SOCIAL SECURITY BENEFITS

HC Deb 11 May 1981 vol 4 cc492-542

Mr. Robert Sheldon (Ashton-under-Lyne)

I beg to move amendment No. 19, in page 15, line 12, leave out subsection (1).

Clause 27 taxes unemployment and supplementary benefits paid to the unemployed. For many years it has not been possible to tax these benefits because of difficulties in collection. The clause seeks to tax these benefits up to the standard rate of benefit. It does not seek to tax supplementary benefits for children, housing or certain exceptional circumstances. All the details concerned with this matter are to come into force by regulations.

Later we shall question why the regulations are to take the place of what we consider ought to be the proper way to do it—by a schedule to the Bill. As I said, that is for later discussion. Meanwhile, we note that the proposal is to bring in the regulations under section 204 of the Taxes Act.

The procedure is that the unemployed person will not have tax rebates paid to him until he is back in employment. He will get no refund of tax until he starts work or until the end of the tax year, whichever comes first.

In the 1980 Budget Statement, the Chancellor announced that short-term social security benefits would be taxed to remove a disincentive to work. I am not sure how the Chancellor measures these incentive and disincentive effects. I believe that he has come adrift on some of these incentives. The relief for higher rates of income tax was supposed at one time to be the salvation of our industry. Lower taxation was put forward as a panacea at the election. However, we can see very little evidence of any results from such incentives. I am not sure that the Chancellor will see very much by way of incentives from the proposal in clause 27.

I have always believed in the principle of taxation of short-term benefits as of nearly all other forms of income. They form part of income. The original intention of those who introduced short-term benefits in the late 1940s was that they should be included. They were taken out of tax only because of the administrative problem and the numbers of civil servants required to produce what could be accepted as a fair and reasonable system.

One of the questions that I shall be asking the Financial Secretary to the Treasury concerns the number of civil servants that he will require to make the system workable. The problem has increased as more people have come into tax. In 1949–50 a married man with two children on average income came into taxation when his income was 99 per cent. of average income. As a result of the Bill, the proportion will now be 38 per cent. It is clear that this will have enormous consequences for the taxation of short-term benefits because more people will come into tax. It will become more attrative to the Inland Revenue to tax people on unemployment benefit because the revenue is greater, but it will have a greater difficulty because there are more of them.

It is difficult in these matters to divorce the principle of taxing these people from the administrative problems concerned. Have the Government discovered a practicable and equitable solution of taxing those on unemployment benefit who are not presently being taxed on it?

We shall be debating the details of clause 28 in Committee upstairs, but that clause shows how this system will be implemented. Clause 28 should frighten the living daylights out of anyone who has any lingering doubts that the citizen is mightier than the State. But that is for discussion in due course.

Clause 29 will deal with the regulations. As I have said, these should form a schedule to the Bill. Treasury Ministers have funked placing before the Committee the full details of what they intend to do, and they are leaving them to be introduced under regulations. We shall be opposing them on this matter. If we are unsuccessful, I must serve notice on the Government Front Bench that we shall seek to change this in subsequent years, if necessary, by amendments and by new clauses at various times. We take a very poor view of the way in which this escape route has been found to avoid dealing with delicate and not very good legislation.

The big argument for not taxing unemployment benefit in particular has been the saving of civil servant numbers. Every Treasury Minister has always examined, whenever he has gone into Great George Street, schemes for taxing these short-term benefits, unemployment benefit in particular. A fair scheme, unquestionably, is expensive to operate.

We note that the Government are keen on reducing the number of civil servants. They have been saving civil servants in a number of ways. They have been saving them on statistics, because they do not want to intervene—and even more, they do not even want to know. They have been saving them on those investigating income tax frauds from the special offices. They have been saving civil servants where they could be shown to produce large sums in revenue. But, at the same time, they have been employing more civil servants to examine social security frauds. They have been chasing up the pence and ignoring the tens of thousands of pounds that are available for collection. Employing more civil servants for taxing short-term benefits seems to be part of this variable change of opinion as to the levels needed in the Civil Service.

The questions that we must now ask ourselves when we are looking at the numbers of civil servants—we shall want some answers during this debate; I have informed the right hon. and learned Gentleman's private office about this matter—are as follows. What numbers of civil servants will be required to undertake this scheme? Where will they be placed? What will be their responsibility? How many claims for benefit do they reckon to deal with? How many movements of paper will be required?

What we really want is a proper discussion of what the Government intend to do in the regulations that they propose to introduce in due course.

As I have said, the number of civil servants required to operate a truly fair scheme is very large, because there are four parts of the administrative framework, and each depends on another. We have the benefit office, the tax office, the claimant, and the employer. All of these people are in some sort of contact with each other. So there is a vast amount of intercommunication which is very expensive in Civil Service manpower.

What can be done—it seems that the Government are thinking in these ways—is to short-circuit this by administrative fiat. What the Government are saying is that the civil servant will make a statement as to the amount owing, and if there is no objection within 30 days, that will be it. It is not subject to any appeal or to the normal rules of law, or to Members of Parliament being able to take a case on behalf of a constituent and being able to say that there were overriding reasons why a person was not able to do this. All of these matters will be turned aside because the Government need a simple system to make the whole thing work. It is on this matter that we shall want to hear from the Minister.

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We know from the greatest authority in this respect, the chairman of the Board of Inland Revenue, the distinguished public servant, Sir Lawrence Airey, that 10 per cent. of the Inland Revenue's codings are wrong. This information was given to the Public Accounts Committee in questioning last week. This established service, with a great reputation and great integrity, is subject to that kind of error. What are we to make of a new service, questioning people frequently at the lower level of income, people who are not well versed in dealing with many matters concerning benefits received, and who do not keep proper records and accounts? Yet they have only 30 days in which to lodge their objections, and if they do not do so, this House, every MP, is powerless to act on behalf of a constituent.

That is the kind of simplification, the kind of demotion of fairness and equity, that we are asked to contemplate. That is why we thought it important enough to bring to the attention of the whole House in Committee.

The trouble is that the present Government are trying to get the taxation of short-term benefits on the cheap and nasty. They are indifferent to the grievances and injustices, and it is the task of the House of Commons and this Committee to make them aware of them. We must give the Government a responsible warning that we are not prepared to see civil servants put into the invidious position of harrowing those who receive benefits just because the scheme that the Government are providing can succeed only on such a basis.

But our opposition is based not just on the administrative simplifications and the unfairness which the scheme introduces. On 26 March 1980, the Chancellor of the Exchequer dealt with the taxation of these benefits. He started off in this way: First, we have the scheme, which my right hon. Friend the Secretary of State for Social Services announced before Christmas, whereby employers would have the responsibility for the payment of a minimum level of sick pay during the early weeks of sickness. This will bring the bulk of sickness payments into tax through PAYE. This scheme should be operating from April 1982. We know what happened to that. Then the Chancellor went on—and this is the scheme that still survives, so far— Secondly, we intend to bring benefits paid to the unemployed into tax at the same time. This will be done in such a way that in general the claimant will neither receive refunds nor suffer deductions of tax until he is back at work. That is the stick. The Chancellor continued: We are also considering how best to bring into income tax at an early date the remaining short-term benefits, and invalidity benefit, which, primarily for administrative reasons, are at present untaxed."—[Official Report, 26 March 1980; Vol. 980, c. 1460.] The Chancellor went on to say that he did not want to wait until 1982 to tax short-term benefits, and, as a result, he would be increasing unemployment benefit and other benefits by 5 per cent. less than what would fully reflect the forecast price movements.

This 5 per cent. on the unemployment benefit and other benefits continues each year. I understand that it was to be a temporary measure, until people were brought into tax, which was the purport of what the Chancellor was saying. But the Government are now bringing these people into tax, and the obvious corollary is that that 5 per cent. should be paid back. The 5 per cent. continues each year. Each year the claimant will be getting a 5 per cent. cut, which will continue year by year. It was lost in November 1980, and it will be carried through to the 1981 uprating and all the others to come, unless the Government take some action. The total benefits each year will be that 5 per cent. less than they should have been.

If we compare unemployment benefit with invalidity benefit, we see that the Chancellor said on 10 March: when invalidity benefit comes into tax the 5 per cent. deduction made from the November 1980 uprating will be restored."—[Official Report, 10 March 1981; Vol. 1000, c. 770.] So the principle has been conceded. The financial Secretary nods. If it has been conceded for the invalidity benefit, it should also be conceded for the unemployment benefit. As we know, the value of the invalidity allowances is to be restored from November next.

We have seen some rough justice, with benefits increased less than the cost of living to take account of untaxed benefits. That is rough justice because some of those beneficiaries would have paid no or very little tax. We have seen biased and partial justice which those claimants do not deserve. But that was for last year. What matters now is that next year we shall again be taxing those benefits. That is truly double taxation. Beneficiaries have had their unemployment benefits reduced and they will now be taxed on what they did not receive. That is the double taxation that the Government are introducing. The unemployed lose part of their benefit and are then taxed on the reduced portion. I can imagine the outraged letters to the Conservative press if the Chancellor had tried that sharp practice on the higher paid.

What worries me is the use of the tax system as a punitive measure which calls into question the uncertain aspects of some of our tax system. We now have two kinds of income tax—schedule D, with allowances for expenses, where one pays months later in money reduced because of inflation. Schedule D allows one to engage in tax avoidance with complicated accounts subject to negotiation. On the other hand, with PAYE one pays on the nail and has no alternative. Not only will these people pay on the nail but they will be robbed too. That is unjustified. We shall oppose it strongly and continually.

When the Government announced that they would introduce taxation of short-term benefits, including unemployment benefit, we were not hostile but we were questioning. Now we have seen the Bill. We have not yet seen all the details, but even at this stage we can see a number of the injustices that it entails. If the Government wish to introduce proposals to tax those benefits equitably, we are prepared to consider them afresh. Meanwhile, we intend to oppose the measures, no only on the Floor of the House but in greater detail in Committee upstairs.

Mr. David Winnick (Walsall, North)

Like my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), I have strong objections to the clause. Once again the Government intend to penalise the unemployed. The Government have previously introduced other measures which have hit the unemployed—for example, the phasing out of the earnings-related supplement. That supplement helped a large number but will be ended in 1982. Another measure which has hit them is the ruling whereby anyone who has been unemployed for longer than 12 months and tries to claim unemployment benefit will not receive a penny if he has over £2,000. A number of unemployed who have received redundancy money will find that they will be unable to receive supplementary benefit once the unemployment benefit is exhausted after 12 months.

The Government have refused to grant long-term supplementary benefit to the registered unemployed, no matter how long a person has been registered, how hard he has tried to find a job or whatever his family circumstances. As my right hon. Friend said, unemployment benefit, like a number of other short-term benefits, will increase by less than 5 per cent. the rate of inflation.

In an interesting letter to The Times today, the director of the Child Poverty Action Group points out that between June 1979 and June 1980 flat rate unemployment benefit for a couple with two children fell from 45.5 per cent. of average net income in work to 42 per cent.

The reduction in the 5 per cent. increase has meant the loss of about £1.65 for a couple. That sum can mean much to someone who has lost his job, especially if he has family responsibilities. It may not mean a great deal to right hon. and hon. Conservative Members—

Mr. D. N. Campbell-Savours (Workington)

Who are not listening.

Mr. Winnick

—who are not even listening. The sum of £1.65—which to the Financial Secretary to the Treasury is just a tip that he would give without a second thought—to many of my constituents is considerable when their wives have to check every penny because they are unemployed and do not know how long it will be before they get a job. However, we would not expect the Government to understand the difficulties and hardships that the unemployed have to endure.

Mr. Campbell-Savours

Has my hon. Friend seen the article in The Times recently which mentioned the considerable division between Treasury Ministers and civil servants in the Treasury on the Government's attitude to monetarist policies? When we consider that the Ministers present today are not listening to the speeches of hon. Gentlemen in this vital debate, we can clearly understand the difficulties that Treasury officials have. It appears that Treasury Ministers are unwilling to listen to the better judgments of their officials, especially in criticising the monetary strategy of the Government.

Mr. Winnick

I endorse that. It is unfortunate that the Financial Secretary to the Treasury did not listen to my hon. Friend. Perhaps he will read it in Hansard. It was a useful intervention and worth studying by the right hon. Gentleman and his colleagues.

The Government not only pursue policies that have brought the highest unemployment since 1933; they also seem determined to harm those who become victims of their policy. A person, especially a family man, who becomes redundant needs all the financial support he can muster. Although the Government may argue that under the clause an unemployed person will not pay income tax on his short-term benefit until he is back in employment, he will not be able to receive the proposed tax refund until he returns to work or until the end of the tax year. That is a setback to the unemployed.

At present, someone who becomes redundant—there are enough in that category now—can, if he claims, receive his tax refund quickly. That helps to support him while he is out of work. Anything that helps the unemployed to survive the ordeal of the dole queue is worth supporting.

Some of my constituents, if they are quick enough, can claim a tax refund. If they are due for a tax refund, they will receive the money. However, under the clause that will not happen. That is why the clause penalises the victims of the Government's economic policies. I wonder whether Treasury Ministers and other members of the Cabinet would be so complacent if they had to endure the shock, pain and humiliation of being made redundant, not knowing how long it will be before they get another job, and did not have private wealth or substantial savings. Would they be so willing to pursue their present policies?

One must compare the manner in which the unemployed will be penalised, and have been penalised over the past 18 to 20 months, with the way in which tax evasion continues. We know of the activities of the Rossminister Group. My right hon. Friend made a valid point when he said that people who have received unemployment benefit, less the 5 per cent., will pay tax, but that the 5 per cent. will not be restored. That is a form of double taxation. My right hon. Friend said that those in the higher income tax bracket would squeal. Of course they would—but they would not expect such treatment from the present Government.

As is to be expected, there seems to be a different attitude towards those with high incomes, who are well protected in many ways. Income tax reductions help not the average income earner, let alone those with less than average incomes, but those with high earnings. The most unfortunate sections of the community are now being penalised, by the Government's taxing unemployment benefit, supplementary benefit and the rest. There may be a case for taxing short-term benefits, but the way in which the Government are going about it should make us all the more determined to oppose their proposals, which are unjust.

The unemployed person needs all the support that he can be given. The phasing out of the earnings-related benefit was a blow. I referred to it when we discussed the Budget last year. Now the Government are telling unemployed people that they cannot claim the normal tax refund that one could usually claim quickly to help in surviving the ordeal of unemployment. That is wrong, and that is why we have every justification for opposing this part of the clause.

4.30 pm

Mr. David Ennals (Norwich, North)

Like my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), when I was in Government, as Secretary of State for Social Services, I made it clear that I accepted the principle of taxing short-term benefits. But the extraordinarily unfeeling way in which the Government have treated the unemployed, and the timing of their decision, are almost beyond comprehension.

When I was preparing my notes I intended to say that the Government had clobbered the unemployed twice over, but my conclusion now is that they have clobbered them five times over. First, as my hon. Friend the Member for Walsall, North (Mr. Winnick) has said, they show insensitivity to the effects on a man's mind, behaviour and consciousness of being forced into unemployment. Some Ministers on the Treasury Bench may not have spoken to people who have now spent long months unemployed as a result of the policies that the Government have forced on the country. They may not know of the humiliation felt by the unemployed, the increase in psychiatric disturbance, and the need for people to see their general practitioners simply because of the psychological effect of being unemployed, being forced out of work, which they believe to be their right.

Secondly, there was the decision of the Secretary of State for Social Services to clobber the unemployed a second time by reducing the level of unemployment benefits. Many of us on the Opposition Benches spoke bitterly, because we felt bitter and still feel bitter, about his decision at the time of the previous Budget that those who should suffer most were not the people who earned most but those who earned least, or who earned nothing and received only benefit. That was an act of despicable meanness by the Government.

The unemployed, already miserable because of their unemployment, with little opportunity of finding new jobs, with a level of benefit below that to which they believe themselves to be entitled, and to which they were entitled under the previous Government, are clobbered thirdly by the Government's now bringing their short-term benefit—long-term though it may be in fact—into taxation. We have heard nothing from the Government Front Bench so far today, but Conservative Back Benchers have often spoken nonsense about people being better off out of work. They will certainly prove now that that is not true. It never was, except of a very small number of people with large families.

There has been a massive increase in the number of people brought within the tax net as a result of the Government's decision to end the working of the Rooker-Wise-Lawson amendment. That was the Government's fourth method of clobbering the unemployed. The allowances to which they were entitled no longer exist.

The Government's fifth method of clobbering the least fortunate in our society is their decision on tax refunds, which is meanness five times compounded. It is despicable to force the unemployed to receive their tax benefit either when they return to work—they are lucky then; when they are out of work they are unlucky, so they are denied what was everyone's entitlement until the introduction of the bill—or at the end of the tax year, which may be 11 months after their entitlement.

We have 2½ million unemployed, and the figure is rising steadily month by month. It will probably go as high as 3 million. What can be the Government's motive in deciding to take measure after measure to damage the unemployed, already damaged as a result of the Government's decisions and their monetarist policies? Of all the clauses in the Bill, this is perhaps the most despicable, the meanest and the most worthy of condemnation.

