on the new pension scheme, because I accept that that is, in effect, an occupational scheme

      1215
      organised by the State to provide people with a proper pension, to avoid their having to go on to supplementary benefit or means-tested benefit on retirement. No one ever construed the graduated pension scheme started by Boyd-Carpenter as an occupational pension scheme, and no one can say that the average payment that all women will get this year—57p a week—is a substantial pension.
      The graduated pension is part and parcel of the retirement system and is not separate from it, like the new system that was started in 1978. This is the first year that it has ever been caught in the tax net. I accept that the new system has to be treated wholly as an occupational pension. But that is no excuse for having the tax threshold so low that people who are on means-tested benefit are paying tax at the same time.
      Mr. Lawson: I note what the hon. Gentleman says about the second State pension. It is the Government's contention that the Boyd-Carpenter addition is analogous to that and should be treated in precisely the same way. The hon. Gentleman is absolutely right in saying that this is the first time that that addition has been liable to tax, in a small number of cases. The root of the problem is .a state of affairs in which we were unable—without allowing Government borrowing to become wholly excessive, with grave consequences for the economy—to increase the personal allowances. That is where the difficulty arises.
      Hon. Members in all parts of the House should bear that in mind when they are calling for increases in public expenditure, because increases in public expenditure have to be paid for. There is no such thing as a free lunch. It is the cost of those increases in public expenditure that we are debating today.
      Mr. Deputy Speaker: It might help the House if at this point I were to give a ruling on the important matter raised by the hon. Member for Berwick-upon-Tweed (Mr. Beith) relating to the application of the rules for notice of oral questions. As 29 July will be a public holiday and the House may not sit on that day, and as a genuine misunderstanding has arisen over the application of the rules, Mr. Speaker has decided that the random selection process for questions for Thursday 30 July will not take place until tomorrow at 4 pm.
      Mr. Beith: I thank you, Mr. Deputy Speaker, and Mr. Speaker, for the trouble that you have taken in giving the ruling and for the arrangement that you have made. Perhaps I may express the hope that the Leader of the House will put us all out of our misery tomorrow by stating clearly that the House will not sit on that day.
      Mr. Robert Sheldon: I am sure that we all are grateful to you for your intervention, Mr. Deputy Speaker.
      I should like to make one or two points in reply to the comments of the Financial Secretary. He failed to answer the major question that concerns those women—single, married or widowed—between the ages of 60 to 64, who, as a result of this legislation, will lose their tolerance of income tax, which can amount to about £30, just because they get a few coppers in the way of State-related pension. For that reason they will lose substantial sums of money. It could have been prevented either by revalorising—the method that we prefer—or by a greater application of the
      1216
      tolerance levels. The right hon. Gentleman sought to avoid either of those two possible escape routes, and because of that we shall divide on amendment No. 24.
      Amendment No. 21 deals with the widows' bereavement allowance. We know full well that the allowance was brought in last year, but we also know that those widows who become widowed in this current year will fail to benefit from any uprating, which they had regarded as their due. The right hon. Gentleman's response was wholly inadequate. In fact, he gave no answer except to say that it was related to the personal allowance. Of course it is, but he could have accepted the amendment, which seeks to make a special exception for widows who are bereaved this year. The others can all catch up on the allowances that are forgone this year and on the failure to increase them. The one category of people who cannot so gain is the widows who are bereaved this year.
      The right hon. Gentleman accepts that the costs entailed in the amendment are very small, but he is still unable to accept it. We shall therefore divide the House on both issues.
      Question put,,That the amendment be made:—
      The House divided: Ayes 209, Noes 275.

      Division No. 272]

      [6.20 pm

      AYES

      Abse, Leo

      Dixon, Donald

      Adams, Allen

      Dobson, Frank

      Alton, David

      Dormand, Jack

      Anderson, Donald

      Douglas-Mann, Bruce

      Archer, Rt Hon Peter

      Dubs, Alfred

      Ashley, Rt Hon Jack

      Duffy, A. E. P.

      Ashton, Joe

      Dunn, James A.

      Atkinson, N. (H'gey,)

      Dunwoody, Hon Mrs G.

      Barnett, Guy (Greenwich)

      Durant, Tony

      Beith, A. J.

      Eadie, Alex

      Bennett, Andrew (St'kp't N)

      Eastham, Ken

      Bidwell, Sydney

      Edwards, R. (W'hampt'n S E)

      Booth, Rt Hon Albert

      Ellis, R. (NE D'bysh're)

      Boothroyd, Miss Betty

      English, Michael

      Bottomley, Rt Hon A. (M'b'ro)

      Ennals, Rt Hon David

      Bray, Dr Jeremy

      Evans, loan (Aberdare)

      Brown, Hugh D. (Provan)

      Faulds, Andrew

      Brown, Ronald W. (H'ckn'y S)

      Field, Frank

      Callaghan, Rt Hon J.

      Fitch, Alan

      Callaghan, Jim (Midd't'n & P)

      Fletcher, Ted (Darlington)

      Campbell, Ian

      Ford, Ben

      Campbell-Savours, Dale

      Forrester, John

      Canavan, Dennis

      Foster, Derek

      Cant, R. B.

      Foulkes, George

      Carter-Jones, Lewis

      Garrett, John (Norwich S)

      Clark, Dr David (S Shields)

      George, Bruce

      Cocks, Rt Hon M. (B'stol S)

      Ginsburg, David

      Cohen, Stanley

      Golding, John

      Coleman, Donald

      Graham, Ted

      Concannon, Rt Hon J. D.

      Grant, George (Morpeth)

      Conlan, Bernard

      Grant, John (Islington C)

      Cook, Robin F.

      Grimond, Rt Hon J.

      Cowans, Harry

      Hamilton, James (Bothwell)

      Cox, T. (W'dsw'th, Toot'g)

      Hardy, Peter

      Craigen, J. M.

      Harrison, Rt Hon Walter

      Crowther, J. S.

      Hart, Rt Hon Dame Judith

      Cryer, Bob

      Hattersley, Rt Hon Roy

      Cunningham, G. (Islington S)

      Heffer, Eric S.

      Cunningham, Dr J. (W'h'n)

      Hogg, N. (E Dunb't'nshire)

      Dalyell, Tam

      Home Robertson, John

      Davies, Rt Hon Denzil (L'lli)

      Homewood, William

      Davies, Ifor (Gower)

      Hooley, Frank

      Davis, Clinton (Hackney C)

      Horam, John

      Davis, T. (B'ham, Stechf'd)

      Howell, Rt Hon D.

      Deakins, Eric

      Howells, Geraint

      Dean, Joseph (Leeds West)

      Huckfield, Les

      Dempsey, James

      Hughes, Robert (Aberdeen N)

      Dewar, Donald

      Janner, Hon Greville

      1217

      Jay, Rt Hon Douglas

      Robinson, G. (Coventry NW)

      John, Brynmor

      Rooker, J. W.

      Johnson, James (Hull West)

      Roper, John

      Johnson, Walter (Derby S)

      Ross, Stephen (Isle of Wight)

      Johnston, Russell (Inverness)

      Rowlands, Ted

      Jones, Rt Hon Alec (Rh'dda)

      Ryman, John

      Jones, Dan (Burnley)

      Sandelson, Neville

      Kaufman, Rt Hon Gerald

      Sever, John

      Kerr, Russell

      Sheldon, Rt Hon R.

      Kilroy-Silk, Robert

      Shore, Rt Hon Peter

      Lambie, David

      Short, Mrs Renée

      Leadbitter, Ted

      Silkin, Rt Hon J. (Deptford)

      Leighton, Ronald

      Silkin, Rt Hon S. C. (Dulwich)

      Lestor, Miss Joan

      Silverman, Julius

      Lewis, Arthur (N'ham NW)

      Skinner, Dennis

      Lewis, Ron (Carlisle)

      Smith, Rt Hon J. (N Lanark)

      Litherland, Robert

      Snape, Peter

      Lofthouse, Geoffrey

      Soley, Clive

      McDonald, Dr Oonagh

      Spearing, Nigel

      McElhone, Frank

      Spriggs, Leslie

      McKay, Allen (Penistone)

      Stallard, A. W.

      McKelvey, William

      Steel, Rt Hon David

      McMahon, Andrew

      Stewart, Rt Hon D. (W Isles)

      McNally, Thomas

      Stoddart, David

      McNamara, Kevin

      Summerskill, Hon Dr Shirley

      McTaggart, Robert

      Taylor, Mrs Ann (Bolton W)

      McWilliam, John

      Thomas, Dafydd (Merioneth)

      Magee, Bryan

      Thomas, Jeffrey (Abertillery)

      Marshall, D (G'gow S'ton)

      Thomas, Dr R. (Carmarthen)

      Marshall, Dr Edmund (Goole)

      Tilley, John

      Martin, M (G'gow S'burn)

      Tinn, James

      Mason, Rt Hon Roy

      Torney, Tom

      Maxton, John

      Urwin, Rt Hon Tom

      Meacher, Michael

      Varley, Rt Hon Eric G.

      Mellish, Rt Hon Robert

      Wainwright, E. (Dearne V)

      Millan, Rt Hon Bruce

      Wainwright, R. (Colne V)

      Miller, Dr M. S. (E Kilbride)

      Walker, Rt Hon H. (D'caster)

      Mitchell, Austin (Grimsby)

      Watkins, David

      Mitchell, R. C. (Soton Itchen)

      Weetch, Ken

      Morris, Rt Hon A. (W'shawe)

      Welsh, Michael

      Morris, Rt Hon C. (O'shaw)

      White, Frank R.

      Morris, Rt Hon J. (Aberavon)

      White, J. (G'gow Pollok)

      Newens, Stanley

      Whitehead, Phillip

      Oakes, Rt Hon Gordon

      Whitlock, William

      Ogden, Eric

      Wigley, Dafydd

      O'Halloran, Michael

      Willey, Rt Hon Frederick

      O'Neill, Martin

      Williams, Rt Hon A. (S'sea W)

      Orme, Rt Hon Stanley

      Wilson, Gordon (Dundee E)

      Palmer, Arthur

      Wilson, William (C'try SE)

      Parker, John

      Winnick, David

      Pavitt, Laurie

      Woodall, Alec

      Pendry, Tom

      Woolmer, Kenneth

      Rees, Rt Hon M (Leeds S)

      Wright, Sheila

      Richardson, Jo

      Young, David (Bolton E)

      Roberts, Albert (Normanton)

      Roberts, Ernest (Hackney N)

      Tellers for the Ayes:

      Roberts, Gwilym (Cannock)

      Mr. George Morton and

      Robertson, George

      Mr. Frank Haynes

      NOES

      Adley, Robert

      Blackburn, John

      Alexander, Richard

      Blaker, Peter

      Alison, Michael

      Body, Richard

      Amery, Rt Hon Julian

      Bonsor, Sir Nicholas

      Ancram, Michael

      Bottomley, Peter (W'wich W)

      Arnold, Tom

      Bowden, Andrew

      Aspinwall, Jack

      Boyson, Dr Rhodes

      Atkins, Rt Hon H. (S'thorne)

      Braine, Sir Bernard

      Atkins, Robert (Preston N)

      Bright, Graham

      Atkinson, David (B'm'th,E)

      Brinton, Tim

      Baker, Kenneth (St.M'bone)

      Brittan, Leon

      Baker, Nicholas (N Dorset)

      Brooke, Hon Peter

      Banks, Robert

      Brotherton, Michael

      Beaumont-Dark, Anthony

      Brown, Michael (Brigg & Sc'n)

      Benyon, Thomas (A'don)

      Browne, John (Winchester)

      Benyon, W. (Buckingham)

      Bruce-Gardyne, John

      Best, Keith

      Buchanan-Smith, Alick

      Bevan, David Gilroy

      Buck, Antony

      Biffen, Rt Hon John

      Bulmer, Esmond

      Biggs-Davison, John

      Burden, Sir Frederick

      1218

      Butcher, John

      Hunt, David (Wirral)

      Cadbury, Jocelyn

      Hunt, John (Ravensbourne)

      Carlisle, John (Luton West)

      Irving, Charles (Cheltenham)

      Carlisle, Kenneth (Lincoln)

      Jessel, Toby

      Carlisle, Rt Hon M. (R'c'n )

      Johnson Smith, Geoffrey

      Chapman, Sydney

      Jopling, Rt Hon Michael

      Churchill, W. S.

      Joseph, Rt Hon Sir Keith

      Clark, Hon A. (Plym'th, S'n)

      Kaberry, Sir Donald

      Clark, Sir W. (Croydon S)

      Kellett-Bowman, Mrs Elaine

      Clarke, Kenneth (Rushcliffe)

      Kershaw, Anthony

      Clegg, Sir Walter

      Kimball, Marcus

      Cockeram, Eric

      King, Rt Hon Tom

      Colvin, Michael

      Knight, Mrs Jill

      Cope, John

      Knox, David

      Cormack, Patrick

      Lamont, Norman

      Corrie, John

      Lang, Ian

      Cranborne, Viscount

      Langford-Holt, Sir John

      Critchley, Julian

      Latham, Michael

      Crouch, David

      Lawrence, Ivan

      Dean, Paul (North Somerset)

      Lawson, Rt Hon Nigel

      Dickens, Geoffrey

      Le Merchant, Spencer

      Douglas-Hamilton, Lord J.

      Lester, Jim (Beeston)

      du Cann, Rt Hon Edward

      Lewis, Kenneth (Rutland)

      Dunn, Robert (Dartford)

      Lloyd, Ian (Havant & W'loo)

      Dykes, Hugh

      Lloyd, Peter (Fareham)

      Eden, Rt Hon Sir John

      Loveridge, John

      Edwards, Rt Hon N. (P'broke)

      Luce, Richard

      Eggar, Tim

      Lyell, Nicholas

      Emery, Peter

      MacKay, John (Argyll)

      Eyre, Reginald

      Macmillan, Rt Hon M.

      Fairbairn, Nicholas

      McNair-Wilson, M. (N'bury)

      Fairgrieve, Russell

      McNair-Wilson, P. (New F'st)

      Farr, John

      McQuarrie, Albert

      Fell, Anthony

      Madel, David

      Fenner, Mrs Peggy

      Major, John

      Fisher, Sir Nigel

      Marland, Paul

      Fletcher, A. (Ed'nb'gh N)

      Marlow, Tony

      Fletcher-Cooke, Sir Charles

      Marshall, Michael (Arundel)

      Fookes, Miss Janet

      Marten, Neil (Banbury)

      Forman, Nigel

      Mates, Michael

      Fowler, Rt Hon Norman

      Mather, Carol

      Fox, Marcus

      Maude, Rt Hon Sir Angus

      Fraser, Rt Hon Sir Hugh

      Mawby, Ray

      Fraser, Peter (South Angus)

      Mawhinney, Dr Brian

      Gardiner, George (Reigate)

      Maxwell-Hyslop, Robin

      Gardner, Edward (S Fylde)

      Mayhew, Patrick

      Garel-Jones, Tristan

      Mellor, David

      Gilmour, Rt Hon Sir Ian

      Miller, Hal (B'grove)

      Glyn, Dr Alan

      Mills, Iain (Meriden)

      Goodhew, Victor

      Mills, Peter (West Devon)

      Goodlad, Alastair

      Miscampbell, Norman

      Gorst, John

      Mitchell, David (Basingstoke)

      Gow, Ian

      Moate, Roger

      Gower, Sir Raymond

      Monro, Hector

      Grant, Anthony (Harrow C)

      Montgomery, Fergus

      Gray, Hamish

      Morris, M. (N'hampton S)

      Greenway, Harry

      Morrison, Hon C. (Devizes)

      Grieve, Percy

      Morrison, Hon P. (Chester)

      Griffiths, E. (B'y St. Edm'ds)

      Murphy, Christopher

      Griffiths, Peter Portsm'th N)

      Neale, Gerrard

      Grist, Ian

      Needham, Richard

      Grylls, Michael

      Neubert, Michael

      Gummer, John Selwyn

      Newton, Tony

      Hamilton, Hon A.

      Normanton, Tom

      Hamilton, Michael (Salisbury)

      Onslow, Cranley

      Hampson, Dr Keith

      Oppenheim, Rt Hon Mrs S.

      Hannam, John

      Osborn, John

      Haselhurst, Alan

      Page, John (Harrow, West)

      Hastings, Stephen

      Page, Richard (SW Herts)

      Havers, Rt Hon Sir Michael

      Parkinson, Cecil

      Hawksley, Warren

      Parris, Matthew

      Hayhoe, Barney

      Patten, Christopher (Bath)

      Heath, Rt Hon Edward

      Pattie, Geoffrey

      Heddle, John

      Pawsey, James

      Heseltine, Rt Hon Michael

      Percival, Sir Ian

      Hicks, Robert

      Peyton, Rt Hon John

      Higgins, Rt Hon Terence L.

      Pollock, Alexander

      Hogg, Hon Douglas (Gr'th'm)

      Powell, Rt Hon J.E. (S Down)

      Holland, Philip (Carlton)

      Prentice, Rt Hon Reg

      Hooson, Tom

      Prior, Rt Hon James

      1219

      Proctor, K. Harvey

      Stokes, John

      Pym, Rt Hon Francis

      Stradling Thomas, J.

      Raison, Timothy

      Tapsell, Peter

      Rathbone, Tim

      Taylor, Robert (Croydon NW)

      Rees, Peter (Dover and Deal)

      Taylor, Teddy (S'end E)

      Renton, Tim

      Tebbit, Norman

      Rhodes James, Robert

      Temple-Morris, Peter

      Rhys Williams, Sir Brandon

      Thomas, Rt Hon Peter

      Ridley, Hon Nicholas

      Thompson, Donald

      Ridsdale, Sir Julian

      Thorne, Neil (Ilford South)

      Rifkind, Malcolm

      Thornton, Malcolm

      Roberts, M. (Cardiff NW)

      Townend, John (Bridlington)

      Roberts, Wyn (Conway)

      Townsend, Cyril D, (B'heath)

      Rossi, Hugh

      Trippier, David

      Rost, Peter

      Trotter, Neville

      Sainsbury, Hon Timothy

      van Straubenzee, W. R.

      St. John-Stevas, Rt Hon N.

      Viggers, Peter

      Scott, Nicholas

      Wakeham, John

      Shaw, Giles (Pudsey)

      Waldegrave, Hon William

      Shelton, William (Streatham)

      Walker, B. (Perth )

      Shepherd, Colin (Hereford)

      Wall, Patrick

      Shepherd, Richard

      Walters, Dennis

      Shersby, Michael

      Ward, John

      Silvester, Fred

      Warren, Kenneth

      Sims, Roger

      Watson, John

      Skeet, T. H. H.

      Wells, John (Maidstone)

      Speed, Keith

      Wells, Bowen

      Speller, Tony

      Wheeler, John

      Spence, John

      Whitney, Raymond

      Spicer, Jim (West Dorset)

      Wickenden, Keith

      Spicer, Michael (S Worcs)

      Wiggin, Jerry

      Sproat, Iain

      Williams, D. (Montgomery)

      Squire, Robin

      Winterton, Nicholas

      Stainton, Keith

      Wolfson, Mark

      Stanbrook, Ivor

      Young, Sir George (Acton)

      Stanley, John

      Younger, Rt Hon George

      Steen, Anthony

      Stevens, Martin

      Tellers for the Noes:

      Stewart, Ian (Hitchin)

      Mr. Robert Boscawen and

      Stewart, A. (E Renfrewshire)

      Mr. Anthony Berry.

      Question accordingly negatived.
      Mr. Cook: I beg to move amendment No. 23, in page 13, line 9, at end insert—
      '(1A) Section 8 of the Taxes Act (personal relief) shall apply for 1982–83 as if each amount specified in that section were increased by an amount equal to the aggregate of the increases that would be otherwise payable under the said section 24(5) in respect of the years 1981–82 and 1982–83.'.
      The amendment seeks to oblige the Government to make good in the next financial year the amount by which they have failed to uprate personal allowances in the current financial year. I admit straight away that we recognise that it is not possible for the House to bind the hands of the House when it meets to consider next year's Finance Bill. However, it is possible for us to bias the judgment of the Government, as they approach next year's Bill, in the direction of carrying out the uprating of personal allowances that they have ducked in this financial year.
      I hope that the Financial Secretary will not take exception to the way in which I phrased our amendment. I recollect that when the matter was debated on the Report stage of the 1977 Bill the Financial Secretary took exception to the idea that the Rooker-Wise amendment, which he supported and was involved in drafting, would bias the judgment of future Governments.
      On the contrary, the right hon. Gentleman said that, instead of biasing judgment, the amendment would remove the bias by which Governments find it possible to forget about inflation and to forget to index personal allowances in line with inflation, thereby increasing their tax revenue without doing the slightest thing.
      1220
      If the Rooker-Wise amendment was prudent because it removed that bias from Governments' attitudes and judgments, it would be prudent of the House similarly to provide for a removal of the bias in the Government's judgment next year. We should thus not find the Chancellor of the Exchequer producing, with a sense of triumph, an uprating of personal allowances next year in line with the inflation of the preceding year, conveniently forgetting both that there has been no uprating this year and that, even if he indexes for this year's inflation, personal allowances will be lower in real terms than they were at the start of the past financial year.
      The amendment takes us to the heart of the major element of the Budget package. The overall tenor of the package, boiled down in the Bill, is to increase taxation. The Bill provides for a new tax on the banks and for an increase in the vehicle excise duty, although the Government inherited from the previous Labour Government, who, they told us, put an oppressive and onerous tax burden on the nation, a commitment to abolish the duty. Instead of carrying out that commitment, the Government have increased the duty so that it is 40 per cent. higher than the level they inherited from a Government who proposed to abolish it.
      We found in Committee signs of increasing desperation on the part of the Treasury to find the money. It even rediscovered a tax on matches, which no one had touched since 1949, and doubled it. We look forward to next year's Budget with trepidation, expecting that the Treasury may rediscover the window tax or another forgotten, mouldering tax that will be included in the Finance Bill to find next year's money.
      Nowhere in the Bill do we find a provision for so much increased revenue as the failure to uprate personal allowances. One would not guess that from the Red Book, which includes a column providing for the amount of revenue affected by the provisions of the Budget. The first line of that table is:
      "Retention of 1980–81 main personal allowances and thresholds".
      The forecast change in taxation provided in the column against that entry is nil.
      The Financial Secretary knows that that is not the case. There will be a substantial effect on revenue.
      Mr. Lawson: Will the hon. Gentleman give way?
      Mr. Cook: If the right hon. Gentleman wishes to refer to the footnote, I should tell him that I am about to come to that.
      Mr. Lawson: It is printed in black and white.
      Mr. Cook: I shall come to the footnote, but it is equally misleading. The right hon. Gentleman knows that there is a change and it is referred to in the footnote, which states:
      "If these had been increased by 15·1 per cent. as specified … the revenue cost would have been … £2,510 million in a full year."
      The Financial Secretary went into the matter in great depth in 1977, and he knows that if the tax allowances were uprated that would not reduce the tax revenue of the Treasury from income tax by £2,510 million. It would not reduce the revenue received last year by a single penny.
      The change means that instead of an uprating, which would cost the Treasury money, the failure to carry out the uprating gains the Treasury £2,510 million more in income tax than it received last year. It provides another £2½ billion of revenue for the Treasury.

      1221
      The Financial Secretary knows that an element of dishonesty is involved in the failure to uprate the tax thresholds. He praised the Rooker-Wise principle in 1977 because it brought truth into taxation. In the same debate, on the Report stage of the 1977 Bill, the right hon. and learned Gentleman the present Chancellor of the Exchequer repeatedly referred to the need for truth in taxation. He said:
      "we are angry because, due to the Treasury's failure to change the tax system in line with inflation, the Treasury itself becomes the main body to profit from the inflation that it has failed to check".—[Official Report, 25 July, 1977; Vol. 936, c. 70.]
      Neither I nor any of my right hon. or hon. Friends could express more succinctly, accurately or pertinently our reaction to the right hon. and learned Gentleman's failure to uprate personal allowances. He is seeking to profit from, as he put it, the inflation that the Government have "failed to check". As a result of the failure to uprate in line with the amendment which he was supporting, he will gain and profit to the extent of £2½ billion of additional revenue.
      The Financial Secretary to the Treasury also intervened in the debate. I commend his speech to hon. Members who may be short of reading matter in the course of tonight's debate. They will find that the report of the proceedings on 25 July 1977 makes entertaining reading. The right hon. Gentleman, speaking in support of the principle of indexing tax thresholds, said:
      "Without doubt it is the most important legislative achievement of this Session".
      That was the Rooker-Wise amendment which the right hon. Gentleman was then supporting. In this Bill, he provides for the Government to get out of the obligation that the amendment imposed on future Governments. The right hon. Gentleman was diffident about the extent to which he had supported the principle in the past. He recognised, in one passage, that he had possibly been expressing his support with too much repetition.
      Mr. Lawson: It was an excellent speech.
      Mr. Cook: I agree that it was an excellent speech. I wish only that in 1981 the right hon. Gentleman had reached the same conclusion as he reached in 1977 when he said:
      "I have beer pressing this case"—
      that is, the case for indexation of the thresholds—
      "ever since I entered the House a little more than three years ago, and I apologise to my right hon. and hon. Friends and to some extent to right hon. and hon. Gentlemen opposite if I have become something of an indexation bore in the process. However, no one gets anywhere in this House unless he is persistent, and I have been just as bored in going on and on with my argument as right hon. and hon. Gentlemen on both sides of the House" .—[Official Report, 25 July 1977; Vol. 396, c. 89–90.]
      I assure the Financial Secretary, in case he feels the same diffidence, that the House is not at all bored with him going on and on about indexation. On the contrary, we yearn to hear from him the same arguments about indexation as he put in 1977 and in the preceding three years. We hark with a sense of nostalgia to hear those arguments about the importance of uprating the tax thresholds in line with inflation, about the need to inject truth in taxation and the need for Governments to avoid the dishonest device of increasing their revenue by failing to uprate the threshold in line with the extent to which they have tolerated a level of inflation.
      The right hon. Gentleman knows that one of the strongest grounds for his urging indexation is that failure
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      to uprate tax thresholds does not fall equally on all income earners. Those who suffer the highest increase in tax burdens are those who previously paid no tax until inflation carried them across the tax threshold. As my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) indicated in the previous debate, it is known how many such taxpayers will be carried over the tax threshold.
      There are 700,000 who would have been let out of the tax net, had there been an uprating in line with Rooker-Wise, who will now remain within the tax net, and another 500,000 who, for the first time, will be brought into the tax net as a result of the failure to uprate in line with inflation. All of them, by definition, are low-paid. It is now necessary to have an income of only one-third of average income to find oneself carried beyond the tax allowances.
      Virtually all the 1¼ million taxpayers who now find themselves for the first time within the tax net earn less than half average income. They are in the bottom quarter of the pile. Many of them are pensioners. This is not surprising. This year, both the single pensioner and the married couple will receive in pension more than the tax allowance for a single person or the tax allowance for a married couple. The results are bizarre.
      6.45 pm
      There has been reference to the case of Miss D from Harlow. I have also been sent details of the case. I spoke to the Harlow social work department earlier this week. I can confirm that Miss D of Harlow has now applied for £9·06 in supplementary pension and will simultaneously, after receiving the benefit, be paying to the Inland Revenue £4·06 in tax revenue. That is bizarre and lunatic. It is so lunatic that the £9·06 she will receive in supplmentary pension is based on her net, not her gross, income. In other words, it includes an allowance for the £4 that she has to pay to the Inland Revenue. She is to receive £4 from the DHSS in order to make a payment to the Inland Revenue. This shows the lunacy of the position at which we have arrived.
      This case is particularly relevant to the amendment before the House. Such occurrences are likely to get worse and more frequent unless the amendment is carried. In his Budget judgment, the Chancellor announced that he estimated that inflation in the year from November of last year to November of this year would be 10 per cent. That estimate was made four months ago. There are very few forecasters who now agree that inflation in the year from November 1980 to November 1981 will be 10 per cent. The mean estimate for inflation over that 12-month period is working out at 12 per cent. Whether it is 12 per cent. or 11½ per cent., it is obvious that inflation for that year will be higher than estimated at the time of the Budget, because one of the consequences of the Budget was to push up the rate of inflation.
      It will be recalled that last year the Government overestimated the amount of inflation for the purposes of uprating the State pension. As a result, this year he Government are knocking 1 per cent. off the State pension with meticulous precision on the allegation of an overpayment. It can therefore confidently be assumed that if this year the Chancellor has underestimated the rate of inflation and has under-provided for the increase in the State pension, he will add on next year the 2 per cent. by which he has underestimated the rate of inflation. I am

      1223
      taking at face value the logic of the Financial Secretary. The Chancellor has given an assurance that he will do precisely that.
      If next March the Chancellor comes to the House and increases pensions in line with inflation, plus 2 per cent. to restore his underestimate for the current year, but increases tax allowances only by the rate of inflation and no more, he will have carried pensions even further beyond the tax allowance than at present. At that stage, the married couple receiving even an age allowance will find that they receive over the financial year 1982–83 a pension payment that exceeds the combined personal allowance with the age allowance. This means that tens of thousands of people will find themselves in the position of Miss D, and literally hundreds of thousands of pensioners will be simultaneously eligible for supplementary pension from the DHSS and liable to pay income tax to the Treasury out of it.
      That imposition on the low-paid is offensive against any sense of fairness and decency. It is doubly offensive when such treatment of the low-paid is compared with the treatment that the Government have initiated with respect to the higher income groups.
      This matter was debated when hon. Members considered this clause in the Committee of the whole House. I got into hot water with the Financial Secretary at the time for suggesting that those earning five times average income had received a net reduction in income tax over the life of the Government. The right hon. Gentleman will recall that, initially, he interrupted me from a sedentary position, saying "Rubbish", and then intervened from a standing position to say that the figures were merely speculative.
      There is a wide enough gulf in the House between the two Front Benches on fiscal policy without our seeking to find a gulf over our data base. I am happy to try to find a common data base on which to erect our differences over fiscal policy. I am happy to accept the Treasury's figures about what has happened to income tax liability of households over the life of this Government. I refer to the figures submitted by the Treasury to the Select Committee on the Treasury and Civil Service when it considered the public expenditure consequences of the 1981 Budget.
      I know that the Financial Secretary differs often enough from his advisers that he may well consider that the figures that they tendered to that Committee are rubbish. But, for the rest of us who approach the Treasury with a due attitude of reverence, we shall treat the figures with cautious respect, and they command that cautious respect. If the Financial Secretary consults the tables on pages 122 and 123 of the Select Committee report, he will find that the following picture emerges.
      Between 1978–79—the last full financial year of the Labour Government—and the current financial year, the income tax burden of a married man on average income with two children increased by £2·30 per week. If the Financial Secretary then looks at the column for the married man with two children who is earning twice the average earnings, he will find that his income tax burden has risen by £3·06. That is more, but my hon. Friends will at once notice that it is not pro rata with income. It is only 50 per cent. more than for the man on average income, although the couple to whom I have just referred have doubled the income.
      1224
      But if we then turn to the column for the married man with two children earning five times the average income, we find that his tax burden has changed more dramatically than that of either of the other two. Whilst the other two are paying more in income tax, that household is paying £16·44 a week less in income tax that it did in the last year of the Labour Goverment.
      The Opposition disagree with the Government on the necessity for increasing the tax burden. We do not think that the Government have made their case. We would prefer to see an element of reflation in the Budget judgment. But, if the increased tax burden is necessary, it is an outrage that the Government, who find and finance that increased tax burden by taxing the pensioners and the unemployed, should nevertheless be able to tolerate a reduced tax burden on those who earn more than five times the national average.
      The Financial Secretary shakes his head. I quote figures provided by the Treasury. If he wishes to describe the figures provided by his own Department as "rubbish" or "speculative", I shall happily give way to him. But those are the figures that he and his Department supplied to the Select Committee. They are on the record. It is perfectly clear that that is the consequence of the right hon. Gentleman's financial and fiscal policy. The right hon. Gentleman may be prepared to justify it. He may try to do so. But he cannot evade the fact that that is the consequence of the sum of his decisions of the last two and a half years.
      That is not what the Conservative Party promised us in the last election campaign. I have with me the Conservative campaign guide. I can commend it to my hon. Friends for spare-time study. The guide contains no fewer than 50 pages on taxation. The full flavour of those 50 pages is caught in the first paragraph. Writing about the result of Labour government, it says:
      "The result is a level of taxation which puts Britain in a class apart from other developed countries. The tax system is being strained to breaking point. Anomalies and injustice abound."
      Anomalies? What richer anomaly could one find than the case of Miss D from Harlow? Injustice? What worse injustice could one find than those with five times the average income getting an income tax cut whilst pensioners and the unemployed get an income tax increase? That is the consequence of two years of government by the party which put that prospectus before the nation at the election.
      If my hon. Friends get hold of this valuable and entertaining publication, I urge them to press on beyond the first paragraph and not to be put off by the obvious irrelevance of the commentary in the first paragraph. I suggest that they turn to some of the interesting tables contained in this document. Let us uncork the real vinegar and see how the figures that the Conservatives quoted in those tables compare with their record in office.
      On page 75 there is a table expressing tax and national insurance contributions as a percentage of gross domestic product. The latest year for which figures are provided in the guide is 1975. According to the guide, in 1975 the percentage of tax and national insurance of GDP was 39·8. It is now 42·7 per cent. , after two years of the right hon. Gentleman at the Treasury and three successive Conservative Budgets.
      On page 86 there is another table giving the percentage of income that the average household pays in tax. In 1976, the latest year included in the table, apparently the average

      1225
      household paid 20 per cent. of its income in tax. Now, after two years of the right hon. Gentleman at the Treasury and after three successive Conservative Budgets, the average household will pay 21·3 per cent. of its income in tax.
      On page 86 there is another table—perhaps the most fascinating table of them all. It compares the level of the tax threshold with the level of supplementary benefit to which a man with three children would be entitled. In January 1977, that supplementary benefit level stood at £43·30 and the tax threshold stood at £37·50. I would entirely agree with the right hon. Gentleman if he wished to condemn that. It is plainly preposterous that we have a supplementary benefit level which is above the tax threshold. The tax threshold, plainly, should be raised so that it is well above supplementary benefit level. I would not dispute with the right hon. Gentleman that that ought to be our objective.
      But what will the figure be after two years of the present Government and after three Conservative Budgets? The respective figures will now be: for supplementary benefit level, £81·70; for the tax threshold, £57. The gulf in the intervening five years has moved from £6 to £25. For the household which the Conservatives themselves chose for illustrative purposes, there is now an entitlement to supplementary benefit £25 in excess of the tax threshold for the same household.
      The fact is that after the first three Budgets of the present Government the nation is paying more in income tax than before. There are more people paying income tax than before. They are paying it on a larger proportion of their income than before. They commence paying it at a higher marginal rate than they did before. There are also 40 per cent. more people in the poverty trap than before the right hon. Gentleman took office.
      Only one final point rests with me to make. I am aware that the Government persist in treating with contempt the suggestion that there is anything that they can do to stimulate the economy. In a speech made shortly after the Budget, the Financial Secretary poured scorn on Keynesian demand management on the basis that the Keynesians could not explain how man succeeded in evolving from the caves. In fairness to Keynes, I must confess that I do not recall his attempting to explain how it was that man managed to evolve from the caves, but if he had attempted an explanation no doubt it would have been mistaken. No doubt the Financial Secretary will explain that the evolution from the cave dwellers was all the result of strict and prudent controls on monetary aggregates.
      I shall make a prediction. It is obvious from all the economic forecasts with which we have been deluged in the last three months that there will be no economic revival before the next Budget in the spring of next year. When that time arrives, the great final judgment day of the general election will be less than two years away. I predict that we shall suddenly discover that the Treasury Benches will then have found that it is open to the Government to stimulate the economy, that it is possible for the Government to find ways of reflating and that their reflation will no longer be a threat to inflation. The Financial Secretary will disappear to the back of the cave, juggle with the bones again, and will come to the conclusion that he is getting a different message from the spirit of economists past. He will be advised to reflate.
      1226
      Having shared that prediction with the House, let me also share with the House a fear. I have a fear that when the Government come to that decision, that next year, suddenly, it will be possible to reflate the economy and that they ought to do so, they will then attempt that reflation by cutting the standard rate of tax. If they do that, they will benefit most those who have already benefited most from their previous tax cuts for the wealthy.
      It is therefore prudent for the House to pass this amendment. Then, when the Financial Secretary and his colleagues decide to reflate next year, they will be obliged to do so by putting back into the pockets of the pensioners and the low-paid the money that they have filched from those pockets by failing to protect tax allowances against the inflation that they have created.
      7 pm
      Mr. Richard Wainwright: It is accepted in most parts of the House that failure to raise the personal allowances for income tax to compensate for inflation is the most sneaky and unfair way of raising large sums in taxation. Whether that sneaky way is adopted by Conservative or Labour Governments, it is equally objectionable. This time, however, the Government's failure to raise the personal allowances is aggravated by the fact that last year they also abolished the reduced rate of income tax. So, although the offence was grave, this time the offence is even more grevious. It means that people who are entering the income tax net at absurdly low incomes—poverty incomes—enter it not at the reduced rate of 25 per cent. that formerly applied but at the full 30 per cent. rate.
      It is beyond my comprehension how Ministers can sit on the Treasury Bench—incidentally, it is no wonder that the Chancellor of the Exchequer has not even paid us a passing visit as we toil through the Finance Bill; I did not see him in Committee, nor has he visited us on Report—knowing that they are introducing people on poverty incomes to the income tax system at 30 per cent., and doing so in the light of what they were saying only a couple of years ago. At Solihull, on 24 March 1979, the Prime Minister said:
      "Less than 30 years ago, a family man with a couple of children didn't start paying income tax until he was more or less earning the average industrial wage. Today the tax man calls before he has even got half-way there … Is it any wonder that people ask 'Why work?"
      She went on to develop her party's promise to reduce taxation on low wages and incomes. Now, with this Bill, the level of income at which the typical family starts to pay tax has fallen from 44·7 per cent. of average male earnings in 1979, when the right hon. Lady made those remarks, to a mere 38 per cent. in the coming year. Anyone on 38 per cent. of average male earnings is now introduced to the tax system, and without the benefit of a reduced rate.
      It has already been said that the proportion of income paid in tax and national insurance by a typical low-paid family has risen from 21·9 per cent. early in 1979 to 23·6 per cent. now. The result, of course, is that not only do we have the misery of people paying tax out of incomes which are not sufficient to maintain them at a tolerable standard of life but we have the enormous administrative expense of taking money through an elaborate process out of one citizen's pocket and putting it into another pocket through a different elaborate system. That is odd, coming from a Government who never cease to boast about how they are streamlining our Administration and taking the

      1227
      advice of Sir Derek Rayner about how to save money by closing sub-post offices, when in fact they have created the largest and most expensive administrative absurdity of all times.
      All this serves to sap the morale of our people and to make them question whether government under our system can ever again provide a fair, equitable and sensibly managed system of taxation and benefits. It is no wonder that some people, under the combined burden of poverty and taxation, are beginning to lose patience.
      In 1979 the Tory manifesto said:
      "Raising tax thresholds will let the low-paid out of the tax net altogether".
      What has happened? As a result of this Bill, more and more of the low-paid will come within the tax net. Moreover, the injustice does not stop there. Under this Government, income tax paying had become more and more of a voluntary club. One joins it just like one signs up for tennis. Piled on top of the injustices that I have outlined there is now the other injustice that a neighbour in the same street" by taking advantage of our lax arrangements and the fact that we do not even bother to send an income tax form to people more than once every five years, on average, may be moonlighting and getting away with a tolerably good living, perhaps from the black economy.
      The combination of all those factors is seriously menacing the cohesion of the nation. As we know from the history of the Roman Empire, it is ill-administered and oppressive taxes which can bring down even the most rigorous governmental system. Treasury Ministers should ask the Prime Minister whether, in the light of what is happening in our country today, she really wishes them to press the Bill in its present form to a Third Reading next week. Certainly it would be considerably improved if the amendments, on which I congratulate the official Opposition, were passed. They are the least that we ought to do if we intend to keep our taxation system within the tolerable bounds of justice.
      Mr. Horam: This group of amendments ingeniously draws to the attention of the House the failure to raise personal allowances during the course of this year. I and the Social Democratic Party support the amendments.
      The steady fall of the tax threshold to lower and lower levels of income is the worst aspect of tax policy as we have known it under successive Governments of both major parties over the past 10 to 15 years. The further massive fall this year, as a result of the Government's failure to index at all, is quite the worst aspect of the Budget—a point that has already been made in the debate today.
      The situation was best summarised, ironically enough, by the Chancellor of the Exchequer last year, when he was talking about the real value of personal tax allowances. He argued that a failure to index last year
      "would have a number of undesirable effects. It would lower the starting point of income tax in real terms, compared with a year ago. It would increase the number of taxpayers. It would narrow the gap between tax thresholds and the main social security benefits, and it would impose particularly heavy burdens on those with the smallest incomes."—[Official Report, 26 March 1980; Vol 981, c. 1474.]
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      That is treasury prose, but it is specific and accurate Treasury prose, and on this occasion I do not argue with the Treasury prose or with the speech writer who may have turned it into that accurate account of the situation.
      Tax policy in the last 10 to 15 years has been devastating. In 1955 people started to pay income tax on average male earnings. Perhaps that was what the hon. Member for Colne Valley (Mr. Wainwright) was talking about when he quoted the Prime Minister. Today, 25 years later, people start to pay income tax on 38 per cent. of average earnings. In addition, in 1955 people were paying income tax at the bottom rate, which was 9 per cent. Today people start to pay income tax at 38 per cent. of average earnings but at the full 30 per cent. rate. That is how the position has deteriorated under all Governments in the last 25 years.
      Let us examine the position of the poorer person. In 1971–72, when the family income supplement was introduced, the tax-free income, as a percentage of family income supplement for a married man with two children, was 90 per cent. As a result of this Government's measures, that figure has fallen to 63 per cent. of family income supplement, which was designed for people in real need.
      The Financial Secretary has been asked about the number of people affected by the failure to index personal allowances. I should like to draw him on another matter in relation to the poverty trap. About 1¼ million more taxpayers than last year are drawn into the net as a result of the failure to index. The Secretary of State for Social Services made an estimate before the Budget. He said that the number would be 500,000. On that basis he said that an additional 10,000 people who were drawing family income supplement would be drawn into the tax net. Has that figure changed? Will 10,000 people in receipt of family income supplement now pay tax when they did not pay it before? Has that figure increased since the Budget and the details of the Finance Bill were worked out? That is a worthwhile question since we have had a different estimate from the Government about the effect of the failure to index on people between the ages of 60 to 64 who are subject to tax for the first time as a result.
      The important effect is not so much on the person with an average income but on the poor and the very poor. That is the real indictment of the Government's taxation policy. That and the level of unemployment are the real causes for concern.
      The hon. Member for Edinburgh, Central (Mr. Cook) said that the cost of full indexation this year would be great. It is clear that the Government have saved a great deal of money by failing to index personal allowances. I argue that we need, and could afford, an increase in the public sector borrowing requirement. We need not fully offset a decision to index personal allowances. Even if we did, I would rather have an increase in the standard rate of income tax than a failure to raise personal allowances. I have no doubt that the arguments of equity and fairness lie in the direction of increasing the standard rate of tax rather than in failing to increase the tax threshold.
      Like the hon. Member for Edinburgh, Central, I fear that if, in due course, in spite of the arguments in the last few months, the Government have to introduce a measure of reflation, the standard rate of income tax will be lowered once again. That will increase the inequity of our

      1229
      tax system and increase the burden on people who are least able to afford it. That is the Government's illogical position and it leads to their false choice of priorities.
      If we are really concerned about decreasing poverty, our first priority should be to raise personal allowances whenever we can. That is a greater priority than lowering the standard rate of income tax.
      7.15 pm
      I wish that we could evolve over a longer period a more consistent approach to taxation policy. However, it behoves us to reach a point where the Treasury can consider the effects of its taxation policy in relation to benefit policy. When I was on the Back Benches in the last Labour Administration, I used to ask what research unit existed in the Treasury for examining the effect of benefits and tax policy in a co-ordinated way. That was when the right hon. Member for Leeds, East (Mr. Healey) was Chancellor of the Exchequer. I was told that there was little research effort in that direction.
      The matter is one of great complexity, as the hon. Member for Birmingham, Perry Barr (Mr. Rooker) explained. The way in which the two issues interact is enormously complicated, but it has amazing effects on the lives of the poorer people. By and large, the effects are side effects of other decisions taken for other reasons. It is high time that a Government examined the two elements of policy together. A Government with a commitment to attack taxation policy should regard this as a high priority.
      The Government have failed to live up to their election pledges. They have failed to come up even with the elements of a c o-ordinated approach. All that I am asking them to do is to examine the taxation and benefits systems from the point of view of the poorer person, or the person on average income, with the same degree of sensitivity as they have examined them from the view of the rich person. That is my fundamental point.
      Mr. Albert Roberts: I am surprised that the hon. Member has not mentioned that if the same people about whom he has been talking were natives of France, Belgium or Germany they would not pay tax at all, because the tax ceiling is so much higher there than in Britain.
      Mr. Horam: I take that point. I was trying to draw my remarks to a close. I was concentrating on Britain. The circumstances here are wholly within the Government's control. They have failed abysmally to live up to their pledges and to the expectations that people rightly have of a concerned Government.
      Mr. David Stoddart: The Financial Secretary has much to answer for. I remember those dark days in 1977 on the Finance Bill Committee when the present Financial Secretary, with great oratory and much persuasion, declared his undying belief in the indexation of allowances. He said that that was the way forward. He said that that was what we must do for people. He said that we must ensure that allowances kept pace with earnings and inflation. He said that if that did not happen people would be disadvantaged and brought into the tax net who should not be there.
      I listened to the right hon. Gentleman with awe because he was silvery tongued at that time. He was very persuasive indeed. He was so persuasive that against the will of the then Government he and his colleagues,
      1230
      together with some of my hon. Friends, brought into law the principle of indexation of allowances. As a result, the then Government's Budget judgment went for a Burton. But, of course, that did not worry the Minister or his right hon. and hon. Friends in any sense at all. They had brought off a political coup. No matter about the effect of £350 million being lost—that did not matter because they had pulled off a political coup.
      I felt that the hon. Gentleman—is he an hon. Gentleman? Perhaps he is a right hon. Gentleman. I see that he is nodding. I am sorry for my mistake. He deserves to be a right hon. Gentleman on that one issue alone lie defeated the then Labour Government, so he deserves some reward from his Government. He was very silvery tongued. He persuaded the Committee that it should do what the Government did not want it to do. I felt that he believed in that policy very deeply indeed and that when he had the opportunity he would not only retain that principle but would extend it to other areas. If I am not mistaken, he spoke eloquently about indexing all taxes. He wanted to extend it to VAT and other taxes. He believed very much in that principle. I expected that in Government he would remain faithful to what he had said and done in Opposition. Instead, we find that, having gained the opportunity and the power, far from retaining indexation of direct taxation, that has been thrown aside in every Budget since the Conservative Government took office.
      The hon. Member for Colne Valley (Mr. Wainwright), who has now left the Chamber, accused both Labour and Conservative Governments of not adhering to Parliament's will on the indexation of tax allowances. I must correct him. Not only did the Labour Chancellor in 1977 not seek to recoup that £350 million, but he obeyed the will of Parliament in 1978 and 1979 and indexed tax allowances. The Labour Government obeyed the will of Parliament. It was left to a Conservative Government, almost as soon as they took office, to overthrow the principle for which they had argued, voted and, indeed, won against the opposition of the Labour Government.
      This year, for the first time in 13 years, since 1968, the Government have failed to increase tax allowances at all, let alone index them. There is no doubt that that failure has caused great hardship to many sections of our population, not only to older women between the ages of 60 and 65 but to every working-class family in Britain. They have been disadvantaged for the simple reason that, as inflation has continued to rise, their ability to spend and to keep their families has diminished. That has happened because the Government, who before the election were demanding less taxation, have imposed a greater level of taxation upon ordinary people than has ever been imposed by any other Government.
      That policy has come from Conservative right hon. and hon. Members who, before the election, were promising my constituents and other people up and down the country—in factories, offices, shops and in the streets—that the Conservatives would cut direct taxation. They said "We want you to have more money in your pockets so that you can spend it as you wish." They did not say how they would achieve that, although they did deny that there would be cuts in the National Health Service. The Conservatives did not, as the Labour Party suggested they would, double prescription charges: they increased them fivefold. They said that they would not raise VAT to 12 per cent. as Labour had suggested. They did not: they doubled it to 15 per cent.

      1231
      Those promises were made by the Conservatives before the election. They promised that people would have more money in their pockets to spend as they wished. Far from that happening, people now have less money in their pockets. They have to pay more for the goods that they buy and for the services upon which they rely—services which have been slashed to the bone, and will be slashed even further.
      Mr. Clive Soley: Will my hon. Friend, in his accurate description, also comment on the other justification put forward by the Conservatives? They said that they would regenerate the British economy because the taxes would go into bolstering industry. In fact, we have witnessed a rapid collapse in industry and more bankruptcies than ever before.
      Mr. Stoddart: I am obliged to my hon. Friend. That was to be my next point.
      The idea of the Conservatives—they have enunciated it for a long time—is that if they release tax, especially to the already rich, the already rich will embark upon entrepreneurial enterprise. They would invest the tax handouts in British industry, new enterprise and new plant and machinery. They would revive and resuscitate the British economy, which would then provide greater employment opportunities and better living standards for our people. Of course, none of that has happened. We knew that it would not happen.
      Much of that money has been salted abroad. Far from going into our industries, it has gone into building offices in Brussels or buying Watergates in New York. That is where the additional tax relief given to the rich has gone. It has not gone into British industry, which is collapsing all around us.
      Because of the Government's failure to increase, let alone to index, tax allowances, money has been taken out of the pockets of ordinary people who buy the goods that industry produces, thereby causing a slump and exacerbating the recession. The Government say that they are not responsible for unemployment. Nothing ever seems to be their fault. They fought an election to become the Government, and everything that has gone wrong appears to be someone else's fault. It is either the fault of the working people or, more often, the fault of the Opposition. We do not have any say any more, but the Government cannot seem to get to grips with the fact that we are no longer in power. They blame us for things that are going wrong.
      Although one accepts that there has been a world recession, the Government, by their failure to index tax allowances or to increase them, have piled home recession upon world recession and thereby caused the slump that has brought about the enormous unemployment problem which is leading to some of the other problems on our streets. Those problems will be exacerbated unless the Government deal with them. Indexation of tax allowances is one way to deal with them. That is why the Government should consider seriously the Opposition's amendment.
      The Government will say that the money is not available. In fact, money is slopping around the British economy with nothing to do. It should be used for investment, but it is doing nothing. The public sector borrowing requirement was £1,000 million below the Government's estimate. They have something in reserve.
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      It would be in the interests of the country and in the Government's own interests if they accepted the amendment, which would lead to restoration next year and help to right some of the wrongs that the Government have committed by failing to do what they should have done and what they promised to do in Opposition.
      7.30 pm
      Mr. Lawson: We have just heard an impassioned speech from the hon. Member for Swindon (Mr. Stoddart). I have great affection for the hon. Gentleman. There was a certain special quality of passion in his speech. We all know from where that came. The hon. Gentleman was the Government Whip in the Standing Committee that considered the 1977 Finance Bill, when the Labour Government were defeated and the indexation provisions were instituted. I understand entirely how the hon. Gentleman feels.
      The hon. Gentleman has misunderstood the position that I took in 1977. He will be able to check the reports in Hansard if he wishes, both in Committee and on Report. I said that there should be no such thing as automatic indexation because it was absurd. Governments have to have certain freedom. They must have whatever tax regime they see fit to introduce at the time. Rightly or wrongly, they have to have that freedon for political reasons and for reasons of the state of the economy. I maintain that Governments should be open and above board in what they are doing and that the presumption should be that the datum line is a similar level of personal allowances in real terms and not in money terms. I argued that any change should be made from that datum line. That is what we have done.
      Opposition Members have indulged in a great deal of exaggeration. It has been implied that personal allowances in real terms have been reduced dramatically. That is not so. Since we have been in office the reduction in the level of personal allowances for a married man has been 4 per cent. in real terms. That is not a dramatic reduction but it is one that I regret.
      Mr. Stoddart: The right hon. Gentleman will remember that there was some indexation of tax allowances in 1980, but to a large degree that was nullified by the removal of the 25 per cent. rate and its replacement with a threshold of 30 per cent.
      Mr. Lawson: That was a separate matter. We consistently criticised the reduced rate band when it was introduced by the Labour Government as being an unwise element in our tax system. When we came to office it was natural that we should get rid of it.
      Mr. Cook: I fear that the right hon. Gentleman's recent memory is playing him tricks. The Government did not abolish the reduced rate band immediately on taking office. They did so during their second year, in their second Budget. The Chancellor said explicitly in his second Budget Statement that he was abolishing the reduced rate band to recoup part of the cost of the full uprating. He created the linkage between the abolition of the reduced rate band and finding the money to carry out the full terms of the Rooker-Wise amendment for that year. It is legitimate for my hon. Friend the Member for Swindon (Mr. Stoddart) to say that the poor lost the reduced rate band so that the tax thresholds could be protected. Having lost the reduced rate band, the poor find that the thresholds are not being protected.
      Mr. Lawson: As my right hon. and learned Friend the Chancellor of the Exchequer said at the time, the beneficiaries of the reduced rate band were conspicuously juveniles and working wives. The change made no great difference to the position of the typically married man or the typical family. There was no trade-off. It was merely a measure to achieve a more sensible structure for the income tax system.
      Since we have been in office, the reduction in the threshold of taxation for the married man has been 4 per cent. I deeply regret that. The reduction has occurred because we have introduced no increase in money terms. We have proceeded in the most open way possible. That has been done as a result of the legislation that we introduced. The hon. Member for Colne Valley (Mr. Wainwright), who is something of an agreeable absurdity in our debates, excelled himself when he described the Government's actions as sneaky. No actions could have been less sneaky. In the previous year's Finance Act we introduced a requirement to lay before the House an order stating what the full index figures would be. We ensured that they would be made available openly and that the entire issue would be above board. That provision was designed to make it clear that any reduction would be a reduction in real terms. There was nothing sneaky about that.
      Clause 23(1) of the Bill states that section 24(5) of the Finance Act 1980—the indexation provision—shall not apply for 1981–82. That appears in the Bill for hon. Members to debate. It is there for hon. Members to amend. In effect, it is the amendment that we are discussing. Nothing could be more open and above board. To call it sneaky is absurd. Under the old regime of the Labour Government, nothing needed to appear in the Finance Bill in this respect. There was no possibility of amendment. If nothing had been done, the same money allowances and personal allowances would have been retained.
      Mr. Richard Wainwright: The right hon. Gentleman knows that I was careful equally to condemn the previous Labour Government, except in the sense that they introduced the reduced rate band. Is he saying that the issue is as plain as the open sky to the common man in the street in Oldham, Huddersfield or Warrington?
      Mr. Lawson: Yes. The hon. Gentleman greatly underestimates the intelligence of the man in the street in Warrington, Oldham or Huddersfield.
      I have always maintained that automatic indexation is nonsense. That is why I was unable to accept the original so-called Rooker-Wise formulation. That was why I added my amendment in Committee, which was eventually carried, to provide that the Government of the day would have power by order to prescribe a lesser sum. Any Government must have that freedom. That freedom is now in a slightly different legislative form because a change was enacted in the Finance Bill 1980.
      I maintained that the issue to which I referred must be open and above board. That is what we have persisted in, and there has been no inconsistency or falling away from the proposition that my right hon. and hon. Friends and I advanced in 1977. The hon. Member said that we had not extended it further, but we have. We have extended it throughout the whole range of income tax bands, the higher rates and the investment income surcharge as
      1234
      well—the main elements of the income tax system. We have not been able to improve on any of them this year, but the provision is there.
      The hon. Member for Edinburgh, Central (Mr. Cook) played the old class-war record. He made a great deal of the fact that during our period of office we had made significant reductions in the top rates of income tax. He is right. We have never denied that. We have said that it was essential. Our top rates of income tax were the highest in the civilised world when we came to office. They were absurd. Lord Lever openly said so on a television programme during the Labour Government's period of office. He said that something should be done and that those rates should be reduced. Many other Opposition Members knew that and said so in private conversation, although they would not say so publicly. They did not have the guts of Lord Lever. They had problems with some of their colleagues, but they did nothing about it. We made that change and it was right that we did so. Those taxes were of a purely political nature. They were damaging the economy. The amount of revenue which they brought in was negligible.
      The hon. Member for Edinburgh, Central and others made great play of the fact that taxation has risen. They felt that it should fall. I believe that there was a general feeling in the Chamber today that it would be a good idea if income tax were lower. I share that view and so do the Government. We would all like lower taxation. The question is how to pay for it. No answer came from any Opposition Members who were calling for it. Their request was dishonest.
      Mr. Robert Sheldon: The right hon. Gentleman cannot get away with that. Surely he remembers that we had amendments to increase the allowances.
      Mr. Lawson: The amendment which we are now debating is slightly curious. It is ingenious and I congratulate the hon. Member for Edinburgh, Central on thinking it up. However, it would have no practical effect, as the hon. Gentleman knows. His concern is to bias the judgment of the House in favour of increasing the allowances. We need no such amendment to prejudge us in favour of that. However, the question remains of how that is to be paid for.
      The right hon. Member for Ashton-under-Lyne (Mr. Sheldon), a former Cabinet Minister, said that it is easy. All we have to do is troop through the Lobbies, pass the amendment and all our problems will be solved. That is the height of absurdity. I am sure that when he was a Treasury Minister the right hon. Gentleman frequently told the House that he would like to cut taxation instead of increasing it. However, the money has to be found through reductions in public expenditure.
      One finds that sometimes on the Conservative Benches there is a certain ambivalence. Some of my hon. Friends favour cutting public expenditure. Others may call for increases in particular areas, which is understandable, human and natural. However, from Opposition Members we hear only calls for more and more public expenditure. For them to call for ever more public expenditure across the board and, at the same time, lower taxation is the height of hypocrisy. On those grounds, if on no others, I ask the House to reject the amendment.
      7.45 pm
      Mr. Cook: Some points made by the Financial Secretary deserve an answer. I am sure that he would not want to go away from the debate without having received that answer.
      With regard to his last point, the right hon. Gentleman knows well that he has succeeded in increasing public expenditure as a percentage of GNP. It is higher under the present Government than it was under the Labour Government. What has happened is that he has simultaneously increased public expenditure and cut public services. The reason why we now have higher public expenditure is to meet the cost of the recession, which was partly induced by the cuts in public services. When we demand higher public expenditure, we are demanding an increase in those public services which would contribute to a recovery from the recession which the Government have engineered.
      The Financial Secretary said earlier that there was a reduction in the tax threshold of the married couple of 4 per cent. over the lifetime of the Government. He regretted that cut, which I acknowledge. He also said that it was not dramatic. I accept that a 4 per cent. cut over two years is not dramatic. It is significant and noticeable. However, when the Government put out their manifesto in 1979 they did not say that the reduction in the tax threshold over their period in Government would not be dramatic. They said that they would raise the tax thresholds. Instead of raising those tax thresholds, in three Budgets by this Administration those thresholds have been reduced by 4 per cent. on the Government's calculations.
      As my hon. Friend the Member for Swindon (Mr. Stoddart) said in an intervention, the story does not end there. Along the road, in order to pay originally for an increase in tax thresholds, we have had the abolition of the reduced rate band. There is no point in the Financial Secretary saying that that is something which we should have done anyway because it was a desirable idea. The fact is that as a result of the abolition of the reduced rate band he is receiving in tax revenue £1·1 billion more than he would have received if the reduced rate band had not been abolished. As he knows, a proportion of that £1·1 billion is coming from low income earners.
      There is also another debit to be entered on the balance sheet—the increase in VAT. My hon. Friends who were present during the Chancellor of the Exchequer's first Budget Statement will remember what he said when he increased VAT:
      "the increase I make must be sufficient to provide for substantial and worthwhile reductions in income tax."—[Official Report, 12 June 1979; Vol. 968, c. 250.]
      In other words, there was a linkage in the right hon. and learned Gentleman's mind between an increase in VAT and a reduction in income tax. That is why he asked the nation to pay an increase in VAT.
      However, the facts submitted by the Treasury to the Treasury and Civil Service Select Committee show that most households—including households on average income, all households below average income and households on up to double average income—are now paying more in income tax than when the Government took office and are also paying an increase in VAT which was supposed to provide for a worthwhile reduction in income tax.
      1236
      Therefore, on the balance sheet we have the 4 per cent. reduction in thresholds, plus the abolition of the reduced rate band and the doubling of the standard rate of VAT, all within two years. God help us over the next three years.
      The Financial Secretary asked how we would pay for the reductions. If the right hon. Gentleman has any doubts about this, I shall make it clear to him again that we believe that, at a time of unparalleled recession and when industrial output has fallen by a larger amount than on any previous occasion since records of industrial output were kept, it is lunacy to seek to cut the PSBR in real terms. If the Government were not so bent on doing that, they could afford to uprate tax thresholds.
      However, even if we accept the Government's Budget judgment—their conclusion that they cannot risk a penny more on the PSBR and that they desperately require this £2½ billion extra in income tax revenue—the honest and equitable way to proceed is plain. It is to put up the standard rate of income tax to where it was when they took office and to increase tax thresholds. That would ensure that the tax burden was shared equitably and that the poorest people did not have to provide the largest proportion of the new tax revenue—which is what will happen now. The 1¼ million taxpayers who will find themselves in the tax net as a result of the failure to uprate will have to provide the highest proportion of the £2½ billion extra revenue.
      The Financial Secretary accused me of playing the old record of the class war. I did not refer to class. I contrasted the effects of the Government's fiscal policy on different income groups. The right hon. Gentleman attempted to defend the fact that the Government have reduced the rate of tax on the highest income earners on the basis that we had the highest rate of tax in the world on high income earners. I do not quarrel with that, and he will not quarrel with me over the fact that we also have the highest rate of income tax at the bottom of the tax league. Those who come across the threshold and start paying tax for the first time start paying it at a marginal rate higher than anywhere else in the world. His Government made that rate higher by abolishing the reduced rate band.
      If the right hon. Gentleman founds his defence on what the Government have done with rates of tax, the contrast is even clearer than the contrast that I unfolded earlier. They reduced the rate of tax for the highest income earners paying the highest tax rates, but for the poorest taxpayers they have increased the marginal rate of tax. That is not a contrast of my invention. I am not dreaming up spectres of the class war. It is a contrast that the right hon. Gentleman created and continues to flaunt in defence of the Government's tax record.
      I have never regarded myself as a Marxist, but the Communist manifesto states:
      "The history of all hitherto existing society is the history of class struggles."
      Until the Government took office, I did not believe that, but the more that we see their policy unfold, and the more that they pile the penal burden of taxation on the lower-paid while continuing to exempt the high-paid, the more I begin to wonder whether there was more truth in the assertion than I had previously supposed.
      It is high time that the House moved to a Division and made it plain that the Government's fiscal policy is not one that the Labour Party is prepared to sanction. If the

      1237
      Government wish to run a high-tax policy, they must at least provide protection for the poorest members of our community.
      Question put, That the amendment be made:—
      The House divided: Ayes 193, Noes 273.

      Division No. 273]

      [7.55 pm

      AYES

      Abse, Leo

      Hardy, Peter

      Adams, Allen

      Harrison, Rt Hon Walter

      Alton, David

      Hart, Rt Hon Dame Judith

      Anderson, Donald

      Haynes, Frank

      Archer, Rt Hon Peter

      Heffer, Eric S.

      Ashley, Rt Hon Jack

      Hogg, N. (E Dunb't'nshire)

      Beith, A. J.

      Holland, S. (L'b'th, Vauxh'll)

      Bennett, Andrew (St'kp't N)

      Home Robertson, John

      Booth, Rt Hon Albert

      Homewood, William

      Boothroyd, Miss Betty

      Hooley, Frank

      Bottomley, Rt Hon A. (M'b'ro)

      Horam, John

      Bray, Dr Jeremy

      Howell, Rt Hon D.

      Brown, Hugh D. (Provan)

      Howells, Geraint

      Brown, Ronald W. (H'ckn'y S)

      Hughes, Robert (Aberdeen N)

      Callaghan, Rt Hon J.

      Janner, Hon Greville

      Callaghan, Jim (Midd't'n & P)

      Jay, Rt Hon Douglas

      Campbell, Ian

      John, Brynmor

      Campbell-Savours, Dale

      Johnson, James (Hull West)

      Canavan, Dennis

      Johnson, Walter (Derby S)

      Cant, R. B.

      Jones, Rt Hon Alec (Rh'dda)

      Carter-Jones, Lewis

      Jones, Barry (East Flint)

      Clark, Dr David (S Shields)

      Jones, Dan (Burnley)

      Cocks, Rt Hon M. (B'stol S)

      Kaufman, Rt Hon Gerald

      Cohen, Stanley

      Kerr, Russell

      Coleman, Donald

      Lambie, David

      Concannon, Rt Hon J. D.

      Leadbitter, Ted

      Conlan, Bernard

      Leighton, Ronald

      Cook, Robin F.

      Lestor, Miss Joan

      Cowans, Harry

      Lewis, Arthur (N'ham NW)

      Cox, T. (W'dsw th, Toot'g)

      Lewis, Ron (Carlisle)

      Craigen, J. M.

      Litherland, Robert

      Crowther, J. S.

      Lofthouse, Geoffrey

      Cryer, Bob

      McDonald, Dr Oonagh

      Cunningham, G. (Islington S)

      McElhone, Frank

      Cunningham, Dr J. (W'h'n)

      McKay, Allen (Penistone)

      Davies, Rt Hon Denzil (L'lli)

      McKelvey, William

      Davies, Ifor (Gower)

      McNally, Thomas

      Davis, Clinton (Hackney C)

      McNamara, Kevin

      Davis, T. (B'ham, Stechf'd)

      McTaggart, Robert

      Deakins, Eric

      McWilliam, John

      Dean, Joseph (Leeds West)

      Magee, Bryan

      Dempsey, James

      Marshall, D (G'gow S'ton)

      Dewar, Donald

      Marshall, Dr Edmund (Goole)

      Dixon, Donald

      Martin, M (G'gow S'burn)

      Dobson, Frank

      Mason, Rt Hon Roy

      Dormand, Jack

      Maxton, John

      Douglas-Mann, Bruce

      Meacher, Michael

      Dubs, Alfred

      Mellish, Rt Hon Robert

      Duffy, A. E. P.

      Millan, Rt Hon Bruce

      Dunn, James A.

      Miller, Dr M. S. (E Kilbride)

      Dunwoody, Hon Mrs G.

      Mitchell, Austin (Grimsby)

      Eadie, Alex

      Mitchell, R. C. (Soton Itchen)

      Eastham, Ken

      Morris, Rt Hon A. (W'shawe)

      Edwards, R. (W'hampt'n S E)

      Morris, Rt Hon J. (Aberavon)

      Ellis, R. (NE D'bysh're)

      Morton, George

      English, Michael

      Newens, Stanley

      Ennals, Rt Hon David

      Oakes, Rt Hon Gordon

      Evans, loan (Aberdare)

      Ogden, Eric

      Field, Frank

      O'Halloran, Michael

      Fitch, Alan

      O'Neill, Martin

      Fletcher, Ted (Darlington)

      Orme, Rt Hon Stanley

      Ford, Ben

      Palmer, Arthur

      Forrester, John

      Parker, John

      Foster, Derek

      Pavitt, Laurie

      Foulkes, George

      Pendry, Tom

      Garrett, John (Norwich S)

      Powell, Raymond (Ogmore)

      George, Bruce

      Rees, Rt Hon M (Leeds S)

      Gilbert, Rt Hon Dr John

      Roberts, Albert (Normanton)

      Ginsburg, David

      Roberts, Gwilym (Cannock)

      Grant, George (Morpeth)

      Robertson, George

      Grant, John (Islington C)

      Robinson, G. (Coventry NW)

      1238

      Rooker, J. W.

      Tilley, John

      Roper, John

      Tinn, James

      Ross, Ernest (Dundee West)

      Torney, Tom

      Ross, Stephen (Isle of Wight)

      Urwin, Rt Hon Tom

      Rowlands, Ted

      Varley, Rt Hon Eric G.

      Ryman, John

      Wainwright, E. (Dearne V)

      Sandelson, Neville

      Wainwright, R. (Colne V)

      Sever, John

      Walker, Rt Hon H. (D'caster)

      Sheldon, Rt Hon R.

      Watkins, David

      Shore, Rt Hon Peter

      Weetch, Ken

      Short, Mrs Renée

      Welsh, Michael

      Silkin, Rt Hon J. (Deptford)

      White, J. (G'gow Pollok)

      Silkin, Rt Hon S. C. (Dulwich)

      Whitehead, Phillip

      Silverman, Julius

      Whitlock, William

      Skinner, Dennis

      Willey, Rt Hon Frederick

      Smith, Rt Hon J. (N Lanark)

      Williams, Rt Hon A. (S'sea W)

      Snape, Peter

      Wilson, Gordon (Dundee E)

      Soley, Clive

      Wilson, William (C'try SE)

      Spearing, Nigel

      Winnick, David

      Spriggs, Leslie

      Woodall, Alec

      Stallard, A. W.

      Woolmer, Kenneth

      Steel, Rt Hon David

      Wright, Sheila

      Stewart, Rt Hon D. (W Isles)

      Young, David (Bolton E)

      Stoddart, David

      Summerskill, Hon Dr Shirley

      Tellers for the Ayes:

      Taylor, Mrs Ann (Bolton W)

      Mr. James Hamilton and

      Thomas, Jeffrey (Abertillery)

      Mr. Frank White.

      Thomas, Dr R. (Carmarthen)

      NOES

      Adley, Robert

      Clegg, Sir Walter

      Aitken, Jonathan

      Cockeram, Eric

      Alexander, Richard

      Colvin, Michael

      Alison, Michael

      Cope, John

      Ancram, Michael

      Cormack, Patrick

      Arnold, Tom

      Corrie, John

      Aspinwall, Jack

      Cranborne, Viscount

      Atkins, Robert (Preston N)

      Critchley, Julian

      Atkinson, David (B'm'th,E)

      Dean, Paul (North Somerset)

      Baker, Nicholas (N Dorset)

      Dickens, Geoffrey

      Banks, Robert

      Douglas-Hamilton, Lord J.

      Beaumont-Dark, Anthony

      du Cann, Rt Hon Edward

      Bendall, Vivian

      Dunn, Robert (Dartford)

      Benyon, W. (Buckingham)

      Durant, Tony

      Best, Keith

      Dykes, Hugh

      Bevan, David Gilroy

      Eden, Rt Hon Sir John

      Biffen, Rt Hon John

      Edwards, Rt Hon N. (P'broke)

      Biggs-Davison, John

      Eggar, Tim

      Blackburn, John

      Emery, Peter

      Blaker, Peter

      Eyre, Reginald

      Body, Richard

      Fairbairn, Nicholas

      Bonsor, Sir Nicholas

      Fairgrieve, Russell

      Boscawen, Hon Robert

      Faith, Mrs Sheila

      Bottomley, Peter (W'wich W)

      Farr, John

      Bowden, Andrew

      Fell, Anthony

      Boyson, Dr Rhodes

      Fenner, Mrs Peggy

      Braine, Sir Bernard

      Fisher, Sir Nigel

      Bright, Graham

      Fletcher, A. (Ed'nb'gh N)

      Brinton, Tim

      Fletcher-Cooke, Sir Charles

      Brittan, Leon

      Fookes, Miss Janet

      Brooke, Hon Peter

      Forman, Nigel

      Brotherton, Michael

      Fowler, Rt Hon Norman

      Brown, Michael (Brigg & Sc'n)

      Fox, Marcus

      Browne, John (Winchester)

      Fraser, Rt Hon Sir Hugh

      Bruce-Gardyne, John

      Fraser, Peter (South Angus)

      Buchanan-Smith, Alick

      Gardiner, George (Reigate)

      Buck, Antony

      Gardner, Edward (S Fylde)

      Bulmer, Esmond

      Garel-Jones, Tristan

      Butcher, John

      Glyn, Dr Alan

      Butler, Hon Adam

      Goodhew, Victor

      Cadbury, Jocelyn

      Goodlad, Alastair

      Carlisle, John (Luton West)

      Gorst, John

      Carlisle, Kenneth (Lincoln)

      Gow, Ian

      Carlisle, Rt Hon M. (R'c'n )

      Gower, Sir Raymond

      Chalker, Mrs. Lynda

      Grant, Anthony (Harrow C)

      Chapman, Sydney

      Gray, Hamish

      Churchill, W. S.

      Greenway, Harry

      Clark, Hon A. (Plym'th, S'n)

      Grieve, Percy

      Clark, Sir W. (Croydon S)

      Griffiths, E. (B'ySt. Edm'ds)

      Clarke, Kenneth (Rushcliffe)

      Griffiths, Peter Portsm'th N)

      1239

      Grist, Ian

      Newton, Tony

      Grylls, Michael

      Normanton, Tom

      Gummer, John Selwyn

      Nott, Rt Hon John

      Hamilton, Hon A.

      Onslow, Cranley

      Hamilton, Michael (Salisbury)

      Oppenheim, Rt Hon Mrs S.

      Hampson, Dr Keith

      Osborn, John

      Hannam,John

      Page, John (Harrow, West)

      Haselhurst, Alan

      Page, Rt Hon Sir G. (Crosby)

      Hastings, Stephen

      Page, Richard (SW Herts)

      Havers, Rt Hon Sir Michael

      Parkinson, Cecil

      Hawksley, Warren

      Parris, Matthew

      Hayhoe, Barney

      Patten, Christopher (Bath)

      Heddle, John

      Pattie, Geoffrey

      Henderson, Barry

      Pawsey, James

      Heseltine, Rt Hon Michael

      Percival, Sir Ian

      Hicks, Robert

      Peyton, Rt Hon John

      Higgins, Rt Hon Terence L.

      Pollock, Alexander

      Hogg, Hon Douglas (Gr'th'm)

      Powell, Rt Hon J.E. (S Down)

      Holland, Philip (Carlton)

      Prentice, Rt Hon Reg

      Hooson, Tom

      Prior, Rt Hon James

      Hunt, David (Wirral)

      Proctor, K. Harvey

      Hunt, John (Ravensbourne)

      Pym, Rt Hon Francis

      Irving, Charles (Cheltenham)

      Raison, Timothy

      Jessel, Toby

      Rathbone, Tim

      Johnson Smith, Geoffrey

      Rees, Peter (Dover and Deal)

      Jopling, Rt Hon Michael

      Renton, Tim

      Joseph, Rt Hon Sir Keith

      Rhodes James, Robert

      Kaberry, Sir Donald

      Rhys Williams, Sir Brandon

      Kellett-Bowman, Mrs Elaine

      Ridley, Hon Nicholas

      Kimball, Marcus

      Ridsdale, Sir Julian

      King, Rt Hon Tom

      Rifkind, Malcolm

      Knight, Mrs Jill

      Roberts, M. (Cardiff NW)

      Knox, David

      Roberts, Wyn (Conway)

      Lamont, Norman

      Ross, Wm. (Londonderry)

      Lang, Ian

      Rossi, Hugh

      Langford-Holt, Sir John

      Rost, Peter

      Latham, Michael

      Sainsbury, Hon Timothy

      Lawrence, Ivan

      St. John-Stevas, Rt Hon N.

      Lawson, Rt Hon Nigel

      Scott, Nicholas

      Lester, Jim (Beeston)

      Shaw, Giles (Pudsey)

      Lewis, Kenneth (Rutland)

      Shelton, William (Streatham)

      Lloyd, Ian (Havant & W'loo)

      Shepherd, Colin (Hereford)

      Lloyd, Peter (Fareham)

      Shepherd, Richard

      Loveridge, John

      Silvester, Fred

      Luce, Richard

      Skeet, T. H. H.

      Lyell, Nicholas

      Speed, Keith

      Macfarlane, Neil

      Speller, Tony

      MacKay, John (Argyll)

      Spence, John

      Macmillan, Rt Hon M.

      Spicer, Jim (West Dorset)

      McNair-Wilson, M. (N'bury)

      Spicer, Michael (S Worcs)

      McNair-Wilson, P. (New F'st)

      Sproat, Iain

      McQuarrie, Albert

      Squire, Robin

      Madel, David

      Stainton, Keith

      Major, John

      Stanbrook, Ivor

      Marland, Paul

      Stanley, John

      Marshall, Michael (Arundel)

      Stevens, Martin

      Marten, Neil (Banbury)

      Stewart, Ian (Hitchin)

      Maude, Rt Hon Sir Angus

      Stewart, A. (E Renfrewshire)

      Mawby, Ray

      Stokes, John

      Mawhinney, Dr Brian

      Stradling Thomas, J.

      Maxwell-Hyslop, Robin

      Tapsell, Peter

      Mayhew, Patrick

      Taylor, Teddy (S'end E)

      Mellor, David

      Tebbit, Norman

      Miller, Hal (B'grove)

      Temple-Morris, Peter

      Mills, Iain (Meriden)

      Thomas, Rt Hon Peter

      Mills, Peter (West Devon)

      Thompson, Donald

      Miscampbell, Norman

      Thorne, Neil (Ilford South)

      Mitchell, David (Basingstoke)

      Thornton, Malcolm

      Moate, Roger

      Townend, John (Bridlington)

      Molyneaux, James

      Townsend, Cyril D, (B'heath)

      Monro, Hector

      Trippier, David

      Morgan, Geraint

      Trotter, Neville

      Morris, M. (N'hampton S)

      van Straubenzee, W. R.

      Morrison, Hon C. (Devizes)

      Vaughan, Dr Gerard

      Morrison, Hon P. (Chester)

      Viggers, Peter

      Murphy, Christopher

      Wakeham, John

      Myles, David

      Waldegrave, Hon William

      Neale, Gerrard

      Walker, B. (Perth)

      Needham, Richard

      Wall, Patrick

      Neubert, Michael

      Ward, John

      1240

      Warren, Kenneth

      Winterton, Nicholas

      Watson, John

      Wolfson, Mark

      Wells, John (Maidstone)

      Young, Sir George (Acton)

      Wells, Bowen

      Younger, Rt Hon George

      Whitelaw, Rt Hon William

      Whitney, Raymond

      Tellers for the Noes:

      Wickenden, Keith

      Mr. Anthony Berry and

      Wiggin, Jerry

      Mr. Carol Mather.

      Williams, D. (Montgomery)

      Question accordingly negatived.
      Amendment proposed: No. 24, in page 13, line 9, at end insert—
      '(1A) In subsection (1A) of section 8 of the Taxes Act (personal relief) there shall be inserted after "upwards" the words "or that she was at any time within the year of assessment of the age of sixty and in receipt of a Category A retirement pension under Subsection (1) of section 28 of the Social Security Act 1975.".'.—[Mr. Robert Sheldon.]
      Question put, That the amendment be made:—
      The House divided: Ayes 195, Noes 276.

      Division No. 274]

      [8.05 pm

      AYES

      Abse, Leo

      Field, Frank

      Adams, Allen

      Fitch, Alan

      Alton, David

      Fletcher, Ted (Darlington)

      Anderson, Donald

      Ford, Ben

      Archer, Rt Hon Peter

      Forrester, John

      Ashley, Rt Hon Jack

      Foster, Derek

      Beith, A. J.

      Foulkes, George

      Bennett, Andrew (St'kp't N)

      Garrett, John (Norwich S)

      Bidwell, Sydney

      George, Bruce

      Booth, Rt Hon Albert

      Gilbert, Rt Hon Dr John

      Boothroyd, Miss Betty

      Ginsburg, David

      Bottomley, Rt Hon k. (M'b'ro)

      Golding, John

      Bray, Dr Jeremy

      Grant, George (Morpeth)

      Brown, Hugh D. (Provan)

      Grant, John (Islington C)

      Brown, Ronald W. (H'ckn'y S)

      Hamilton, James (Bothwell)

      Callaghan, Rt Hon J.

      Hardy, Peter

      Callaghan, Jim (Midd't'n &P)

      Harrison, Rt Hon Walter

      Campbell, Ian

      Hart, Rt Hon Dame Judith

      Campbell-Savours, Dale

      Haynes, Frank

      Canavan, Dennis

      Heffer, Eric S.

      Cant, R. B.

      Hogg, N. (E Dunb't'nshire)

      Clark, Dr David (S Shields)

      Holland, S. (L'b'th, Vauxh'll)

      Cocks, Rt Hon M. (B'stol S)

      Home Robertson, John

      Cohen, Stanley

      Homewood, William

      Concannon, Rt Hon J. D.

      Hooley, Frank

      Conlan, Bernard

      Horam, John

      Cook, Robin F.

      Howell, Rt Hon D.

      Cowans, Harry

      Howells, Geraint

      Cox, T. (W'dsw'th, Toot'g)

      Huckfield, Les

      Craigen, J. M,

      Hughes, Robert (Aberdeen N)

      Crowther, J. S.

      Janner, Hon Greville

      Cryer, Bob

      Jay, Rt Hon Douglas

      Cunningham, G. (Islington S)

      John, Brynmor

      Cunningham, Dr J. (W'h'n)

      Johnson, James (Hull West)

      Davies, Rt Hon Denzil (L'lli)

      Johnson, Walter (Derby S)

      Davies, Ifor (Gower)

      Jones, Rt Hon Alec (Rh'dda)

      Davis, Clinton (Hackney C)

      Jones, Barry (East Flint)

      Davis, T. (B'ham, Stechf'd)

      Jones, Dan (Burnley)

      Deakins, Eric

      Kaufman, Rt Hon Gerald

      Dempsey, James

      Kerr, Russell

      Dewar, Donald

      Lambie, David

      Dixon, Donald

      Leadbitter, Ted

      Dobson, Frank

      Leighton, Ronald

      Dormand, Jack

      Lestor, Miss Joan

      Douglas-Mann, Bruce

      Lewis, Arthur (N'ham NW)

      Dubs, Alfred

      Lewis, Ron (Carlisle)

      Duffy, A. E. P.

      Litherland, Robert

      Dunn, James A.

      Lofthouse, Geoffrey

      Dunwoody, Hon Mrs G.

      McDonald, Dr Oonagh

      Eadie, Alex

      McElhone, Frank

      Eastham, Ken

      McKay, Allen (Penistone)

      Edwards, R. (W'hampt'n S E)

      McKelvey, William

      Ellis, R. (NE D'bysh're)

      McNally, Thomas

      Ennals, Rt Hon David

      McNamara, Kevin

      Evans, loan (Aberdare)

      McTaggart, Robert

      1241

      McWilliam, John

      Silkin, Rt Hon S. C. (Dulwich)

      Magee, Bryan

      Silverman, Julius

      Marshall, D (G'gow S'ton)

      Skinner, Dennis

      Marshall, Dr Edmund (Goole)

      Smith, Rt Hon J. (N Lanark)

      Martin, M (G'gow S'burn)

      Snape, Peter

      Mason, Rt Hon Roy

      Soley, Clive

      Maxton, John

      Spearing, Nigel

      Meacher, Michael

      Spriggs, Leslie

      Mellish, Rt Hon Robert

      Stallard, A. W.

      Millan, Rt Hon Bruce

      Steel, Rt Hon David

      Miller, Dr M. S. (E Kilbride)

      Stewart, Rt Hon D. (W Isles)

      Mitchell, Austin (Grimsby)

      Stoddart, David

      Mitchell, R. C. (Soton Itchen)

      Summerskill, Hon Dr Shirley

      Morris, Rt Hon A. (W'shawe)

      Taylor, Mrs Ann (Bolton W)

      Morris, Rt Hon J. (Aberavon)

      Thomas, Jeffrey (Abertillery)

      Morton, George

      Thomas, Dr R. (Carmarthen)

      Newens, Stanley

      Tilley, John

      Oakes, Rt Hon Gordon

      Tinn, James

      Ogden, Eric

      Torney, Tom

      O'Halloran, Michael

      Urwin, Rt Hon Tom

      O'Neill, Martin

      Varley, Rt Hon Eric G.

      Orme, Rt Hon Stanley

      Wainwright, E. (Dearne V)

      Palmer, Arthur

      Wainwright, R. (Colne V)

      Parker, John

      Walker, Rt Hon H. (D'caster)

      Pavitt, Laurie

      Watkins, David

      Pendry, Tom

      Weetch, Ken

      Penhaligon, David

      Welsh, Michael

      Powell, Raymond (Ogmore)

      White, Frank R.

      Rees, Rt Hon M (Leeds S)

      White, J. (G'gow Pollok)

      Roberts, Albert (Normanton)

      Whitehead, Phillip

      Roberts, Gwilym (Cannock)

      Whitlock, William

      Robertson, George

      Willey, Rt Hon Frederick

      Robinson, G. (Coventry NW)

      Williams, Rt Hon A. (S'sea W)

      Rooker, J. W.

      Wilson, Gordon (Dundee E)

      Roper, John

      Wilson, William (C'try SE)

      Ross, Ernest (Dundee West)

      Winnick, David

      Ross, Stephen (Isle of Wight)

      Woodall, Alec

      Rowlands, Ted

      Woolmer, Kenneth

      Sandelson, Neville

      Wright, Sheila

      Sever, John

      Young, David (Bolton E)

      Sheldon, Rt Hon R.

      Shore, Rt Hon Peter

      Tellers for the Ayes:

      Short, Mrs Renée

      Mr. Donald Coleman and

      Silkin, Rt Hon J. (Deptford)

      Mr. Joe Dean.

      NOES

      Adley, Robert

      Browne, John (Winchester)

      Aitken, Jonathan

      Bruce-Gardyne, John

      Alexander, Richard

      Buchanan-Smith, Alick

      Alison, Michael

      Buck, Antony

      Ancram, Michael

      Bulmer, Esmond

      Arnold, Tom

      Butcher, John

      Aspinwall, Jack

      Butler, Hon Adam

      Atkins, Rt Hon H. (S'thorne)

      Cadbury, Jocelyn

      Atkins, Robert (Preston N)

      Carlisle, John (Luton West)

      Atkinson, David (B'm'th,E)

      Carlisle, Kenneth (Lincoln)

      Baker, Nicholas (N Dorset)

      Carlisle, Rt Hon M. (R'c'n)

      Banks, Robert

      Chalker, Mrs. Lynda

      Beaumont-Dark, Anthony

      Chapman, Sydney

      Bendall, Vivian

      Churchill, W. S.

      Benyon, W. (Buckingham)

      Clark, Hon A. (Plym'th, S'n)

      Best, Keith

      Clark, Sir W. (Croydon S)

      Bevan, David Gilroy

      Clarke, Kenneth (Rushcliffe)

      Biffen, Rt Hon John

      Clegg, Sir Walter

      Biggs-Davison, John

      Cockeram, Eric

      Blackburn, John

      Colvin, Michael

      Blaker, Peter

      Cope, John

      Body, Richard

      Cormack, Patrick

      Bonsor, Sir Nicholas

      Corrie, John

      Bosocawen, Hon Robert

      Cranborne, Viscount

      Bottomley, Peter (W'wich W)

      Critchley, Julian

      Bowden, Andrew

      Crouch, David

      Boyson, Dr Rhodes

      Dean, Paul (North Somerset)

      Braine, Sir Bernard

      Dickens, Geoffrey

      Bright, Graham

      Douglas-Hamilton, Lord J.

      Brinton, Tim

      du Cann, Rt Hon Edward

      Brittan, Leon

      Dunn, Robert (Dartford)

      Brooke, Hon Peter

      Durant, Tony

      Brotherton, Michael

      Dykes, Hugh

      Brown, Michael (Brigg & Sc'n)

      Eden, Rt Hon Sir John

      1242

      Edwards, Rt Hon N. (P'broke)

      Lyell, Nicholas

      Eggar, Tim

      Macfarlane, Neil

      Emery, Peter

      MacKay, John (Argyll)

      Eyre, Reginald

      Macmillan, Rt Hon M.

      Fairbairn, Nicholas

      McNair-Wilson, M. (N'bury)

      Fairgrieve, Russell

      McNalr-Wilson, P. (New F'st)

      Faith, Mrs Sheila

      McQuarrie, Albert

      Farr, John

      Madel, David

      Fell, Anthony

      Major, John

      Fenner, Mrs Peggy

      Marland, Paul

      Fisher, Sir Nigel

      Marshall, Michael (Arundel)

      Fletcher, A. (Ed'nb'gh N)

      Marten, Neil (Banbury)

      Fletcher-Cooke, Sir Charles

      Mates, Michael

      Fookes, Miss Janet

      Maude, Rt Hon Sir Angus

      Forman, Nigel

      Mawby, Ray

      Fowler, Rt Hon Norman

      Mawhinney, Dr Brian

      Fox, Marcus

      Maxwell-Hyslop, Robin

      Fraser, Rt Hon Sir Hugh

      Mayhew, Patrick

      Fraser, Peter (South Angus)

      Mellor, David

      Gardiner, George (Reigate)

      Miller, Hal (B'grove)

      Gardner, Edward (S Fylde)

      Mills, Iain (Meriden)

      Garel-Jones, Tristan

      Mills, Peter (West Devon)

      Glyn, Dr Alan

      Miscampbell, Norman

      Goodhew, Victor

      Mitchell, David (Basingstoke)

      Goodlad, Alastair

      Moate, Roger

      Gorst, John

      Molyneaux, James

      Gow, Ian

      Monro, Hector

      Gower, Sir Raymond

      Morgan, Geraint

      Grant, Anthony (Harrow C)

      Morris, M. (N'hampton S)

      Gray, Hamish

      Morrison, Hon P. (Chester)

      Greenway, Harry

      Murphy, Christopher

      Grieve, Percy

      Myles, David

      Griffiths, B. (B'ySt. Edm'ds)

      Neale, Gerrard

      Griffiths, Peter Portsm'th N)

      Needham, Richard

      Grist, Ian

      Neubert, Michael

      Grylls, Michael

      Newton, Tony

      Gummer, John Selwyn

      Normanton, Tom

      Hamilton, Hon A.

      Nott, Rt Hon John

      Hamilton, Michael (Salisbury)

      Onslow, Cranley

      Hampson, Dr Keith

      Oppenheim, Rt Hon Mrs S.

      Hannam,John

      Osborn, John

      Haselhurst, Alan

      Page, John (Harrow, West)

      Hastings, Stephen

      Page, Rt Hon Sir G. (Crosby)

      Havers, Rt Hon Sir Michael

      Page, Richard (SW Herts)

      Hawksley, Warren

      Parkinson, Cecil

      Hayhoe, Barney

      Parris, Matthew

      Heddle, John

      Patten, Christopher (Bath)

      Henderson, Barry

      Pattie, Geoffrey

      Heseltine, Rt Hon Michael

      Pawsey, James

      Hicks, Robert

      Percival, Sir Ian

      Higgins, Rt Hon Terence L.

      Peyton, Rt Hon John

      Hogg, Hon Douglas (Gr'th'm)

      Pollock, Alexander

      Holland, Philip (Carlton)

      Powell, Rt Hon J.E. (S Down)

      Hooson, Tom

      Prentice, Rt Hon Reg

      Hunt, David (Wirral)

      Prior, Rt Hon James

      Hunt, John (Ravensbourne)

      Proctor, K. Harvey

      Irving, Charles (Cheltenham)

      Pym, Rt Hon Francis

      Jenkin, Rt Hon Patrick

      Raison, Timothy

      Jessel, Toby

      Rathbone, Tim

      Johnson Smith, Geoffrey

      Rees, Peter (Dover and Deal)

      Jopling, Rt Hon Michael

      Rees-Davies, W. R.

      Joseph, Rt Hon Sir Keith

      Renton, Tim

      Kaberry, Sir Donald

      Rhodes James, Robert

      Kellett-Bowman, Mrs Elaine

      Rhys Williams, Sir Brandon

      Kimball, Marcus

      Ridley, Hon Nicholas

      King, Rt Hon Tom

      Ridsdale, Sir Julian

      Knight, Mrs Jill

      Rifkind, Malcolm

      Knox, David

      Roberts, M. (Cardiff NW)

      Lamont, Norman

      Roberts, Wyn (Conway)

      Lang, Ian

      Rossi, Hugh

      Langford-Holt, Sir John

      Rost, Peter

      Latham, Michael

      Royle, Sir Anthony

      Lawrence, Ivan

      Sainsbury, Hon Timothy

      Lawson, Rt Hon Nigel

      St. John-Stevas, Rt Hon N.

      Lester, Jim (Beeston)

      Scott, Nicholas

      Lewis, Kenneth (Rutland)

      Shaw, Giles (Pudsey)

      Lloyd, Ian (Havant & W'loo)

      Shelton, William (Streatham)

      Lloyd, Peter (Fareham)

      Shepherd, Colin (Hereford)

      Loveridge, John

      Shepherd, Richard

      Luce, Richard

      Silvester, Fred

      1243

      Skeet, T. H. H.

      Trotter, Neville

      Speed, Keith

      van Straubenzee, W. R.

      Speller, Tony

      Vaughan, Dr Gerard

      Spence, John

      Viggers, Peter

      Spicer, Jim (West Dorset)

      Wakeham, John

      Spicer, Michael (S Worcs)

      Waldegrave, Hon William

      Sproat, Iain

      Walker, B. (Perth)

      Squire, Robin

      Wall, Patrick

      Stainton, Keith

      Ward, John

      Stanbrook, Ivor

      Warren, Kenneth

      Stanley, John

      Watson, John

      Stewart, Ian (Hitchin)

      Wells, John (Maidstone)

      Stewart, A. (E Renfrewshire)

      Wells, Bowen

      Stokes, John

      Whitelaw, Rt Hon William

      Stradling Thomas, J.

      Whitney, Raymond

      Tapsell, Peter

      Wickenden, Keith

      Taylor, Teddy (S'end E)

      Wiggin, Jerry

      Tebbit, Norman

      Williams, D. (Montgomery)

      Temple-Morris, Peter

      Winterton, Nicholas

      Thomas, Rt Hon Peter

      Wolfson, Mark

      Thompson, Donald

      Young, Sir George (Acton)

      Thorne, Neil (Ilford South)

      Younger, Rt Hon George

      Thornton, Malcolm

      Townend, John (Bridlington)

      Tellers for the Noes:

      Townsend, Cyril D, (B'heath)

      Mr. Anthony Berry and

      Trippier, David

      Mr. Carol Mather.

    Clause 27

      SOCIAL SECURITY BENEFITS
      Mr. Cook: I beg to move amendment No. 27, in page 15, line 42, at end insert
      "less any sum deducted under subsection (1)(b) of section 6 of the Social Security (No. 2) Act 1980."
      Mr. Deputy Speaker (Mr. Bryant Godman Irvine): With this it will be convenient to take the following amendments:
      No. 28, in page 16, line 10, after 'of' , insert 'six-sevenths of.
      No. 29, in page 16, line 15, after `to', insert 'six-sevenths of.
      Mr. Cook: It is perhaps appropriate that, after a debate in which we looked at the effect of the Government's fiscal policy on low-income groups in general, we turn to a debate on the effect of that fiscal policy on two particular groups of low income holders. I refer to those who are on strike and who are, therefore, deprived of any income from their work and to those who are unemployed and, therefore, largely dependent on the benefits that they receive.
      I am sure that the Financial Secretary will not object if I once again refer to that bible, the Conservative campaign guide. In a separate section that deals with health and social security the guide contains the following observation about the Labour Government:
      "The heavy taxation of the poor is among the most discreditable features of the Labour Government."
      In our last debate we established that the income tax burden on the poor had increased under this Government beyond a level that the Conservative Party regarded as discreditable when the Labour Party was in office. The amendments concern specific proposals that the Government have introduced in order to impose a novel tax burden on the incomes of two groups which are, at the time of the tax levy, by definition, living in poverty.
      Amendment No. 27 deals with the method of assessment for the tax liability of the striker and his family.
      1244
      Hon. Members will be aware that, when the Finance Bill was published, assurances were given that the tax to be levied would be confined to the amount payable in benefit for an adult dependant, and that the additions that were paid, for instance, in respect of children, would not be liable to tax. Hon. Members will also recollect that when this was debated in Committee, I demonstrated that that assurance—at least in respect of the striker and his family—was pure humbug.
      The striker's benefit is subject to a deduction of £12. If he has a wife and no children, he is left with a net benefit of about £6 and he is taxed on that. If, however, he receives the child addition, his total amount of supplementary benefit returns to the adult dependant rate and he is taxed at the full adult dependant rate, although patently the sum being taxed is the child's addition being paid to top up the original sum. If the Financial Secretary and the Treasury Bench wish to avoid that the result and tax being levied on the child addition, they will have to provide that the maximum amount taxable is the adult dependant rate less the deduction levied under the Act introduced last year. That would be the effect of amendment No. 27. Anything else will have the most unfortunate effect—which I regard as repugnant and I hope the House regards as repugnant—that we would be levying a tax on the child additions which are calculated as the sums necessary to support, feed and clothe the children of a striker to ensure that he continues to send them to school.
      There is another way to demonstrate the effect of taxing the child additions. Let us take two families—one with children and one without. Let us assume that they receive £12 from a trade union—which was the justification for docking £12 under the 1980 Act—and that both families declare that £12. The result would be that the married man with no children would receive a portion of the adult dependant rate of £6. When he adds his £12 received from the union, he will return to the adult dependant rate and it is at that rate that he will be taxed when he returns to work.
      However, the married man with two children will receive the full adult dependant rate and more because he is receiving child additions and will also have to declare the £12 he receives from the union. He will be taxed at the full adult dependant rate plus £12. The only difference in income between the two families is the child additions. It is therefore logically inescapable that the child additions are taxed. That is the only additional income that the second family has and it must be that income that is being taxed in one case and not in the other.
      The Financial Secretary knows that that arrangement is indefensible, because it was debated in Committee. In Committee he denied that that was so, but plainly that is the effect. If he wants to avoid that effect he should accept amendment No. 27. If he will not accept it, he must justify why he feels able to ask the House to tax the child additions which the House has set at a level necessary for the subsistence of a child.
      Mr. John Silkin: On a point of order, Mr. Deputy Speaker. I am loath to interrupt the proceedings on the Finance Bill, but I understand that there has been a rather serious incursion by the police in the heart of Brixton today. There are serious possibilities of riots resulting from that this evening. I hope that the Home Secretary might be prepared to consider the matter, to ask

      1245
      for a report arid perhaps to make a statement to the House later. I understand that he could not possibly make a statement at such short notice, but I hope that my point of order will be listened to and understood by the Government.
      Mr. Deputy Speaker: The right hon. Gentleman is well aware that such matters are not arranged by the Chair. I am sure that his words will have been listened to.
      Mr. Cook: Amendments Nos. 28 and 29 deal with the taxation of the unemployment benefit which is provided for in the clause. The effect of the amendments would be to exempt one-seventh of unemployment benefit from tax. As will be immediately apprehended by numerate hon. Members, one-seventh is 15 per cent. The effect of exempting 15 per cent. will be to leave in the hands of the claimants 5 per cent. of the total benefit. That is the amount that was deducted last year from the unemployment benefit on the basis that unemployment benefit is not liable to tax. Our amendments are a device, albeit a clumsy device, to make good the 5 per cent. abatement that was applied to unemployment benefit by the Government on the pretext that it was in lieu of taxation.
      I admit at once that this is a clumsy and inelegant—albeit an ingenious—device, and we should much prefer not to have to press these amendments to a Division. We should like the Financial Secretary instead to give us an assurance that he will restore the full rate of unemployment benefit, and restore the 5 per cent. abatement that has been taken from the unemployed in the last two years. But if we are unable to achieve a greater assurance and with more confidence than we had in Committee, we shall feel obliged to press the amendments to a Division.
      Since we debated these matters in Committee two things have developed which have coloured our debate on the taxation of unemployment benefit. First, there are even more unemployed than when we last debated the matter in Committee. Indeed, it is now evident—it is agreed in all parts of the House—that unemployment will shortly top 3 million. That is an inescapable figure. The CBI has put forward its own forecast of unemployment for early next year of 3¼ million, and the CBI's estimates have tended to lag behind the rate of increase in unemployment.
      The second thing that we have seen—as the intervention on the point of order has reminded the House—is the effects in our streets of the social stress that arises from mass unemployment. In particular, we see it in the pockets of our inner urban areas where we now have youth unemployment in excess of 50 per cent. It need surprise no one that that rate of unemployment in a single generation gives rise to intolerable social stress which has the kinds of results that we have been obliged to discuss over the past fortnight.
      It is also evident—we have seen it in the last fortnight and discussed the consequences of that rate of unemployment—that Conservative Members do not understand why we protest so much and are so concerned at the mass outrage of unemployment. How else are we to explain our feelings when, having achieved a level of unemployment that is higher than any level of unemployment since records have been kept, the Government have the nerve to respond to that novel and unique situation by bringing in a new tax on the same people that they themselves have put out of work?
      1246
      While we have demanded the creation of new jobs in manufacturing industry or in the public services, what is contained in the clause is a proposal to create another 3,500 jobs in order to tax all the other people who are out of work. We find that proposal paradoxical. But if Conservative Members are bent on taxing unemployment benefit, at least let them give us a guarantee that they will restore the 5 per cent. abatement that they removed from the unemployed on the basis that they were not liable to taxation.
      During our debate in Committee, I got into hot water because I was rash enough to suggest that that 5 per cent. abatement had been stolen from the unemployed. The Financial Secretary corrected me by saying that what is legally enacted and approved by the House of Commons cannot be construed as theft. I would assent to that proposition technically and legally. What is passed by the House cannot be construed as legal theft. But in judging the propriety of what the House passed two years ago we are surely entitled to have regard to what the House was told at the time that it passed the measure providing for the 5 per cent. abatement. I have before me some quotations from the speeches of the Secretary of State for Social Services when he introduced the measure. On Second Reading, he said:
      "taxation in 1982 is two years away, and the Government have decided that we must start … with an interim scheme in lieu of taxation."
      Indeed, for the avoidance of doubt, he repeated it later in the same speech. He said:
      "The right hon. Gentleman accused me of using the words 'This is a form of taxation.' I never said that. I said that it was an interim measure in lieu of taxation."—[Official Report, 15 April 1980; Vol. 982, c. 1040–59.]
      Then again, for good measure, he said in Committee:
      "I made it abundantly clear on Second Reading … that we recognised that this is not proper taxation. This is an interim scheme in lieu of taxation."—[Official Report, Standing Committee B, 29 April 1980; c. 358.]
      So, on three successive occasions, on Second Reading and in Committee the Secretary of State assured both the House and the Committee that the 5 per cent. abatement was an interim scheme in lieu of taxation. I shall not go so far as to challenge the authority of the Chair by suggesting that the Chair had allowed the Secretary of State to be tedious and repetitive, but he has persisted and put on record several times his assertion that this was an interim scheme in lieu of taxation.
      8.30 pm
      In Committee, the Secretary of State was asked what he meant when he suggested that the 5 per cent. abatement would be restored, subject to the availability of resources. He replied:
      "I shall not be drawn on that. However, the yield from proper taxation will be three times what will be saved by clause 1. One is perfectly capable of looking at the accounts as a whole, at both revenue and expenditure. I do not therefore anticipate any difficulty in meeting the obligation to restore the benefits and fulfilling the pledge that I have given. When the benefits come into tax, the revenue will be there.".—[Official Report, Standing Committee B, 1 May 1980; c. 684.]
      There we have it. The Secretary of State plainly said that when the benefits were taxed the resources would be there to restore the 5 per cent. abatement.
      I can go further than the Secretary of State. I can advise the House that he understated the amount by which the revenue from taxation would exceed the 5 per cent. abatement. He said that it was three times. We know from the figures that we obtained in Committee that the revenue

      1247
      that the Treasury will receive as a result of taxing unemployment benefit will be five times the amount necessary to restore the 5 per cent. abatement.
      The Financial Secretary has the resources, and with them he should restore the 5 per cent. abatement. I know why he and the Government are reluctant to do so. It is true that they want the money, but there is another reason. It is what they are pleased to call the "Why work?" syndrome. Despite the startling rise in unemployment since they came into office, despite the obscene, tragic contrast between the number of vacancies and the number of people unemployed, those who are seeking work now exceed the number of vacancies in most regions 15 to 20 times. Despite that, the Government nurse a secret suspicion that they are unemployed not because they have been thrown out of work but because they are better off unemployed.
      I concede that there are many more people for whom it is financially better to be unemployed than in work under this Government than under the previous Government, because the number of people in the poverty trap has increased by 40 per cent. under this Government on the Government's own estimates. It has increased because the Government have failed to uprate the tax allowances. Those at the bottom end of the spectrum are paying more taxes, and to that extent the Secretary of State has widened the poverty trap.
      The solution to the poverty trap is to raise the tax thresholds to let people out. The solution that the Government seem bent on is, having penalised those in work with a higher tax burden, equally to penalise those who are out of work by retaining the 5 per cent. abatement on their benefit. I do not believe that the House can be prepared to accept that. If it does accept it, the unemployed will be liable to double taxation—the 5 per cent. deduction, which we were told was being levied in lieu of taxation, and the proper taxation that is being introduced in the Bill.
      My hon. Friends who sat through the last debate will recall the passion with which the Financial Secretary came to the defence of the higher income earners who pay the higher tax rates. My hon. Friends who were present yesterday will recall that when we debated tax avoidance and evasion there were a number of interventions from hon. Members below the Gangway who defended with passion the cuts made by their Government in the higher rates of tax, cuts made on the basis that the previous rate of tax levied by the Labour Government had been confiscatory, to use the word used by one of them.
      I invite my hon. Friends to contemplate with what passion, anger and indignation Conservative hon. Members would rise if it were proposed to apply a double taxation penalty to the high income earners. We should be lucky if we concluded the Report stage in time to save tomorrow's business if such a proposal were before us. Yet that is precisely what is proposed for the taxation of the unemployed, who from 1982 onwards are liable to be taxed by the 5 per cent. abatement levied in lieu of taxation and taxed properly on the unemployment benefit that they receive net of that 5 per cent. abatement.
      That would be intolerable. I hope that the Government do not intend to allow it to happen. We tabled the amendments to give the Financial Secretary an opportunity
      1248
      to assure the House that that is not the Government's intention, that they will give a guarantee to restore the 5 per cent. abatement to the unemployed next year.
      If we are unable to obtain that assurance, we shall be failing in our duty to those whom we represent, too many of whom are now, sadly, unemployed, if we do not press the amendments to a Division.
      Mr. Ronald W. Brown: I endorse what my hon. Friend the Member for Edinburgh, Central (Mr. Cook) has said, and particularly his argument about the unemployment benefit being liable to double taxation. In my constituency the Department of Employment is unable to pay the unemployment benefit that it should pay. In addition, the Department of Health and Social Security is unable to keep its offices open to pay social security benefit to my people who are entitled to unemployment benefit, and the local authority is unable to make any emergency payment.
      In Hackney tonight families are starving. There are now threats of looting, of people doing things to obtain food. Yet the Financial Secretary sits on the Treasury Bench as though nothing has happened. Double taxation may or may not be all right, just so long as those concerned are ever paid the unemployment benefit. What right has the Financial Secretary to sit there in the full knowledge that people are not being paid their due? I urge him to say what he will do about it. Who will pay the unemployment benefit to which my families are entitled?
      I have seen the Secretary of State for Employment and the Secretary of State for Social Services. It is true that one of them is giving me an interview next Tuesday. But what will the right hon. Gentleman do about those in my constituency—news of this is on the tape tonight—who will line up tomorrow for money that they will not receive?
      I hope that the Financial Secretary will take advice and tell me how his Government can reduce our country to its present state, with people starving because there is no means of their obtaining food. Do the Government intend to set up workhouses and soup kitchens? How are my people to be paid? They have no money and they have had none since last Friday. I want an undertaking from the Treasury, since it is responsible, about what it intends to do so that families in my area will be told tomorrow how they can get money to buy food for their babies.
      No money is available. The social services department of Hackney borough council has no money. The council was put in the penalty box by the Government and had £15 million withdrawn. We are in a disastrous state. I urge the Financial Secretary to tell me how I can help my constituents to get what is rightly theirs—unemployment benefit, or, if they cannot get that, supplementary benefit. If they cannot get supplementary benefit, no other help is available.
      Mr. Horam: The hon. Member for Hackney, South and Shoreditch (Mr. Brown) has put, with his customary sincerity, an important point which I hope the Government will answer. The Government should feel responsible for the hardship that they are causing in many parts of the country. Their handling of the Civil Service dispute has made worse problems that are having serious effects on many people who draw benefit.
      That is not the first incursion, to use the word employed by the right hon. Member for Deptford (Mr. Silkin) earlier, of events outside the Chamber. We know that there