I am glad that the amendment has been moved. I shall vote proudly with the rest of the Opposition, and I hope that we shall be joined by some Conservative Members. There do not seem to be many present who give a damn about the issue—

Mr. Winnick

Nor does the Minister.

Mr. Ennals

Having had responsibility in a previous Cabinet for, admittedly, a much smaller number of unemployed, I feel deeply and passionately about the way in which the present Government are behaving towards a most unfortunate group in our society.

Mr. Keith Best (Anglesey)

I think that there is general acceptance in the House—there certainly is in the Committee—that short-term benefits should be subject to tax. Not one speaker on either side of the Committee has said that that should not be so.

I welcome the Government's decision to bring short-term benefits within the tax net. The abuse may have been over-estimated by many, but the general public perceived that some people were doing very well out of the fact that benefit was not subject to tax. However, a number of us on the Conservative Benches are concerned that the Government have not given an undertaking that the true level of unemployment benefit will be restored when the benefit is finally brought within the tax bracket.

The belief that short-term benefits should be brought within tax is also held by the Child Poverty Action Group. I am sure that most hon. Members taking part in the debate have received its copious briefs. It does a great service to the community through its research, which helps us to come to decisions.

I shall not repeat the points that have already been made about the pronouncements of various Ministers about the nature of the 5 per cent. shortfall. I ask right hon. and hon. Members to consider only two. The first is the statement by my right hon. Friend the Secretary of State for Social Services during the Committee stage of the Social Security (No. 2) Bill last year. He said: as the unemployment benefit comes into tax so the rationale for the 5 per cent. abatement ends. It is an interim scheme in lieu of taxation. One will give way to the other."—[Official Report, Standing Committee B, 30 April 1980; c. 526.] The other was made by my hon. Friend the Under-Secretary of State for Health and Social Security. She said: It is a temporary measure pending taxation."—[Official Report; 3 February 1981; Vol. 998, c. 140.] What confuses me to a certain extent is why it is said that security is being given to the invalidity benefit and that that will be safeguarded but that unemployment benefit will not be safeguarded. To my suspicious lawyer's mind, there seems to be an inequality of treatment there which needs further amplification.

It may be said by the Government that the current level of unemployment benefit is too high and that it has to be reviewed. If that is really the Governement's view, it is only fair to this Committee that it should be spelt out. We could then argue about that rather than seeking to gain an assurance that unemployment benefit will be restored to its former level minus the 5 per cent. shortfall, if that assurance is not to be forthcoming in any event because in reality the Government are saying that unemployment benefit is too high.

You would not allow me, Mr. Weatherill, to go into a broader debate on that subject, and in any event there is not time for it today, but it was clearly the impression of many of my hon. Friends and quite obviously it was the impression of Opposition hon. Members that when pronouncements were made about the 5 per cent. shortfall it was on the clear understanding that the shortfall would be made good when the short-term benefits finally came into tax.

All I ask my hon. Friend the Financial Secretary to do is to tell the Committee what the Government really mean. I do not argue that the Government do not have to look at the matter in the light of prevailing economic circumstances—it would be supreme folly not to do so—but it is only fair that the Committee be told whether the Government will never give an assurance that those benefits will be made good or whether they are saying that they think that short-term benefits should be reviewed per se. If the latter is the Government's response, I hope that my hon. Friend will feel able to say so.

There is no shame in saying that any benefits should be subject to review. I have no doubt that such a statement would be greeted with a cacophony of noise and abuse from the Opposition, but I am sure that the more rational and realistic of hon. Members would say that it was right to look at matters from time to time and to review benefits.

I ask my hon. Friend to say on behalf of the Government whether that is the case. Then we can have a debate about it.

Mr. John Horam (Gateshead, West)

I support the decision to count unemployment benefit and other short-term benefits as taxable income, and I do so for two reasons.

Those whose income comes from State benefits such as unemployment and other short-term benefits should be treated the same as those whose income comes from work. That is a simple matter of equity. In a notably inequitable tax system, we should sieze every opportunity to make a further step towards fairness.

Here, we are discussing in practical terms the difference between people who work all the year and the amount of tax that they pay and people who work only part of the year and may be unemployed for the remainder of the year, and the amount of tax that they pay. That, in the real world, is the position that is affected by the clause.

4.45 pm

I am also in favour of bringing unemployment and other short-term benefits into the tax net because it widens the tax base. Over the years the tax base has narrowed substantially. That is one of the reasons why we have had to increase the rate of income tax and why we have had to lower the tax threshold to the remarkable and damaging point to which the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) referred just now. People are paying tax on an extremely low level of income—below the poverty level—and that is indefensible whichever way it is looked at. Therefore, it is important to begin trying to widen the tax base so that we may reverse this general creep of the tax threshold down to ever lower levels of income.

As a number of hon. Members have pointed out, the principle of taxing short-term benefits is one that not only this Government are seeking to bring into effect but that was supported in principle by the Labour Government. The right hon. Member for Norwich, North (Mr. Ennals) agreed that he, as Secretary of State for Social Services, had supported the principle of taxing short-term benefits.

That being said, however, it is legitimate to put two questions to the Government. First, there is the question that the hon. Member for Anglesey (Mr. Best) talked about so effectively. I refer to the 5 per cent. deduction made last year. It was made in lieu of taxation. We are now getting taxation, and it is legitimate to ask what are the Government's intentions about restoring the deduction that was made last year. I will not go into that at any length, because the point has been made from both sides of the Committee, but it is a question that the Government must answer.

The second and wider question is a taxation one, and I put it to the Financial Secretary. It is typical of this Government that while many of us believe that it is right to widen the tax base for the reasons that I have outlined, once again they have started at the wrong end. They have started at the lowest levels of income and they have not gone into the possibility of widening the tax base for those with higher levels of income.

In a leader on 9 April the Financial Times pointed out the Government's position very fairly. It said: What is notably lacking is any comprehensive review of what the Inland Revenue rightly calls 'tax expenditures'—the concessions, worth some billions in revenue, to various forms of private income and expenditure. Would-be reformers have argued convincingly that the cost of concessions to house purchase, contractual saving and some classes of capital investment is not simply a matter of lost revenue, but imposes a further heavy burden on the economy, through distorting the allocation of financial and real resources … there is no way in which the Government's aim to create an incentive society can be achieved without facing these issues. Excessive borrowing and income taxes below the poverty line are not appropriate sources of finance. That goes to the heart of the matter, which the Government must explore.

Is this the beginning of a serious attempt to widen the tax base that will follow through ultimately to other tax expenditures affecting people on higher levels of income, or are we to see once again simply an attempt to penalise the poor and stop there, with no one else being brought into the tax net? That is the fundamental principle of taxation on which the Government should be answering questions and making their broad view clear to the Committee. In other spheres of economic policy they are anxious enough to point out that they have some sort of medium-term strategy, and I welcome that, but they should also be outlining their long-term view about the evolution of their tax policy, and so far we have heard nothing about it.

There are legitimate questions that the Government have to answer about the way in which they have handled this issue. However, on the principle itself I support the decision to bring short-term benefits into the tax net.

Mr. Campbell-Savours

I see the proposal in clause 27 as very much an inexcusable imposition on great numbers of people who are unemployed today not as a result of their own deficiency but directly as a result of deficiencies in the Government's central economic strategy. I treat this as an imposition, because l cannot separate the clause from clauses in other Bills that we have dealt with over the past 18 months, all of which, collectively, have the effect of penalising our constituents.

We have seen considerable increases in nationalised industry prices, which in many ways are only substitutes for taxation. In many areas they were introduced simply to raise revenue where the Government had given hack tax in their first Budget. The allowance thresholds have been frozen in this Budget. That, too, is a severe penalty to my constituents and the constituents of my hon. Friends, particularly as we are now told that the taxation threshold has been reduced from nearly 90 per cent. to 38 per cent. That brings many more people into the tax net.

The decision to phase out the earnings-related supplements is causing considerable anxiety to industrial workers throughout the country. There have been increases in VAT, and heavily increased charges for National Health Service provision. Overlapping supplementary benefit rules were introduced in a small measure that passed through the House earlier last year. My hon. Friends will have received much correspondence about the overlapping benefit rule changes, particularly because they affect our constituents in many areas where we had not imagined that they would surface. Many of the problems that arise in my surgery now relate to the changes resulting from that legislation. Those changes were not fully debated, because we could not anticipate them fully.

The measure is inexcusable also because it implies a penalty for unemployed people. The unemployed are beginning to wonder whether the Government are trying to wage a war against them. Ministers rarely appear on television—that being the chief communication medium for most of our constituents—to defend their policies on unemployment. In the grey and indifferent answers that they give in parliamentary replies they do not seem to come to terms with the considerable problems that exist. There is a feeling in the country that the Government are indifferent to the plight of unemployed people. This measure will cut the take-home pay of unemployed people. That is how they see it.

It is inexcusable, too, because the clause is based on a crude deception. That deception of the British people has been mentioned frequently. It stems from the Government's decision, in November 1980, to downrate the increase in unemployment benefit, whereby a single unemployed person will lose 70p and a married couple £1.20. That social security legislation of November 1980, together with the social security legislation currently before the House, means that married couples will be £1.65 per week worse off. Those people can rightly say that they accepted the decreases because they were decreases on the natural increase in advance of what they thought would be compensatory increases when the Government introduced the taxation of benefits, on which there has been general agreement on both sides of the House.

The hon. Member for Anglesey (Mr. Best) mentioned the comments of the Under-Secretary of State when she chided a Labour Back Bencher, during oral questions some months ago, for criticising the Government's policy on unemployment. I shall quote what she said: The hon. Gentleman is quite wrong to paint the abatement in unemployment benefit as he did. It is a temporary measure pending taxation which all parties in the House have agreed".—[Official Report, 3 February 1981; Vol. 998, c. 140.] Labour Members were in no doubt about that. We accepted the Government's word that it was a temporary measure. It is clear that there is disquiet among some Conservative Members, too, about whether the House was misled on that occasion.

I shall quote a small section of the brief that the Child Poverty Action Group sent to hon. Members. That group has been at the forefront of the national lobby and has expressed considerable anxiety about the changes. Its latest brief says: Dismay and incredulity at the Government's position would have been better descriptions of the CPAG's reaction. We would argue that such a wait-and-see position is simply not good enough. How can Ministers on the one hand argue that the benefit cut was a temporary measure pending taxation and on the other refuse to make any commitment whatsoever to put an end to the temporary measure once taxation takes effect? Their position is untenable. It is surely unfair to ask Members to vote on the question of taxation of unemployment benefit without giving them a clear idea of the Government's intentions with regard to restoring the cut in unemployment benefit. The two issues are interlinked and cannot be debated separately". That is absolutely right.

The Financial Secretary knows the importance of this issue in the country. He knows its importance to hon. Members who took what was said on that occasion as a promise from the Government that there would be some form of uprating of unemployment benefit before the introduction of taxation on unemployment and supplementary short-term benefits. However, that did not happen. Instead, the Government are picking on a minority—unemployed people—to pay the bills for the Government's failure in their economic strategy.

The right hon. Gentleman bears a heavy responsibility. The article in The Times the other day said that he, as a Treasury Minister, was refusing to accept that Treasury officials, on this occasion, speaking the same language as Members of Parliament, not only on the Labour Benches but on Conservative Benches, were accusing him and his hon. Friends of an inflexibility that was not normal in the House of Commons. The right hon. Gentleman should not be on the defensive when he comes to the Dispatch Box. He should spell out clearly why he has refused to link these important issues. The House was convinced at the time of that statement, and the right hon. Gentleman, in pursuing the approach that he does, is gravely undermining the confidence of the House.

The £200 million that we are told will be raised in revenue as a result of the taxation of short-term benefits and unemployment benefit should go back to the unemployed and the underprivileged groups of people who are being required to pay it. If Treasury Ministers and Ministers in the Department of Health and Social Security evaluate the worth of that £200 million, they can find responsible ways of channelling it back. The £45 million that will arise directly from the refusal fully to uprate under the 5 per cent. and 1 per cent., under successive social security legislation, should be fed directly back to the groups who are losing out.

There was an article in The Sunday Times yesterday about the difficulties that the hon. Member for Caernarvon (Mr. Wigley) is having with his Bill on disablement. We are told that the Government will not give him his Bill because they cannot afford to do so in the International Year of Disabled People. If the Government have any humanity and compassion—we on the Labour Benches have no monopoly of those qualities—they will have the courage to demand that that part of the £200 million is allocated to these special groups.

5 pm

We are told that raising benefits reduces incentives and that reducing and taxing benefits—which is what will happen if the Bill is passed—increases incentives. The greatest and most positive disincentive is the decision not to index-link tax allowances and to raise the threshhold. That is a real disincentive. The failure of the Government to act in that area led them to introduce the change that we are discussing.

The Budget contains a business start-up scheme. It is said in the media and in the corridors of the House that some Government Members object to restrictions in the scheme. Perhaps many people do not know that a great deal of money for people on large incomes is tied up in the clause. Many tens of thousands of people could make up to £7,500 a year by claiming tax relief on investment in small businesses if they are willing to take the risk. I am not against risk takers. Tax incentives should be available. However, we must understand that because of the way in which such schemes are funded, affluent people will receive tax reliefs and unemployed men and women will pay the price.

Mr. K. J. Woolmer (Batley and Morley)

Before I discuss the arguments for and against taxing benefits and the Government's motives, I wish to discuss the reduction in the real value of unemployment benefits. Last year the Government declared that there was to be an interim measure until they introduced other methods of taxing benefits.

About £1.20 a week for a couple is involved in the cuts in unemployment benefit, at a time when we have the highest unemployment level since the 1930s. People will regard that cut as one of to meanest of many mean measures taken by the Government. This year the cuts are expected to rise to £1.65 for a couple. Will the Minister confirm that that is correct? Will he confirm that the measure is still regarded as interim, in lieu of taxation, or have the Government changed their minds? The House is entitled to know. Have the Government decided that the cuts are not interim, but permanent? If they have decided that the cuts are to be permanent, why did they make that decision? Why did they tell the House last year that the measure was interim, in lieu of taxation? We are entitled to clear answers.

I should deplore such a change of heart. I hope that we will have an assurance that the real cuts in unemployment benefit will be reversed. At the least I hope for a clear explanation of Government thinking. They should not let the issue slip away in a general reply. An important principle is at stake. If there is a misunderstanding we should clear it up. Do the Government intend to restore the real value of the benefits?

I can understand the argument that all incomes should be liable to income taxation, given an appropriate method of offsetting allowances. In that spirit many people inside and outside the House accept that all forms of benefit should be subject to income taxation, depending on the level of income received in a year.

That is not the reason given by the Government on a number of occasions. The explanation given last year by the Chancellor of the Exchequer was: The net extra reward to a low earner from going out to work can be so close to the benefits he can get when on social security as to extinguish his incentive to find or stick to a job. Indeed, there are people whose incomes out of work exceed what they could reasonably expect to get when in work. There is undoubtedly widespread and justified public concern about this disincentive."—[Official Report, 26 March 1980; Vol. 980, col. 1459.] That is a clear expression of Tory appeal to prejudice, fear and concern. That was the reason given for introducing taxes on benefits. The notion was that in some sense the absence of taxation on benefits provided a disincentive to work. The reason had nothing to do with the view that all income should be taxed.

Does the Financial Secretary still believe that there is widespread concern that there is no incentive to work? If he does, does he believe the concern to be justified? If he believes that it is justified, will he provide figures on which he bases that judgment? What proportion of people are better off out of work than in work? Is the proportion significant? I accept that scroungers exist. Some scroungers are wealthy. They do not do a day's work, but have a high standard of living. They often fiddle or exploit loopholes in the taxation rules. They often have a darned sight better living standard than people on the bottom of the pile. Now that the Financial Secretary is no longer involved in electioneering he should say what effect the Bill will have on the incentive to work. How many more people does he expect to see at work in 12 months' time as a result of this measure?

The conclusions of a Policy Studies Institute study were that only slightly more than 3 per cent. of male unemployed were receiving more in benefits than they would earn by working. The study shows the reality that, on average, unemployed men receive only 46 per cent. of their previous earnings. I accept the frustrations and niggles caused by those who take advantage of social security, but we must recognise that the overwhelming bulk—97 per cent.—of the 2½ million unemployed do not do so. It is unreasonable not to put emphasis on the 97 per cent. who are a darn sight worse off because they are out of work. It is an insult to the problems that they face if emphasis is not placed on them.

Does the Financial Secretary disagree with the conclusions of the Policy Studies Institute? Does he still wish to put the same emphasis on the reasons for introducing this measure? Like so many Government actions—for example, the leaked announcement about an 11 per cent. pay rise for the Armed Forces while they are trying to make civil servants and others accept 6 per cent.—it is not necessarily the merit of their actions that causes trouble, but the incredible ineptitude of their timing. When unemployment is rising sharply, with more than 2½ million unemployed, and when virtually all the unemployed want to work, the real reason why these measures are being introduced can only be the ideological prejudice of the Government.