      1249
      is further trouble down in Brixton, which shows the extent to which the country is under stress as a result of the Government's economic and social policies.
      The general theme of our debate bears on all those problems. The Social Democrats support the principle that social security benefits should be treated as taxable income. The Child Poverty Action Group also supports that general principle, and we believe that it is right to treat social security benefits as income, just as earnings are treated as income.
      Equally, it is right to help with the problem of work incentive by taxing social security benefits. In addition, the money that the Government gain by taxing benefits is available to improve the level of benefits. That was brought out well by the hon. Member for Edinburgh, Central (Mr. Cook) who quoted figures obtained in Committee. The money that the Government gain from taxing benefits is about five times what they would need to make good the real cut in benefit made last year in lieu of taxation.
      We are asking for very little and for something which is compatible with the Government's general stand on work incentives. The Social Democrats agree that it is right in principle that all income should be taxed. However, we also support higher levels of benefits and we believe that the Government should restore the cuts that they made on the ground that they could not at that time bring in measures to tax benefits.
      In case the Government fall back on the argument that higher benefits would affect the work incentive, I should point out that a recent survey by the Institute of Policy Studies, financed by the Department of Employment and the Manpower Services Commission, found that only 3 per cent. of white men and 5 per cent. of men in any minority group received more in benefits than they had previously earned.
      An astonishing aspect of that survey was that the average incomes of those men had declined by 46 per cent. since they had become unemployed. There can be no problem of work incentives when the gap between what is received in benefits and what is received in incomes is so great. The study also showed—and this relates to a point by the hon. Member for Hackney, South and Shoreditch—that there is real hardship for people living on the present level of unemployment benefit, particularly if they live on that benefit for a long time.
      8.45 pm
      My constituents in Gateshead are just as much at risk in this respect as are the citizens of Hackney. Indeed, unemployment in Gateshead, I suspect, is higher than, or a least as high as, the unemployment rate in parts of inner London. I know that parts of inner London are suffering an increasing level of unemployment. This is an issue about which those hon. Members who represent inner city areas feel concern. It is evident in the present, real troubles that the country faces.
      The pat argument that the Government and the Prime Minister tend to evoke does not stand up. The way to increase benefits, in the short term, is to use the money that the Government have gained by taxing benefits not simply to restore cuts but to make substantial increases, for example in the long-term supplementary benefit grade as it applies to the unemployed. The unemployed are the only group outside it. The cost would be about £75 million to be added to the £45 million entailed in what the
      1250
      amendment seeks. This would make a direct contribution to lessening the tensions and the difficulties that are evident in the country and that must cause the Government the utmost concern.
      The Prime Minister said only recently that this has been the most difficult period of her premiership. The right hon. Lady recognised the sense of responsibility that she must feel for the riots that have occurred across the country. If she is to do anything about them—there are many aspects to the problem—she must pay attention to the plight of the unemployed. This is the central fact to which the amendment seeks to direct the mind of the Government.
      Mr. Soley: Today, as on other occasions during the progress of the Finance Bill, much has been heard about the Government's economic policy. This is an appropriate time to say that underlying that policy is what amounts almost to a desire to punish people who go on strike or who are seen as scroungers. They are put in the firing line. It is unique to this Government that, both at the time of the election and since, they have chosen to blame the failures of British economic policy on some moral failing of the British people. No one can believe that. The failings have much deeper causes. Clearly, however, the people in the front line are those on low incomes and those who might have been on strike.
      I acknowledge to some extent the Minister's argument that higher rates of tax were absurdly high. The problem that arises is that if tax levels are increased on people at the lower end of the scale at the same time as reliefs are granted at the higher end, our people, who are not stupid and who understand what is happening, become angry. Their anger is understandable. They are aware that there is no effective tax on wealth. Yet they are told that those at the lower end of the income scale must make extra sacrifices for the good of the country. People know that that cannot be fair.
      My hon. Friend the Member for Hackney, South arid Shoreditch (Mr. Brown) has drawn attention to a matter of terrifying significance. I received a letter recently, the contents of which I was inclined to doubt although it came from a good source, stating that in my constituency the supply of Girocheques to pay benefit was becoming exhausted. I have taken steps to check whether that is so. It is clear from what my hon. Friend says that it must be. It is terrifying to think that, at a time when law and order is already in a shaky state, not least because of the Government's policies, people might be denied benefit. On top of all the other sufferings, that must impose yet greater strains on the fabric of society.
      There is a fundamental fault in the Government's approach when they can continue increasing the burdens on the lower income groups, on the unemployed and on those on strike while they continue to give relief to those at the higher end of the spectrum. It is that flaunting of privilege in the face of deprivation that so damages people's trust and confidence in the system.
      Unless the Government change and show some recognition of the needs of those at the lower end of the income scale, we are in for much more serious trouble than Britain has seen for many years.
      Mr. Lawson: This debate has been briefer than the previous debate, but it has ranged no less widely. It has touched on many areas of deep concern. All of us are concerned about the level of unemployment. All of us are

      1251
      particularly concerned about the recent examples of riots, some of which have tended to be imitative, in some of our cities. We are also deeply concerned about the effects of the Civil Service strike on innocent victims such as the constituents of the hon. Member for Hackney, South and Shoreditch (Mr. Brown).
      The Government deplore the fact not merely that the Civil Service unions should have called this strike but, in particular, that they should be causing hardship to some of the weakest members of our society through the failure to pay unemployment benefit in the way that the hon. Gentleman described. It is astonishing that a group of people who, over the past two years, have had an increase of 50 per cent. in their pay and who now have offered to them a further increase of 7 per cent., and who have a higher degree of security of employment than any other group in our society, should now be on strike and causing the sort of consequences to which the hon. Gentleman has alluded.
      Mr. K. J. Woolmer: Will the right hon. Gentleman give way?
      Mr. Soley rose—
      Mr. Lawson: I shall continue.
      I have every sympathy with the constituents of the hon. Member for Hackney, South and Shoreditch. He has taken up the matter with my right hon. Friends the Secretary of State for Employment and the Secretary of State for Social Services. They are the Ministers who have a direct responsibility. It is not a Treasury responsibility. I am glad that the hon. Gentleman has done that. I understand that he felt moved to ventilate the difficulty in this debate. I would be the last person to criticise him for having done
      SO.
      Mr. Soley: It is totally unacceptable that the right hon. Gentleman simply blames this on the civil servants, as though the Government have no responsibility. The Government are party to the negotiations. Everyone knows that if the Pay Research Unit had not been abolished, or that if the Government had set up some other negotiating machinery, they could have carried on the normal trade union negotiations in this respect. It is not enough to say, as the Government say over and again, "This is nothing to do with the Government; it is not our fault."
      Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. I did not intervene previously, but we had a major debate on this subject yesterday. The Financial Secretary was answering a question put by the hon. Member for Hackney, South and Shoreditch (Mr. Brown), and I allowed that to continue. However, we must now return to the subject of the clause.
      Mr. Lawson: I shall certainly do that, Mr. Deputy Speaker. If at any moment I strayed out of order, I regret that. I did so only because of the intervention of the hon. Member for Hackney, South and Shoreditch, who felt very strongly about the subject, and understandably so. I felt that I owed him a reply and that I should not ignore what he said by seeking to shelter around a narrow construction of the rules of order.
      The main matter under debate is the question of the taxation of unemployment benefit and supplementary benefit paid in respect of unemployment—because the
      1252
      two, obviously, in all equity, must be treated in the same way. When we discussed the matter in Committee, both the spokesmen for the official Opposition, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) and the hon. Member for Edinburgh, Central (Mr. Cook), conceded that it was right to subject unemployment benefit and supplementary benefit for the unemployed to tax. They argued about the method, but they agreed that those benefits should be taxed. However, in his most recent intervention, the hon. Member for Edinburgh, Central seems to have shifted away from that, and suggests that it is disgraceful that unemployment benefit should be taxed. I note his opportunism, but in all logic, equity and common sense, the people of this country recognise that the principle he enunciated in Committee was sounder than the one he now enunciates on Report. Indeed, that latter principle was also enunciated today by the hon. Member for Gateshead, West (Mr. Horam) on behalf of the Social Democratic Party.
      I was asked to give an assurance that the 5 per cent. abatement of unemployment benefit would be made good when unemployment benefit and supplementary benefit in respect of unemployment come into tax in April 1982. I am afraid that I can add nothing to the statement that I made on this matter when we discussed it in Committee. I understand all the arguments that have been adduced by Opposition Members today, but we are discussing a public expenditure matter, and the decision will be taken in the normal way in the course of the annual public expenditure review which takes place during the summer and autumn of this year. The decision whether to make good the abatement will be announced publicly well before April 1982, when the benefits are due to come into tax.
      The decision will be made not just, as was suggested by the hon. Members for Gateshead, West and Edinburgh, Central, in the light of the narrow question of how much is being collected in taxation and how much it would cost to pay the abatement—that may be relevant, but the decision will not be taken in that limited context—but in the context of the overall total public expenditure and the priorities within that total. That is the way that Governments of any political colour would address public expenditure matters, and that is the way that we shall do it. The matter remains to be decided, and therefore I cannot make a statement today. However, I have noted what has been said.
      It is most unwise of hon. Members, however strongly they feel about unemployment and the suffering and hardship that it involves, to get carried away by the headlines and imply that it is responsible for the riots that have occurred in many of our cities recently. There is no evidence for that connection. We must take a serious view of the civil disturbances, and to explain them away glibly as automatic consequences of unemployment is irresponsible and regrettable.
      Mr. Robert Sheldon: Perhaps the right hon. Gentleman did not hear the Prime Minister say that unemployment was a factor.
      Mr. Lawson: My right hon. Friend went on to say that it was certainly not the main factor. I associate myself with what my right hon. Friend the Prime Minister said. I am glad that the Opposition agree with the Prime Minister's words. On that happy and harmonious note I ask the House to reject the amendment.
      Question put, That the amendment be made:—
      The House divided:Ayes 178, Noes 271.

      Division No. 275]

      [8.55 pm

      AYES

      Abse, Leo

      Holland, S. (L'b'th, Vauxh'll)

      Adams, Allen

      Home Robertson, John

      Anderson, Donald

      Homewood, William

      Archer, Rt Hon Peter

      Hooley, Frank

      Ashley, Rt Hon Jack

      Howell, Rt Hon D.

      Ashton, Joe

      Huckfield, Les

      Bennett, Andrew (St'kp't N)

      Hughes, Robert (Aberdeen N)

      Bidwell, Sydney

      Jay, Rt Hon Douglas

      Booth, Rt Hon Albert

      John, Brynmor

      Boothroyd, Miss Betty

      Johnson, James (Hull West)

      Bottomley, Rt Hon A. (M'b'ro)

      Johnson, Walter (Derby S)

      Bray, Dr Jeremy

      Jones, Rt Hon Alec (Rh'dda)

      Brown, Hugh D. (Provan)

      Jones, Barry (East Flint)

      Brown, Ronald W. (H'ckn'y S)

      Jones, Dan (Burnley)

      Callaghan, Rt Hon J.

      Kaufman, Rt Hon Gerald

      Callaghan, Jim (Midd't'n & P)

      Kerr, Russell

      Campbell, Ian

      Lambie, David

      Campbell-Savours, Dale

      Leadbitter, Ted

      Canavan, Dennis

      Lestor, Miss Joan

      Cant, R. B.

      Lewis, Arthur (N'ham NW)

      Clark, Dr David (S Shields)

      Lewis, Ron (Carlisle)

      Cocks, Rt Hon M. (B'stol S)

      Lofthouse, Geoffrey

      Cohen, Stanley

      McDonald, Dr Oonagh

      Coleman, Donald

      McElhone, Frank

      Concannon, Rt Hon J. D.

      McKay, Allen (Penistone)

      Conlan, Bernard

      McNally, Thomas

      Cook, Robin P,

      McNamara, Kevin

      Cowans, Harry

      McWilliam, John

      Cox, T. (W'dsw'th, Toot'g)

      Magee, Bryan

      Craigen, J. M.

      Marshall, D (G'gow S'ton)

      Crowther, J. S.

      Marshall, Dr Edmund (Goole)

      Cryer, Bob

      Martin, M (G'gow S'burn)

      Cunningham, G. (Islington S)

      Mason, Rt Hon Roy

      Cunningham, Dr J. (W'h'n)

      Maxton, John

      Davies, Rt Hon Denzil (L'lli)

      Meacher, Michael

      Davies, Ifor (Gower)

      Mellish, Rt Hon Robert

      Davis, Clinton (Hackney C)

      Millan, Rt Hon Bruce

      Davis, T. (B'ham, Stechf'd)

      Miller, Dr M. S. (E Kilbride)

      Deakins, Eric

      Mitchell, Austin (Grimsby)

      Dempsey, James

      Mitchell, R. C. (Soton Itchen)

      Dewar, Donald

      Morris, Rt Hon A. (W'shawe)

      Dixon, Donald

      Morris, Rt Hon C. (O'shaw)

      Dobson, Frank

      Morris, Rt Hon J. (Aberavon)

      Dormand, Jack

      Newens, Stanley

      Douglas-Mann, Bruce

      Oakes, Rt Hon Gordon

      Dubs, Alfred

      Ogden, Eric

      Duffy, A. E. P.

      O'Halloran, Michael

      Dunn, James A.

      O'Neill, Martin

      Dunwoody, Hon Mrs G.

      Orme, Rt Hon Stanley

      Eadie Alex

      Paisley, Rev Ian

      Eastham, Ken

      Palmer, Arthur

      Edwards, R. (W'hampt'n S E)

      Parker, John

      Ellis, R. (NE D'bysh're)

      Pavitt, Laurie

      English, Michael

      Pendry, Tom

      Evans, loan (Aberdare)

      Powell, Raymond (Ogmore)

      Faulds, Andrew

      Rees, Rt Hon M (Leeds S)

      Field, Frank

      Roberts, Albert (Normanton)

      Fitch, Alan

      Roberts, Gwilym (Cannock)

      Fletcher, Ted (Darlington)

      Robertson, George

      Ford, Ben

      Robinson, G. (Coventry NW)

      Forrester, John

      Rooker, J. W.

      Foster, Derek

      Rowlands, Ted

      Foulkes, George

      Sever, John

      Fraser, J. (Lamb'th, N'w'd)

      Sheldon, Rt Hon R.

      Garrett, John (Norwich S)

      Shore, Rt Hon Peter

      George, Bruce

      Short, Mrs Renée

      Gilbert, Rt Hon Dr John

      Silkin, Rt Hon J. (Deptford)

      Golding, John

      Silkin, Rt Hon S. C. (Dulwich)

      Grant, George (Morpeth)

      Silverman, Julius

      Hamilton, James (Bothwell)

      Skinner, Dennis

      Hardy, Peter

      Smith, Rt Hon J. (N Lanark)

      Harrison, Rt Hon Walter

      Snape, Peter

      Hart, Rt Hon Dame Judith

      Soley, Clive

      Haynes, Frank

      Spearing, Nigel

      Heffer, Eric S.

      Spriggs, Leslie

      Hogg, N. (E Dunb't'nshire)

      Stallard, A. W.

      1254

      Stewart, Rt Hon D. (W Isles)

      White, J. (G'gow Pollok)

      Stoddart, David

      Whitlock, William

      Taylor, Mrs Ann (Bolton W)

      Wigley, Dafydd

      Thomas, Jeffrey (Abertillery)

      Willey, Rt Hon Frederick

      Thomas, Dr R. (Carmarthen)

      Wilson, Gordon (Dundee E)

      Tilley, John

      Wilson, William (C'try SE)

      Tinn, James

      Winnick, David

      Torney, Tom

      Woodall, Alec

      Urwin, Rt Hon Tom

      Woolmer, Kenneth

      Varley, Rt Hon Eric G.

      Wright, Sheila

      Wainwright, E. (Dearne V)

      Young, David (Bolton E)

      Walker, Rt Hon H. (D'caster)

      Watkins, David

      Tellers for the Ayes:

      Weetch, Ken

      Mr. George Morton and

      Welsh. Michael

      Mr. Frank White.

      NOES

      Adley, Robert

      Eggar, Tim

      Aitken, Jonathan

      Emery, Peter

      Alexander, Richard

      Eyre, Reginald

      Alison, Michael

      Fairgrieve, Russell

      Ancram, Michael

      Faith, Mrs Sheila

      Atkins, Robert (Preston N)

      Farr, John

      Atkinson, David (B'm'th,E)

      Fell, Anthony

      Baker, Nicholas (N Dorset)

      Fenner, Mrs Peggy

      Beaumont-Dark, Anthony

      Fisher, Sir Nigel

      Bendall, Vivian

      Fletcher, A. (Ed'nb'gh N)

      Benyon, W. (Buckingham)

      Fletcher-Cooke, Sir Charles

      Best, Keith

      Fookes, Miss Janet

      Bevan, David Gilroy

      Forman, Nigel

      Biffen, Rt Hon John

      Fowler, Rt Hon Norman

      Biggs-Davison, John

      Fraser, Rt Hon Sir Hugh

      Blackburn, John

      Fraser, Peter (South Angus)

      Blaker, Peter

      Gardiner, George (Reigate)

      Body, Richard

      Gardner, Edward (S Fylde)

      Bonsor, Sir Nicholas

      Garel-Jones, Tristan

      Bowden, Andrew

      Glyn, Dr Alan

      Boyson, Dr Rhodes

      Goodhew, Victor

      Braine, Sir Bernard

      Goodlad, Alastair

      Bright, Graham

      Gorst, John

      Brinton, Tim

      Gow, Ian

      Brittan, Leon

      Gower, Sir Raymond

      Brooke, Hon Peter

      Grant, Anthony (Harrow C)

      Brotherton, Michael

      Gray, Hamish

      Brown, Michael (Brigg & Sc'n)

      Greenway, Harry

      Browne, John (Winchester)

      Grieve, Percy

      Bruce-Gardyne, John

      Griffiths, E. (B'y St. Edm'ds)

      Buchanan-Smith, Alick

      Griffiths, Peter Portsm'th N)

      Buck, Antony

      Grist, Ian

      Bulmer, Esmond

      Grylls, Michael

      Butcher, John

      Gummer, John Selwyn

      Butler, Hon Adam

      Hamilton, Hon A.

      Cadbury, Jocelyn

      Hamilton, Michael (Salisbury)

      Carlisle, John (Luton West)

      Hampson, Dr Keith

      Carlisle, Kenneth (Lincoln)

      Hannam, John

      Carlisle, Rt Hon M. (R'c'n )

      Haselhurst, Alan

      Chalker, Mrs. Lynda

      Hastings, Stephen

      Chapman, Sydney

      Havers, Rt Hon Sir Michael

      Churchill, W. S.

      Hawksley, Warren

      Clark, Hon A. (Plym'th, S'n)

      Hayhoe, Barney

      Clark, Sir W. (Croydon S)

      Heddle, John

      Clarke, Kenneth (Rushcliffe)

      Henderson, Barry

      Clegg, Sir Walter

      Heseltine, Rt Hon Michael

      Cockeram, Eric

      Hicks, Robert

      Colvin, Michael

      Higgins, Rt Hon Terence L.

      Cope, John

      Hogg, Hon Douglas (Gr'th'm)

      Cormack, Patrick

      Holland, Philip (Carlton)

      Come, John

      Hooson, Tom

      Cranborne, Viscount

      Howell, Ralph (N Norfolk)

      Critchley, Julian

      Hunt, David (Wirral)

      Crouch, David

      Hunt, John (Ravensbourne)

      Dean, Paul (North Somerset)

      Irving, Charles (Cheltenham)

      Dickens, Geoffrey

      Jenkin, Rt Hon Patrick

      Douglas-Hamilton, Lord J.

      Jessel, Toby

      du Cann, Rt Hon Edward

      Johnson Smith, Geoffrey

      Dunn, Robert (Dartford)

      Jopling, Rt Hon Michael

      Durant, Tony

      Joseph, Rt Hon Sir Keith

      Dykes, Hugh

      Kaberry, Sir Donald

      Eden, Rt Hon Sir John

      Kellett-Bowman, Mrs Elaine

      Edwards, Rt Hon N. (P'broke)

      King, Rt Hon Tom

      1255

      Knight, Mrs Jill

      Rees, Peter (Dover and Deal)

      Knox, David

      Rees-Davies, W. R.

      Lamont, Norman

      Renton, Tim

      Lang, Ian

      Rhodes James, Robert

      Langford-Holt, Sir John

      Ridley, Hon Nicholas

      Latham, Michael

      Ridsdale, Sir Julian

      Lawrence, Ivan

      Rifkind, Malcolm

      Lawson, Rt Hon Nigel

      Roberts, M. (Cardiff NW)

      Lennox-Boyd, Hon Mark

      Roberts, Wyn (Conway)

      Lester, Jim (Beeston)

      Rossi, Hugh

      Lewis, Kenneth (Rutland)

      Rost, Peter

      Lloyd, Ian (Havant & W'loo)

      Royle, Sir Anthony

      Lloyd, Peter (Fareham)

      Sainsbury, Hon Timothy

      Loveridge, John

      St. John-Stevas, Rt Hon N.

      Luce, Richard

      Scott, Nicholas

      Lyell, Nicholas

      Shaw, Giles (Pudsey)

      Macfarlane, Neil

      Shelton, William (Streatham)

      MacKay, John (Argyll)

      Shepherd, Colin (Hereford)

      Macmillan, Rt Hon M.

      Shepherd, Richard

      McNair-Wilson, M. (N'bury)

      Silvester, Fred

      McNair-Wilson, P. (New F'st)

      Skeet, T. H. H.

      McQuarrie, Albert

      Speed, Keith

      Major, John

      Speller, Tony

      Marland, Paul

      Spence, John

      Marlow, Tony

      Spicer, Jim (West Dorset)

      Marshall, Michael (Arundel)

      Spicer, Michael (S Worcs)

      Marten, Neil (Banbury)

      Sproat, Iain

      Mates, Michael

      Squire, Robin

      Mather, Carol

      Stainton, Keith

      Maude, Rt Hon Sir Angus

      Stanbrook, Ivor

      Mawby, Ray

      Stanley, John

      Mawhinney, Dr Brian

      Steen, Anthony

      Maxwell-Hyslop, Robin

      Stevens, Martin

      Mayhew, Patrick

      Stewart, Ian (Hitchin)

      Mellor, David

      Stewart, A. (E Renfrewshire)

      Miller, Hal (B'grove)

      Stokes, John

      Mills, Iain (Meriden)

      Stradling Thomas, J.

      Mills, Peter (West Devon)

      Tapsell, Peter

      Miscampbell, Norman

      Taylor, Teddy (S'end E)

      Mitchell, David (Basingstoke)

      Tebbit, Norman

      Moate, Roger

      Temple-Morris, Peter

      Molyneaux, James

      Thatcher, Rt Hon Mrs M.

      Monro, Hector

      Thomas, Rt Hon Peter

      Moore, John

      Thompson, Donald

      Morgan, Geraint

      Thorne, Neil (Ilford South)

      Morris, M. (N'hampton S)

      Thornton, Malcolm

      Morrison, Hon P. (Chester)

      Townend, John (Bridlington)

      Myles, David

      Townsend, Cyril D, (B'heath)

      Neale, Gerrard

      Trippier, David

      Needham, Richard

      Trotter, Neville

      Neubert, Michael

      van Straubenzee, W. R.

      Newton, Tony

      Vaughan, Dr Gerard

      Normanton, Tom

      Viggers, Peter

      Nott, Rt Hon John

      Wakeham, John

      Onslow, Cranley

      Waldegrave, Hon William

      Oppenheim, Rt Hon Mrs S.

      Wall, Patrick

      Osborn, John

      Walters, Dennis

      Page, John (Harrow, West)

      Ward, John

      Page, Rt Hon Sir G. (Crosby)

      Warren, Kenneth

      Page, Richard (SW Herts)

      Watson, John

      Parris, Matthew

      Wells, John (Maidstone)

      Patten, Christopher (Bath)

      Wells, Bowen

      Pattie, Geoffrey

      Whitelaw, Rt Hon William

      Pawsey, James

      Whitney, Raymond

      Percival, Sir Ian

      Wickenden, Keith

      Pollock, Alexander

      Williams, D. (Montgomery)

      Powell, Rt Hon J.E. (S Down)

      Winterton, Nicholas

      Prentice, Rt Hon Reg

      Wolfson, Mark

      Price, Sir David (Eastleigh)

      Young, Sir George (Acton)

      Prior, Rt Hon James

      Younger, Rt Hon George

      Proctor, K. Harvey

      Pym, Rt Hon Francis

      Tellers for the Noes:

      Raison, Timothy

      Mr. Anthony Berry and

      Rathbone, Tim

      Mr. Robert Boscawen.

      Question accordingly negatived.
      Amendment proposed: No. 28, in page 16, line 10, after 'of, insert 'six-sevenths of.—[Mr. Robert Sheldon.]
      Question put, That the amendment be made:—
      The House divided:Ayes 189,Noes 279.

      Division No. 276]

      [9.10 pm

      AYES

      Abse, Leo

      Hogg, N. (E Dunb't'nshire)

      Adams, Allen

      Holland, S. (L'b'th, Vauxh'll)

      Alton, David

      Home Robertson, John

      Anderson, Donald

      Homewood, William

      Archer, Rt Hon Peter

      Hooley, Frank

      Ashley, Rt Hon Jack

      Horam, John

      Ashton, Joe

      Howell, Rt Hon D.

      Beith, A. J.

      Howells, Geraint

      Bennett, Andrew (St'kp't N)

      Huckfield, Les

      Bidwell, Sydney

      Hughes, Robert (Aberdeen N)

      Booth, Rt Hon Albert

      Hughes, Roy (Newport)

      Boothroyd, Miss Betty

      Janner, Hon Greville

      Bottomley, Rt Hon A. (M'b'ro)

      Jay, Rt Hon Douglas

      Bray, Dr Jeremy

      John, Brynmor

      Brown, Hugh D. (Provan)

      Johnson, James (Hull West)

      Brown, Ronald W. (H'ckn'yS)

      Johnson, Walter (Derby S)

      Callaghan, Rt Hon J.

      Jones, Rt Hon Alec (Rh'dda)

      Callaghan, Jim (Midd't'n & P)

      Jones, Barry (East Flint)

      Campbell, Ian

      Jones, Dan (Burnley)

      Campbell-Savours, Dale

      Kaufman, Rt Hon Gerald

      Canavan, Dennis

      Kerr, Russell

      Cant, R. B.

      Lambie, David

      Clark, Dr David (S Shields)

      Leadbitter, Ted

      Cocks, Rt Hon M. (B'stol S)

      Lestor, Miss Joan

      Cohen, Stanley

      Lewis, Arthur (N'ham NW)

      Coleman, Donald

      Lewis, Ron (Carlisle)

      Concannon, Rt Hon J. D.

      Lofthouse, Geoffrey

      Conlan, Bernard

      McDonald, Dr Oonagh

      Cook, Robin F.

      McElhone, Frank

      Cowans, Harry

      McKay, Allen (Penistone)

      Cox, T. (W'dsw'th, Toot'g)

      McNally, Thomas

      Craigen, J. M.

      McNamara, Kevin

      Crowther, J. S.

      McWilliam, John

      Cryer, Bob

      Magee, Bryan

      Cunningham, G. (Islington S)

      Marshall, D (G'gow S'ton)

      Cunningham, Dr J. (W'h'n)

      Marshall, Dr Edmund (Goole)

      Davies, Rt Hon Denzil (L'lli)

      Martin, M (G'gow S'burn)

      Davies, Ifor (Gower)

      Mason, Rt Hon Roy

      Davis, Clinton (Hackney C)

      Maxton, John

      Davis, T. (B'ham, Stechf'd)

      Meacher, Michael

      Deakins, Eric

      Mellish, Rt Hon Robert

      Dempsey, James

      Millan, Rt Hon Bruce

      Dewar, Donald

      Miller, Dr M. S. (E Kilbride)

      Dixon, Donald

      Mitchell, Austin (Grimsby)

      Dobson, Frank

      Mitchell, R. C. (Soton Itchen)

      Dormand, Jack

      Morris, Rt Hon A. (W'shawe)

      Douglas-Mann, Bruce

      Morris, Rt Hon C. (O'shaw)

      Dubs, Alfred

      Morris, Rt Hon J. (Aberavon)

      Duffy, A. E. P.

      Morton, George

      Dunn, James A.

      Newens, Stanley

      Dunwoody, Hon Mrs G.

      Oakes, Rt Hon Gordon

      Eadie, Alex

      O'Halloran, Michael

      Eastham, Ken

      O'Neill, Martin

      Edwards, R. (W'hampt'n S E)

      Orme, Rt Hon Stanley

      Ellis, R. (NE D'bysh're)

      Paisley, Rev Ian

      English, Michael

      Palmer, Arthur

      Evans, loan (Aberdare)

      Parker, John

      Faulds, Andrew

      Pavitt, Laurie

      Field, Frank

      Pendry, Tom

      Fitch, Alan

      Powell, Raymond (Ogmore)

      Fletcher, Ted (Darlington)

      Rees, Rt Hon M (Leeds S)

      Ford, Ben

      Roberts, Albert (Normanton)

      Forrester, John

      Roberts, Gwilym (Cannock)

      Foster, Derek

      Robertson, George

      Foulkes, George

      Robinson, G. (Coventry NW)

      Fraser, J. (Lamb'th, N'w'd)

      Rooker, J. W.

      Garrett, John (Norwich S)

      Roper, John

      George, Bruce

      Ross, Stephen (Isle of Wight)

      Gilbert, Rt Hon Dr John

      Rowlands, Ted

      Golding, John

      Ryman, John

      Grant, George (Morpeth)

      Sandelson, Neville

      Hardy, Peter

      Sever, John

      Harrison, Rt Hon Walter

      Sheldon, Rt Hon R.

      Hart, Rt Hon Dame Judith

      Shore, Rt Hon Peter

      Haynes, Frank

      Short, Mrs Renée

      Heffer, Eric S.

      Silkin, Rt Hon J. (Deptford)

      1257

      Silkin, Rt Hon S. C. (Dulwich)

      Walker, Rt Hon H. (D'caster)

      Silverman, Julius

      Watkins, David

      Skinner, Dennis

      Weetch, Ken

      Smith, Rt Hon J. (N Lanark)

      Welsh, Michael

      Snape, Peter

      White, Frank R.

      Soley, Clive

      White, J. (G'gow Pollok)

      Spearing, Nigel

      Whitlock, William

      Spriggs, Leslie

      Wigley, Dafydd

      Stallard, A. W.

      Willey, Rt Hon Frederick

      Steel, Rt Hon David

      Wilson, Gordon (Dundee E)

      Stewart, Rt Hon D. (W Isles)

      Wilson, William (C'try SE)

      Stoddart, David

      Winnick, David

      Taylor, Mrs Ann (Bolton W)

      Woodall, Alec

      Thomas, Jeffrey (Abertillery)

      Woolmer, Kenneth

      Thomas, Dr R. (Carmarthen)

      Wright, Sheila

      Tilley, John

      Young, David (Bolton E)

      Torney, Tom

      Urwin, Rt Hon Tom

      Tellers for the Ayes:

      Varley, Rt Hon Eric G.

      Mr. James Hamilton and

      Wainwright, E. (Dearne V)

      Mr. James Tinn.

      Wainwright, R. (Colne V)

      NOES

      Adley, Robert

      Crouch, David

      Aitken, Jonathan

      Dean, Paul (North Somerset)

      Alexander, Richard

      Dickens, Geoffrey

      Alison, Michael

      Douglas-Hamilton, Lord J.

      Ancram, Michael

      du Cann, Rt Hon Edward

      Arnold, Tom

      Dunn, Robert (Dartford)

      Aspinwall, Jack

      Durant, Tony

      Atkins, Robert (Preston N)

      Dykes, Hugh

      Atkinson, David (B'm'th,E)

      Eden, Rt Hon Sir John

      Baker, Nicholas (N Dorset)

      Edwards, Rt Hon N. (P'broke)

      Banks, Robert

      Eggar, Tim

      Beaumont-Dark, Anthony

      Emery, Peter

      Bendall, Vivian

      Eyre, Reginald

      Benyon, W. (Buckingham)

      Fairbairn, Nicholas

      Best, Keith

      Fairgrieve, Russell

      Bevan, David Gilroy

      Faith, Mrs Sheila

      Biffen, Rt Hon John

      Farr, John

      Biggs-Davison, John

      Fell, Anthony

      Blackburn, John

      Fenner, Mrs Peggy

      Blaker, Peter

      Fisher, Sir Nigel

      Body, Richard

      Fletcher, A. (Ed'nb'gh N)

      Bonsor, Sir Nicholas

      Fletcher-Cooke, Sir Charles

      Bottomley, Peter (W'wich W)

      Fookes, Miss Janet

      Bowden, Andrew

      Forman, Nigel

      Boyson, Dr Rhodes

      Fowler, Rt Hon Norman

      Braine, Sir Bernard

      Fraser, Rt Hon Sir Hugh

      Bright, Graham

      Fraser, Peter (South Angus)

      Brinton, Tim

      Gardiner, George (Reigate)

      Brittan, Leon

      Gardner, Edward (S Fylde)

      Brooke, Hon Peter

      Garel-Jones, Tristan

      Brotherton, Michael

      Glyn, Dr Alan

      Brown, Michael (Brigg & Sc'n)

      Goodhew, Victor

      Browne, John (Winchester)

      Goodlad, Alastair

      Bruce-Gardyne, John

      Gorst, John

      Buchanan-Smith, Alick

      Gow, Ian

      Buck, Antony

      Gower, Sir Raymond

      Bulmer, Esmond

      Grant, Anthony (Harrow C)

      Butcher, John

      Gray, Hamish

      Butler, Hon Adam

      Greenway, Harry

      Cadbury, Jocelyn

      Grieve, Percy

      Carlisle, John (Luton West)

      Griffiths, E. (B'y St. Edm'ds)

      Carlisle, Kenneth (Lincoln)

      Griffiths, Peter Portsm'th N)

      Carlisle, Rt Hon M. (R'c'n)

      Grist, Ian

      Chalker, Mrs. Lynda

      Grylls, Michael

      Chapman, Sydney

      Gummer, John Selwyn

      Churchill, W. S.

      Hamilton, Hon A.

      Clark, Hon A. (Plym'th, S'n)

      Hamilton, Michael (Salisbury)

      Clark, Sir W. (Croydon S)

      Hampson, Dr Keith

      Clarke, Kenneth (Rushcliffe)

      Hannam, John

      Clegg, Sir Walter

      Haselhurst, Alan

      Cockeram, Eric

      Hastings, Stephen

      Colvin, Michael

      Havers, Rt Hon Sir Michael

      Cope, John

      Hawksley, Warren

      Cormack, Patrick

      Hayhoe, Barney

      Corrie, John

      Heddle, John

      Cranborne, Viscount

      Henderson, Barry

      Critchley, Julian

      Heseltine, Rt Hon Michael

      1258

      Hicks, Robert

      Patten, Christopher (Bath)

      Higgins, Rt Hon Terence L.

      Pattie, Geoffrey

      Hogg, Hon Douglas (Gr'th'm)

      Pawsey, James

      Holland, Philip (Carlton)

      Percival, Sir Ian

      Hooson, Tom

      Pollock, Alexander

      Howell, Ralph (N Norfolk)

      Powell, Rt Hon J.E. (S Down)

      Hunt, David (Wirral)

      Prentice, Rt Hon Reg

      Hunt, John (Ravensbourne)

      Price, Sir David (Eastleigh)

      Irving, Charles (Cheltenham)

      Prior, Rt Hon James

      Jenkin, Rt Hon Patrick

      Proctor, K. Harvey

      Jessel, Toby

      Pym, Rt Hon Francis

      Johnson Smith, Geoffrey

      Raison, Timothy

      Jopling, Rt Hon Michael

      Rathbone, Tim

      Joseph, Rt Hon Sir Keith

      Rees, Peter (Dover and Deal)

      Kaberry, Sir Donald

      Rees-Davies, W. R.

      Kellett-Bowman, Mrs Elaine

      Renton, Tim

      King, Rt Hon Tom

      Rhodes James, Robert

      Knight, Mrs Jill

      Ridley, Hon Nicholas

      Knox, David

      Ridsdale, Sir Julian

      Lamont, Norman

      Rifkind, Malcolm

      Lang, Ian

      Roberts, M. (Cardiff NW)

      Langford-Holt, Sir John

      Roberts, Wyn (Conway)

      Latham, Michael

      Rossi, Hugh

      Lawrence, Ivan

      Rost, Peter

      Lawson, Rt Hon Nigel

      Royle, Sir Anthony

      Lennox-Boyd, Hon Mark

      Sainsbury, Hon Timothy

      Lester, Jim (Beeston)

      St. John-Stevas, Rt Hon N.

      Lewis, Kenneth (Rutland)

      Scott, Nicholas

      Lloyd, Ian (Havant & W'loo)

      Shaw, Giles (Pudsey)

      Lloyd, Peter (Fareham)

      Shelton, William (Streatham)

      Loveridge, John

      Shepherd, Colin (Hereford)

      Luce, Richard

      Shepherd, Richard

      Lyell, Nicholas

      Silvester, Fred

      Macfarlane, Neil

      Skeet, T. H. H.

      MacKay, John (Argyll)

      Speed, Keith

      Macmillan, Rt Hon M.

      Speller, Tony

      McNair-Wilson, M. (N'bury)

      Spence, John

      McNair-Wilson, P. (New F'st)

      Spicer, Jim (West Dorset)

      McQuarrie, Albert

      Spicer, Michael (S Worcs)

      Major, John

      Sproat, Iain

      Marland, Paul

      Squire, Robin

      Marlow, Tony

      Stainton, Keith

      Marshall, Michael (Arundel)

      Stanbrook, Ivor

      Marten, Neil (Banbury)

      Stanley, John

      Mates, Michael

      Steen, Anthony

      Mather, Carol

      Stevens, Martin

      Maude, Rt Hon Sir Angus

      Stewart, Ian (Hitchin)

      Mawby, Ray

      Stewart, A. (E Renfrewshire)

      Mawhinney, Dr Brian

      Stokes, John

      Maxwell-Hyslop, Robin

      Stradling Thomas, J.

      Mayhew, Patrick

      Tapsell, Peter

      Mellor, David

      Taylor, Teddy (S'end E)

      Miller, Hal (B'grove)

      Tebbit, Norman

      Mills, Iain (Meriden)

      Temple-Morris, Peter

      Mills, Peter (West Devon)

      Thatcher, Rt Hon Mrs M.

      Miscampbell, Norman

      Thomas, Rt Hon Peter

      Mitchell, David (Basingstoke)

      Thompson, Donald

      Moate, Roger

      Thorne, Neil (Ilford South)

      Molyneaux, James

      Thornton, Malcolm

      Monro, Hector

      Townend, John (Bridlington)

      Moore, John

      Townsend, Cyril D, (B'heath)

      Morgan, Geraint

      Trippier, David

      Morris, M. (N'hampton S)

      Trotter, Neville

      Morrison, Hon P. (Chester)

      van Straubenzee, W. R.

      Mudd, David

      Vaughan, Dr Gerard

      Murphy, Christopher

      Viggers, Peter

      Myles, David

      Wakeham, John

      Neale, Gerrard

      Waldegrave, Hon William

      Needham, Richard

      Walker, B. (Perth)

      Neubert, Michael

      Wall, Patrick

      Newton, Tony

      Walters, Dennis

      Normanton, Tom

      Ward, John

      Nott, Rt Hon John

      Warren, Kenneth

      Onslow, Cranley

      Watson, John

      Oppenheim, Rt Hon Mrs S.

      Wells, John (Maidstone)

      Osborn, John

      Wells, Bowen

      Page, John (Harrow, West)

      Whitelaw, Rt Hon William

      Page, Rt Hon Sir G. (Crosby)

      Whitney, Raymond

      Page, Richard (SW Herts)

      Wickenden, Keith

      Parris, Matthew

      Wiggin, Jerry

      1259

      Williams, D. (Montgomery)

      Winterton, Nicholas

      Tellers for the Noes:

      Wolfson, Mark

      Mr. Anthony Berry and

      Young, Sir George (Acton)

      Mr. Robert Boscawen.

      Younger, Rt Hon George

      Question accordingly negatived.

    Clause 28

      NOTIFICATION OF AMOUNT TAXABLE UNDER SECTION 27
      Mr. Robert Sheldon: I beg to move amendment No. 32, in page 17, line 33, after 'assessment', insert 'less than £50'.
      Mr. Deputy Speaker: With this it will be convenient to take amendment No. 35, in clause 29, page 18, line 32, after 'tax', insert 'less than £50'.
      Mr. Sheldon: We are concerned with the administrative arrangements by which short-term benefits are to be taxed. Such matters have been considered on and off over the past 30 years or more. The Government have made a fresh attempt to tax short-term benefits in a way that short-circuits past cumbersome procedures.
      We are talking about the trade-off between simplification and equity—whether it is possible to achieve a simplified structure to tax short-term benefits without dispensing with the equity that we have always believed to be an essential part of a taxation system. This is a matter that the House is peculiarly well equipped to deal with, particularly in Finance Bills. We are used to trade-offs between simplicity and equity, and our normal preference is for equity.
      An hon. Member may have representations made to him by a constituent or an interested body and discover an aspect of the tax law that is unfair. He immediately puts down an amendment, and, if it has merit, it finds its way into the Finance Bill. So Finance Bills increase in size year by year, becoming weightier and weightier. The main reason for that is that we try to remedy unfairness. This has activated our policies on all the Finance Bills that we have debated.
      The advantages of simplicity are recognised. It is well known that the present Bill could be cut by half and still meet most of the requirements, but the result would be a much less fair Finance Bill. That is something that we have known, accepted and come to live with.
      When it comes to the taxation of short-term benefits, however, rather than have a mass of legislation and administrative complexity, the Minister has sought to cut out all the extra parts which would cover the problems of dealing fairly with people who will find their benefits taxed. The Government have instead sought to ensure that there is a simplified method, which of course means fewer civil servants. Whereas in the past it has been thought that as many as 10,000 civil servants might be required to inaugurate the kind of fair and equitable scheme that has always been regarded as the type of scheme required, under the Minister's administrative arrangements the number would be reduced to 3,000. The increase in civil servants will be kept down to 3,000 at the expense of a considerable amount of unfairness which I shall attempt to set out.
      Under the scheme devised by the Government, the benefit officer from, say, the DHSS will inform the
      1260
      claimant of the amount of benefit that has been received and the amount that is taxable. In the original proposal, the claimant had to reply within 30 days. As a result of the debates in Committee, however, an amendment to which we shall come later extends the period to 60 days.
      If no objection is made within that period, no appeal is possible on the amount of taxable benefit. The problem is that the benefit officer may be the person to whom the claimant applies, for example, for supplementary benefit. He will decide how much of the benefit paid to the claimant is taxable. We all know that the relationship between the claimant and the supplementary benefit officer, for example, is a delicate one. The claimant very often appears as a supplicant. He then receives the money and the same person may well lay down the amount of benefit that will be taxable. The claimant must then appeal against that decision.
      We are not here dealing with sophisticated people, knowledgeable in the ways of taxation and used to filling in returns and forms. We are dealing with people at a strong disadvantage vis-à-vis the person to whom they make application for supplementary benefit. The claimant is then required to complete a form saying that he does not agree with the figure. If he does not do so within 60 days, that is the end of it. It is not even open to Members of Parliament to do anything. Our function then ceases. Within the 60-day period, the claimant may come to his Member of Parliament saying that he believes that the figure is wrong. The Member of Parliament may then advise him how to make out a statement denying that that was the amount received. After 60 days, however, we are of no use to him at all.
      This is a novelty in our legislation. Moreover, the gross unfairness being introduced for this section of the community is without precedent. One has only to consider the extent of our attempts to remedy injustices to the well-off, the subsections and paragraphs and the mass of legislation to ensure that fairness applies to every citizen. We are now excluding from that the most deserving, hard-pressed people at a time when they face some of the greatest emotional and economic difficulties that they are ever likely to face. We have objected strongly to that and we shall continue to do so.
      The difficulty for the right hon. Gentleman is that a fair scheme would be very complicated because it would depend on a relationship between four sets of people, namely, the person applying for supplementary benefit or unemployment pay, the Inland Revenue, the Department—whether it is the DHSS or the Department of Employment—and the employer. Each of them would have to communicate with the other three. That would require a great amount of paper work and many civil servants.
      9.30 pm
      That situation led several people to believe that that was not a sensible way to proceed. As a result, there was little movement until the Government sought to cut this Gordian knot by an unparalled example of unfairness in dealing with the taxation of underprivileged people. The report of the Public Accounts Committee was printed on 7 August 1980. It deals with the Board of Inland Revenue. Paragraph 14 concentrates on the standards of accuracy achieved by district taxation offices. It makes the following observation:
      "A small representative sample of the cases is re-examined within each District to detect arithmetical and transcription

      1261
      errors. In 1977–78, these checks disclosed an error rate of 2·5 per cent. in the cases where no end-of-year assessment had been considered necessary and 3·6 per cent. in the assessment cases."
      Paragraph 15 covers more complex cases and states:
      "error rates…ranged up to 21 per cent. for cases involving PAYE taxpayers."
      We are dealing with Inland Revenue officers whose job involves handling tax matters. I suspect that they had a higher morale before than they have now. Nevertheless, errors were discovered in that proportion of cases. If such errors are found in the notices that are sent to claimants and if the claimants do not contest the figures, there is no possible form of appeal. If the Inland Revenue, which is used to such matters, makes such mistakes, it is logical to assume that benefits officers, who are quite unused to taxation matters, would make several more mistakes. In addition, the advantage that the ordinary taxpayer has in being able to appeal to the Inland Revenue would not be available. That is grossly unjust and unfair.
      We dealt with this subject in Committee, but it must be re-examined. We are throwing a lifeline to the Financial Secretary. We should prefer a proper system of taxation as regards short-term benefits. If the Government will not agree to that we should at least limit the unfairness and also keep some of the advantages of administrative simplicity that the Government—unlike us—seem so wedded to. If the assessment is less than £50, the absence of appeal could more easily be accepted. In other words, the many cases in which small sums are involved could go through. If more substantial sums are involved, the right of appeal should continue to exist. The amendment seeks to ameliorate some of the legislation's most unpleasant features. I hope that the Financial Secretary will accept the amendment.
      Mr. Soley: I am aware of the many amendments we have to consider, so I shall not detain the House for long. It will be remembered that in Committee I tried to identify certain groups of people who would be vulnerable if they were not allowed to appeal. After a full debate, the Minister went some way towards recognising the difficulty by extending the period of appeal from 30 days to 60 days. I welcome that.
      It is important that we should now take the next logical step along the road, although I should prefer to handle it in other ways. That next logical step is to impose a limit. The groups that I identified were those who move frequently, those who, during a year, are in and out of institutions such as psychiatric hospital or prison, those living in flats or lodging houses, those who have difficulty with reading and writing and those whose letters have gone astray either in the postal system or after delivery to a block of flats in which many people live. Those are the vulnerable groups who discover that they have been asked to pay tax on a sum of money the size of which they dispute.
      The person who moves frequently is a person who moves around the country seeking casual employment. He may return to his base area occasionally. He might work on an oil rig or for the oil industry in Scotland for several months. He might work on a construction site or on a motorway and return to the town or the area where he normally lives. At that point, he may go on to supplementary benefit for a while. If, by the time he is told the amount of money on which he must pay tax he disagrees, he cannot appeal because he has run out of time.
      1262
      The same applies to a person who is in and out of an institution. The classic example is of a person who spends some months in a psychiatric hospital. When he leaves hospital he takes a long time to reorder his affairs because recovering from that experience is not easy. He may discover that he has an additional financial burden of which he was not aware and against which there is no appeal.
      My right hon. Friend has made a good case for limiting the amount so that, economically, it is not too painful. A reasonable cut-off point would be £50, and our amendment would ensure that people are not presented with unreasonably high bills against which they cannot appeal. No matter how many times they go to advice centres, Members of Parliament or anyone else, they cannot change it. I hope that the Minister will be able to accept the amendment.
      Mr. Lawson: We have been over this ground, as both the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) and the hon. Member for Hammersmith, North (Mr. Soley) said. In Committee representations were made to me about the method to be used for bringing short-term benefits into the tax net, by which the benefit officer notifies a beneficiary of the amount of taxable benefit. The beneficiary has a time in which to appeal against that and may lodge an objection.
      Those procedures may work harshly or unreasonably for the sort of people mentioned by the hon. Member for Hammersmith, North and other people who find such matters difficult to grasp. That is why I agreed after a full debate in Committee that the time scale should be extended from 30 days to 60 days. That is a longer time than anywhere else in our tax or social security systems. It is on the borderline of the two.
      I felt that that met the points that had been made. I feel that we should now let the system begin to operate and assess it when it is operating, as we hope it will be, from April 1982.
      The right hon. Gentleman said that he was throwing me a lifeline, but the amendment as drafted would make it impossible to work the arrangements. It would never be possible, at the time when the person's taxable benefit was being computed, to know what might be the amount of any subsequent tax assessment in which the benefit would be included. The benefit might be small but the assessment might include other income, in which case it would take it above the level of £50, so that in every case the benefit officer would be unable to assume, after the 60-day period had expired, that the figure of taxable benefit had been agreed and was final for the purposes of the subsequent assessment. It would mean that records would have to be kept indefinitely in the benefit offices.
      I concede that the purpose of the system is to make the procedure administratively simple and workable. If the amendment were passed, all that gain would be lost and we should be back in the position where we should require an excessive number of staff to operate the procedure. It was that which led the Labour Government to reject a similar proposal when they considered it.
      The effect of the amendment, therefore, would be to prevent the system being workable. The right way to approach the matter is as we have suggested, but with the doubling of the period in which a person may lodge an objection or contest the assessment from 30 to 60 days.
      Mr. Soley: One of the cases put to me since I spoke in Committee was that of the person admitted under a section of the Mental Health Act to a psychiatric hospital, and who may be held for a month, which may be extended by a further month in certain circumstances. That would mean that the 60 days would expire. Will the Minister give an undertaking that he will review the matter in the light of cases of that nature?
      Mr. Lawson: As I explained in Committee, there is scope for the consideration of that sort of case. It is not our intention that the safety net in the Bill should be abused. But the hon. Member will be aware that clause 28(6) states:
      "Where a benefit officer has notified an amount to a person under subsection (1) above, he may by another notice in writing notify the person of an alteration in the amount previously notified and, if he does so, the original notification shall be cancelled".
      The 60 days would then run from the new notification. So there is scope there for special cases that are brought to the attention of the authorities where clearly an injustice has been done. There is no intention whatever that any injustice should be done to anyone as a result of the legislation.
      Mr. Robert Sheldon: The right hon. Gentleman says that if the amendment were carried benefit officers would have to keep the assessment in case further amounts were subsequently added. I hope that they keep the assessments, because if there is any error and the assessment is not kept to the end of the year, what is the use of subsection (6)? They would have no authority to do anything, because there would be no records. That is what is worrying me very much. The idea is that as soon as the 60 days are over all the records go into the wastepaper basket.
      Mr. Lawson indicated dissent.
      9.45 pm
      Mr. Sheldon: I am glad to receive the right hon. Gentleman's assurance that that is not so. In that case, his first point does not hold. If the records are still there and there are further assessments, they are there to be added to. This ensures that we shall be able to deal with the larger cases alone.
      The opening words of clause 28 are:
      "A benefit officer may by notice in writing notify a person"
      of his liability. In Committee on 4 June we asked whether "may" could be replaced by "shall". I should have thought that there was no question about that, but the right hon. Gentleman said at the end of the debate:
      "Two valid points have been raised…The first is the question of 'may' and 'shall', which was raised by both the hon. Member for Sheffield, Heeley (Mr. Hooley) and the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I have not the faintest idea why the clause says 'may' instead of 'shall'. I shall look into the matter and, if it would improve the Bill to substitute 'shall', I shall ensure that it is done."—[Official Report, Standing Committee E, 4 June 1981; c. 368.]
      I should like some reaction from the right hon. Gentleman now.
      There is the question of assessments being kept by the benefit officer so that subsequent appeals may be allowed if there is a change, and the question of certain assessments being able to be added, under certain circumstances, to the original assessments to deal with those who have, for them, substantial sums. To us, £50 may not appear a vast sum, but to somebody on supplementary benefit living on
      1264
      the poverty line all his years it is substantial. I hope that the right hon. Gentleman will relate the size of the sums to the position of the individuals making claims.
      Mr. Lawson: I was not sure whether the Opposition had satisfied themselves independently on the question of the use of "may" or "shall", because they did not table an amendment on Report. There is good reason why the Bill says "may" rather than "shall". It is not to give an arbitrary discretion to the benefit officer. There is one class of claimant who will not be notified by the benefit officer of the amount of taxable benefit. That class consists of the so-called quarterly attenders, who number 60,000 or 70,000 at any one time. These are people over the age of 50 who have been unemployed for two years or more and who are not obliged to go fortnightly to the benefit office. Instead, they go quarterly. They are paid through a DHSS order book, as are retirement pensioners, rather than being issued with individual fortnightly cheques.
      Liability to tax for those people, who are long-term unemployed, will arise considerably less often than among the normal unemployed population. Usually their normal income for the year will be benefit, which will be fully covered by their personal tax allowances, and there will be no tax liability. For such cases it would be wasteful to go through the normal notification procedure.
      In those infrequent cases where liability arises for those people—for example, when a claimant returns to work and therefore has benefit and earnings in the same year—liability will be agreed in the usual way between the person concerned and the Revenue. In those few cases, the normal tax appeal procedures, and not the clause 28 procedures, will apply if required. We would not want to go through all the clause 28 procedure for the quarterly attenders, and that is why "may" rather than "shall" appears in the Bill. However, there is not intended to be any arbitrary or capricious discretion on the part of a benefit officer in normal cases.
      Mr. Robert Sheldon: Will the right hon. Gentleman deal with the question of errors found by the Inland Revenue and made by those who are well trained and qualified in tax matters, and will he compare that with the errors that we should expect from benefit officers dealing with an unfamiliar area? Will the right hon. Gentleman also deal with the keeping of records and the lack of difficulty in adding to them so that the £50 can be of some help to those for whom it is a large sum?
      Mr. Lawson: Records are kept for, on average, a little more than 12 months. That gets round the problem that the right hon. Gentleman is concerned about, but it does not get round the problem to which I alluded.
      The right hon. Gentleman compared the errors likely to be made by benefit officers with the errors made from time to time by Inland Revenue officials who, he said, are more expert in these matters. They may be more expert, but they are also dealing with much more complex matters and the errors tend to occur in such matters. We are concerned with a relatively simple matter and there are ways in which errors can be put right. I suggested one to the hon. Member for Hammersmith, North (Mr. Soley).
      We certainly hope that if there are errors they will be put right. There is no perfection on this earth, but there is no reason to believe that there will be more errors in these

      1265
      cases. Indeed, because of their relative simplicity, I suspect that there will be fewer errors than there are in the complex world inhabited by the Inland Revenue.
      Mr. Sheldon: I quarrel with what the Financial Secretary said about the limited number of errors. We were talking about arithmetic and transcription errors in matters in which the Inland Revenue is knowledgeable and of which it has long experience. A substantial proportion of errors were made in those matters. Newer and less qualified staff will be dealing with the matters that we are discussing. The right hon. Gentleman has not dealt with the points that we made and we shall vote for the amendment.
      Question put, That the amendment be made:—
      The House divided: Ayes 195, Noes 276.

      Division No. 277]

      [9.55 pm

      AYES

      Abse, Leo

      Field, Frank

      Adams, Allen

      Fitch, Alan

      Alton, David

      Fletcher, Ted (Darlington)

      Anderson, Donald

      Forrester, John

      Archer, Rt Hon Peter

      Foster, Derek

      Ashley, Rt Hon Jack

      Foulkes, George

      Ashton, Joe

      Fraser, J. (Lamb'th, N'w'd)

      Beith, A. J.

      Freeson, Rt Hon Reginald

      Bennett, Andrew (St'kp't N)

      Garrett, John (Norwich S)

      Bidwell, Sydney

      George, Bruce

      Booth, Rt Hon Albert

      Gilbert, Rt Hon Dr John

      Boothroyd, Miss Betty

      Golding, John

      Bray, Dr Jeremy

      Grant, George (Morpeth)

      Brown, Hugh D. (Provan)

      Grant, John (Islington C)

      Brown, Ronald W. (H'ckn'y S)

      Hamilton, James (Bothwell)

      Callaghan, Rt Hon J.

      Hardy, Peter

      Callaghan, Jim (Midd't'n & P)

      Harrison, Rt Hon Walter

      Campbell, Ian

      Hart, Rt Hon Dame Judith

      Campbell-Savours, Dale

      Haynes, Frank

      Canavan, Dennis

      Heffer, Eric S.

      Cant, R. B.

      Hogg, N. (E Dunb't'nshire)

      Clark, Dr David (S Shields)

      Holland, S. (L'b'th, Vauxh'll)

      Cocks, Rt Hon M. (B'stol S)

      Home Robertson, John

      Cohen, Stanley

      Homewood, William

      Coleman, Donald

      Hooley, Frank

      Concannon, Rt Hon J. D.

      Horam, John

      Conlan, Bernard

      Howell, Rt Hon D.

      Cook, Robin F.

      Howells, Geraint

      Cowans, Harry

      Huckfield, Les

      Cox, T. (W'dsw'th, Toot'g)

      Hughes, Robert (Aberdeen N)

      Craigen, J. M.

      Hughes, Roy (Newport)

      Crowther, J. S.

      Janner, Hon Greville

      Cryer, Bob

      Jay, Rt Hon Douglas

      Cunningham, G. (Islington S)

      John, Brynmor

      Cunningham, Dr J. (W'h'n)

      Johnson, James (Hull West)

      Davies, Rt Hon Denzil (L'lli)

      Johnson, Walter (Derby S)

      Davies, Ifor (Gower)

      Jones, Rt Hon Alec (Rh'dda)

      Davis, Clinton (Hackney C)

      Jones, Barry (East Flint)

      Davis, T. (B'ham, Stechf'd)

      Jones, Dan (Burnley)

      Deakins, Eric

      Kaufman, Rt Hon Gerald

      Dempsey, James

      Kerr, Russell

      Dewar, Donald

      Lambie, David

      Dixon, Donald

      Leadbitter, Ted

      Dobson, Frank

      Lestor, Miss Joan

      Dormand, Jack

      Lewis, Arthur (N'ham NW)

      Douglas-Mann, Bruce

      Lewis, Ron (Carlisle)

      Dubs, Alfred

      Litherland, Robert

      Duffy, A. E. P.

      Lofthouse, Geoffrey

      Dunn, James A.

      McDonald, Dr Oonagh

      Dunwoody, Hon Mrs G.

      McElhone, Frank

      Eadie, Alex

      McKelvey, William

      Eastham, Ken

      McNally, Thomas

      Edwards, R. (W'hampt'n S E)

      McNamara, Kevin

      Ellis, R. (NE D'bysh're)

      McTaggart, Robert

      English, Michael

      McWilliam, John

      Ennals, Rt Hon David

      Magee, Bryan

      Evans, Ioan (Aberdare)

      Marshall, D (G'gow S'ton)

      Faulds, Andrew

      Marshall, Dr Edmund (Goole)

      1266

      Martin, M (G'gow S'burn)

      Silverman, Julius

      Mason, Rt Hon Roy

      Skinner, Dennis

      Maxton, John

      Smith, Rt Hon J. (N Lanark)

      Meacher, Michael

      Snape, Peter

      Millan, Rt Hon Bruce

      Soley, Clive

      Miller, Dr M. S. (E Kilbride)

      Spearing, Nigel

      Mitchell, Austin (Grimsby)

      Spriggs, Leslie

      Mitchell, R. C. (Soton Itchen)

      Stallard, A. W.

      Morris, Rt Hon A. (W'shawe)

      Steel, Rt Hon David

      Morris, Rt Hon C. (O'shaw)

      Stewart, Rt Hon D. (W Isles)

      Morris, Rt Hon J. (Aberavon)

      Stoddart, David

      Morton, George

      Taylor, Mrs Ann (Bolton W)

      Moyle, Rt Hon Roland

      Thomas, Jeffrey (Abertillery)

      Newens, Stanley

      Thomas, Dr R. (Carmarthen)

      Oakes, Rt Hon Gordon

      Tilley, John

      Ogden, Eric

      Tinn, James

      O'Halloran, Michael

      Torney, Tom

      O'Neill, Martin

      Urwin, Rt Hon Tom

      Orme, Rt Hon Stanley

      Varley, Rt Hon Eric G.

      Paisley, Rev Ian

      Wainwright, E. (Dearne V)

      Palmer, Arthur

      Wainwright, H. (Colne V)

      Parker, John

      Walker, Rt Hon H. (D'caster)

      Pavitt, Laurie

      Watkins, David

      Pendry, Tom

      Weetch, Ken

      Powell, Raymond (Ogmore)

      Welsh, Michael

      Price, C. (Lewisham W)

      White, Frank R.

      Rees, Rt Hon M (Leeds S)

      White, J. (G'gow Pollok)

      Richardson, Jo

      Whitlock, William

      Roberts, Albert (Normanton)

      Wigley, Dafydd

      Roberts, Gwilym (Cannock)

      Willey, Rt Hon Frederick

      Robertson, George

      Williams, Rt Hon A. (S'sea W)

      Robinson, G. (Coventry NW)

      Wilson, Gordon (Dundee E)

      Rooker, J. W.

      Wilson, William (C'try SE)

      Ross, Ernest (Dundee West)

      Winnick, David

      Ross, Stephen (Isle of Wight)

      Woodall, Alec

      Rowlands, Ted

      Woolmer, Kenneth

      Ryman, John

      Wright, Sheila

      Sandelson, Neville

      Young, David (Bolton E)

      Sever, John

      Sheldon, Rt Hon R.

      Tellers for the Ayes:

      Shore, Rt Hon Peter

      Mr. Joseph Dean and

      Short, Mrs Renée

      Mr. Allen McKay

      Silkin, Rt Hon J. (Deptford)

      NOES

      Adley, Robert

      Buck, Antony

      Aitken, Jonathan

      Bulmer, Esmond

      Alexander, Richard

      Butcher, John

      Alison, Michael

      Butler, Hon Adam

      Ancram, Michael

      Cadbury, Jocelyn

      Arnold, Tom

      Carlisle, John (Luton West)

      Aspinwall, Jack

      Carlisle, Kenneth (Lincoln)

      Atkins, Robert (Preston N)

      Carlisle, Rt Hon M. (R'c'n)

      Atkinson, David (B'm'th,E)

      Chalker, Mrs. Lynda

      Baker, Nicholas (N Dorset)

      Chapman, Sydney

      Banks, Robert

      Churchill, W. S.

      Beaumont-Dark, Anthony

      Clark, Hon A. (Plym'th, S'n)

      Bendall, Vivian

      Clark, Sir W. (Croydon S)

      Benyon, W. (Buckingham)

      Clarke, Kenneth (Rushcliffe)

      Best, Keith

      Clegg, Sir Walter

      Bevan, David Gilroy

      Cockeram, Eric

      Biffen, Rt Hon John

      Colvin, Michael

      Biggs-Davison, John

      Cope, John

      Blackburn, John

      Cormack, Patrick

      Blaker, Peter

      Corrie, John

      Body, Richard

      Cranborne, Viscount

      Boscawen, Hon Robert

      Critchley, Julian

      Bottomley, Peter (W'wich W)

      Crouch, David

      Bowden, Andrew

      Dean, Paul (North Somerset)

      Boyson, Dr Rhodes

      Dickens, Geoffrey

      Braine, Sir Bernard

      Douglas-Hamilton, Lord J.

      Bright, Graham

      du Cann, Rt Hon Edward

      Brinton, Tim

      Dunn, Robert (Dartford)

      Brittan, Leon

      Durant, Tony

      Brooke, Hon Peter

      Dykes, Hugh

      Brotherton, Michael

      Eden, Rt Hon Sir John

      Brown, Michael (Brigg & Sc'n)

      Edwards, Rt Hon N. (P'broke)

      Browne, John (Winchester)

      Eggar, Tim

      Bruce-Gardyne, John

      Emery, Peter

      Buchanan-Smith, Alick

      Eyre, Reginald

      1267

      Fairbairn, Nicholas

      McNair-Wilson, M. (N'bury)

      Fairgrieve, Russell

      McNair-Wilson, P. (New F'st)

      Faith, Mrs Sheila

      McQuarrie, Albert

      Farr, John

      Major, John

      Fell, Anthony

      Marland, Paul

      Fenner, Mrs Peggy

      Marlow, Tony

      Fisher, Sir Nigel

      Marshall, Michael (Arundel)

      Fletcher, A. (Ed'nb'gh N)

      Marten, Neil (Banbury)

      Fletcher-Cooke, Sir Charles

      Mates, Michael

      Fookes, Miss Janet

      Maude, Rt Hon Sir Angus

      Forman, Nigel

      Mawby, Ray

      Fowler, Rt Hon Norman

      Mawhinney, Dr Brian

      Fox, Marcus

      Maxwell-Hyslop, Robin

      Fraser, Peter (South Angus)

      Mayhew, Patrick

      Gardiner, George (Reigate)

      Mellor, David

      Gardner, Edward (S Fylde)

      Miller, Hal (B'grove)

      Garel-Jones, Tristan

      Mills, Iain (Meriden)

      Glyn, Dr Alan

      Mills, Peter (West Devon)

      Goodhew, Victor

      Miscampbell, Norman

      Goodlad, Alastair

      Mitchell, David (Basingstoke)

      Gorst, John

      Moate, Roger

      Gow, Ian

      Molyneaux, James

      Gower, Sir Raymond

      Monro, Hector

      Grant, Anthony (Harrow C)

      Moore, John

      Gray, Hamish

      Morgan, Geraint

      Greenway, Harry

      Morris, M. (N'hampton S)

      Grieve, Percy

      Morrison, Hon P. (Chester)

      Griffiths, E. (B'y St. Edm'ds)

      Mudd, David

      Griffiths, Peter Portsm'th N)

      Murphy, Christopher

      Grist, Ian

      Myles, David

      Grylls, Michael

      Neale, Gerrard

      Gummer, John Selwyn

      Needham, Richard

      Hamilton, Hon A.

      Neubert, Michael

      Hamilton, Michael (Salisbury)

      Normanton, Tom

      Hampson, Dr Keith

      Nott, Rt Hon John

      Hannam, John

      Onslow, Cranley

      Haselhurst, Alan

      Oppenheim, Rt Hon Mrs S.

      Hastings, Stephen

      Osborn, John

      Havers, Rt Hon Sir Michael

      Page, John (Harrow, West)

      Hawksley, Warren

      Page, Rt Hon Sir G. (Crosby)

      Hayhoe, Barney

      Page, Richard (SW Herts)

      Heddle, John

      Parris, Matthew

      Henderson, Barry

      Patten, Christopher (Bath)

      Heseltine, Rt Hon Michael

      Pattie, Geoffrey

      Hicks, Robert

      Pawsey, James

      Higgins, Rt Hon Terence L.

      Percival, Sir Ian

      Hogg, Hon Douglas (Gr'th'm)

      Peyton, Rt Hon John

      Holland, Philip (Carlton)

      Pollock, Alexander

      Hooson, Tom

      Powell, Rt Hon J.E. (S Down)

      Howell, Ralph (N Norfolk)

      Prentice, Rt Hon Reg

      Hunt, David (Wirral)

      Price, Sir David (Eastleigh)

      Hunt, John (Ravensbourne)

      Prior, Rt Hon James

      Irving, Charles (Cheltenham)

      Proctor, K. Harvey

      Jenkin, Rt Hon Patrick

      Pym, Rt Hon Francis

      Jessel, Toby

      Raison, Timothy

      Johnson Smith, Geoffrey

      Rathbone, Tim

      Jopling, Rt Hon Michael

      Rees, Peter (Dover and Deal)

      Joseph, Rt Hon Sir Keith

      Renton, Tim

      Kaberry, Sir Donald

      Rhodes James, Robert

      Kellett-Bowman, Mrs Elaine

      Rhys Williams, Sir Brandon

      King, Rt Hon Tom

      Ridley, Hon Nicholas

      Knight, Mrs Jill

      Ridsdale, Sir Julian

      Knox, David

      Rifkind, Malcolm

      Lamont, Norman

      Roberts, M. (Cardiff NW)

      Lang, Ian

      Roberts, Wyn (Conway)

      Langford-Holt, Sir John

      Rossi, Hugh

      Latham, Michael

      Rost, Peter

      Lawrence, Ivan

      Royle, Sir Anthony

      Lawson, Rt Hon Nigel

      Sainsbury, Hon Timothy

      Lennox-Boyd, Hon Mark

      St. John-Stevas, Rt Hon N.

      Lester, Jim (Beeston)

      Shaw, Giles (Pudsey)

      Lewis, Kenneth (Rutland)

      Shelton, William (Streatham)

      Lloyd, Ian (Havant & W'loo)

      Shepherd, Colin (Hereford)

      Lloyd, Peter (Fareham)

      Shepherd, Richard

      Loveridge, John

      Silvester, Fred

      Luce, Richard

      Skeet, T. H. H.

      Lyell, Nicholas

      Speed, Keith

      Macfarlane, Neil

      Speller, Tony

      MacKay, John (Argyll)

      Spence, John

      Macmillan, Rt Hon M.

      Spicer, Jim (West Dorset)

      1268

      Spicer, Michael (S Worcs)

      Vaughan, Dr Gerard

      Sproat, Iain

      Viggers, Peter

      Squire, Robin

      Wakeham,John

      Stainton, Keith

      Waldegrave, Hon William

      Stanbrook, Ivor

      Walker, B. (Perth)

      Stanley, John

      Wall, Patrick

      Stevens, Martin

      Walters, Dennis

      Stewart, Ian (Hitchin)

      Ward, John

      Stewart, A. (E Renfrewshire)

      Warren, Kenneth

      Stokes, John

      Watson, John

      Stradling Thomas, J.

      Wells, John (Maidstone)

      Tapsell, Peter

      Wells, Bowen

      Taylor, Teddy (S'end E)

      Whitelaw, Rt Hon William

      Tebbit, Norman

      Whitney, Raymond

      Temple-Morris, Peter

      Wickenden, Keith

      Thatcher, Rt Hon Mrs M.

      Williams, D. (Montgomery)

      Thomas, Rt Hon Peter

      Winterton, Nicholas

      Thompson, Donald

      Wolfson, Mark

      Thorne, Neil (Ilford South)

      Young, Sir George (Acton)

      Thornton, Malcolm

      Younger, Rt Hon George

      Townend, John (Bridlington)

      Townsend, Cyril D, (B'heath)

      Tellers for the Noes:

      Trippier, David

      Mr. Anthony Berry and

      Trotter, Neville

      Mr. Carol Mather.

      van Straubenzee, W. R.

      Question accordingly negatived.
      It being after Ten o'clock, further consideration of the Bill stood adjourned.

    BUSINESS OF THE HOUSE
    Ordered,
    That, at this day's sitting, consideration of Lords Amendments to the Iron and Steel Bill and consideration of Lords Amendments to the Criminal Attempts Bill may be proceeded with, though opposed, until any hour.—[Mr. Thompson.]

  Finance Bill
  Bill, as amended (in the Committee and in the Standing Committee), again considered.
  Mr. Lawson: I beg to move amendment No. 33, in page 18, line 1, leave out 'thirty' and insert 'sixty'.
  As I said in Committee, the Opposition put forward two amendments, which the Government accepted, to change from 30 days to 60 days the period after the issue of the notification during which the claimant could object to it. Those amendments altered the period mentioned in subsections (1) and (5) of the clause. The resiling provision in subsection (4) was not mentioned in Committee. This, like the others, was modelled on a similar provision in section 54(2) of the Taxes Management Act 1970, which specifies a period of 30 days. However, in the light of the concessions that I made in Committee we felt that as a matter of fairness and consistency it would be as well for both the periods mentioned in the clause to be changed to 60 days. The amendment achieves that.
  Mr. Robert Sheldon: As the right hon. Gentleman said, the original legislation allowed only 30 days for consideration of the tax assessment, within which period an objection had to be made, otherwise there was no question of appeal. We found those matters quite objectionable, but we tabled an amendment to extend the period within which objections might be made from 30 days to 60 days. We are pleased that the right hon. Gentleman has seen fit to table this amendment, which we welcome.
  Amendment agreed to.

  Finance Bill
    Clause 29

      PAY AS YOU EARN REPAYMENTS
      The Minister of State, Treasury (Mr. Peter Rees): I beg to move amendment No. 36, in page 18 line 34, leave out 'or' and insert:
      'in respect of a period including that time; or
      (aa) he has claimed'.
      Mr. Deputy Speaker: With this we may take the following amendments:
      No. 38, in page 18, line 37, after '1977', insert:
      'which is taxable by virute of section 27 above'.
      Government amendment No. 39,
      No. 40, in page 18, line 39, leave out:
      'he is disqualified at the time'
      and insert:
      'he has been disqualified for a period of not less than four weeks'.
      Mr. Rees: Amendment No. 36, taken with amendment No. 39, restricts the power to withhold tax refunds, so that the order-making power will apply only in the case of claimants whose benefit is taxable. It meets precisely the purpose of amendment No. 38, which stands in the names of the right hon. Member for Stepney and Poplar (Mr. Shore) and the hon. Member for Edinburgh, Central (Mr. Cook). The matter was ventilated in Committee, and I hope that the hon. Gentleman will feel that ample justice has been done. He knows the ways of parliamentary draftsmen. For some obscure reason, the amendment that I moved is slightly superior—purely on technical grounds—to his amendment. I hope that the basic principle is the same.
      Mr. Cook: I do not know whether it is appropriate for me to welcome the Minister of State to our deliberations today, because I am tempted to complain that it is unfair of the Treasury Bench to throw fresh troops at us after we have been battling all the afternoon. However, we are grateful to him for moving the amendment, and we welcome it.
      The amendments meet the purpose of an amendment that we moved in Committee. Without the amendments, the effect of the clause as drafted would be to provide for the withholding of refunds for any person who claimed supplementary benefit, for whatever reason, when he was entitled to a refund. The clause would therefore bite on pensioners claiming supplementary pensions, on sick people claiming supplementary benefit, and on single-parent families claiming supplementary benefit. Plainly, the intention was not to catch these people, because they could not conceivably have a supplementary benefit that was taxable under the Bill. I entirely accept that the Treasury never intended it to have that effect. I therefore welcome the fact that the Treasury has accepted our observation and put it into less defective language than that of our amendment.
      I am tempted to take up the point made earlier by the hon. Member for Gateshead, West (Mr. Horam), and say that this may illustrate the lack of joint study and joint consultation between the DHSS and the Treasury on the interaction between the tax regime of our State and the social security system. This is a case where a Bill, put forward in all good faith—I do not challenge the intention of the Bill—had the effect of going much wider than the Treasury draftsmen had envisaged. That might demonstrate what the hon. Member for Gateshead, West said
      1270
      about there being a strong case for more consultation and a joint study between the Treasury and the DHSS to ensure that the growing complexity and interaction of the social security system and tax regime are catered for adequately.
      Amendment No. 38 is redundant. We tried to move a similar amendment in Committee and we tabled amendment No. 38 in case the commitment had slipped Ministers' minds. We are delighted that it has not. We accept that amendment No. 38 is defective.
      Amendment No. 40 is on a slightly different tack. It attempts to achieve the same purpose. Amendments Nos. 36, 38 and 39 relate to the unemployed person. Amendment No. 40 relates to the person on strike. As the clause stands, there is no provision to limit the right to withhold the tax refund from strikers who have made a claim for benefit. The right to withhold refund will be applied to all strikers, whether or not they have claimed benefit.
      Our view is that that provision is unreasonably wide. Only a small proportion of workers on strike claim benefit. For instance, a single man cannot claim any benefit when on strike, because a striker is entitled to benefit only in respect of a wife or other dependant. A man who does not have a wife or dependant does not qualify for benefit. However, tax refunds to which that person might be entitled will be withheld on the basis that when he returns to work a calculation will be made between the taxable benefit and the refund. In the case that I have described such a calculation cannot apply. There is no taxable benefit and therefore there is no reason for withholding the refund.
      In Committee we moved an amendment which was intended to deal with that position. The amendment was rejected. Instead of tabling that amendment again we have tabled a different amendment to provide that the right to withhold benefit from all strikers will run only from the fifth week of the strike. We may have approached the problem at a tangent, but we chose the method because of one of the arguments by the Chief Secretary when responding to the debate in Committee.
      In support of our amendment I referred to the small proportion of strikers who claim benefit. I said that in the last year only 7 per cent. of strikers claimed benefit and that in none of the preceding five years had more than 5 per cent. of strikers claimed benefit. The implication that I drew was that as a result of the clause 100 per cent. of strikers would have refunds withheld, although only 5 per cent. had any benefit that could be taxable under the terms of the clause. It is unreasonable that 100 per cent. of strikers should have their refunds withheld to facilitate the taxation of the 5 per cent. who claim benefit.
      To rebut my argument the Minister said that I was working out the percentage from all those on strike and thereby biasing my sample. He said that I should have looked at those involved in long strikes, although they are not defined. The Chief Secretary argued that those on long strikes had a higher uptake of benefits. He put the figure at one-third—still a minority, but a substantial minority.
      If the purpose of the regime ushered in in the clauses is to tax those who claim benefit because they are involved in longer strikes, let us incorporate in the Bill a provision that will limit the mechanism to those involved in longer strikes. That is why we proposed the amendment. It would allow those involved in a short strike to claim their first tax refund, which would normally be paid at the end of

      1271
      four weeks. It would catch those involved in a longer strike, who would be unable to obtain any tax refund beyond the first four weeks.
      10.15 pm
      I apprehend that that proposal might commend itself to the Treasury Minister because, as well as having the effect of allowing those on short strikes to claim their first refund, which would be of benefit to them, it would also be of benefit to the Treasury, because it would exclude from the operation of the mechanism the administrative burden of stopping refunds and calculating benefits for those on strike for a short time, and the revenue to be gained from taxing their benefits must be modest. It would also ensure that at least in those cases where refunds were withheld there was a sporting chance—one in three—that the person having his refund withheld was claiming benefit that was taxable under the Act.
      As the legislation stands, in all those cases where refund is withheld only in one in 20 will there be a benefit that is taxable. I cannot believe that that is what the Treasury meant to happen. I understand the Minister's difficulty. I hope that he will see his way to accept the amendment, which seeks to provide for the striker a similar protection to that which we have already accepted for the unemployed. If it is not possible for him to accept the amendment, I hope that he will bend his mind to the difficulty and tell the House that it is not the Treasury's intention that we should end up with a position in which a large number of people who are not claiming benefit—who are not eligible to claim benefit—are simultaneously having their refunds withheld to facilitate the taxation of the few strikers who do claim benefit.
      Mr. Peter Rees: I wish to respond to the persuasive case advanced by the hon. Gentleman in support of amendment No. 40. The difficulty is that it would have the consequence of excluding about 85 per cent. or more of all strikers. That may be the hon. Gentleman's intention. I do not entirely follow his argument that that would reduce the administrative burden, because by not paying tax refunds there would be an automatic alleviation of the administrative burden.
      I find it difficult to meet the hon. Gentleman's argument head on because the Government propose to withhold refunds from all strikers not because some of them are benefit claimants but because the large majority of the unemployed are claimants and will have their refunds withheld. That point is not affected by the question whether only 5 per cent. of strikers in a particular strike are claimants, or whether, in a longer strike, 25 or 30 per cent. are claimants. The Government's intention is to achieve a broad, practical equivalence of position between strikers and unemployed. Refunds, therefore, are to be deferred from strikers as a whole, and from the beginning of the strike.
      I listened carefully to the hon. Gentleman. It may be that a certain confusion crept into our debates in Committee. I hope that the hon. Gentleman was not misled into thinking that the Government were advancing these provisions on some basis that I could no longer support. Right from the beginning this was the Government's position on that point.
      Mr. Cook: The Minister made a point that was also made by the Chief Secretary when we debated the matter
      1272
      in Committee of the whole House. I wish to draw his attention to the point that I put then to the Chief Secretary. If the argument is that it is necessary to achieve equity and balance between the unemployed and the strikers, I invite the Minister to refer to paragraph (a) of the clause, which makes it perfectly plain that refunds can be withheld only when the unemployed person has made a claim for benefit. In other words, the right to withhold refund does not apply where the person has become unemployed and there is no benefit which is taxable within the terms of the Bill.
      However, if the hon. and learned Gentleman refers to paragraph (b), which deals with the striker, he will see that the right to withhold refund applies to all strikers even though in the majority of cases there will not be any benefit that is taxable. Far from it being the purpose of the Treasury to achieve broad equivalence between the unemployed and the striker, it is the Opposition who are seeking to achieve that parallel by providing that the striker shall have his refund withheld only if there is at least a reasonable probability of a benefit being claimed, whereas only the unemployed who claim benefit will have their refund withheld. I accept that that is the appropriate approach.
      Mr. Rees: I follow the theme of the hon. Gentleman's intervention. It was thought to be a pointless exercise that the unemployed should claim a tax refund when they became unemployed, whereas at the same time they were claiming unemployment benefit that was taxable but that would be taxed at the year end. That was an absurd position. It was thought to be equally absurd that strikers should be able to claim their tax refunds immediately and, to the outward eye at least, be in a more favoured position than the unemployed. I understand the Opposition's reservations about the whole system of taxing benefits. I understand the broad division of principle. As for the equivalence between strikers and the unemployed, I had hoped that there was a certain identity of view between the two sides of the Committee and the two sides of the House.
      Mr. Cook: I ask for the leave of the House, Mr. Deputy Speaker. The hon. and learned Gentleman referred to the Opposition's reservations about the regime and mechanism of taxation that is being created in the part of the Bill that we are discussing. I shall not be tempted into giving him my observations. If he has any doubt about them, I am sure that the Financial Secretary, who has recently heard them, will be happy to refresh the hon. and learned Gentleman's mind.
      Leaving aside general prejudices, we find it unsatisfactory that we have ended up with a mechanism that, in providing primarily for the taxation of the 5 per cent. who will claim a taxable benefit, will stop the refund to all strikers. I cannot accept that there is broad equivalence between the striker and the unemployed. An unemployed person's right to withhold his refund is dependent on a claim for benefit. The striker's right to withhold his refund is not dependent on a claim for benefit. In the great bulk of cases the mechanism will be applied where there is no claim for benefit. In many instances, no claim for benefit will be possible.
      I appreciate that the amendment is a roundabout way of meeting our argument. The Minister said that we would let out of the right to withhold refund 85 per cent. of all strikers. I am prepared to accept that figure. We would hope for a high degree of correlation between that 85 per

      1273
      cent. and the 95 per cent. who make no claim for benefit. I appreciate that the amendment is not a direct way of addressing ourselves to the problem. We do not propose to press the amendment to a Division. However, I think that it was right to record our own dissatisfaction with a mechanism that when applied will mean that those who are not claiming a taxable benefit will have withheld from them tax refunds to which they are otherwise entitled. We shall not press amendment No. 40.
      Amendment agreed to
      Amendment made: No. 39, in page 18, line 38, after 'time', insert:
      'and his right to the allowance is subject to the condition mentioned in section 5 of the said Act of 1976 or Article 7 of the said Order (registration and availability for employment' .—[Mr. Peter Rees.]

    Clause 30

      SICK PAY
      Mr. Lawson: I beg to move amendment No. 42, in page 19, line 14, leave out 'either by his employer or'.
      Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments:
      No. 43, in page 19, line 20, at end insert—
      'and the amour t of the said sums liable to charge under this section shall be such proportion of them as is not attributable to any contribution towards the cost of their provision made by the person above referred to.'.
      Government amendments No. 44 and 45
      No. 46, in page 19, line 31, leave out '1982–83' and insert '1983–84'.
      Mr. Lawson: This clause, which concerns the taxation of sick pay paid through insurance schemes, is one which, in principle, was agreed as being right and equitable on both sides of the Committee when we discussed it. However, certain difficulties were pointed out, in particular by my hon. Friend the Member for Croydon, South (Sir W. Clark). I undertook to bring forward on Report amendments to deal with those difficulties.
      Amendment No. 42 is a straightforward amendment that takes out some words that we believe are no longer necessary. The more substantial amendments are Nos. 44 and 45. Amendment No. 44 deals with the point that was rightly raised about jointly funded schemes, in which the employer and employee contribute to the sick pay benefit that is being provided. In those cases it is desirable that only that proportion of the benefit financed by the employer which is a benefit to the employee should be taxed. The employee should not be taxed on the benefit that he is providing himself. Amendment No. 44 meets that point in the most sensible and appropriate way.
      Amendment No. 45 meets perhaps a more difficult point, which was raised in Committee. Although the Bill provides that those benefits should come into the tax net only in 1982, it was represented to me—I had meetings with the companies that were particularly affected—that many companies that had those schemes would have to go through a complicated process of renegotiation with the trade unions. It would have been difficult to sort out everything in time for 1982. Therefore, in Committee I undertook that the schemes and arrangements that already exist would not be brought into the tax net until 1983, but the 1982 date would apply otherwise. That is the sense and meaning of amendment No. 45, which meets that point. I commend it to the House.
      Sir William Clark: I am grateful to my right hon. Friend for accepting the amendments. As he rightly said, the two amendments that are in my name are covered by Government amendments.
      It is right that if an employee pays for sickness insurance out of taxed income, whatever he gets for the proportion of the insurance should not be taxed, because that would be double taxation. I believe that the House agreed with my right hon. Friend when he acknowledged the fact that sickness benefit should eventually be brought into the tax bracket. With the State scheme coming in in 1983–84, since the Bill provided that the sickness benefit under insurance scheme would come in in 1982–83 it would have meant two separate negotiations for employers. I am delighted that the Government have accepted the spirit of my amendment. Consequently, I should like to thank my right hon. Friend and his colleagues. I trust that we shall receive the same sort of co-operation from the Government in future amendments.
      Mr. Cook: The Financial Secretary said that this was not a clause in which there was any division in principle between the two Front Benches. The Government were right to act to deal with the situation in which an increasing number of schemes were being formed to take advantage of a tax advantage. Therefore, there is no dispute between us over the principle of the clause.
      We warmly welcome amendments Nos. 44 and 45, which improve the form of the clause. Amendment No. 44 will be of benefit to the schemes where there is part contribution by employee and employer—in particular the forward benefit scheme, which is perhaps the largest, in which the costs are shared almost equally between the two parties to the agreement and in which it would be wrong that the tax would be levied on the whole of the benefit paid out under that agreement. That position will be very much improved by amendment No. 44.
      10.30 pm
      I particularly welcome amendment No. 45, which will provide added time for negotiation and rearrangement to those affected by existing schemes who have perhaps unfortunately been caught. A number of the schemes were set up many years ago, and there is no suggestion that they were created to take advantage of the tax advantage conferred. However, those involved may be caught in the net because others, on their backs, sought to take advantage of the position. In many cases there can be no suggestion that a tax device was arranged, and it is right that those people should have an additional year to negotiate new arrangements, particularly if the House, in its wisdom, decides to give the Treasury powers to tax sickness benefit and particularly as there will be a further set of negotiations for the subsequent year starting in April 1983.
      For those reasons, I warmly welcome the amendments, which will improve the clause.
      Amendment agreed to.
      Amendments made: No. 44, in page 19, line 20, at end insert—
      '(1A) Where the funds fox making payments under any arrangements are attributable partly to contributions made by the employer and partly to contributions made by the persons employed by him subsection (1) above shall apply only to such part of the sums paid as a result of the arrangements as it is just and reasonable to regard as attributable to the employer's contributions.'.

      1275
      No. 45, in page 19, line 31, leave out subsection (4) and insert—
      '(4) This section has effect—

      (a) in the case of sums not falling within paragraph (b) below, for the year 1982–83 and subsequent years of assessment;

      (b) in the case of sums paid as a result of arrangements in force on 4th June 1981, for the year 1983–84 and subsequent years of assessment.'.—[Mr. Lawson.]

    Clause 31

      PAYMENTS FOR LOSS OF EMPLOYMENT ETC.
      Sir William Clark: I beg to move amendment No. 47, in page 20, line 26, at end insert
      '(9)(a) Where a payment is made to an employee which, on the application of the person making or receiving the payment or both of them, is determined by the Commissioners of Inland Revenue to be a payment made upon a redundancy but not one which falls within section 412 of the Income and Corporation Taxes Act 1970 the payment shall not be chargeable to income tax under Schedule E except under the provisions of section 187 of the said Income and Corporation Taxes Act.
      (b) In determining under paragraph (a) above whether or not a payment is a payment upon a redundancy the Commissioners shall have regard to all the circumstances surrounding the making of the payment.
      (c) A person who has made an application under paragraph (a) above and who is dissatisfied with the decision of the Commissioners may appeal to the General or Special Commissioners to determine whether or not the payment in question is a payment upon a redundancy.'.
      It is not necessary for me to rehearse the arguments made in Committee. The amendment concerns redundancy payments. It would take out of the extrastatutory concession list the discretion given to the Revenue to deal with the payments under the income tax legislation. I am sure that I carry the whole House with me in this. One thing that I do not like about extrastatutory concessions is that there is no right of appeal, and that omission should be remedied, which is the objective of the amendment.
      My hon. and learned Friend the Minister of State may not accept my amendment, but I hope that he will say that, if cases are put to him in the next year, he will consider them sympathetically.
      Mr. Peter Rees: I share my hon. Friend's reservations about the undesirability of proceeding too far and too often by extrastatutory concessions. Indeed, in Committee my right hon. and learned Friend the Chief Secretary said that he would endeavour to see whether the statement of practice put out by the Inland Revenue on 10 March on non-statutory redundancy payments could be translated into law. It can be done, but we felt, on consideration, that it would deprive the Revenue of a certain measure of flexibility, which, on the whole, would be exercised in favour of the taxpayer.
      However, I recognise the force of my hon. Friend's constitutional objections, but I hope that he will allow the matter to rest on the basis of the statement of practice for the time being. I am happy to give him and the House the assurance that, should hard evidence be brought to our attention that the Revenue is exercising its discretion in a way which does not do full justice to the needs of individual taxpayers, we shall be happy to come back on another occasion with a statutory provision that the House can consider in detail.
      1276
      I hope that on that basis my hon. Friend will feel able to withdraw his amendment.
      Sir William Clark: In view of my hon. and learned Friend's explanation and assurance, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.

  Schedule 9

    STOCK RELIEF
    Sir William Clark: I beg to move amendment No. 49, in page 148, line 38, leave out from 'is' to the end of line 40 and insert:
    'negligible in comparison with their scale for previous periods of account beginning not more than six years before the first mentioned period and continues to be so negligible during subsequent periods of account beginning not more than six years after the first mentioned period.'.
    Mr. Deputy Speaker (Mr. Bryant Godman Irvine): With this it will be convenient to take Government amendment No. 50.
    No. 51, in page 155, line 2, leave out from 'is' to end of line 4 and insert
    'negligible in comparison with their scale for previous periods of account beginning not more than six years before the first mentioned period and continues to be so negligible during subsequent periods of account beginning not more than six years after the first mentioned period.'.
    Government amendment No. 52.
    Sir William Clark: I am sorry to bore the House with another amendment. This is a small point in relation to stock relief. In fact, my amendment No. 49 is covered by Government amendment No. 50 and my amendment No. 51 is covered by Government amendment No. 52. As the Government have agreed with both the points that I sought to cover, there is no need for me to say more.
    Mr. Lawson: As my hon. Friend has said, the valid points that he raised have been met in Government amendments Nos. 50 and 52. If he wishes to ask any questions, I shall, with the leave of the House, be happy to do my best to answer them. If he is satisfied, however, he may care to withdraw his amendment and yield to the Government amendments.
    Sir William Clark: As the Government and I seem to be in unison on both matters, there is no point in my asking questions. Knowing that the Government amendments cover both points, I shall be delighted to seek leave to withdraw my amendment.
    Mr. Lawson: There is one question which I thought that my hon. Friend might ask me. As he has not asked it, with the leave of the House, I shall answer it anyway.
    As I indicated earlier, the Revenue will issue a statement of practice as to how it proposes to interpret these provisions. Broadly, it will adopt the approach that a recovery charge will not normally arise unless turnover has fallen to 2½ per cent. or less of its level during the period of account in which it was at its highest during the previous six years. Reductions in turnover due to temporary factors will be ignored. I hope that the statement of practice, which will be issued very soon, in conjunction with the Government amendments will remove any remaining fears about the threat of clawback for the normal continuing business.
    Sir William Clark: I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Amendments made: No. 50, in page 148, line 38, leave out 'small' arid insert 'negligible'.
    No. 52, in page 155, line 2, leave out 'small' and insert 'negligible'.—[Mr. Lawson.]
    Mr. Lawson: I beg to move amendment No. 53, in page 159, line 3, leave out 'referred to in' and insert:
    'of his trading stock at the end of that period, as reduced in accordance with'.
    Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 54, 55 and 58.
    Mr. Lawson: The purposes of these amendments is to increase the amount of relief for new businesses in the first year of trading, while at the same time simplifying the calculation of relief for the same period.
    Under the old scheme, relief was based on the difference between the opening and closing stocks of the year, that is to say, ignoring the profit restriction. The Act provides that in the case of new business the figure for opening stocks is deemed to be such value as is reasonable and just in the circumstances, and the legislation contains some guidance as to how that value is to be arrived at. In practice, it proved to be a rather contentious area and there were a number of requests for the provisions to be made more precise.
    In framing the rules for the new scheme, therefore, we decided to try to meet that point. The Bill provides that relief is to be based, broadly speaking, on the average value of the business's trading stock over the first year. On reflection, although the point was not made when we discussed the matter in the Standing Committee, we feel that we can go further and at the same time increase the amount of relief to help a new business to become established.
    In many cases there will be no figure for monthly stock levels and so we have decided that, exceptionally in these cases, the relief for the first year will be based on the value of closing stocks at the end of the year discounted by the increase in the all stocks index over that period. Perhaps that is sufficient. My hon. Friend the Member for Fife, East (Mr. Henderson) appears to be a little bemused by this. However, an Inland Revenue press notice on this subject was issued last week. As a result of a busy July, my hon. Friend will not have had time to look at it. However, those who have a deep interest in such matters will have read the press release. I notice that the hon. Member for Colne Valley (Mr. Wainwright) is nodding his head. Clearly he has read it.
    Therefore, I hope that the House is satisfied that the amendments represent modest but important improvements in the stock relief scheme as regards new businesses. They conform with the spirit of the Bill, which is designed to help new businesses in many ways.
    Mr. Richard Wainwright: I am sure that all hon. Members will agree that Inland Revenue press notices are no substitute for advocacy from the Treasury Bench. It will be a poor day if, in an atmosphere of levity, we reach the pitch when hon. Members are referred to an Inland Revenue press notice. I have not read it. I am the Liberal spokesman on the economy, for what that is worth, but I do not wish to overemphasise that. I have tried in vain to get a regular supply of those press notices. Even if a
    1278
    Minister has been eclipsed by a large photograph in The Times Business Supplement showing one of his Treasury colleagues standing against the background of the door of No. 11 Downing Street, I do not expect to be asked to swallow Inland Revenue press notices. I have not read the Inland Revenue press notice, and I am damned if I see why I should.
    Whatever the easy appetite of other hon. Members, Liberal Members cannot swallow amendment No. 54.
    Mr. David Crouch: Where are they?
    Mr. Wainwright: Liberal Members will come into the Chamber in time. We are as well drilled in our voluntary way as any of the parties that are under the lash of the Whip. Further evidence of that will arrive with every moment that passes. My hon. Friend the Member for Liverpool, Edge Hill (Mr. Alton) is not the Chief Whip. He will arrive later.
    We are not prepared to swallow amendment No. 54 and we intend to divide the House unless the Financial Secretary sees sense in his reply. The amendment refers to the "all stocks index". A few lines further on there is reference to "that index". That is the term that I should apply to it. I shall rely not on my rather out-of-date judgment as a former practising accountant but on the up-to-date information of the Consultative Committee of Accountancy Bodies. That committee consists of the Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants of Scotland—I promised that Liberal Members would appear at the right moment, and I am glad to see my right hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel)—the Institute of Chartered Accountants in Ireland—[Interruption]—and the Association of Certified Accountants—[Interruption.]. I hope that no hon. Member will suggest that this levity has been induced by my remarks.
    The committee also consists of the Institute of Cost and Management Accountants and the Chartered Institute of Public Finance and Accountancy. Those separate financial bodies—all of whose examinations are known to be rigorous and which require experience before membership is granted—united in the Consultative Committee of Accountancy Bodies, wrote to me on 13 July. I quote one sentence but I am happy to make the letter available to anyone who wants further particulars. It states:
    "The Consultative Committee of Accountancy Bodies believes that the application of a general stock index is fundamentally wrong."
    This is why we oppose the amendment.
    10.45 pm
    There is available a more scientific, fair and equitable alternative, which is that instead of the all stocks index, which, in certain cases, will lose revenue for the Government, there should be applied the stocks index for that trade. If a highly diversified company or group of companies is occupied in a variety of trades, each of its separate subsidiaries, divisions or sections must apply the index for that trade. Those are available from the Department of Industry and there is no obstacle to their regular appearance.
    As I argued in Committee, the effect of applying the all stocks index is that in a number of trades, such as the hoot and shoe trade, the Government will lose revenue. A Government who go to the length of taxing widows' pensions and single women's pensions, the pensions of

    1279
    people who have no other income corning in to their pockets, are deliberately losing revenue from companies by insisting on an all stocks index that would enable companies in some trades to deflate their profits far more than is necessary. Such professional bodies are performing a strictly professional duty—not one that will be popular with some of their members—pointing out that an unscientific alliance on an all stocks index, which I suggest is purely for ease of administration, in aid of this absurd business of playing the numbers game in the Civil Service and taking a sadistic delight in reducing the number of tax inspectors, will lose revenue for the Government, who go to the most appalling lengths to try to scrape up money from widows and single retired people.
    There is a sensible alternative, namely, that the appropriate stocks index of inflation in each trade should be applied. I was glad that in Committee I had the support of the hon. Member for Edinburgh, Central (Mr. Cook)—who, as we all know applies himself meticulously to these matters—and the hon. Member for Gosport (Mr. Viggers).
    I quoted one compelling sentence from the observations of the Consultative Committee of Accountancy Bodies, but I hope that I shall not bore the House intolerably if I expand a little on that damning sentence. In its submission to the Government the committee suggested that in terms of current cost accounting, which has now been adopted by the profession, it did not agree that any one prescribed method of calculating the effect of price changes on the current replacement cost of stock could be capable of universal application. That is the principle at which it has arrived after, admittedly, too many years of professional deliberation. I wish that it had got on with it more quickly, but it cannot be accused of rushing the matter.
    The various accountancy bodies have taken an enormous amount of care, trouble and time in arriving at the view that there is no single index that can be capable of universal application. The submission to the Government goes on to show how the application of a single index would be very appropriate in the case of many businesses. The conclusion is arrived at after arguing the case, and the Government have had seven months in which to consider it. The submission states:
    "We are, however, in no doubt that the application of a general stock index is fundamentally wrong".
    Can it be proper that the House should pass an amendment that contains the use of an all stocks index that all the leading accountancy bodies, without exception, told the Government seven months ago was fundamentally wrong?
    I hope that this will not be regarded as some arcane technical matter, that hon. Members not versed in accountancy cannot be expected to follow, because that is not so. The all stocks index—I say this to those hon. Members who may be tempted to opt out because they did not serve articles in an accountant's office, which shows how very wise they were in their choice of a career—is based on a basket of goods.
    The all stocks index is meant for the convenience of shoppers and housewives. The basket of goods is a very appropriate concept for a housewife wanting to measure the effect of inflation or to claim an increased pension because her shopping bill week by week has increased as a result of inflation.
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    That is a splendid concept for the consumer, but of what use is a basket of goods to people whose sole occupation is making clogs in Hebden Bridge, universal joints in Coventry, or aeroplane parts in Weybridge? They do not trade in a basket of goods. They do not instruct their purchasing officers to go out into the commercial world and come back with a basket of goods. Each of them in his own specialist way buys in specialist supplies for the making of specialist goods, be they clogs, universal joints for vehicles, parts for aircraft, or any other specialist product that any hon. Member cares to conjure up in his mind.
    I make the simple submission that to judge trading profits—especially for a small and new business that is very vulnerable to taxation and has not a lot of fat on its back—on the basis of the increase in price of a basket of goods that is meant to apply to consumers is wholly inappropriate when so many small businesses thrive on the basis of a specialist product.
    There is an alternative available, because the Department of Industry—God bless it—produces and is perfectly able to produce stock indices for various trades. The Liberal alternative—I hope that it is not just the Liberal alternative—is that instead of referring to the all stocks index the Government should refer to the index for the appropriate trade. We had no adequate answer to this point in Committee, and in the absence of any answer this evening it will be our intention to divide the House.
    Mr. Cook: The Opposition Front Bench has considerable sympathy with the hon. Member for Colne Valley (Mr. Wainwright). There is substance in his argument.
    The hon. Gentleman referred to a number of the bodies that have condemned the idea of an all stocks index and called for a plural index system. One could go further and say that no reputable body in the accountancy profession, or in industry, commerce or the academic world, has defended the concept of a single all stocks index. The reason is simple: an all stocks index will be perfectly satisfactory for those companies that trade in a basket of goods—and for nobody else. Since the great majority of commercial companies engage in business trade not in a basket of goods but in particular commodities and products, it follows that most of them will find them, to varying degrees, out of line with the all stocks index.
    They irony is that the matter cuts both ways. Some companies will be disadvantaged by the index, finding that the commodities that they hold in stock rise in value faster than the index. They therefore suffer a tax penalty, because they cannot claim the full amount of stock relief to which they would be entitled under the present arrangements, the full rise in the value of their commodities being reflected in the amount of relief that they can claim. But other companies will find that their commodities do not rise in value with inflation to the same degree as the index, and therefore, without their doing anything to achieve that result, they will be entitled to more relief than is reflected in the rise in value of the commodity that they stock, giving them a windfall tax gain.
    That is why we find it particularly perverse that the Treasury should have resisted our attempts to get it to see the folly of its ways and accept a plural number of indices, which would not necessarily be more expensive. If a number of indices resulted in more tax being recouped

    1281
    from those whose commodities rose by less than the all stocks index, as well as giving additional benefits to those whose commodities rose faster in value, the broad effect on the Treasury's revenue would be neutral. Therefore, it is not because of the cost that the Treasury resisted this proposal. It was resisted on the old ground of administrative simplicity. This is a classic instance of administrative simplicity triumphing over common sense.
    In Committee we took the line that there should be a plural number of indices and that the all stocks index was an unfortunate idea that the Treasury, if it is misguided enough to insist upon it, will live to regret in the very near future as industry starts to complain about the unjust anomalies that will flow from having a single all-purpose index across the board of commercial and industrial activity. Therefore, in Committee we tabled our amendments and the hon. Member for Colne Valley tabled his, and we bad a joint vote in favour of them.
    Were there such amendments before the House tonight, we would vole for them. If there were a proposal for the first time to create an all stocks index, we would vote against it. But I must tell the hon. Gentleman, in all fairness and candour, that we do not see what purpose would be served by dividing on amendment No. 54, as it seeks to make a modest improvement in an all stocks index that is already in the Bill. By voting against it we should not strike at the heart of the all stocks index, nor vote for a plural number of indices. In effect, we should be seeking to prevent a modest improvement to a concept that we accept is faulty. Therefore, we shall not join the hon. Gentleman in the Lobby, although we appreciate that his opposition and that of many others to the all stocks index—opposition that we share—might well impel him to vote against that amendment as a gesture.
    I wish that the Treasury had listened to the views that we expressed in Committee. That would have prevented the unfortunate fact that for the next few years British industry will have to wrestle with an all stocks index that may bear not the slightest relation to its experience of inflation and what it does to the value of the stocks held.
    Mr. Lawson: The hon. Member for Edinburgh, Central (Mr. Cook) said that he wished that the Treasury had listened to what was said in Committee. The reason why I introduced the amendments rather perfunctorily was that I was under the misapprehension that Opposition Members, particularly the hon. Member for Colne Valley (Mr. Wainwright), had listened to what was said in Committee. However, the contribution of the hon. Member for Colne Valley showed that nothing had penetrated his skull.
    The hon. Gentleman said that the all stocks index was a consumer index. It is not. He also seemed to have no concept between changes in the general price level—inflation which the hon. Member for Edinburgh, Central also mentioned; and we would not be discussing the schedule if it were not for the effect of inflation on companies and the way that it ravages their liability for taxation if nothing is done through stock relief—and changes in relative prices.
    11 pm
    We propose the new index on grounds of principle and not simply for administrative convenience, though there is some such convenience for the Inland Revenue and for individual companies. It is significant that the complaints that the hon. Gentleman voiced and that come from certain
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    accountancy and other bodies are not echoed by individual companies. It is on grounds of principle that the clause and the schedule are framed in this way.
    We are anxious to find a means of dealing with the consequences of inflation increasing the value of stocks and, therefore, increasing the tax liability. We are not concerned with changes in relative prices. The all stocks index will give a general indication of the rise in prices for stocks as a whole.
    If we were to make a change for relative prices, as the hon. Member for Colne Valley suggests, a company that made substantial dealing profits because it had the wit to, say, buy a metal when it was rising in price would be held to have made no taxable profit, because its index would have gone up by the same amount. That would be a palpable absurdity.
    What may be right for accounting purposes may not be right for taxation purposes, and we are talking about taxation and adjusting taxation for the effects of inflation. That is why we have the all stocks index.
    The hon. Gentleman may, by all means, vote against the amendment. In conformity with the rest of the schedule, it is based on the all stocks index. It is a relief for new businesses and if the hon. Gentleman votes against the amendment he will be voting against relief for new businesses. That would be consistent with the Alice-in-Wonderland logic with which he has plagued the House on this matter, upstairs and down.
    Mr. Richard Wainwright: By leave of the House, I should like to make a brief comment on the Financial Secretary's remarks. The House will have observed that he addressed his abuse to me personally. I do not complain about that, but it is not my judgment that I am asking the House to accept. It is the judgment not of certain accountancy bodies, as the right hon. Gentleman described them, but of the whole collection of the accepted, reputable, long-established accountancy bodies in private practice and in public finance in all parts of the United Kingdom.
    It was a parody for the right hon. Gentleman to describe those organisations as "certain accountancy bodies", as though I had selected a particular group of accountancy bodies and ignored representations from others. I challenge the right hon. Gentleman to mention a single reputable accountancy body admitting people by examination that accepts his view rather than the one that I have tried to put.
    The right hon. Gentleman tries to defend the basket of goods. I was endeavouring to give an illustration when I used the concept of a shopping expedition. I was not suggesting that this is literally a housewife's basket of goods. I should like to explain the basket of goods represented by this mistaken all stocks index. It contains stone and slate quarrying goods for sale, mineral oil, refining goods for sale, tractors for sale, footwear goods for sale, the building materials industry and the electricity industry's non-fuel stocks. What kind of a basket is that to be applied to those making clogs, universal joints for motor vehicles, or parts for aircraft? It is a basket concept. None of the right hon. Gentleman's levity enables him to get away from the fact that the Government are applying to all kinds of specialised industries an all-purpose index that is widely inappropriate and will lose them revenue.
    It is notable that the right hon. Gentleman did not refer to the fact that the Treasury, through the concept of the all

    1283
    stocks index, is voluntarily, deliberately and wilfully giving away revenue at the same time as it is scraping it up from every poor household in the country. We are driven to vote against the Government to express our view. There are occasions when, in order to get across a point, it is necessary to cause some temporary deprivation.
    It is often stated by what I am glad to say is only a small minority in the House that nothing must be done to upset trade with South Africa in case temporary hardship is caused to some of the indigenous South African people. It has never been an argument that the bulk of hon. Members have been willing to accept. In order to establish a principle it is sometimes necessary to cause temporary hardship.
    So great is the Government's concern for small businesses that if they were defeated Ministers would quickly return to the House with a reputable way of dealing with inflation in profits in place of the easy, sloppy and slipshod proposal that they are now attempting to pass.
    Amendment agreed to.
    Amendment proposed: No. 54, in page 159, line 10, leave out sub-paragraph (3) and insert—
    '(3) For the purposes of sub-paragraph (2)(a) above the value of the person's trading stock at the end of the period of account in respect of which the relief is given shall be reduced by multiplying it by the fraction of which—

    (a) the numerator is the figure given by the all stocks index for the month containing the last day before the beginning of that period; and

    (b) the denominator is the figure given by that index for the month containing the last day of that period.'.—[Mr. Lawson.]