More than 22 per cent. of men and youth in Batley in my constituencies are out of work. There are more than 70 unemployed for every job vacancy. Individual after individual comes to me and other hon. Members at our surgeries, or writes to us, to tell us of the real tragedy that they are applying not only for one or 10 jobs, but for 100, 200 or 300 jobs. To paint a picture suggesting that unemployment is a result of fecklessness and scrounging is far from the reality of the painful problems hitting families and individuals. That attitude hits the strikers and the unemployed not simply as irrelevant but as a sickening commentary on the Government's understanding of the problems facing the unemployed. I hope that the Government will respond with a renewed statement of what they think they are achieving and the reason why they are introducing these measures today.

I hope that the Committee will approve the Opposition amendment. It is not the right time to hit still harder at the unemployed. It is not the right time to hit the families of those driven to take industrial action. In this day and age the people of Britain want jobs. The Government should not be concentrating on penalising those out of work but should be ensuring that they create work for my constituents and the constituents of other members of the Committee.

People in Britain want the opportunity to work. They do not want to scrounge or to take advantage of the welfare State. They want the opportunity of a job. Offer them the work and they will take it.

5.15 pm

Mr. Austin Mitchell (Grimsby)

The clamour of speakers on the Conservative benches casts a depressing light on the attitude of the Conservative Party towards the debates both this week and last week. Last week no one on the Conservative Benches was keen to participate. They disapproved of the Government's decision not to raise allowances in line with inflation, as was argued for by the Financial Secretary in 1977. They are not here this week because of their basic shame about the effects of this clause. The Opposition are trying to counteract the clause by tabling this amendment. Where is the reserve army of the Tory unemployed when this especially nasty piece of legislation is being discussed? How are they salving their consciences?

This is a vicious piece of legislation which reveals the vicious face of the Tory Party. Government strategy during the past two years began with the much-heralded and trumpeted tax cuts for the better-off in 1979. They were primarily for the really well-off, not for the mass of the population. Those tax cuts were given on the pretext of stimulating incentive, initiative and enterprise and regenerating the British economy on the basis of new dynamic forces. At that time, the Chief Secretary warned that they would allow people more time to spend on the golf course, and that has happened. The incentives and the encouragement of enterprise did not work.

We have seen an accelerating downward spiral of decline, the cost of which has been unemployment, a loss of tax revenue and the need to increase expenditure on nationalised industries. All that has forced the Government now to ask the poor, the unemployed and the social security beneficiaries—the less well-off section of the community—to pay the price of the Government's folly during the past two years and of the failure of their economic policies. One consequence of today's clause has been described as making the Government a Robin Hood in reverse. It is far more vicious than that. It is sheer, simple, fiscal thuggery, which is appropriate to some who sit on the Government Benches. They are taking from those with least to give to finance the failure of the Government's policies during the past two years, and the failure of the tax concessions in 1979.

The unemployed are being asked to stump up their mite to finance that failure. That is the real face of Toryism in the 1980s. They are taking away from those with least to give.

It is not a Tory Party of one nation, but very definitely of two nations in which the downstairs nation pays for the lifestyle and the tax concessions of those upstairs. It is not the Whig tradition of Macmillanite Toryism which looked for an expansion of the cake so that the crumbs of affluence could be dropped on the tables of the workers. We are seeing all the viciousness of a zero sum society in which the poor and the unemployed are asked to pay for the tax concessions for the well-off being handed out by the Tory Party. They have also the consolation that they are paying for the Prime Minister's manifest economic delusions of two years ago—delusions which she and a dwindling band of those in the Treasury still share.

Bearing in mind what has happened over the past two years, the logic is that unemployment benefits should be increased and not taxed in this paltry pettifogging fashion. The whole trend of increased unemployment benefit and redundancy payments in the 1960s and 1970s was to encourage employees to change jobs more rapidly and to encourage labour to be more mobile, to move to new jobs and to sacrifice existing jobs. That was what the improvement and regeneration of the economy demanded. That was the logic behind increasing unemployment benefits and redundancy payments.

The Government have thrown that process into reverse at this time by accepting that unemployment on its present scale is a permanent feature of the economy. In effect, the Government are saying to the unemployed "You have been called on by the Prime Minister to make a sacrifice for the nation. You are asked to be a voluntary import control so that you will not purchase as much from overseas. You are asked to be a sanction or a weapon against trade unions and against those in work so that they will keep down their demands for wage increases and the pressure of wage inflation. You are the reserve army of unemployed to bring pressure on them. What do we give you for this sacrifice? We give you taxation of the paltry benefits that we allow you in the first place. You are asked not only to make sacrifices but to suffer at the same time." That is the logic behind the clause.

That logic is compounded by the insult of last year's 5 per cent. abatement of the necessary increase in unemployment benefit. That was said to be a temporary measure, awaiting the introduction of taxation of unemployment benefit. It was said specifically last year that it was in lieu of taxation. However, there is now no sign that that temporary abatement will end. Equally, there is no sign that its cumulative effect upon unemployment benefit will be rectified. The effect has been substantial because following the uprating of November 1981 it will amount to a cut in unemployment benefit for a single person of about £1 a week and, for a couple, about £1.65 a week.

The commitment to restoration was specific. The Secretary of State for Social Services addressed the Committee examining the Social Security (No 2) Bill in April 1980. When speaking about the abatement he said: That will make no difference, because as the unemployment benefit comes into tax so the rationale for the 5 per cent. abatement ends. It is an interim scheme in lieu of taxation. One will give way to the other."—[Official Report, Standing Committe B, 30 April 1980; c. 526] There is no indication that it will. No promise has been held out.

If the Government meant their words of 1980, they will have the decency now to say that the abatement will be made good, the cut will be removed and its cumulative effect will be removed. How can we accept the clause without a promise from the Government to effect compensation, to ensure that the reduced standard of living of the unemployed will be compensated, if they are to be taxed, by increases in benefits that they should have had last year? If the Government are not prepared to make that promise, it is clear that their intention is to reduce the standard of living of the unemployed.

It has been estimated that about £200 million to £250 million will arise from the taxation of unemployment benefit and the other benefits that will be imposed by the clause. Why are the Government not promising to use that money to extend long-term rates of supplementary benefit to the unemployed? That is a development that would cost about £75 million a year, a small sum when compared with the sum to be raised by the proposal contained in the clause. Why is not the flat rate of unemployment benefit being increased for the long-term unemployed? Why are those in that position not being put in the same position financially as the long-term sick?

It appears that long-term unemployment will be a permanent feature of the economy. It will worsen under the Government's economic policy and the Government have a duty to compensate the unemployed. They are asking the unemployed to make sacrifices. The cost of putting the long-term unemployed in the same financial position as the long-term sick would probably cost less than the saving that the Government will make if these proposals are implemented. Unemployment and supplementary benefits for the unemployed are worth less now when set against the average net income of the diminishing number in work than at any time during the 1970s. It ill behoves a Government who have been arguing for years about scroungers and the "Why work?" syndrome to introduce such a proposal. Indeed, in its 1979 manifesto the Conservative Party stated: Income tax starts at such a low level that many poor people are being taxed to pay for their own benefits. That is what the Government are now introducing. The manifesto continues: All too often they are little or no better off at work than they are on social security. That is what the Government are now guaranteeing, not so much by the clause that the Committee is discussing but by the rest of the Budget, and specifically by the failure to increase allowances.

Why is this mean, vicious and nasty clause being introduced when there should be a review of the framework of all allowances for all sections of society? Why are the unemployed and social security beneficiaries being singled out for special treatment? There is a second Welfare State of tax allowances. It is extremely expensive and it benefits predominantly those in the middle class. Obviously those who pay more tax receive more benefit from tax allowances. The allowance system is in need of revision and overhaul. It should be subject to broad consideration so that all sections are treated fairly. Why is the review restricted to the unemployed and social security beneficiaries?

Mr. Winnick

Is not the short answer to my hon. Friend's question simple—namely, that we have a Tory Government?

Mr. Mitchell

The tenor of my speech suggests that I hesitate to make such an aspersion against the Government. I am glad that my hon. Friend has made it rather than myself. It is vital that all sections of society should be treated fairly. For example, why are national insurance contributions not to be allowable against tax if benefits are to be taxable?

At this juncture most Governments would try to act with a certain amount of delicacy and tact. Perhaps delicacy and tact are too much to expect from the Financial Secretary but those qualities are not too much to expect from the Government. It is incumbent on a Government who believe that this is one nation and one country to treat all sections alike and not to hit out viciously against one section.

There has been a welcome for the general principle of the taxation of benefits or at least for extending the tax framework. It is one of those bright ideas that are so difficult in practice. It is perhaps good in theory that all revenue should be treated alike for tax purposes, but that is difficult to implement in practice. The difficulties were constantly pointed out by Labour Ministers when the Labour Party was in power.

5.30 pm

The chief difficulty is the large number of civil servants that will have to be employed. A complicated system is necessary if that is to be done fairly or at all. The Government face an ideological problem about increasing the number of civil servants. The Minister has been asked about that several times. I hope that he will tell us what number of civil servants is necessary as a result of the measure.

Because of their ideological quibbles and doubts about increasing the number of civil servants, the Government have tried to cut down that increase to the minimum, by having a stark, simple system. That system, because of its starkness and simplicity, becomes unfair. To stop increasing the number of civil servants, the Government have introduced a system in its most unfair form, through the present proposal. It is a crude system which gives too much discretion to the Civil Service, from which there is no recourse and on which there is no appeal. The Government are getting the worst of all worlds because they are increasing the number of civil servants and treating the unemployed with the maximum brutality.

The provision is based on a myth which was deliberately fostered by the Tory Party for the five years when the Labour Government were in power. That myth was that the unemployed were scroungers, that they were living off the fat of the land and that they had a higher standard of living than anyone else. That myth was fostered by the Tory Party and Tory press, such as the Daily Mail. Everywhere one went canvassing, people always knew of someone who was living off hundreds of pounds a week and who was spending all his time in the pub, on social security. They could never mention a name or produce an example, but they all knew of someone because they had been told of such people by the Tory Party and the Tory press.

The Government are a little more quiet and tactful about that myth now. However they are still using it to justify the measure. It is being used as the whole basis of their approach. The idea is that the standard of living of the unemployed should be brought into line with that of others and that scrounging should be penalised by such a measure. That is the justification for the measure, even if the Government are now in a new, moderate and condescending, public relations, pitying mood—which the Prime Minister has favoured—and even though they are speaking tactfully about the unemployed these days.

Mr. Woolmer

I do not believe that my hon. Friend noticed that the hon. Member for Sowerby (Mr. Thompson) was vigorously indicating by motions of his head that he felt that a significant proportion of the unemployed were scroungers. I am not sure whether that was the indication. My hon. Friend should give him the opportunity to back that up. Perhaps my hon. Friends should give opportunities to Conservative Members to express their views rather than nodding or shaking their heads.

Mr. Mitchell

I do not believe that the hon. Member for Sowerby (Mr. Thompson) can believe that. Every time I visit my mother in Sowerby and read the Halifax Evening Courier, I see the roll-call of factory, textile and plant closures in that constituency, I see how pressing the problem of unemployment is becoming there. I am sure that the hon. Gentleman cannot have such a view of the unemployed. I hope that my hon. Friend's assumption is incorrect. However, that is a motivating force in large sections of the Conservative Party. I shall exempt the hon. Member for Sowerby from that taint because of the problems in his constituency which should bring the question of unemployment much to his mind. The Conservatives have that view of the unemployed and are using it to justify the measure.

As my hon. Friend the Member for Batley and Morley (Mr. Woolmer) said, the Policy Studies Institute research, which was financed by the Department of Employment and the Manpower Services Commission, found that among only 3 per cent. of whites and 5 per cent of minority groups were there people who received more on benefit when they were unemployed than they had earned while working. The average drop in their income as a result of unemployment was 46 per cent. The pressing problem and picture of the unemployed was one of hardship, not a picture of scrounging, living the life of Riley, drinking 20 pints a day in every pub in the land. That picture has been painted by the Tory Party for many years. The report concluded that benefits could be substantially increased while still maintaining the incentive to find work.

In 1980, the Institute of Fiscal Studies argued that unemployment benefit could be raised by 12 per cent., using the extra revenue accruing from taxation of such benefits, as is now being proposed. Why is that benefit not being raised in such a way?

The Government have a clear duty to commit themselves to that policy now so that we can decide on it in the light of full knowledge and information. Tragically, there is now emerging the culture of unemployment which will be not only heartbreaking for the unemployed but destructive of our institutions and of many of the values that are so important to our society. There is a remorseless rise in unemployment. There is now no way in which the Government can stop unemployment rising to 3 million this year. I am almost certain that the rise will continue next year. It is possible, as the Cambridge economic policy group has done, to conjecture a rise to 4 million and more on present trends.

What is to stop unemployment rising? It is not the silver lining which the Prime Minister discerns all over the place because she has not much else to discern in the economic situation. How can unemployment stop rising when the overvalued pound is not competitive, and when we are still not investing or growing? That points remorselessly to a continued decline. Additionally, there is the tremendous burden of unemployment. The calculations of the cost, in lost revenues and in benefits, of each person who is out of work vary, but taking the Treasury calculation it would be an average of £5,000.

We should compare the gross cost of unemployment with the burdens mentioned by Professors Bacon and Eltis. They said that those burdens were shackling the economy under the Labour Government. The burden must now be more substantial and a greater shackle. Therefore, industry must have more difficulties to bear if it is to compete in the world outside. The Government are creating that situation. Unemployment is a burden on industry's back and it will cripple and probably break British insustry.

In the face of those facts there can be nothing of the revival expected by the Prime Minister, the Chief Secretary and the Financial Secretary, who mentioned it in his interview on "Weekend World." There will be no stimulus, no expansion and no growth but a continued further decline and with it, a remorseless rise in unemployment.

It is just when unemployment on such a scale is becoming a long-term feature of the British economy that the Government choose, with their tact, grace and charm, to introduce this vicious, nasty little measure and to start taxing the benefits of the unemployed in such a fashion. It is all very well for the Prime Minister to pity and sympathise with the unemployed when that is politically necessary, after five years of sneering at them as scroungers and layabouts. That is not enough. The unemployed must be helped. They should be helped at this juncture and not treated in such a way.

In conclusion, this is perhaps the Government's most sordid action in a particularly depressing Budget. A Government who have staked much on their desire to cut the Civil Service are increasing it. The measure treats the unemployed crudely and painfully at a time when unemployment is remorselessly rising. It is unworthy of the Committee, although perhaps not of the Government.

Mr. Clive Soley (Hammersmith, North)

Earlier, when my hon. Friend the Member for Grimsby (Mr. Mitchell) pointed to the lack of Conservative Members I overheard one who was leaving the Chamber say that that made it more difficult to keep the debate going. They do not want to keep the debate going for the reasons that my hon. Member gave.

I remember the Conservative campaign before the election to label people out of work as scroungers. I almost take my hat off to the Conservative Party for the way that it makes emotional claims about race, crime and people claiming benefits. The Government, say that they will do the community a service by clamping down on such problems. They rarely, do so, although they try to get away with measures such as this. They made great noises about crime, but have produced only a couple of detention centres, which are supposed, to solve the problem of thuggery. They back down over crime, but I wish that instead they had backed down over this measure. It is one of the most appalling displays of double standards that we have seen.

The campaign waged by Conservative newspapers to support the Government, as my hon. Friend said, picked out individuals who it was said were receiving hundreds of pounds a week that they were not earning. Claimants and others with low incomes were made to feel that there was something wrong with them. Decent people became anxious about what others thought of them. Research is now linking depression and suicide with rising unemployment. The figures also increased during the slump in the 1930s. Work makes a person feel respectable. Depression can be linked to receiving benefits and being accused of being a scrounger. The feeling is perpetuated by the Government and the newspapers that support them. It does a great disservice to the country and causes individuals and families to suffer, as is increasingly being accepted.

When I was canvassing at the last election, people would frequently, suggest that there was work available for so-called scroungers if they wanted it, even though I explained that one had to take account of the skills in demand in an area and income levels compared with State benefits. Newspapers had given what they said were classic examples of scroungers as evil people. Little of that is mentioned now, primarily because people realise that unemployment is a real problem. West London is comparatively well off for employment, but even in my area people recognise that unemployment is a problem.

5.45 pm

The vast majority of working people are not scroungers. For complicated social, economic and psychological reasons a tiny percentage may not want to work and are scroungers, but that is a far lesser problem than that of those on high incomes who make an art of tax avoidance and evasion. The Government show their immorality by not recognising that. A far greater proportion of lost revenue results from actions of people at the higher end of the income scale. I realise that we do not want to set precedents or to justify certain behaviour, but that should not make us blind to what happens at the higher end of the income scale. We pursue so-called scroungers far more determinedly and vociferously than we pursue people at the other end of the income scale.

It is not often mentioned that many unemployed people do not claim benefit, and we do not discuss the lack of take-up of other social security benefits. If an office is raided to collect papers to confirm tax avoidance, it becomes headline news, and it is said that such action threatens individual freedom and is reminiscent of the actions of the SS and the police striking at night. We do not hear much when people are sent round from the Department of Health and Social Security to find out whether a woman has a man living with her and should therefore be given a few pounds less. Our moral values are the wrong way round.