    Question put, That the amendment be made:—
    The House divided: Ayes 260, Noes 12.

    Division No. 278]

    [11.10 pm

    AYES

    Adley, Robert

    Butcher, John

    Aitken, Jonathan

    Butler, Hon Adam

    Alexander, Richard

    Cadbury, Jocelyn

    Alison, Michael

    Carlisle, John (Luton West)

    Ancram, Michael

    Carlisle, Kenneth (Lincoln)

    Arnold, Tom

    Carlisle, Rt Hon M. (R'c'n)

    Aspinwall, Jack

    Chalker, Mrs. Lynda

    Atkins, Rt Hon H. (S'thorne)

    Chapman, Sydney

    Atkins, Robert (Preston N)

    Churchill, W. S.

    Atkinson, David (B'm'th,E)

    Clark, Sir W. (Croydon S)

    Baker, Kenneth (St.M'bone)

    Clarke, Kenneth (Rushcliffe)

    Baker, Nicholas (N Dorset)

    Clegg, Sir Walter

    Banks, Robert

    Cockeram, Eric

    Beaumont-Dark, Anthony

    Colvin, Michael

    Bendall, Vivian

    Cope, John

    Benyon, W. (Buckingham)

    Corrie, John

    Best, Keith

    Cranborne, Viscount

    Bevan, David Gilroy

    Critchley, Julian

    Biffen, Rt Hon John

    Crouch, David

    Biggs-Davison, John

    Douglas-Hamilton, Lord J.

    Blackburn, John

    du Cann, Rt Hon Edward

    Blaker, Peter

    Dunn, Robert (Dartford)

    Bonsor, Sir Nicholas

    Durant, Tony

    Boscawen, Hon Robert

    Dykes, Hugh

    Bowden, Andrew

    Eden, Rt Hon Sir John

    Braine, Sir Bernard

    Edwards, Rt Hon N. (P'broke)

    Bright, Graham

    Eggar, Tim

    Brinton, Tim

    Emery, Peter

    Brittan, Leon

    Eyre, Reginald

    Brooke, Hon Peter

    Fairbairn, Nicholas

    Brotherton, Michael

    Fairgrieve, Russell

    Brown, Michael (Brigg & Sc'n)

    Faith, Mrs Sheila

    Browne, John (Winchester)

    Fenner, Mrs Peggy

    Bruce-Gardyne, John

    Fisher, Sir Nigel

    Buchanan-Smith, Alick

    Fletcher, A. (Ed'nb'gh N)

    Buck, Antony

    Fletcher-Cooke, Sir Charles

    1284

    Fookes, Miss Janet

    Miscampbell, Norman

    Forman, Nigel

    Mitchell, David (Basingstoke)

    Fowler, Rt Hon Norman

    Moate, Roger

    Fox, Marcus

    Monro, Hector

    Fraser, Peter (South Angus)

    Morris, M. (N'hampton S)

    Gardiner, George (Reigate)

    Morrison, Hon P. (Chester)

    Gardner, Edward (S Fylde)

    Mudd, David

    Garel-Jones, Tristan

    Murphy, Christopher

    Glyn, Dr Alan

    Myles, David

    Goodlad, Alastair

    Neale, Gerrard

    Gorst, John

    Needham, Richard

    Gow, Ian

    Neubert, Michael

    Gower, Sir Raymond

    Newton, Tony

    Grant, Anthony (Harrow C)

    Normanton, Tom

    Gray, Hamish

    Onslow, Cranley

    Greenway, Harry

    Osborn, John

    Griffiths, E. (B'y St. Edm'ds)

    Page, John (Harrow, West)

    Griffiths, Peter Portsm'th N)

    Page, Rt Hon Sir G. (Crosby)

    Grist, Ian

    Page, Richard (SW Herts)

    Grylls, Michael

    Parris, Matthew

    Gummer, John Selwyn

    Patten, Christopher (Bath)

    Hamilton, Hon A.

    Pattie, Geoffrey

    Hampson, Dr Keith

    Pawsey, James

    Hannam, John

    Percival, Sir Ian

    Hastings, Stephen

    Pollock, Alexander

    Havers, Rt Hon Sir Michael

    Powell, Rt Hon J.E. (S Down)

    Hawksley, Warren

    Price, Sir David (Eastleigh)

    Henderson, Barry

    Prior, Rt Hon James

    Heseltine, Rt Hon Michael

    Proctor, K. Harvey

    Hicks, Robert

    Pym, Rt Hon Francis

    Higgins, Rt Hon Terence L.

    Raison, Timothy

    Hogg, Hon Douglas (Gr'th'm)

    Rathbone, Tim

    Holland, Philip (Carlton)

    Rees, Peter (Dover and Deal)

    Hooson, Tom

    Rees-Davies, W. R.

    Howell, Ralph (N Norfolk)

    Renton, Tim

    Hunt, David (Wirral)

    Rhodes James, Robert

    Hunt, John (Ravensbourne)

    Ridley, Hon Nicholas

    Jenkin, Rt Hon Patrick

    Rifkind, Malcolm

    Jessel, Toby

    Roberts, M. (Cardiff NW)

    Johnson Smith, Geoffrey

    Roberts, Wyn (Conway)

    Jopling, Rt Hon Michael

    Rossi, Hugh

    Joseph, Rt Hon Sir Keith

    Royle, Sir Anthony

    Kaberry, Sir Donald

    Sainsbury, Hon Timothy

    Kellett-Bowman, Mrs Elaine

    St. John-Stevas, Rt Hon N.

    King, Rt Hon Tom

    Shaw, Giles (Pudsey)

    Knight, Mrs Jill

    Shelton, William (Streatham)

    Knox, David

    Shepherd, Colin (Hereford)

    Lamont, Norman

    Shepherd, Richard

    Lang, Ian

    Shersby, Michael

    Lawrence, Ivan

    Silvester, Fred

    Lawson, Rt Hon Nigel

    Sims, Roger

    Lennox-Boyd, Hon Mark

    Skeet, T. H. H.

    Lester, Jim (Beeston)

    Speed, Keith

    Lewis, Kenneth (Rutland)

    Speller, Tony

    Lloyd, Ian (Havant & W'loo)

    Spence, John

    Lloyd, Peter (Fareham)

    Spicer, Jim (West Dorset)

    Loveridge, John

    Spicer, Michael (S Worcs)

    Luce, Richard

    Squire, Robin

    Lyell, Nicholas

    Stainton, Keith

    Macfarlane, Neil

    Stanbrook, Ivor

    MacKay, John (Argyll)

    Stanley, John

    Macmillan, Rt Hon M.

    Stevens, Martin

    McNair-Wilson, M. (N'bury)

    Stewart, Ian (Hitchin)

    McNair-Wilson, P. (New F'st)

    Stewart, A. (E Renfrewshire)

    McQuarrie, Albert

    Stradling Thomas, J.

    Madel, David

    Taylor, Teddy (S'end E)

    Major, John

    Tebbit, Norman

    Marland, Paul

    Temple-Morris, Peter

    Marlow, Tony

    Thomas, Rt Hon Peter

    Marshall, Michael (Arundel)

    Thompson, Donald

    Marten, Neil (Banbury)

    Thorne, Neil (Word South)

    Mates, Michael

    Thornton, Malcolm

    Maude, Rt Hon Sir Angus

    Townend, John (Bridlington)

    Mawby, Ray

    Townsend, Cyril D, (B'heath)

    Mawhinney, Dr Brian

    Trippier, David

    Maxwell-Hyslop, Robin

    Trotter, Neville

    Mayhew, Patrick

    van Straubenzee, W. R.

    Mellor, David

    Vaughan, Dr Gerard

    Mills, Iain (Meriden)

    Viggers, Peter

    Mills, Peter (West Devon)

    Wakeham, John

    1285

    Waldegrave, Hon William

    Wiggin, Jerry

    Walker, B. (Perth )

    Williams, D. (Montgomery)

    Wall, Patrick

    Winterton, Nicholas

    Ward, John

    Wolfson, Mark

    Warren, Kenneth

    Young, Sir George (Acton)

    Watson, John

    Younger, Rt Hon George

    Wells, John (Maidstone)

    Wells, Bowen

    Tellers for the Ayes:

    Wheeler, John

    Mr. Anthony Berry and

    Whitney, Raymond

    Mr. Carol Mather.

    Wickenden, Keith

    NOES

    Alton, David

    Penhaligon, David

    Bennett, Andrew ('St'kp't N)

    Roper, John

    Campbell-Savours, Dale

    Ross, Stephen (Isle of Wight)

    Cryer, Bob

    Steel, Rt Hon David

    Grimond, Rt Hon J.

    Horam, John

    Tellers for the Noes:

    Howells, Geraint

    Mr. A. J. Beith and

    Paisley, Rev Ian

    Mr. Richard Wainwright

    Question accordingly agreed to.
    Amendment made: No. 55, in page 159, line 16, after '(3)', insert '(a)'.—[Mr. Lawson.]
    Mr. Lawson: I beg to move amendment No. 56, in page 162, line 22, leave out 'the Board may direct that'.
    Mr. Deputy Speaker: With this we shall discuss Government amendment No. 57.
    Mr. Lawson: For the benefit of the hon. Member for Colne Valley (Mr. Wainwright), I shall take this amendment with due deliberation. When we discussed stock relief in Committee questions were asked about long periods of account and how they were to be dealt with. Schedule 9 provides that if a period of account exceeds 18 months the Revenue may direct—and I repeat "may direct"—that it be split into different parts of not less than 12 months plus any remainder.
    As I said in Committee, the Revenue will interpret that as requiring it to split long periods into periods of 12 months plus any balance. However, during our discussions in Committee my right hon. Friend the Member for Crosby (Sir G. Page) questioned the wording and proposed an amendment to make the split explicitly mandatory. I undertook to consider what he said. I have met his point in these amendments, which I hope he will agree achieve the result which he desired.
    Sir Graham Page: The amendments meet the point which I raised.
    Amendment agreed to.
    Amendments made: No. 57, in page 162, line 27, leave out sub-paragraph (2) and insert—
    '(2) Each of the separate parts of the period shall (so far as length of the period permits) consist of twelve months, any remaining months being used to form the last part.'.
    No. 58, in page 162, line 30, leave out 'other than paragraph 19 above.'.—[Mr. Lawson.]

  Clause 41

    SUMS PAID TO SETTLOR OTHERWISE THAN AS INCOME
    Sir Graham Page: I beg to move amendment No. 59, in page 28, line 13, at end insert—
    '(c) in paragraph (b) for the words "the next following year" there shall be inserted the words "the next following eleven years.".
    Clause 41 amends section 451 of the Taxes Act, or is a rewrite of that magician's provision which converts capital
    1286
    payments into income in certain cases, provided that there is some income in the settlement fund from which the payment was said to be a payment of capital.
    Let us suppose that the settlor transfers some of his invested savings to trustees and settles them so that he might become a beneficiary under that trust. When he needs some capital there might be an advance of capital of £10,000 to the settlor. If there is £1,000 of income in the fund, that money could be advanced to him as £9,000 capital and £1,000 income. On that basis he is assessed on the £1,000 income. As time passes and further income accrues, he is assessed up to the £10,000 advance.
    However, let us suppose that after the first advance and the calculation of income in the fund at that time no furl her income goes into the fund for a considerable time. It may be 15 or 20 years before one has any income to set against the capital payments and to assess the tax on it.
    I submit that anything more than 12 years is too long. We must draw the line somewhere to reach a settlement of assessments that would convert the capital payment into an income payment. The amendment seeks to limit that period to 12 years. I think that that is fairly generous to the Inland Revenue.
    Mr. Peter Rees: As one would expect, my right hon. Friend the Member for Crosby (Sir G. Page) has fastened on a good point. There must be a limit at some time when a capital payment made to the settlor can no longer be matched with accumulations of income. Perhaps 12 years strikes a reasonable balance. I therefore recommend the amendment to the House.
    Amendment agreed to.

  Clause 42

    SUMS PAID TO SETTLOR OTHERWISE THAN AS INCOME: CONNECTED COMPANIES
    Sir Graham Page: I beg to move amendment No. 71, in page 31, line 9, leave out from beginning to 'corporate' in line 10 and insert
    'that body corporate has control of, or is controlled by, another body corporate or both are under the control of the same per son or persons within the meaning of section 534 below'.
    Mr. Deputy Speaker: With this we may take the following amendments: No. 72, in page 31, line 30, leave out 'five years' and insert 'two years'.
    No. 73, in page 31, line 37, at end add—
    '(8) subsection (1) above does not apply to any sum paid the settor by way of loan or repayment of a loan if it appears that the loan and the repayment were effected for bona fide commercial reasons and did not form part of a scheme or arrangements of which the main purpose, or one of the main purposes was the avoidance of liability to income tax;'.
    Sir Graham Page: Amendment No. 71 is an amendment to clause 43, which makes an addition to section 451 to the Taxes Act, which will be known as section 451A. The effect of subsection (1) of the new section is that if the trustees of a settlement make a payment to a company connected with the settlement, and that company then pays the settlor, that payment is treated as a payment by the trustees direct to the settlor. If it is a capital payment, it can become income and subject to assessment for income tax. Under clause 42, if the trustees pay to an unconnected company, but that company is associated with a connected company, it pays to the connected company which pays to the settlor. I am sorry

    1287
    if I am using many technical phrases about a complicated process of payment. When it goes through the two processes from unconnected company to connected company and then to the settlor, it can still be treated as a payment direct to the settlor.
    It is reasonable to treat that apparently indirect payment as a direct payment if the two intermediate companies are controlled by the same person. However, that is not quite what the clause says. It refers to associated companies. An associated company, as defined by section 302 of the Taxes Act—which is referred to in the clause—is a company that has at one time, in the past 12 months, been a controlled company. An associated company is not necessarily under the control of the same person at the time when the payment process takes place.
    The mischief against which the clause is aimed is when the two companies are controlled by the same person. The amendment proposes that only when the companies are controlled by the same person, not if they have been controlled in the past by the same person, should the clause apply.
    11.30 pm
    Amendment No. 72 deals with the repayment of a loan by the process that I have described in dealing with amendment No. 71. It makes it a capital payment which is to be taxable as income. By the new subsection (6)(a) there is recognition that payment by way of loan, or repayment of a loan, shall not be affected by the provision if it is only a temporary loan, that is, if
    "the whole of the loan is repaid within twelve months".
    There is the proviso of similar loans made to or by the settlor that are outstanding for over 12 months at any time in five years. I am not sure what the reference to five years means. Does it mean before, after or both when applied to the loan in question? It seems that it is five years before or five years after. I submit that five years is far too long. These are anti-tax avoidance provisions. However, it is necessary only to go so far as is reasonable in finding instances in which there could be tax avoidance. In amendment No. 72 I propose that the five years in the clause be reduced to two years.
    I shall deal briefly with amendment No. 73. The new section 451A of the Taxes Act, which is introduced by the clause, is in common with all its subsections an anti-tax avoidance section. As such it assumes too readily that every transaction that involves the sort of payment that is described in subsection (1) is made for the purpose of avoiding tax. That is not a fact. There may be loans to trading companies that are bona fide commercial transactions. Even if those involved in such transactions can prove that they are genuine transactions, they will have no relief under the section. I suggest in amendment No. 73 a defence for those who are carrying on genuine commercial transactions to enable them to prove that they are genuine and thereby get out of the difficulty of having the repayment of a loan taxed as an income payment to the lender.
    Mr. Peter Rees: Section 451 of the Taxes Act, to which the amendments of my right hon. Friend the Member for Crosby (Sir G. Page) are directed, has a long and inglorious history and has been much criticised by the courts in not only the past decade but, I should think, over the past three decades. This Government, for the first time
    1288
    for many years, have bent their mind to trying to rationalise the provision. My right hon. Friend, will, I am sure, be the first to recognise and appreciate what has been done in the Bill to make the section a rather more human provision. However, I think that the House will recognise that there is a problem to be countered by section 451. A balance must be struck.
    Amendment 71 suggests that my right hon. Friend would prefer that the test of association between the company and the settlor should be applied at the moment that the transaction of the capital sum by loan or repayment of loan is made. I understand the argument. However, I am sure that my right hon. Friend will recognise on reflection that if it were to be applied only at that moment it would be possible to circumvent the section almost in its entirety by ensuring that the financial movements took place earlier or later.
    It is for that reason that the Government prefer that the test should be applied not only when the financial movements take place, but during the preceding year. I recognise my right hon. Friend's point, but it would make it a little too easy—as I am sure he will agree on reflection—if the test had to be applied only at one single instant of time.
    On amendment No. 72, again we wish to ensure that the settlor does not make any permanent loans or receive any repayment of permanent loans from a body corporate connected with himself. I lapse into technical jargon only because my right hon. Friend, with his commendable lucidity, has explained the loans procedure so clearly to the House. Therefore, I do not believe that I need explain it myself.
    The reason we have made a two-year test is to ensure that a senior does not make a series of loans over a period which are, in effect, a continuous method of funding a company. Therefore, we say that the loans should be repaid within 12 months and that that should not be repeated during a period of five years. It is a matter for legitimate debate as to whether five years is too long. I would say with all respect to my right hon. Friend's powerful argument that two years is too short. I hope, however, that because the Government have taken some fairly considerable steps to liberalise section 451, my right hon. Friend will allow us to judge a little by experience. If it should be found that this provision has been too tightly drawn, I hope that there will be opportunities in subsequent Finance Bills to deal with it. I would be the last to pretend that section 451, even after the amendments which commended themselves in Committee, will remain the most perfect example of the legislator's art—if it is an art rather than a science, or something of a rather lower order altogether.
    I see entirely the force of my right hon. Friend's arguments on amendment No. 73. We hoped that it would be for the convenience of taxpayers and their advisers as well as for the convenience of the Revenue to lay down some fairly precise tests which have to be satisfied. If they are satisfied, a payment to a settlor will escape tax. If I understood the drift of my right hon. Friend's remarks, I think that he would prefer the section to be more imprecisely drawn, but that there should be a motive test so that the taxpayer may escape the charge if he can demonstrate that his motives were of the purest.
    With his considerable experience, my right hon. Friend will know that, although motive tests serve a purpose, they serve also to complicate legislation for the taxpayer, the

    1289
    Revenue and the taxpayer's advisers. Often it must be a matter of fine debate as to precisely what the taxpayer's motives were in any given situation. Although I may be searching for the Holy Grail, I hope that in this instance we can define the tests with sufficent precision that the taxpayer will know whether he is within or without the section and we shall not have to have recourse to the sort of tests which my right hon. Friend proposes in amendment No. 73.
    Therefore, I hope that my right hon. Friend will feel that he has initiated a useful debate and that, with the assurance that, of course, we shall be happy to look at the further developments in this area in the light of the amendments which have been approved by the Committee, he will feel able to withdraw the amendment.
    Sir Graham Page: I am grateful to my hon. and learned Friend for going into these matters so carefully. I should like to leave these amendments as markers in looking at the developments of the amendments to section 451 which the Bill contains. I beg to ask leave to withdraw the amendment.
    Amendment, by leave withdrawn.

  Clause 44

    TRANSFER OF ASSETS ABROAD: LIABILITY OF NON- TRANSFERORS
    Sir Graham Page: I beg to move amendment No. 221, in page 33, line 2, after 'year', insert
    'nor by virtue of section 76 of this Act been treated as his chargeable gains'.
    Mr. Deputy Speaker: With this we may also discuss the following amendments:
    No. 220, in page 33, line 17 at end insert
    'but excluding income which has already borne the like charge to income tax as such income would have borne had it arisen to a person resident or domiciled in the United Kingdom'.
    Government amendment No. 224.
    Amendment No. 222, in page 33, line 31, at end insert—
    '(5) After sub-paragraph (7) of paragraph 11 of Schedule 5 to the Finance Act 1975 there shall be inserted the following sub-paragraph:—
    "(7A) Any amount treated as the income of an individual by virtue of the provisions of section 44 of the Finance Act 1981 shall be treated as reducing the amount of a distribution payment and in a case where income tax assessed under that section on an individual who has received in an earlier year of assessment a capital benefit paid out of settled property is paid on behalf of that individual out of the property comprised in the settlement such payment shall not be a distribution payment.".'.
    Amendment No. 223, in page 34, line 2, at end insert—
    '(9) In computing the amount of any relevant income, a deduction shall be allowed for foreign taxes and for administration and other expenses necessarily incurred and in computing the .:ax liability of the beneficiary, credit shall be given for any UK tax suffered on the relevant income.'.
    Government amendment No. 225.
    Sir Graham Page: The position is that under the clause an individual who is ordinarily resident in the United Kingdom and who has no liability to tax under section 478 of the Taxes Act 1970, and who receives a capital benefit from a non-resident or non-domiciled person after 10 March 1981, will be assessed to schedule D, Case VI income tax on the amount or value of such benefit by
    1290
    reference to the relevant income—defined in the clause—of the non-resident or non-domiciled person arising on or after 10 March 1981.
    So long as the capital benefit does not exceed the amount of the relevant income for years of assessment up to and including the year in which it is received, the capital benefit is to be treated for income purposes as part of the individual's income for the year of receipt. To the extent that the capital benefit exceeds the amount of the previous relevant income the excess of the capital benefit is carried forward to subsequent years and matched with the relevant income of those parts and treated as the individual's income for income tax purposes until the capital benefit equals the amount of relevant income.
    In my view there should be a proviso in that part of the clause so as to avoid the taxation of the same sum twice. Any capital payment that is treated as a capital payment for the purposes of clause 76 and is therefore charged to capital gains tax for the purpose of that clause should not be part of the capital convened into income for the purpose of clause 44. It is amendment No. 221 that endeavours to remedy that position of a possible double taxation of the same sum.
    There is another possibility of a double charge to tax as a result of the clause. The clause would apply, I think, to a case in which one of the trustees of a settlement is resident in the United Kingdom. The whole of the settlement income would then be assessed in his name, with the consequence that the income might suffer exactly the same rate of United Kingdom tax as it would have done as income arising wholly to resident United Kingdom trustees. If a beneficiary of such a settlement is chargeable under the clause on the balance of the settlement income the effect would be a charge to tax twice over on the same amount.
    This situation can be remedied for the purposes of the clause and the definition of relevant income if that definition were stated not to include income that has already been assessed to United Kingdom tax in the name of a United Kingdom resident trustee. It is amendment No. 220 that seeks to put that right.
    The clause requires also to be considered in the capital transfer tax context, in particular, paragraphs 11(7) and (8) of schedule 5 of the Finance Act 1975. As my hon. and learned Friend will know, the effect of those paragraphs is that distribution payments, which are income of a person for any of the purposes of income tax, are not within the charge to capital transfer tax.
    11.45 pm
    If the clause remains in its present form it appears that in some cases it will be impossible to determine the capital transfer tax liability arising on an appointment of capital to a beneficiary. The amount of such capital sum ultimately to be treated as income for income tax purpose under this clause cannot be determined either at the date when the appointment was made or even at the later time when capital transfer tax becomes due and payable.
    If capital transfer tax is assessed and paid on the basis of the situation existing at the date of the capital appointment, it appears to me that in some cases the Revenue will be required to make annual repayments of capital transfer tax where the clause bites on future relevant income. In order to meet that capital transfer tax difficulty, amendment No. 222 makes an addition to paragraph 11 of schedule 5 of the Finance Act 1975,

    1291
    which, briefly, provides that any amount treated as the income of an individual by virtue of the provisions of clause 44 should be treated as reducing the amount of the distribution payment.
    Those are the first three amendments in my name. The fourth, amendment No. 223, is of a different kind, but still in reference to clause 44. It is noticeable that clause 44 allows no relief for expenses incurred by overseas trustees. The full gross amount of the relevant income can form the basis of assessment under the clause. That is quite unreasonable. It should be recognised that the income may be reduced by necessary expenses. This amendment endeavours to take that into account.
    Mr. Peter Rees: If I may, I shall respond to the points so ably argued by my right hon. Friend the Member for Crosby (Sir G. Page) and also speak to Government amendments Nos. 224 and 225.
    The principal point underlying amendment No. 221 was raised in Committee by my right hon. Friend and also raised at an earlier stage in correspondence by my hon. Friend the Member for Eastleigh (Sir D. Price), whom I am happy to see in the Chamber. The point is a good one, as one would expect coming from two such notable sources. It is to prevent a double charge to capital gains tax and income tax under section 478 in respect of the same payments.
    We have been seized of the point, and I hope that I may say, without immodesty, that we feel that amendments Nos. 224 and 225 marginally deal with the point a little more effectively than the amendment in my right hon. Friend's name. I hope that the House will feel able to accept them in place of amendment No. 221.
    In a different sense, amendment No. 220 gives added force to an old principle that income should not be subject to tax twice. In practice, it is extremely unlikely that that would arise in the circumstances likely to be affected by section 478 in other than a case of avoidance. My right hon. Friend may well cite back to me the words that I uttered in respect of the previous group of amendments, but there is a motive test in section 478(3). It will therefore always be possible for a taxpayer to establish that there is no hint of tax avoidance in the particular complex of circumstances in which the charge might be raised. Therefore, at least one set of assessments would fall by the wayside.
    Just in case my right hon. Friend's fears should be justified, however, we should like to reconsider the position to see whether an amendment could possibly be introduced next year—I say "possibly" because, as my right hon. Friend will be the first to realise, it may be very difficult to link the underlying income on which one charge to tax in the United Kingdom may have been raised with the sum paid to the beneficiary or person resident in the United Kingdom. There are considerable tactical problems here, but we shall certainly address our minds to his to see whether we can introduce something taut and accurate in a later Finance Bill. I hope that with that assurance my right hon. Friend will not press amendment No. 220.
    I must also tell my right hon. Friend that I think, again, that it is most unlikely that under the existing legislation a payment charged to income tax under section 478 could possibly be charged to capital transfer tax, because, as he
    1292
    knows, there is a specific exemption in capital transfer tax legislation in respect of sums transferred that have been subject to income tax. I hope that I can reassure my right hon. Friend on that point also.
    Finally, on amendment No. 223, my right hon. Friend very persuasively argues for some kind of deduction in computing relevant income for foreign taxes, administration and other expenses. I certainly have sympathy with the reasons underlying that amendment, but it would be difficult for me to recommend its acceptance, certainly as it now stands, as it would be extremely difficult to operate and might produce rather capricious results. It is not always easy to determine what are legitimate expenses abroad; nor will it always be easy to link any foreign taxes that may be charged on the underlying income of the trust or company with the particular tranche of income or assets that may be paid to United Kingdom residents.
    I think that in a sense this point was ventilated by my hon. Friend the Member for Croydon, South (Sir W. Clark) in Committee. We have applied our minds to this, but the precise correlation between the income that has borne foreign tax and the payment that might be made to United Kingdom resident beneficiaries has defeated us. I must therefore advise the House that that amendment No. 223 would not achieve the object that my right hon. Friend has in mind. Again, however, as this is clearly a real problem we should like to return to it next year, although I cannot assure the House that we shall find a perfect solution.
    On that basis, I hope that the House will feel able to accept Government amendments Nos. 224 and 225 and that my right hon. Friend will feel that ample justice has been done to the important points that he has raised in his amendments.
    Sir Graham Page: I am grateful to my hon. and learned Friend for dealing with the amendments in that way. I am, of course, happy with the Government amendments, which cover a considerable number of the points that I raised. I am a little disappointed about amendment No. 223, with regard to expenses. Nevertheless, I shall not seek to press any of my amendments.
    I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Amendment made: No. 224, in page 33, line 31, at end insert—
    '(5A) Where—

    (a) the whole or part of the benefit received by an individual in a year of assessment is a capital payment within the meaning of section 77 or 78(2) below (because not falling within the amount of relevant income referred to in paragraph (a) of sub-section (2) above); and

    (b) chargeable gains are by reason of that payment treated under either of those sections as accruing to him in that or a subsequent year,

    paragraph (b) of that subsection shall apply in relation to any year of assessment ("a year of charge") after one in which chargeable gains have been so treated as accruing to him as of a part of the amount or value of the benefit corresponding to the amount of those gains had been treated under the subsection as his income for a year of assessment before the year of charge. '—[Mr. Peter Rees.]

  Clause 45

    TRANSFER OF ASSETS ABROAD: OTHER PROVISIONS
    Sir Graham Page: I beg to move amendment No. 213, in page 34, line 38, after 'him', insert

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    'on or after 10th March 1981'.
    Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 76.
    Sir Graham Page: My amendment is covered by Government amendment No. 76, and therefore I do not wish to speak to it.
    Mr. Peter Rees: My right hon. Friend the Member for Crosby (Sir G . Page) has been good enough to indicate that his point is amply covered by amendment No. 76. Indeed, amendment No. 76 goes a little further because it makes the provision operative from 6 April 1981, while my right hon. Friend's amendment would have made it operative from Budget day. This is to the taxpayer's advantage.
    Amendment negatived.
    Mr. Peter Rees: I beg to move amendment No. 75, in page 34, line 39, leave out from 'it' to end of line 43.
    The amendment is designed to remove two possible sources of misunderstanding from the new rules proposed in clause 45(3) relating to the receipt of capital sums. I hope that the House will approve it.
    Amendment agreed to.
    Amendment made: No. 76, in page 35, line 3, at end insert—
    '(3A) Subsection (2A) of the said section 478 as inserted by subsection (3) above shall not apply to any direction or assignment given or made before 6 April 1981.'—[Mr. Peter Rees.]

  Clause 50

    THE RELIEF
    Mr. Peter Rees: I beg to move amendment No. 77, in page 39, line 7, at end insert
    'or within such further period (not exceeding twelve months) as the Board may allow'.
    We have moved to the business start-up schemes, which were extensively debated in Committee. Indeed, considerable care was given to this subject in Committee. In the light of the debates and of the representations made before and after our debates in Committee, it was felt that there was still room for improvements in the provisions. I regret to say that many Government amendments are the result of our deliberations.
    The amendment is designed to ensure that a company whose shares are acquired—and payment for which will attract tax relief for an individual taxpayer—must have started to trade within two years of the issue of the shares. This is a liberalisation of the existing rules and is designed to cover cases such as companies that are involved in high technology. In such cases, a little time is needed before the full merits of the company's trade become manifest. I commend the amendment.
    Amendment agreed to.
    Mr. Peter Rees: I beg to move amendment No. 78, in page 39, leave out line 18 and insert
    'beginning with the incorporation of the company (or, if the company was incorporated more than two years before the date on which the shares were issued, beginning two years before that date) and ending'.
    Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 89.
    Mr. Rees: The amendments are designed to shorten to not more than two years before the issue of the shares the period during which the conditions for the grant of relief
    1294
    must be satisfied, except that since commencing business the company must always have existed to carry on a new qualifying trade wholly or mainly in the United Kingdom. I am sure that the good sense and liberality of the amendment will commend it to hon. Members.
    Amendment agreed to.

  Clause 51

    LIMITS ON RELIEF
    Amendment made: No. 79, in page 40, line 5, after '(1)', insert
    'Subject to section (Nominees and appoved investment funds) below,'.—[Mr. Peter Rees.]
    12 midnight
    Mr. Peter Rees: I beg to move amendment No. 80, in page 40, line 9, leave out '£1,000' and insert '£500'.
    Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 108.
    Mr. Rees: This amendment is of considerable importance. As the House will know, there is an upper limit of £10,000 on the moneys that can be invested in shares of start-up companies. The lower limit originally was £1,000. That was for administrative reasons. I say that with candour, although I appreciate that that sort of explanation is not likely to commend the limit to the House. There will be pressures on the Inland Revenue in administering a scheme of that sort. However, I was strongly impressed by the powerful arguments directed to me in Committee both from my hon. Friends and from the corporation.
    Notwithstanding the administrative burdens that that undoubtedly will put on the Inland Revenue in administering the scheme, we thought it right to table an amendment reducing the lower limit from £1,000 to £500, thus, as it was strongly urged. on me in Committee, making it easier for the smaller investor to participate in such schemes.
    I hope that the amendments will find favour with the House.
    Mr. Robert Sheldon: I thank the hon. and learned Member for introducing the amendments on Report. As he knows, we welcome the start-up scheme even though we feel that it is being oversold. We are anxious about some of the possibilities of fraudulent operation about which I am sure the hon. and learned Gentleman knows a great deal because of the debates we had in Committee.
    I accept that whenever one lowers the limit there is bound to be an increase in the administrative burden, but it is equally wrong that £1,000 should be the amount that the investor requires to raise for the purpose. We are pleased that the hon. and learned Gentleman has accepted our proposal for a limit of £500. We shall watch to see what effect that will have on the start-up schemes that we look forward to observing with interest.
    Amendment agreed to.

  Clause 52

    INDIVIDUALS QUALIFYING FOR RELIEF
    Mr. John Browne: I beg to move amendment No. 82, in page 41, line 20, leave out from 'issued' to end of line 13 on page 43.
    Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments:
    No. 83, in page 41, line 25, after '(a)',
    insert 'subject to subsection (3) below'.
    No. 84, in page 41, line 32, after 'director', insert 'or employee'.
    No. 85, in page 41, line 42, after 'director', insert 'or employee'.
    No. 86, in page 42, line 4, leave out 'and'.
    No. 87, hi page 42, line 14, at end insert
    ; and

    (f) any reasonable and necessary remuneration paid to him as a director or employee of the company in respect of his duties performed in that capacity. ' .

    Government amendment No. 88.
    Amendment No. 107, in clause 57, page 50, line 21, at end insert—
    '(9) For the avoidance of doubt it is hereby declared that, insofar as any payments made to a director or employee of a company do not constitute reasonable and necessary remuneration for the purposes of section 52 (3) (f), the same shall not be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by the company making such payments'.
    Mr. Browne: The aim of this wide-sweeping amendment in cutting out pages is to urge my right hon. Friend and my hon. and learned Friend to lay much more open the qualifying conditions for individuals investing in the scheme that my right hon. Friend has initiated.
    We know that the technological revolution and the need for repairing the structural imbalance in our economy requires a dramatic start in new businesses and in the growth of small and medium-sized businesses. The Wilson report states clearly that there is plenty of capital for such enterprises, but it is the wrong type of capital. It is nearly all loan capital, and what is drastically needed is high-risk equity capital.
    The Government have done some work in allowing Treasury stock to be purchased by companies and the loan guarantee scheme is good, but only at the margin. Much work must be done in abolishing the discrimination in the over-the-counter market between licensed dealers and those dealing on the Stock Exchange and in reducing or abolishing the fiscal bias in favour of the insurance companies and the pension funds. They are siphoning off vast amounts of personal savings to the institutions that are, first, risk averse; secondly, out of contact with entrepreneurs and uncontactable by most entrepreneurs; and, thirdly, have few staff to manage their funds and are, therefore, the wrong vehicles to be managing small investments in small companies.
    The economy needs a bombshell of incentive for individuals to steer their savings into high-risk equity investments in new and small businesses. I looked with great expectation at the scheme when it was announced in the Budget and I thought that what was to come really would be a bombshell, in clear and simple terms. I am afraid to have to say to my hon. and learned Friend that I find it very complex and unclear, so much so that it discriminates positively against the smaller investor who cannot afford an accountant to look through all the rigmarole of the investment to get the best advantage. Much more should be done to make it much clearer and simpler. I realise that much has been done in Committee, and I thank my hon. Friends who have urged these changes
    1296
    on the Government. I also thank my hon. and learned Friend for accepting a number of them, some of which have already been introduced tonight.
    I urge my hon. and learned Friend to admit consultants as qualifying individuals, and also relations and employees, because these are the people who know the company and know the quality of the management. They will not risk their money unless they feel that it will bring a reward. I strongly urge my hon. and learned Friend to open the qualifications to them. I realise that it opens up a possible tax loophole and that it is a very complex area of tax, but I ask him to accept the offset of the tax loophole cost to the Exchequer against the increased revenues that he should be getting by reducing the fiscal bias that is now in favour of the pension funds and the insurance companies, which will be much larger than the loss of revenue that he may get by people abusing the system at the edges.
    As I said, I realise that it is a difficult and complex area. I urge my hon. and learned Friend, when the Bill becomes an Act, to publish the present scheme in clear and simple form as a new system, because many people were disillusioned by the one that they read in the Bill after the Budget. Secondly, will he re-examine the whole area to make sure that we have the bombshell that is needed to revive investment in companies of this sort and is so necessary for our survival?
    Mr. David Steel: I am fully in sympathy with the amendment moved by the hon. Member for Winchester (Mr. Browne), although he admitted that it is a wide-ranging amendment and does not hold high hopes that the Government will accept it. His analysis is correct.
    When the business start-up scheme was first announced to the House, it was met with considerable enthusiasm on the Opposition Benches, in my party and no doubt elsewhere. It was also met with considerable enthusiasm among the small business community and in the country at large. That initial enthusiasm was dissipated when it was discovered that the original excellent concept was hemmed around by restriction, qualification and complication. I am therefore greatly in sympathy with the general tone of the proposal.
    I wish to draw the attention of the House to amendments Nos. 83 to 87, which are far more limited and specific in their purpose than the hon. Member's amendment. The purpose of the amendments is to remove the disqualification from employees in benefiting from the scheme. The matter was debated in Committee and I have read very carefully what the Minister of State said on the matter. I am grateful to our Treasury spokesman, my hon. Friend the Member for Colne Valley (Mr. Wainwright), who served on the Committee and who, with his advisers, has tried genuinely to meet the objections which the Minister of State raised in Committee. The attempt to meet the objections is set out in detail in the amendments.
    In what the Minister of State said in Committee, I detected once again the general line from Conservative Ministers that if the Liberals wanted to pester them again with their theories of employee participation they were wholly sympathetic and willing to offer all assistance, short of actual help. He was very sympathetic and polite to my hon. Friend but was unable to accept the proposition, for a series of specific reasons. The main reason that the hon. and learned Gentleman gave was that

    1297
    the Government were worried that the inclusion of employees in the scheme could lead to tax avoidance. Like the hon. Member for Winchester, I think that this has become an almost ludicrous obsession. I do not dispute the Minister's argument, but it raises a technical and exceptional objection to a laudable principle. I ask him to reconsider the matter.
    The Minister's specific objection was that a company would be able to deduct the employee's salary for corporation tax purposes and that if, therefore the employee could set part of his income against tax by taking advantage of this scheme the salary would be relieved a second time. This was a principle that the Treasury did not like. In fact, there are already instances in the tax system of a particular payment being relieved twice. For example, that part of an employee's salary on which he receives income tax relief because he is paying a mortgage is already relieved twice, in the Treasury jargon. In any case, there could be tax avoidance only if an employer paid an artificially high salary that was then reinvested in the new business under this scheme.
    For that reason, our amendment provides, in effect, that if an individual who seeks relief has been artificially overpaid, the extent of the overpayment will be non-deductible against corporation tax by the company. The amendment defines the overpayment as anything over and above
    "any reasonable and necessary remuneration".
    The Minister may say that that is an imprecise definition, but we are using the same device as the Government have used in relation to directors. The Bill already provides, in clause 52(3)(e), that a director is excluded from the scheme unless any payment that he receives is, inter alia,
    "any reasonable and necessary remuneration which—
    (i) is paid for services rendered to the company".
    In any case, I am advised that as a matter of law section 54 of the Companies Act 1948 already decrees that any excessive payments made to an employee or a director in connection with his subscription of shares would be unlawful.
    Our amendment is workable. If the Government resist it, we are entitled to take that objection as an excuse and not a reason. This is a sensible and workmanlike improvement to a scheme that we want to see made into a success. We believe it right that employees should be encouraged to have a stake in a new business and that they should not be excluded from the benefits of what is a bold and innovative scheme.
    Mr. Richard Page: I wish to speak to amendments Nos. 276 to 280, in the names of my hon. Friends on our Back-Bench committee concerned with smaller businesses and in the name of my hon. Friend the Member for Surrey, North-West (Mr. Grylls).
    The amendments are an attempt to meet the request—I shall not say "the challenge"—of my hon. and learned Friend the Minister of State when in Committee he replied to a debate on a similar amendment, moved by my hon. Friend the Member for Luton, East (Mr. Bright). That amendment would have enabled employees and working directors to participate and invest in the company with which they were connected.
    12.15 am
    My hon. and learned Friend the Minister of State rejected the amendment on the ground that it would enable an employee to obtain income tax relief on a salary which
    1298
    would also attract corporation tax relief for the company. Commercially, it is unlikely that existing controlling shareholders will pay inflated salaries to employees to avoid corporation tax simply to attract a little more .risk capital, unless they are seeking to encourage greater employee participation in their business. However, I appreciate the validity of the point made by my hon. and learned Friend if the full £10,000 under the scheme were allowed to existing employees and working directors, and I appreciate that abuses could have followed from that amendment if it had been implemented in full.
    The amendments proposed by my hon. Friends and myself are deliberately limited in order to gain acceptance. They restrict the annual investment by an employee or working director, for which relief will be available, to an amount not exceeding £1,000. Now that the minimum relief has been set at £500, the amendments would give a bracket from £500 to £1,000 that could be invested by an employee. The concept of the working director, which is already recognised in some tax legislation, is being repeated so that such employees claiming the proposed relief will not be allowed to own more than 5 per cent. of the company's ordinary share capital.
    The amendments are important because relief for employees and working directors is essential if we are to encourage wider ownership of wealth and greater participation in companies' activities. The present disqualification of employees and working directors removes not only a valuable source of finance but the opportunity for employees to take part in the growth, enterprise and expansion of their companies.
    I hope that my hon. and learned Friend the Minister of State will recognise that the amendments are a genuine attempt to get investment by a section of the working population and that they will boost the enterprise that the country needs so badly.
    Mr. Richard Wainwright: As my right hon. Friend the leader of the Liberal Party made clear, all hon. Members who have tabled amendments to the clause, including Liberal Members and several Conservative Members, have the same aim, which we believe to be particularly important at this juncture in British industrial relations. I hope that the Minister of State has noted that many of his hon. Friends have tabled amendments with .a purpose similar to that of the Liberal amendment. So noble is the aim of Conservative Members that I was almost led into congratulating the hon. Member for Luton, East (Mr. Bright) on his knighthood. He is referred to as a knight three times on the Amendment Paper. I hope that that is an indication of the reward that awaits him for pursuing this splendid cause.
    All that remains to be said about the amendments is that we stick by that in my name because we believe that ii: meets the difficulties that the Minister of State repeated so firmly in Committee. The hon. Member for Winchester. (Mr. Browne) has already made clear, frankly, that hit, amendment makes a point but he does not expect it to become law. The amendments spoken to by the hon Member for Hertfordshire, South-West (Mr. Page) have a laudable purpose, but they seem to us to make employees second-class shareholders.
    In order to try to meet the difficulties that the Treasury Bench presses so hard—we think unreasonably hard—the hon. Member for Hertfordshire, South-West suggests that employees and directors should be limited to investments

    1299
    of £1,000 a year or less. That is better than nothing. However, in our view, it is unacceptable that the maximum for employees should be less than—indeed, only one-tenth of—the maximum for other shareholders. On those grounds, we feel reluctantly unable to support the amendments to which the hon. Gentleman has spoken.
    Hon. Members will have realised that many people today receive redundancy payments running to several thousand pounds. They may have been lucky on the pools. They may have had a legacy from Aunt Agatha, who is the patron saint of the whole start-up scheme. [Interruption.] I confine myself to saying that Aunt Agatha is reasonably well off but that this does not make her a Tory. I speak from some experience in my own constituency.
    It is not reasonable that an employee who has come into some money should be limited to an investment in his own job to keep his company in being of only £1,000 a year. I believe that the limit disqualifies the amendments in the name of the hon. Member for Hertfordshire, South-West and others. We intend to divide the House and to invite support from all hon. Members who have put their names to amendments with the same purpose as ours.
    I should like to explain why, at 20 minutes past midnight on this summer evening, we take this matter so seriously. It was as far back as 1928 that the Liberal programme, colloquially known as the Yellow Book, from Lord Keynes, Lord Layton, Henderson, Seebohm Rowntree and many others stated:
    "The real purpose of profit-sharing is to show that the worker is treated as a partner, and that the division of the proceeds of industry is not a mystery concealed from him, but is based upon known and established rules to which he is a party."
    More recently, Lord Wade and others have made clear that the Liberal aim is either that labour should hire capital or, at the very least, that labour and capital should meet each other in a mutually satisfactory bargain, as it were, to employ each other. Because we believe that the Government have hit upon the germ of a way of giving some effect to this approach, at any rate, in new businesses, we support the business start-up scheme but wish to remedy the serious defect at present within it. We shall therefore invite the House to divide on the amendment.
    Mr. Michael Grylls: I wish to add my support to the amendments to which my name is attached. My hon. and learned Friend the Minister of State and his Treasury colleagues have been most forthcoming with changes introduced to the initial scheme. They have acted swiftly and with understanding. The scheme is now very good. All hon. Members, particularly those on the Liberal Benches, wish it well and hope to see a maximum take-up leading to the creation of the maximum possible number of new businesses and the encouragement of existing businesses.
    I believe that the whole House would wish to encourage wider share ownership by employees and employees to take a stake in their own business. There is no difference between Back Benchers and my hon. and learned Friend the Minister of State. My hon. and learned Friend was perhaps more forthcoming than is the case normally with Treasury Ministers in responding to the amendment tabled in Committee when he said:
    1300
    "I regret very much that we have had to exclude employees and working directors, but I hope that the Committee will recognise the difficulties that we have encountered."
    Those were obviously drafting difficulties.
    "Dare I throw out this challenge? If an amendment is put down on Report which faces squarely the difficulties that have defeated us, I shall approach it with an open mind."—[Official Report, Standing Committee E, 11 June 1981; c. 596.]
    From reading the report on that debate, it is perfectly clear that the Minister of State very much wanted to succeed in this, but he was defeated, understandably, through drafting.
    A number of us have put forward these amendments in an endeavour to respond to the Minister of State's very generous suggestion—that if we tabled amendments he would consider them carefully. This is the reason—and this, perhaps, is the answer to the hon. Member for Colne Valley (Mr. Wainwright)—why the maximum that is being proposed in these amendments is £1,000. We wanted to be modest because we recognise that there is a potential problem of tax evasion. We wanted to help the Treasury to put a much lower ceiling than that on the generality of the start-up scheme of £10,000 a very modest ceiling to encourage the Treasury to say "Yes"—my hon. and learned Friend is saying "Yes"—and to give it a go.
    I would much rather see it start—and Ministers accept this—at a modest level of £1,000 and gain confidence over the years ahead that there will not be a great deal of abuse, and then gradually raise it to £10,000 over two or three years, in two or three Finance Bills. We have approached this matter in a modest and sensible way. I hope that the bracket for employees and working directors will now be between the new minimum of £500—about which I am delighted—and the special maximum for the employees' stake of £1,000.
    I emphasise that we must not lose this new potential for investment in start-ups which can come particularly from middle managers in some small companies. They are not necessarily minnow companies. They may be medium-sized companies. We must remember that we are going back five years. These may be companies that are on the ascendancy but may need extra capital to grow and to undertake the next stage of expansion. Why on earth should not that capital come from people who work in the business? Both sides of the House want this provision.
    I beg my hon. and learned Friend the Minister—I say this in all friendliness—to respond to this debate in the way that he responded in Committee, with an open mind. I hope that he will accept the amendments, with the new maximum of £1,000. That will not lose the Revenue very much, even if there is the odd person who goes in for some form of abuse. We are talking about a maximum tax loss per employee per year of £600 if the employee is on the top rate of earned income tax, which is probably rather unlikely. We are talking about minute figures.
    We want to see the principle established. I ask my hon. and learned Friend to look at the amendments as favourably as he can, for reasons which have the support of the whole House.
    Mr. Peter Rees: I congratulate my hon. Friend the Member for Winchester (Mr. Browne) on his amendment. It has triggered off an extremely interesting debate. He did not have the privilege of serving with us in Standing Committee but obviously he has got the flavour of our debates and has added considerably to them tonight. We have had contributions from both sides of the House.

    1301
    I was interested to note that my hon. Friend was anxious that there should be a bombshell in the investment field. I do not know whether I quite envisage that kind of outcome to the proposals that we have devised and refined in Standing Committee, but I would be very happy if it showed the dynamism that he and I want of it.
    The amendments are designed to refine one small part of the scheme, but it is none the less an important part. I notice that the Liberal Party always endeavours to stake out a particular claim in respect of share incentives. Now Liberal Members are endeavouring to stake out a particular claim to the affection and loyalty of Aunt Agatha. Perhaps we should leave each hon. Member to his or her constituency, to compete for the favours of Aunt Agatha. I am confident that when Aunt Agatha has considered what we have devised for her portfolio of investments in business start-ups she will recognise where her essential interests are best safeguarded.
    Mr. Austin Mitchell: An interest in tax fiddling.
    12.30 am
    Mr. Rees: I am sure that Aunt Agatha will have listened to the intervention of the hon. Member for Grimsby (Mr. Mitchell), which was singularly out of key with other interventions from the Opposition Benches in this debate. However, he is right to remind us that these provisions could be subject to abuse unless we strike the right balance.
    Clearly, it has to be the concern of any person who is charged with my responsibilities to see that any worthwhile scheme, whether or not it be an investment bombshell—however one chooses to describe it—does not forfeit the confidence of the country because it is too susceptible to abuse. I may be encouraged at the margin by hon. Gentlemen on both sides to take a few risks. I am delighted to be encouraged by the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) not to be obsessed with tax avoidance, because all too often I receive charges of a different kind from different quarters of the House. On this occasion it is pleasant to be encouraged to discard any lingering inhibitions that I may still have.
    I take up one small matter that was raised by my hon. Friend the Member for Winchester. I see no reason why consultants should not invest in companies of this kind. My hon. Friend will notice that it is possible for an unpaid director to be remunerated for professional services. I hope that that will reassure him.
    Then there is the question of relations. Only those who are in direct line—great-grandparents, grandparents, parents and children—are regarded as connected and therefore debarred from participating in these attractive ventures. Wider degrees of relationship are not excluded. I hope that my hon. Friend will feel that the problem is not quite as pressing as he may at first have thought.
    In answer to my hon. Friend's suggestion that we should publish the present scheme, we have endeavoured to publicise it. Indeed, I was criticised—only mildly—by the Opposition in Committee Room 10, but I said then and I shall say now that we want the maximum take-up of the scheme. We hope that the greater the take-up, the greater the activity that will be generated and the more jobs that will be created. I am sure that the whole House hopes that the charms of the scheme will be publicised widely outside the House.
    1302
    A delicate balance is needed in a technical Revenue handout. All too often laymen outside the House regard books of this kind as having the force of law. We are anxious that such people should not be misled in any particular. I foresee that a handbook of that nature might end up almost as complex as the provisions themselves. As I said in Committee, I regret the complexity of the provisions, but we are dealing with complex industrial investment situations.
    I come to the issue that has caused most agitation among right hon. and hon. Gentlemen—the question of employees and their investments. Let me say in, I hope, ringing terms that the Liberal Party has no monopoly of concern for employee participation and share incentive schemes. The Conservative Party is happy to stand on its record. It looks back to the Finance Bills of 1972 and 1973, the considerable support given in 1978 to the measures then introduced, and the refinements introduced in last year's Finance Bill. I am sure that that will not be the end of the Conservative contribution to an important subject. We yield to none in the House in our concern for that objective.
    However, on this occasion we should not confuse too many objectives. The main purpose of these provisions is to ensure a flow of fresh capital into business start-ups. It does not detract from that objective that, in the first instance, for the reasons that I outlined, we thought it right to exclude paid directors and employees. I said—and I am sure that the Committee accepted the sincerity of what I said—that if we could have devised a reasonably watertight solution to the problem we should have done so.
    The difficulty that I outlined then and that I outline now is that it would be all too possible—not, of course, in every case, but in possibly enough cases—to excite the indignation and ruffle the susceptibilities of people like the hon. Member for Grimsby. He is the custodian of fiscal morality. None the less, we must take account of his susceptibility. We had an interesting debate last night. I did not notice that there was much to separate the hon. Member and myself on that issue. The Liberal Party might be engineering another Lib-Lab pact, but Liberal Members must have regard for the hon. Member's susceptibility.
    If paid employees and directors were, without any constraint, permitted to invest, a double relief might be achieved. My hon. Friend the Member for Surrey, North-West (Mr. Grylls) has laboured long and hard, and my hon. Friend the Member for Hertfordshire, South-West (Mr. Page) has contributed much to the refinement of the scheme. They say that we must take risks and that we could limit investment to £1,000.
    We have considered various monetary limits. We have considered the Liberal suggestion that there might be a limit on the remuneration paid to an employee. However, if we fixed remuneration too low we would probably debar the people who are entitled to participate. Their remuneration would probably be less than the average industrial wage, so they would not be able to participate. If we imposed a high limit, abuse would be a possibility. I hope that I am not being obsessive.
    Mr. Richard Wainwright: The hon. and learned Gentleman is in error in implying that we suppose that employees will derive their investment funds from earnings. I was at pains to point out that we have in mind the employee of a new business who has been made redundant by his former employer and has redundancy

    1303
    money. Alternatively, he may have a legacy, or a gift from Aunt Agatha, or he might have won on the pools. We are not suggesting that the opportunity should involve what the man can afford out of his earnings.
    Mr. Rees: I appreciate that. We could envisage a whole range of situations in which employees or directors were anxious to invest. There is no reason why they should not invest. However, the argument is that they should not attract the generous tax relief that gilds the scheme.
    It might have escaped the hon. Gentleman's keen accountant's eye that it would be possible for companies to set up a share incentive scheme and reward their employees in that way. I am not sure whether the hon. Gentleman is more concerned to ensure employee participation or whether he wishes to tap a fresh source of capital. I suspect that my hon. Friends want to tap a fresh source of capital. They want the widest possible reservoir. I have explained the possible dangers. It is for the House to judge. It may feel that I have been over-oppressive.
    We are setting up a novel scheme. There is no precedent in Western Europe or even the United States for tax relief of such staggering generosity. That being so, it would be better to proceed with modesty and caution in the first instance. As the scheme develops, I hope that we shall be able to decide whether it should be broadened in scope.
    I have not set my face in principle against participation by employees and directors. I want to avoid the consequences that may tarnish the scheme in the eyes of keen observers such as the hon. Member for Grimsby.
    Mr. Grylls: May I press my hon. and learned Friend about the limited reliefs on the special ceiling of £1,000 instead of £10,000, in the amendments? The risk is so small that it is surely worth establishing a principle. We have tried to meet the point made in Committee and to ensure that the risks to the Treasury are minimal. At least the principle should be encouraged. An outside investor with £1,000 is allowed tax relief, but the employee with £1,000 is not allowed tax relief. That does not make sense. I beg my hon. and learned Friend to consider the matter again.
    Mr. Rees: I took very careful account, as I always do, of what my hon. Friend said. He knows that during the past six weeks I have taken careful account of everything that he has said. He was generous enough to pay tribute to that. He will see in the Bill a response to points made not only by himself but by my hon. Friend the Member for Hertfordshire, South-West and a whole range of people from both inside and outside the House. There has been no question of a closed mind. We are now fastening on one particular point. I know that it is of importance.
    All that my hon. Friend is doing by imposing a £1,000 limit is saying that there may be a risk but the damage will be so limited that we can afford to carry it. He is not saying that he has devised a waterproof solution. He is saying that if the water does seep in, it will not be considerable and the Treasury can paddle around in its gumboots. That may be so, but I should prefer to remain dry, at least for the first year or so of the scheme.
    I wish to make a more fundamental point, which may have missed my hon. Friend's keen eye. The point of the scheme is to attract outside capital investment. The close member of the family, perhaps even the employee and
    1304
    certainly the working director, will in any case have an incentive to invest, because his livelihood is involved. The scheme was devised to fill a gap that was perceived even by a Royal Commission presided over by the right hon. Member for Huyton (Sir H. Wilson). If my hon. Friends want a point of principle on which to fasten, that is it. It is a scheme for outside investors.
    Mr. John Browne: This is a crucial point. Of course we want outside capital, but surely giving the tax deduction facility is taking Revenue money from the Government along for the ride. Surely one of the aims is to get the equivalent of Government funding into the investments, which have contact with the entrepreneur. I cannot understand the objection to having a father, who would otherwise invest in the company, being encouraged to invest more in high-risk operations with which he is connected and taking the Government along for the tax-deducted part.
    Mr. Rees: My hon. Friend makes my point. If the father will invest in any event, is there any reason why the general body of taxpayers should subsidise him up to 75 per cent? I know that my hon. Friend did not follow the matter as closely as those of us who were privileged to serve on the Committee.
    It was emphasised on many occasions that the scheme was designed to attract outside capital into start-up ventures. We could have devised a quite different scheme. We could have decided to salvage companies on the downward slope. We could have encouraged people inside the companies. But the equity gap that was perceived was the difficulty of attracting outside capital into the small, usually unquoted companies. On a point of principle I ask the House, attractive though the amendments are, to reject them.
    Mr. Richard Wainwright: Before the Minister concludes his highly reasoned speech, will he turn to the point that was not debated in Committee but is embodied in amendment No. 87? That provides the safeguard that the remuneration must be reasonable and necessary. That is the established formula, used by Government, to give the commissioners power to disregard remuneration that is extravagant.
    Mr. Peter Rees: No, there are one or two questions that on the whole have been productive of litigation. It is not very easy for the courts to determine what is reasonable or necessary. That is not a perfect solution.
    There is certainly unanimity, except possibly for the hon. Member for Grimsby, in the view that this is a scheme towards which we should move. The question is at what pace and when. I say with diffidence to the House that we should at least get the scheme off the ground before considering how it might be modified and broadened. On that basis, I hope that hon. Members on both sides of the House—
    Mr. Grylls rose—
    Mr. Rees: No. I am under great pressure. I have given way to my hon. Friend on at least three occasions. I hope that he will forgive me if I do not do so now.
    12.45 am
    There is a further amendment, standing in the name of my right hon. and learned Friend the Chancellor of the Exchequer, that is on a different matter. I commend amendment No. 88 to the House. It was tabled in response

    1305
    to an argument advanced by my right hon. Friend the Member for Crosby (Sir G. Page). It relates to determining the assests in the course of a winding-up operation, which determines to a degree whether a person may or may not participate arid whether he is regarded as associated with the company. It should be possible to disregard normal commercial loans. The amendment meets what I hope is an entirely uncontroversial issue. It is with profound regret that I must advise the House to resist the blandishments that have been showered on it from both sides.
    Mr. John Browne: I thank my hon. and learned Friend for his remarks. Surely the aim should be to attract capital into high-risk investments, and not only new capital. I have great sympathy with the amendment of the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel). If he presses it to a Division, I hope that he will understand that I also have great respect for my hon. and learned Friend, who is one of the foremost tax attorneys in the country. Therefore, I shall not support the right hon. Gentleman's amendment if he divides the House. I shall not be pressing my amendment to a Division.
    Mr. David Steel; It would be wrong if the House passed on to the next debate without registering its view on the issue before it. The argument in support of the amendment has been advanced strongly from both sides of the Chamber. I was of a mind to think that the amendment that was being pursued by certain Conservative Back Benchers had great merits as a modest, conservative and cautious approach to the same end as that which my right hon. and hon. Friends are advocating.
    The Minister of State has talked about the Government's staggering generosity. It is disappointing that he should be so obsessed by the hon. Member for Grimsby (Mr. Mitchell), who is out on a limb on this issue, as to pray him in aid without taking the bold step of saying "Let us go some way to extending the scheme to employees." The objection of the hon. and learned Gentleman to the Liberal amendment is that it might cause difficulties in the courts. That is a strange objection as we took the wording directly from another part of the Bill. It is novel for a Minister to say, in effect, "We do not like the wording that we have chosen because it might cause difficulties in the courts."
    The hon. and learned Gentleman says that the Liberal amendment is not a perfect solution. That may be. We do not have a perfect solution. Conservative Back Benchers said that they did not have a perfect solution. The hon. and learned Gentleman has weighed up the merits of boldness to encourage employees to invest in new businesses for which Conservative Members were arguing and he has offset that against the admitted possibility of some loss of revenue to the Treasury. He has come down on the side of safety and caution. That is sad.
    The hon. and learned Gentleman said in his opening words that he yielded to nobody in his zeal and the Conservative Party yielded to no one in its zeal to move towards employee participation, but in this scheme he is introducing positive discrimination against employees. It is not simply that he is not doing anything to encourage employee participation. He is actually introducing discrimination against them.
    The House has expressed its view entirely against the Minister's argument, and despite the lateness of the hour the House should have the opportunity again to express its
    1306
    view by means of a Division. I invite the House to support amendment No. 83, the hon. Member for Winchester (Mr. Browne) having indicated that he is not prepared to press amendment No. 82.
    Mr. Deputy Speaker (Mr. Ernest Armstrong): As the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) spoke after the hon. Member for Winchester (Mr. Browne) said that he would not press amendment No. 82, I must put the amendment to the House.
    Amendment negatived.

  Clause 52

    INDIVIDUALS QUALIFYING FOR RELIEF
    Amendment proposed: No. 83, in page 41, line 25, after '(a)', insert 'subject to subsection (3) below.—[Mr. David Steel.]
    Question put, That the amendment be made:—
    The House divided: Ayes 6, Noes 176.

    Division No. 279]

    [12.50 am

    AYES

    Horam, John

    Wainwright, R. (Colne V)

    Howells, Geraint

    Penhaligon, David

    Tellers for the Ayes:

    Ross, Stephen (Isle of Wight)

    Mr. A. J. Beith and

    Steel, Rt Hon David

    Mr. David Alton.

    NOES

    Adley, Robert

    Emery, Peter

    Alexander, Richard

    Eyre, Reginald

    Alison, Michael

    Fairgrieve, Russell

    Ancram, Michael

    Fenner, Mrs Peggy

    Baker, Kenneth (St.M'bone)

    Fisher, Sir Nigel

    Baker, Nicholas (N Dorset)

    Forman, Nigel

    Beaumont-Dark, Anthony

    Fraser, Peter (South Angus)

    Bendall, Vivian

    Garel-Jones, Tristan

    Benyon, W. (Buckingham)

    Glyn, Dr Alan

    Best, Keith

    Goodlad, Alastair

    Bevan, David Gilroy

    Gorst, John

    Biffen, Rt Hon John

    Gow, Ian

    Blackburn, John

    Gower, Sir Raymond

    Blaker, Peter

    Grant, Anthony (Harrow C)

    Boscawen, Hon Robert

    Gray, Hamish

    Bowden, Andrew

    Griffiths, E. (B'y St. Edm'ds)

    Braine, Sir Bernard

    Griffiths, Peter Portsm'th N)

    Bright, Graham

    Grist, Ian

    Brinton, Tim

    Gummer, John Selwyn

    Brittan, Leon

    Hampson, Dr Keith

    Brown, Michael (Brigg & Sc'n)

    Hastings, Stephen

    Buchanan-Smith, Alick

    Havers, Rt Hon Sir Michael

    Buck, Antony

    Hawksley, Warren

    Bulmer, Esmond

    Henderson, Barry

    Butcher, John

    Heseltine, Rt Hon Michael

    Butler, Hon Adam

    Hicks, Robert

    Cadbury, Jocelyn

    Higgins, Rt Hon Terence L.

    Carlisle, John (Luton West)

    Hogg, Hon Douglas (Gr'th'm)

    Carlisle, Kenneth (Lincoln)

    Holland, Philip (Carlton)

    Carlisle, Rt Hon M. (R'c'n)

    Hooson, Tom

    Clark, Sir W. (Croydon S)

    Hunt, David (Wirral)

    Clarke, Kenneth (Rushcliffe)

    Hunt, John (Ravensbourne)

    Colvin, Michael

    Jenkin, Rt Hon Patrick

    Cope, John

    Jessel, Toby

    Corrie, John

    Jopling, Rt Hon Michael

    Cranborne, Viscount

    Joseph, Rt Hon Sir Keith

    Crouch, David

    Kellett-Bowman, Mrs Elaine

    Dean, Paul (North Somerset)

    King, Rt Hon Tom

    Douglas-Hamilton, Lord J.

    Knight, Mrs Jill

    du Cann, Rt Hon Edward

    Knox, David

    Dunn, Robert (Dartford)

    Lamont, Norman

    Durant, Tony

    Lang, Ian

    Eden, Rt Hon Sir John

    Lawrence, Ivan

    Edwards, Rt Hon N. (P'broke)

    Lawson, Rt Hon Nigel

    Eggar, Tim

    Lennox-Boyd, Hon Mark

    1307

    Lester, Jim (Beeston)

    Rossi, Hugh

    Lewis, Kenneth (Rutland)

    Sainsbury, Hon Timothy

    Lloyd, Peter (Fareham)

    Shelton, William (Streatham)

    Macfarlane, Neil

    Shepherd, Colin (Hereford)

    MacKay, John (Argyll)

    Shersby, Michael

    McNair-Wilson, M. (N'bury)

    Silvester, Fred

    McNair-Wilson, P. (New F'st)

    Sims, Roger

    McQuarrie, Albert

    Speed, Keith

    Madel, David

    Speller, Tony

    Major, John

    Spicer, Jim (West Dorset)

    Marland, Paul

    Spicer, Michael (S Worcs)

    Marshall, Michael (Arundel)

    Squire, Robin

    Mather, Carol

    Stanbrook, Ivor

    Mawhinney, Dr Brian

    Stanley, John

    Maxwell-Hyslop, Robin

    Steen, Anthony

    Mayhew, Patrick

    Stevens, Martin

    Mills, Iain (Meriden)

    Stewart, Ian (Hitchin)

    Mills, Peter (West Devon)

    Stewart, A. (E Renfrewshire)

    Mitchell, David (Basingstoke)

    Stradling Thomas, J.

    Moate, Roger

    Taylor, Teddy (S'end E)

    Monro, Hector

    Tebbit, Norman

    Morris, M. (N'hampton S)

    Temple-Morris, Peter

    Morrison, Hon P. (Chester)

    Thomas, Rt Hon Peter

    Mudd, David

    Thompson, Donald

    Murphy, Christopher

    Townsend, Cyril D, (B'heath)

    Neale, Gerrard

    van Straubenzee, W. R.

    Needham, Richard

    Vaughan, Dr Gerard

    Newton, Tony

    Viggers, Peter

    Normanton, Tom

    Wakeham, John

    Page, Rt Hon Sir G. (Crosby)

    Waldegrave, Hon William

    Page, Richard (SW Herts)

    Walker, B. (Perth)

    Parris, Matthew

    Wall, Patrick

    Patten, Christopher (Bath)

    Ward, John

    Pattie, Geoffrey

    Watson, John

    Pawsey, James

    Wells, John (Maidstone)

    Percival, Sir Ian

    Wells, Bowen

    Pollock, Alexander

    Whitney, Raymond

    Price, Sir David (Eastleigh)

    Wickenden, Keith

    Proctor, K. Harvey

    Wiggin, Jerry

    Rathbone, Tim

    Wolfson, Mark

    Rees, Peter (Dover and Deal)

    Young, Sir George (Acton)

    Rees-Davies, W. R.

    Rhodes James, Robert

    Tellers for the Noes:

    Roberts, M. (Cardiff NW)

    Mr. Anthony Berry and

    Roberts, Wyn (Conway)

    Mr.Peter Brooke.

    Question accordingly negatived.
    Amendment made: No. 88, in page 42, line 38, leave out from 'to' to end of line 41 and insert
    'equity holders of the company, and for the purposes of this subsection—

    (a) the persons who are equity holders of the company; and

    (b) the percentage of the assets of the company to which the individual would be entitled,

    shall be determined in accordance with paragraphs 1 and 3 of Schedule 12 to the Finance Act 1973, faking references in paragraph 3 to the first company as references to an equity holder and references to a winding up as including references to any other circumstances in which assets of the company are available for distribution to its equity holders.' .—[Mr. Peter Rees.]

  Clause 53

    NEW QUALIFYING COMPANIES
    Amendment made: No. 89, in page 44, line 1, after '(6)', insert
    'Where the relevant period begins after the incorporation of the company the requirements of subsection (3) above must have been complied with since its incorporation; but'.—[Mr. Peter Rees.]

  Clause 54

    NEW QUALIFYING TRADES
    1 am
    Mr. Peter Rees: I beg to move amendment No. 90, in page 44, line 23, after '(2)', insert ', (2A)'.
    Mr. Deputy Speaker: With this it will be convenient to take the following:
    Government amendments Nos. 91 and 92.
    Amendment No. 93, in page 44, line 32, after 'fees', insert
    'or receiving royalties or licence fees except where such royalties or licence fees arise out of or accrue in respect of assets produced or made or caused to be so produced or made by the company in the course of its trade.'.
    Government amendments Nos. 94 to 96 and 193.
    Mr. Rees: The amendments are designed principally to admit as qualifying trades the ordinary trade of retail and wholesale, which was a point much pressed on us in Committee. I said that I would consider it. There were certain difficulties. I hope that we have found a solution that will commend itself to the House.
    Amendment No. 93 is in the name of my hon. Friend the Member for Surrey, North-West (Mr. Grylls). I appreciate the difficulties. We shall consider the matter, but it will not be possible to do anything this year. We may return to it next year.
    I also draw the House's attention to Government amendment No. 96, which will also admit farming companies. I hope that this will please the House.
    Mr. Grylls: Amendment No. 93 has some importance. It is to ensure that film and video makers who produce the software are included. Where they are earning royalties on assets that they have produced in their business and trade, there is no logic in not including them. The industry needs encouraging. It would be sensible if new money could be included in the scheme.
    I am delighted to hear that my hon. and learned Friend will look at the matter and perhaps make some provision in the next financial year.
    Amemdment agreed to.
    Amendments made:
    No. 91, in page 44, line 27, leave out 'goods'.
    No. 92, in page 44, line 28, at end insert—
    ('aa) dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution; or'.
    No. 94, in page 44, line 36, leave out
    'paragraph (a), (b), (c) or (d) above'
    and insert
    'any of the foregoing paragraphs'.
    No. 95, in page 44, line 39, at end insert—
    '(2A) For the purposes of paragraph (aa) of subsection (2) above—

    (a) a trade of wholesale distribution is one in which the goods are offered for sale and sold to persons for resale by them or for processing and resale by them;

    (b) a trade of retail distribution is one in which the goods are offered for sale and sold to members of the general public for their use or consumption;

    and in determining for the purposes of that paragraph whether a trade is an ordinary trade of wholesale or retail distribution regard shall be had to the extent to which it has the features mentioned in Schedule (Relief for investment in new corporate trades: wholesale and retail distribution) to this Act, those in Part I being regarded as indications that the trade is such an ordinary trade and those in Part II being regarded as indications of the contrary.'.

    1309
    No. 96, in page 46, line 6, leave out paragraph (a).—[Mr. Peter Rees.]

  Clause 55

    DISPOSAL OF SHARES
    Amendments made:
    No. 98, in page 46, line 30, leave out from 'Where' to 'any' in line 32 and insert
    'the relief has been given to an individual in respect of shares in a company which have been issued to him at different times'.
    No. 99, in page 46, line 34, leave out from 'issued' to end of line 35 and insert
    'earlier rather than to those issued later'.
    No. 100, in page 46, line 36, leave out first 'the'.
    No. 101, in page 46, line 40, leave out from 'holding' to end of line 42 and insert—

    '(a) a disposal of the whole or part of the new holding shall be treated for the purposes of this section as a disposal of the whole or a corresponding part of those shares; and

    (b) the new holding shall be treated for the purposes of subsection (2) above as shares in respect of which the relief has been given.'.—[Mr. Peter Rees.]

  Clause 56

    VALUE RECEIVED FROM COMPANY
    Amendments made:
    No. 102, in page 47, line 14, leave out 'or makes to him' and insert
    'other than a debt which was incurred by the company—

    (i) on or after the date on which he subscribed for the shares in respect of which the relief is claimed; and

    (ii) otherwise than in consideration of the extinguishment of a debt incurred before that date;

    (bb) makes to the individual.'.
    No. 103, in page 47, line 38, leave out 'or (b)' and insert , (b) or (bb)'.
    No. 104, in page 48, line 13, leave out from 'individual' to second 'the' in line 14 and insert
    'to whom ordinary shares in a company have been issued at different times'
    No. 105, in page 48, line 15, leave out from 'of' to end of line 16 and insert
    'shares issued earlier rather than in respect of shares issued later'.—[Mr. Peter Rees.]

  Clause 57
    PREVENTION OF MISUSE
    Amendment made: No. 106, in page 49, line 26, after 'issued', insert 'ordinary'.—[Mr. Peter Rees.]
  Clause 59
    CLAIMS
    Amendment made: No. 108, in page 52, line 23, leave out '£1,000' and insert '£500'.—[Mr. Peter Rees.]
  Clause 61

    INFORMATION
    Amendments made: No. 109, in page 54, line 26, leave out 'thirty days' and insert
    'sixty days of his coming to know'.
    No. 110, in page 54, line 35, leave out 'thirty' and insert 'sixty'.
    1310
    No. 111, in page 55, line 2 leave out 'thirty' and insert 'sixty'.
    No. 112, in page 55, line 11, leave out 'thirty' and insert 'sixty'.
    No. 113, in page 55, line 20, leave out 'thirty' and insert 'sixty'.
    No. 114, in page 56, line 2, after 'holds', insert 'or has held'.
    No. 115, in page 56, line 3, after 'are', insert 'or were'.
    No. 116, in page 56, line 4, after 'shares', insert 'which are or were'.
    No. 117, in page 56, line 5, after 'are', insert 'or were'.
    No. 118, in page 56, line 6, at end insert—
    '(9) No obligation as to secrecy imposed by statute or otherwise shall preclude the inspector from disclosing to a company that relief has been given or claimed in respect of a particular number or proportion of its shares.'.—[Mr. Peter Rees.]

  Clause 62

    CAPITAL GAINS TAX
    Mr. Peter Rees: I beg to move amendment No. 119, in page 56, line 9, after 'gain', insert 'or loss'.
    Mr. Deputy Speaker: With this it will be convenient to take the following amendments:
    Government amendment No. 120.
    No. 121, in page 56, line 11, leave out
    'the amount of the relief'
    and insert
    'the income tax from which the individual has been relieved'.
    Government amendments Nos. 122 and 123.
    Mr. Rees: This amendment is designed purely to ensure that no one will suffer capital gains tax on disposing of his shares if he incurs a real commercial loss. It was brought to my attention that the Bill as at present drafted could have resulted in that rather unattractive position. The amendment meets that point. On that basis, I commend it to the House.
    Amendment agreed to.
    Amendments made: No. 120, in page 56, line 11, leave out from 'reduced' to end of line 12 and insert—

    '(a) where paragraph (b) below does not apply, by an amount equal to one-half of the amount of the relief;

    (b) where those sums exceed the consideration, by an amount equal to

    (i) the whole amount of the relief; or

    (ii) the excess, whichever is the less;

    but the foregoing provisions of this subsection shall not apply to a disposal falling within section 44(1) of the Capital Gains Tax Act 1979 (disposals between husband and wife)'.

    No. 122, in page 56, line 13, leave out subsection (2) and insert
    '(2) Section 65 of the said Act of 1979 (pooling of shares etc.) shall not apply to shares in respect of which any relief has been given and not withdrawn; and any question whether a disposal relates to such shares or to other shares shall for the purposes of capital gains tax be determined as for the purposes of section 55 above.
    (3) Where an individual holds ordinary shares in a company and the relief has been given in respect of some but not others, then, if there is within the meaning of section 77 of the said Act of 1979 a reorganisation affecting those shares, section 78 of that Act shall apply separately to the shares in respect of which the relief has been given and to the other shares (so that the shares of each kind are treated as a separate holding of original shares and identified with a separate new holding).'.
    No. 123, in page 56, line 23, leave out subsection (4).—[Mr. Peter Rees.]

  Clause 65

    CARS AVAILABLE FOR PRIVATE USE
    The Chief Secretary to the Treasury (Mr. Leon Brittan): I beg to move amendment No. 125, in page 58, line 39, at end insert—
    '(2A) After subsection (2) there shall be inserted—
    "(2A) Where in any year a person is taxable in respect of the benefit of a car under this section, he shall not be taxable—

    (a) under section 181 of the Taxes Act in respect of the discharge of any liability of his in connection with the car;

    (b) under section 36 or 36A of the Finance (No. 2) Act 1975 in respect of any voucher or credit token to the extent that it is used by him—

    (i) for obtaining money which is spent on goods or services in connection with the car, or

    (ii) for obtaining such goods or services;

    (c) under section 60 above in respect of any payment made by him in respect of expenses incurred by him in connection with the car.".'.

    Mr. Deputy Speaker: With this it will be convenient to take amendment No. 129, in page 59, line 18, at end insert—
    '(8) Where in any year beginning on or after 6th April 1982 a car is made available to a person within the meaning of subsection (1) above:—

    (a) no charge to income tax shall be made in respect of that car itself, or any of the incidental costs of maintaining it in a roadworthy condition, other than under this section; and

    (b) the incidental costs of so maintaining a car include any sums paid to or put at the disposal of or paid away by the person mentioned in subsection (1) above and any other facilities in relation to any expenditure incurred by him in maintaining that car in a roadworthy condition but does not extend to any fuel provided to the said person in relation to that car or otherwise.'.

    Mr. Brittan: This amendment is designed to remove the possibility that a director or higher-paid employee who is liable to a scaled charge in respect of a car or petrol might also be liable under the normal charging rules of schedule E and under the special rules applying to vouchers or credit cards or the special rules relating to reimbursed expenses. I commend it to the House.
    Amendment agreed to.
    Mr. Brittan: I beg to move amendment No. 126, in page 58, line 42, leave out 'paragraphs 2 to 5' and insert
    'sub-paragraph (1) of paragraph 2 of Part II of that Schedule in a case in which sub-paragraph (2)(b) of that paragraph applies or by virtue of paragraphs 3 to 5 of that Part'.
    This amendment enables an employer who during any pay period first makes a car available or replaces a car available to an employee, who is liable to tax under section 64 of the Finance Act 1976 in respect of the benefit of that car, to calculate the amount of the car benefit for the pay period in which the car is made available or changed and apply PAYE to that figure without waiting for a notification from the inspector. It is, therefore, an easement of the position, and I commend the amendment to the House.
    Amendment agreed to.
    Mr. Brittan: I beg to move amendment No. 127, in page 59, line 13, leave out
    'for which he must account'
    and insert
    'which he is liable to pay'.
    This small technical amendment is designed to make it clear that the only amounts which can give rise to a charge on the director or higher-paid employee under the new
    1312
    section 64(7) of the Finance Act 1976 are amounts of tax in respect of car benefits which are ultimately to be paid by the employer and which the employer has been unable to recover out of payments of cash emoluments, out of tax repayments or in some other way from the employee.
    Amendment agreed to.
    Sir William Clark: I beg to move amendment No. 128, in page 59, line 14, leave out from 'shall' to end of line 18 and insert
    'on notifying the Board of the amount of such unrecovered income tax, be discharged from any liability to account for it to the Board, and all such consequences shall follow as if there had been made on the employee on such date as he is notified by the inspector of the amount so unrecovered an assessment under Schedule E to the best of the inspector's judgment under which the amount of tax charged on the employee is the amount so unrecovered'.
    I am sorry, but the formality ends now. I do not think that we need spend too much time on this. If under the PAYE regulations an employee gets a benefit, from a car or whatever, and consequently that being added to his income means that because of his coding there is insufficient income the following month or week to repay the employer for the tax which is due on the increased benefit which comes in during the fiscal year, this should not be a liability on the employer. It should be for the Inland Revenue to collect it from the employee.
    Mr. Brittan: This amendment is the same as that tabled by my hon. Friend the Member for Croydon, South (Sir W. Clark) in Committee. He will be familiar with the points that were raised then. To some extent, the point has been met by the draft regulations that have been placed in the Library and by Government amendment No. 127, which the House has just accepted. That amendment and the draft regulations will ensure that when an employer has made a mistake in good faith and has acted with reasonable care, but failed to apply PAYE correctly on the benefits, the inspector may direct that the unpaid tax be recovered from the employee, not the employer.
    In those circumstances, I hope that my hon. Friend will not feel it necessary to press his amendment.
    Sir William Clark: I am grateful to the Chief Secretary for that reply. However, I urge one point on him. I hope that if cases were brought to my right hon. and learned Friend's attention in which the Inland Revenue declared that the employer should pay PAYE tax which was the employee's responsibility—simply because of the benefits—he would deal with them sympathetically.
    I am sure that hon. Members will agree that we should try to put measures into legislative form and should not leave matters to the discretion of departments such as the Inland Revenue. I shall be happy to withdraw the amendment if my right hon. and learned Friend gives the assurance that I have sought.
    Mr. Brittan: I assure my hon. Friend that if such difficulties arise I shall consider them sympathetically.
    Sir William Clark: I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.

  Clause 66

    CAR FUEL
    Mr. Brittan: I beg to move amendment No. 131, in page 59, line 29, leave out from 'year' to end of line 3 on page 60 and insert
    'in the case of a person employed in director's or higher-paid employment fuel is provided by reason of his employment for a car which is made available as mentioned in section 64 above, he shall be treated for the purposes of the Income Tax Acts (and in particular section 204 of the Taxes Act (pay as you earn)) as being paid by his employer in that year an emolument of his employment of an amount equal to whatever is the cash equivalent of that benefit in that year.
    (2) Subject to the following provisions of this section, the cash equivalent of that benefit shall be ascertained from Table A below where the car has an internal combustion engine with one or more reciprocating pistons and from Table B below in the case of other cars; and for the purposes of Table A below a car's cylinder capacity is the cylinder capacity of its engine calculated as for the purposes of the Vehicles (Excise) Act 1971 or the Vehicles (Excise) Act (Northern Ireland) 1972.

    Table A

    Cars having a cylinder capacity

    Cylinder capacity of car in cubic centimetres

    Cash equivalent

    1300 or less

    £270

    More than 1300, but not more than 1800

    £360

    More than 1800

    £540

    (3) Without prejudice to the generality of subsection (1) above fuel is provided for a car if—

    (a) any liability in respect of the provision of fuel for the car is discharged;

    (b) a voucher within the meaning of section 36 of the Finance (No. 2) Act 1975 or a credit-token within the meaning of section 36A of that Act is used to obtain fuel for the car or money which is spent on such fuel; or

    (c) any sum is paid in respect of expenses incurred in providing fuel for the car.

    (4) The Treasury may by order taking effect from the beginning of any year beginning after it is made (but not of any year earlier than 1983–84) substitute a different Table for either of the Tables in subsection (2) above.
    Orders under this subsection shall be made by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.
    (5) Where paragraph 2 or 3 of Part II of Schedule 7 to this Act applies to reduce the cash equivalent of the benefit of the car for which the fuel is provided, the same reduction shall be made to the cash equivalent of the benefit of the fuel ascertained under subsection (2) above.
    (6) If in the relevant year—

    (a) the employee is required to make good to the person providing the fuel the whole of the expense incurred by him in or in connection with the provision of fuel for his private use and he does so; or

    (b) the fuel is made available only for business travel, the cash equivalent is nil.

    (7) For the purposes of section 204 of the Taxes Act no alteration of the cash equivalent shall be made by virtue of sub-paragraph (1) of paragraph 2 of Part II of Schedule 7 to this Act in a case in which sub-paragraph (2)(b) of that paragraph applies or of paragraph 3 of that Part or of subsection (6)(a) above unless the inspector has notified the employer of the alteration to be made.
    (8) Subsections (6) and (7) of section 64 above shall apply in relation to the amount referred to in subsection (1) above as they apply to the amount referred to in subsection (1) of that section.".'.
    Mr. Deputy Speaker: With this, it will be convenient to take the following amendments to the proposed amendment:
    (a), in line 4, leave out from 'of' to 'as' in line 5, and insert
    'this Chapter and, with effect from 1983–84, shall also be treated for the purposes of section 204 of the Taxes Act (pay as you earn)'.
    (b), in line 46, at end insert—
    '(6A) If in the relevant year the employee is required to make good to the person providing the fuel a sum falling short of the whole expense mentioned in paragraph (a) of the last preceding subsection the cash equivalent shall be reduced by the amount so made good.'.
    (c), in line 51, after 'subsection (6)(a)', insert 'or (6A)'; and amendment No. 132, in page 59, line 39, at end insert—
    '(1A) The charge under subsection (1) above shall apply to the exclusion of any other charge to tax not only when fuel is provided in kind but also when arrangements exist whereby the

    1315
    cost of fuel made available to the person or a member of his family or household is not ultimately borne by that person including transactions whereby payment for such fuel is initially made by that person and he is later reimbursed and transactions where credit arrangements exist of which he is able to take advantage.'.
    Mr. Brittan: The amendment introduces the Government's proposals for taxing petrol and other fuel provided for use in a company car, taxable under section 64 of the Finance Act 1976. It replaces the existing skeleton clause 66 and contains the detailed rules for charging the benefit and scale tables, by reference to which the charge is to be calculated. The table speaks for itself, but if any hon. Member wishes me to elaborate any point I shall be happy to do so.
    Mr. Peter Viggers: I understand that representatives of many companies, including those of the CBI, are worried that it will not be possible to implement these provisions in terms of PAYE. I particularly commend amendment (a), which delays the implementation of PAYE for one year to allow companies to appraise the scheme and to implement it later rather than earlier. It does not alter the implementation of tax; it merely delays the implementation of PAYE. Perhaps the Chief Secretary will say whether the Government are prepared to accept the amendments.
    Mr. Brittan: I am sorry to disappoint my hon. Friend the Member for Gosport (Mr. Viggers) but I cannot commend the amendments to the amendment. There are no interim difficulties that would be assisted by a delay in which they could be sorted out. I appreciate that the scheme is not exactly universally popular, but by delaying it for a year we shall not be able to sort out the problems. Although one is tempted to go down the line that my hon. Friend has suggested, it would be an exercise inconsistent with the Government's intentions, having produced a reasonable scheme. I recommend its introduction now.
    1.15 am
    Mr. Cook: The Opposition take no exception to the clause as drafted, but I take the opportunity to repeat to the Chief Secretary the point that I made in Committee, which is that we still have a rate of tax on cars that are benefits in kind that is more generous than the rates envisaged when the proposals were introduced for the 1976 Act. It is worth making the point that the scale rates provided in the amendment only just overhaul the bottom end of the scale rates that were originally proposed for inclusion in the 1976 Act. In the 1976 Act the cash equivalent for a car with an engine capacity of less than 1,000 cc was £250. We have finally managed to pass a figure that was thought appropriate six years ago.
    I appreciate that in his figures the Chief Secretary provides for a 20 per cent. uprating over the previous figure. One appreciates that that is the advance of inflation, but at that rate of increase it will be many years before we get back to the figures that were thought appropriate five years ago and many years yet before we catch up with the figures that the Automobile Association used to demonstrate the cost of maintaining a car and, by implication, the advantage of obtaining a company car.
    Although I do not want to stand in the way of the amendment, I take the opportunity to urge on the Chief
    1316
    Secretary the need to make more rapid progress to obtain a cash equivalent which bears a closer approximation to the real value of the car as a benefit in kind.
    Amendment agreed to.
    Mr. Cook: I beg to move amendment No. 133, in page 60, line 16, at end insert
    'other than a travel concession provided by a transport undertaking to its employees'.
    The amendment has been tabled as an avoidance-of-doubt proposal. I hope that it will be possible for us to obtain an assurance that the amendment is redundant and that it will not be necessary to press it to a Division.
    As the Chief Secretary will be aware, the Opposition have no quarrel with the principle of the clause. We accept that it is right and proper that if an employer furnishes a transport voucher to his employees to enable them to buy season tickets for use on the railways, it is proper that the employees should be taxed on the benefit in kind that they receive as a result.
    We did not challenge the clause in Committee because we understood that it did not disturb the basis of assessment laid down in the 1975 Act. After all, these are amendments to the 1975 Act. Section 36, which the clause amends, provides that the basis of assessment is laid down that the employee will be taxed by an amount equal to the expense incurred by the person providing the voucher.
    On that basis we found the clause acceptable. Since then, as the Chief Secretary will be aware, some disquiet has arisen because it is suspected that the clause may bite on the travel concessions given by transport undertakings to their staff. The disquiet has surfaced especially in British Rail, but, presumably, if British Rail's anxieties are well-founded, by the same token the disquiet will some day apply in the airlines, where by the same method the travel concessions that airlines extend to their staff may also come within tax.
    I am happy to go on adding to the list of transport undertakings whose employees might find their travel concessions taxed by the same method that applies to the employees of British Rail. If airline staff were to be taxed on the face value of the travel concessions that they receive, they would face a substantial tax burden.
    It may assist the House and the Chief Secretary if I indicate briefly the basis of the travel concession operated by British Rail. It provides a travel concession to its staff in the full knowledge that on most of its trains there will be empty seats. On average, the occupancy rate on trains run by British Rail is less than 50 per cent. The chances are, therefore, that on the great majority of trains which those holding a travel concession join there will be empty seats in which they may sit. If there are no empty seats, British Rail has a marked reluctance to turn away passengers seeking to join a train, even if it is necessary for a passenger to stand all the way to his destination.
    It would, therefore, be difficult to establish that any passenger has ever been displaced by a British Rail employee holding a travel concession and travelling at a reduced rate. For that reason, it would be difficult to establish that British Rail incurred any real cost in providing a travel concession to its employees who travel at a marginal rate of nil to British Rail.
    There is, of course, administrative cost, but it is more than fully met by the charge which British Rail makes to its employees for the concessionary tickets that it sells to those employees. Indeed, those concessionary tickets are

    1317
    purchased at one-quarter of the face value, and that more than covers the administrative cost. The relative figures are £100,000 for administrative costs and £6 million for the revenue from the sale of those concessionary tickets to British Rail's own employees. British Rail contrives to make a modest profit out of the sale of travel concessions to its own staff and does not bear any net cost as a result of providing that concession.
    If the concessions were to come within tax, I can tell the Chief Secretary what would happen. The unions would inevitably come under pressure from their members to obtain cash payments rather than travel concessions, and a cash payment equivalent to the benefit to the employee of the travel concession at present employed. If that were to happen, as the Chief Secretary will apprehend, British Rail would he obliged to meet in full the cash payment to its employees, which would be at real cost to British Rail, to replace a concession which at present costs British Rail nothing. That would, as he will immediately apprehend, place pressure. on British Rail's finances, in turn place pressure on the Government to support British Rail, and ultimately work its way through to an effect on public expenditure.
    I am sure that the Chief Secretary would agree with me that that would be a most unsatisfactory and undesirable outcome, and hope that he will be able to assure me and the House that those fears which are entertained in British Rail are unfounded, and that he will be able to give us an assurance that the present basis, which is contained in section 36 of the 1975 Act, will not be disturbed in any way by this clause.
    I have a letter which was sent by the Chancellor of the Exchequer to Sir Peter Parker on 12 June. In it the Chancellor says:
    "I understand that you have supplied a considerable amount of evidence which is now being considered by the Inland Revenue and that your view is that that evidence establishes that your board does not incur expense in providing the concessions in question. If that is indeed the case it would appear that the effects of clause 66"—
    it has now been renumbered as clause 67—
    "on your industry will be neutral. However, I can well understand your concern to see the question resolved with the minimum delay, and have asked the Inland Revenue to keep me informed of progress ."
    That letter was sent on 12 June, which is now a month ago. Some time has passed since then, and the Chief Secretary will be aware that it has become a matter of concern. The amendment was tabled last week.
    I hope, therefore, that the Chief Secretary will end the period of delay and uncertainty over this issue and will be able to give us an assurance that there will be no byproduct of the clause which will result in a disturbance to a tax regime applied to British Rail employees which is now of long standing and which recognises the fact that the travel concession is supplied by British Rail at nil or negligible cost. There is no taxable benefit, therefore, in the hands of British Rail employees.
    Mr. John Browne: There is at least one case to my knowledge of someone being barred from entering a British Rail carriage. It happened to me, and I complained to Sir Peter Parker. I had to go from a non-smoking compartment into a smokers' compartment.
    Mr. Brittan: The amendment raises the question of the impact of clause 67 on lower-paid employees of British Rail. The question arises only if expenses have been
    1318
    incurred by the employers conferring the kind of concessions mentioned by the hon. Member for Edinburgh, Central (Mr. Cook). The extent to which that happens, if at all, is being examined by the Inland Revenue. As a result of that examination, the clause may well have no significant effect on British Rail employees. Whatever the outcome of that investigation, which is not yet completed, the Government do not intend the clause to disturb the status quo. If anything were to be done, it would be in the context of a more general policy on perks for those earning less than £8,500, and not by means of the clause.
    The Opposition amendment goes too wide. Clause 67 in any event will not take effect until 6 April 1982. I undertake that in next year's Bill we shall, if necessary, return to the subject and ensure that the clause is amended to exclude from its effects the lower-paid employees of British Rail. In the meantime, the Inland Revenue will not exercise its discretionary power to ask the employers to keep records and submit returns in these cases.
    Mr. Michael Shersby: How long does my right hon. and learned Friend intend that the Government will perpetuate the artificial division between higher-paid and lower-paid employees at £8,500 a year? It seems curious that in relation to this clause we should still be dealing with this peculiar cut-off point. Has he given further consideration to it during the Bill's passage? Have the Government any intention of removing or revising the limit next year? It emerged two or three years and has been perpetuated. It will cause a great deal of resentment among those members of the community who use cars for business purposes.
    Mr. Brittan: We have taken my hon. Friend's point on board, and we are considering what should be done. I am not in a position to announce a decision. Otherwise, it would have been implemented in the Bill. I cannot even promise when we shall complete our consideration or give any indication of what the conclusions will be.
    Mr. Cook: The Chief Secretary has given us a fall response. We very much appreciate his undertakings. I understand him to say that it is not the Government's intention that the clause should bite on British Rail's lower-paid employees, but that should that happen he will examine the matter again. In the light of those undertakings, I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Amendment made: No. 134, in page 60, line 33, after 'child', insert
    'or any dependent of the employee's'.—[Mr. Newton.]

  Clause 68

    CREDIT-TOKENS
    Amendments made: No. 136, in page 62, line 4. at end insert—
    '(6) If a person furnishes to the inspector a statement of the cases and circumstances in which credit-tokens are provided for any employees (whether his own or those of anyone else) and the inspector is satisfied that no additional tax is payable under this section by reference to the credit-tokens mentioned in the statement, the inspector shall notify the person accordingly and nothing in this section shall apply to the provision of those credit-tokens or their use.
    (7) The inspector may, if in his opinion there is reason to do so, by notice in writing served on the person to whom the

    1319
    notification under subsection (6) above was given, revoke the notification, either as from the date of its making or as from such later date as may be specified in the notice under this subsection; and all such income tax becomes chargeable, and all such returns are to be made by that person and by the employees in question, as would have been chargeable or would have had to be made in the first instance if the notification under subsection (6) above had never been given or, as the case may be, it had ceased to have effect on the specified date.'.
    No. 139, in page 62, line 6 after 'emoluments)', insert
    'and in section 69(2)(a) of the Finance Act 1976 (amounts included as emoluments for purposes of director's or higher-paid employment)'.—[Mr. Newton.]

  Clause 69
    MEDICAL INSURANCE
    Amendment made: No. 140, in page 62, line 10, leave out Clause 69.—[Mr. Newton.]
  Clause 70

    INDUSTRIAL BUILDINGS ETC.: INCREASE OF INITIAL ALLOWANCES
    Amendment made: No. 142, in page 62, line 25, at end insert—
    '(1A) A person other than a company may, in making a claim to an initial allowance at the rate applying by virtue of this section, require the initial allowance to be reduced to a specified amount; and a company may, by notice in writing given to the inspector not later than two years after the end of the chargeable period for which an initial allowance at that rate falls to be made, disclaim the allowance or require it to be reduced to a specified amount.'.—[Mr. Newton.]
    1.30 am
    Mr. Anthony Grant: I beg to move amendment No. 144, in page 62, line 25, at end insert—
    '1(A) Paragraph 1 of the said Schedule 6 shall be further amended by substituting for the words "one-fifth" the words "30 per cent." . ' .
    The amendment was tabled by my hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies), who may wish to take part in the debate later. It merits some debate and consideration. It is designed to give hotels the same increased benefits in terms of allowances as have been enjoyed by other industrial buildings.
    There was a time when the Treasury took the view that hotels were such strange and curious animals that they could not be regarded in the same light as factories or warehouses. That view was sustained for a long time. I had some responsibility in Government for tourism and I had to do substantial battle with Treasury Ministers to try to persuade them that hotels had as big a contribution to make to our economy as did factories. I failed, but we have passed that point and it is accepted that hotels have a right to such allowances.
    All that we are seeking to do is to provide that hotels should have an increase in the allowance which coincides with that given to the rest of industry. I understand that the cost of our modest amendment would be no more than about £3 million—my right hon. Friend the Financial Secretary will correct me if I am wrong—which is puny by any standard and represents only two or three days of subsidy to the British Steel Corporation or any of our other gigantic loss-making outfits.
    The hotel and tourist industries are successes, and we should be encouraging and backing success in our
    1320
    economy. When we debated this matter while the Conservatives were in Opposition, the strongest supporters of the case made in the amendment included my right hon. Friend the Financial Secretary, my hon. Friend the Parliamentary Private Secretary to the Prime Minister and other distinguished right hon. and hon. Members. I hope that my right hon. Friend the Financial Secretary will reflect on that time when he put the case so clearly and lucidly and will agree that times have not changed. I hope that he will reply sympathetically to our proposal.
    Mr. Robert Hicks: The amendment, so ably moved by my hon. Friend the Member for Harrow, Central (Mr. Grant), is essentially about investment and jobs. I should have thought that these two items would be given top priority by the Government. I believe, in particular, that there is a need to maintain equity between industrial building allowances for the manufacturing sector and for the hotel industry. My right hon. and learned Friend the Chancellor of the Exchequer, in his Budget Statement, increased the building allowances for manufacturing from 50 per cent. to 75 per cent. The allowances for hotels remained at 20 per cent. This caused surprise and disappointment within the tourist industry.
    The United Kingdom tourism industry should be given every encouragement. It earns over £4,000 million a year in foreign currency from the 14 million visitors to the country. It provides employment for 2 million people—a fact that should appeal to Opposition Members—representing 6 per cent. of the current work force of the United Kingdom.
    An increase in the industrial building allowance for hotels would give a much-needed stimulus to investment at a critical period. It would provide additional employment not only in the building and construction industry but also in ancillary trades connected with the hotel industry—everything from the manufacture of carpets to the supply of cutlery and all that goes into a new hotel or the extension of existing premises. The British Tourist Authority estimates that by 1985 there will be 15 million visitors to this country, which means that additional bedrooms will be required.
    An increase in the industrial building allowance to 50 per cent., I am told, would involve an immediate cost to the Treasury of £10 million. The cost, in terms of this amendment, would be £3⅓ million. My argument is that the immediate loss of revenue would be more than offset by subsequent savings and revenue to the Treasury. There would be a saving of unemployment benefit and increased revenue to the Treasury from taxation, VAT receipts and national insurance contributions as well as the overall multiplier effect.
    There are also the regional implications. I represent a constituency in the West Country. In 1979, the last year for which figures are available, domestic tourists spent £650 million in the region. Overseas visitors contributed an additional £105 million. The net effect was that tourism contributed £250 million to the economy of the South-West and generated 200,000 jobs in an area of high unemployment.
    Within the South-West region, the further west one goes, from Avon and Gloucester in the east to Devon and Cornwall in the west, the more important the tourism factor becomes in the local economy, and, at the same time, the incidence of unemployment in those areas increases.

    1321
    I should have thought that the principle of assisting a growth industry and a successful industry would appeal to the Government. It is somewhat ironic that it was a Labour Chancellor of the Exchequer who introduced the principle of industrial building allowances for the hotel industry in 1978. It would be logical that our Treasury Ministers, given the current economic climate, should be given every encouragement to back winners now. As its public sector borrowing requirement objective, the Treasury has a figure of £10,500 million. I should have thought that it was virtually impossible to fine-tune that figure to the extent of £10 million one way or the other—or, in terms of the amendment, £3⅓ million one way or the other. Even if the Minister thinks that that is possible, he is showing very little imagination or political nous. Therefore, I hope that he will give every sympathetic consideration to the amendment.
    Mr. W. R. Rees-Davies: I apologise for not being in my place for the opening of this debate. I am delighted that my hon. Friend the Member for Harrow, Central (Mr. Grant) moved the amendment in my absence.
    We are indebted to my hon. Friend the Member for Eastbourne (Mr. Gow) for the beginnings of this whole matter. On 7 June 1978 he moved that we should increase what the Labour Party then proposed. The Labour Party then produced for the first time the suggestion that all new hotels should be classified as industrial buildings.
    A new hotel is purpose-built, in the same way as a factory. The most important concession that I ask the Minister to give tonight is the reiteration that he stands firmly by the fact that what was agreed by all the parties in the House—that hotels should be treated as industrial hereditaments—shall stand.
    It is singularly unfortunate that the Labour Party is not here tonight. [HON. MEMBERS: "Oh"] No, it is not.
    Mr. Cook rose—
    Mr. Rees-Davies: There are only four Labour Members present.
    Mr. Cook: Will the hon. and learned Gentleman give way?
    Mr. Rees-Davies: I shall not give way.
    Mr. Cook rose—
    Mr. Deputy Speaker: Order. If the hon. and learned Member for Thanet, West (Mr. Rees-Davies) does not give way, the hon. Gentleman should resume his seat.
    Mr. Rees-Davies: I shall not give way, because it is singularly unfortunate that as Labour Members were the original promoters of the idea of the right hon. Member for Sheffield, Park (Mr. Mulley), that they should introduce this scheme and that they did so, they should not be here to speak in support of it tonight. I am very sorry that the whole of the Labour Party has gone home tonight and is not prepared to support—
    Mr. Cook: On a point of order, Mr. Deputy Speaker. You have eyes to see who is in the Chamber. I grant that every hon. Member has to be responsible for the content of his own speech, however mistaken, but it surely cannot be beyond your capacity to observe that the Labour Party is represented in the Chamber and has been represented in the Chamber throughout all the hours of tonight and last
    1322
    night, when the hon. and learned Member for Thanet, West (Mr. Rees-Davies) has not been seen in the Chamber.
    Mr. Deputy Speaker: Order. The hon. Gentleman has made his point, but it is not a point of order.
    Mr. Rees-Davies: It was on 7 June—
    1.45 am
    Mr. George Robertson: On a point of order, Mr. Deputy Speaker. Is it in order for the hon. and learned Gentleman to imply that there are no hon.
    Members on the Opposition Benches? I speak as a member of the Scottish Tourist Board for three years and as a member of the development committee of the British Tourist Authority for the same three years, and I have some expertise on the subject. Surely, it cannot be in order for the record to show that the hon. and learned Gentleman says that there are no members of the Labour Party present.
    Mr. Deputy Speaker: I am not responsible for the hon. and learned Gentleman's speech, and if he wants to make his speech he is perfectly at liberty to do so.
    Mr. Austin Mitchell: The hon. and learned Gentleman should get some glasses.
    Mr. Rees-Davies: It is singularly unfortunate that, having regard to the fact that the amendment was originally moved by the Chancellor of the Exchequer on behalf of the Labour Benches, all but four Labour Members should have gone home. Moreover, it was supported by the Liberal Party, none of whose members are here. Nor are there any members of the Social Democrats.
    I read the words of the then Chancellor of the Exchequer, in his Budget Statement, which were quoted in the opening observations of my hon. Friend the Member for Eastbourne:
    "In recent years a substantial increase in tourism has made an important contribution to our invisible export earnings. I therefore propose that any expenditure incurred after today on the construction or extension of an hotel with at least 10 bedrooms should qualify for capital allowances at the rate of 20 per cent. initial allowance and 4 per cent. annual allowance".
    My hon. Friend the Member for Eastbourne then said:
    "The effect of the amendment would be to put hotels in a similar position for capital allowances as is already enjoyed by industrial buildings and structures under the Capital Allowances Act 1968. the Bill as at present drafted provided that there shall be a capital allowance of 20 per cent. only of expenditure, whereas in the case of industrial buildings the expenditure for which an allowance is granted is 50 per cent."—[Official Report, Standing Committee A, 7 June 1978; c. 812.]
    He went on to argue, very eloquently, that it should be increased to 50 per cent.
    The entertaining aspect of all this is that not only is my hon. Friend in the Chamber now but the two persons involved in answering the debate were my hon. and learned Friend the Member for Dover and Deal (Mr. Rees)—the Minister of State—and my right hon. Friend the Member for Blaby (Mr. Lawson)—the Financial Secretary. Moreover, the Whip was my hon. Friend Me Member for Braintree (Mr. Newton). They all fully supported what we are proposing now. I propose to establish that absolutely, because it is the first time in my 25 years' experience in the House that I have ever known a case when all four hon. Members on the same side have been present who supported an amendment that was moved in 1978.