People on low incomes are more in need of an accountant. Those on high incomes should be able to manage for themselves. There is a limit to the amount of work that people can do themselves, but the moral need is on the side of those with low incomes. That becomes more so as we bring people at the lower end of the scale into the tax net, which people seem to agree is acceptable.

Although less so recently, the Conservatives have used so-called scroungers as scapegoats for the failure of their economic system, although they have given the rich major tax concessions. My hon. Friend the Member for Workington (Mr. Campbell-Savours) mentioned some of those tax concessions. It is a fallacious argument that they will generate investment. People invest for other reasons. Although money is available it is not being invested because of the uncertainty of the future of our economy. It does not pay to invest in Britain, not least because of the Government's policies. The theory behind such tax concessions is wrong.

It is also false to believe that giving people benefits discourages them from working. The two assumptions have led to a division not only between rich and poor and North and South but between those who receive benefits and those who do not. People on benefits have wrongly been made to believe that they are to blame for an economic system that has failed them.

The Financial Secretary to the Treasury (Mr. Nigel Lawson)

I hope that you will forgive me, Mr. Lamond, if I am sufficiently eccentric to confine myself to the amendment. In some ways it has been a strange debate. The amendment seeks to prevent unemployment benefit being taxed, yet the overwhelming majority of Opposition speakers, who, led by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), presumably will shortly troop into the lobby to support it, having conceded that the benefits should be taxed. He said that at the Dispatch Box today and he said it many times when he was a Treasury Minister.

I shall now deal with some of the points that have been raised. There was some concern, which I understand, about the uncertainty as to whether the 5 per cent. abatement of unemployment benefit will be made good when the taxation comes into play in April 1982. If I could answer that question here and now, I would gladly do so, but I cannot, for the simple reason that no decision has been taken. This is a public expenditure matter and the decision will be taken in the course of the public expenditure review alongside all the other public expenditure decisions. The review will take place this summer and autumn in the normal way and the decision, of course, will be made clear and announced publicly well before April 1982, when taxation of benefits under the clause comes into effect.

Mr. Campbell-Savours

If that is so, does the Minister believe that the vast expenditure on matters such as Trident are more important in the Government's evaluation of priorities than expenditure on the unemployed? Will he tell us that now?

Mr. Lawson

No, of course I shall not, and I should be out of order were I to do so. But the hon. Gentleman is right to imply that public expenditure priorities as well as the totality of public expenditure and what can be afforded will be discussed during the review. The results of those discussions will be put before the House and the country well before April. 1982 when unemployment benefit will come into tax under the clause.

Mr. Robin F. Cook (Edinburgh, Central)

The Minister is resting his case for being unable to assure the House that the 5 per cent. abatement will be restored on public expenditure considerations. It would help us to know how much weight to attach to those considerations if he would tell the Committee how much revenue will be generated by the clause and how much it would cost to restore the 5 per cent. abatement. If more revenue will be gained from the clause than it would cost to restore the 5 per cent. abatement, surely in justice his first priority should be to use that revenue to repay the 5 per cent. that he stole from the unemployed.

Mr. Lawson

It is absurd to talk about money having been stolen from the unemployed. The hon. Gentleman, who is very eloquent, is inclined to get carried away, as he has done on this occasion. I am sure that he will agree that what is legally enacted and approved by the House of Commons cannot be construed as theft. I shall come to cost later. The hon. Gentleman's comparison between the two costs is not relevant. The relevant figure in the public expenditure discussions is the cost of restoring the 5 per cent. abatement, which must be assessed in the light of all the factors in the public expenditure equation. That figure is some £50 million, which is a significant sum.

The hon. Member for Batley and Morley (Mr. Woolmer) asked a question and made an assertion. He always makes thoughtful contributions, which I welcome. In this, he provides an example which might fruitfully be emulated by some of his hon. Friends. He asked whether I could confirm his figures as to the value of the 5 per cent. abatement. I confirm that the figures that he quoted are broadly accurate.

The hon. Gentleman's assertion was perhaps in the form of a question. He was perhaps asking me whether thought that there was still today what has come to he known as a "why work?" problem. Indeed I do. If my hon. Friend the Member for Norfolk, North (Mr. Howell) were in the Chamber, he would certainly be greatly surprised if it were asserted that the problem no longer existed. There is indeed a problem. The hon. Gentleman perhaps inadvertently confused himself by assuming that the full dimension of the problem was the small, although not insignificant, minority who are actually better off out of work than in work.

The dimensions of the problem are far wider than that. There is also the large number of people who, as a result of the interaction of the taxation and benefit systems, are only slightly better off in work than out of work. Finally, there are those—the overwhelming majority of the unemployed—mentioned by the hon. Member for Gateshead, West (Mr. Horam), speaking for the Social Democratic Party, who are in work for part of the year and on unemployment benefit for the other part. The total net income that they receive as a result is considerably greater than the net income that they would receive if they were in work for the whole year, having the same gross income. That is another dimension.

I commend to the hon. Gentleman, who I know reads a great deal—I refer to the hon. Member for Batley and Morley, in case the hon. Member for Blackburn (Mr. Straw) who has just entered the Chamber is not quite tuned in yet—an interesting article in the autumn 1978 issue of the "Midland Bank Review" by Mr. John Hemming and Professor Tony Atkinson on this whole matter. The hon. Gentleman will know that Professor Atkinson is scarcely likely to be party to anything which sought to grind the faces of the poor, as the Government are alleged to be doing by some Opposition Members; nor indeed is Mr. Flemming. The thrust of that article was that there was a real problem and that the main remedy, although not the only remedy, was the taxation of unemployment benefits.

Mr. Woolmer

If the burden of the Minister's argument is that introducing taxation of unemployment benefits would reduce the balance between income received while unemployed and while working, by how much would the average weekly income be reduced in a typical example? It is not unfair to ask that. How much, for example, if a family man with two children receives two-thirds of average earnings and is in work for half of the year and out of work for the other half, by how much would his average income be reduced? Knowing that would give us some feeling of how much importance the Financial Secretary attaches to the effect of a reduction in income on incentive to work.

Mr. Lawson

I do not have in my head figures for all the different families in different circumstances working for different fractions of the year, but if the hon. Gentleman wishes to write to me, I shall be glad to answer that point.

Mr. Cook

The Minister prayed in aid the study by Mr. Flemming and Professor Atkinson. I trust that before leaving that point he will make it clear that they had set out to show how much better off the unemployed would be if the benefit were taxed and the proceeds used to increase the benefit.

Mr. Lawson

That was not their purpose, although they certainly suggested that the proceeds might be applied in that way. That was not the thrust of the argument. Nor do we have the funds available to do that. Nor, in my judgment, would it be justifiable to use the money for that purpose at any time.

The hon. Member for Gateshead, West was among the many who supported the principle of the clause. He had, however, one further concern. He asked whether the Government were in favour of widening the tax base in general rather than only in this sphere. The hon. Gentleman suggested that it was necessary to widen it in every respect. I do not think that one can take such a simplistic view. In general, there is a strong presumption in favour of widening the tax base.

6 pm

However, I quote one example that was mentioned earlier by the hon. Member for Workington (Mr. Campbell-Savours). We are due to debate the business start-up scheme later in Committee. That can be construed as—and in a way it is—a narrowing of the tax base. Will the Social Democratic representative who serves on the Committee be voting against the business start-up scheme on those grounds? We shall see. The width of the tax base is not the only yardstick that one has to use. The hon. Gentleman suggested that the tax base could be increased by the abolition of mortgage interest relief. I am interested to learn that that is the official policy of the Social Democratic Party. I assure the hon. Gentleman that it is not the policy of the Government.

The right hon. Member for Ashton-under-Lyne asked about the cost in terms of Inland Revenue staff. Governments in the past have accepted the principle of making unemployment benefit liable to tax. That is the only way to achieve equity between those in work and those out of work, particularly between those in work for part of the year and those in work for the whole of the year. That is quite apart from the disincentive effect contained in the present system. Nevertheless, previous Governments, including the Labour Government, have shrunk from that decision on the grounds of the number of staff involved.

Towards the end of their period of office, the Labour Government estimated that they would need between 10,000 and 11,000 extra staff to handle the taxing of unemployment and sickness benefit. Of course, sickness benefit is not covered in the Bill, and when that becomes liable to tax it is our intention that it will be done through the employers' statutory sick pay scheme. As a result, there will be negligible staff implications. The number of staff required to deal with the taxation of unemployment benefit will be about one-third the figure which the right hon. Gentleman quoted.

Mr. Robert Sheldon

I take it that that is the gross figure.

Mr. Lawson

Our best estimate of the total number of increased staff required is in the order of 3,500. That must be set against the reduction of 9,000 Revenue staff that we have already secured.

Mr. Robert Sheldon

The right hon. Gentleman will have received the questions that I put to him through his Private Office. They included questions about the number of claims for benefit and the Dependants other than the Inland Revenue in which that extra staff may be found.

Mr. Lawson

I did not receive notice of the first of those two questions. As to his second, in addition to Inland Revenue staff, there will be staff from the Department of Employment, the DHSS and the Northern Ireland DHSS. The lot are included. However, I do not have a breakdown of the figures. If the right hon. Gentleman wishes, he can table some written questions and we shall do our best to answer them. Inevitably, these questions are somewhat speculative, because the figures depend on future levels of threshold, the number of unemployed and so on.

The right hon. Gentleman also asked a number of detailed questions about the 30-day rule and other matters. Those matters come under clause 28 which we shall be debating in Committee upstairs. Indeed, there were no representations from the Opposition to the effect that we should debate that clause on the Floor of the House. Therefore, we shall come to that clause in due course and we shall be happy to answer his questions at the appropriate time.

The right hon. Gentleman complained that the mechanics of the scheme would be introduced by regulation, and argued that they should be included in a schedule to the Bill. I am surprised that, as a former Treasury Minister, he should make that point, because he must know that all the legislation relating to the mechanics of the PAYE system has been introduced by regulation. The mechanics of PAYE have never been included in the main legislation. We are, therefore, maintaining the practice that has existed since the PAYE system began, which was maintained by the Labour Government.

Nevertheless, the right hon. Gentleman opposed the method that we have chosen to bring unemployment benefit into tax. It is a method that I unhesitatingly commend to the Committee. We are saying that throughout the period in which he is unemployed, a man will receive the gross unemployment benefit with no deduction for tax, nor will he receive any PAYE refunds. When he returns to work or at the end of the financial year, whichever is the sooner, the one will be netted off the other. In 90 per cent. of cases, the amount due in refunds will be greater than the amount which should have been paid in taxation during the period of unemployment. Therefore, when the man returns to work, a small payment will be made to him representing the netted out difference between the two figures. That is a practical and commonsense way of bringing unemployment benefit into tax, and the principle is approved just as much by the Opposition as by the Government.

The right hon. Member for Ashton-under-Lyne said that as a result of the abatement the unemployed will be taxed on what they have not even received. That is not the case. In no way can the unemployed be taxed on a higher rate of benefit than they have received. I am sure that the right hon. Gentleman is aware of that.

Mr. Robert Sheldon

The point that I was trying to make was that these unfortunate people will be denied that money and will find themselves taxed on it. That is what I was objecting to.

Mr. Lawson

They will be taxed on the benefit that they receive, not on the unabated benefit. If that were the case, we would indeed be open to criticism, but that is not the case.

The hon. Member for Edinburgh, Central (Mr. Cooke) asked about the cost of this amendment. It is about £240 million. I must emphasise the size of that figure, because it touches on an earlier point about which the hon. Member for Gateshead, West made some telling comments. The Opposition have already voted on amendments which altogether would cost more than £4 billion. This amendment brings the total to nearly £4¼ billion. If they press the next set of amendments to a vote, the figure will be well over £4½ billion, and this is only the third day of the Committee stage. They are in favour of public expenditure increases as well.

Because of the Opposition's delight for public expenditure, one assumes that they would wish to see public expenditure increased by a similar amount. Therefore, altogether we are talking about an increase in the PSBR of £9 billion or £10 billion. They support that. In other words, the existing public sector borrowing requirement would be doubled. Do the Opposition have any idea of the consequences for interest rates and, as a result, for industry? Do they have any idea of the inflationary threat that such a borrowing requirement would portend? The Opposition have shown the height of irresponsibility.

However, I do not defend the provision on those grounds alone. Some of the other tax increases in this Budget, notably those on personal allowances, were put to the House with some regret. There was no great merit in them other than the money that they raised, which was vital to the proper conduct of the economy. However, this provision has the merit that there is no reason in principle, why unemployment benefit should not be liable to tax on the grounds of incentive and equity.

I commend the clause to the House. With no apology whatever, I ask the Committee to reject the opportunistic amendment that has been tabled in the name of the official Opposition.

Mr. Richard Wainwright (Colne Valley)

Although employees' contributions for national insurance are not allowed as a relief for income tax, Liberal Members have long made it clear that, along with most hon. Members, they support the principle of taxing benefits when they cross the tax thresholds. I expected the Financial Secretary to make the case in such a way that we should be able to join him in resisting the amendment. However, he found himself unwilling or unable to give us cause to think that the abatement of benefit—which was explicitly stated by his ministerial colleagues to be a temporary substitute for tax—will be put right when the tax comes into effect. That completely changes the picture.

I am always reluctant to repeat quotations. However, the statement made by the Secretary of State for Social Services in Committee commits the Government. The right hon. Gentleman spoke on the Social Security (No. 2) Bill and said: The hon. Gentleman asked specifically about abated unemployment benefit. That will make no difference because as the unemployment benefit comes into tax so the rationale for the 5 per cent. abatement ends. It is an interim scheme in lieu of taxation. One will give way to the other." — [Official Report, Standing Committee B, 30 April 1980; c. 526.] If the Financial Secretary had repeated that without making a detailed legislative commitment, Liberal Members would have been minded to resist the amendment. However, the right hon. Gentleman has been unable to give the Committee an assurance.

I reject the reason that the right hon. Gentleman ostensibly gave for being unable to reassure hon. Members. He said that the matter would have to wait until public expenditure was reviewed. All hon. Members know that many of the public expenditure commitments for 1982–83 are firmly established. The Government know that they cannot avoid them. The idea that £50 million could not be committed at this stage does not hold water, particularly when the Government are to be commended on having largely implemented the admirable principle that the House should be able to discuss revenue and expenditure together.

It is established that we should have the White Paper on public expenditure at the same time as the Budget. What the Financial Secretary has said to excuse his inability to give any commitment on removing the abatement of benefit is in clear conflict with that. Until the Government state categorically that they intend to honour the commitment so clearly expressed by the Secretary of State for Social Services we cannot possibly help them to protect the clause.

6.15 pm

Mr. Cook

At the beginning of the debate the Financial Secretary stated that he would be eccentric and would stick to the terms of the amendment. He ended his speech by going over every amendment that the Committee has considered in the past three days. I should like to nail to the table the canard that the Treasury has produced three times from the Dispatch Box. Indeed, it is something of a tribute to the bankruptcy of the Treasury's arguments that it produces that canard each time that it is called on to defend a proposition. As the Financial Secretary well knows, it is an insult to the intelligence of Committee members to suggest that it is possible to take the sum of the Opposition's amendments and say that it represents their considered and balanced view of what a Budget should be.

Last week I made it perfectly plain that we were moving the amendment on the reduced rate band in the light of the defeat of our amendment to increase tax thresholds. I made it clear that after the Treasury had voted itself £2 billion it was appropriate to consider giving £1 billion back to the low-paid through the reduced rate band. Had our reason, persuasion and eloquence—to which the right hon. Gentleman keeps paying tribute—carried the right hon. Gentleman with us on tax thresholds and had we convinced him of the view that he espoused in 1977, we might not have thought it necessary to move the amendment on the reduced rate band. That knocks £1,100 million from the sum that the right hon. Gentleman mentioned earlier.

In his political interest, the right hon. Gentleman should drop his argument. The Conservative Party waged its election campaign on the basis that the country was groaning under the taxation imposed by a Labour Government. During that campaign there was no suggestion—in the Daily Mail or anywhere else—that the time would come when the right hon. Gentleman would resist Opposition amendments to remove £4 billion of taxation in the interests of fiscal prudence.

Mr. Lawson

I am interested to hear what the hon. Gentleman says. He said that he had made certain remarks earlier. I was not in the Chamber when he did so, but I take his word for it. If he is saying that if the Opposition threshold amendment had been carried they would not have moved their amendment to restore the lower rate band, that is of interest. The figure would then have become not over £4 billion but about £3 billion, plus whatever was pressed to a vote. Will the hon. Gentleman confirm that figure of £3 billion? If not, what is the figure? The Opposition's view of an appropriate Budget judgment and of what they think appropriate in terms of taxation and public expenditure is of some interest to the Committee and to the country. By what total amount would the Opposition seek to reduce taxation and by what amount would they increase public expenditure?

Mr. Cook

I am happy to repeat what has already been said from the Dispatch Box. We do not have a figure. It is well known—this was said several times during the Budget debate and we do not resile from it—that the Government's Budget judgment reduces the public sector borrowing requirement, in real terms, at a time of unprecedented recession and fall in output. That can only make it more difficult for the economy to expand. Were we to increase public expenditure along the lines that we have consistently argued for—I do not think that the right hon. Gentleman denies our consistency—it would not necessarily result in an equivalent rise in the public sector borrowing requirement.

The Financial Secretary said that he would eccentrically stick to the amendment. Having dealt with his eccentric departure from the amendment, I shall come back to his remarks on it. I entirely acquit him of having spoken—as my hon. Friend the Member for Workington (Mr. Campbell-Savours) feared he might—in a defensive mood. Whatever else he may have been he was not defensive. The passionate, eloquent, well-argued speeches from my hon. Friends on the Back Benches clearly failed to get across our concern, anger and indignation at what the Government are doing to the unemployed. This measure represents the last step in the cumulative process.

The Financial Secretary said that it was common ground among all who took part in the debate that in principle short-term benefits should be taxed. That is so. It has been common ground among all Governments since 1948 that short-term benefits should be subject to tax. It has also been common ground among all Governments since 1949 that there was no way of doing it that was both fair to the claimant and practical to the Treasury. Having heard the Financial Secretary, the Committee must ask whether that way, which has eluded every Government, both Conservative and Labour, since 1949, has now been found by the right hon. Gentleman.

I turn straight away to the figure that the right hon. Gentleman gave to the Committee, which I think surprised and shocked many hon. Members. The right hon. Gentleman—for perhaps the first time under this Government—announced an increase of 3,500 civil servants to implement this clause and the associated clauses. That is, as he generously admitted, 40 per cent. of the number that had been saved by the Treasury in cutting back on civil servants. The hon. Gentleman said that the Treasury had saved 9,000, and 3,500 is 40 per cent. of 9,000.

Mr. Lawson

That was from the Inland Revenue alone. From the Chancellor's Department as a whole the saving has been 130,000— a substantial part of the total saving.

Mr. Cook

How many—130,000?

Mr. Lawson

I am sorry—13,000.

Mr. Cook

If we keep knocking off digits at this rate, we shall soon be below 3,500. I accept the figure of 13,000, but that still leaves us with the fact that in this and the following two clauses we are restoring 25 per cent. of the cuts achieved with considerable difficulty by the right hon. Gentleman and his colleagues during the past two years.

It is perhaps worth recalling what some of those dismissed civil servants did. About 2,000 worked on tax avoidance and tax evasion measures. There is more money to be made by the Treasury from putting the screws on tax avoidance and evasion than will ever be recouped from these three miserable clauses.

There is another provision in the Bill to relax the excise rules. That will result in 400 redundancies among warehouse men and excise men attached to bonded warehouses. As a result, excise duty will virtually become a matter of voluntary tax assessment by the distillers companies.

Last week we had a debate on the reduced rate band. The hon. Member for Colne Valley (Mr. Wainwright) will recall that the question of the number involved in implementing the reduced rate band was raised not by the Opposition but by the Government Front Bench. At that time the Chief Secretary said: On the administrative costs, which the hon. Member for Colne Valley rather pooh-poohed, the Committee should get the facts on the record and draw its own conclusions. I do not suggest—I very much doubt whether anyone else in my position would—that the administrative cost should be a conclusive consideration, but it is relevant. The Government aim to reduce the proportion of our resources that we spend on administration. The saving of 1,300 staff resulting from the abolition of the lower rate band last year will contribute towards this."—[Official Report, 5 May 1981; Vol. 4, c. 89–90.] There we have it. Last year the Treasury saved 1,300 staff because it was unwilling to maintain the reduced rate band, which produced a lower marginal rate of tax for the low-paid and softened the introduction of the tax threshold for the low-paid. This year the Treasury is contemplating taking on 3,500 additional staff to increase the tax on the low-paid—indeed, to increase the tax on the unemployed. There is a glaring contrast there between the resources that the Treasury is not prepared to spend to assist the low-paid and the resources that it is prepared to find to wring tax out of the low-paid.

I know, and the Committee in its heart knows, why the Treasury has been able to conquer its prejudice against Civil Service numbers. On this occasion the Treasury has been able to do so because it has been overwhelmed by its even stronger prejudice against the unemployed. We are back to the vision that the Prime Minister held out to the nation in December 1979 about the nation's expanding army of the workshy. One would need a neck of brass to double unemployment as the Government have done—to break the unemployment record of the 1930s—and then to blame it on the unemployed.

My right hon. Friend the Member for Norwich, North (Mr. Ennals) and my hon. Friends the Members for Workington and Batley and Morley (Mr. Woolmer) said that one would have thought that the Government would avoid the introduction of this tax on the unemployed at a time when they have achieved record unemployment.

Mr. Lawson

First, I owe the hon. Gentleman and the Committee an apology. In my zeal to correct the figure of 9,000 I exaggerated somewhat at 13,000. On checking the figure I see that the saving for the Chancellor's Department as a whole is 11,000.

Secondly, the cost will gradually reduce as the computerisation of PAYE, which starts on a pilot basis in 1983, comes into effect. This is the initial cost in terms of staff, and there will be a reducing staff cost.

Thirdly, I should like to get the hon. Gentleman's position clear. Is he opposing the increase because he is wholly in support of our general policy of reducing the size of the Civil Service? Is he in support of that policy? If not, does he believe that the Civil Service should not be reduced? If so, his argument on staff cost seems somewhat paradoxical.

Mr. Cooke

I am encouraged by the rate at which the figures produced by the Treasury for savings on staff have been so rapidly revised in a downward direction. We began with 130,000; we moved rapidly to 13,000, and now we are down to 11,000. It will be some time yet before I conclude. We look forward with interest to what the figure is when I sit down.

Returning to the last point made by the Financial Secretary in his generous intervention, it has not been any part of our argument that we should hire civil servants for the sake of it. Equally, we believe that there is no argument for laying off civil servants to massage the figures downward for electoral purposes. We firmly take the view that we should increase the size of the Civil Service only where the result will be efficacious and effective. To take on 3,500 additional civil servants for this purpose is not effective or reasonable, especially when that suggestion comes from a Government who have laid off 2,000 tax inspectors working on tax avoidance who netted a far larger sum than will be netted by these 3,500.

My hon. Friend the Member for Batley and Morley made a point that I think weighs heavily with every Opposition Member who has taken part in the debate. We have so many unemployed now not because they are workshy or better off on the dole but because jobs are not available. The Prime Minister visited Perth last week. She made a stirring speech, in which she referred to sunny uplands just over the horizon and to living in a land of hope, if not of glory. On the day that the right hon. Lady spoke in Perth the jobcentre there had an advertisement for only one dozen vacancies—every one of them in Saudi Arabia. That is the reality in respect of the jobs available for the young unemployed in Perth. It is not that they are workshy or scroungers; the jobs are not there.

My hon. Friend the Member for Batley and Morley referred to the PSI study, which established that just over 3 per cent. of male unemployed are better off unemployed than in work. There was another figure in that study that particularly stood out. The study found that only 12 per cent. of the unemployed covered by the survey had turned down the offer of a job in the first six weeks of unemployment. Putting it the other way round, 88 per cent. of those offered any job in the first six weeks took it. In half of those cases of the 88 per cent. who took a job, the job was worse paid than the job that they had held before, but they took it to get out of unemployment.

6.30 pm

That is the reality of the situation. Yet the Government—we recognise it—remain obsessed with the mythical problem of the "Why work?" syndrome. I can understand why the Government are sensitive about the problem of the "Why work?" syndrome. They are sensitive about it because they themselves have done more to worsen the poverty trap than any Government since the last war. Last year they deepened the trap by abolishing the reduced rate band. This year they have widened the trap by not upping the tax thresholds.

I can tell my hon. Friends and the hon. Member for Colne Valley why it is that the Government cannot make a commitment to restore the 5 per cent. abatement. The reason why they cannot up the unemployment benefit by 5 per cent. is that, having failed to increase the tax thresholds, if they were now to up unemployment benefit by 5 per cent. they would thrust tens of thousands more people into the poverty trap, who then would find that it was better to be out of work than to be in work.

The Government were pressed very strongly on the issue of the 5 per cent. abatement—not a cut, but an abatement, as we were assured. A number of hon. Members referred to the statement by the Secretary of State for Social Services, who said that as the unemployment benefit comes into tax so the rationale for the 5 per cent. abatement ends."—[Official Report, Standing Committee B, 30th April 1980; c. 526.] The hon. Member for Anglesey (Mr. Best)—I am sorry that he has not been in the Chamber since he finished speaking—quoted the Under-Secretary for Health and Social Security, who said: It is a temporary measure pending taxation which all parties in the House have greed."—[Official Report, 3 February 1981; Vol. 998, c. 140.] I am bound to say that the hon. Lady took something of a liberty with the other parties in the House, since all the other parties in the House voted against it, but I presume that we are taken to have agreed, since we lost because the right hon. Gentleman called out his troops.

We have not had the advantage of an intervention from the Secretary of State for Social Services. Throughout most of the debate we have had the attendance of his Minister—who, for most of the debate, was kept two Treasury spokesman seats away from the Dispatch Box just in case he should be tempted to break his silence and make a rash commitment to spend money on upping unemployment benefit by 5 per cent.

It is grossly unfair for the Committee to be asked to vote the money that will arise out of taxation and then be told that the Goxernment will think about what they will do about the 5 per cent. abatement that was imposed last year on the basis that taxation was round the corner. It will not do, for the reason to which the right hon. Gentleman referred in his reply. As he clearly admitted, the resources are there. They arise under this clause, apart from anywhere else. As the right hon. Gentleman said, he will benefit by £240 million from the clause, and it will cost £50 million to restore the 5 per cent. to the unemployed.

In all candour and in all decency, the first call on the £240 million that the right hon. Gentleman is getting out of this clause has to be the restoration of the 5 per cent. abatement from the very people whom he is now taxing.

The Chancellor of the Exchequer, during his reply to the Budget debate, responded to a characteristically trenchant intervention by my hon. Friend the Member for Keighley (Mr. Cryer). In his response the Chancellor said: Conservative Members are as much concerned about the unemployed as anyone else."—[Official Report, 16 March 1981; Vol. 1, c. 96.] I am very glad that we have the Chancellor's word for it, because we could not have divined it from what he has done over the past two years. During that period his Government abolished earnings-related supplement for the unemployed. Last year he cut unemployment benefit by 4 per cent. This year, in a Bill that we shall be debating again later this week, the Government are to cut a further 1 per cent. off unemployment benefit in order that they can get their full 5 per cent. of flesh from the unemployed. That is the record of the past two years.

If the Chancellor is really concerned about the unemployed as much as anyone else, he now has the opportunity to remedy part of the problem and assure the Committee that if we pass this provision for taxation of unemployment benefit he will restore the 5 per cent. that was taken from the unemployed on the pretence that they were to be taxed and that this was in lieu of taxation.

If we cannot have that assurance, I do not think that my hon. Friends and I have any alternative but to vote against the clause by voting for our amendment. In doing so it is relevant to draw to the Committee's attention to one last contrast that is presented to us in the Bill. The Financial Secretary suggested that the entire thrust of our concern about the Bill was simply with those places where additional tax was imposed. I must put it back to the Financial Secretary.

If we look at the Finance Bill as a whole we find that there is one other fresh inequity that arises from it, even among the unemployed. There is another clause—clause 31—that provides additional relief for those who are made redundant and get a golden handshake. At present they can get £10,000 without paying tax. Ten thousand pounds is a very generous figure. Indeed, the same study as that to which my hon. Friend the Member for Batley and Morley referred discovered that only 5 per cent. of those made redundant received a payment from the employer exceeding £2,000. A very small percentage received £10,000.

Clause 31 ups that figure of tax-free golden handshakes from £10,000 to £25,000. That is where the Chancellor's concern for the unemployed is. It is for that tiny proportion of the unemployed who get golden handshakes of £25,000. They are the people for whom the Government have found the money. They are the people who represent the social priorities of the Government. Those social priorities are repugnant to Opposition Members and we shall repudiate them in a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 210, Noes 275.

Division No. 174]	[6.37 pm
AYES
Abse, Leo	Conlan, Bernard
Adams, Allen	Cook, Robin F.
Allaun, Frank	Cowans, Harry
Anderson, Donald	Craigen, J. M.
Archer, Rt Hon Peter	Crowther, J. S.
Ashley, Rt Hon Jack	Cryer, Bob
Ashton, Joe	Cunliffe, Lawrence
Atkinson, N.(H'gey,)	Cunningham, G. (Islington S)
Bagier, Gordon A.T.	Cunningham, Dr J. (W'h'n)
Barnett, Guy (Greenwich)	Dalyell, Tam
Barnett, Rt Hon Joel (H'wd)	Davidson, Arthur
Benn, Rt Hon A. Wedgwood	Davies, Rt Hon Denzil (L'lli)
Bennett, Andrew(St'kp't N)	Davies, Ifor (Gower)
Bidwell, Sydney	Davis, Clinton (Hackney C)
Booth, Rt Hon Albert	Davis, T. (B'ham, Stechf'd)
Boothroyd, Miss Betty	Deakins, Eric
Bray, Dr Jeremy	Dean, Joseph (Leeds West)
Brown, R. C. (N'castle W)	Dempsey, James
Brown, Ron (E'burgh, Leith)	Dewar, Donald
Buchan, Norman	Dixon, Donald
Callaghan, Rt Hon J.	Dobson, Frank
Callaghan, Jim (Midd't'n & P)	Dormand, Jack
Campbell, Ian	Douglas-Mann, Bruce
Campbell-Savours, Dale	Dubs, Alfred
Canavan, Dennis	Duffy, A. E. P.
Cant, R. B.	Dunn, James A.
Carmichael, Neil	Dunnett, Jack
Carter-Jones, Lewis	Dunwoody, Hon Mrs G.
Clark, Dr David (S Shields)	Eadie, Alex
Cocks, Rt Hon M. (B'stol S)	Eastham, Ken
Coleman, Donald	Ellis, R. (NE D'bysh're)
Concannon, Rt Hon J. D.	English, Michael

Ennals, Rt Hon David	Morris, Rt Hon A. (W'shawe)
Evans, loan (Aberdare)	Morris, Rt Hon C. (O'shaw)
Evans, John (Newton)	Morris, Rt Hon J. (Aberavon)
Ewing, Harry	Morton, George
Field, Frank	Oakes, Rt Hon Gordon
Fitt, Gerard	Ogden, Eric
Flannery, Martin	O'Halloran, Michael
Fletcher, Ted (Darlington)	O'Neill, Martin
Foot, Rt Hon Michael	Orme, Rt Hon Stanley
Ford, Ben	Palmer, Arthur
Forrester, John	Parry, Robert
Foster, Derek	Prescott, John
Fraser, J. (Lamb'th, N'w'd)	Price, C. (Lewisham W)
Garrett, John (Norwich S)	Race, Reg
George, Bruce	Radice, Giles
Gilbert, Rt Hon Dr John	Rees, Rt Hon M (Leeds S)
Ginsburg, David	Richardson, Jo
Graham, Ted	Roberts, Albert (Normanton)
Grant, George (Morpeth)	Roberts, Allan (Bootle)
Hamilton, W. W. (C'tral Fife)	Roberts, Ernest (Hackney N)
Harrison, Rt Hon Walter	Roberts, Gwilym (Cannock)
Hattersley, Rt Hon Roy	Robertson, George
Healey, Rt Hon Denis	Robinson, G. (Coventry NW)
Heffer, Eric S.	Rooker, J. W.
Hogg, N. (E Dunb't'nshire)	Ross, Ernest (Dundee West)
Holland, S. (L'b'th, Vauxh'll)	Rowlands, Ted
Homewood, William	Ryman, John
Howell, Rt Hon D.	Sever, John
Hudson Davies, Gwilym E.	Sheerman, Barry
Hughes, Mark (Durham)	Sheldon, Rt Hon R.
Hughes, Robert (Aberdeen N)	Shore, Rt Hon Peter
Hughes, Roy (Newport)	Short, Mrs Renée
Janner, Hon Greville	Silkin, Rt Hon J. (Deptford)
Jay, Rt Hon Douglas	Skinner, Dennis
John, Brynmor	Smith, Rt Hon J. (N Lanark)
Johnson, James (Hull West)	Snape, Peter
Jones, Rt Hon Alec (Rh'dda)	Soley, Clive
Jones, Barry (East Flint)	Spearing, Nigel
Jones, Dan (Burnley)	Spriggs, Leslie
Kaufman, Rt Hon Gerald	Stallard, A. W.
Kerr, Russell	Stewart, Rt Hon D. (W Isles)
Kilroy-Silk, Robert	Stoddart, David
Kinnock, Neil	Stott, Roger
Lambie, David	Straw, Jack
Lamborn, Harry	Summerskill, Hon Dr Shirley
Leadbitter, Ted	Thomas, Dafydd (Merioneth)
Leighton, Ronald	Thomas, Jeffrey (Abertillery)
Lestor, Miss Joan	Thomas, Dr R.(Carmarthen)
Lewis, Arthur (N'ham NW)	Thorne, Stan (Preston South)
Litherland, Robert	Tilley, John
Lyon, Alexander (York)	Tinn, James
Mabon, Rt Hon Dr J. Dickson	Torney, Tom
McCartney, Hugh	Wainwright, E.(Dearne V)
McElhone, Frank	Walker, Rt Hon H.(D'caster)
McKay, Allen (Penistone)	Watkins, David
McKelvey, William	Weetch, Ken
MacKenzie, Rt Hon Gregor	Wellbeloved, James
McMahon, Andrew	Welsh, Michael
McNally, Thomas	White, Frank R.
McNamara, Kevin	White, J. (G'gow Pollok)
McWilliam, John	Whitlock, William
Magee, Bryan	Wigley, Dafydd
Marks, Kenneth	Willey, Rt Hon Frederick
Marshall,D(G'gow S'ton)	Williams, Rt Hon A.(S'sea W)
Marshall, Dr Edmund (Goole)	Wilson, Rt Hon Sir H.(H'ton)
Marshall, Jim (Leicester S)	Wilson, William (C'try SE)
Martin, M(G'gow S'burn)	Winnick, David
Mason, Rt Hon Roy	Woodall, Alec
Maxton, John	Woolmer, Kenneth
Maynard, Miss Joan	Wright, Sheila
Mellish, Rt Hon Robert	Young, David (Bolton E)
Mikardo, Ian
Millan, Rt Hon Bruce	Tellers for the Ayes:
Mitchell, Austin (Grimsby)	Mr. James Hamilton and Mr. Frank Haynes.
Mitchell, R. C. (Soton Itchen)