    1323
    I should point out, moreover, that it was totally accepted by the then Government—the present Opposition—yet they are not here to support my right hon. and hon. Friends who are so anxious to obtain the concession that the amendment seeks.
    The Liberals, who were represented by Mr. Pardoe, the then Member for Cornwall, North—which happily is now represented by my hon. Friend, who is also present—were also in favour of the proposal.
    The picture is very clear. It is a matter of principle, and it is an important principle. It was stated that night that it was to be accepted beyond any doubt that this was an industrial question. Hotels were in future to be treated as industrial hereditaments. For that reason, they were able to get capital allowances. It was pointed out by my hon. and learned Friend the Minister of State that as a start they should be treated at 20 per cent. rather than at 50 per cent. The Opposition rightly took the view that they would not press the matter to a Division, as my hon. Friend the Member for Eastbourne wanted.
    My hon. and learned Friend the Member for Dover and Deal said:
    "The Minister of State"—
    that is, of the Labour Party—
    "has been perfectly candid about it. Our argument is this. Do the hotel industry and those dependent on it, including, as my hon. Friend the Member for Braintree (Mr. Newton)—
    that is, the Whip—
    "has perceptibly pointed out, the building industry, deserve an additional shot in the arm now and over the next few years? Speaking for this side of the Committee, we think that they do. Here I draw particularly on my own constituency experience. It may come as a surprise to hon. Gentlemen who represent inland constituencies, particularly north of the Trent, that there are considerable pockets of unemployment in the South-East in the coastal areas. I cannot speak for my hon. Friends who represent Eastbourne and Weston-super-Mare, but it is certainly true in the South-East, in Thanet and parts of East Kent that I am privileged to represent, by any standard there are quite high unemployment figures."
    My hon. and learned Friend went on to deal with the question of a direct contribution to alleviating unemployment, as the amendment does. He said that we should back success. He said:
    "it will draw on the resources of the building industry and the ripple effects may spread outwards."—[Official Report, Standing Committee A, 7 June 1978; c. 812.]
    He went on to deal with other matters.
    The essence of what the Front Bench was saying was that it entirely accepted the principle that hotels should be regarded as being purpose-built. If they are purpose-built, they are the same as factories. Therefore, factories and purpose-built hotels should be treated as if they receive taxable allowances.
    We accept that initially 20 per cent., as against 50 per cent., can be accepted. That is a start. Later that position would be married. What amazed me when I first read the Bill was that there was no reason why the Government should not keep the same rate in pari passu. All that the Government had to do was to increase it from 20 per cent. to 30 per cent. They have rightly put up industrial allowances from 50 per cent. to 75 per cent.
    There is no differentiation between the cases. The rate for industry was put up because of the present trouble that it is in. However, the most successful industry, which can make a good return for the money invested, is the tourist
    1324
    industry. We must put up the rate for the tourist industry from 20 per cent. to 30 per cent. at the same time as raising the industral rate from 50 per cent. to 75 per cent.
    The cost would be nothing in the current year. The effect of the 1978 Act was considerable. First, Ladbroke's went into action. It produced a number of hotels. Each hotel created increased employment and a large increase in the country's income.
    The Mercury hotel and conference centre at Warwick was opened in April 1981, with 160 new employees, 132 bedrooms and 60 conference and syndicate rooms. Having regard to the 20 per cent. allowance, the firm has been able already to start to show a good profit in return for the money that the Labour Government allowed by their Act. That is why I find it so surprising that the Labour Party is not here tonight to support what is obviously an amendment that it would wish to support.
    On 1 July 1981 Ladbroke's opened the Dragonara in Edinburgh, with 130 employees and 142 bedrooms. In September 1980 it opened the Mercury hotel and conference centre at Bracknell, which employs 140 people, with 150 bedrooms and eight conference rooms. The Mercury hotel and conference centre at Leyland also opened in September 1980. It employs 90 people and has 93 bedrooms and seven conference rooms. All those are producing immensely valuable revenue for Britain. They are all producing money that is a good return. They are also producing employment, which is immensely valuable.
    Unfortunately, the debate started badly upstairs. An amendment that was not really suitable was moved to increase the allowance to 50 per cent. My right hon. Friend the Financial Secretary made a statement which, I am sorry to say, must be taken to pieces. It was in reply to a most inadequate debate. That is why I am so delighted that we have the opportunity to debate the matter on the Floor of the House. My right hon. Friend said.
    "I can assure my hon. Friend the Member for Cornwall, North, who raised the point, that in that context the position of hotels will be taken into account in the review of capital allowances. Views that have been expressed in this brief debate will be taken into account by the Government in the framing of the Corporation Tax Green Paper which will come out some time this winter—I hope, before the end of the year."
    Earlier he said:
    "the whole question of capital allowances, including the questions whether there should be several rates, whether there should be discrimination and whether there should be differences, are pre-eminently matters which must be discussed in the Green Paper and the discussion which will follow it. It is just the sort of issue for which the Green Paper is intended."—[Official Report, Standing Committee E, 16 June 1981; c. 715–6.]
    It is nothing of the sort. The issue has already been decided by the House. It was decided absolutely in 1968—with no disagreement from the Conservative Party, the Labour Party or the Liberal Party—that the tourist industry should be regarded as an industry, treated as an industry, and given allowances on that basis. In due course, when finances permit, those allowances should be increased to level them with industry allowances.
    What could be the argument for not increasing the allowances in pari passu today, taking them from 20 per cent. to 30 per cent.? The argument cannot be that that will cost the Government any money this year. It will not. It will not cost them any money until, at the earliest, next year, and probably not until the year after next. Therefore, the only reason can be that they want to wait and see.

    1325
    The danger is that if the matter is to be included for discussion in the Green Paper it will give the Treasury the opportunity to back-track on what it has already agreed should be accepted. If it back-tracks, we may find ourselves in danger of losing the 20 per cent. allowance. The first assurance that I want to hear from my right hon. Friend is that there will be no question of back-tracking on the 20 per cent. allowance. The second assurance that is required is that next year it will be brought into line with industrial allowances, namely, 30 per cent. Those are crucial aspects.
    We ask for those assurances for a simple reason. For many, many years both sides of the House have failed to recognise, as has the Treasury and a large part of the Civil Service, that the one really successful industry in Britain is tourism. It is the one that pays. It is the one in which we back success. It is the one that is really improving. It is the one that has every opportunity of improving. Why do we spend hundreds of millions of pounds backing failures such as British Leyland when a small proportion of that expenditure would bring a good return if it were directed to the tourist industry?
    2 am
    The Opposition Members who are in their places, such as they are, must recognise the force of my argument. My right hon. and hon. Friends recognise that what I am saying is true. We must persuade the Treasury that it is completely wrong and demolish its argument.
    There is no truth in the suggestion that an office building is purpose-built in the same way as a hotel. A hotel is purpose-built to provide accommodation for conferences and to provide bedrooms. Offices may be used for many purposes. However, those who are concerned about offices will ask for the same type of privilege or tax advantage that we are saying should be not only maintained but extended for the tourist industry.
    I have mentioned one of the companies that is involved in the industry. Another example is the Swallow group, which has introduced a first-class hotel close to the M1. It has 183 bedrooms and 150 employees. It may be argued that it is a powerful and rich company. There are other small companies that are not so wealthy and that will not be prepared to invest in the tourist industry unless they have the advantage of a grant.
    I regard this as a vital matter for the tourist industry. That is not only because many of my right hon. and hon. Friends gave an undertaking to Sir Henry Marking that we would seek a debate. The British Tourist Authority and the English Tourist Board regard this as the most important amendment on the Order Paper from their point of view. It was as a result of their representatives coming to the House that the amendment was tabled. It is the indulgence of Mr. Speaker that, notwithstanding a similar amendment being debated in Standing Committee, has presented us with the opportunity of this debate, albeit late at night. However, that is no one's fault.
    We want to ensure that we get from the EEC the vital grants to which I have referred. The grants will go only to areas in industrial regions. If the hotel industry is not regarded as a qualifying industry, we shall not be able to obtain the EEC grants. That is why the amendment and the treatment that the industry receives will be crucial to the future of the industry. That is why there is strong feeling on the Government Benches, which I hoped would be shared in other quarters, that the issue should receive the
    1326
    keenest and closest attention of my right hon. and hon. Friends on the Treasury Bench, who previously supported almost every word that I said on the matter. I hope that they will continue to give their support in Government, following their support when the Conservative Party was in Opposition. I hope that we shall give the tourist industry the support that it badly needs, which will enable it to grow with great success for the benefit of the nation.
    Mr. David Mudd: I intervene briefly to support mainly the points made by my hon. Friend the Member for Bodmin (Mr. Hicks). It is beyond doubt that the tourist industry is for many regions in Britain, particularly Cornwall, our last great industry. It is a labour-intensive industry which provides opportunities to people irrespective of age and of skill. It also undertakes the social responsibility of providing jobs for the disabled.
    We have heard a great deal about the input value of any money made available to the tourist industry in providing more taxation, more national insurance contributions and more VAT, and about its stimulus to the building industry. We should not overlook the fact that if the tourist industry gets the investment that it requires its contributions in rates to the local authorities will not be insignificant.
    Therefore, in terms of jobs created for the underprivileged, the young, the unskilled, and the disabled by the tourist industry, for its bringing the building industry back into operation and for its contribution to rates, I am delighted to support the amendment in the hope that something will be done for the tourist industry of Great Britain.
    Sir Julian Ridsdale: I am glad to support my hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies). In supporting this amendment in the early hours of the morning, I underline the fact that I believe that in this Budget we should have supported a little more the tourist industry, which, as my hon. and learned Friend the Member for Thanet, West has said, is one of our most successful industries.
    I point out to the Financial Secretary that in some places in the coastal districts there is a high rate of unemployment. We look to this amendment as a pointer of what the Government may be able to do to help the hotel industry, particularly over employment. I was talking yesterday to a hotelier in my constituency. He underlined the fact that, whereas he had kept people permanently employed over last winter, this winter, because of the increasing rate burden, because no help had been given over VAT and because we were not giving help over special development area status, the burdens on the hotel industry will increase and he will not be able to keep people employed but will have to make them casual labour, which means increasing the unemployment rate.
    That is why I hope that we shall hear an encouraging reply from the Financial Secretary, because this amendment is a pointer to help to solve unemployment in the seaside areas, which is becoming acute. It is for that reason particularly that I support my hon. Friend the Member for Harrow, Central (Mr. Grant).
    I am sure that we must do much more nationally to help our tourist and hotel industries. Yesterday I was talking to a great number of hoteliers from all over the country. Their mood was that we should give them more help as their

    1327
    industry is successful. In order to get the tourists here, we should do more than we are doing, because otherwise we shall not be able to earn the exchange.
    I hope, therefore, that the reply will be a pointer to hope for the tourist industry, which at the moment is slightly dubious of the help which the Government are giving.
    Mr. Terence Higgins: For some years I have had the unique distinction of being president of the Worthing Hotel and Guest House Association. It is therefore with some enthusiasm that I rise to support the case which has been put forward by my hon. Friend the Member for Harrow, Central (Mr. Grant).
    The tourist industry is important for Worthing and is an important source of employment. It is a reason why the town is prosperous. For that reason, it is right that the industry should be encouraged. I studied with interest the report of the Committee stage in which a similar amendment was debated. The answer which the Financial Secretary gave on that occasion was not encouraging. If my right hon. Friend still has "Resist" written at the top of his brief, I feel that he will need to be far more convincing than he was on that occasion if he is to carry the House with him.
    I want to make a number of specific points, dealing first with the arguments that might be deployed against the amendment and then with positive points in favour of it. One of the arguments that could have been deployed against the amendment some years ago was what might be called "the thin end of the wedge" argument. That was to the effect that if we went along with this sort of allowance for hotels as well as industrial buildings, there would be other structures that people would feel had a similar claim. As has been pointed out, that argument is no longer valid. The point of principle has long since disappeared because there are already allowances for hotels, albeit at a much lower level than is the case for industrial buildings. There is no point of principle involved here and no case for the "thin end of the wedge" argument that would encourage my right hon. Friend to resist the amendment. It is purely a question of quantity.
    The second argument always used on these occassions is that of cost. I do not think that the cost of this amendment is such that one could consider that it would wreck my right hon. and learned Friend's medium-term financial strategy. The cost is wholly within the possible margins of error in any computation of this kind and trivial compared with many of the other items on which we are quite happy to expend revenue or give allowances for. It cannot be argued that there is any ground for resisting the amendment on grounds of cost.
    An argument that my right hon. Friend deployed in Committee was to the effect that we ought not to make a change at this stage because there is to be a Green Paper on corporation tax that will include the question of capital allowances of this kind. Having read the reports of the Committee proceedings, I found a certain amount of inconsistency between the point my right hon. Friend made in replying to the debate on hotels at column 716 of the Official Report, where he argued essentially that we must wait for the Green Paper, and, on the other hand, the argument deployed at column 708, where he discussed industrial allowances, when he said:
    "We thought that the Green Paper which will come out this winter should be the proper means for considering this matter and
    1328
    for having a full discussion. At the same time, that should not preclude us from giving some assistance now to investment and to the construction industry. That is why the clause, which I commend to the Committee, is in the Bill."—[Official Report, Standing Committee E, 16 June 1981; c. 708.]
    If that is so for the construction industry, the Green Paper argument cannot be a valid argument for failing to do something for hotels as well.
    Those are the three main arguments against the amendment and they are all clearly invalid. That being the case, we need to look at the positive angles. As a result of the Government's policies, there has been a significant reduction in overmanning in industry. It is to be hoped that when some economic upturn takes place we shall find, at that stage, that it is possible for manufacturing industry to spread its overheads, cut its unit costs and so on. But there is still a great need on the supply side of the economy, which my right hon. Friend is keen to stress. There is also a need not simply to improve the overheads position but to get new investment.
    I say to my right hon. Friend, against the present economic background, that the clause that we are seeking to amend will not have a very significant impact on investment in manufacturing industry. On the other hand, the amendment might well have a significant impact on investment in the hotel industry because the situation there is not the same as it is in manufacturing industry and, I am happy to say, nowhere near as depressed, generally speaking.
    The industry has, of course, suffered significantly, as have industry and exports generally, from the exchange rate. We have seen a significant fall in the sterling exchange rate—particulary in relation to the dollar—so that it is reasonable to suppose that if this continues over the next year or 18 months we shall see an upturn in the tourist industry compared to this year. If that is so, and if we are to compete in a very intensive market for tourism world-wide, it is important that we should have hotels that are able to deal with the situation and able to invest in new products. That reinforces the argument for accepting the amendment.
    It is apparent that there are no valid arguments against the amendment, and there are positive arguments in its favour. It would encourage investment and employment, improve our balance of payments, which after the recent slide in sterling needs strenghtening—I would not wish to see the sterling exchange rate fall significantly further—and generally help the economy.
    The tourist industry makes a significant contribution to our economy, and we should encourage it. I therefore hope that the Minister's reply will be far more forthcoming than the reply that we had in Committee.
    2.15 am
    Mr. Peter Emery: The Government are fortunate that it is 2.15 am. Earlier in the day speeches would have been much longer and the Government may have been pressed harder.
    In my constituency I have three times as many hotels as factories; four times more people work in the hotel industry than in manufacturing industry. The hotel industry does not understand why it should not be treated in the same way as industry generally. The variation has never been understood. In Devon and the South-West it is imperative for employment and particularly for work in the

    1329
    construction industry that our wealth-creating industries should be treated in the same way as manufacturing industry.
    The Minister must convince the House and the hotel industry that the Treasury considers that that industry is as important as manufacturing. That is not the impression at present. I repeat the warning given by my right hon. Friend the Member for Worthing (Mr. Higgins). We wish to see the Treasury's approach to the economy work and do not wish to hamper my right hon. and learned Friend in his general intent, but we do not feel that £3 million, which could greatly help a major industry certainly in the South-West, should be taken away by the Treasury.
    I therefore hope that the Minister will seriously consider the strong pleas made from the Benches behind him.
    Mr. Cook: As you will be aware, Mr. Deputy Speaker, it is my custom, along with many of my colleagues, to attend the Labour Party conference once a year. You may recollect—although I know that these days you are not supposed to bring these matters to the forefront of your mind—that there is a rhetorical trick which never fails to produce a round of applause and which is practised by speakers seasoned in how to manipulate conference. It is to say that an issue is so important that it is tragic that so many delegates have chosen not to be present. Without fail, that line provokes a round of applause from those present who feel smug and complacent about the fact that they are there on such an important issue.
    I do not know when the hon. and learned Member for Thanet, West (Mr. Rees-Davies) attended a Labour Party conference, but plainly he has captured exactly the same rhetorical trick. I do not wish to detain the House to any great extent by responding to the red herring that the hon. and learned Gentleman raised on the question of attendance, but it is important to put on record that we have been debating the Finance Bill for close on 48 hours, in the course of which we have discussed a wide range of matters. Yesterday we debated at some length the issue of reduction of national insurance surcharge contributions, which would have had given a far greater stimulus to the finances of the. hotel industry than the modest proposals before us now. We also debated the major issue of tax evasion and avoidance. Some hours ago, we debated the taxation of the unemployed and those on strike. We have had separate debates on the Government's failure to uprate, for the first time since 1968, any personal allowances.
    In none of those debates was there a single contribution from the Government Back Benches. Nor do I recollect the hon. and learned Member for Thanet, West being present for one of those debates. Indeed, as he was obliged to point out, he even arrived late for his own debate. It is therefore not for him to bandy words about who was present to hear him speak.
    The Opposition recognise—although Conservative hon. Member; appear to doubt this—the important role of the hotel industry. I come from a city based mainly on
    1330
    service industries. There is comparatively little manufacturing content in the labour force of Edinburgh. It is primarily a service industry city, based on commerce, the Civil Service, insurance companies and the hotel industry. I therefore recognise the very important role of the service industries in our economy. recognise in particular that one of the advantages of the tourist trade is that it is labour intensive. That aspect must appeal to all hon. Members in view of the present recession.
    The right hon. Member for Worthing (Mr. Higgins) said that British industry had been going through a period of welcome reduction in overmanning. I must put it to him that we have in fact been going through a period of unwelcome reduction in manning, in the course of which the cost per unit output has increased rather than diminished. As a result of that reduction, we now have a very large pool of surplus labour for which work must be found. I recognise that one of the ways to find that work is to consider those industries which are labour intensive to see how they may be assisted.
    I accept that the industry deserves assistance. In all humility, however, I should have thought that one way to assist it would have been for Conservative Members who are so keen to speak in this debate to support the Opposition's proposal last night to cut the national insurance surcharge. That was, after all, an objective in the manifesto on which every one of them stood for election only two years ago
    We must consider, however, the proposal in the amendment and whether the way to assist the industry is through an improvement in capital allowances. The Financial Secretary will be aware that in Committee I expressed a certain scepticism about the efficacy of capital allowances. There are a number of reasons for being sceptical about the effectiveness of such allowances in stimulating further investment. One obvious macroeconomic reason for being doubtful about it is the fact that we now have a staggering total of £30 billion of unused capital allowances being rolled forward from year to year because industry and commerce cannot find sufficient profit to absorb the mammoth capital allowances that it has already acquired.
    Mr. Rees-Davies rose—
    Mr. Cook: If the hon. and learned Gentleman will allow me to finish my point, I will happily give way to him, although he was surprisingly reluctant to give way to hon. Members to whom he referred in his own speech.
    Because of that very large sum and the tax exhaustion that it has produced, it is very difficult to believe that in those areas where there has been investment which has attracted those capital allowances the allowances played a significant part in the decision of those who decided to undertake that investment.
    Mr. Rees-Davies: Is the case that the hon. Gentleman is making applicable to the tourist industry? My information is that the 20 per cent. allowances are being taken up by the tourist industry and being effectively applied. Indeed, I illustrated that in my speech. If the amount was increased, the allowances would be taken up. What the hon. Gentleman is saying about other capital allowances outside the tourist industry may well be true.
    Mr. Cook: My point is that it is obvious that investment has gone ahead on the part of companies that

    1331
    plainly did not have sufficient taxable profits in order to set the capital allowance gained by investment against them. That suggests that for many industries and commercial concerns capital allowances were not the determining factor in making investment decisions. I should not have thought that those who ran hotels would be so different from those who make other commercial judgments.
    The hon. and learned Gentleman referred to several hotels that have been constructed since 1978. He will admit—because he is fair-minded—that the difficulty in working out the extent to which the 20 per cent. capital allowance played a part in stimulating that investment is in knowing how many of those hotels would have been built if the 20 per cent. capital allowance had not been introduced. The hon. and learned Gentleman referred to the Dragonara hotel in Edinburgh. I can claim some knowledge of what goes on in Edinburgh. I drive past that site every time I return home from my constituency. It is an attractive site near a pleasant part of the centre of Edinburgh. If the Boundary Commissioners have their way, it will fall in my constituency. I am not surprised that a hotel company chose that site to develop. I can also say why it chose to do so in 1978. The building on the site burnt to the ground in 1978 and the site became available. Therefore, it is not immediately apparent that it was the introduction of a 20 per cent. capital allowance in 1978 that led to that development.
    That is the nub of the problem facing the Financial Secretary. If he increases capital allowances, they will be taken up by those who will carry out developments. I should be amazed if they were not taken up by those contemplating investment. The right hon. Gentleman must address himself to the question whether an additional 10 per cent. subsidy through the increase in the capital allowance would of itself stimulate developments that would not otherwise take place.
    It has been said that as a result of the reduction in the value of the pound against other currencies there might be an increase in our tourist trade. The extent of the reduction in the value of the pound was rather overstated. That reduction is primarily against the dollar. There is little sign of the necessary change between the pound and the other currencies that we must compete with. However, I accept that if there were such a reduction against other currencies there would be an increase in trade. If I were a hotelier, I would be looking for a reduction in the pound against other currencies rather than an additional building allowance. However, if I were contemplating further investment, the factor that would count would not be whether there was the prospect of an additional 10 per cent. capital allowance from the Treasury but whether I believed that additional trade was to hand to justify that investment and to give me a return on it that I could set the additional 10 per cent. capital allowance against.
    Mr. Tim Eggar: Is the hon. Gentleman prepared to apply the same logic to the suggestion of a reduction in the capital allowance available to manufacturing industry?
    Mr. Cook: If the hon. Gentleman consults Hansard, he will find that in Committee I expressed the same scepticism over the proposal to increase the capital allowance for industrial buildings. We did not press the
    1332
    matter to a Division, because there are so few scraps in the Bill to stimulate industry and construction that we were loth to turn down the one sop offered. If I were in the Financial Secretary's shoes, I would seek more efficacious ways of restimulating the economy and manufacturing industry.
    2.30 am
    I do not know what is in the Financial Secretary's mind about the amendment, but he did not accept the parallel amendment so ably moved by the hon. Member for Cornwall, North (Mr. Neale) in Committee. As no hon. Member has paid tribute to the work of the hon. Member for Cornwall, North, perhaps I may pay tribute to the fact that he raised this matter in Committee and spoke eloquently to it. The Financial Secaretary did not accept that amendment and I suspect that he will not be minded to accept this amendment now. If he accepts it, we should look to him to remove from our minds our doubts about whether this increase in the capital allowance will make the slightest difference to the amount of investment that we can expect in the forthcoming year.
    Mr. Tim Sainsbury: In his interesting speech the hon. Member for Edinburgh, Central (Mr. Cook) missed the point that has been made by my right hon. and hon. Friends. The amendment is concerned with discrimination against an industry. It is not equal treatment that the hotel industry should receive such an inadequate allowance, which is not increased when the allowance for the rest of industry is increased.
    The tourist industry is internationally competitive. It is not just that the domestic tourist has the alternative—of which we are conscious in my constituency, where on a clear day from the higher parts one can see the mainland of Europe—of going to France or the Low Countries that are close by and in many cases as short a journey as he makes to Hove or Brighton. The international tourist has a wide-ranging choice of destinations. In addition, in these days the important and valuable conference trade has a wider choice of destinations in a number of countries. If we do not allow our hotels and conference facilities to be as up to date as those in other countries, we shall lose valuable employment and much income to areas that are in need of that help.
    I hope that if my right hon. Friend is unable to provide immediate help to my right hon. and hon. Friends he will carefully consider the international comparisons that affect the hotel industry and decide whether, on an international basis, it can be said that our hotels are being treated fairly vis-a-vis their international competitors.
    Mr. Robert Adley: I first declare an interest as marketing consultant to Commonwealth Holiday Inns, of Canada, and a member of the national council of the British Hotels, Restaurants and Caterers Association, which I met today in company with a number of my right hon. and hon. Friends.
    It is the view of many hoteliers that capital allowances would be a helpful incentive to creating new construction in the hotel industry. We are talking about continuing the battle to win recognition for the importance of tourism within the British economy—put simply and succinctly by the chairman of the English Tourist Board in his foreword to the ETB annual report "Tourism is Jobs". To a waiter, his job is just as important as is the job of a welder to a welder.

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    The fact that so many of us are here at this hour in the morning—as my hon. Friend the Member for Honiton (Mr. Emery) said—should impress on my right hon. Friend the importance that many of us attach to the subject. In Committee my hon. Friend made a point about a Green Paper. My hon. Friend the Member for Bodmin (Mr. Hicks) and I received almost identical assurances from Lord Cockfield when we discussed this matter with him over a year ago.
    The question that the industry asks the Government is: was it a deliberate act of policy on the part of the Government to widen the gap in investment allowances between hotels and manufacturing industries? If the answer to that is "Yes", my right hon. Friend should not be surprised [f many people in the hotel and catering industry get the impression that the Government are not specially concerned with the welfare of the industry and do not give it a particularly high priority.
    The industry is not begging for handouts; it is asking for justice. We talk about the cost of industrial building allowances, but there is no cost unless the investment takes place. The Government should, in effect, be asking the industry "This project might have cost £10 million if the proposals to increase the allowances to 50 per cent. had been put forward. What can you do to see that it costs £100 million?" If it were to cost £100 million, it would mean that there was a massive increase in construction and investment in the hotel industry, and presumably we are all concerned about the need to create more jobs.
    I close with a quotation from a letter that I have received today from Mr. Clive Derby, the chief executive of the British Hotels, Restaurants and Caterers Association:
    "I find it inexpressibly sad that this Government, blessed with an industry that, given a decent level of IBAs, would find itself able and willing to invest and provide more jobs, turns its back and seeks refuge by consigning the question of IBAs to yet another Green Paper. Do they want to encourage investment and job creation, or don't they?"
    I ask the same question of my right hon. Friend.
    Mr. Andrew Bowden: The industry has done very well at a time of deep international and home recession. It now needs a positive act by the Government to show their future confidence and belief in the expansion and development of the industry. We know that there has been a significant drop in employment in manufacturing industry over the last 10 years, whereas within the hotel and tourist industry there has been a real and positive increase.
    Indeed, the Prime Minister recently stressed the importance of tourism as a job creator. I know that my hon. Friend the Member for Eastbourne (Mr. Gow) is well aware that in Eastbourne alone tourism is worth £50 million to his town. It is worth even more to Brighton. The tourist industry is vital to many areas. My own town of Brighton has shown its faith and belief in the future of the industry by making a massive investment of ratepayers' money in conference centres and facilities. We ask for help and support from the Government in seeing this through in the years ahead.
    Tourism and the hotel industry as a whole must be utilised to achieve maximum employment and financial benefit, for the areas concerned and for the nation as a whole. All we ask is for a little practical help from the Government.
    Mr. David Gilroy Bevan: In order not to draw wrath—unlike my hon. and learned Friend the Member for Thanet, West (Mr. Rees Davies)—I wish to pay tribute to the packed Opposition Benches and not to criticise in any way whatever.
    I am not a Member representing a seaside constituency. There are no beaches in Birmingham, to the best of my knowledge, although hon. Members will be fortified in the knowledge that my constituency of Yardley has the largest pub in Europe. Nevertheless, we in the West Midlands are fast becoming a most important tourist centre—and the gateway to other tourist centres.
    We have an avenue of approach by air to Birmingham airport, which is being enlarged at a cost of some £50 million. We have the railway line to Birmingham International, with a fast train service from London. We are the centre of the motorway network and have the National Exhibition Centre. We serve all the central counties of England and Stratford, Warwick, Kenilworth, Malvern and places much further away.
    It is essential that in the hotel business we retain the industrial aspect. If we do not ensure that the grants are on an industrial basis, we may put in jeopardy the grants that this country receives from the EEC, which could be dangerous. Therefore, it is axiomatic that the amendment should be made.Tourism is one of our greatest money-spinners, making over £4,000 million a year and bringing about 12 million visitors to Britain every year. It is growing fast all the time.
    One hopes that before long the assisted areas will be spread out more evenly, that they will not be centred as they are now but will be enlarged to include other areas, especially the West Midlands, where unemployment is growing at three times the rate of anywhere else in the United Kingdom. In Birmingham, which is not used to unemployment, it is 13·4 per cent.
    We are not being unreasonable in putting forward the amendment. We are not suggesting an increase to 50 per cent., although some might consider that that would be more appropriate. We suggest a modest increase in the initial stages, from 20 to 30 per cent. Surely that must be acceptable to my right hon. Friend.
    Our area is desperately short of hotels and hotel rooms. It needs extra rooms, but without encouragement investment will not be channelled into this vital currency-earning and job-providing sector.
    There is a case for extending this provision into self-catering, for making it apply to cottages, villas and permanent apartments. At present it applies only to hotels with 10 rooms or more. There is a case for reducing the starting point to four rooms.
    Finally, the return on grants for tourism is far, far, far better than the return on grants to other industries.
    Mr. Keith Best: I can claim no interest, other than having had lunch—a lunch that has receded into distant history—with the British Hotels, Restaurants and Caterers Association.
    In Wales tourism is the second most important industry after manufacturing. Indeed, in many parts of the Principality it is the major growth industry.
    The amendment is necessary for the development of tourism. It is in line with previous legislation, and it is undoubtedly fair to tourism, which is why it has received so much support tonight.

    1335
    I find it difficult to follow the logic of the hon. Member for Edinburgh, Central (Mr. Cook), who concluded that the amendment should not be supported because there was not a full take-up of certain industrial building allowances on the manufacturing side. My hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies) pointed out that that was not true of the tourist trade.
    The hon. Gentleman said that if he were a hotelier he would see whether the business would justify the take-up of the building allowance for the hotel, but the very fact that the allowances are being taken up must surely mean that hoteliers see that there will be enough business. If the hon. Gentleman reflects on the matter he will see that he should support the amendment rather than pour cold water on it.
    2.45 am
    My hon. Friend the Member for Harrow, Central (Mr.Grant) and my hon. and learned Friend the Member for Thanet, West said that most members of the Government supported this excellent proposal in the past. I wish to refer to one who has been missed out. It would be unfair not to mention my right hon. Friend the Minister for Consumer Affairs, who said in a recent interview with British Travel News:
    "It is vitally important in the creation of jobs throughout the country and in the contribution it makes to the quality of life, both for our own people and for visitors from abroad. The fact is that tourism must be accorded its full status as an industry of absolutely major importance. I feel that people in a country which has, in times historical, relied tremendously on manufacturing industry must now recognise that we are moving into a different world—a world in which service industries are growing and tourism itself will become increasingly important as leisure time increases."
    If my right hon. Friend were here, she would no doubt be arguing for more than we are asking for. We are not asking for the world; we are asking for a modest amount. We ask only that my right hon. Friend the Financial Secretary should welcome the amendment because he realises that in a full year it will cost no more than what the Government have to spend on 500 people being unemployed.
    Mr. Woolmer: Conservative Members have made a number of gibes about my hon. Friends, but I recall that when we were discussing the uprating of unemployment benefits and the rebate of heavy oil duty for industry the Government Benches were virtually empty.
    I agree that there is a case for treating tourism in parallel with other important parts of the economy. It is an important part of the economic system, but I remind Conservative Members that if we have no industry and no jobs tourism will be irrelevant. People will not be able to take holidays. The larger part of our tourism still consists of British people taking holidays in Britain. When a plea is made for exceptional treatment for hotels, it should be remembered that most of those using hotels are our own workers.
    I would be more impressed by the arguments of Conservative Members if they pleaded to make sure that people had jobs in industry so that they could take holidays in hotels. I take the greatest exception to the gibes of Conservative Members when they do not bother to turn up to support measures to ensure that our workers are in jobs and can therefore take holidays in the hotels to which hon. Members wish to give tax help.
    1336
    Our tourist has suffered the same problem as manufacturing industry—the over-valued pound. Foreign tourists have found this country extremely expensive in the past year or two. The tourist industry complains that the pound has been greatly over-valued. This has meant high hotel and meal prices and high living costs. Our own working people have taken cheaper holidays abroad not because the hotel industry lacked incentive but because of the over-valued pound.
    Conservative Members who wish to encourage our own industry and who also wish to persuade our own tourists to stay at home should be supporting policy changes aimed at creating jobs that will enable workers to afford a holiday. They should also be calling for a change in the value of the pound so that people find a holiday in this country worth while. The size of the turnout on the Tory Benches at this time of night in support of a marginal change in tax allowances is sheer hypocrisy. I wish only that they had turned out in such numbers to support the Opposition's proposals on the national insurance surcharge and efforts to change the direction of Government policies. Instead, the House has heard them bleating about an issue described by the right hon. Member for Worthing (Mr.Higgins), who has previously deplored any switch in the direction of Government policy, as a small change. I find this situation remarkable.
    Hon. Members know that the Minister will not support them. They should have been supporting proposals for a change of direction by the Government, a drop in the value of the pound and an increase in jobs—all moves that would have produced greater benefits for the hotel and tourist industry. If they wish to press their case they should support the Opposition on Monday night to ensure the creation of real jobs rather than indulge in synthetic anger at this time of the morning in attempt to produce phoney jobs.
    Mr. John MacKay: I wish to add a Scottish voice in support of the amendment. Tourism is extremely important to Scotland, particularly the Highlands. Without wishing to become involved in an argument with the hon. Member for Batley and Morley (Mr. Woolmer), I can say that these jobs cannot possibly be described as phoney. They are every bit as real as jobs in any industry. The proposal put by my hon. Friends stands on its own merit. The tourist industry feels that Governments of all colours over the years have discriminated against the industry in comparison with other industries.
    When we are increasing the allownace from 50 per cent. to 75 per cent. in other industries, we should increase the allowance in the tourist industry from 20 per cent. to 30 per cent. I hope that my right hon. Friend will take this matter on board. This is an important industry. It requires encouragement and support.
    Mrs. Elaine Kellett-Bowman: In answer to the hon. Member for Batley and Morley (Mr. Woolmer), perhaps I may say that tourism is not confined to the South. It is extremely important to the North-West, particularly to Lancaster and Morecambe. We are very interested in getting an improvement in this regard.
    Mr. Lawson: If I am a little brief, at this hour of night, in dealing with this important matter, I hope that it will not be considered a discourtesy to my hon. Friend the Member for Harrow, Central (Mr. Grant) or to those of my right hon. and hon. Friends who have spoken in the debate, all

    1337
    of whose speeches I have listened to most assiduously. I have taken great note of the points that they have made. Nor, I hope, will my relative brevity, which arises from a sensitivity to the hour, be misconstrued in any way as a reflection on the Government's approach to the tourist industry. We regard it as an industry of the first importance.
    My hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies) said one or two things that need to be corrected. In his best forensic manner he attempted to make the case that all of us who are sitting on the Treasury Bench had already committed ourselves to everything that he was proposing. That is not so. If he rereads the Hansard report of the debates in the Committee stage of the Finance Bill in 1978, to which he referred, he will see that I, for one, made no reference to the percentage of industrial building allowance that I considered to be appropriate for hotels, and that what happened on that occasion was that my hon. Friend the Member for Eastbourne (Mr. Gow) initiated a very useful and worthwhile debate but did not press his amendment to a Division. It is right that that should be firmly on record.
    At that time we welcomed the 20 per cent. industrial building allowance introduced for the qualifying hotels by the previous Government.
    The problem with the amendment that is before us is one not merely of the hotel allowance; it deals with the whole question of capital allowances. My hon. and learned Friend the Member for Thanet, West said "There is something special about hotels. They are purpose-built." So are theatres and cinemas and so are most shops. So are most of the buildings in which service industries reside. My hon. Friend the Member for Anglesey (Mr. Best) pointed to the importance of service industries generally. There are many distinctions in industry at present. For example, the industrial building allowance is of particular importance to manufacturing, and it is now increased from 50 per cent. to 75 per cent. Qualifying hotels attract 20 per cent. Agricultural buildings—these have not been mentioned—attract a 20 per cent. allowance. That has not been increased in this Finance Bill. There is also a 40 per cent. initial allowance for mining works. Again, that has been kept at 40 per cent. in this Budget. So it is not true that hotels have been specially discriminated against. I utterly repudiate that.
    3 am
    We received many representations that manufacturing industry had suffered as a result of the recession and we were told that there was a strong case for doing something to help. We therefore decided, in advance of the Green Paper, to increase the industrial building allowance for manufacturing industry. Now we are accused of widening the gap, not merely against hotels but against all the other categories. Hotels have not been disadvantaged in any way. The whole idea of widening the gap—that if an advantage is given to one section of the economy it should automatically be given to every other section—is a rather un-Conservative attitude to the manner in which we should conduct our affairs. That is the attitude that I would expect of Opposition Members.
    We accept that the whole question of capital allowances needs to be looked at fully. I said in Committee and I repeat now that we announced some time ago—it has not suddenly been dreamt up to deal with the amendment—that there is to be a Green Paper on
    1338
    corporation tax, and a major part of it will deal with the whole question of capital allowances. There are different rates for different kinds of buildings—and indeed, no allowance at all for commercial buildings generally.
    The House may think that that is not a matter of any great controversy, but that is not true. Only a couple of years ago, in proceedings on the Finance Bill, my right hon. Friend the Member for Crosby (Sir G. Page) put forward a new clause to give industrial building allowances to the retailing industry. I believe that my hon. Friend the Member for Hove (Mr. Sainsbury) spoke eloquently in support of that amendment. Now he is talking about hotels. The issue is much wider than that, and should be considered properly in the Green Paper. That Green Paper will lead to a full discussion, on the basis of which the Government will take their decisions. It is premature to do so now. What has been said in this debate will be borne in mind by the Government.
    My hon. and learned Friend the Member for Thanet, West asked me for an assurance that the Government would not do away with the industrial building allowance for hotels, following the Green Paper. I can give him that assurance. The Government have no intention of withdrawing the 20 per cent. allowance for hotels. As to whether there should be any improvement for the other categories of service industries, for which a strong case can be made, that is something that will have to await the Green Paper. I have given the only assurance that I can give at this stage. I assure the House and my right hon. and hon. Friends that these matters will be fully considered in the Green Paper and in the discussions that follow that paper. On the basis of that assurance, I therefore hope any hon. Friend will ask leave to withdraw the amendment.
    Mr. Rees-Davies: I appreciate what my right hon. Friend said, but I do not think that it is sufficient. I therefore ask my right hon. and hon. Friends to vote on the amendment.
    Mr. Deputy Speaker: It is up to the hon. Member for Harrow, Central (Mr. Grant) to decide, because he moved the amendment.
    Amendment negatived.
    Amendments made: No. 145, in page 62, line 27, leave out '; and' and insert
    'and to expenditure which by virtue of section 5(1) of the said Act of 1968 (purchase of unused buildings or structures) is deemed to have been incurred after that date; but'.
    No. 146, in page 62, line 30, leave out from first 'of' to end of line 32 and insert
    'that Act (expenditure incurred before trade begins): .—[Mr. Lawson.]
    Sir William Clark: We have now been debating for over 10 hours. I am delighted that we have had audience participation at this late hour. I have no doubt that most hon. Members have been waiting for amendment No. 147. Since the Government have accepted the principle in that amendment and have tabled their own amendment No. 149, I do not intend to move amendment No. 147.

  Clause 76

    EMIGRATION OF DONEE
    Amendments made: No. 149, in page 68, line 30, at end insert—
    '(3A) Where the relevant disposal was made to an individual, subsection (1) above shall not apply by reason of his becoming

    1339
    neither resident nor ordinarily resident more than six years after the end of the year of assessment in which the relevant disposal was made.
    (3B) Subsection (1) above shall not apply where the relevant disposal was made to an individual and—

    (a) the reason for his becoming neither resident nor ordinarily resident in the United Kingdom is that he works in an employment or office all the duties of which are performed outside the United Kingdom, and

    (b) he again becomes resident or ordinarily resident in the United Kingdom within the period of three years from the time when he ceases to be so, without having meanwhile disposed of the asset in question;

    and accordingly no assessment shall be made by virtue of subsection (1) above before the end of the said period of three years in any case where the condition in paragraph (a) above is, and the condition in paragraph (b) above may be, satisfied.
    (3C) For the purposes of subsection (3B) above a person shall be taken to have disposed of an asset if he has made a disposal in connection with which the whole or part of the held-over gain on the relevant disposal would, had he been resident in the United Kingdom, have been represented by a reduction made in accordance with section 79(1)(b) of the Finance Act 1980; and subsection (3) above shall have effect for the purposes of this subsection as it has effect for the purposes of subsection (2) above.'.
    No. 151, in page 68, leave out lines 37 to 43 and insert—
    '(5) No assessment shall be made under subsection (4) above more than six years after the end of the year of assessment in which the relevant disposal was made.'.—[Mr. Peter Rees.]

    PROVISIONS SUPPLEMENTARY TO SECTIONS 77 TO 79
    Amendments made: No. 225, in page 72, line 3, at end insert—
    '(2A) The fact that the whole or part of a benefit is by virtue of section 44(2)(b) above treated as the recipient's income for a year of assessment after that in which it is received—

    (a) shall not prevent the benefit or that part of it being treated for the purposes of sections 77 to 79 above as a capital payment in relation to any year of assessment earlier than that in which it is treated as his income; but

    (b) shall preclude its being treated for those purposes as a capital payment in relation to that or any later year of assessment.'.

    No. 152, in page 72, line 14, leave out 'otherwise' and insert
    'is otherwise paid or applied'.
    No. 153, in page 72, line 16, leave out from 'direction' to end of line 18.
    No. 154, in page 72, line 18, at end add—
    '(5) Section 29(3) of the Capital Gains Tax Act 1979 (losses accruing to non-residents not to be allowable losses) shall not prevent losses accruing to trustees in a year of assessment for which section 77 above or section 17 of that Act applied to the settlement from being allowed as a deduction from chargeable gains accruing in any later year beginning after 5 April 1981 (so far as they have not previously been set against gains for the purposes of a computation under either of those sections or otherwise).'.—[Mr. Peter Rees.]

  Clause 87

    MARKET VALUE
    Sir William Clark: I beg to move amendment No. 155, in page 76, line 26, leave out from beginning to end of line 10 on page 77 and insert—
    (2) Subsection (1) above shall no, apply to the acquisition of an asset if—

    (a) there is no corresponding disposal of it, and

    1340

    (b) there is no consideration in money or money's worth or the consideration is of an amount or value lower than the market value of the asset.'.

    Mr. Deputy Speaker (Mr. Bryant Godman Irvine): With this we may discuss the following amendments:
    Government amendment No. 156.
    No. 157, in page 76, line 34, at end insert—
    '(3) Where a company acquires shares or securities of another company, which is controlled by it, the provisions of subsection (1) shall not apply except where the main purpose, or one of the main purposes, of the transaction is the avoidance of liability to capital gains tax or corporation tax.'.
    No. 262, in page 76, line 38, at end insert
    '; but in such a case both the disposal and the acquisition shall, subject to the provisions of this Act, be deemed to be for a consideration equal to:

    (a) the actual consideration (if any) or, if there is none,

    (b) such an amount as would secure that neither a gain nor a loss would accrue to the excluded person making the disposal'.

    Government amendments Nos. 158 and 159.
    Mr. Peter Rees: I hope that my hon. Friend's point is adequately covered by amendments Nos. 156 and 158, which I commend to the House.
    Mr. Deputy Speaker: We are dealing with amendment No. 155.
    Sir William Clark: I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Amendments made: No. 156, in page 76, line 26, after '(2)', insert
    'Except in the case specified in subsection (3A) below'.
    No. 158, in page 76, line 38, at end insert—
    '(3A) The exception referred to in subsection (2) above is the acquisition by an individual of tangible movable property or currency in circumstances where there is a corresponding disposal by an individual who is neither resident nor ordinarily resident in the United Kingdom; and for this purpose "tangible movable property" does not include commodities of a kind dealt with on a terminal market, or a mere right in or over any property.'.
    No. 159, in page 77, line 10, at end insert—
    '(1A) In section 32 of the Capital Gains Tax Act 1979 (allowance of expenditure in computation of gains) after subsection (4) there shall be added—
    "(5) Where—

    (a) a person acquires an asset for no consideration in money or money's worth or for a consideration of an amount or value lower than the market value of the asset, and is not treated under any provision of this Act as acquiring it for a consideration other than the actual consideration, and

    (b) there is a corresponding disposal of the asset by a person who is neither resident nor ordinarily resident in the United Kingdom, and

    (c) a charge to income tax, corporation tax or capital gains tax arises in respect of the acquisition,

    the sums allowable under this section as a deduction in the computation made on the first-mentioned person's disposal of the asset shall include a sum equal to the amount in respect of which the charge arises.
    (6) The condition in paragraph (c) of subsection (5) above shall be taken to be satisfied where under section 77(3) of the Finance Act 1981 chargeable gains are treated as accruing to a person in any year by reason of his acquisition of an asset in that or an earlier year; and the reference in subsection (5) above to the amount in respect of which the charge arises shall be taken to be a reference to the amount of the gains treated as accruing to him.".'.—[Mr. Peter Rees.]

  Clause 88

    CONSIDERATION ON REORGANISATION OF SHARE CAPITAL ETC
    Sir William Clark: I beg to move amendment No. 161, in page '77, line 36, at end add
    'but nothing in this proviso shall apply where the reorganisation was effected in relation to shares of a company which are quoted on a recognised stock exchange'.
    This is a capital gains tax matter on the reorganisation of capital. The amendment is intended to take the stock market rights issues outside the clause. I know that my hon. and learned Friend the Minister is well seized of the point. There does not appear to be any reason why stock market rights issues should not be allowed to take place on normal terms, so that the price paid for rights shares becomes base value for tax purposes.
    Mr. Peter Rees: As the House would expect, my hon. Friend raises a point of great importance. I hope that, on reflection, he will feel that the principle of his amendment is met adequately by the insertion of the words
    "otherwise than by way of a bargain made at arm's length",
    which I proposed in Committee and which were accepted. I hope that on that basis he will withdraw the amendment.
    Sir William Clark: In view of that explanation, I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.

  Clause 90

    TEN-YEAR CUMULATION PERIOD
    Mr. Robert Sheldon: I beg to move amendment No. 165, in page 79, line 13, leave out 'ten' and insert 'twenty' lb/>
    Under the capital transfer tax system there are two forms of taxation—one is based upon liftime transfers and the other on transfers on death. The Bill provides for lifetime transfers to have their rate of tax reduced considerably. There have been many debates about that, both in Committee and on the Floor of the House.
    The amendment concerns the lifetime transfers where a new principle has been introduced, namely, to wipe the slate completely clean every 10 years. If a person inherits a large sum of money and acquires great wealth early in his life, he is able every 10 years to transfer sums of money. Because there is a provision for the free transfer of wealth between husband and wife, the transfer of even larger sums is possible when both the husband and wife pass on their wealth to their offspring or to somebody else.
    That means that the effect of capital transfer tax is being eroded, and some would even say emasculated. For example, if we take into account that each of the spouses can bequeath £3,000 every year, the sums of money that can pass from one generation to the other during a long period can be very considerable. If a couple were to start their transfer of wealth at the age of 50, they would make three such transfers by the time that they reached their seventies. That is rapidly reducing the effect of capital transfer tax and is becoming similar to the old estate duty. The main disadvantage, as we all know, of the old estate duty was that it was a tax on the improvident, the unlucky and those who disliked their heirs. That is the sort of position that capital transfer tax is rapidly approaching.
    What is the cost of the 10-year wipe off? Every 10 years, all the amounts that have been passed under capital
    1342
    transfer tax are ignored and one starts again. The forecast of the cost that appears in the Red Book for 1981–82 is nil, and that we understand. It will take time for the provision to take effect. No figure is supplied for the forecast for the full year. All we find is "i", which leads us to a footnote. We are told in the footnote that the cost cannot be estimated. That may be true, but it cannot be denied that it will be large and that over a long period it will be extremely large. We are witnessing a considerable reduction in taxation at a time when taxation has not been reduced for many others.
    3.15 am
    On a previous occasion the Minister of State said that capital transfer tax was not a perfect tax but that in time he hoped to eliminate some of its grosser imperfections. I think that he is going much further than that. He is limiting its operation as a viable and useful tax. Estate duty was easily avoided by the seven-year limitation, and CTT will be similarly avoided by the process of erosion which the hon. and learned Gentleman hinted was in its early stages. This is a major new step to retain the inequalities of wealth and to enable wealth to be passed on from generation to generation in the large sums that have been transferred in the past.
    This will be happening under a Government who have failed to revalorise personal taxes and who have sought substantial revenue in many different ways. They have even turned their attention to smaller matters such as the sale of matches and lighters and activities such as Tupperware parties. No form of taxation has appeared too small for them to lay their hands on to get the money that they say they need so desperately. At a time when they are doing that, it shows insensitivity to hand out large sums to the big estates. The 10-year cumulation rule whereby we start all over again at the end of 10 years is of especial benefit to large estates that can plan the succession of property at an early age from those who have inherited wealth as opposed to those who have earned their wealth and typically will not have large sums to dispose of until they come to the later years of their lives. They will not be able to take advantage of this new provision in the same way as those who have inherited wealth.
    The provision is wrong from so many different angles. Those who made their money by their own exertions will be disadvantaged in comparison with those who have inherited wealth. This is a major attack on an important principle. We understood that the Government would be accepting capital transfer tax and its major provisions. This is a major onslaught, and from what we have heard it seems likely that it is only the first of a number to come. There will be plenty of work for the next Labour Government in restoring the position.
    Mr. Austin Mitchell: The amendment takes us away from the end of the pier show and the synthetic and dramatic performance of the Cleethorpes landladies' choral society that we had during the discussion on amendment No. 143 and to the central iniquity of the Budget. The Budget increased taxation on matches, lighters and chewing tobacco in the Government's dredging for revenue. That has been excused by the "We need the money" syndrome. The Government have hit the mass of the population by their failure to raise allowances. The people will have to pay for the deprivation which the Government have engendered. This Government of millionaires—we have Government of millionaires for

    1343
    millionaires by millionaires—have chosen to dole out substantial sums to the wealthy who should be paying their share of revenue to the Government. The Government dole out sums to those who have most.
    Clause 90 is one of the chief ways in which that handout will occur. It is a handout of unknown dimensions as it wipes the transfer slate clean every 10 years. For example, over 30 years, it is possible for £150,000 to be passed on tax-free compared with only £50,000 without the change that the clause proposes. Our amendment softens the position by extending the period from 10 years to 20 years. It is right to do that because the concessions made to capital in the Budget are unnecessary and undesirable.
    In this country we are still an unequal society. According to the 1978 figures, the top 1 per cent. of the adult population owned almost a quarter of the total marketable personal wealth. They owned almost half of the wealth owned in buildings and almost 70 per cent. of that held in the form of land and listed shares. Such differences which scar the country arise mainly through the inheritance of wealth, which will be strengthened and accelerated by the Bill unless it is modified by the Opposition's amendment.
    Despite the huge gaps which scar the country, the proportionate yield from capital taxes has been declining partly because of cuts in the rates and partly because of expedients such as clause 90, née clause 89. Capital transfer tax or its equivalent at the beginning of the Second World War provided nearly 15 per cent. of Inland Revenue receipts. By 1948–49, it was down to 9 per cent. Now the proportion must be minute. Capital transfer tax raised 6p for every £1 of income tax in 1973–74. That proportion will be 1·6p for every £1 this year. There is no case for the concession which has been made by the clause.
    If capital transfer tax had remained in line with income tax, it would be enough now to allow a cut in the standard rate of income tax by 1p in the pound. Capital transfer tax would be raising £1·6 billion if it had increased in line with income tax. Under this Government the income tax yield has increased by about 38 per cent., but capital transfer tax and estate duty together are up only 7 per cent., which is less than in line with the progress of inflation.
    While the level of income at which families start to pay tax has fallen from 45 per cent. of average earnings to about 38 per cent. of average earnings, while the rate of tax they pay at the bottom level has increased from 25p in the pound to 30p in the pound, while the number of people in the poverty trap has increased by about 40 per cent. and while women between the ages of 60 and 64 are beginning to pay tax on their little pensions, as the Prime Minister put it, the really wealthy will pay less because of the clause unless it is modified by our amendment. They will pay less and less on the wealth which should bear its share, and which certainly has the ability to bear a major share.
    Wealth should bear an increasing share of taxation on grounds of equity, economic stimulus, efficiency and keeping the money circulating. If there is a disincentive effect of taxation, it must be less when that taxation is applied to past acquisitions rather than to present effort. The disincentive effect of capital transfer taxation must therefore be less. Wealth should bear its share, too, on the most rational ground of all—that it confers privilege, advantage and power. It should therefore contribute
    1344
    substantially to the purposes of a society as a rent on those advantages which it has, particularly when the rest of society is having to face the kind of burdens that the Government are imposing because of the economic trap into which they have stumbled so enthusiastically as a result of the necessity to increase taxation and spending to pay for the depression and the unemployment they have generated.
    Every concession, such as this one on the 10-year period, every little fiddle, every reduction in capital taxation, is building up a chorus of protest, a chorus of annoyance, a chorus of simple grievances, at seeing those most able to bear their share paying less and less and seeing all of this being done by a Cabinet of millionaires, furthering their own self-interest.
    It is clear that measures like this are paving the way for the wealth tax that the next Labour Government will undoubtedly introduce on the bigger fortunes. Let there be no doubt about that. Such measures are paving the way for such a tax to be enthusiastically received by a nation that is being cheated and that sees its own wealthy people cheating it because they are not contributing their share to the burdens of the community. Those burdens are being substantially increased by a Government who are allowing the wealthy not to pay their share. The wider society knows this. By such actions the Government are building up a body of resentment that will make certain that our wealth tax, when it is introduced, is enthusiastically received.
    Mr. Peter Rees: We have heard once before, in Committee, the speech that the hon. Member for Grimsby (Mr. Mitchell) has just delivered—
    Mr. Austin Mitchell: Not from the hon. Member for Grimsby.
    Mr. Rees: Indeed, from the hon. Member for Grimsby. I had hoped that his contribution would have been mellowed a little after the agreeable exchanges that we had in Committee Room 10. Sadly that is not so, and we have had some rather cheap gibes at members of the Conservative Cabinet.
    The hon. Member might care to cast his mind back to the proceedings in the House on Tuesday, when a Ten-Minute Bill dealing with land-owning in Scotland was introduced. It seemed that a principal landowner was speaking from the Labour side of the House then. Be that as it may, I do not propose to descend to that kind of analysis of personal fortunes comprised in Westminster because I do not think that it advances the debate.
    I say to the hon. Member for Grimsby that the country will note his full-blooded adoption of a wealth tax and will draw its own conclusion about the kind of Labour Party and the kind of Labour policies with which it will be confronted at the next general election.
    The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) displayed an understandable pride of paternity. One recalls the notable part that he played in devising, introducing and commending capital tranfer tax to a rather sceptical House some six years ago. I cannot say that over the years acquaintance and familiarity with the tax have made it any more endearing to the country as a whole, although it may have endeared itself more to the Labour Party .
    The right hon. Member and his hon. Friends underestimated the damage that a tax of the kind that they

    1345
    devised, at the rate that they proposed, would have done to the business and agricultural structure of the country. There would have been a dissipation of wealth, or the transfer of wealth from private hands to the State. I do not believe that, on the record of this country since the war, the State cart be regarded as a better steward of the assets of this country overall than the individual members of it. Of course, there will be variations, but that is a proposition that I hope will command the support of my right hon. and hon. Friends.
    If I have reservations about the measures, it is that perhaps they do not go quite as far as the target that we set ourselves in the manifesto on which we fought the election. I will surely carry the Opposition with me on this. Manifesto commitments must be treated with great respect by the whole House. After all, that is a cardinal article of faith of the Labour Party, and Labour Members must concede that we, too, must be punctilious in fulfilling the obligations mat we so willingly assumed.
    3.30 am
    Mr. Cook: I am grateful to the hon. and learned Gentleman for saying that he places the same importance—indeed, elevation—on manifesto commitments as we do, so perhaps he could tell us when he hopes to carry out the Conservative manifesto commitment to raise tax thresholds to let the low-paid out of the tax net.
    Mr. Rees: The hon. Gentleman will recall that in our first Budget we valorised the thresholds twice over—if I may put it in that inelegant way at this hour of the morning. That is something on which we can look back with considerable satisfaction. The fact that this year we were unable to achieve that target does not mean that we shall not revert to the problem. I believe that we shall do more—and substantially more—than the Labour Administration could ever claim credit for, even with the compelling assistance of the Liberal Party and the Conservative Opposition. The hon. Gentleman must contain his patience a little longer. He will see that we shall go to the country with a creditable record in that regard.
    As I said, it was our manifesto commitment that we would humanise—we would not abolish—capital transfer tax. I give that minor reassurance to the right hon. Member for Ashton-under-Lyne. We would endeavour to smooth off the rough edges. My hon. Friends may well tell me that many remain to be smoothed off, but at any rate we have made a modest start.
    The right hon. Gentleman raised the question of cost. The cost will be negligible. If the right hon. Gentleman looks at the Red Book, he will see that the amount of capital transfer tax forgone this year will be about £5 million, which I am sure the whole country will recognise as not at all excessive. Even in the year after it will be not more than about £20 million. I do not feel, therefore, that we have concentrated unduly or that our fiscal measures have been at all out of joint.
    The underlying theme of the 10-year accumulation period, as opposed to the 20-year period that the right hon. Gentleman and his hon. Friends propose in amendment No. 165, is to encourage the free transmission of wealth between the generations. That must surely be a theme that the right hon. Gentleman also has at heart. I recall that in the middle of the Committee stage in which capital transfer tax was commended to the House he thought fit, with his
    1346
    right hon. Friends, to change the whole structure and to encourage gifts inter vivos, so we are taking the theme only a little further. I am sure that on reflection the right hon. Gentleman will realise that he should ask leave to withdraw his amendment and support the position that we have taken up, which is in harmony with the thinking of the Labour Party in 1975.
    What the Labour Party will be proposing for the country in later years by way of a wealth tax and a sharpened capital transfer tax—I do not understand how it can be called a softened capital transfer tax, which was the phrase used by the hon. Member for Grimsby—I leave to the hon. Gentleman to explain in due course. We believe that wealth can be more productively employed in private hands, so that we should scrutinise, soften and reduce the rigours of capital transfer tax and, indeed, of other capital taxes. Proportionately we now derive less of our revenues by way of capital taxes than we did in 1945 because there has been a greater diffusion of wealth and incomes, which is something that the hon. Gentleman should welcome.
    I hope that on that basis the Labour Party will feel that the subject has had an airing, will recognise that perhaps some of its sentiments are a little extreme, and will feel able to ask leave to withdraw the amendment.
    Amendment negatived.