NOES
Adley, Robert	Alison, Michael
Aitken, Jonathan	Amery, Rt Hon Julian
Alexander, Richard	Ancram, Michael

Aspinwall, Jack	Gardner, Edward (S Fylde)
Atkins, Robert(Preston N)	Garel-Jones, Tristan
Baker, Kenneth(St.M'bone)	Gilmour, Rt Hon Sir Ian
Baker, Nicholas (N Dorset)	Glyn, Dr Alan
Banks, Robert	Goodlad, Alastair
Bell, Sir Ronald	Gow, Ian
Bendall, Vivian	Gower, Sir Raymond
Benyon, Thomas (A'don)	Gray, Hamish
Benyon, W. (Buckingham)	Greenway, Harry
Berry, Hon Anthony	Griffiths, E.(B'y St. Edm'ds)
Best, Keith	Griffiths, Peter Portsm'th N)
Bevan, David Gilroy	Grist, Ian
Biggs-Davison, John	Grylls, Michael
Blackburn, John	Hamilton, Hon A.
Blaker, Peter	Hamilton, Michael (Salisbury)
Body, Richard	Hampson, Dr Keith
Bonsor, Sir Nicholas	Hannam, John
Bowden, Andrew	Haselhurst, Alan
Boyson, Dr Rhodes	Hastings, Stephen
Braine, Sir Bernard	Havers, Rt Hon Sir Michael
Bright, Graham	Hawksley, Warren
Brinton, Tim	Hayhoe, Barney
Brittan, Leon	Heddle, John
Brooke, Hon Peter	Henderson, Barry
Brotherton, Michael	Heseltine, Rt Hon Michael
Brown, Michael(Brigg & Sc'n)	Hicks, Robert
Browne, John (Winchester)	Higgins, Rt Hon Terence L.
Bruce-Gardyne, John	Holland, Philip (Carlton)
Bryan, Sir Paul	Hooson, Tom
Buchanan-Smith, Alick	Hordern, Peter
Buck, Antony	Howell, Rt Hon D. (G'ldf'd)
Budgen, Nick	Hunt, David (Wirral)
Bulmer, Esmond	Hunt, John (Ravensbourne)
Burden, Sir Frederick	Hurd, Hon Douglas
Butcher, John	Jenkin, Rt Hon Patrick
Cadbury, Jocelyn	Johnson Smith, Geoffrey
Carlisle, John (Luton West)	Jopling, Rt Hon Michael
Carlisle, Kenneth (Lincoln)	Kaberry, Sir Donald
Carlisle, Rt Hon M. (R'c'n)	Kellett-Bowman, Mrs Elaine
Chalker, Mrs. Lynda	Kimball, Marcus
Channon, Rt. Hon. Paul	King, Rt Hon Tom
Chapman, Sydney	Kitson, Sir Timothy
Churchill, W. S.	Knox, David
Clark, Hon A. (Plym'th, S'n)	Lamont, Norman
Clark, Sir W. (Croydon S)	Langford-Holt, Sir John
Clarke, Kenneth (Rushcliffe)	Latham, Michael
Clegg, Sir Walter	Lawrence, Ivan
Cockeram, Eric	Lawson, Rt Hon Nigel
Colvin, Michael	Lee, John
Cope, John	Le Marchant, Spencer
Corrie, John	Lennox-Boyd, Hon Mark
Cranborne, Viscount	Lewis, Kenneth (Rutland)
Critchley, Julian	Lloyd, Ian (Havant & W'loo)
Crouch, David	Lloyd, Peter (Fareham)
Dean, Paul (North Somerset)	Loveridge, John
Dickens, Geoffrey	Luce, Richard
Dorrell, Stephen	Lyell, Nicholas
Dover, Denshore	McCartney, Hugh
du Cann, Rt Hon Edward	McCrindle, Robert
Dunn, Robert (Dartford)	Macfarlane, Neil
Dykes, Hugh	MacGregor, John
Eden, Rt Hon Sir John	MacKay, John (Argyll)
Edwards, Rt Hon N. (P'broke)	Macmillan, Rt Hon M.
Eggar, Tim	McNair-Wilson, M. (N'bury)
Emery, Peter	McNair-Wilson, P. (New F'st)
Eyre, Reginald	McQuarrie, Albert
Fairgrieve, Russell	Madel, David
Faith, Mrs Sheila	Major, John
Fell, Anthony	Marland, Paul
Fenner, Mrs Peggy	Marlow, Tony
Fisher, Sir Nigel	Marshall, Michael (Arundel)
Fletcher, A. (Ed'nb'gh N)	Mather, Carol
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
Fry, Peter	Meyer, Sir Anthony
Gardiner, George (Reigate)	Miller, Hal (B'grove)

Mills, Peter (West Devon)	Sims, Roger
Miscampbell, Norman	Skeet, T. H. H.
Moate, Roger	Speed, Keith
Monro, Hector	Speller, Tony
Moore, John	Spicer, Michael (S Worcs)
Morris, M. (N'hampton S)	Sproat, lain
Morrison, Hon C. (Devizes)	Squire, Robin
Morrison, Hon P. (Chester)	Stanbrook, Ivor
Mudd, David	Stanley, John
Murphy, Christopher	Steen, Anthony
Myles, David	Stevens, Martin
Neale, Gerrard	Stewart, Ian (Hitchin)
Needham, Richard	Stewart, A.(E Renfrewshire)
Nelson, Anthony	Stokes, John
Neubert, Michael	Stradling Thomas, J.
Newton, Tony	Tapsell, Peter
Normanton, Tom	Taylor, Robert (Croydon NW)
Onslow, Cranley	Taylor, Teddy (S'end E)
Page, Rt Hon Sir G. (Crosby)	Tebbit, Norman
Page, Richard (SW Herts)	Temple-Morris, Peter
Parkinson, Cecil	Thomas, Rt Hon Peter
Parris, Matthew	Thompson, Donald
Patten, Christopher (Bath)	Thorne, Neil (llford South)
Patten, John (Oxford)	Thornton, Malcolm
Pattie, Geoffrey	Townend, John (Bridlington)
Pawsey, James	Townsend, Cyril D, (B'heath)
Percival, Sir Ian	Trippier, David
Peyton, Rt Hon John	Trotter, Neville
Pink, R. Bonner	van Straubenzee, W. R.
Porter, Barry	Vaughan, Dr Gerard
Powell, Rt Hon J.E. (S Down)	Viggers, Peter
Prentice, Rt Hon Reg	Waddington, David
Proctor, K. Harvey	Wakeham, John
Pym, Rt Hon Francis	Waldegrave, Hon William
Raison, Timothy	Walker, B. (Perth)
Rathbone, Tim	Walker-Smith, Rt Hon Sir D.
Rees, Peter (Dover and Deal)	Wall, Patrick
Rees-Davies, W. R.	Waller, Gary
Renton, Tim	Walters, Dennis
Rhodes James, Robert	Warren, Kenneth
Ridley, Hon Nicholas	Watson, John
Ridsdale, Sir Julian	Wells, John (Maidstone)
Rifkind, Malcolm	Wells, Bowen
Roberts, M. (Cardiff NW)	Wheeler, John
Roberts, Wyn (Conway)	Whitelaw, Rt Hon William
Rossi, Hugh	Whitney, Raymond
Rost, Peter	Wickenden, Keith
Royle, Sir Anthony	Williams, D.(Montgomery)
Sainsbury, Hon Timothy	Winterton, Nicholas
Scott, Nicholas	Wolfson, Mark
Shaw, Giles (Pudsey)	Young, Sir George (Acton)
Shaw, Michael (Scarborough)	Younger, Rt Hon George
Shelton, William (Streatham)
Shepherd, Colin (Hereford)	Tellers for the Noes:
Shepherd, Richard	Lord James Douglas-Hamilton and Mr. Robert Boscawen.
Shersby, Michael
Silvester, Fred

Question accordingly negatived.

Mr. Cook

I beg to move amendment No. 20, in page 15, line 17, leave out subsection (2).

The Temporary Chairman (Sir Albert Costain)

With this we shall take the following amendments: No.59, in page 15, line 42, at end insert 'less any deduction made under section 6 of the Social Security (No. 2) Act 1980'. No. 21, in page 16, line 10, leave out from first 'the'to 'and' in line 14 and insert 'amount specified in paragraph (a) above'. No. 22, in page 16, line 15, leave out 'the' and insert 'amount specified in paragraph (a) above'.

Mr. Cook

We shall concentrate on amendments Nos. 20 and 59, which we regard as matters of substance. The two amendments grouped with them are a modest attempt to simplify the clause, by standardising the amount liable to taxation in each case. We hope that that will make a reasonable contribution to reducing paper-chasing and limiting the 3,500 staff, about whom we are so grievously concerned.

Amendments Nos. 20 and 59 go to the heart of two matters about which the Opposition are concerned and about which the whole Committee should be concerned. The Financial Secretary said in his reply to the previous debate that it was common ground that short-term benefits—unemployment benefit and sickness benefit—should in principle be subject to tax. We concede that principle, but we disagree about whether this is the proper, right, just and practical way to go about it.

There is no common ground between the Opposition and the Government about taxation of supplementary benefit paid to the dependants of a striker. That is a petty, vindictive and mean gesture, which we reject, not simply because of its practical implications, but in principle.

Our first reason is that the proposal imports into the tax law the principle that supplementary benefit payments should be subject to taxation. We understand that, as a result of the subsection on which we have just voted, it is now inescapable that unemployed families receiving supplementary benefit because they are unemployed will come within the ambit of taxation. We understand why. One of the anomalies that embarrassed the Government when they started to examine the taxation of unemployment benefit was that if they merely taxed unemployment benefit they would create the paradoxical result that the family that had paid its contributions over the preceding year, and therefore qualified for unemployment benefit, would be subject to tax, whereas the head of household who had not paid contributions over the preceding year, and therefore did not qualify for unemployment benefit, would not be subject to tax on supplementary benefit.

It was therefore necessary—we understand and accept why—explicitly to provide in the clause for the taxation of supplementary benefit paid to the unemployed person. That is inescapable, but it is not inescapable that supplementary benefit paid to a striker should be subject to tax. There is no necessary link or comparison between the unemployed person and the person on strike, who by definition is an employed person temporarily out of work. Indeed, many categories are in receipt of supplementary benefit and are not employed.

There are the sick, who either receive supplementary benefit to top up their sickness benefit or receive it in lieu of sickness benefit, because they are out of contribution. There are the pensioners, just over half of whom receive a supplementary pension to top up their State pension. If for any reason they do not qualify for the State pension, they qualify for a supplementary pension to its entire value. The disabled either qualify for supplementary benefit to top up such benefit as they receive or receive a supplementary benefit entirely to make up those national insurance benefits. Finally, there is the large, growing and now significant group claiming supplementary benefit who are single parents entirely dependent on supplementary benefit for their income.

Of all those categories in receipt of supplementary benefit, the Government have chosen for the special treatment of taxation only those receiving supplementary benefit because they are on strike. Why have the Government chosen them? Why have they picked on that group? It cannot be because that group makes up a significant number of those receiving supplementary benefit, because strikers are a tiny proportion of the total number receiving it. Never in the past few years have those on strike receiving supplementary benefit made up more than 2 per cent. of all claimants of supplementary benefit. They are a small proportion of the total. It follows that the revenue from taxing those people's benefit will be miserable.

That brings us to a further question. How much will the Financial Secretary get from this miserly measure? There is another question that we naturally couple with that: how much will it cost? If it is difficult to administer the taxation of the unemployment benefit, it is surely far more difficult to administer the taxation of the supplementary benefit paid to a striker's family. In the nature of things, the striker tends to be out of work for a much shorter period than the unemployed person. Therefore, far more paper-chasing is involved per week of benefit. Indeed, the paper will have to chase itself rapidly if it is ever to catch up before the man returns to work.

The truth is that this measure is not put before the Committee either because strikers make up a large proportion of the whole number on supplementary benefit or because it is hoped to obtain revenue from it. It is put forward because the Treasury Bench are adopting, as part of the Government's general approach, what can be described in plain English only as a vindictive attitude towards the person on strike.

We have already seen what the Government's vindictive attitude towards the striker can mean—the deduction of £12 from the supplementary benefit paid to him to support his family. It has been asserted, not in the Committee but outside the House, to the press and other media when the Bill was unveiled that what will be taxed as a result of the clause is the flat rate benefits, not the additions for heating, rent or child additions. On the day the Bill was published the Board of Inland Revenue issued a press release in which it said: In the case of strikers, the benefit to be taxed is the supplementary benefit which a striker may claim in respect of an adult dependant. … As was announced last year, additions to unemployment and supplementary benefit, for children, housing and exceptional circumstances, are not to be brought into the charge to tax. That assurance is humbug. The board is plainly mistaken with reference to the striker.

I can demonstrate why. Let us take two strikers' families. I do not want to cause any offence, so let us for the sake of example call them Rees and Lawson, who have come out in opposition to their employer for some reason.

Mr. Rees has a wife and no children. He therefore qualifies for £18.60 as from next November in respect of his wife, who is the, adult dependant referred to in the board's press statement. However, as a result of the Social Security (No. 2) Act 1980, £12 is now knocked off that sum, leaving him with £6.60, on which he will be taxed under the clause. I do not wish to speculate on how he and his wife are to survive on £6.60 a week; I merely take the implications of the clause.

Mr Lawson receives the £6.60 in respect of his wife, but he also has two children aged 4 and 5. Therefore, he qualifies for an additional £14.60 child addition, which when added to the £6.60, takes him back beyond the flat rate level for the adult dependant, and it is at that level that he is taxed. The effect of the £12 deduction is to make the first £12 of his child addition taxable. It must have that effect, because there is nothing else left to tax once the £12 has been deducted from the flat rate for the adult dependant.

Thus we can see from this illustrative example that the striker is subject to even more special treatment than at first appears from the clause. Not only is he singled out among claimants of supplementary benefit for the treatment of taxation, but he will be penalised by tax even more than the unemployed because in his case the child additions will be taxed, not the flat rate for the adult dependant. Even the toddlers of the striker will be subject to tax on the income which they receive from the State.

7 pm

It may be necessary at this stage to pinch ourselves and to remind ourselves what supplementary benefit is. It is an income set by Parliament as a basic subsistence income. It represents the poverty line. Academics accept the level of supplementary benefit as the poverty line, which defines the numbers living in poverty as those who are below it and the numbers not living in poverty as those who are above it.

There is a profound paradox that Parliament should now be asked to make special provision to bring into tax the very income which Parliament has decided is the bare minimum necessary to give subsistence life.

It is also perhaps necessary to remind ourselves what the child addition is. It represents the estimate of Parliament, based on the calculations put to it formerly by the Supplementary Benefits Commission and now by the Department of Health and Social Security, of the cost of feeding and warming a child. It is not income in the strict sense. It is the expense necessary to feed a child so that it grows and to clothe it so that it can go to school.

Families on supplementary benefit find it difficult to achieve that on the level of income which they obtain from supplementary benefit, even with those child additions. Yet it is exactly those child additions which are to be taxed under this subsection. To use what appears to be a vogue phrase, that proposition must be distasteful to all right-minded people. If we cannot in this debate persuade the Financial Secretary of the iniquity of that proposition, we must demonstrate our distaste by voting in favour of amendment No. 20.

Mr. Lawson

The hon. Member for Edinburgh, Central (Mr. Cook) concentrated on amendments Nos. 20 and 59. I shall do the same.

Amendment No. 20 is a curious proposal to have tabled. As I understand it, the hon. Gentleman accepts in principle the taxation of supplementary benefit for the unemployed. As he rightly pointed out, it would be absurd if one man was getting unemployment benefit and paid tax on it, as I described in our last debate, while another man who was also unemployed was getting supplementary benefit because, for example, he had not paid sufficient contributions, and was not being taxed. So clearly the unemployed have to be on the same footing whether they receive unemployment benefit or supplementary benefit. That is one of the main elements in this subsection which the Opposition seek to delete.

I should say that the total cost of the amendment is about £130 million.

It appears that the Opposition are concerned about the position not so much of the unemployed person on supplementary benefit as of the striker on supplementary benefit. If the hon. Member for Edinburgh, Central wished to concentrate on strikers, I am surprised that he did not table an amendment addressing itself specifically to them rather than one dealing with the general subject of taxation of supplementary benefit to the unemployed and strikers. But I understand now that the specific objection of the Opposition is to the treatment of strikers, and it is in this context, too that they tabled amendment No. 59 which concerns a detailed point on the position of the striker.

Before coming to the general question, perhaps I should address myself to amendment No. 59. The hon. Member for Edinburgh, Central, suggests that the £12 reduction applies only to the claimant's adult dependant and therefore the extra supplementary benefit which the striker and his family are getting should not be taken into account in assessing how much of the benefit should be liable to tax.

That is not the view taken by the Government. We believe that the only logical way of approaching this is that, where the total amount that the claimant is getting is in excess of the basic £17.05, as it is at present, that basic amount should be liable to tax.

However, the general point made by the hon. Member for Edinburgh, Central—that supplementary benefit is set at subsistence level and therefore should not be taxed—falls to the ground because of the method that we have chosen. Our method does not take money from a man on supplementary benefit during the time that he is drawing supplementary benefit. In the case of the striker, the liability is taken into account when he returns to work so that the subsistence is paid in the same way.

There is a general issue of principle here. The hon. Gentleman asks why strikers should be treated in this way when others on supplementary benefit are not. He is asking, in other words, what is special about strikers.

Two features are special about strikers. One is that strikes do great damage to our economy. Another is that, unlike the many other disabilities mentioned by the hon. Gentleman, strikes are voluntary. People go on strike voluntarily and specifically to improve their financial position. They have a right to do so in a free society, but the nature of what they are doing is quite different from that of the various other matters mentioned by the hon. Gentleman.

The Opposition's attitude is interesting. Whereas they accept in principle—they may have arguments about the method—the taxing of unemployment benefit and supplementary benefit for the unemployed, they reject in principle the taxation of supplementary benefit for strikers. They are saying, in other words, that the striker should be better off than the man who is unemployed. That is where they stand, and the Committee and the country will know it. The Government reject it.

Mr. Woolmer

I wish to take up two of the remarks made by the Financial Secretary.

I found it extremely interesting that when pushed, with his back metaphorically against the wall, the hon. Gentleman brought out the truth. He was only too happy to justify taxing the supplementary benefit of strikers because, he said, strikers damaged the country and strikes were voluntary.

Perhaps I may spend a few moments looking at that motivation. It is a fact that the damage done by this Government to the country in terms of lost output, the collapse of manufacturing industry, the loss now of export markets and the loss of our own industries' markets to foreign competition is far greater than the damage done by strikes since this Government came to office.

The Financial Secretary has the gall at this time in our nation's history to repeat the pre-election rhetoric of which he should now be ashamed. He openly boasts and is proud of the claim that this clause is necessary, by implication, to teach strikers a lesson and to make sure that they suffer greater hardship. That, I suggest, is one reason why we should be on our guard against accepting the Government's proposals. At root, the matter has nothing to do with equity or a fine tuning of the taxation system. It is a political decision to rub the noses of strikers and their families in financial hardship.

Strikers and their families suffer financial hardship that few people in work appreciate. The Financial Secretary cannot think—I do not believe that he does—that most people enter into a strike lightly and ignore or take lightly the financial consequences. Strikes are only a last resort. Workers do their utmost to avoid going on strike, not just for industrial relations reasons, but because of the financial hardship that they suffer.

I reject the motivation that the Financial Secretary revealed in his outburst when he said that strikers damage the country and that they should therefore be taught a lesson. That is not true. Most strikers are only too pleased to get back to work, partly for financial reasons and partly because people want to work.

The second reason given by the Financial Secretary—it is the substance of his reason for opposing the amendment—was that strikes are voluntary, and that in some way that justifies penalising them. Conservatives often say that they are the party of freedom and that choice is essential. However, strikers do not revel in the use of the strike weapon. They do not take it lightly. Strikes are voluntary, of course, in that people have the right to strike, although many Conservative Members would like to restrict that right and the voluntary nature of that action. Often, workers are forced into striking. Strikes are uncommon in industries such as the textile industries, but that has done little to save jobs or to prevent the deterioration of living standards.

People who strike do so out of desperation and only when there is a serious situation. The Government say that the strikers' action is voluntary and that inadequate management or poor industrial relations should not be held responsible. They say that the person whose only weapon is to withdraw his labour should be penalised. That is the kind of one-sided view that causes strikes and is typical of the Government and many of their more hawkish Back Benchers. The remarks of the right hon. Gentleman, who is a leading Conservative Member—it is perhaps only by chance that he is not a member of the Cabinet—will be remembered.

Mr. Lawson

In going through the reasons that I gave, will the hon. Gentleman address himself to the culminating reason—namely, that not to do this would put the striker in a much better position than people who are unemployed, and that, in equity, those strikers should be no better off than the man who is unemployed?

7.15 pm

Mr. Woolmer

People are adversely affected, whether in work or out of work on supplementary benefit, because the Government—and, indeed, the Financial Secretary himself—have refused to uprate benefits and have deepened and widened the poverty trap.

I do not intend to be lectured or hectored about the merits or otherwise of the problems of the low incomes that we are discussing. The Financial Secretary revealed, as tends to happen when he gets enthusiastic, that his true motive was to get at strikers. In his outburst against strikers he picked on them on a perjorative manner, and said that the person withdrawing his labour should be penalised, and that the firm or employer is not to be penalised. That is to take a one-sided view of industrial relations, regardless of the merits of the situation.

One aspect has not been mentioned, and that is that the supplementary benefit, as my hon. Friend the Member for Edinburgh, Central (Mr. Cook) said belongs as of right to the family. The purpose is not to give a high standard of living or even a modest standard of living, but to cover the bare essentials of life for the children and the wife of the person involved. Precious few in this Chamber, if any, could face a period of living on the incomes that we are talking about, with no wage packet coming in, and with supplementary benefit being the sole pay for the family.

I reject the notion that in a Finance Bill we should take a one-sided view of industrial relations and economic problems. Yet the Financial Secretary has made it plain that that is at the root of his thinking in seeking to tax supplementary benefit for strikers.

Mr. Austin Mitchell

The principle underlying the amendment is exactly the same as the principle of the amendment that we tabled on taxing unemployment benefit. Two years ago the Government gave away massive tax cuts to the better-off in the hope of stimulating initiative and enterprise. The hope did not materialise, the stimulus was not there, and the economy has gone downhill since. Now the Government have the nerve to come back to the less well-off sections of the community—the unemployed, the people on supplementary benefits, the strikers—and say "You will have the privilege of paying for the failure of the grand hopes that we held out two years ago". It is typical that they ask those who are least able to bear the burden.

In this case there is an extra twist—the lemon in the gin and tonic—in the vindictive attitude of the Financial Secretary towards strikers. His whole defence is based on a far-fetched and fictitious argument that in resisting the principle of taxation of benefits for strikers, the Opposition are saying "We want to support strikers and we think it unreasonable that strikers should be taxed". Rarely have I heard a more far-fetched and ridiculous argument.

We oppose the measure because it is mean, vindictive and unnecessary. We have no other reason for opposing it. Strikes are the Government's fig leaf. They justify such petty vindictiveness and so much else of the Government's economy policy. In two years the Government have steered us deliberately into the worst depression that the country has faced since the war and the biggest drop in industrial output since 1929 to 1931.

We must ask why the Government have done that. They say that it is to combat inflation. The logic of that is that as soon as the pressures are taken off and some mild expansion is allowed inflation will take off automatically again. They have economic permafrost. That is their way of defeating inflation.

We should be insulated from the world depression, since we are an oil Power We should not be going into a depression faster and deeper than any other industrial country is going in. The Government are imposing a discipline on the work force. They want to break the industrial power of the unions. They want to be able to say to people in work "Do not go for higher pay, because that will threaten your jobs and the existence of your firm." The Government's obsession with strikes motivates the clause and the Government's economic policy.

The Government hold a whip over the working population by rapidly increasing unemployment. In addition, they are imposing extra vindictiveness against the unemployed. Supplementary benefits are already inadequate. The levels of benefit will become worse as, in the next few months and years, the Government are forced into a desperate search for further cuts and economies towards which the whole logic of their financial position pushes them. They will be under pressure to achieve the type of tax cuts forecast by the Financial Secretary on "Weekend World".

Taxes will be increased because of the mounting burden of unemployment and the Depression. The Government will be forced into another massive internal struggle for economies. Unemployment benefit, supplementary benefit and pensions will be considered as ripe for the cheeseparing economies that the Government will have to make.

Over the years the Tory Party has changed from the party of empire to one that rushes, in a servile and sycophantic fashion, towards Europe, to a party that insists, in its financial measures, that there are two nations and that the lower nation shall bear the burden. It was the party of Heathean technocracy that made such a mess, but it has now reneged and pulled back from that. After the abdication of all the strands of Conservative Party policy, what is left is the prejudice expressed tonight by the Financial Secretary in his juvenile little interventions. It is a prejudice against workers, trade unions, the unemployed and strikers. That prejudice is manifest in the measure and in the Financial Secretary's attitude.

The Tory Party is now held together by prejudices, which are being put into legislative form. They have festered in Tory associations and corner grocery shops over the years. Now the prejudices are crawling on to the statute book in little vindictive measures such as this.

The Government justify the measure by saying that income from all sources should be taxable. Why is not that social justice applied to tax evasion? The Financial Secretary told us about the economies in Inland Revenue staff. That staff could be employed in rooting out tax evasion, which is more expensive, on a bigger scale, and more harmful to the economy than strikes. Why is that same approach not being applied? Strikers are defending their standard of living against the Government's economic policies.

If the Government insist on taxing people who, according to the Financial Secretary, are acting voluntarily in a way that is harmful to the economy, why do they not tax people who export their capital on a massive scale? It would be interesting to hear the accurate figures of the amount of capital that flows out of Britain for portfolio investment, investment in villas, and other useless activities overseas, which should be invested here to produce jobs. What harm is done by that outflow of capital? If the Government are interested in fiscal justice, why do they not deal with that?

The Prime Minister often says that she is concerned about the family. If that concern leads to such vindictiveness towards the families of strikers, what of that concern? How does the Prime Minister justify making a distinction between the families of strikers and the families in the rest of the community?

The measure increases the number of civil servants when the Government are committed to reducing that number. It is unnecessarily vindictive and complicated. The Committee should oppose this squalid little measure.

Mr. Campbell-Savours

I heard the hon. Member for Watford (Mr. Garel-Jones) ask, from a sedentary position, "Should we intervene?" It is significant that Government Back Benchers have not intervened in the debate. They have not sought to intervene, because they believe that the Government's decisions and recommendations cannot be sustained and defended on any public platform anywhere in the United Kingdom. The clauses penalise, because they are vindictive. Their objective is to undermine working men and women.

The clause affects strikers' families rather than strikers. We can trace that to the Government's election programme. We remember the campaign that was mounted by the Tory Party to generate hysteria about the position of strikers' families and the benefits paid to them. The Financial Secretary said that we were seeking special arrangements. We are doing so in many ways. We are seeking to establish that the dependants of strikers are fully protected in any legislation that comes before the House. That is not an ignoble suggestion, but an objective that should be shared by the majority in Britain. There is no understandable reason why the wives or other dependants of strikers should be penalised in any way by Government action. It is not true that strikers draw supplementary benefits, as has been implied by the Financial Secretary and by the Conservative Party. They draw benefit on behalf of their families and dependants.

7.30 pm

The debate is an extension of the industrial relations debates with which the Conservative Party preoccupies itself. We can evaluate the Conservatives' attitude on the basis of what little experience they have of industrial relations problems. It is a significant point that if one visits a picket line in any major industrial action and asks those picketing whether they have met their Conservative Members of Parliament, the answer is always "No." The comments of Conservative Members, reported in the local press, are marked by the derision with which they treat those who take action, even when they believe that they have a legitimate claim.

The root of this clause, and of other clauses in other Bills, is to be found in the fact that Conservatives have no instinctive understanding of industrial relations—why workers take industrial action, or why they need to do so to defend their interests. We can link this little measure to the Employment Act 1980, introduced soon after the general election. It had the effect of restricting trade union rights and the rights of those taking industrial action. The obsessive support and promotion by the Conservative Parliamentary Party and the Government of postal balloting, sponsored by the State, is an extension—

Mr. Tristan Garel-Jones (Watford)

Shame.

Mr. Campbell-Savours

It is strange how the truth hurts. A long list of measures introduced by the Government have the same effect, namely, to undermine the position of those taking industrial action, whether or not it is for legitimate reasons.

I am sure that my hon. Friends will be quick to endorse the AUEW decision last week to reject sponsored postal balloting and to conduct balloting only on the basis that it should financially support any arrangements that it wishes to make. In addition to this clause, there is the argument about the closed shop and the little measure that was passed some months ago to allow the Army, under certain conditions, to be used in a strike-breaking move. Such little measures may not appear to be part of the general package on industrial relations, but the clause is rooted in the Government's general policy, and it arises only when the Government cannot gain agreement with trade unions about industrial relations.

There is a distinct difference in the approach of the Government and that of the Labour Government. I do not claim that the social contract was successful in its latter days. That may have been due to a statistical error by the then Prime Minister, who imposed a 5 per cent. rather than a 10 per cent. pay limit. Many believe that if he had chosen 10 per cent. there would have been a Labour Government today. However, the principle underlying all the actions of the Labour Administration in their relationship with trade unions was to forge conditions of consent.

When the Government were elected, and following the interesting Ridley report, produced by the present Minister of State, Foreign and Commonwealth Office, who pinpointed areas of policy initiative as far back as 1978, they said that they would pursue a different approach from that of the Labour Government. The final means that they have used to subdue strikers and reduce industrial action has been their pursuance of monetarist strategy, thereby increasing the numbers who wait for jobs at the gates of places of work. The hon. Member for Watford (Mr. Garel-Jones) may smile, but that package of proposals was used on the doorstep during the last general election campaign to justify the return of a Conservative Government. Conservative canvassers used it to illustrate how a Conservative Government would deal with what they believed to be a major problem in industrial relations.

The next Labour Government will not pursue that approach. A number of measures will have to be repealed at an early stage if we are to reforge the links with the trade unions. Legislation on the statute book, or about to be placed on the statute book, undermines the possibility of future good relations.

Mr. Cook

The debate has served a useful function, even if the Opposition are defeated in the Division. If nothing else, we have had fascinating glimpses into the thinking of the Financial Secretary—

Mr. Jack Straw (Blackburn)

Rare glimpses.

Mr. Cook

My hon. Friends are competing with me for words to describe it. I happily accept "rare", "disturbing" or other synonyms for the fascinating glimpses. It is well for the Financial Secretary that the Minister of State, who has some experience in his profession of precision in fiscal policy and fiscal rationale, left the Chamber before the right hon. Gentleman spoke. The Minister might have experienced some unease at the rationale produced by the right hon. Gentleman for the fiscal decision. We were told that strikers should be singled out for taxation because striking was a voluntary action. That was an interesting illustration of the way in which the Financial Secretary regards the striker—as someone who does irresponsible damage to the economy purely of his own volition and free will.

Some who have spoken from the Dispatch Box in the past have claimed that retirement was voluntary and that it was not necessary to give up work. It is within my living memory, which is slightly shorter than that of the Financial Secretary, that some used to say that parenthood was voluntary and that those who made themselves single parents had done so of their own volition and free will. Should they also be subject to taxation? We were told by the Financial Secretary that the striker should be subject to taxation because strikes damage the economy. Retirement damages the economy. The economy would be healthier if people did not retire and did not cease to be economically active. Should they be subject to taxation?

Lastly, the right hon. Gentleman asserted that strikers should be singled out for this special measure because in striking they are taking action to improve their income. I thought that if nothing else the Government had adjured the population to take entrepreneurial action in a rough and ready market force jungle to improve their incomes. However, the right hon. Gentleman argues that strikers should be deemed to be a special group that should be subject to the scope of taxation. They are to be treated differently from other groups in receipt of supplementary benefit.

The right hon. Gentleman asked why the family with an unemployed head of household should be worse off than the family with a head of household who is on strike. The striker's family is already much worse off than the household that is suffering unemployment. Its income is reduced by the income that would normally be granted under the supplementary benefit rules to the head of the household. The rest of the family—the wife and the children—are worse off by the deduction of the £12, a measure that was introduced by the Government last year. Therefore, a striker's family is about £30 a week worse off than the family of the unemployed worker. It is bogus to suggest that we must import the concept of taxation to the taxable income and supplementary benefit of the striker to achieve equity between the striker and the unemployed worker. There is already gross inequity between them and that is at the expense of the striker's family.