  Schedule 13

    CAPITAL TRANSFER TAX RELIEF FOR AGRICULTURAL PROPERTY
    Mr. W. Benyon: I beg to move amendment No. 208, in page 170, line 38, after 'occupation', insert 'of the woodland'.
    The amendment relates to the definition of intensive livestock farming. The Finance Act 1974 gave relief for agriculture, but the definition of agriculture in that Act did not include intensive farming methods. In practice, however, by means of an extra-statutory concession by the Revenue, the relief was given.
    The Bill gives a statutory definition to what was an extra-statutory concession. Legal advice, however, suggests that it will have little practical effect because of the two tests that are included. The amendment refers to the second test, which is unlikely to be satisfied, which means that the relief would not be available.
    The amendment removes the second test. I hope that it is acceptable. If the Government tell me that it is not, will my hon. and learned Friend say categorically that the definition contained in the Bill covers the items to which I refer, namely, piggeries, broiler houses, fish farms, and so on, and recognises them as an integral part of British agriculture, which will therefore receive relief?
    Mr. Peter Rees: I hope that I can reassure my hon. Friend. It is certainly our intention that intensive rearing of livestock or fish should qualify for the relief, provided that those activities are subsidiary to the occupation of agricultural land.
    If my hon. Friend feels that what he described as the second condition will create difficulties in practice and unduly restrict the scope of this relief in regard to the activities that he has in mind, we shall be prepared to reconsider the matter next year. I hope that we have in fact

    1347
    done full justice to those activities, but we are open-minded on the subject and if, on reflection, in the course of the next year we see any defects in the legislation we can certainly return to this in the next Finance Bill.
    Mr. Benyon: In the light of that assurance, I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Amendments made: No. 169, in page 171, line 43, leave out from 'to' to 'would' and insert
    'a part of the value transferred equal to the amount which'.
    No. 170, in page 173, line 9, at end insert—
    '6. Where the transferor became entitled to his interest on the death of his spouse on or after 10th March 1981—

    (a) he shall for the purposes of paragraph 2(2)(b) above be deemed to have been beneficially entitled to it for any period for which his spouse was beneficially entitled to it;

    (b) the condition set out in paragraph 2(3)(a) shall be taken to be satisfied if and only if it is satisfied in relation to his spouse; and

    (c) the condition set out in paragraph 2(3)(b) shall be taken to be satisfied only if it is satisfied both in relation to him and in relation to his spouse.'.—[Mr. Peter Rees.]

  Clause 94

    GRANT OF TENANCIES OF AGRICULTURAL PROPERTY
    Amendments made: No. 171, in page 82, line 42, leave out 'on or after 10th March 1981'.
    No. 172, in page 82, line 45, at end add—
    '(3) This section applies to grants before as well as after the passing of this Act. '.—[Mr. Peter Rees.]

  Clause 95
    BUSINESS PROPERTY USED BY BENEFICIARY UNDER SETTLEMENT
    Amendment made: No. 174, in page 83, line 10, after 'building', insert ', machinery or plant'.—[Mr. Peter Rees.]
  Clause 109

    CONTRACTS WITH DEFERRED PAYMENT
    Amendment made: No. 177, in page 96, line 5, at end insert—
    '(5) Where a contract provides for payments in respect of the completion of stages in the performance of separate parts of the work specified in the contract, the payments under the contract shall be treated as complying with subsection (3) above if the payments attributable to each part of the contract wuld have complied with that subsection if that part had been the subject of a separate contract'.—[Mr. Peter Rees.]

  Clause 116

    CHARGES OF SUPPLEMENTARY PETROLEUM DUTY
    Mr. Eggar: I beg to move amendment No. 229, in page 100, line 28, leave out 'and 30th June 1982'.
    Under considerable pressure, I shall be as brief as possible, but I must stress that this is an extraordinarily important area of tax law, which receives all too little attention.
    In the Budget considerable changes were introduced to petroleum revenue tax and special petroleum duty.
    1348
    I begin by quoting an extract from a study initiated by Kemp and Rose, of Aberdeen university. The main summary of that independent study of the 1981 tax changes was as follows:
    "The 1981 tax changes will influence the behaviour of operators. The development of marginal fields could be postponed, as could satellite developments."
    I wish briefly to focus attention on the effect of the tax changes on the marginal fields and on the smaller satellite developments. I shall do so by means of a series of questions to my hon. and learned Friend. I realise that he will not have an opportunity to reply in detail now, but I am sure that he will take an opportunity in the near future to go on the record.
    Are the Government using the tax changes as a backdoor method of depletion policy? If so, that is the worst possible kind of depletion policy, because it will slow down the development of the marginal and satellite fields. Unless we are careful, this tax regime may mean that a considerable amount of oil that could otherwise be recovered will be left in the ground. Given the changing circumstances, it will never be economic to extract that oil.
    There is a way round the impact that the tax changes will have on the marginal and satellite fields. We could look seriously at the way in which fields are designated. When we debated the Oil Taxation Bill in 1975, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) made it clear that the designation of fields was a geological decision and was not taken on economic or any other grounds.
    Perhaps my hon. and learned Friend could clarify matters and improve the situation by making it clear that the Department of Energy will exercise more discretion over the designation of fields. Is that envisaged? I am sure that my hon. and learned Friend would be the first to agree that the special petroleum duty is a bad tax. It is based not on profits but on revenues. It is also a discriminatory tax, particularly in relation to American and French companies. Because the tax is effectively a royalty or an excise duty, it is deductible—under the double taxation treaties between France and the United States of America—but not creditable. Effectively, that means that American and French companies will have to pay tax in their respective countries over and above the special petroleum duty. We always try to avoid that form of double taxation.
    The Government have introduced an amendment that enables those companies to pay PRT earlier. That means only that in addition to paying the special petroleum duty a company can pay PRT earlier and can give the British Government—instead of the French or American Governments—the extra tax. That is not a suitable concession to make. Will my hon. and learned Friend give an even more categorical assurance than the one that he gave in Committee, to the effect that the Treasury is going into a consultation period with the oil companies with an open mind and that it will not sit back and wait for the oil companies to put forward alternative proposals which the Treasury can play off, one against the other?
    Will my hon. and learned Friend give an assurance that when the taxation review has been concluded, and any decisions have been made, there will, on the introduction of the new tax regime, be a clear statement on our future fiscal stability? The Dell assurances on North Sea taxation

    1349
    were extremely helpful to the industry. They were reassuring and they were followed. The industry requires something similar from the Government.
    3.45 am
    I end with the thought that is easier for the Government to point to the fact that the oil companies are still interested in the exploration blocks and that there is no firm evidence of production and development plans being put back. Throughout the world there is a drastic shortage of skilled oil personnel with offshore experience. The shortage is growing rather than decreasing. The multinational oil companies, which dominate the oil industry, whether we like it or not, have to decide how to allocate scarce human resources. Unless we can convince those companies that there is a future in the North Sea, those skilled teams that have been built up over the past eight or nine years will be broken up. That will happen not suddenly but gradually, and we shall realise that in four or five years' time we are not getting the sort of development that is necessary to maximise our North Sea resources.
    Then it will be no good for the Government to try to change the tax regime to encourage more investment and development by those companies, because the expertise will have been dissipated to other parts of the world. I wish that the Government would spend less time considering discounted cash flow returns on fields and more time considering the human implications of what they are doing.
    Mr. Bowen Wells: I want briefly to speak in support of my hon. Friend the Member for Enfield, North (Mr. Eggar). [HON. MEMBERS: "Hear, hear."] I appreciate those sounds of approval for the brevity of my speech.
    In Committee my hon. and learned Friend referred to the fact that he was not certain that he was correct about special petroleum duty. I understand that what he meant was that if the teams of expertise were dispersed and we did not extract the maximum return of both oil and finances from the North Sea he would change the tax.
    Much representation has been made to myself and other hon. Members that the Government are incorrect. Therefore, in supporting the cogent arguments of my hon. Friend the Member for Enfield, North, I ask the Government to reconsider the comments made by the oil companies.
    Mr. Peter Rees: I hope that the House will acquit me of discourtesy if I deal briefly with the four points, important though they may be, raised by my hon. Friends.
    I deal seriatim with the questions raised by my hon. Friend the Member for Enfield, North (Mr. Eggar). His first question was: Are the Government using tax changes as a back door to depletion policy? My answer is "No". The second question was about the designation of fields and whether it should be done on a geological or an economic basis. That is a matter for my right hon. Friend the Secretary of State for Energy. The third question was more a proposition that special petroleum duty is a bad tax because it discriminates against United States and French companies. I hope not. Indeed, my hon. Friend was kind enough to recognise that clause 110 does a little to mitigate the situation about petroleum revenue tax. He shakes his head, but he must recognise that that clause does that and he made that point himself. However, we shall take that into account it the reception we shall offer to suggestions for amending the regime in the autumn.
    1350
    Fourthly, my hon. Friend asked me to give a categorical assurance—more categorical than the one I gave before—that the Treasury will approach consultation with an open mind. I do not believe that I could be more categorical. Yes, we shall approach the cosultations with an open mind.
    Will I give a clear statement of fiscal stability? I am in difficulty there, first, on general constitutional grounds, because nothing that I say will bind a subsequent Administration. Secondly, I am in the same breath being enjoined by my hon. Friends to be open-minded about a possible new regime to be suggested by the oil companies. I am not quite certain whether I can reconcile those two aspirations, but I hope that I have done adequate justice to the important points made.
    I am sorry that more time is not available for debate, but the subject was canvassed fairly thoroughly at an earlier stage in our debates. Although I know that my hon. Friend has a deep interest in these matters and would like to explore them thoroughly, I hope that he will feel able to seek leave to withdraw the amendment.
    Mr. Eggar: I find that response somewhat disappointing. I hope that my hon. and learned Friend will be able to expand in the fairly near future on the rather brief answers that he gave so that his argument may he on the record.
    I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.

  Clause 126

    DEVELOPMENT FOR OWNER'S USE
    Amendment made: No. 178, in page 107, line 7, leave out '1983', and insert '1984'.—[Mr. Peter Rees.]
    Sir Graham Page: I beg to move amendment No. 179, in page 107, line 13, after 'person', insert
    'a dependent relative or an adult member of his family as defined by section 15(3) of the Development Land Tax Act 1976'.
    This is an amendment to the clause dealing with the development land tax. In the Development Land Tax Act 1976 there were transitional provisions which gave exemption from the tax to the owner who developed property for his own purpose. But in 1976 it was not only for himself; we included then the case where he developed it for a dependent relative or an adult member of his family who did not happen to be a dependant.
    In the present Bill there is, as it were, an extension of that exemption, although in this case it is merely a deferral of tax. But there is a distinction. In this case we have left out the members of the family of the dependant. It is only if he develops the property for his own personal use that he will get the concession of deferral of tax.
    The amendment seeks to add the sort of exemption and concession that was given in 1976 for those owning land at that time, and I can see no distinction in principle between the 1976 provisions and those in the Bill.
    Mr. Brittan: This point was raised by my right hon. Friend during the "clause stand part" debate in Committee. The reason why I would not advise the House to accept my right hon. Friend's amendment is related to the underlying purpose of the clause, which is to extend to commercial concerns the benefit which at the moment exists for industrial concerns. In principle, the rules for the two reliefs should be kept in line. The industrial relief does not

    1351
    apply to property to be used by a member of the owner's family, and it is for that reason that we think it reasonable that the relief in respect of commercial concerns should be similarly confined.
    I hope that my right hon. Friend will feel able to withdraw the amendment.
    Amendment negatived.
    Mr. Paul Dean: I beg to move amendment No. 180, in page 107, line 24, at end insert—
    '(2) For the purposes of this section a person carrying on a trade who is a lessor of tied premises shall be treated as occupying those premises.
    This subsection shall be construed in accordance with section 140(2) of the Taxes Act (income tax and corporation tax on tied premises.'.
    Mr. Deputy Speaker (Mr. Bernard Weatherill): With this it will be convenient to take Government amendment No. 249.
    Mr. Dean: I declare an interest in this subject and I am grateful to the Brewers Society for drawing my attention to an anomaly which will arise unless an amendment on these lines is accepted.
    I am pleased to see Government amendment No. 249, which appears to deal with the same point. If my right hon. and learned Friend can give me an assurance to that effect, I shall be pleased in due course to withdraw my amendment. At this very late hour I shall describe the amendment and the purpose behind it extremely briefly.
    Section 19 of the Development Land Tax Act provides that, where a trader carries out a project of material development for the industrial purposes of that trade, liability for development land tax shall be deferred until the interest in the land being developed is disposed of. In his Budget Statement my right hon. and learned Friend the Chancellor of the Exchequer proposed that the deferment of development land tax currently allowed to traders in respect of development for their own industrial use should be extended to commercial and other types of development, but the proposal included a condition that would exclude premises that a brewer had in mind for occupation by a tied tenant.
    In the case of brewery-owned licensed premises, this condition would seem to include premises intended to be operated by the company's own employees but to exclude premises that the brewer had in mind for occupation by a tied tenant. The situation would be anomalous and troublesome, in that a firm decision might not be made at the commencement of the project as to which of those two options should be adopted, or unforeseen events might cause a change of plan at any stage.
    I am confident that the Government did not intend to draw an artificial distinction of that kind. The purpose of the amendment is to deal with it.
    Mr. Brittan: I am happy to assure my hon. Friend that Government amendment No. 249 is designed to deal with the point that he has raised. The only reason why amendment No. 180 was not regarded as acceptable is that it is technically not satisfactory. I hope, therefore, that my hon. Friend will seek to withdraw his amendment and will support the Government amendment.
    Mr. Dean: I am grateful to my right hon. and learned Friend for completely meeting the point that I put to him, and I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Amendment made: No. 249, in page 107, line 34, at end insert—
    '(2A) Where on the grant of a lease of any premises the premises become tied premises—

    (a) if the grant of the lease would not otherwise be a disposal falling within subsection (2) above, it shall be deemed to be so;

    (b) whether or not any other person is actually in occupation of the premises, the lessor shall be treated for the purposes of this section as if he himself occupies the premises during any period during which the premises are tied premises; and

    (c) if at any time during the lease the premises cease to be tied premises and are not from that time occupied by the lessor, the relevant interest, or if subsection (1)(b) above applies to part only of the building or other land so much of the relevant interest as subsists in that part, shall be treated for the purposes only of subsection (1) above and section 27 below as having been disposed of at that time;

    and for the purposes of this section premises subject to a lease are tied premises if they are tied premises within the meaning of section 140(2) of the Taxes Act in relation to the lessor and to a trade carried on by him.'.—[Mr. Brittan.]

  Clause 128

    SPECIAL TAX ON BANKING DEPOSITS
    Amendment proposed: No. 182, in page 109, line 12, leave out '10' and insert '15'.—[Mr. Lawson.]
    Mr. Deputy Speaker: With this we shall take the following:
    Government amendment No. 183.
    Amendment No. 190, in page 109, line 16, after 'above' insert
    'but shall not be charged, where it will reduce a bank's current cost return on equity below 2·5 per cent. per annum'.
    Government amendments Nos. 184 and 187.
    Sir William Clark: The Government have made some progress on the windfall profits tax. Many of us on the Conservative Benches do not like the whole principle of such a tax, but this is not the time to rehearse the reasons.
    In Committee my right hon. Friend the Financial Secretary gave an assurance that the windfall profits tax would be a one-off tax and that the Government had no intention of repeating this levy. We welcome the relief given by the increase in the threshold and the reduction in the rate from 2½ to 2 per cent. That has reduced some of our antagonism, but I urge my right hon. Friend to repeat the categorical assurance that he gave in Committee upstairs that the levy will not be repeated and that a special tax will not be put on the banks in future.
    Mr. John Browne: I declare an interest, although not a financial interest.
    I join my hon. Friend the Member for Croydon, South (Sir W. Clark) in requesting a categorical assurance that the tax is a one-off levy. On becoming a Member of the House I expected to have disagreements with the Conservative Party, but I never expected to be thoroughly ashamed of a tax proposal made by a Conservative Government. I am ashamed that a Conservative Government should put forward a discriminatory tax which has been made retrospective without the banks having been given the precise warning to which my right hon. and learned Friend the Chancellor of the Exchequer referred specifically when in Opposition. He said:

    1353
    "First, warning must have been given to the taxpayer of the intention to legislate in this way and the warning must have been precise in form."—[Official Report, 12 July 1978; Vol. 953, c. 1641.]
    I do not agree that the vague warning last year that there might be some tax on the banks was a precise warning.
    4 am
    We in the Conservative Party have made a rod for our backs. What will we do if a future Socialist Government introduce a retrospective wealth tax? I find the Government s proposal outrageous and I am amazed that it got through Committee, though I understand the severe Whipping that takes place in Committee. I cannot support this retrospective tax.
    If the Chancellor insists on pursuing the implementation of the discriminatory and retrospective tax, which does not meet his precise criterion about warning, will he allow the banks to retain at least a 2½ per cent. return on equity on a current cost accounting basis? If he will not allow that, what does he consider a reasonable return for a bank?
    Mr. Eggar: I am deeply concerned about this tax. I was concerned about it when we last discussed it on the Floor of the House and my concern was considerably strengthened when I discovered, to my amazement, that while taking about £350 million from private sector banks, the Government had decided to give £7½ million to the National Giro. That is an odd sense of priorities for a Conservative Government.
    It would be churlish not to recognise that the Government have made some concessions, but I should like to comment on them. The justification for the introduction of the levy is the endowment profit on domestic banking business. Whether the bank is small or large, the endowment element is identical and it is extraordinary that the concessions should have been given to smaller banks. There is no logical justification for that.
    Not only is the tax more discriminatory because it hits particularly the clearing banks, but it assists 20 foreign banks in London. At a time when foreign banks already have about 30 per cent. of the wholesale banking market in this country giving them an extra competitive edge over the domestic banking system seems to be extraordinary.
    Mr. Lawson: It may be appropriate if I reply briefly to some of the points made in the debate. Taking them in reverse order, as they say in the Miss World contest, my hon. Friend the Member for Enfield, North (Mr. Eggar) rightly said that the logic is that the endowment profit—or, more accurately, the potential for endowment profit—is the target for the tax and, therefore, there is no reason for any distinction in respect of banks of different size. He has a strong point. That is why the Bill, when first published, contained no such distinction. It is right, however, that the Government should pay heed to the feeling of the House.
    I had to attend a meeting in Brussels at the time when this matter was debated at great length in Committee but I have read every word of the discussion that took place. There was a clear feeling on both sides of the Committee that something needed to be done for the smaller banks. The trustee savings banks were among those mentioned. I proposed, therefore, to meet those representations in a way that was not discriminatory. The concessions now before the House apply across the board to all banks. The concessions on the exempt slice and on the lower, reduced
    1354
    rate for the first £200 million worth of deposits meet the point in a manner that I hope commends itself to the House.
    I was not seeking to be discriminatory. It is true that certain foreign banks will benefit. I am surprised that my hon. Friend the Member for Enfield, North, who is a sophisticated member of the financial community, should be opposed to foreign banks in London. The foreign banks in London have been an asset to the financial community of London and a healthy new element in the financial scene. I believe that we have benefited.
    My hon. Friend the Member for Winchester (Mr. Browne) seeks a profits limit to the tax. The Government considered very carefully whether the tax should be geared to profits as such. It would have made the tax much more complicated. It would not have been precisely addressed to what we consider the justification for levying the tax, namely, the specific profit, or profit potential from the endowment element from non-interest-bearing deposits—in other words, current accounts. That is why we framed our proposal in the way it has appeared. My hon. Friend suggests a different kind of tax. I do not think that the two can be married. We decided that it was not possible. The argument about simplicity applies particularly to a once-for-all tax. It is not some complicated edifice that we intend to continue year in and year out, as I have made clear.
    The retrospective element has been mentioned. I cannot accept that argument, certainly not in the sense in which a quotation from my right hon. and learned Friend the Chancellor of the Exchequer has been used. The retrospective element comes only in the sense that the amount of non-interest bearing deposits on which the tax is levied has clearly to be an amount at a particular date. That date, it is true, is a date in the past.
    Had the Government taken today's date, the yield from the tax, if one takes the non-interest-bearing deposits that the banks now have, would have been no less and, if anything, slightly more. The essential reason for taking a date that had already occurred was that it would have been a relatively easy matter, since it was geared to non-interest-bearing deposits, for the banks to have paid a nominal amount of interest on their deposits and there would have been no yield at all. It is not the principle of retrospection that my hon. Friend is getting at. He is suggesting that the tax in its entirety should be dropped.
    I accept my hon. Friend's stand on this matter. I know where he stands, and he has been consistent about it. But we wished to raise money from the endowment profits of the banks, and he must see that it had to be done in this way.
    Mr. John Browne: My point about retrospectivity is that, if it were clearly and precisely given as a warning beforehand, it would, according to the criteria of my right hon. and learned Friend the Chancellor, and his quotation of Mr. Heathcoat Amory, have allowed people to adjust their circumstances to meet the forthcoming tax.
    Mr. Lawson: That is not the intention. The context in which my right hon. and learned Friend the Chancellor was speaking was anti-avoidance measures. It is a different context. We are not talking about anti-avoidance measures now.
    I am most grateful to my hon. Friend the Member for Croydon, South (Sir W. Clark) for his welcome to the

    1355
    Government amendments, not merely the amendments to which I have already referred but also amendments Nos. 185 and 186, which meet the unease which was voiced in Committee about the information which the Board of Inland Revenue was able to ask for in a return from the banks. If my hon. Friend looks at amendments Nos. 185 and 186, he will see that now the information which the board can ask for is very much restricted, and in particular information about individual bank accounts, the most sensitive area, is totally excluded.
    I think that these are advances. I gladly repeat the categorical assurance that this is a once-for-all tax. As such, it follows that it will not be repeated, not merely in this form but in some slightly altered form. It is genuinely a once-for-all tax.
    Amendment agreed to.
    Amendments made: No. 183, in page 109, line 15, leave out '2½' and insert '2'.
    No. 184, in page 109, line 16, at end insert
    'or, if the excess is more than £200 million, the aggregate of 2 per cent. of the first £200 million and 2½ per cent. of the remainder. '.—[Mr. Lawson.]

  Schedule 15

    SPECIAL TAX ON BANKING DEPOSITS
    Amendments made: No. 185, in page 185, line 20, after 'him', insert
    'and of—

    (i) any deposits excluded from the chargeable deposits by virtue of paragraph 3(2)(b), (c) or (d) above;

    (ii) any adjustment of the amount of the chargeable deposits made by virtue of paragraph 4 or 5 above;'.

    No. 186, in page 185, line 26, leave out paragraph (c) and insert—
    '(c) such particulars of the aggregate amounts of the different kinds of deposit held by him in his banking business at each material time as the Board may require for the purposes of the tax.'.
    No. 187, in page 192, line 21, leave out '10' and insert '15'.—[Mr. Lawson.]

  New Schedule

    RELIEF FOR INVESTMENT IN NEW CORPORATE TRADES:WHOLESALE AND RETAIL DISTRIBUTION
    Part I
    1. The goods are brought by the trader in quantities larger than those in which he sells them.
    2. The goods are brought and sold by the trader in different markets.
    3. The trader employs staff and incurs expenses in the trade in addition to the cost of the goods and, in the case of a trade carried on by a company, in addition to any remuneration paid to any person connected with it.
    PART II
    4. There are purchases or sales from or to persons who are connected with the trader.
    5. Purchases are matched with forward sales or vice versa.
    6. The goods are held by the trader for longer than is normal for goods of the kind in question.
    7. The trade is carried on otherwise than at a place or places commonly used for wholesale or retail trade.
    8. The trader does not take physical possession of the goods.'.—[Mr.Lawson.]
    Brought up, read the First and Second time, and added to the Bill.

  New Schedule

    CAPITAL TRANSFER TAX: SCOTTISH AGRICULTURAL LEASES
    1. Subject to the following provisions of this Schedule, where any part of the value of a person's estate immediately before his death is attributable to the value of the interest of a tenant in agricultural property in Scotland, being an interest held by virtue of tacit relocation, and either he had been tenant of the said property continuously for a period of at least two years immediately preceeding his death or he had become tenant of the said property by succession, and the said interest is acquired on his death by a new tenant, the value of the said interest shall be left out of account in determining the value transferred on the death.
    2. The value to be left out of account under paragraph 1 above shall not include the value of any rights to compensation in respect of tenant's improvements.
    3.—(1) Subject to the following provisions of this paragraph, where, under paragraph 1 above, the value of an interest has been left out of account in determining the value transferred on the death of a person, and the whole or any part of that interest is disposed of before being transferred on the death of any other person, tax shall be charged in accordance with paragraph 4 below.
    (2) The person liable for the tax chargeable under this paragraph shall be the person who is entitled to the consideration for the disposal or who would be so entitled if any consideration passed on the disposal.
    (3) Sub-paragraph (1) above does not apply to a disposal made by any person to his spouse.
    (4) Where tax has been charged under this paragraph on the disposal of the whole of an interest or of any part thereof, tax shall not again be charged in relation to the same death on a further disposal of the whole or, as the case may be, of the same part, of the said interest.
    4.—(1) Where tax is chargeable under paragraph 3 above it shall be charged on the following amount, namely—

    (a) if the disposal is a sale for full consideration in money or money's worth, on the net proceeds of the sale;

    (b) in any other case on the value of the interest or of the part disposed of, as the case may be, immediately before the time of the disposal, and at the rate or rates at which it would have been chargeable on that death if that amount, and any amount on which tax was previously chargeable under that paragraph in relation to the death, had been included in the value transferred on death and the amount on which the tax is chargeable had formed the highest part of that value.

    (2) The tax chargeable under paragraph 3 above shall not exceed the difference between the tax chargeable on the death and the tax which would have been chargeable on the death had paragraph 1 above not applied and had the value of the interest formed the highest part of the value of the estate.
    5. Where a disposal on which tax is chargeable under paragraph 3 above is a chargeable transfer, the value transferred by it shall be calculated as if the value of the interest in the tenancy had been reduced by the tax chargeable under that paragraph.
    6. In this Schedule—

    (a) references to the value transferred on a death are references to the value transferred by the chargeable transfer made on that death; and

    (b) references to the net proceeds of sale are references to the proceeds of sale after deduction of any expenses of sale.

    7.—(1) This Schedule applies to deaths on or after 15th November 1976.
    (2) Where a person died on or after 15th November 1976 and before the passing of this Act, this Schedule shall apply only if a claim for relief under paragraph 1 above is made within the period of twelve months immediately following the passing of this Act by a person who (apart from the operation of this Schedule) would be liable to pay the whole or part of the tax chargeable on the value transferred on the death and attributable to the said interest.
    (3) Where a person died on or after 15th November 1976, paragraph 3 above shall not apply to any disposal before the passing of this Act.'.—[Mr. Lawson.]
    Brought up, read the First and Second time, and added to the Bill.

    Schedule 17

      REPEALS
      Amendments made: No. 195, in page 198, line 25, at end insert—
      .'1974 c.30.The Finance Act 1974.Section 2(1).'.
      No. 196,: in page 199, line 36, column 3, at end insert—
      'Section 8.'
      No. 197, in page 200, leave out lines 4 and 5. —[Mr. Lawson.]
      Bill to be read the Third time this day

Iron and Steel Bill
Lords amendments considered.
Iron and Steel Bill
  Clause 2

    ORGANISATION OF THE CORPORATION'S ACTIVITIES
    Lords amendment: No. 1, in page 3, line 15, leave out from "may" to end of line 18 and insert
    ",after consultation with the Corporation, by order, give to the Corporation directions—"
    4.15 am
    The Under-Secretary of State for Industry (Mr. Michael Marshall): I beg to move, That this House: doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker (Mr. Bernard Weatherill): With this we may take Lords amendments 2 to 11.
    Dr. John Cunningham: I have no objection to discussing the amendments together. I am sure that there are a number of hon. Gentlemen who would like to have a debate in some depth about the 21 amendments on the Amendment Paper, but I assure the House that I intend to be brief. I shall simply put a number of questions to the Under-Secretary which I hope that he can answer briefly.
    In amendment No. 1 there seems to be a slight softening of the Government's position, in that the amendment seeks to allow some consultation before the Secretary of State may give a direction to the corporation to act in a way that he may determine. The Under-Secretary knows that we are not happy about the fact that he should give directions of that kind. However, we welcome the amendment if its intention is that these matters should be discussed with the corporation before any such direction is given. Amendments Nos. 2 and 3, as I understand them, are consequential drafting amendments following from amendment No. 1, so I have nothing to say about them.
    Amendment No. 4—as I understand it; I hope that the Under-Secretary will confirm my understanding, so that we need not pursue the matter—seeks to ensure that the corporation shall have no choice other than to give effect to any direction that the Secretary of State may choose to give it. In other words, nothing is left to chance in amendment No. 4.
    Amendment No. 5 seeks to omit subsection (6) of the clause which was introduced by the Government on Report. When I commented on this matter on 14 May, when we were considering the Iron and Steel Bill in the House, the Under-Secretary replied:
    "The hon. Member made sport of subsection (6). Procedure is provided under that subsection to ensure that a direction is given and made known formally to the corporation. That is an integral part of making plain the formal position. It is part of the mechanism under which that direction will appear in the annual report. That is how the issue is made public. On reflection, the hon. Gentleman"—
    that is me—
    "might appreciate the significance of that".— [Official Report, 14 May 1981; Vol. 4, c. 963.]
    We did not appreciate the significance at the time. Now that the provision has been removed altogether, I am tempted to have a little more sport. However, at this late hour I simply ask the Under-Secretary to say whether he thought that the sport that we had at the time was worth noting, or whether there is another purpose in moving the

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    amendment to remove the subsection, which he said at that time was an integral part of making plain the Government's intentions.
    I understand that Lords amendment No. 6 clarifies the situation. Amendment No. 7 involves the omission of a provision introduced by the Government on Report. It refers to the Secretary of State giving notice
    "as soon as it is practicable to do so".
    That was the subject of criticism similar to that made of amendment No. 5, and it is to be removed. Why is it being removed? Does it mean that the Secretary of State will not give notice? Alternatively, will the notice be covered in some other way.
    Amendments Nos. 8, 9 and 10 are drafting amendments. I assume that the Under-Secretary will reply before I ask more questions.
    Mr. Michael Marshall: I am grateful to the hon. Member for Whitehaven (Dr. Cunningham) for the way in which he has responded. I can cover his questions about amendments Nos. 1 to 8 with a general answer because they are interrelated.
    The purpose of Lords amendments No. 11 is to continue exemptions from stamp duty which currently are enjoyed under certain conditions by subsidiaries of the corporation. It replaces the amendment made by clause 2(4). It is a tidying-up amendment.
    Lords amendments Nos. 9 to 11 are drafting amendments. The term "changes in organisation made" is an improvement on "organisation changes effected."
    The substance of the hon. Gentlemen's remarks related to Lords amendments Nos. 1 to 8. I shall spell out precisely how the group of amendments apply.
    The amendments remove the power of the Secretary of State to give direction direct to a publicly owned company to dispose of its property, rights, liabilities and obligations. In that sense it is a softening.
    The passage in the Bill was designed to facilitate the imposition of restrictions in section 4A(7)(b), which clause 2(1) of the Bill inserts into the Iron and Steel Act 1975. Those restrictions enable the Secretary of State to maintain control of the nature and assets of a company that is formed as a result of his direction. The basis of the relationship between Ministers and the chairman and the board of the BSC, however, is that control of the corporation's subsidiaries should be in the hands of the corporation. It would be inconsistent with that view for the Secretary of State to take power to give a direction to subsidiaries that was not channelled through the corporation. That is an overriding consideration.
    These amendments also have the advantage of shortening the clause.
    Question put and agreed to.
    Lords amendments Nos. 2 to 11 agreed to.
    Lords amendment: No. 12, in page 5, line 38, at end insert—
    "(6) Paragraph 2 of Schedule 4 to the 1975 Act (duty to make regulations providing compensation to employees of certain nationalised companies or of the former Iron and Steel Board) shall cease to have effect but without prejudice to the continuance in force of the regulations made or having effect as if made under that paragraph."
    Mr. Michael Marshall: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this it will be convenient to discuss Lords amendments Nos. 17 and 19.
    Dr. John Cunningham: Amendment No. 12 refers to compensation as set out in the Iron and Steel Act 1975. On page 39 the regulations are set out in some detail. I shall not bother to read them. As I understand the amendment, part of that is to cease to have effect. What is the purpose of the amendment, what materially will be changed by it, and if the changes are made will that leave people in the industry at a disadvantage? I hope that the Minister will clarify those questions.
    I do not have any questions on amendments Nos. 17 and 19 because I understand them to be consequential drafting amendments.
    Mr. Michael Marshall: As the hon. Gentleman said, amendments Nos. 17 and 19 are consequential to amendment No. 12. That amendment is largely consequential upon the introduction of clause 2 of the Bill and the related repeal of, among other provisions, sections 4(2) and 5(1) of the 1975 act. Those two subsections are referred to in schedule 4, paragraph 2, of the same Act, and the amendment will repeal that paragraph in its entirety.
    The 1967 Act provided for regulations to be made entitling those employed at the time by the companies nationalised in that year to compensation payments from the British Steel Corporation. Such compensation would cover loss of employment, and loss or diminution of earnings or pension rights, as a result of the nationalisation itself, any subsequent directions made by the Secretary of State under what is now section 4(2) of the 1975 Act, or organisational changes following a review of the corporation's activities under what is now section 5(1). In 1968 one set of regulations of this sort was made by the Secretary of State. It is still in force, the BSC is still making payments under it, and the present amendment will leave it unaffected.
    The hon. Gentleman will appreciate that we are speaking of a position that arose at the time of nationalisation and what flowed directly therefrom. It is clear that this is a historic position, which we are tidying up.
    Although schedule 4, paragraph 2(1)(a), of the 1975 Act has maintained these provisions of the 1967 Act in force, their declining relevance in the lengthening period since nationalisation has been underlined by the fact that no other regulations have been made since 1968, apart from one small amendment in 1971. There are no regulations under schedule 4, paragraph 2(1)(b), which provides for some related types of compensation.
    Reverting to paragraph 2(1)(a), it is by now almost inconceivable that further regulations will be needed to compensate employees for losses arising out of the original nationalisation in 1967. Moreover, section 4(2) of the 1975 Act, relating to directions given by the Secretary of State, is to be repealed by the present Bill, as is section 5(1), covering a formal review of the corporation's affairs. In those circumstances, it seems reasonable to conclude that the provisions of paragraph 2 of schedule 4 are no longer needed, and that is why the amendment proposes its repeal.
    As I have already mentioned, the amendment at the same time leaves in force the regulations that have already been made. That meets the hon. Gentleman's concern to

    1361
    ensure that nobody is disadvantaged by the proposal. That ensures that those employees still receiving payments will continue to do so. On that basis I commend the amendment to the House.
    Question put and agreed to.

  New Clause

    CORPORATION'S MEMBERS' TERMS OF APPOINTMENT, ETC.: NO NEED FOR STATEMENTS TO BE LAID BEFORE PARLIAMENT
    Lords amendment: No. 13, after clause 5, insert the following new clause—
    " . The following provisions of the 1975 Act shall cease to have effect: —

    (a) in section 1, subsection (6) (after appointing member of Corporation, Secretary of State to lay before Parliament a statement of term of appointment); and

    (b) in Schedule 1, paragraph 8 (Secretary of State to lay before Parliament a statement of certain determinations about remuneration etc. of Corporation's members)."

    Mr. Michael Marshall: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this we may take Lords amendments Nos. 16, 18 and 21.
    Dr. John Cunningham: Amendment No. 13 removes a provision it section 1(6) of the 1975 Act, which states:
    "As soon as possible after appointing a person to be a member of the Corporation the Secretary of State shall lay before each House of Parliament a statement of the term for which he has been appointed."
    The proposed new clause alters paragraph 8 of schedule 1 on the disclosure of the terms and conditions of remuneration to such appointees to the board. We are in favour of the disclosure of such appointments both to Parliament and to the public and the terms and conditions on which they are appointed. Why is the amendment removing the provision for the House to be so informed? Is the point to be met in some other way, and, if so, what is that way to be? If it is to be met, we shall be happy to accept the amendment. I hope that the Minister will be able to give us, an assurance that the amendment will not mean that appointments will be made and not publicly recorded in some way, even if it is not within the terms presently laid down by the 1975 Act.
    4.30 am
    I understand that the linked amendments are merely drafting or consequential amendments. I have no questions to ask about the other amendments.
    Mr. Michael Marshall: I confirm that amendments Nos. 16, 18 and 21 are consequential and related to amendment No. 13. The amendments take the opportunity afforded by the Bill to remove from the Secretary of State the duty to lay before Parliament certain statements about members of the corporation. This is to bring the corporation in line with other nationalised industries. Section 1(6) of the lion and Steel Act 1975 requires that
    "As soon as possible after appointing a person to be a member of the Corporation the Secretary of State shall lay before each House of Parliament a statement of the term for which he has been appointed."
    Paragraph 8 of schedule 1 to the Act provides that the Secretary of State shall also lay before each House of Parliament a statement of the remuneration, allowances and pensions of board members whenever there is a change in the amounts being paid.
    1362
    It is considered that these provisions are no longer necessary. Information on board members will still be available to the House as the corporation publishes similar details in its annual report and accounts, which are laid before Parliament. Should the corporation for any reason decide to discontinue this practice, it would be open to the Secretary of State, under section 24(1) of the 1975 Act, to direct the corporation to resume it. These amendments follow the precedent set in respect of the remuneration, allowances and pensions of board members of other nationalised industries that are sponsored by the Department.
    The hon. Gentleman may be aware that the proposed clause follows the practice of the previous Administration in the proposals put to the House at the time of the Aircraft and Shipbuilding Industries Act 1977.
    Question put and agreed to.

  Schedule 1

    RELATED AND CONSEQUENTIAL AMENDMENTS
    Lords amendment: No. 14, in page 9, line 1 leave out "and section 19(1)(a)"
    Mr. Michael Marshall: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this it will be convenient to discuss Lords amendments Nos. 15 and 20.
    Dr. John Cunningham: I believe that these are consequential drafting amendments and have no new effect other than that which we discussed when dealing with the previous group of amendments. If the hon. Gentleman will confirm that that is so, I shall not pursue the matter.
    Mr. Michael Marshall: I can confirm that the Bill, by paragraph 6(1) and (2) of schedule 1, provides for a number of alterations to the 1975 Act to reflect the likelihood that a number of the BSC's activities may be carried on through subsidiaries in which there is a minority private sector stake. To take account of this, the Bill provides for the words "publicly owned company"—defined as a wholly owned subsidiary of the corporation—to be changed to the word "subsidiary" in certain places in the 1975 Act. It is essentially a tidying-up operation.
    One of the places where this change has been made Ls in section 19 of the 1975 Act, which sets out the BSC's statutory borrowing limit. The position as it now stands under the Bill, therefore, is that the limit would embrace all the BSC's subsidiaries, including those in which its stake is less than 100 per cent. —and it would also cover overseas as well as United Kingdom companies. The effect would clearly be to act as a disincentive to a private sector company wishing to take a minority stake in a BSC subsidiary, since the subsidiary's borrowing powers would be curtailed if the borrowing limit that relates to the corporation had been reached. That could materially inhibit the corporation's prospects of recruiting minority partners for joint ventures and would be contrary to our general policy on privatisation.
    The amendment therefore restores the situation to where it stood under the 1975 Act, which does not place statutory controls on the extent of borrowing by non wholly owned subsidiaries of the BSC or on the BSC's. borrowings from a publicly owned company. I should

    1363
    mention, however, that the action proposed would not affect existing controls on the borrowings of non-wholly owned subsidiaries through the external financial limit system, since all external borrowing by such subsidiaries counts against the EFL.
    In short, this amendment to the definition of the BSC' s statutory borrowing limit also has the effect of restoring that definition to the same basis as that used in the British Telecommunications Bill. We regard it as an essential tidying-up and clarificatory amendment. I commend it to the House.
    Question put and agreed to.
    Lords amendments Nos. 15 to 21 agreed to

Criminal Attempts Bill
Lords amendments considered.
Criminal Attempts Bill
  Clause 4

    TRIAL AND PENALTIES
    Lords amendment: No. 1, in page 4, line 32, leave out subsection (6).
    4.37 am
    The Minister of State, Home Office (Mr. Patrick Mayhew): I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker (Mr. Bernard Weatherill): With this we may take Lords amendments Nos. 5, 6 and 8.
    Mr. Mayhew: I believe that it may also be for the convenience of the House if, at the same time, we take Lords amendments Nos. 2, 3, 4 and 7. Each of those is either a drafting or a technical amendment.
    Mr. George Cunningham: At 4.30 in the morning there is no need to detain the entire House to hear again the explanations of the amendments, which were given in the House of Lords. We have all studied those explanations. The Opposition are perfectly content with them. I would have wished that two of the Lords amendments that did not carry a majority in the other place could be amongst the number here, but they are not. Therefore, our activities can be less controversial and much shorter than they might have been otherwise.
    Question put and agreed to.
    Lords amendments Nos. 2 to 8 agreed to.

Duty-free Goods (Airports)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Thompson.]
4.38 am
Mr. Anthony Grant: At this late hour I am extremely grateful to my hon. and learned Friend the Minister of State, Treasury for being here to answer this debate after the long days and nights that he has spent on the Finance Bill.
This is an important subject, because most of us have experienced the tedious burden of humping duty-free goods on and off aircraft and the discomfort that the load causes during our journey. This crazy ritual, which has become a standard feature of air travel nowadays, has worse effects than mere inconvenience to passengers.
At a time of high energy costs and severe financial difficulty for airlines throughout the world, this absurd practice adds hugely to overheads and hence to fares or subsidies to airlines. British Airways have undertaken a careful analysis of the effects upon them. They estimate that the average quantity of duty-free liquor carried by passengers imposes an additional fuel cost of over £1 million per annum. Other airlines, large or small, sustain equivalent added costs throughout the world. As energy costs rise, so will this quite unnecessary bill.
What is more, the carriage of duty-free alcohol is an added safety hazard. My hon. Friend the Member for Newbury (Mr. McNair-Wilson) drew attention to this in a thoughtful speech on 22 May this year. Further, the British Air Line Pilots Association, in a recent report, pointed out this factor most forcefully. In 1973, in the Varig fatal accident, 117 lives were lost following an uncontrollable fire that was found to have been exacerbated by duty-free spirits igniting in the luggage racks.
During one month in 1980 there were seven recorded cases in the United States where bottles were used by hijackers. The hijacked VC 10 at Amsterdam was burnt out as a result of a deliberate fire started with duty-free bottles. On a lesser scale, there have been instances of injury to passengers as a result of falling bottles, and falling bottles have also proved an added hazard when emergency exits have had to be made from aeroplanes. Of course, the safety aspect should not be exaggerated, but anything that minimises risk should be carefully considered.
What can be done? One solution would be to abolish the whole silly charade of duty-free goods. There seems to be no justification for giving air travellers a duty-free allowance in addition to what they need to drink in transit. But, of course, our airports earn about £20 million to £30 million a year from their duty-free shops, and that admirable company Sealink also benefits from them. Certain other interests no doubt benefit and would be in jeopardy if there were complete abolition.
Therefore, I propose a simple solution, and that is to enable duty-free goods to be purchased at the point of arrival rather than the point of departure. Purists in Her Majesty's Customs, I know, look upon this suggestion with the same horror a maiden aunt looks upon the notion of a blue film show. There is really no more or less morality and no more or less justice in buying duty-free
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goods when one arrives rather than when one leaves. It is vastly more economic for airlines and air travellers generally. It is also safer.
What could be more absurd than the quite common practice of buying at the shop in Heathrow and lugging bottles to Europe or elsewhere in the world—and I confess that I have sometimes done this myself—and then bringing them back again, all because one feared that a suitable shop might not be available abroad? I understand that there would be no legal difficulties in following this proposal because section 13 of the Customs and Excise Duties (General Reliefs) Act 1979 provides:
"The Commissioners may by order make provisions for conferring on persons entering the United Kingdom reliefs from duty and value added tax".
There may be international obligations to be overcome, and if there are I am sure that my hon. and learned Friend will tell me. These should not be insuperable. All nations that have airlines have an interest in economy and safety of operation. Many places already provide duty-free shops for those arriving. This is the case at Rio de Janeiro, Cairo, Khartoum, Colombo, Singapore, Caracas and Iceland, and I understand that Australia is considering adopting such a facility.
There would have to be some physical reorganisation at airports, but anyone who uses Heathrow will know that reorganisation is almost a feature of everyday life there. Transferring sales to the point of arrival would make little if any difference to sales. Airlines would gain by carrying either less fuel or more passengers, instead of whisky and gin. Passengers' rights would be unchanged, and their benefits would be greater safety and convenience and, quite possibly, cheaper fares.
The Customs would not lose their precious revenue. Her Majesty's Customs is still thinking back to the age when travel was by sea and it was sometimes necessary to take victuals for sustenance on long voyages, and, if one had some left over, there was a concession to bring it in. However, in the interests of economy, air travel and safety, Customs should be brought into the jet age. I look to the Minister of State, who is one of the most reasonable and sympathetic Treasury Ministers I have known, to do so.
4.46 am
The Minister of State, Treasury (Mr. Peter Rees.): I am grateful to my hon. Friend the Member for Harrow, Central (Mr. Grant) for his kind words. May I in turn congratulate him on the zest with which he has raised a subject of such topical importance after what has seemed like 36 hours of almost continuous fiscal debate? At any rate, he has not flagged.
Before I come to the solutions that he propounds, I hope that the House will forgive me if I briefly outline the historical background to the establishment of duty-free shops and the relationship with the personal allowances granted to passengers on arrival in the United Kingdom.
Duty-free shops were originally provided to encourage visitors to this country to purchase British goods before they returned home. That was considered to be a useful way to advertise domestic products, and, in the past certainly, the foreign currency earned in that way was regarded as a valuable, if small, contribution to our balance of payments. The facility was later extended to United Kingdom residents going abroad, partly for similar reasons but mainly because access to duty-free shopping

1367
had come to be regarded throughout the world as a normal convenience for outward-bound passengers. The basis of the relief in law is, of course, that exported goods are relieved from indirect taxes.
The personal allowances which permit incoming passengers to import small quantities of goods free of revenue charges have their roots—as my hon. Friend perceptively observed—in the distant past, when vessels were victualled for long voyages, and both passengers and crew usually had something in hand on their return. Even in those distant days, Customs recognised the need for compassion and desisted from levying duties on nominal amounts of food, drink and tobacco imported in that way.
Nowadays, of course, the purpose of the allowances granted to incoming passengers is to speed up Customs clearance by avoiding the need to collect small sums of duty and tax on items that are typically bought by returning tourists. It is an administrative measure that conveniently embraces a hallowed tradition of the past. It is not, as it were, a reward for having been abroad to which passengers should be entitled even if they did not actually bring the goods with them.
My hon. Friend touched on the question of air safety, and naturally I share his concern. However, I remind him and the House that the subject of liquor carried on aircraft was aired in the House on a previous occasion on 4 February last year, when my hon. Friend the Minister of State, Department of Industry, who was at the time Under-Secretary of State for Trade, and who, of course, has personal experience of flying in many roles, said that he did not believe that there was an unacceptable safety hazard if liquor was stowed properly—and I agree that that is a qualification to his remarks.
However, quite large amounts of liquor are, in any event, carried aboard aircraft for sale and consumption in flight. I doubt whether passengers would relish flying dry, even in the interests of greater safety or for the more convenient administration of Customs and Excise at either end.
I noted carefully what my hon. Friend said about fuel saving. I think, however, that it is not unreasonable to say that the quantities involved are so variable and so small, in the light of the weight of fuel, passengers and baggage carried and, indeed, of the aircraft itself, as not to be susceptible to precise worldwide calculation. It is certainly doubtful whether the quantity of spirits carried by passengers is any greater than that held in aircraft stores.
My hon. Friend, with his background, rightly touched on some of the legal constraints which might have to be considered. I should perhaps, therefore, turn briefly to some of the constraints which apply to the introduction of
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inward duty-free shops, which I think was his preferred solution to what admittedly is a problem that we should consider.
On the international front, this country, together with most other major countries engaged in air transport, has subscribed to recommendations made in 1960 by the Customs Co-operation Council that sales in duty-free shops should be confined to travellers leaving for abroad by sea or air. I must advise the House that we could not depart unilaterally from our obligations under that convention, and there is little sign that other countries concerned would welcome a move in that direction.
My hon. Friend listed a number of places which have such facilities, but the airports concerned are located in developing countries seeking to take advantage of a marked preponderance of inward tourists rather than their own nationals going abroad. I must observe that only one of the countries that he mentioned—it would perhaps be invidious to single it out—is a signatory to the convention to which I have drawn attention.
I do not believe that inward facilities would be generally welcomed by airport operators. I understand that it would be difficult to locate them at our principal airports without major alterations which would be extremely expensive. Their use would also tend to create congestion and delay at the very point where every attempt is made by all concerned to streamline and speed the clearance of passengers. Inevitably there would be a proliferation of such facilities.
I can assure my hon. Friend that the Customs and Excise, far from being lodged in the eighteenth or nineteenth century, is acutely aware of the problem. It maintains a very close relationship with its counterparts in the air industry and makes every effort to keep abreast of developments in this rapidly developing field. It has considered very carefully the idea of introducing inward duty-free shops, but has concluded—rightly, I believe, at the present time—that such a change in favour of air passengers could not be justified and would not be practicable in the absence of widespread agreement within the industry as a whole and with major countries concerned in air transport.
My hon. Friend has done a service to the House in ventilating the problem. I hope that I have demonstrated that thought has been given to developments in this area. Although it may be necessary in future to attempt to renegotiate the convention, depending on developments in this area, I must say—without, I hope, myself being regarded as stuck in the eighteenth or nineteenth century—that I do not feel that the moment has yet arrived for the imaginative development proposed by my hon. Friend.
Question put and agreed to.
Adjourned accordingly at seven minutes to Five o'clock am.