We are in danger of repeating granny's footsteps. We began by taxing unemployment benefit. We moved inescapably to taxing supplementary benefit received by a family whose head of household is unemployed and who has not paid sufficient contributions to obtain unemployment benefit. Thus it follows logically that that household has to come within the ambit of the taxation of unemployment benefit. I do not think that that is desirable in principle. It is one of the reasons that should weigh with us when we decide to tax unemployment benefit. However, the decision having been taken, I accept that it is an inescapable corollary.

The argument is advanced by the Financial Secretary that there is a further inescapable corollary—that we must tax the supplementary benefit received by the striker's household. If we are to follow that chain of reasoning, why should we stop there? Having taxed the supplementary benefit of the striker's household, should not we tax the supplementary benefit paid to other households? Why should the woman whose husband is on strike be worse off than the woman whose husband has deserted her? What fiscal rationale can be found for distinguishing between the two?

Mr. Austin Mitchell

Vindictiveness.

7.45 pm

Mr. Cook

I ask my hon. Friend not to rush me. I am coming to that. If a logical break can be found in that chain of reasoning, it rests in limiting taxation to the taxation of the unemployed. We settled that for better or worse in the previous Division and that is where we should leave it.

My hon. Friend the Member for Grimsby (Mr. Mitchell) suggests that there is vindictiveness on the Government's part. Marxists have always argued that the history of mankind is the history of class conflict. I have never been entirely persuaded of that view of history. However, the longer that we live under this Government the more I can be persuaded that there may be some truth in that argument. I was persuaded of it when listening to the Financial Secretary. It is plain that the taxation of strikers has been inserted in the Bill as a vindictive action against strikers.

If the right hon. Gentleman is prepared rashly to endorse a view of history that is based on class conflict, I warn him that many people strike who are not necessarily Marxists. Many who are striking against the Government in the Civil Service voted for the Conservative Party at the general election. If he does not believe me, I ask him to talk to the pickets as I have. It is interesting to note that they are striking against their employer, the Government, who have unilaterally suspended their pay bargaining procedure.

If the right hon. Gentleman speaks to the pickets, he will find that none of them thinks that he is on strike voluntarily. He will conceive that he is on strike because his employer took unilateral action. It is therefore necessary for civil servants to take action to bring their employer back to the pay bargaining system. They regard it as necessary rather than voluntary. That is not a right that has been challenged by the Government. At no stage over the past two years have the Government had the courage to say that they regard the right to strike as something suspect, which should be suspended. We may hear that but we have not yet heard it.

Instead, we have had a series of attacks on the flank to weaken the ability to strike by hitting at the pockets not of the man on strike but of the housewife and the children. The Government do not have the courage openly to challenge the right to strike, but they intend to erode that right by making those who strike subject to a special form of taxation that will be different from that applied to any other household in receipt of supplementary benefit except the household which comes within the ambit of unemployment benefit. I do not think that the Committee can accept that proposition and challenge and it must divide on the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 212, Noes 275

Division No. 175]	[7.47 pm
AYES
Abse, Leo	Garrett, John (Norwich S)
Adams, Allen	George, Bruce
Allaun, Frank	Gilbert, Rt Hon Dr John
Anderson, Donald	Ginsburg, David
Archer, Rt Hon Peter	Graham, Ted
Ashley, Rt Hon Jack	Grant, George (Morpeth)
Ashton, Joe	Hamilton, James (Bothwell)
Atkinson, N.(H'gey,)	Hamilton, W. W. (C'tral Fife)
Bagier, Gordon A.T.	Harrison, Rt Hon Walter
Barnett, Guy (Greenwich)	Hart, Rt Hon Dame Judith
Barnett, Rt Hon Joel (H'wd)	Hattersley, Rt Hon Roy
Benn, Rt Hon A. Wedgwood	Haynes, Frank
Bennett, Andrew(St'kp't N)	Healey, Rt Hon Denis
Bidwell, Sydney	Heffer, Eric S.
Booth, Rt Hon Albert	Hogg, N. (E Dunb't'nshire)
Boothroyd, Miss Betty	Holland, S. (L'b'th, Vauxh'll)
Bray, Dr Jeremy	Homewood, William
Brown, R. C. (N'castle W)	Hooley, Frank
Brown, Ron (E'burgh, Leith)	Howell, Rt Hon D.
Buchan, Norman	Hudson Davies, Gwilym E.
Callaghan, Jim (Midd't'n & P)	Hughes, Mark (Durham)
Campbell, Ian	Hughes, Robert (Aberdeen N)
Campbell-Savours, Dale	Hughes, Roy (Newport)
Canavan, Dennis	Janner, Hon Greville
Cant, R. B.	Jay, Rt Hon Douglas
Carmichael, Neil	John, Brynmor
Carter-Jones, Lewis	Johnson, James (Hull West)
Clark, Dr David (S Shields)	Jones, Rt Hon Alec (Rh'dda)
Cocks, Rt Hon M. (B'stol S)	Jones, Barry (East Flint)
Coleman, Donald	Jones, Dan (Burnley)
Concannon, Rt Hon J. D.	Kaufman, Rt Hon Gerald
Conlan, Bernard	Kerr, Russell
Cook, Robin F.	Kilroy-Silk, Robert
Cowans, Harry	Kinnock, Neil
Craigen, J. M.	Lambie, David
Crowther, J. S.	Lamborn, Harry
Cryer, Bob	Leadbitter, Ted
Cunliffe, Lawrence	Leighton, Ronald
Cunningham, G. (lslington S)	Lestor, Miss Joan
Cunningham, Dr J. (W'h'n)	Lewis, Arthur (N'ham NW)
Dalyell, Tam	Litherland, Robert
Davidson, Arthur	Lyon, Alexander (York)
Davies, Rt Hon Denzil (L'lli)	Mabon, Rt Hon Dr J. Dickson
Davies, Ifor (Gower)	McElhone, Frank
Davis, Clinton (Hackney C)	McKelvey, William
Davis, T. (B'ham, Stechf'd)	MacKenzie, Rt Hon Gregor
Dean, Joseph (Leeds West)	McMahon, Andrew
Dempsey, James	McNally, Thomas
Dewar, Donald	McNamara, Kevin
Dixon, Donald	McWilliam, John
Dobson, Frank	Magee, Bryan
Dormand, Jack	Marks, Kenneth
Douglas-Mann, Bruce	Marshall, D(G'gow S'ton)
Dubs, Alfred	Marshall, Dr Edmund (Goole)
Duffy, A. E. P.	Marshall, Jim (Leicester S)
Dunn, James A.	Martin, M(G'gow S'burn)
Dunnett, Jack	Mason, Rt Hon Roy
Dunwoody, Hon Mrs G.	Maxton, John
Eadie, Alex	Maynard, Miss Joan
Eastham, Ken	Mellish, Rt Hon Robert
Ellis, R. (NE D'bysh're)	Mikardo, lan
English, Michael	Millan, Rt Hon Bruce
Ennals, Rt Hon David	Mitchell, Austin (Grimsby)
Evans, loan (Aberdare)	Mitchell, R. C. (Soton Itchen)
Evans, John (Newton)	Morris. Rt Hon A. (W'shawe)
Ewing, Harry	Morris, Rt Hon C. (O'shaw)
Field, Frank	Morris, Rt Hon J. (Aberavon)
Fitch, Alan	Morton, George
Fitt, Gerard	Oakes, Rt Hon Gordon
Flannery, Martin	Ogden, Eric
Fletcher, Ted (Darlington)	O'Halloran, Michael
Foot, Rt Hon Michael	O'Neill, Martin
Ford, Ben	Orme, Rt Hon Stanley
Forrester, John	Palmer, Arthur
Foster, Derek	Parry, Robert
Fraser, J. (Lamb'th, N'w'd)	Prescott, John
Freeson, Rt Hon Reginald	Price, C. (Lewisham W)

Race, Reg	Summerskill, Hon Dr Shirley
Radice, Giles	Thomas, Dafydd (Merioneth)
Rees, Rt Hon M (Leeds S)	Thomas, Jeffrey (Abertillery)
Richardson, Jo	Thomas, Dr R. (Carmarthen)
Roberts, Albert (Normanton)	Thorne, Stan (Preston South)
Roberts, Allan (Bootle)	Tilley, John
Roberts, Ernest (Hackney N)	Tinn, James
Roberts, Gwilym (Cannock)	Torney, Tom
Robertson, George	Wainwright, E.(Dearne V)
Robinson, G. (Coventry NW)	Walker, Rt Hon H.(D'caster)
Ross, Ernest (Dundee West)	Watkins, David
Rowlands, Ted	Weetch, Ken
Ryman, John	Wellbeloved, James
Sever, John	Welsh, Michael
Sheerman, Barry	White, Frank R.
Sheldon, Rt Hon R.	White, J. (G'gow Pollok)
Shore, Rt Hon Peter	Whitlock, William
Short, Mrs Renée	Wigley, Dafydd
Silkin, Rt Hon J. (Deptford)	Willey, Rt Hon Frederick
Silkin, Rt Hon S. C. (Dulwich)	Williams, Rt Hon A.(S'sea W)
Skinner, Dennis	Wilson, Rt Hon Sir H.(H'ton)
Smith, Rt Hon J. (N Lanark)	Wilson, William (C'try SE)
Snape, Peter	Winnick, David
Soley, Clive	Woodall, Alec
Spearing, Nigel	Woolmer, Kenneth
Spriggs, Leslie	Wright, Sheila
Stallard, A. W.	Young, David (Bolton E)
Stewart, Rt Hon D. (W Isles)
Stoddart, David	Tellers for the Ayes:
Stott, Roger	Mr. Hugh McCartney and Mr. Allen McKay.
Straw, Jack

NOES
Adley, Robert	Clark, Hon A. (Plym'th, S'n)
Aitken, Jonathan	Clark, Sir W. (Croydon S)
Alexander, Richard	Clarke, Kenneth (Rushcliffe)
Alison, Michael	Clegg, Sir Walter
Amery, Rt Hon Julian	Cockeram, Eric
Ancram, Michael	Colvin, Michael
Aspinwall, Jack	Cope, John
Atkins, Robert(Preston N)	Corrie, John
Baker, Kenneth(St.M'bone,)	Cranborne, Viscount
Baker, Nicholas (N Dorset)	Critchley, Julian
Banks, Robert	Crouch, David
Bell, Sir Ronald	Dean, Paul (North Somerset)
Bendall, Vivian	Dickens, Geoffrey
Benyon, Thomas (A'don)	Dorrell, Stephen
Benyon, W. (Buckingham)	Douglas-Hamilton, Lord J.
Berry, Hon Anthony	Dover, Denshore
Best, Keith	du Cann, Rt Hon Edward
Bevan, David Gilroy	Dunn, Robert (Dartford)
Biggs-Davison, John	Dykes, Hugh
Blackburn, John	Eden, Rt Hon Sir John
Blaker, Peter	Edwards, Rt Hon N. (P'broke)
Body, Richard	Eggar, Tim
Bonsor, Sir Nicholas	Elliott, Sir William
Bowden, Andrew	Emery, Peter
Boyson, Dr Rhodes	Eyre, Reginald
Braine, Sir Bernard	Fairgrieve, Russell
Bright, Graham	Faith, Mrs Sheila
Brinton, Tim	Fell, Anthony
Brittan, Leon	Fenner, Mrs Peggy
Brooke, Hon Peter	Fisher, Sir Nigel
Brotherton, Michael	Fletcher, A. (Ed'nb'gh N)
Brown, Michael(Brigg & Sc'n)	Fookes, Miss Janet
Browne, John (Winchester)	Forman, Nigel
Bruce-Gardyne, John	Fowler, Rt Hon Norman
Bryan, Sir Paul	Fox, Marcus
Buchanan-Smith, Alick	Fraser, Rt Hon Sir Hugh
Buck, Antony	Fraser, Peter (South Angus)
Budgen, Nick	Fry, Peter
Bulmer, Esmond	Gardiner, George (Reigate)
Burden, Sir Frederick	Gardner, Edward (S Fylde)
Butcher, John	Garel-Jones, Tristan
Cadbury, Jocelyn	Gilmour, Rt Hon Sir Ian
Carlisle, John (Luton West)	Glyn, Dr Alan
Carlisle, Kenneth (Lincoln)	Gow, Ian
Carlisle, Rt Hon M. (R'c'n)	Gower, Sir Raymond
Chalker, Mrs. Lynda	Gray, Hamish
Churchill, W. S.	Greenway, Harry

Griffiths, E.(B'y St. Edm'ds)	Murphy, Christopher
Griffiths, Peter (Portsm'th N)	Myles, David
Grist, Ian	Neale, Gerrard
Grylls, Michael	Needham, Richard
Hamilton, Hon A.	Nelson, Anthony
Hamilton, Michael (Salisbury)	Neubert, Michael
Hampson, Dr Keith	Newton, Tony
Hannam, John	Normanton, Tom
Haselhurst, Alan	Onslow, Cranley
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	Patten, John (Oxford)
Heseltine, Rt Hon Michael	Pattie, Geoffrey
Hicks, Robert	Percival, Sir Ian
Higgins, Rt Hon Terence L.	Peyton, Rt Hon John
Holland, Philip (Carlton)	Pink, R. Bonner
Hooson, Tom	Porter, Barry
Hordern, Peter	Powell, Rt Hon J.E. (S Down)
Howell, Rt Hon D. (G'ldf'd)	Prentice, Rt Hon Reg
Hunt, David (Wirral)	Price, Sir David (Eastleigh)
Hunt, John (Ravensbourne)	Proctor, K. Harvey
Hurd, Hon Douglas	Pym, Rt Hon Francis
Jenkin, Rt Hon Patrick	Raison, Timothy
Johnson Smith, Geoffrey	Rathbone, Tim
Jopling, Rt Hon Michael	Rees, Peter (Dover and Deal)
Kaberry, Sir Donald	Rees-Davies, W. R.
Kellett-Bowman, Mrs Elaine	Renton, Tim
Kimball, Marcus	Rhodes James, Robert
Kitson, Sir Timothy	Ridley, Hon Nicholas
Knox, David	Ridsdale, Sir Julian
Lamont, Norman	Rifkind, Malcolm
Lang, Ian	Rippon, Rt Hon Geoffrey
Langford-Holt, Sir John	Roberts, M. (Cardiff NW)
Latham, Michael	Roberts, Wyn (Conway)
Lawrence, Ivan	Rossi, Hugh
Lawson, Rt Hon Nigel	Rost, Peter
Lee, John	Royle, Sir Anthony
Le Merchant, Spencer	Sainsbury, Hon Timothy
Lennox-Boyd, Hon Mark	Scott, Nicholas
Lloyd, Ian (Havant & W'loo)	Shaw, Michael (Scarborough)
Lloyd, Peter (Fareham)	Shelton, William (Streatham)
Loveridge, John	Shepherd, Colin (Hereford)
Luce, Richard	Shepherd, Richard
Lyell, Nicholas	Shersby, Michael
McCrindle, Robert	Silvester, Fred
Macfarlane, Neil	Sims, Roger
MacGregor, John	Skeet, T. H. H.
MacKay, John (Argyll)	Speed, Keith
Macmillan, Rt Hon M.	Speller, Tony
McNair-Wilson, M. (N'bury)	Spicer, Jim (West Dorset)
McNair-Wilson, P. (New F'st)	Spicer, Michael (S Worcs)
McQuarrie, Albert	Sproat, lain
Madel, David	Squire, Robin
Major, John	Stanbrook, Ivor
Marland, Paul	Stanley, John
Marlow, Tony	Steen, Anthony
Marshall, Michael (Arundel)	Stevens, Martin
Mather, Carol	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, Robert (Croydon NW)
Mellor, David	Taylor, Teddy (S'end E)
Meyer, Sir Anthony	Tebbit, Norman
Miller, Hal (B'grove)	Temple-Morris, Peter
Mills, lain (Meriden)	Thomas, Rt Hon Peter
Miscampbell, Norman	Thompson, Donald
Moate, Roger	Thorne, Neil (llford South)
Molyneaux, James	Thornton, Malcolm
Monro, Hector	Townend, John (Bridlington)
Montgomery, Fergus	Trippier, David
Moore, John	Trotter, Neville
Morris, M. (N'hampton S)	van Straubenzee, W. R.
Morrison, Hon C. (Devizes)	Vaughan, Dr Gerard
Morrison, Hon P. (Chester)	Viggers, Peter
Mudd, David	Waddington, David

Wakeham, John	Whitelaw, Rt Hon William
Waldegrave, Hon William	Whitney, Raymond
Walker, B. (Perth)	Wickenden, Keith
Walker-Smith, Rt Hon Sir D.	Williams, D.(Montgomery)
Wall, Patrick	Winterton, Nicholas
Waller, Gary	Wolfson, Mark
Walters, Dennis	Young, Sir George (Acton)
Ward, John	Younger, Rt Hon George
Warren, Kenneth
Watson, John	Tellers for the Noes:
Wells, John (Maidstone)	Mr. Robert Boscawen and Mr. Alastair Goodlad.
Wells, Bowen
Wheeler, John

Question accordingly negatived.

Clause 27 ordered to stand part of the Bill.